TMI Blog2021 (11) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conditions of registration , such a person has to make an application to the Commissioner or the Principal Commissioner in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification. The true trigger for an application under section 12A(1)(b) has to be the modification of objects which do not conform to the conditions of the registration . In our considered view, therefore, unless such modifications are demonstrated, mere is no occasion for the Principal Commissioner to assume jurisdiction. This aspect of the matter is thus a foundational aspect to the entire proceedings in question. The registration granted vide order dated 12th February 1996, was on the basis of memorandum of association dated 28th November 1940 . Unless, therefore, there are significant variations in the aforesaid memorandum of association and the amended memorandum of association, the provisions of Section 12A(1)(ab) will not come into play inasmuch these provisions come into play only when the assessee has adopted or undertaken modifications of the objects which do not conform to the conditions of registration . As indeed the object clauses in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally concerned with that aspect of the matter as on now. Principal Commissioner erred in declining registration under section 12AA on the facts of this case; she ought to have held that the registration under section 12A dated 12 February 1996 not having been withdrawn or cancelled still holds good in law and in force. Entire basis of declining registration is invoking the proviso to Section 2(15) on the ground that the IPL activities are in the nature of commercial activities and cross the threshold limit specified in exceptions to the proviso to Section 2(15). It is, however, well-settled in law that so far as registration under section 12 AA is concerned, Section 2(15) has no application in the matter. No conflict in the cricket becoming more popular and the cricket becoming more entertaining. It results in providing significant economic opportunities to those associated with the holding of the IPL tournament and, in the process, enriching the resources of the assessee trust. As long as the object of promoting cricket remains intact, and that continues to be the predominant object, the assessee cannot be said to be not following the object of promoting cricket, just be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of the assessee and other considerations germane to this context. 3. Granting registration as a charitable institution is usually a one-time exercise and the assessee institution has duly been granted registration under section 12A on 12th February 1996. That registration is yet to be cancelled or withdrawn. However, the assessee has applied for fresh registration, and the event triggering the present registration application is the amendment of its 'memorandum of association, and rules and regulations', to implement the recommendations of a Committee chaired by Justice R.M. Lodha, former Chief Justice of India (hereinafter referred to as 'Justice Lodha Committee') and as approved by Hon'ble Supreme Court of India, vide judgment dated 9th August 2018. 4. The assessee has taken as many as eleven grounds of appeal, which will be taken up together for our adjudication, as reproduced below: 1. The learned Principal Commissioner of Income Tax (POT) erred in facts and in law in rejecting the application under section 12A(1) (ab) of the Income Tax Act made by the Appellant. 2. The learned PCIT erred in facts and in law in denying registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, only a few material facts need to be taken note of. The assessee before us is a society registered at Madras, on 28th November 1940, under Societies Registration Act 1880- now repealed and substituted, so far as the State of Tamilnadu is concerned, by the Tamilnadu Societies Registration Act 1975. Until the assessment year 1996-97, the assessee was granted an exemption, as a notified institution, under section 10(23) of the Act. Section 10(23), it may be mentioned, stands omitted as of now. On 12th February 1996, the Director of Income Tax (Exemption) Mumbai issued a certificate of registration under section 12A to the assessee, with effect from 1st April 1995, i.e. financial year relevant to the assessment year 1996-97. On 1st June 2006, and then on 21st August 2007, certain amendments were made to the Memorandum of Association of the assessee society. These amendments were examined by the Director of Income Tax (Exemptions), and, vide communication dated 28th December 2012, he informed the assessee that (i) when the objects of the institution, which are the basis of grant of registration are altered after grant of such registration, the very foundation of registration having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the amended memorandum of association etc and that the assessee does not respect the Tribunal by carrying out their suggestions/directions . Implicit in these observations was the stand of the Commissioner that once there is an amendment in the memorandum of association, the assessee should approach the Principal Commissioner for re-examination of eligibility for registration. Be that as it may, the matter was, as evident from the show cause notices and replies thereto, examined in detail, and the contention of the assessee all along was that these amendments were insignificant and had no impact whatsoever on the basic objects of the institution. It appears that the further proceedings were dropped in the matter, as the proposed action was not really taken by the Commissioner, and the registration obtained by the assessee under section 12 A remained intact. 