TaxTMI 
TaxTMI 
2018 (1) TMI 134
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..../44 of 1960-61. The assessee association filed an application in Form No.10A on 31.03.2003 seeking registration u/s.12A of the Act before the CIT, Cuttack Charge Cuttack. However, the CIT, Cuttack Charge, Cuttack has neither granted the registration nor rejected the application filed by the assessee in Form No.10A on 31.03.2003. Survey operations were conducted in the premises of M/s Orissa Cricket Association along with search and seizure operations in the residential premises of the Honorary Secretary of Orissa Cricket Association on 28.03.2006 and demands were raised for the AYs. 2000- 01 to 2006-07 during the course of assessments and the same were confirmed by the CIT(A). The assessee preferred second appeal against the orders of AO before Tribunal and pleaded that the application filed on 31.03.2003 seeking registration u/s.12A of the I.T.Act, 1961 is still pending with the Competent Income Tax Authority for consideration. The Tribunal accepted such plea put forth by the assessee association and set aside the assessment orders framed for the AYs. 2000-01 to 2006-07 for examination after the pending petition filed by the association u/s.12A of the Act is disposed of by the ....
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....the Tribunal to recall its earlier order in ITA No.232/CTK/2010 dated 27.06.2014 in the light of the Hon‟ble Supreme Court Judgment in the case of CIT, Kanpur & Ors vs. Society for the Promotion of Education Allahabad, Civil Appeal No.1478 of 2016, SLP (C) No. 9705 of 2009 and requested to hold the proceedings for Registration u/s.12AA of the IT, Act, 1961 until the said petition is disposed of by the Tribunal. Accordingly, the case was reposted on 14.06.2016 at Camp office Bhubaneswar. Shri Diganta Das, Advocate of the assessee association appeared for hearing on 14.12,2015 and requested for adjournment of hearing as the petition filed by the association before the Tribunal was not disposed of, considering the submissions of the assessee association, the case was reposted to 10.08.2016, however, the assessee requested for adjournment of hearing vide letter received on 17.08.2016. The Tribunal vide order in MA.No.03/CTK/2016 (arising out of ITA No.232/CTK/2010) dated 19.08.2016, rejected the miscellaneous petition filed by the assessee association. In this connection, the assessee association was required to appear for hearing before the Commissioner of Income Tax(E), Hyde....
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....irs of the association, in violation of the objects of the association and the provisions of section 13 of the Act. Though these provisions have to be examined by the AO during the assessment, the information available on record, which clearly evidenced the violations of provisions of section 13 of the Act, cannot be ignored while considering the association for granting registration u/s.12AA of the Income Tax Act, 1961. Further, the CIT(E) observed that on analysis of the Income and Expenditure statements filed by the assessee association, It is found that the receipts are in the form of fees from affiliated clubs and institutions, rental income from hiring out of plant and machinery like generators and to a substantial extent the receipts comprised of sale of tickets in respect of various cricket matches and various infrastructure subsidy and other receipts classified as corpus fund from BCCI and the expenses were comprised of grants given to district level associations, institutions and clubs for conducting central level cricket matches and expenditure relating to national level matches such as Ranji Trophy, Duleep Trophy, Deodhar Trophy, Inter state tournaments for players u....
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....itten in Memorandum of the Association. The CIT(E) observed that the he was satisfied that the activities of the association are not genuine and charitable based on facts of the case. Therefore, he rejected the application dated 31.03.2003 filed by the assessee in Form No.10A. 4. Ld. AR of the assessee Shri S.K.Tulsiyan, Advocate appeared and filed written submissions which read as under :- The appellant was registered under the Societies Registration Act, 1860 on 08/03/1961 under Registration No. 346/44 of 1960-61, having its registered office at Barabati Stadium, Cuttack. A copy of the said Certificate of Registration is enclosed at page no. 01 of the paper book filed. The appellant had been created for the promotion, encouragement, growth and diffusion of knowledge in relation to games and sports with special emphasis on cricket in the state of Orissa and to take all steps necessary to assist the citizens of Orissa to develop their physic and have a healthy mind and a healthy body and to subscribe to become a member of any other Association or club whose objects are similar. The appellant had been allowed exemption u/s 10(23) of the Income Tax Act, ....
