TaxTMI 
TaxTMI 
2014 (7) TMI 1259
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. That, the learned Commissioner of Income-tax has committed serious error by invoking the amended section 2 (15) of the Income-tax Act. 1961 (hereinafter referred as "the Act') which was not in existence in the year under consideration for which the appellant has filed the application for grant of registration u/s 12A of the Act and for that matter the order of the learned Commissioner of Income-tax is liable to be quashed. 4. That, the learned Commissioner of Income-tax has committed serious error by citing the activities conducted by Orissa Cricket Association which is nothing to do with the activities of the appellant and for that matter the refusal to grant registration u/s 12A of the Act is a case of non-application of mind and is based on preconceived notion and therefore is liable to be quashed. 5. That, the learned Commissioner of Income-tax has committed serious error by examining the matters subsequent to filing of the application and thereby refused to grant the registration which is contrary to the order of Hon'ble High Court of Orissa in the case of Srikhetra A.C. Bhakti Vedant Swamy Charitable Trust vrs ACIT and another [2006 (2) OLR 75] and for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nothing adverse brought into record for which it can be concluded that substantial financial gain has been provided to the author, founder of the trust or the persons interested within the meaning of said section and for that matter the conclusion based on such irrelevant appreciation of facts and law is liable to be quashed. 12. That, the earned Commissioner of Income-tax has committed serious error by mentioning that the actual contribution of the association for the development of any sports and games to the standard of Olympic games has never been materialized in the last six decades which is highly uncalled for and for matter the rejection of application u/s 12AA of the Act is liable to be declared is a case of non-application of mind and the application for registration is to be allowed u/s 12A of the Act. 13. That, the learned Commissioner of Income-tax has not considered the CBDT instruction and 10(23)(C) application wherein the appellant's activity has been considered and accepted as genuine one and for that matter the denial of registration by the learned Commissioner of Income-tax is a case of nonapplication of mind and is liable to be allowed. 2. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ks of the association year after year. The actual contribution of the association for the development of any sports and games to be of the standards of Olympic Games has never materialized in the last 6 decades. PARA - 46 From the sum total of such Instructions/guidelines/circulars when applied to the factual matrix of the functioning of the association-inferences can be drawn that the activities of the association neither resulted in any charity as understood in a common sense nor can be categorized as activities for charitable purpose as defined in the section 2(15) of the Income Tax Act, 1961. PARA - 47 CONCLUSION On the totality of the facts and circumstances of the case the application claimed to have been pending and not disposed off from April, 1997 onwards is hereby dismissed ab initio and the Orissa Olympic Association is considered not to be involved in any charitable activities in true sense of the term." 3. The ld. AR contended that the CIT must have disposed off the application within 6 months and should not have kept it pending otherwise registration will be deemed to have been allowed. Reliance was placed in this regard....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... account and the report of the Hon. General Secretary as prepared and published in the annual accounts, copy of which was filed before us in paper book. 4. The ld. DR submitted the following written submission : "The first ground of appeal is that the order of the Ld. Commissioner of Income-tax, Cuttack is illegal, arbitrary, without jurisdiction and for that matter the order of the Ld. Commissioner of Income-tax is liable to be quashed and/or annulled. It is submitted that, this is a general ground and no reason whatsoever is given why and how the order of CIT, Cuttack is illegal, arbitrary and without jurisdiction. 2. The second of appeal is that the Ld. Commissioner of Income-tax has exceeded in his jurisdiction by examining the accounts of the appellant for the financial year 2001-02 to 2008-09 and coming to an irrelevant and absurd conclusion in refusing to grant the registration to the appellant and for that matter the order of the Ld. CIT being illegal is liable to be quashed. It is submitted that, It is clear from the order of the CIT Cuttack dated. 