TaxTMI 
TaxTMI 
2014 (6) TMI 1004
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....at, the learned Commissioner of Income-tax has committed serious error by invoking the amended section 2 (15) of the Act which was not in existence in the year under consideration in which the appellant has filed the application or for the period for which the appellant has filed the application for grant of registration u/s 12AA of the Act in Form No-10A read with Rule 17A of the I.T. Rules 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 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 that matter the order of refusal to grant the registration u/s 12AA of the Act by the Commissioner of Income-tax is liable to be quashed. 5. That, the learned Commissioner of Income-tax has used the materials behind the back of the appellant without giving opportunity of being heard and for that matter the order of refusal t....
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....the Commissioner of Income-tax is liable to be quashed. 11. That, the learned Commissioner of Income-tax has committed serious error both in law as well as in 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 and for that matter the order of refusal by the learned Commissioner of Income-tax is liable to be quashed and/or annulled. 12. That, the learned Commissioner of Income-tax has committed serious error both in law and in facts by coming to an irrelevant conclusion that the current activity of the appellant is promotion of entertainment and not charitable which is per se illegal and without jurisdiction and for that matter the order of refusal based on such premises is liable to be quashed and/or annulled. 13. That, the learned Commissioner of Income-tax has committed serious error by considering the sports activity especially cricket activity of the appellant as a business risk for the purpose of commercial game and for that matter the refusal on the basis of such observation is liable to be quashed and/or annulled. 14. That, the learned Commissioner of Income-tax has....
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....sociation did not carry on any genuine activities in the nature of charity as commonly understood and illustrated in the definition of the section 2(15) of the Income Tax Act, 1961 and as interpreted by the various courts of law. Also the accounts of the association for the Financial Years 2002-2003 to 2008-2009 are quite questionable since the Honorary Secretary is found to have been managing the financial affairs of the association for various years involving substantial irregularities in financial and accounts matter and indirectly had facilitated substantial financial gain to the Honorary Secretary and his relatives. For such reasons for the Financial Years 2002-2003 to 2008-2009 registration u/s 12A is not entertained and hence the application for such years is dismissed. PARA - 55 In respect of the financial year 2008-2009 onwards the amended provision of section 2(15) of the Income Tax Act, 1961 would clearly be applicable to the association. The activities carried out by the cricket association involving providing of services, facilities and amenities to the general public for a fee or service charges at the time of conducting various cricke....
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...., to spread the ideals of cricket and all that it stands for throughout the length and breadth of its area by arranging schools for coaching, lectures, tournaments and to arrange international matches in order to facilitate its local sportsmen to get knowledge, strength and basically to encourage them to possess the quality to play the international standard matches, promotion and development of Cricket and to provide international standard of training and to produce large number of international cricketers from the State of Odisha. Since from its inception, the Assessee is involved in the above mentioned activities. Since the Assessee's activities are coming well within the ambit of Charitable Activity, in order to avail exemption, it has filed an application for grant of Registration w.e.f from 01.04.1997 U/s.12A of the Act before the learned Commissioners of Income Tax, Cuttack on 31.03.2003 in the prescribed Form No.10A read with Rule 17 of the Income Tax Rules, 1962 (herein after referred as ‗the Rules' ) along with an application for condonation of delay and for grant of Registration w.e.f 01.04.1997. Copy of Registration certificate, bye-laws and copy of Appli....
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....pects for the sake of revenue interest, rather by giving vague allegations and wrongly interpreting the statutory provisions of law, rejected the application by holding that the activities of the assessee are not charitable. Hence denied to grant registration. Since the Ld. Commissioner has not applied his judicial bent of mind in its proper prospective and denied the legitimate claim of the assessee, being aggrieved the assessee knocked the door of this Hon'ble Tribunal for justice and equity. 4. THE ORDER OF REJECTION PASSED BY THE LEARNED COMMISSIONER IS ILLEGAL: 1. For that, the learned Commissioner of Income Tax has committed gross error of law in denying grant of registration u/s.12AA of the Act, particularly when, no dispute has been raised by him either as to the genuineness of the trust or as to the activities of the trust not being in accordance with the objects of the trust. Since, these facts are undisputed, the question of denial of grant of registration does not arise at all. While considering the application for grant of registration, what the Commissioner is required under the law, is to see that the object....