6. It is in this backdrop that we have to take note of certain amendments in the memorandum of association and rules and regulations of the assessee institution. These amendments were on the recommendations of a Committee appointed by Hon'ble Supreme Court of India, and chaired by one of the former Chief Justices of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedures and necessary amendments in the Memorandum of Association and Rules Regulations on the matters set out in Paragraph 109 of the judgment dated 22nd January 2015..... The task assigned to the Committee is clear: recommend those changes in the Rules and Regulations of BCCI that will further the interest of the public at large in the sport of cricket, improve the ethical standards and discipline in the game, streamline and create efficiency in the management of the BCCI, provide accessibility and transparency, prevent conflicts of interest situations and eradicate political and commercial interference and abuse and create mechanisms for resolution of disputes and grievances. As the Supreme Court has reiterated that the BCCI is carrying out public functions - functions that govern the interests of the public - the necessary corollary is that BCCI is subject to the rigours of public law. This would mandate that it acts in line with the general principles of reasonableness and fairness, and also that it adheres to the basic principles of accountability and transparency. 7. Justice Lodha Committee submitted its very comprehensive report, making a large number of reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that any State Association does not undertake compliance with the above said directions, the directions contained in the orders of this Court dated 7 October 2016 and 21 October 2016 shall revive. 41. The Committee of Administrations is at liberty to submit a further report for such future directions as may be warranted and to secure compliance. 8. On 15th September 2018, i.e. also immediately after the above directions of Hon'ble Supreme Court as above having been given effect, the assessee institution filed an application in Form 10A seeking registration under section 12AA r.w.s. 12A(1)(b). That is how the Commissioner was seized of the matter with respect to continuance of the registration. 9. Learned Principal Commissioner, however, did not accept the registration request of the assessee. She began by noting that the date of original registration is 12.2.1996 by DIT(E) Mumbai and the date of modification of its objects has been shown as 21.8.2018 . It was then noted that clause (s) of the amended Memorandum of Association provided that to carry out any other activity which may seem to the BCCI capable of being conveniently carried out in connection with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption under section 13(8) in appropriate cases, the grant of registration is one time exercise. It was also submitted that while granting registration, what is to be considered is whether the objects of the trust are charitable in nature having regard to the established legal principles governing the concept of 'charity', while proviso to section 2(15) can only come into play while granting the exemption under section 11. Without prejudice to this line of argument, it was also emphasized that the activities of the BCCI, in any case, were well within the ambit of the expression 'charitable purposes' under section 2(15). It was further added that genuineness of the activities of the assessee are anyway not in doubt, and all that is to be seen, for the present purposes, is whether the amended objects are charitable or not. Elaborate submissions were made in support of the proposition that the activities of the assessee are wholly charitable, genuine and the element of profit, in organizing the IPL event, does not vitiate the predominant character of the assessee. As for the observation with regard to the insertion of the clause to carry out any other activity which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Principal Commissioner. She rejected the application for registration, and her findings in this regard can be summarised as follows: i. In paragraphs 4 and 5 at pages 13 and 14 of the impugned Order, after referring to section 12A and section 12AA, it has been observed that the Respondent has to satisfy herself regarding the objects of the Appellant and genuineness of its activities. ii. In paragraph 6 at page 14 of the impugned order reference has been made to the fact that the Appellant, despite opportunity, did not produce the audited Accounts for the assessment year 2018-19. iii. In paragraphs 7 and 8 at pages 14 to 16, reference has been made to the proviso to section 2(15) of the Act alongwith the necessary interpretation to be placed thereon with an observation that the fulfilment of the condition of the said proviso would be necessary to examine the objects and genuineness of the activities of the Appellant in terms of charitable purpose as defined under section 2(15) of the Act. iv. The entire discussion thereafter in paragraphs 9 to 12.3 from pages 16 to 34 is on the manner of the conduct of the IPL by the Appellant and streams of revenue derived ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was granted, the assessee nevertheless approached the Principal Commissioner in deference to the observations made by a co-ordinate bench to the effect that the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law . 