22.03.2010 that the assessee for the first time had filed an application for registrati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2( 15 ) so as to provide that "the advancement of any other object of general public utility"shall not be a charitable purpose if it involves the carrying on of following activities: (a ) any activity in the nature of trade, commerce or business or, ( b ) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity". it has been stated in the CBDT's Circular No. 11 of 2008, dated 19th December, 2008 (reported in 308 ITR (St.5) that an entity with a charitable object, inter alia, consisting of advancement of any object of general public was eligible for exemption under section 11 of the Act. "However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has nothing to do with the activities of the appellant and for that matter the refusal to grant registration u/s 12A of the Act is a case of nonapplication of mind and is based on preconceived notion and therefore is liable to be quashed. It is submitted that the Ld. Commissioner of Income-tax has committed no error by citing the activities conducted by Orissa Cricket Association. In fact the statement of the Ld.AR that the activities conducted by Orissa Cricket Association have got nothing to do with the activities of the appellant is not correct because as could be seen from Para- 22 of 12AA(1)(b)(i) order of the CIT Cuttack dated 22-3-2010 it is stated that "The activities of the Orissa Olympic Association as put forth by the Ld. Counsel in writing in the petition dated 27.01.2010 comprising of carrying on the activities of Olympic movements/Amateur sports regulation and encouragement of various games and sports relating to Hockey, volley ball, Basket ball, Football, Cricket, Tennis, Table tennis, Badminton, Swimming, Atheltics, Wrestling, Kabadi, Weightlifting, Gymnastics, Boxing, Cycling, Kho Kho, Judo, Rifle Shooting, Archery and Hand ball etc., essentially mean vari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....diction over the petition originally filed in April 1997 a fresh hearing was given to the association and clarifications have been called for from the association by the competent Income-tax Authorities vide letter dated 10.08.2009 on various issues raised in the questionnaire to be filed by 25.08.2009. On behalf of the Orissa Cricket Association the authorized representative Sri Diganta Das, Advocate had appeared and submitted a written clarification to the questionnaire issued by the Commissioner of Income Tax, Cuttack on 27.01.2010. As could be seen from the above, the CIT Cuttack before passing his order u/s 12AA dated 22.03.2010 gave opportunity and a reply has also been filed by the authorized representative. Hence the statement of the assessee's counsel that CIT used the material behind the back of assessee without giving opportunity of being heard is not correct. 7. The seventh ground of appeal is that, the Ld. Commissioner of Income-tax is illegal, arbitrary and without jurisdiction by incorporating the materials found during the course of survey conducted u/s 133A of the Act on 28.03.2006 which is nine years subsequent to the application filed by the app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT Cuttack granting or refusing registration on the application of appellant for registration u/s 12A, though filed on in April 1997 till March 2010, the CIT, Cuttack had passed an order u/s I2AA, in the case of the appellant on 22.03.2010 dismissing the application in para 47 as under: "On the totality of the facts and circumstances of the case the application claimed to have been pending and not disposed off from April, 1997 onwards is hereby dismissed ab initio and the Orissa Olympic Association is considered not to be involved in any charitable activities in true sense of the term." In view of the above, when the Commissioner is examining an application for registration in the year 2010, he has to examined the material before him and the CIT did well in incorporating the materials found during the course of survey conducted u/s 133A of the Act on 28.03.2006 which is nine years subsequent to the application filed by the appellant 8. The eighth ground of appeal is that, the Ld. Commissioner of Income-tax has committed serious error by not considering that the appellant's activity includes education of sports and for that matter the activities of the app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....constructed building, Barabati Palace, Barabati guest House, over head tank and moveable assets in the form of furniture & fixtures and plant & machinery, sports materials etc. The value of land inside the Barabati Stadium and adjoining areas is reflected to be Rs. 84,54,46,875.00 as on 31.03.2009. The value of Barabati Stadium and its shopping complexes and the Barabati Palace and Barabati guest house are reflected at Rs. 3,83,92,323.00 as on 31.03.2009 whereas the sum total of movable assets is shown at Rs. 25,67,100.00. Over the last 10 years period the only activity the Orissa Olympic Association has broadly done is commercial exploitation of its immovable property in the form of Barabati Stadium, Shop complexes No.1 & 2, Bank building complex, ticket counters, self constructed building, Barabati palace, Barabati guest house given to various tenants under commercial lease under which monthly lease rentals along with electricity charges water charges are being received. PARA-33 The Orissa Olympic Association over the last 10 years has no source of Income other than such lease rents from letting out its various assets to large number of tenants. Substantial portion....