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....n in the cricket game and also in the field of physical culture and the spirit of sportsmanship. This benefit is available to the general public irrespective of caste, creed, religion or sex, maintaining library of books, publication of periodicals in the interest of the sportsmen and diffuse knowledge of cricket and its ideals of sportsmanship. That apart the society is providing social security, safe guards for the players, officials such as managers, coaches, umpires, selectors and other who are directly connected with the game. The intention of the society is to create large number of international cricketers from the State of Orissa for which it is organizing proper coaching scheme for the benefit of young and promising cricketers within the State, it also provides the scheme of net practice, whether free of charges or on payment for members of affiliated clubs, District Associations and for players selected to represent the association in various competition within or outside of the State, it also makes arrangements for group coaching, lectures, exhibition of cricket for the purpose of educating the promising cricketers. It also invites the professional cricketers to provide ....
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.... Income tax has denied the registration of the assessee trust by observing that, the assessee trust had arranged oneday international cricket matches and in turn had received T.V. subsidy and subvention income i.e. sharing the T.V. broadcasting right and advertisement sales income and thus he is of the opinion that, it had carried out the activities in the nature of trade ,commerce or business in view of the first proviso of Section 2(15) of the Act, the Commissioner held that the objects of the assessee trust was no longer of charitable in nature. In response to the above allegation it is respectfully submitted that, all the receipts arising or accruing to the assessee trust are accounted for and the activities carried out to meet the object of the assessee trust i.e.to promote and to encourage the game of cricket in Orissa by organizing coaching schemes, tournaments, exhibition matches and other matches etc, and they are not with the intention to carry out any trade, commerce or business with profit motive. Such receipts are strictly confined to the attainment of the objects of the assessee trust and there is absolutely no intention to carry out any trade, commerce or business pr....
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.... profit motive, the said activities cannot be treated as trade, commerce or business merely because some surplus has remained over the expenditure to carry out such activities. Thus if the dominant object or the primary object is charitable, the subsidiary object for the purpose of securing the fulfilment of dominant object would not militate against its charitable character and the purpose would not be any less charitable. 8. For that, the learned Commissioner for denying the grant of exemption u/s.12AA has taken help of the proviso to section 2(15) of the Act but ignored the clarification issued by the CBDT on this purpose. The CBDT in paragraph No.3.2 has clarified that, each case would therefore be decided on its own facts and, no generalisation would be possible. The assessee, who claim that, their activities are charitable purpose within the meaning of section 2(15) would be well advised to eschew any activity, which is in the nature of trade, commerce or business or the rendering of the any service in relation to any trade, commerce or business. Thus the anxiety of the Parliament in introducing the proviso 2(15) of the Act is only to check those institution who atte....
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....ronouncements relied upon by the learned Commissioner D/R have no application to the facts and circumstances of the case. So far as the judgment of ITAT (Chennal B Bench) is concerned, it is respectfully submitted that, the same has been over ruled by the Hon'ble Madras High Court in Tax case (appeal) 450 of 2013. Therefore the same cnno tbe applied in the instant case. So far as the judgment of ITAT (Panaji Bench) is concerned, it is respectfully submitted that, the same stands on a different footing. In that case the assessee society was established to hold international film festivals issued relating to establishment of entertainment industries and to create an entertainment hub which are completely different from the activities undertaken by the assessee. Therefore the same cannot be applied against the assessee. So far as the judgment in respect of ITAT (Mumbai) is concerned, it is respectfully submitted that, the issues involved in that case, have already been decided by the Hon'ble Madras High Court in a similar set of facts in favour of the assessee and your assessee also refers and relies on the judicial pronouncements of the Hon'ble Madras High Court. ....