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....Hon'ble ITAT that its Application filed u/s 12A of the Income Tax Act, 1961 was still pending before the Ld. CIT, Cuttack for consideration which was not disposed off by his goodself till that date for reasons best known to him and until such Application was disposed off, the findings of the Assessing Officer/first appellate authority on the quantified assessable total income for the concerned Assessment Years could not be adjudicated upon by the Hon'ble ITAT. Thereafter, considering the submissions made by the appellant and being convinced by the plea of the appellant, the Hon 'ble ITA T had set aside the Assessment Orders framed by the Assessing Officer and had directed the Assessment Orders to be re-framed after the disposal of the pending petitions u/s 12A of the Income Tax Act, 1961. Consequent to the above, petition was filed by the appellant before the Ld. CIT, Cuttack vide letter 25/0312008 (copy enclosed at pages 60 to 61 of the paper book). While reiterating the pendency of the original Application filed on 3110312003, the appellant also submitted the main objects of the association. It would be of relevance here to mention that unde....
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.... Pursuant to the said Order of the Ld. CIT, appeal was filed by the appellant before the Hon'ble ITAT, Cuttack and detailed Submission dated 08/0312011 (copy of the written submission of the appellant enclosed at pages 128 to 174 of the paper book) was filed before the Bench reiterating the submissions made before the Ld. CIT, Cuttack. The point regarding the appellant's application filed in Form No. 10A not being disposed off by the Ld. CIT within 6 months of filing the application as per section 12AA(2) of the Income Tax Act, 1961 was raised by the appellant before the Hon'ble ITAT. However the Hon'ble ITAT, Cuttack influenced by the Hon'ble Orissa High Court's decision in the case of Srikhetra, A.C. Bhakti Vedanta Swami Charitable Trust vs. ACIT, WP(C) 12347 of 2005 which held that "In our view the period of six months as provided in sub-section (2) of Section 12AA is not mandatory" passed its Order on 27/06/2014 vide ITA No. 232/CTK/2010 without directing grant of registration to the appellant, setting aside the order of the Ld. CIT, Cuttack, restored the issue to the file of the CIT with the following directions; to look into the m....
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....d on that date. (page 36 of order) The Hon'ble ITAT has through paras 5.5 to 5.9 of its order discussed the provisions of section 2(15) as it existed prior to the amendment and the rationale behind such amendment. The Hon'ble ITAT in view of all the discussions, has held that the amendment to section 2(15) of the Act is not retrospective in operation and therefore, on that basis, the Id. CIT cannot reject the application for registration, provided the Assessee complies with all other conditions. The Hon'ble IT AT further observed that if the Ld. CIT thinks that the Assessee is hit by the proviso to Sec. 2(15) w.e.f 1.4.2009, he can pass Order u/s 154 of the Act, rectifying the Order granting registration to the assessee as that will tantamount to a mistake of law apparent on record from that date.(para 5.9 page 42) The Hon'ble ITAT has held that provisions of Sec. 12AA(1)(a) & (b) of the Act mandates that when a charitable trust/institution makes an application for registration, the CIT at this stage is not required to examine whether the Applicant trust had applied any of its income for charitable purpose or not. (para 5.10) At the s....
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....cation, then the registration shall be deemed to have been granted to the trust u/s 12AA of the Income Tax Act, 1961, therefore the appellant stood registered u/s 12AA of the Income Tax Act, 1961 since its application for registration filed on 31/03/2003 (w.e.f 01/04/1997) had not been disposed off within six months of filing the application i.e. by 30th September, 2003. Upon hearing the appellant, the impugned order dated 26/05/2017 u/s 12AA(1)(b)(i) of the Income Tax Act, 1961 was passed by the Ld. CIT(E), Hyderabad denying the appellant registration as a charitable trust u/s 12AA of the Income Tax Act, 1961 on the following alleged premises: Incriminating documents and books of accounts were impounded during the search and seizure operation conducted in the residential premises of the appellant's Honorary Secretary and tax demand for the block period [A.Y.s 2000-01 to 2006-07] were raised by the AO which were subsequently confirmed by the CIT(A). The incriminating documents and books of accounts impounded during the search and seizure operations have brought out the fact that the functioning of the appellant were conducted in a manner so as to conf....