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accounts. In view of the above, it is submitted that the Ld. Commissioner of Income-tax has committed no error both in law as well as on facts by applying the provision of section 13(1) (c) (ii) of the Act for refusing to grant the registration u/s 12AA of the Act. 10. The tenth ground of appeal is that, the Ld. Commissioner of Income-tax has committed serious error by giving an opinion regarding the charitable activities for last 63 years on the basis of surmise, conjecture and whisper and for that matter conclusion based on such past 63 years is fallacious, non-application of mind, preconceived notion and motivated one which is liable to be quashed and/or annulled. The Commissioner of Income Tax, Cuttack in par 35 of this order stated as under : "PARA-35 With such statement of affairs the crucial question arises as to whether the commercial activities of letting out certain immoveable property and moveable property to tenants on the basis of commercial lease agreements for house, plant & machinery etc. and charging fixed electricity dues and other rentals would constitute any activity being advancement of any object of general public utility o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment with a partnership firm M/s. Incon Associates in which the owners are the two sons of the Honorary Secretary of Orissa Olympic Association as well as Orissa Cricket Association. By such agreement the Orissa Olympic Association has leased out 10,000 sq. ft. of space to M/s Incon Associates for construction of a Kalyan Mandap named Barabati Palace for which M/s Incon Associates has to pay monthly rent of Rs. 21,000/- only to Orissa Olympic Association. The partnership firm owned by the family members of the Honorary Secretary of Orissa Olympic Association is found to be using this space of Barabati Palace in which a Kalyan Mandap has been constructed for business purposes from which not less than Rs. 80,000/- per day is the rental receipts from the general public. In respect of the total expenditure of about Rs. 84 lakhs incurred by M/s. Incon Associates on construction of the Kalyan Mandap the monthly lease rent of Rs. 21,000/- has to be adjusted to the extent of 50% towards cost and 50% as monthly rent is paid to the Orissa Olympic Association. PARA-39 Such financial transactions and transfer of rights of immovable property belonging to Orissa Olympic Association appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Orissa Cricket Association on mutual agreement basis Orissa Cricket Association has been paying certain fixed share of the Income generated in the hands of the Orissa Cricket Association from various cricketing activities and also in form of providing certain fixed payments. In other words the providing of services, facilities, amenities of Barabati Stadium owned by the Orissa Olympic Association for use by the Orissa Cricket Association has been for a fee or service charges or monetary consideration. For such reasons even such extended arguments would not justify the activities of the Orissa Olympic Association to be charitable in nature with in the meaning of the section of 2(15) of the Income Tax Act, 1961." In view of the above, it is clear that the Ld. Commissioner of Income-tax has committed no by mentioning that the agreement between the appellant with the Incon Associates is very much beneficial to the appellant in view of the material brought into record from which it can be concluded that substantial financial gain has been provided to the author, founder of the trust or the persons interested within the meaning of said section. 12. The twelfth ground ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the Ld. Counsel the content of such circular may be applicable to hold the activities of the Orissa Olympic Association for all the past periods from 1997-1998 to 2008- 2009 to be charitable in nature. However, this circular only states that associations which are not notified u/s 10(23 C) can claim exemption u/s 11. This circular does not say that all kinds of Association involved in a sports activities would entitled to Registration u/s 12A of the Income Tax Act, 1961, once the application is filed. Further very concept of charitable purpose has gone drastic changes after amendment of the section 2 (15) of the Income Tax Act, 1961. Under the amended provision the Competent Income Tax Authorities while examining the admissibility or otherwise of an application filed u/s 12A of the Income Tax Act, 1961 have to be guided by the CBDT Instruction 1981 issued in April, 2000 and examine the genuineness of the activities of the Association and the implication of the term charitable purpose. As per the various material facts on records the functioning of the Orissa Olympic Association are found not to be charitable in nature." The Commissioner of Income-tax, has given suffi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adu Cricket Association vs. DIT (Exemption) reported in 32 Taxmann.com 50 (Chennai Trib) 2013. 2. Hon'ble ITAT, Panaji Bench in the case of Entertainment Society of Goa Vs. CIT Reported in (2013) 23 ITR (Trib) 635 (Panaji) 3. Hon'ble ITAT, Mumbai Bench "B' in the case of Mumbai Cricket Association Vs. DIT (Exemption), Mumbai reported in [2012] 24 taxmann.com 99(Mum) 4. Hon'ble ITAT, Hyderabad Bench in the case of Operation Eyesight Universal Vs. Director of Income-tax (Exemption) Hyderabad reported in 142 lTD 641, Hyderabad 1 In fact in a case where Registration was granted, the same was cancelled by the DIT(Exemptions) u/s 12AA(3) and Hon'ble Chennai Bench has upheld the order of DIT(Exemption) cancelling the registration u/s 12A of the Act. In fact the facts of the assessee's case are similar to that of Tamilnadu Cricket Association except that in assessee's case registration has not been granted. Similarly, Hon'ble ITAT Panaji Bench in the case of Entertainment Society of Goa Vs. CIT in ITA No. 90/PNJ/20l2 dated 05.04.2013 reported in (2013) 23 ITR (Trib) 635(Panaji) , also upheld cancellatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Eyesight