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....ssessee has submitted copy of accounts not for the earlier years. Copies of the accounts were filed only from F.Y 2002-03 onwards. The activities carried on are not charitable activities. Ultimately, following groundwise submissions were made : ―Fulfilling the criteria of ―Charitable purpose‖ is the fundamental prerequisite for the purposes of Income Tax registration and availing of the exemptions u/s 11 of the Income tax Act.1961. The grounds of appeal of the appellant are dealt as under: 1. The first Ground of appeal is that, the order of the learned Commissioner of Income Tax, Cuttack is illegal, arbitrary without jurisdiction and for that matter the order of the learned 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 ground is that, the Ld. Commissioner of Income-tax has exceeded in his jurisdiction by examining the accounts of the appellant for the financial year 2002-03 to 2008-09 and coming into an irreleva....
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....ntities operating on commercial lines are claiming exemption on their income either u/s 10 (23C) or Sec11 of the Act on the ground that they are Charitable Institutions. This is based on the argument that they are engaged in the ―advancement of an object of general public utility‖ as included 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 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,....
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.... was held that when a provision is capable of interpreting without any clarification the amendment would only clarify the same. In such cases the amendment may be deemed to the retrospective in its application. Therefore invoking of the amended section 2(15) of the Act which was not existing in the year in which the assessee filed the application for grant of registration u/s 12AA is very much in order. 4. The fourth ground is that, the Ld. Commissioner of Income-tax has committed serious error by examining the matters subsequent to filling 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 Vedanta Swamy Charitable Trust Vrs. ACIT and another [2006 (2) OLR 75] and for that matter the order of refusal to grant the registration u/s 12AA of the Act by the Commissioner of Income-tax is Liable to be quashed. It is submitted that, the reply to this ground is already stated in the reply to ground two. The decision of the Hon'ble Orissa High Court in the case M/s Srikhetra,A.C. Bhakti Vedanta Swamy Charitable Trust Vs. ACIT and another 2006(11) OLR -75 w.p.(C)....
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.... not correct. 6. The sixth ground is that, the order of 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 three years subsequent to the application filed by the appellant and for that matter the Ld. Commissioner of Income-tax has exceeded in his jurisdiction by examining the matter not relating to the period for which the application for registration is filed. It is submitted that, the Hon'ble High Court of Odisha in the case of M/s Srikhetra, A.C, Shakti-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 tha....
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.... understood and illustrated in the definition of the section 2(15) of the Income-tax Act, 1961 and as interpreted by the various courts of law. Also the accounts of the association for the Financial Years 2002-03 to 2008-09 are quite questionable since the Honorary Secretary is found to have been managing the financial affairs of the association for various years involving substantial irregularities in financial and accounts matter and indirectly had facilitated substantial gain to the Honorary Secretary and his relatives. For such reasons for the Financial Years 2002-03 to 2008-09 registration u/s 12A is not entertained and hence the application for such years is dismissed. Para-55: In respect of the financial year 2008-09 onwards the amended provision of section 2(15) of the Income-tax Act, 1961 would clearly be applicable to the association. The activities carried out by the cricket association involving providing of services, facilities and amenities to the general public for a fee or service charges at the time of conducting various cricket matches at different places of the State, specially after the introduction of the Indian Premier League format, Indian cricket ha....
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....in the restricted meaning of education u/s 2 (15) of the Act and not a wider meaning i.e. advancement of any other object of general public utility. It is submitted that, the Hon'bte Supreme Court in the case of Sole Trustee, Loka Sikshana Trust Vs. CIT (SC) 101 ITR 234 has given a restricted meaning to education in the sense in which the word education‖ has been used in section 2(15) is the ―systemic instruction, schooling or training given to the young in preparation for the work of life. It also commits the whole course of scholastic institution.‖ Therefore, the sense in which ‗education' is used in section 2(15) is different from what is referred to by the appellant. 9. The nineth ground of appeal is that the Ld. Commissioner of Income-tax has committed serious error by discussing the matter relating to Indian Premier League which neither existed during the period for which the application is made nor the appellant is any way related with the functioning of the Indian Premier League and for that matter the said observation is liable to be expunged as well as the order of the refusal to grant registration on such extraneous reasons is Li....