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....statutory period of six months as prescribed by section 12AA(2) of the Income Tax Act, 1961 for passing orders either refusing/granting registration to applicants filing application uls 12A of the Act, within six months of filing an application, is not mandatory. However subsequently, the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax, Kanpur & Ors. vs, Society For The Promotion Of Education, Allahabad dated 16/02/2016 reported in [2016] 382 ITR 6 (SC) held that once an application u/s 12A of the Income Tax Act, 1961 for registration of a trust has been made before the CIT as per Rule 17A and the same is not disposed off within six months of making the application, then the registration shall be deemed to have been granted to the trust u/s 12AA of the Income Tax Act, 1961. The above decision of the Hon'ble Supreme Court of India having reversed the Orissa High Court's decision in the case of Srikhetra, A.C. Bhakti Vedanta Swami Charitable Trust (supra), (in view of which the Hon'ble ITAT, Cuttack denied to grant the appellant registration u/s 12AA of the Income Tax Act, 1961), the appellant is deemed to be registered u/s 1....
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.... on receipt of application for registration u/s 12A of the Act has to call for documents or information from the trust/institution to verify the genuineness of the activities of the trust/institution and he has to satisfy himself about the objects of the trust/institution. Further Rule 17 A of the Income Tax Rules, 1962 lays down how an application for registration of Charitable or Religious Trust is to be made. Rule 17 A of the Income-Tax Rules, 1962, provides as under: "17 A. An application under Clause (a) of Section 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form No.10A and shall be accompanied by the following documents, namely:-- (a) where the trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof, and where the trust is created, or the institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof: Provided that if the instrument or document in original cannot conveniently be ....
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....hat it was duly notified by the Central Government in the official gazette having regard to the fact that it has, as its objects the control, supervision, regulation or encouragement of the game of cricket in India. For such Notification post amendment vide Finance Act, 1992 w.e.f. 01/04/1992, the appellant was required to make an Application for identification as a sports Body for its income qualifying exemption u/s 10(23) of the Act. The Central Government before notifying the Association under this clause called for documents including Audited Accounts, information from the Association to satisfy itself about the genuineness of its activities and conducted necessary enquiry as they thought fit. This can be seen from the requirement of section 10(23) as it existed on 01/04/1992. The copy of the Notification issued by the Government of India, Ministry of Finance, Department of Revenue, New Delhi on 25/11/1991 and notified vide Notification No.8945 is enclosed at page 40 of the paper book. Further the appellant is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC having as its primary object as, - "the promotion, growth, en....
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....late 'Representative Matches' in Orissa and outside, by teams representing the Association and to select teams to represent the Association and State of Orissa and to provide incentive in cash/kind to players, Coaches, Managers and Teams for their excellence or for arrangement of competitions etc. j- To encourage the formation of Clubs, Organisations and District Cricket Association for the control of the game of Cricket in such territory as is or may be assigned to them by the Association. k. To foster the spirit of sportsmanship amongst students and members of affiliated organizations. I. To maintain a panel of Umpires and to do such acts as may be necessary for this purpose (particularly for good supervision and control of game). m. To arrange, organize, authorize or control League and Knock- out tournaments and other representative matches, including matches with other States and Countries. n. To frame, add, alter, maintain and enforce rules, bye-laws and regulations for the control and governance of the game of Cricket in Orissa and to maintain discipline among it members and among players, officials and affiliated organizat....
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....d out by the appellant in pursuance of its objectives: Conducting of cricket matches in the nature of league and knock out tournaments. Conducting cricket tournaments in the nature of district, national and international level tournaments Conducting Junior Inter State Tournament - under 22 years, under 25 years, under 27 years, under 17 years, under 15 years, under 16 years, under 19 years and under 14 years. The appellant also provides grants to District Level Associations, Institutions and Clubs, for up keeping turf wickets for conducting matches. Conducting of particular Tournaments like the Ranji Trophy, Duleep Trophy, Deodhar Trophy, C.K. Nayudu Tournament, Cuttack League Tournament, Inter Club Cricket Tournament and Ranji Trophy Multi days Tournament. Conducting of Inter district tournaments like the Kalahandi Cup, Junior under District Tournament - under 22 years, under 16 years, under 19 years and under 14 years, Conducting of Inter school cricket tournament, Inter College cricket tournament, State level Inter School Cricket Tournament and State Level Inter Club cricket tournament. The appellant had als....
