2017 (5) TMI 1094 - AT - Income Tax

Tribunal grants appeal for statistical review, remands registration cancellation issue.

MIG Cricket Club Versus Director of Income tax (Exemption) Mumbai And MIG Cricket Club Versus Assistant Director of Income tax (Exemption)

The tribunal allowed the appeals for statistical purposes only, restoring the issue of cancellation of registration to the DIT(E) for a fresh ... Registration u/s 12A cancelled - cancellation of registration as the activities of the assessee are in the nature of trade, commerce or business , and gross receipts are in excess of ₹ 10 lacs invoking newly inserted proviso to Section 2(15) of 1961 Act - Held that:- The activities of the assessee of Banquet Hall Hiring, Hospitality (Restaurants) and Permit Room (Bar) are in the nature of carrying on trade, commerce, or business for consideration, which are hit by proviso to Section 2(15) of 1961 Act. We further observe that the receipts from these activities, during the previous year relevant to the impugned assessment year 2009-10, are far in excess of minimum prescribed threshold limit. This requires detailed enquiry and examination by the Ld. DIT(Exemption) as to the various activities undertaken by the assessee over a period of time and its nexus with activity of rendering of trade commerce or business as contemplated and mandated by amended Section 2(15) of 1961 Act read in conjunction with significant observations made in the above order dated 14-2-2017 in North Indian Association (2017 (3) TMI 37 - BOMBAY HIGH COURT). Thus, enquiry and examination by learned DIT(E) is further required to arrive at a conclusion whether activities of the assessee are genuine or not in context of Section 11 of the Act read with amended Section 2(15) of the Act and breach of threshold limit over a period of time. The learned DIT(E) shall also examine whether services were only rendered to members or was it also rendered to non-members. The learned DIT(E) shall also examine every activity carried on by the assessee before concluding on merits as to whether activities of the assessee are hit by amended provisions of Section 2(15) of the Act. - Appeal filed by the assessee allowed for statistical purposes. Issues Involved:1. Reasonable opportunity of being heard and principles of natural justice.2. Consideration of binding precedents and facts of the case.3. Nature of activities as charitable or non-genuine.4. Retrospective effect of cancellation of registration.Issue-wise Detailed Analysis:1. Reasonable Opportunity and Principles of Natural Justice:The appellant argued that the DIT(E) erred by not granting a 'reasonable' opportunity of being heard as mandated by proviso to Section 12AA(3) and violated principles of natural justice, thereby denying the appellant its right of legal representation. However, this ground was not pressed by the appellant’s counsel and was dismissed as 'not pressed'.2. Consideration of Binding Precedents and Facts:The appellant contended that the DIT(E) did not consider the binding precedents cited by the appellant and failed to appreciate the facts of the case. The appellant highlighted that similar activities were considered charitable in nature in previous years and exemptions were granted under Section 11 of the Act by the Revenue and upheld by the Hon’ble Bombay High Court.3. Nature of Activities as Charitable or Non-Genuine:The DIT(E) treated the activities of the appellant as non-charitable on the basis of the newly inserted proviso to Section 2(15) of the Act, which came into effect from the assessment year 2009-10. The appellant's receipts from Banquet Hall Hiring Charges, Hospitality (Restaurants), and Permit Room (Bar) exceeded the threshold limit of Rs. 10 lakhs, thus falling under trade, commerce, or business. The DIT(E) cancelled the registration under Section 12AA(3) of the Act, stating that the activities were not genuine and were in breach of the trust's objects.4. Retrospective Effect of Cancellation of Registration:The appellant argued that the DIT(E) erred in giving the cancellation of registration a retrospective effect, which was prior to the date of the order and before the authority for passing such an order was vested by the Finance Act 2010. The tribunal noted that the activities of the appellant were consistent and known to the Revenue for several years, and the registration could not be cancelled merely due to the amendment in Section 2(15) of the Act.Tribunal's Decision:The tribunal restored the issue of cancellation of registration to the file of the DIT(E) for a de-novo determination on merits, considering the amended Section 2(15) of the Act and the decision of the Hon’ble Bombay High Court in the case of DIT(Exemption) v. North Indian Association. It was emphasized that a detailed enquiry and examination of the appellant's activities over time were required to conclude whether the activities were genuine and in accordance with the objects of the trust.Consequential Appeal:The appeal in ITA No.4638/Mum/2013, which was consequential to the cancellation of registration, was also restored to the file of the Assessing Officer for de-novo adjudication in light of the fresh decision to be passed by the DIT(E).Final Order:Both appeals, ITA No.602/Mum/2012 and ITA No.4638/Mum/2013, were allowed for statistical purposes only. The order was pronounced in the open court on 18th April 2017.