TaxTMI 
TaxTMI 
2018 (1) TMI 135
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.... society are as under:- (a) To provide physical and mental recreation and social entertainment for and amongst the members of the club. (b) To diffuse social knowledge about the game of golf and to prompt, develop and popularize the game of golf and in fulfilment of this. (c) To promote and maintain bonds of friendship between other golf clubs in the state of Rajasthan and even outside. (d) To uphold and maintain the rules of golf issued from time to time. (e) To arrange and control the conduct of such championship and other open or restricted competitions as may be approved by the club. (f) To undertake from time to time such other special activities as may be approved by the club and fall with the purview of section 20 of Rajasthan Societies Registration Act. (g) To collect funds for the club and to employ the same in such manner as may be considered expedient. Further, as per the Regulations of the club, on dissolution of the society, the properties shall not be paid or distributed amongst the members of the society but shall be given to some other society as decided by the members or by the competent court PBP 32 para 58). 2.2 The Ld. CIT observed tha....
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.... the trust charitable. (e) The club is receiving huge receipts from activity of sale of liquor and food. This activity is commercial activity like running of a bar/hotel/restaurant. (f) Most of the receipts are from members in shape of subscription in fees in lieu of the services provided by the club to them. The income received from members is spent for the benefits of members and there is no charity involved in the entire process. Thus, the club is functioning mainly for the benefit of its own members. Whatever promotion of golf is canvassed is limited to the members of club only. (g) The assessee may take plea that registration u/s 12AA(3) can be withdrawn only in two conditions. Since none of these conditions are attracted, registration cannot be withdrawn u/s 12AA. This plea is not tenable as when the activities do not remain charitable it is implied that the institution do not remain charitable and registration granted earlier is deemed to be withdrawn. (h) A general power has been given to the Commissioner u/s 293C to withdraw any approval granted under the Act. This power is squarely applicable on the registration granted u/s 12A/12AA of the IT Act. As such the ....
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.... such approval has not been specifically provided in such provision. However, both these provisions cannot have retrospective application as a privilege or benefit once granted cannot be withdrawn from retrospective effect on the principle of promissory estoppel. Reliance in this connection is placed on the following cases:- DIT(Exemtion) Vs. Mool Chand Khairati Ram Trust (2011) 339 ITR 0622 (Del.) (HC) Sec. 12A, as it stood at the time when it provided for registration of trust, nowhere provided for cancellation of the registration once granted. It is also pertinent to note that the words "such trust or institution is registered under s. 12AA" were also substituted in this section w.e.f. 1st April, 1997. In fact, this section even now nowhere stipulates about the cancellation or withdrawal of the registration, once granted under the said section. It is only under s. 12AA, which came in the statute book w.e.f. 1st April, 1997 that a fresh procedure for registration of the trust or institution is prescribed. Even under this s. 12AA, there was no provision for cancellation of registration once granted till the enactment of sub-s. (3) w.e.f. 1st Oct., 2004. From the conjoint rea....
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....power to cancel the registration under s. 12AA(3). In the instant case, registration was granted to the assessee society on 1st March, 1999, i.e., much prior to 1st Oct., 2004 when s. 12AA(3) was inserted. Therefore, CIT had no jurisdiction to cancel the registration granted to the assessee society under s. 12A. Ajit Eduation Trust Vs. CIT (2010) 46 DTR 482 (Ahd.) (Trib.) Sec. 12AA(3) cannot be termed merely a procedural introduction in the statute but this introduction has substantially made an impact on the sizeable rights of a trust or institution. Even otherwise if it is to be termed as a procedural amendment then also a procedural amendment cannot be held as retrospective in nature so as to be effective from an earlier date. Insertion of the new clause w.e.f. 1st June, 2010 should not be applicable retrospectively and its operation has to be effective from the date it was introduced and onwards. Mumbai Cricket Association Vs. DIT(Exemption) (2013) 84 DTR 162 (Mum.) (Trib.) Where an approval had been given, its withdrawal with retrospective effect is bad and illegal. Sub section (3) was introduced in the statute books only with effect from 01.06.2010, i.e. its funct....
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....ed for promotion of the game of golf. Therefore, it cannot be held that the facility of playing of golf is restricted to the members only and not for public at large. Charging of green fees from non members which is more in comparison to fees charged from the members or not providing playing facility at concessional/free charge to weaker class of the society is not a condition precedent to categorize an institution as a charitable institution. (c) The object mentioned at clause (f) & (g) simply provides that the club may undertake such other activities as may be approved by the club but fall in the purview of section 20 of the Rajasthan Societies Registration Act and also collect funds to employ in such manner as may be considered expedient. These clauses has been interpreted by CIT that the same authorize the club to do any activity whether charitable or not. However, in holding so, the Ld. CIT has not considered that as per this clause only those activities can be carried out which fall in the purview of section 20 of the Rajasthan Societies Registration Act. As per section 20 of this Act, such activities are in relation to the soldiers, orphans, literature, science, art, hist....