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....egarding the appellant's activities and finding them to be in conformity with section 10(23) of the Income Tax Act, 1961, the appellant's registration u/s 12AA of the Income Tax Act, 1961 on a valid Application made u/s 12A should have been automatic. However the Ld. CIT(E) has refused registration to the appellant u/s 12AA of the Income Tax Act, 1961 vide his order dated 26.05.2017 even after the appellant's objectives are held to be charitable and requirements for grant of registration u/s 12AA of the Income Tax Act, 1961 stood satisfied in the appellant's case, on the basis of various allegations. Herein the appellant would like to place reliance on the following judicial pronouncements: The Hon'bIe Karnataka High Court in the case DIT(E) vs. Meenakshi Amma Endowment Trust reported in [2013] 354 ITR 219 (Kar) held the following: "5. On a perusal of the records we note that the trust was formed on January 23, 2008, and within a period of nine months they had filed an application under section 12A for issuance of the registration claiming exemption. The fact that the corpus of the trust is nothing but the contribution of Rs. ....
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..... All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17 A and whether Form 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not At this stage, it is not proper to examine the application of income. " The Hon'ble ITAT, Kolkata in the case of Maa Kamakhya Narmadeshwar Educational Charitable Trust vs. CIT(E), ITA Nos. 355 & 356/Kol/2017 held the following: "We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has relied on the decision of Hon 'ble Delhi High Court in the case Director of Income tax vs Foundation of Opthalmic & Optometry Research Education Centre (ITA 1687 12010 dated 16.12.2010) in support of the assessee's case. In the said case, the application of the assessee for registration u/s 12AA was rejected by the DIT (Exemption) on the ground that no charitable activity had in fact taken place since the society was a newly established one by relying on the decision of Hon 'ble Kerala High Court in the case of Self Employer Servic....
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....use (U) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A. 10. Facially, the above provision would suggest that there are no restrictions of the kind which the Revenue is reading into in this case. In other words, the statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself/or registration. 11. If the Revenue's contentions are correct then, necessa....
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.... the block period [A.Y.s 2000-01 to 2006-07] were raised by the AO which were subsequently confirmed by the CIT(A) and such incriminating documents and books of accounts impounded during the search and seizure operations have brought out the fact that the functioning of the appellant were conducted in a manner so as to confer certain financial benefits/gains to the executives managing the affairs of the appellant, in violation of section 13(1)( c) of the Income Tax Act, 1961. The above being one of the alleged premises of the Ld. CIT(E) for refusing the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 it is being submitted that section 13(l)(c) of the Income Tax Act, 1961 can be invoked only at the stage of assessment and not at the stage of granting registration. In fact the Ld. CIT(E) has himself accepted and acknowledged this in page 5 para 9 of the order passed by him on 26.05.2017. Herein the appellant would like to submit that its application filed for grant of registration u/s 12AA of the Income Tax Act, 1961 was set aside to the Ld. CIT(E) by the Hon'ble ITAT, Cuttack on 27/06/2014 in ITA No. 232/CTK/2010 with the specific di....
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....e case of Pt. Ram Shanker Misra Trust (supra) to hold that the expenditure incurred by a trust for the benefit of one community is an expenditure incurred on a public charitable object still holds the field notwithstanding the provisions contained in section 13(1)(b) since the definition of the term "charitable purpose" given in section 2(15) continues to remain the same. The provisions of section 13(1) are thus not directly relevant in this regard. On the other hand, the said section begins with the words "Nothing contained in section 11 or section 12 shall operate so as to exclude, from the total income of the previous year, of the person .... " which clearly envisages operation of section 11 or section 12 before the provisions of section 13 can be applied or invoked in a given case. It also shows that the said provisions can be applied or invoked only at the time of computation of total income of the previous year of the person who is claiming exemption under section 11 or section 12. Both these situations contemplated in section 13 can arise only and only if registration under section 12A is granted to the said person. If the same is not granted and the person is refused the re....