11. The fact that the assessee did inform the Principal Commissioner, according to the learned senior counsel, of the changes in the Memorandum of Association should be seen in this light. Learned senior counsel, however, submits that once the assessee has moved the application, the Commissioner ought to have held that since there is no material change in the objects of the assessee institution, so far as entitlement to registration under section 12A is concerned, the assessee is entitled to registration. In any event, now that the registration has been declined by the learned Principal Commissioner, according to the learned senior counsel, we have to take a call on the correctness of her stand in doing so. It is once again submitted that her action is clearly erroneous and contrary to the scheme of the Income Tax Act. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the activity of the trust or institution, the only test should be whether the activities carried on by the assessee Institution are within the four corners of the objects or they go beyond it. d. Whether the proviso to section 2(15) of the Act can have no relevance for adjudicating the aspect relating to the genuineness of the activities of the Trust. Placing of reliance on this proviso for denying grant of registration under section 12A/12AA tantamounts to reading a condition in the said sections which does not exist. e. Assuming without admitting that the proviso to section 2(15) of the Act has any relevance while considering the present application, whether the predominant object pursued by the Appellant continues to be to control, regulate, encourage and promote the game of cricket and conduct of the IPL is an activity carried out in furtherance of the said object and not as a business. 15. The registration granted vide order dated 12th February 1996, a copy of which was placed before us at page 275 of the paper-book, was on the basis of memorandum of association dated 28th November 1940 . Unless, therefore, there are significant variations in the aforesaid mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these two documents. This statement, inter alia, gives the following comparison: THE BOARD OF CONTROL FOR CRICKET IN INDIA COMPARISON OF THE OBJECTS AS PER ORIGINAL AND AMENDED MEMORANDUM OF ASSOCIATION (MoA) Cl. no. Relevant clauses of MoA adopted in 1994 on the basis of which registration u/s 12A was granted Corresponding clauses of MoA as amended in 2018 in accordance with direction of the Supreme Court 1. The name of the Association is THE BOARD OF CONTROL FOR CRICKET IN INDIA and it shall hereafter be referred to as the BOARD The name of the Association is THE BOARD OF CONTROL FOR CRICKET IN INDIA and it shall hereafter be referred to as the BCCI 2. The objects of the Board are: The objects and purposes of BCCI are: (a) To control the game of Cricket in India and give its decision on all matters which may be referred to it by any State, Regional or other Association (a) To control and improve quality and sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by it, for carrying out the objects of the BCCI (k) To carry on any other activity which may seem to the Board capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value of, or render profitable any of the properties or rights of the Board (s) To carry out any other activity which may seem to the BCCI capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value or render profitable or generate better income/revenue, from any of the properties, assets and rights of the BCCI (l) To donate such sum or sums for such causes as would be deemed fit by the Board conducive to the promotion of the game of Cricket; the benefit of a Cricketer or his widow or children as the Board may deem fit; any other person who has served cricket or his widow or his children as the Board may consider fit (u) To grant/donate such sum/s for: Such causes as would be deemed fit by the BCCI conducive to the promotion of the gam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er thereof, for or towards, all or any of the objects of the BCCI (p)(ii) To appoint Committees, from time to time to organize matches for the achievement of the objects of the Board and to utilize the net proceeds thereof towards the implementation of the objects set out herein (n) To constitute Committees, from time to time, and entrust or delegate its functions and duties to such Committees, for achieving the objects of the BCCI (r) To take such action as may be necessary to co- ordinate the activities of affiliated Associations, Institutions and their Members in relation to the Board and amongst themselves (x) To co-ordinate the activities of members and institutions in relation to the BCCI and amongst themselves (s) To select teams to represent India in test matches, official or unofficial played in India or abroad, and to select such other teams as the Board may decide from time to time (g) To select teams to represent India in Test Matches, One Day Internationals, Twenty/20 matches and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and managerial side so that the Players can fully concentrate on the game; Registering all duly qualified agents to ensure that there is oversight and transparency in player representation; Offering appropriate remuneration of an international standard when representing the country on the international stage, and always recalling that national representation has priority over club or franchise No corresponding clause in the original objects (y) To create and maintain a central repository and database of all Cricketers along with their game statistics No corresponding clause in the original objects (aa)To provide a fair and transparent grievance redressal mechanism to players, support personnel and other entities associated with Cricket 3 The income, funds and properties of the Board however acquired, shall be utilised and applied solely for the promotion of the objects of the Board as set forth above