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....e managing the affairs of the institution in violation of the objectives of the association. The CIT Cuttack in his order u/s 12AA at Para 45 held as under: ―Examination of the Impounded books for the financial year 2005-2006 shows that although the rules and regulations of the association require the Honorary Secretary to take approval of the treasurer of the association to spend funds of the Orissa Cricket Association; substantial expenses were found to be incurred by the Honorary Secretary without approval of the treasurer such as payment of Rs. 13,06,170=00 to M/s. Incon Associates/payment to Srikanta Kumar Sahoo, caterer Rs. 48,08,911=00. As per the audit observations for the accounting year 2004-2005 it is seen that the Honorary Secretary had incurred expenditure beyond budgetary provisions and had deposited a sum of Rs. 10 lakhs with the National Credit Cooperative Society Limited, Cuttack which was irregular so far as the by-laws and rules a regulations of the association is concerned. The auditor had also observed that the Honorary Secretary had incurred Rs. 11,31,850=00 as nor-recurring expenditure without obtaining prior approval of the council. Similarly ....
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.... Secretary had without proper procedure and without following the rules and regulations of the by-laws of the association had incurred substantial expenses and had withdrawn substantial cash from the bank accounts of the Orissa Cricket Association maintained with Canara Bank and Allahabad Bank for making cash payments against bogus vouchers raised against Orissa Cricket Association. Para-49. The implication of such findings from the impounded books, documents for the financial year 2002-2003 to 2005-2006 would amply justify to hold that the accounts of the Orissa Cricket Association for the financial year 2002-2003 to financial year 2006-2007 as stated in the audited accounts were quite questionable and had not been supported by the proper bills and vouchers. The entire financial transactions had been managed and controlled by the Honorary Secretary for his apparent personal gain through commission payment from persons who had raised bogus inflated bills for various expenses. Such findings would indicate that in reality the financial transactions of the association were so managed that substantial financial gain accrued to the Honorary Secretary and his family members/rela....
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....in 1977, 107 ITR 108 had observed that promotion and encouragement of entertainment as such is not charitable purpose and is not an object of general public utility. Para-52: From the analysis of the functioning in the present scenario of financial years 2008-2009 onwards it may be reasonable to hold that cricket associations all over India including Orissa Cricket Association are functioning with the dominant objective of making commercial gain and game of cricket in true sense has become only incidental to composite business ventures which are currently observed in all Indian Premier League format cricket matches all over the world which certainly is oriented to be a kind of money spinner for the investors. Substantial business risk, planning, decision making are involved and the entire cricket activities in the field in the premises of cricket association have become more of a composite presentation of glamour, fashion, music, celebrities, catwalks and all kind of modern entertainment options involving huge financial transactions. It would be accordingly a misnomer to still consider the activities of the cricket association to be involving any charity at all. H....
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....be refused or granted on the basis of materials prior to 2002 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 for the reasons submitted in the above paragraphs and in view of the judgment of Hon'ble Jurisdictional High Court in the case of M/s Srikhetra, A.C. Bhakti Vedanta Swamy Charitable Trust Vs. ACIT and another the action of the CIT, Cuttack in refusing to grant registration u/s 12AA of the Act for financial years 2002-03 to 2008-09 is in order. 15. The fifteenth ground is that the Ld. Commissioner of Income-tax has committed serious error by refusing registration u/s 12AA of the Act from the financial year 2002-03 where as the application has been made to grant registration from 01.04.1997 and for that matter the order passed by the Ld. Assessing Officer is liable to be quashed and/or annulled. It is submitted that, the CIT, Cuttack in his order u/s 12AA dated 22.03.2010 clearly stated in first Para as under: ―Para-01: Orissa Cricket Association stated to be an Association registered under the Society Registration Act, 1860 claims to have been allowed e....