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....aritable. In that view of the matter, we set aside his impugned order and direct that registration applied for by the assessee-trust under section 12A be granted to it. " The above judicial pronouncement thus clearly explains the law with regard to grant of registration u/s 12AA of the Income Tax Act, 1961 and the application of section 13(1) of the Income Tax Act, 1961 in connection to it. In view of the above the Ld. CIT(E) denying to grant registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 13(1) of the Income Tax Act, 1961 is bad in law and cannot be a basis for refusal of registration Thus the Ld. CIT(E) having refused the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 13(1)(c) of the Income Tax Act, 1961 (even after accepting that the law does not permit him to invoke the said provision at the stage of granting/refusing registration), has acted in sheer disregard and violation of the law and the direction of the Hon'ble ITAT, Cuttack and hence the impugned action of the Ld. CIT(E) is bad in law and cannot be a basis for denying registration to....
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....ed at page 281 of the paper book. Therefore, whether the receipts from BCCI were rightfully considered as a part of 'corpus funds' or not by the appellant as per section l1(l)(d) of the Income Tax Act, 1961 is a subject matter of assessment of a trust registered under the Income Tax Act, 1961. Thus the Ld. CIT(E) having refused the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 11(1)(d) of the Income Tax Act, 1961 has acted in violation of the law and sheer disregard of the Hon'ble ITAT, Cuttack's direction and hence the impugned action of the Ld. CIT(E) is bad in law and cannot be a basis for denying registration to the appellant u/s 12AA of the Income Tax Act, 1961. However when a point regarding the same has been raised, without prejudice to the above, the appellant would like to submit that all the receipts from BCCI for all the respective years has been specifically directed by BCCI to be treated as part of the corpus by the appellant and regarding receipt of subsidy for infrastructure, it has been directed to be treated separately. Also evidence regarding the same (being a co....
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....14 and 15 of this submission above) which are in consonance with its objectives as enshrined in clause 3 of its MOA and further evidencing the same has also enclosed the Activity reports at pages 473 to 573 of the paper book. Therefore the Ld. CIT(E)'s allegation that no charitable activities were untaken by the appellant is factually incorrect and hence cannot be relied upon. Thereafter with regard to the Ld. CIT(E)'s allegation regarding the appellant generating income by selling tickets and letting out the infrastructure facilities, it is being submitted before Your Honours' that tickets for matches are sold by it only when international cricket matches are conducted at the Barabati stadium and not for any other cricket matches conducted of National, district, school or college levels. Further International cricket matches are usually conducted once a year or at the most twice whereas the stadium requires maintenance throughout the year for which the appellant incurs a huge expenditure since it includes maintaining the ground, floodlight, display board, security, sports equipment, gymnasium in the stadium so as to provide players of international standards and r....
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.... would like to submit that for the F.Y.s 2002-2003 to 2008-2009, in addition to receipt of proceeds from sale of tickets of cricket matches, the appellant also received service charges for hiring out the cricket ground premises for advertisement. Further the appellant's receipts from hiring out the cricket ground premises for advertisement are utilized for the development and growth of cricket in the state of Orissa and for fulfilling the other objectives of the appellant. Thus fee charged by the appellant for hiring out the cricket ground premises for advertisement is incidental to the fulfillment of its primary/predominant objective since apart from the funds received by it from BCCI for some specific purposes, there is no other source of fund for the appellant with the help of which it can execute its objectives for which it has been established. Further with regard to the appellant selling tickets of IPL matches, the appellant would like to submit that it had charged fees of Rs. 70 lakhs from the concerned organizers for providing the facilities of the stadium and other incidental amenities alongwith it while the organizers in turn had fixed selling price ....
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....charged was for fulfilling the appellant's objectives of developing and promoting cricket in the state of Orissa. It was incidental to the attainment of the appellant's objects and as authorized by its MOA and the Rules (as mentioned above). Thus, with the help of these ancilliary activities of selling tickets and earning from letting out of infrastructure facilities, the appellant accumulates funds to accomplish the predominant objective of developing, promoting and encouraging the growth of cricket in the state of Orissa. In addition to the above the appellant would like to submit that with regard to sale of tickets of the IPL matches, it had nothing to do with the amount charged for the tickets since that was within the control and ambit of the organisers of the IPL match and the appellant was merely providing its stadium for conducting the IPL match there, in return of a fee which would facilitate in accomplishing its objects. The money raised by selling the tickets of the IPL matches went to the investors and organisers of the IPL tournament who may have had a commercial purpose for conducting such matches since they might be doing business and earnin....
