2018 (9) TMI 713 - HC - Income Tax

High Court rejects Revenue's appeal on trust registration cancellation, admits appeal on object clause amendments.

The High Court of Bombay declined to entertain the Revenue's appeal challenging the Tribunal's decision favoring the Respondent in a case regarding the ... Registration granted under Section 12A - whether benefit of exemption would continue even after the assessee society was found to be regularly involved in holding various commercial tournaments on behalf of BCCI and receiving payment from BCCI for TV and other rights? - Held that:- Issue stands concluded against the Revenue and in favour of the Respondent by the decision of this Court in the case of Director of Income Tax (Exemptions) Vs. Khar Gymkhana [2016 (6) TMI 489 - BOMBAY HIGH COURT] and The Commissioner of Income Tax – II, Thane Vs. The Mumbai Metropolitan Regional Iron and Steel Market Committee [2017 (7) TMI 920 - BOMBAY HIGH COURT]. Appeal is admitted on substantial question -(iii) “ Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that even after addition to the objects clauses made without intimation to the department, the registration cannot be ipso facto cancelled in terms of Sec. 12AA(3) of the Act, without appreciating the fact that registration granted under Section 12A and the benefits flowing therefrom, cannot continue after amending the objects without the approval of the competent authority as the registration granted is to be objects prior to such amendment”? Issues:1. Challenge to the Tribunal's order allowing the Respondent's appeal against the cancellation of trust registration under Section 12AA(3) of the Income Tax Act.2. Substantial questions of law raised by the Revenue regarding the continuation of registration post-commercial activities, invoking Section 12AA(3), and impact of object clause amendments on registration validity.Analysis:1. The High Court of Bombay heard an appeal challenging the Tribunal's decision that favored the Respondent, allowing their appeal against the cancellation of trust registration under Section 12AA(3) of the Income Tax Act for AY 2009-10 onwards. The Revenue contested this decision through an appeal under Section 260A of the Act.2. The Revenue raised substantial questions of law for consideration, primarily focusing on the impact of the trust's involvement in commercial activities on the continuation of registration under Section 12A. The first question queried whether the registration could persist despite the trust engaging in activities that could be deemed as services to trade, commerce, or business, falling under the proviso to Section 2(15) introduced from April 1, 2009.3. The second question pertained to the Commissioner's authority to invoke Section 12AA(3) due to the trust's primarily commercial activities in Maharashtra under BCCI's control, potentially violating the conditions specified in the said section regarding the genuine pursuit of trust objectives.4. Upon analysis, the Court noted that the questions raised by the Revenue were previously addressed in other judgments, specifically citing cases such as Director of Income Tax (Exemptions) Vs. Khar Gymkhana (2016) 385 ITR 162 (Bom) and Commissioner of Income Tax – II, Thane Vs. Mumbai Metropolitan Regional Iron and Steel Market Committee ITA No. 43 of 2015. Consequently, the Court concluded that these questions did not present new substantial legal issues and thus declined to entertain them.5. However, the Court admitted the appeal on the third question, which focused on the impact of amendments to the trust's object clauses on the validity of registration under Section 12AA(3) of the Act. This issue remained open for further deliberation and examination by the Court.6. As a procedural directive, the Registry was instructed to provide a copy of the Court's order to the Tribunal to ensure the availability of relevant papers and proceedings related to the ongoing appeal.7. Lastly, the Respondent's counsel waived the service, indicating their acknowledgment and acceptance of the legal proceedings and developments in the case.