Universal Vs. Director of Income-tax (Exemption) Hyderabad reported in 142 ITD 641, Hyderabad tribunal at Para -31 held as under. "Section 13(1)(c) provides that where part of the income of charitable or religious trust or institution ensures or is used or applied directly for the benefit of those persons specified in section 13(3) such a trust or institution shall forfeit the exclusion under section 11. Even if only small portion of the income ensures or is used or applied for the benefit of a person mentioned 13(3); the entire income of the trust is denied the exclusion except in the case provided in section 13(4). In the case of appellant substantial financial gain has passed on from the appellant to the relatives of the Secretary of the Association. As discussed by the CIT in his order and in this submission while discussing ground 11. For the reasons stated above, it is submitted that this is a case where the CIT Cuttack after considering the facts and circumstance of the case, has rejected the application of the assessee in view of the irregularities pointed out in the financial affairs of the association and held that the Association is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s where one can read books, journals and papers on sport and health; h) To promote, encourage and improve games and sports listed in the article 3(c) with special attention to whose which are included in the Olympic programme; i) To procure from the Government of Orissa, the Orissa Council of Sports and such other bodies such facilities, as may be necessary for the achievement of its objects; j) To be responsible for : (i) The Olympic flag day collection arrangements in Orissa. (ii) Organizing a state sports festival every year. k) To simulate interest of the people of the state in the promotion of the sports and games enlisted in article 3(c) with special attention to those which are included in the Olympic programme and to that end the formation of a state sports controlling body for items included in the Olympic programme and also the formation of Olympic association in each district, sub-division, taluk and panchayat; l) To give financial assistance as and when possible to its affiliated members in need of such help; m) To directly manage if necessary, any game or sports from the list mentioned in article 3(c) and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he conduct of its business, and generally to do all such things as may be necessary or expedient, lawful, incidental or conducive to the attainment of the foregoing objects or any of them. 5. The income and property of the association however derived shall be applied solely towards the promotion of its objects as set forth in this memorandum of association and no portion thereof shall be paid or transferred directly or indirectly by way of dividends, bonus or otherwise by way of profit to its members, provided that nothing therein shall prevent the payment of remuneration to its officers or staff or other persons in return for any services actually rendered by them to it." The Assessee has applied for registration u/s 12A in April, 1997 as per the order of CIT. The copy of the application was not filed by the ld. AR before us. The Assessee claimed that he has filed copy of the Income & Expenditure as well as the Balance Sheet before CIT from financial year ended 31.3.1995 till 31.3.2008, copies of which were also placed before us. On going through the Income and Expenditure account we noted that the main source of income of the Assessee is not only the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the period aforesaid for sufficient reasons; (ii) From the first day of the financial year in which the application is made, if the Chief Commissioner or Commissioner is not so satisfied; Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007. (a) The person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA (b) Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the explanation below sub section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]" "Application for registration of charitable or religious trusts, etc. 17A. An application under [clause (aa) of sub-section (1)] 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 produced, it shall be open to the [....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be made. It also prescribes form No. 10A and also requires that the application for registration can be made only by a charitable or religious Trust or institution. This rule also prescribes the various documents which are to be enclosed along with the application. The copy of the instrument by which the trust is created or institution is established has to be filed. If the Trust or institution was in existence prior to the year in which the application is made, two copies of the accounts of the Trust such prior year being not more than 3 years has to be filed. Accounts in our opinion here means the audited accounts in case the provision of section 12 (1) (b) are applicable. 5.4 Therefore, in our opinion, it is essential for the assessee for the purpose of the registration under the Income Tax Act to prove that it has been established for charitable or religious purpose. It is not the case of the assessee society that it is a religious society. Section 2(15) defines the charitable purpose. This section was amended by the Finance Act 2008. CIT took the view that the amending proviso to Sec. 2(15) would be applicable to the activities of the Association for the earlier....