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....character attached to these. receipts; so too, the donations and contributions and the sale of tickets in conducting matches organised by BCCI. Pointing out that the Association was not running any canteen or restaurant, the assessee submitted that as far as fee for providing services to IPL is concerned, the entire income from the sale of tickets belonged to the franchisee, and therefore, there was no service rendered or charges made by the assessee. " The Hon'ble Madras High Court on consideration of the facts of the assessee's case and the law in this regard, held the following: 55. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council}. BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to 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 sp....
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.... of the Revenue that the assessee is carrying on "trade, commerce or business" under the garb of the activity being "general public utility. As regards the various receipts of the assessee, we find that in the case of Tamil Nadu Cricket Association, the receipts were from: 1. Subscription 2. Renting for hiring cricket ground rooms and premises 3. Fee for providing services for IPL 4. Income from advertisement 5. Subsidy from BCCI # 6. Sale of tickets for conducting the matches and 7. Restaurant and catering income. Such receipts of money by the Tamil Nadu Cricket Association were not considered by the Hon 'ble Madras High Court, as activities in the nature of "trade, commerce or business". There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 37. Thus respectfully following the decision of Hon 'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from a) ground booking charges, b) health club ....
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.... Surat Art Silk Cloth Manufacturers Association reported in [1980] 121 ITR 1 (SC) held that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit- making was not the real object. The theory of dominant or primary object of the trust had, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz., the advancement of any other object of general public utility, so as to make the carrying on of the business activity merely ancillary or incidental to the main object. Following are the relevant extracts: "It is obvious that the exclusionary clause was added with a view to overcoming the decision of the Privy Council in the Tribune's case [l939] 7 ITR 415 (PC), where it was held that the object of supplying the community with an organ of educated public opinion by publication of a newspaper was an object of general public utility and hence charitable in character even though the activity of publication of the newspaper was carried on commercial lines with the object of earning profit. The publication of the newspaper was an activity engaged in by the trust for the....
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....as holding the Indian Trade Fair and sponsoring the Conference of the Afro-Asian Organisation, were for the advancement of the dominant object and purpose of the Federation, viz., promotion, protection and development of trade, commerce and industry in India, and were exempt from tax under s. 11(1)(a) read with s. 2(15). The said appeal raised the much vexed question as to whether the words "not involving the carrying on of any activity for profit" in the definition of "charitable purpose" contained in s. 2(15) of the Act, governed the word "advancement" and not the words "object of general public utility". Following are the relevant extracts of the said judgment: "Unfortunately, for the revenue, the court has, in a five-judges Bench, by a majority of 4 to 1, in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980} 121 ITR 1 (SC) reversed these two decisions in Loka Shikshana Trust case [1975] 101 ITR 234 (SC) and the Indian Chamber of Commerce case [1975] 101 ITR 796 (SC). The court has approved of the observations of Beg J. in his separate but concurring judgment in the Loka Shikshana Trust case that (p. 256) " if the profit must necessaril....
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....cussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of "charitable purpose" as laid out in section 2(15) of the Act and also the definition of "business" in relation to the said section amply reveals' that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the institution is charitable in nature or not. Where the main object of the institution was "charitable" in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non-members, were all held to be "charitable" in nature. The hon'ble apex court in the Indian Chamber of Commerce v. ITO earliest case of Andhra Chamber of Commerce [l965] 55 ITR 722 (SC) had clearly laid out the principle that if the primary purpose o} an institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable ....
