2014 (12) TMI 435 - AT - Income Tax

Assessee's Appeals Granted: Registration Restored, Order Set Aside

Maharashtra Cricket Association Versus Commissioner of Income Tax - I, Pune.

The Tribunal allowed both appeals of the assessee, restoring the registration under section 12A and setting aside the order passed under section 263. The ... Cancellation of registration u/s 12A(a) – Validity of exercise of jurisdiction by the Commissioner u/s 12AA(3) – Conditions precedent for invocating the power of cancellation contained in section 12AA(3) of the Act are fulfilled or not – Held that:- The significance of the registration granted to the assessee u/s 12A of the Act lies in the fact that it entitles the assessee to claim exemptions under section 11 of the Act, of course subject to the fulfillment of other conditions prescribed - in order to cancel the registration already granted, the Commissioner ought to be satisfied on two counts – firstly, that the activities of the trust or institution are not genuine; and, secondly, that the activities are not being carried out in accordance with the objects of the trust or the institution - power of the Commissioner to cancel the registration u/s 12AA(3) of the Act is not without fetters, and is rather circumscribed by the conditions prescribed - a statutory authority has no power, jurisdiction or discretion to go beyond the statutory provisions - no power can be assumed in the absence of any specific provision – relying upon The Commissioner of Income Tax-I, Madurai. Versus Sarvodaya Ilakkiya Pannai [2012 (2) TMI 160 - Madras High Court] - It is only on 07.08.2009 that a notice was issued by the Commissioner u/s 12AA(3) of the Act pointing out that assessee was promoting sport activity on a commercial basis by holding various tournaments of BCCI viz. Ranji Trophy Matches, World Cup Trial Matches, Twenty-Twenty Tournaments, etc. for which BCCI was making payments to assessee. According to the Commissioner, the aforesaid was a commercial activity so as to be hit by the proviso to section 2(15) of the Act as inserted by the Finance Act, 2008. As per the Commissioner, the activities of the assessee do not qualify to fall within the meaning of charitable purpose as per proviso to section 2(15) inserted with effect from 1.4.2009 - such an objection cannot be the basis of invoke section 12AA(3) so as to cancel the registration already granted to the assessee u/s 12A - registration already granted to the assessee could not have been re-visited by the Commissioner on the basis of the reasoning aforesaid, since his power to cancel registration u/s 12AA(3) was confined to the examination as to whether the activities of the assessee society/association are genuine or that the same are not being carried out in accordance with the stated objects - action taken by the Commissioner does not fall within the parameters of section 12AA(3) of the Act and the order is bad in law. The Commissioner has merely noted that there is an addition in objects clause, which has not been intimated to the Department and therefore the registration is required to be cancelled - in the absence of any finding that how the additional objects vitiate the registration earlier granted u/s 12A of the Act, the cancellation cannot be effectuated – thus, the order of the Commissioner is set aside and the registration granted to the assessee u/s 12A is to be restored – Decided in favour of assessee. Validity of order of CIT u/s 263 – Commissioner directed AO to make fresh assessment – Held that:- The AO specifically required the assessee to explain the subsidy received from BCCI of ₹ 21 crores along with its purpose and the assessee was also required to explain as to why the same may not by taxed in view of the amended section 2(15) of the Act - the AO made an active and conscious examination of the facts relating to subsidy by way of share in T.V. rights received from BCCI even in terms of the amended provisions of section 2(15) of the Act - the charge made by the Commissioner that the AO accepted the claim of the assessee for exemption u/s 11 of the Act with respect to the subsidy by way of share in T.V. rights received from BCCI without making enquiries cannot be upheld. It is difficult to uphold the charge made by the Commissioner of non application of mind by the AO – AO examined the case of the assessee for grant of exemption u/s 11 of the Act in the context of the advent of new cricketing tournament, namely, T-20 tournament, etc. - no such tournaments have been conducted by the assessee during the year under consideration - it would have been appropriate for him to put such discussion in the body of the assessment order itself - on the preliminary issue itself, the order of the Commissioner is set aside – Decided in favour of assessee. Issues involved:1. Cancellation of registration under section 12A of the Income Tax Act, 1961.2. Applicability of amended provisions of section 2(15) of the Income Tax Act, 1961.3. Non-intimation of changes in the objects clause to the Department.4. Examination of the nature of subsidy received from BCCI.5. Revisionary jurisdiction under section 263 of the Income Tax Act, 1961.Detailed Analysis:1. Cancellation of Registration under Section 12A:The Commissioner cancelled the registration granted to the assessee under section 12A(a) of the Act from the assessment year 2009-10 onwards. The primary grievance of the assessee was that the Commissioner erred in exercising his jurisdiction under section 12AA(3) of the Act without any factual or legal justification. The Commissioner's action was based on the grounds that the activities of the assessee were in the nature of trade, commerce, or business and thus hit by the amendment to section 2(15) of the Act by the Finance Act, 2008, and that the assessee did not intimate changes in the objects clause to the Department.2. Applicability of Amended Provisions of Section 2(15):The Commissioner held that the activities of the assessee, such as holding various tournaments for which payments were received from BCCI, were commercial in nature and thus not charitable under the amended section 2(15) of the Act. The Tribunal, however, noted that section 12AA(3) permits cancellation of registration only if the activities are not genuine or not carried out in accordance with the objects of the trust. The Tribunal concluded that the Commissioner's perception based on the amended section 2(15) did not fall within the scope of section 12AA(3) and cited similar rulings from other cases to support this view.3. Non-intimation of Changes in Objects Clause:The Commissioner also cancelled the registration on the ground that the assessee did not intimate changes in the objects clause to the Department. The Tribunal observed that mere non-communication of changes cannot be a ground for cancellation unless it is shown that the changes result in activities that contravene the charitable purpose. The Tribunal found no such adverse finding by the Commissioner and held that the additional objects did not violate the charitable nature of the assessee's activities.4. Examination of Nature of Subsidy from BCCI:The Commissioner noted that the Assessing Officer failed to examine the nature of the subsidy received from BCCI and its applicability under the amended section 2(15). The Tribunal found that the Assessing Officer had indeed made specific enquiries regarding the subsidy and its nature, and the assessee had furnished detailed explanations. The Tribunal concluded that the assessment order was not made without application of mind and thus could not be held erroneous on this ground.5. Revisionary Jurisdiction under Section 263:The Commissioner invoked his revisionary power under section 263, stating that the assessment order was erroneous and prejudicial to the interests of the Revenue due to the failure to examine the nature of the subsidy and the changes in the objects clause. The Tribunal, however, found that the Assessing Officer had made necessary enquiries and applied his mind to the issues. The Tribunal emphasized that an assessment order cannot be held erroneous merely because it does not contain an elaborate discussion if the record shows that the Assessing Officer had made enquiries and the assessee had furnished detailed explanations. Consequently, the Tribunal set aside the Commissioner's order and restored the assessment order.Conclusion:The Tribunal allowed both appeals of the assessee, restoring the registration under section 12A and setting aside the order passed under section 263. The Tribunal held that the Commissioner's grounds for cancellation and revision were not within the scope of the respective sections and that the Assessing Officer had applied his mind to the relevant issues.