X X X X Extracts X X X X
X X X X Extracts X X X X
....34,64,524 2008-2009 31,56,404 Therefore, CIT was of the view that the main part of the activity of Orissa Olympic Association comprise of leasing out of immoveable properties, lease rental and maintenance of let out assets. This, in no way, can be considered to be relatable to the generation of any public utility. CIT also noted that the Assessee‟s only activities for the last 6 decades have been to provide on commercial lease, its houses, building premises to various tenants. The Assessee entered into an agreement with a partnership firm, M/s. Incon Associates in which the owners are the two sons of the Hon. Secretary of Orissa Olympic Association as well as Orissa Cricket Association. As per this agreement, the Assessee has leased out 10,000 sq. ft. of its space to M/s. Incon Associates for construction of Kalyan Mandap named Barabati Palace for which M/s. Incon Associates has to pay a rent of only Rs. 21,000/- p.m. to the Assessee. In return, the said partnership firm has let out this Kalyan Mandap at rate not less than Rs. 80,000/- per day. The lease rent of Rs. 21,000/- has to be adjusted to the extent o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The amendment that was effected in the year 1988 for the purpose of introducing an explanation under entry No. 5, was introduced, as set out in the memorandum explaining the provisions of the Finance Bill 1987 in the following manner : "It has been found that certain taxpayers manufacturing aerated waters in which synthetic essence is being used, are claiming the above benefits on the ground that the synthetic essence cannot be included in the expression "blended flavouring concentrates in any form'. As this was never the legislative intent, with a view to counteracting the tax avoidance and placing the matter beyond doubt, the proposed amendment seeks to provide that the blended flavouring concentrate appearing in item 5 would include synthetic essence in any form." On interpretation of this explanation, the Hon'ble Court held that the fact that this amendment was made effective from April 1, 1988, therefore, does not in any way have the effect of denuding the original entry of a part of its content. The synthetic essence being but one form of a blended flavouring concentrate was a blended flavouring concentrate before the amendment a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cluded in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2(15) so as to provide that "the advancement of any other object of general public utility" shall not be a charitable purpose if it involves the carrying on of- (a) any activity in the nature of trade, commerce or business or, (b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years." From the explanation, it is apparent that the intention of the legislature is clear that the entities operating on commercial lines should....