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.... Act, 1961 on 3110312Q03, there existed no limitation regarding any activity resulting into profit. If the simple criterion of the object falling with the four limbs of the definition was fulfilled then the appellant stood covered within the ambit of the section 2(15) of the Act and was eligible for Registration u/s 12AA of the Income Tax Act, 1961 which is the case of the appellant before us. Thus the appellant stood in all correctness eligible for the Registration u/s 12AA of the Income Tax Act, 1961 and the act of the Ld. CIT(E) in rejecting the said Application is absolutely illegal and contrary to law. 4. That the Hon'ble ITAT, Cuttack Bench, Cuttack vide Order in ITA No. 232/CTK/2010 dated 27/06/2014, also commented in para 5.10 that "It is not the case of the Assessee that it is running a normal schooling for sports. Therefore, we hold that the Assessee's activities do not fall within the term 'education '. In this regard the assessee would like to submit that the Hon'ble ITAT, Cuttack by observing the above has nowhere stated that the appellant's activities are not charitable. It has only been stated that the appellant'....
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....rved that the objects of the assessee society are of general public utility and consequently, charitable in nature, however, he refused to grant registration mainly on the ground that the funds of the assessee society were diverted for personal benefit of the executives of the society in violation of provisions of Section 13(1)(c) of the Income Tax Act, 1961. Further the CIT(A) also observed that in the financial statements the assessee has reflected receipts from Board of Control for Cricket in India (BCCI) as corpus fund instead of treating it as revenue income. Further, the CIT(E) also observed that as the assessee has distributed the funds received from the BCCI to other organizations in the state of Orissa and merely acted as a nodal agency and has not undertaken any charitable activity as per the objects of the association, except, generating income by selling tickets and by letting out the infrastructure facilities of the cricket stadium, which is of commercial nature. We find that the objects of the assessee society are directed towards promotion of State Cricket. The assessee is an affiliated member of BCCI, thus, it is not in dispute that the objects of the assessee socie....
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....y ground to cancel the registration under section 12AA(3) of the Act. 56. As regards the observation of the Income-tax Appellate Tribunal that IPL matches and Celebrity cricket matches are also being held by the association and, hence, it is an entertainment industry, we need not go into these aspects for the order of the Director of Income-tax (Exemptions) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the Assessing Officer to take note of all facts, while considering the same under section 11 of the Income-tax Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above said circumstances, we set aside the order of the Income-tax Appellate Tribunal." Further, the CIT(E) was also not correct in observing that the income and expenditure amount of the assessee reveals that no expenditure was incurred by it towards its attaining of object and the assessee acted only as nodal agency on behalf of the BCCI. A perusal of the income and expenditure account of the assessee placed at page 458 & 459 of the paper book shows that the assessee has also incurred expenditure under the head floodlight operation, ground preparation,....
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....tion Under Section 11 or Section 12. Both these situations contemplated in Section 13can arise only and only if registration Under Section 12A is granted to the said person. If the same is not granted and the person is refused the registration Under Section 12A, he would not be entitled to claim any benefit available Under Section 11 or 12 and there will be no occasion to the Assessing Officer to invoke or apply Section 13 in his case. This position would not only be contrary to the scheme of the Act as laid down in Sections 11, 12, 12A, 12AA and 13but the same may also cause prejudice/hardship to the persons in certain cases. For instance, the objects for which the assessee trust in the present case is established, as indicated in object Clauses 3(1) & 3(2), no doubt are for the benefits of a particular community, viz., Vaish. Nevertheless, as per object Clause 3(4), it was also established to run schools, colleges, hospitals etc. for the benefit of public at large. In this situation, if the registration applied for Under Section 12A is not granted to it for violation of provisions of Section 13(1)(b) and it is ultimately found that the assessee trust actually accomplished the obj....
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....nstitution, whichever is later. It has to be made by the person in receipt of the income of the trust. At that stage, the Commissioner is not required to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17A of the Income-tax Rules, 1962, and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not.." In view of the above, we find that, as in the instant case, it is admitted in the impugned order that the objects of the assessee society are charitable in nature and in absence of pointing out any specific activities of the assessee society which were not genuine, in our considered view, rejection of application for registration u/s.12AA of the Act on the ground of diversion of funds for the benefit of executives of the association in violation of provisions of Section 13(1)(c) of the Act is not justified. The violation of provisions of Section 13(1)(c) of the Act is a matter which is to be looked into by the Assessing Officer while making assessment after grant of registration u/s.12AA of the Act and the Asse....