to aid and assist financially or otherwise and to promote, encourage, advance and develop and generally to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause (y) Clause (bb) 19. Our careful perusal of the above chart, as indeed the object clauses in the two sets of memorandum of association, does not show any change in the present MoA which is contrary to the corresponding clause in the earlier MoA. In any event, these changes, as mentioned in the Justice Lodha Committee report and as approved by Hon'ble Supreme Court, stated to be changed that will further the interest of the public at large in the sport of cricket, improve the ethical; standards and discipline in the game, streamline and create efficiency in the management of the BCCI, provide accessibility and transparency, prevent conflicts of interest situations and eradicate political and commercial interference and abuse and create mechanisms for resolution of disputes and grievances Hon'ble Supreme Court, as noted by Justice Lodha Committee, has reiterated that the BCCI is carrying out public functions -- functions that govern the interests of the public -- the necessary corollary is that BCCI is subject to the rigours of public law, which mandates that the BCCI acts in line with the general prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Paper-book), 30.11.2016 (see pages 415 and 416 of the Paper-book), 13.11.2017 (see page 417 of the Paper-book) and 20.11.2017 (see page 418 of the Paper-book) were issued by the Respondent herein to cancer the registration earlier granted under section 12A of the Act on 12.02.1996. However, after considering the detailed submissions as made by the Appellant before the then Respondent on 14.12.2016 (see pages 419 to 429 of the Paper book), 11.12.2017 (see pages 497 to 505 of the Paper book), 14.12.2017 (see pages 506 to 533 of the Paper book and 18.12.2017 (see pages 534 to 546 of the Paper book), the Respondent has accepted the Appellant's claim as no order cancelling the registration has been passed till date. A bare perusal of the objects as per the Memorandum of Association prior to its amendment and after the amendment shows that except for some minor changes in language, the basic objects remains the same. Annexed hereto and marked as Annexure 'A' is a copy of the tabular chart detailing the objects as existing before and after the adoption of the amended Constitution. Therefore, the objects on the basis of which registration continued upto 08.08.2018 (i.e. befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y changes to bring out reforms in the functioning of the BCCI and specifically approved by Hon'ble Supreme Court to be for that purpose, cannot be termed to be the changes that dilute the fundamental objective of promoting the game of cricket, or said to be not in conformity with the objects of promoting the game of cricket all along espoused by the BCCI and as set out in the pre-amendment MoA. In this view of the matter, the condition precedent for invoking section 12A(1)(ab), in our humble understanding, is not fulfilled on the facts of the present case. 22. We may, at this stage, once again reiterate, with respect, the view of the co-ordinate bench as articulated in the assessee's own case (supra), that the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law , but then this requirement, in our humble understanding, does not necessarily extend to the filing of the fresh application of registration under section 12A(1)(ab) unless the amendments are such as not in conformity with the documents based on which registration was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal Commissioner, did not lead to cancellation of registration under section 12AA(3). We are, therefore, not really concerned with that aspect of the matter as on now. 24. In view of the above discussions, as also bearing in mind the entirety of the case, we are of the considered view that the learned Principal Commissioner erred in declining registration under section 12AA on the facts of this case; she ought to have held that the registration under section 12A dated 12 February 1996 not having been withdrawn or cancelled still holds good in law and in force. 25. In any event, however, entire basis of declining registration is invoking the proviso to Section 2(15) on the ground that the IPL activities are in the nature of commercial activities and cross the threshold limit specified in exceptions to the proviso to Section 2(15). It is, however, well-settled in law that so far as registration under section 12 AA is concerned, Section 2(15) has no application in the matter. Holding so, a co-ordinate bench of this Tribunal, in the case of Kapurthala Improvement Trust (supra) and speaking through one of us (Vice President), has observed as follows: 10. There is, however, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only the nature of the activity but also the level of activity which, taken together, determine whether this disabling clause can come into play. The safeguard against the objects of the trust being vitiated insofar as their character of 'charitable activities' is concerned, is inbuilt in the provisions of Section 13(8) which was brought into effect with effect from the same point of time when proviso to Section 2(15) was introduced i.e. with effect from 1st April 2009. Section 13(8) provides as follows: Section 13-Section 11 not to apply in certain cases. (8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year . 