X X X X Extracts X X X X
X X X X Extracts X X X X
....activity will not be a relevant consideration. In view of this specific provision, we are not concerned to look into how an institution has used, applied or retained its income, if the income has been received by the institution from any activity carried out in the nature of trade, commerce or business or from any activity of rendering any service in relation to trade, commerce or business. The words used in the proviso are "carrying on of any activity in the nature of trade, commerce or business" not the words „carrying on trade commerce or business‟. Using of the words „any activity in the nature of‟ prior to „trade, commerce or business‟ in our opinion has a specific meaning while interpreting the proviso. These words cannot be ignored. This in our opinion mandates that the institution need not actually be carrying on trade, commerce or business but the activity carried on by him are similar to trade, commerce or business. The profit motive is required while an institution is carrying on trade, commerce or business. The use of words „carrying on any activity in the nature of trade, commerce or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management. We, therefore, agree with Beg. J. When he said in Sole Trustee, Loka Sikhshana Trust's case [1975] 101 ITR 234, 256 (SC) that: "If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity." The learned judge also added that the restrictive condition "that the purpose should not involve the carrying on of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us of bringing himself within Section 2 (15). In so doing, he has to attract and repel-attract the condition that his objects are of "general public utility"and repel the charge that he is advancing these objects by involvement in activities for profit. Once this broad dual basis is made out, the revenue will not go into meticulous mathematics and charge every chance excess or random surplus. If the activity is prone to yielding income and in fact results in profits, the revenue will examine the reality or pretense of the condition that the activity is not for profit. Here, one may well say: "Suit the action to the word, the word, to the action." In this background, the Court held that the activities of charging fees and issuing certificates of origin as also settlement of disputes among traders by arbitration are undoubtedly services of general public utility. But all these activities are amenable to tax as being carried on for profit, there being nothing to show that the Chamber was undertaking these jobs on a "no profit" basis. If the fee charged for doing so is more or less commensurate with the expense, the chamber had to incur, a minor surplus will not attract tax. Every t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act has omitted the words "not involving the carrying on of any activity for profit' from the definition. This amendment is consequential to the amendment made in section 11 of the Income-tax Act by section 6(b) of the Finance Act, whereunder profits and gains of business in the case of charitable or religious trusts and institutions will not be entitled to exemption under that section, except in cases where the business fulfils the conditions specified in section 11(4) of the Act. The amendment takes effect from 1st April 1984, and will accordingly apply in relation to the assessment year 1984-85 and subsequent years." 5.9 Subsequently, by the Finance Act, 2008 w.e.f. 1.4.2009 first proviso to Sec. 2(15) was inserted. The scope of the amendment has been explained by the CBDT Circular no. 1 dt. 27.3.2009, 310 ITR (St.) 42. This amendment was made with a view to limiting the scope of the phrase „advancement of any other object of general public utility‟. Clause (15) of section 2 has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k into whether the objects of the trust/institution are charitable/religious or not. We do not find any irregularity or infirmity so far as jurisdiction of CIT is concerned in ascertaining the purpose of the object for which the institution has been established. We have also examined the submission of the ld. AR that the Assessee is engaged in activity of education and rendering education in the sports and therefore, the proviso to Sec. 2(15) will not be applicable in the case of the Assessee. In our opinion, this submission of the Assessee, keeping in view the objects of the Assessee, does not have any leg to stand in view of the decision of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Sikhshana Trust‟s case [1975] 101 ITR 234 (SC) in which Hon'ble J. Khanna explained the meaning of the term "education" as used in Sec. 2(15) of the Income Tax Act by observing as under : "The sense in which the word "education"has been used in Section 2(15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction, which a person has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 12A. We noted that this issue is duly covered in favour of the Revenue by the order of the jurisdiction High Court in the case of M/s Srikhetra, A.C. Bhakti-Vedanta Vs. ACIT and another [2006 (II) OLR-75 w.p.(c) No. 12437 of 2005] where in the Hon‟ble jurisdictional High Court answering the contention of the Learned Counsel for the petitioner that once the period of six months expires, the authority looses its right to refuse registration of trust the court held that they are unable to uphold such contention and held at para-5 as under: "In our view the period of six months as provided in Sub-section (2) of Section 12AA is not mandatory. Though the word "shall' has been used but it is well known that to ascertain whether a provision is mandatory or not, the expression "shall' is not always decisive. It is also well known that whether a statutory provision is mandatory or directory has to be ascertained not only from the wording of the statute but also from nature and design of the statute and the purpose which it seeks to achieve. Herein the time frame under Sub-section (2) of Section 12AA of the Act has been so provided to exclude any delay or lethargic appr....