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....rovide facilities relating to golf and to afford to the members of the club all the usual privilege, advantages and convenience associated with the game of Golf. It is also authorized to carry out activities which are incidental and auxiliary to promote the said game. It was granted registration u/s 12AA w.e.f. 01.04.2001. Its major source of income includes income from catering and bar, rental income, adoption of hole income, green fees, interest income, shooting charges, etc. The DIT(Exemptions) cancelled the registration u/s 12AA(3) by holding that these receipts are in the nature of commerce or trade and thus assessee trust is directly hit by the proviso to section 2(15). Findings:- Registration granted u/s 12AA can be cancelled in terms of section 12AA(3) only if the CIT or DIT is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects. Except for these two conditions, the CIT/DIT cannot cancel the registration which has already been granted earlier. Nowhere the DIT(E) has recorded any satisfaction that the activities of the assessee trust are not genuine or are not being carried out in accorda....
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....bserved 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. Accordingly, CIT vide his order held that activities of Assessee club were not genuine and were not being carried out in accordance with objects of trust or institution in terms of section 12AA(3) Findings:- Assessee club was formed for the purpose of providing facilities for development of golf. For cancellation of registration u/s 12A, CIT had to be satisfied to effect regarding activities of trust or institution were genuine or not and if activities were being carried on in accordance with objects of trust. CIT was heavily weighed down by fact that assessee club was earning money by different ways including membership fee, rent, interest, etc. However, nowhere in his order, CIT had been able to bring on record that activities of club were not for furtherance of development of game of golf that was main object of assessee. CIT had also not been able to bring on record fact that assessee's activities were not being carried out in same fashion from very initiation of....
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....rned, the sponsorship fee received is an income incidental to the main activity of promoting golf in the state of Tamilnadu, therefore, at any stretch of imagination, the collection of sponsorship fee cannot be considered as commercial activity by the assessee. Similarly, the tournament fee, annual subscription fee, green fee, catering income, round charges etc. are incidental to the main activity of promoting the sport of golf. As rightly submitted by the ld. Representative for the assessee, the non-refundable membership fee collected at the time of admission is in the nature of capital receipt, therefore, it cannot be treated as income of the assessee. Therefore, the CIT(A) is not justified in saying that the assessee is engaged in activity which is similar to commerce or trade. This Tribunal is of the considered opinion that the assessee is engaged only in promoting the sport of golf and receiving subscription, tournament fee, sponsorship fees etc. are in the course of its carrying on the charitable activity. Therefore, the activity of the assessee is not similar to commerce or trade." CIT Vs. Delhi Golf Club Ltd. ITA No.1757 of 2010 dt. 30.03.2011 (Del.) (HC) Facts:- ....
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....es received from the casual members as income u/s 12A merely because assessee club was not maintaining separate books of accounts regarding this business activity. As per AO it was a business income and not income from the mutual interest that was not liable for exemption u/s 11. There is no merit in the AO's action for treating the fees received from the casual members as business income. The assessee club was maintaining required records with regard to income and expenditure. There is no requirement of maintaining separate accounts with respect to fees received from different kinds of members as provided in the articles of Association. (e) The assessee is a well known club having been in Delhi for over five decades. Its main object is to promote the game of golf in India. It has members from various walks of life. Even the department all along after due examination had accepted that activity of the assessee as not for profit motive. In spite of this consistent finding of the department itself in the past, without any cogent reason, the AO has held that because the assessee was not maintaining separate books of accounts of such casual members it was a business income of t....
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....income from IPL matches cannot be considered as charitable activity. Findings:- (a) Power of cancellation of registration obtained u/s 12A were incorporated by way of amendment introduced u/s 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010. Registration granted u/s 12A, prior to amendment cannot be withdrawn retrospectively. Thus withdrawal of registration with retrospective effect from 1.4.2009 by order passed u/s 12AA(3) was bad in law. (b) Further, for cancellation of registration u/s 12AA(3), Commissioner should record a satisfaction that the activities of trust or institution were not genuine or that activities were not being carried on in accordance with the objects of the trust. In instant case main and predominant object and activity of assessee was to promote, regulate and control game of cricket in and around Delhi. Over years this activity had been recognized by revenue as a charitable activity and registration u/s 12A was granted to assessee. Thus, fact of assessee being a charitable institution was not in dispute and DIT(E) agreed that assessee was carrying on activity of "general public utility". It was also not case of DIT(E) that as....
