TaxTMI 
TaxTMI 
2015 (12) TMI 687
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....notice that the club is being run by an elite and affluent class of people and is for the exclusive benefit of such people. The facilities being provided by the club are beyond the reach of the common man. The detailed analysis was made by the learned Commissioner of Income Tax in show cause notice. It was further observed that the assessee club is indulged in the activities which are commercial in nature i.e. running of a bar and restaurant, advertisement and publicity, interest income, festival income, rental income, etc. Further, citing the judgment of the Hon'ble Supreme Court in the case of MCD Vs. Children Book Trust (1992) 3SSC 390, wherein the Hon'ble Court held that where a society or body is making systematic profit, even though that profit is utilized only for charitable purpose, it cannot be said that it could claim exemption. The learned Commissioner of Income Tax thus show caused the assessee to the effect that why not the registration granted to it under section 12A of the Act be rejected. 3. In reply to the said show cause, the assessee made detailed submissions time to time before the learned Commissioner of Income Tax. However, rejecting all the contentio....
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....of Income Tax be quashed. 6. The learned D.R. relied upon the order of the Commissioner of Income Tax and further submitted that the assessee club is indulged in the activities which are in the nature of trade or business and all the activities of the club are tainted with commercial objects. Therefore, since the objects of the club are for the benefit of general public while the club is providing services to affluent class only, therefore, it is not carrying on activities charitable in nature. Therefore, the registration granted to it under section 12A of the Act is rightly cancelled by the learned Commissioner of Income Tax. 7. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. Before adjudicating the issue in question, we would like to summarize the reasons given by the learned Commissioner of Income Tax in his order for cancellation of registration under section 12A of the Act. We have very carefully perused the order of the learned Commissioner of Income Tax running into 23 pages, which starts with stating the fact that the registration to the assessee club was granted ....
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....ceives substantial income from discount on sales. viii) The assessee club has earned substantial interest income also. ix) The accounts of assessee club are being maintained in a very casual manner. 8. After discussing all the above issues in detail stating the facts and figures of various years, the Commissioner of Income Tax further compared the data of two years i.e. assessment years 2011-12 and 2012-13 and held that the assessee club is not primarily working for the promotion of game of golf but in the garb, it is rampantly engaged in providing its members a platform for entertainment, enjoyment and providing all facilities that a multi-star resort can have. The learned Commissioner of Income Tax relied upon on the judgment of Hon'ble High Court of Uttarakhand in the case of CIT Vs. Queen's Educational Society, (2009) 319 ITR 160, whereby it has been held that the income accrued on account of activities in the nature of trade and commerce cannot be claimed as exempt, even if it is utilized for charitable purposes. In this view, in the said paragraph of his order, the learned Commissioner of Income Tax held that the activities of the assessee are not genuine and are....
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....e conditions. Therefore, the very first premises on the basis of which the learned Commissioner of Income Tax had cancelled the registration is factually incorrect. 11. At many places of his order, the learned Commissioner of Income Tax has made a mention of the proviso to section 2(15) of the Act and on perusal of the whole order, we see that the amendment brought out by the Finance Act, 2008 in section 2(15) of the Act has actually been one of the major reasons for the learned Commissioner of Income Tax to cancel the registration granted under section 12A of the Act. However, we may point out that the proviso to section 2(15) of the Act cannot be the basis for cancellation of registration under section 12A of the Act. The reliance placed by the learned counsel for the assessee on the order of the Amritsar Bench in the case of Kapurthala Improvement Trust (supra) is not out of place, whereby in very clear terms it has been held that the basis for cancellation of registration under section 12AA(3) of the Act can never be the proviso to section 2(15) of the Act as the applicability of proviso to section 2(15) of the Act can be taken care of only by the Assessing Officer during the ....
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....tion where in the garb of charity benefit to specific persons are being provided or no charity at all is being done or charity is being camouflaged for the purposes of some other ulterior motive. Therefore, the Commissioner of Income Tax while canceling the registration has to give a finding, if the activities of the trust are not genuine or these activities are not being carried out in accordance with the objects of the trust. This is a fact on record in the present case that there is no change in the objects of the society and the objects remain the same on the basis of which the registration under section 12A of the Act was granted to it. This is also a fact on record that the regular assessment of various assessment years of the assessee were going on and the order of the Hon'ble I.T.A.T. for assessment year 2008-09 is dated 30.7.2012, which is only four months prior to the issue of show cause under section 12AA(3) of the Act by the Commissioner of Income Tax. The assessment order, Commissioner of Income Tax (Appeals) orders and the orders of the I.T.A.T. for various assessment years are part of the Paper Book filed by the assessee and in all the years the activities of the....
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....earned Commissioner of Income Tax has not been able to make out a case that the activities of the trust are not genuine. 17. Whatever he has stated in his order may be relevant to the Assessing Officer at the stage of assessment proceedings but are not relevant for cancellation of registration granted under section 12A of the Act. If any of the activities of the club seems to be commercial in nature to the Commissioner of Income Tax, which is not a dominant activity of the assessee, it is for the Assessing Officer to consider while giving exemption under section 11 of the Act and not for the Commissioner of Income Tax for cancellation of registration once granted under section 12A of the Act. At most, this can be considered at the time of granting registration under section 12A of the Act but not for cancellation of the said registration. Further, it is an undisputed fact that the activities are recognized as being charitable consistently in all the years as is evident from various orders filed by the assessee in its Paper Book and the receipts which are the bone of contention for the Commissioner of Income Tax are actually intrinsically related and interconnected with the charita....