13. While introducing this amendment, Explanatory Memorandum to the Finance Bill 2012 fhttp://indiabudgetnic.in/budget2012-2013/ub2012-13/mem/meml.pdFI explained the reasons and backdrop of this legislative amendment as follows: Assessment of charitable organization in case commercial receipts exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is, therefore, proposed to amend.....section 13.....of the Act to ensure that such organization does not get benefit of tax exemption in the year in which it's receipts from commercial activities exceed the threshold whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded. This amendment will take effect retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent assessment years. (Emphasis supplied) 14. It is thus clear that the impact of the proviso to Section 2(15) being hit by the assessee will be that, to that extent, the assessee will not be eligible for exemption under section 11 of the Act. The mere fact that the assessee is granted registration under section 12 A or 12AA as a charitable institution will have no bearing on this denial of registration. As a corollary to this legal position, the fact that the objects of the assessee may be hit by the proviso to section 2(15) cannot have any bearing on the grant, denial or withdrawal of the registration under section 112AA. 15. It is also important to bear in mind the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that some of the objects may be hit by the first proviso to Section 2(15) but the assessee's receipts from such activities do not exceed specified threshold in a particular assessment year, the assessee will be subjected to undue hardship in the sense that while the assessee will be disentitled to exemption under section 11 due to denial of registration under section 12 A or 12AA which is sine qua non for admissibility of exemption under section 11. On the other hand, if the status of registration is granted to the assessee even when some of the objects may be hit by the first proviso to Section 2(15) and the assessee's receipts from such activities do exceed specified threshold, no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quant pereat, i.e., to make it workable rather than redundant. 18. The considerations about the possibilities of the first proviso to Section 2(15) c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 12AA(3) was held to be justified on the ground that the proviso to Section 2(15) was attracted on the facts of this case. It is thus contended that, to that extent, the decision of the co-ordinate bench does not hold good law. That plea, however, does not appeal to us. As learned senior counsel rightly points out, Hon'ble Kerala High Court has upheld the stand of the Tribunal on the ground that the activity specifically carried on by the assessee is the execution of contract awarded by the Indian Railways and this (activity) does not come within any of the objects professed by the assessee in its MoA . Once the activity of the assessee trust is held to be not for the objects professed in the MoA, the very justification for registration as a charitable institution ceases to hold good in law. In the entire operative portion of this judgment, which is reproduced below in its entirety, there is not even a whisper about the application of proviso to Section 2(15). Therefore, irrespective of what was observed by the Commissioner cancelling the registration or the Tribunal upholding the cancellation, this decision of Hon'ble Kerala High Court cannot be an authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tender had been awarded the work for a consideration agreed upon between the parties and carrying on of such work cannot be categorised as a charitable work merely because the poor or persons from marginsalised sections are given employment. The execution of the work awarded by the Railways, is not a public utility service carried on by the assessee and the mere fact that the poor are employed in such execution of contract awarded, would not make it a charitable purpose. 10. Further though the assessee is said to have provided employment to various people who are engaged in the actual cleaning work carried out in pursuance of the contract, there is absolutely no material placed as to the categories from which such employees were sourced. But for the mere assertion that the nature of the work would itself indicate that only poor people would come for the same, the assessee has not indicated anything about the source from which the assessee had employed such people. 11. The Tribunal correctly found that for cancellation of registration, there are two conditions to be satisfied; one that there is a registration granted earlier and the other the satisfaction of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motion of cricket, strictly speaking, it is not necessary for us to go into this aspect of the matter at this stage, as the impugned order is held to be vitiated in law on account of factors discussed hereinabove. We may, however, add that on the face of it merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in more paying sponsorships and greater mobilization of resources, the basic character of the activity of popularizing cricket is not lost. It is indeed possible that the predominant object remains the promotion of cricket but that activity is done in a more effective and financially optimal manner, and that there is no conflict in the cricket becoming more popular and the cricket becoming more entertaining. It results in providing significant economic opportunities to those associated with the holding of the IPL tournament and, in the process, enriching the resources of the assessee trust. As long as the object of promoting cricket remains intact, and that continues to be the predominant object, the assessee cannot be said to be not following the object of promoting cricket, just because the operational model of a cricket ..... 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