TaxTMI 
TaxTMI 
2016 (5) TMI 930
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....nd maintain other services and amenities and generally to do anything necessary or expedient for purposes of such development and for purposes incidental thereto." 2. The assessee had applied for registration on 02/03/2007, under section 12A which was rejected by the then Commissioner vide order dt. 27.09.2007. When the order declining registration was carried in appeal before the Tribunal, the grievance of the assessee was upheld and was thus granted registration u/s 12A of the Act, w.e.f. 01.04.2003 vide order dated 21.10.2010. Subsequently the definition of the term 'charitable purpose' provided in clause (15) of section 2 was amended by Finance Act, 2008 w.e.f. A.Y. 2009-10 and a proviso was included which stated that "advancement of any other object of general public utility" would not be a charitable purpose if it involved the carrying on of any activity in the nature of trade, commerce or business. The Ld. CIT held that the activities carried out by the assessee were in the nature of commerce or business and therefore fell under the exclusion provided in the first proviso to section 2(15). He therefore, held that the activities of the assessee were not for charitable purpo....
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....cing reliance on the order of coordinate benches of Hon'ble ITAT and Hon'ble High Courts as well. In doing so, the Ld. CIT-II has erroneously and illegally ignored the binding precedence on the identical issue. 8. Because the order is against law and facts. 4. Briefly stated in all the grounds raised, the assessee has agitated against the cancellation of registration under section 12AA(3) of the Act. 5. Before us Ld. AR argued at length, the gist of his arguments being that the power of cancellation of registration u/s 12AA(3) can be exercised only when the Ld.CIT is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects as available at the time of grant of registration. The proviso to section 2(15) cannot be applied to review / withdraw/ cancel registration u/s 12AA(3). Ld. AR stated that the assessee is carrying out activities in accordance with its objects and the receipts being earned by it are as prescribed by the state government, which the assessee has no power to change. 6. Ld. AR relied upon a number of case laws in support of its arguments: 1. CIT Vs. Varanasi Catholic Education Society ....
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....led since the assessee has been found to be carrying on activities in the nature of business and commerce and on account of the first proviso to section 2(15) the activities are no longer charitable in nature. Thus, registration in the present case has been cancelled on account of the first proviso to section 2(15) coming into play in the facts of the case. 10. We find that on the issue whether on the basis of amendment to section 2(15), the Commissioner has the power to cancel registration or not has been dealt by the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association Vs. DIT (Exemption) (2013) 40 tamann.com 250, deciding the issue in favour of the assessee. The Hon'ble High Court held that cancellation of Registration granted under section 12A could only be in terms of section 12AA(3) of the Income Tax Act, as per which if the Commissioner is satisfied that the activities of the institution are not genuine or they are not carried on in accordance with the trust / institution he could pass an order in writing cancelling the registration of such trust or institution. Thereafter, the Hon'ble High Court held that the power of cancellation has to be seen with ref....
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....s of the association, the Commissioner had rightly come to the conclusion that the assessee's registration was liable to be withdrawn. 45. "We do not accept the submission of learned Standing counsel appearing for the Revenue. As rightly observed by learned Senior counsel appearing for the assessee, the Revenue granted registration under Section 12AA of the Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting the registration, if the registration is to be canceled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exempti....
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....sfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessee's income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. The court further held at para 51 of its order that the question whether a particular income (being income from holding of maches in the impugned case) qualified under section 11 of the Act was not the same as the activity being genuine or not and which was the issue to be addressed for the purpose of cancelling registration under section 12AA(3) of the Act. The court further held that undeniably the Commissioner having satisfied himself about ....
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.... the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal's view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with t....
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....o to section 2(15) was introduced i.e. w.e.f. 01.04.2009, which provides for denial of exemption of income u/s 11 in the year in which the first proviso becomes applicable. Thus, legally the impact of the proviso to section 2(15) being attracted is that the assessee will not be eligible for exemption u/s 11 of the Act. As a corollary to this legal position, registration u/s 12AA cannot be impacted by the object being hit by the first proviso to section 2(15). This view has been upheld by the Amritsar Bench of ITAT in the case of Kapurthala Development Trust Vs. CIT in ITA No 732 of 2013 dt. 11/06/2015 wherein it was held as follows: "10. There is, however, a much more fundamental a reason for the assessee succeeding in this appeal. In our considered view, the considerations with respect to the first proviso to Section 2(15) coming into the play and, for that reason, the objects of an assessee trust or institution being held to be not covered by the definition of 'charitable purposes', have no role to play in the matters relating to registration of a trust or institution under section 12A or 12AA- whether in respect of granting or declining of a registration or in respect of cancel....
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....) 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 (http://indiabudget.nic.in/budget2012-2013/ub2012-13/mem/mem1.pdf) explained the reasons and backdrop of this legislative amendment as follows: Assessment of charitable organization in case commercial receipts exceed the specified threshold Sections 11 and 12 of the Act exempt income of any charitable trust or institution, if such income is applied for charitable purposes in India and such institution is registered under section 12AA of the Act. ............... Section 2(15) of the Act provides definition of charitable purpose. It includes "advancement of any other object of general public utility" as charitable purpose provided that it does not involve carrying on of any activity in the nature....
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....ly in relation to the assessment year 2009-10 and subsequent assessment years. (Emphasis by underling supplied by us) 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 12AA. 15. It is also important to bear in mind the fact that in terms of the second proviso to Section 2(15), which was introduced by the Finance Act 2010 with retrospective effect from 1st April 2009, the legal prescription set out in first proviso to section 2(15) cannot come into play "if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year". Clearly, therefore, in order that the benefits under section 11 are ....
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....tion 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 I.T.A. No. 732 (Asr) of 2013 Assessment year: 2009-10 Page 11 of 12 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 quam pereat, i.e., to make it workable rather than redundant. 18. The considerations about the possibilities of the first proviso to Section 2(15) coming into play affecting the grant, decline or withdrawal of registration under section 12AA will thus lead to wholly avoidable undue hardships to the assessee, will be unworkable in practice and be contrary to the scheme of the Act. 19. In view of the above discussions, in our considered view, the considerations....