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.... as business activity. It is part and parcel of charitable activity and the receipt in question cannot be termed as an activity which is in nature of "trade, commerce or business". (g) Advertising and contractual receipts reduces part of cost incurred by the assessee for its charitable activity and hence cannot be termed as business or that assessee has undertaken activity in the nature of trade, commerce or business. Receipts from IPCL and sale of tickets cannot be considered as an activity of trade, commerce or business. Further activity of playing cards was an incidental recreation activity undertaken in most clubs and what was charged by the assessee goes to recover the costs for providing such recreational facility to its member. Receipts were miniscule and hence negligible. As regard receipts from health club it was held that only a part of expenditure incurred on health club was recovered by way of charges from members who were using the health club facility and these receipts cannot be termed as an activity in the nature of "trade, commerce or business". Thus all receipts of assessee were intrinsically linked with activity of organizing matches and tournaments for ....
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....see as reproduced at Pg 4 Para 5.1 of the order. The ld. CIT also referred to its Income & Expenditure account and observed that various sources of income like subscription, interest income, sponsorship, income from bar & canteen and guest house charges. The ld. CIT withdrew the registration granted u/s 12A r.w.s. 293C of the Act from the initial year from which the registration was granted. Against the order of Ld. CIT, assessee filed detailed written submission supported by case laws, filed various documents as required in course of appellate proceedings and also made the oral submissions. 2.5 (2) Having considered the rival submission, we note that the first issue in the present appeal is whether Ld. CIT is correct in withdrawing the registration from the initial year when the registration was granted after satisfying himself about the objects of the society and genuineness of its activities and the second issue is whether he is correct in holding that the activities of the society are not charitable. 2.5(3) In respect of the first issue, we find that power to withdraw the registration by CIT is provided in the statue by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby s....
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....t approved. 2.5(4) In respect of second issue we note that the object of the assesse, when it was granted registration u/s 12A w.e.f. 15.06.1999 and that when the same was withdrawn u/s 12AA(3) vide order dated 28.03.2012 remains the same. The sources of income and nature of the expenses also remains the same. In course of appellate hearing we noted from the reply filed by the assesse to CIT (PB 6-7) wherein assesse has explained as to how its activities are for promoting the game of golf and is for benefit of public at large, that there were various court cases pending against the assesse vis-à-vis State of Rajasthan. The details of these cases were called for. In response assesse submitted the various orders including that of Divisional Bench of Rajasthan High Court titled as Rajasthan Polo Club Vs. State of Rajasthan and 7 others (D.B. Civil Special Appeal No. 847/96 dated 25-09-2001)[PBP114-{10}] where the entire matter was discussed and the decision of committee & the finding of court is given. The relevant part of the decision of the committee and the finding of court for ready reference is reproduced as under:- "The Government in engaging in this exercise,....
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....ee writ petitions which led to the passing of the judgment by the Hon'ble Single Bench on 24.5.96, whereupon JDA and Polo Club will also withdraw their D.B. appeals (3 each). Hon'ble Division Bench will be requested to allow all these withdrawals and set aside the judgment passed by Hon'ble Single Bench in view of the settlement reached between the parties. Consequently, the JDA also withdraw the SLPs pending before the Hon'ble Supreme Court. 5. Pending designing of the golf course, and in anticipation of the withdrawal of the litigation as above, JDA will immediately start the development of the two parking lots (proposed along P.R. Road & B.D. Road) and development of the park from the PR Road/BD Road end in view of the forthcoming international Rajasthan/ Conclave 2000 starting from 23.09.2000 in Jaipur." It was also decided that the Hon'ble Division Bench would be requested to allow withdrawal of the original Writ Petitions Nos. 6826/94, 6855/94 and 1162/95 and set aside the judgment passed by the Hon'ble Single bench in view of the settlement, arrived at between the parties. Thereafter in Para 106 & 107, the Hon'ble Court held as under [PBP 114 {47}]:- "10....
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....itendraShrimali& another and VedPrakashBishnoirespectively, are dismissed. No costs. The Writ petitions Nos. 6826/94; 6855/94 and 1162/95, filed by Shri K.K. Sharma, M/s. Rambagh Golf Club and Dr. S.C. Kabra and another, are permitted to be withdrawn as the agreement arrived at between the State Government, Ram Bagh Golf Club and Rajasthan Polo Club is in accordance with law. By virtue of our holding that the settlement is valid and our permitting the petitioners to withdraw the writ petitions, judgment passed by the learned Single Judge dated, 24.5.96 shall not remain in force from today." From the above we note that JDA is the owner of land and the assesse has no title/ right in the land. The assesse is only running & managing the golf course in public interest. Golf Club is also making contribution to the development of tourism in Rajasthan. We, therefore, conclude that the assesse is promoting the sports of golf. The assessee in his written submission as reproduced above has also explained the various objections of CIT in withdrawing the registration u/s 12AA. The assesse has also provided a table giving the percentage of expenditure in the game of golf with reference to its....