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....ch may kindly be confirmed in view of the following decisions: 1. Hon'ble ITAT, Chennai Bench in the case of Tamilnadu 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'bte ITAT, Mumbai Bench ‗B' in the case of Mumbai Cricket Association Vs. DIT (Exemption), Mumbai reported in [2012] 24 taxmann.com 99(Mum) 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/2012 dated 05.04.2013 reported in (2013) 23 ITR (Trib) 635(Panaji), also upheld cancellation of registration by the CIT u/s 12AA(3) . The Hon'ble Bench at Para-20 held as under: &#....
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....the CIT Cuttack after considering the facts and circumstances of the case, has rejected the application of the assessee for the Financial Years 2003-04 to 2008-09 in view of the irregularities pointed out in the financial affairs of the association and held that the Association is not eligible for registration u/s 12A from Financial year 2008-09 onwards. When the registration granted u/s 12AA could be cancelled in several cases as above, in a case where registration is refused u/s 12AA, it is prayed to confirm the order of CIT Cuttack, in toto and dismissing the appeal of the assessee.‖ 5. We have heard the rival submissions and carefully considered the same alongwith the order of CIT passed u/s 12A. The Assessee society was incorporated under the Societies Registration Act, 1860 and registered with Registrar under no. 346/44 of 1960-61 on 18.3.1961 as per the certificate issued by the Registrar of Societies, Mr. B. Sivaraman, copy of which is placed at pg. 1 of the paper book with the following aims and objects : ―3. The Objects of the Association are a. Diffusion of useful knowledge of sports of all kinds, particularly, the game of Cri....
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....may :- a. Edit, compile, print and publish any newspapers, periodicals or leaflets. b. Establish or support or aid in the establishment or support of any other association having similar objects. c. Enter into agreement with other association or organisations for fulfilment or its objects. d. Assist, subscribe, co-operate with, affiliate with or give affiliation to or amalgamate with any other institution, society or association whether incorporate to or registered or not, and having objects altogether or in part similar to it, e. Accept or procure subscriptions donations or other contributions on such terms, as it may consider reasonable. f. Procure, collect and accept gifts and endowments on such terms, as it may consider reasonable. g. Borrow or raise money by any lawful means for the purpose of the Association including the issue of or upon bonds, debentures, bills of exchange, promissory notes or other obligations or securities of the Association. h. Organise relief work in time of flood, famine, epidemic or disaster of any kind or on any other occasion independently of or in collaboration with other indiv....
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....es but umpiring, examination fee, sponsorship fee, receipt from advertisement, affiliation fee. Even the Assessee has got TV rights receipt from BCCI relating to international matches. International matches are conducted by the Assessee for which tickets etc. are sold. This fact is clear from the income and expenditure account for the year ended 31.3.2001, copy of which is filed before us. Similarly, during the year ended 31.3.2002, the Assessee got income from sale of tickets as well as advertising for conducting the international match. In the subsequent year also, the source of income are of similar nature such as affiliation fees, hire charges for generators, fee for holding the test matches. The Assessee was recognised u/s 10(23) upto A.Y 1993-94. After that, the Assessee made application for registration u/s 12A for the first time only on 31.3.2003. 5.1 The provisions regarding registration and procedure for registration are given under the Income Tax Act, 1961 u/s 12A, 12AA and Rule 17 which are reproduced as under : "Section 12 A The provisions of section 11 and section 12 shall not apply in relation....
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....ter the 1st day of June, 2007 the provisions of sections 11 and 12 shall apply in relation to the income of such year in which such application is made. Procedure for registration "Section 12 AA 12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) After satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) Shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of b....
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....l year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up. 5.2 From the provision of the section 12A, it is clear that this section states that provision of Section 11 and 12 are not applicable unless condition for registration of the Trust or institution is fulfilled. Section 12 (1) (a) requires making of an application for registration; in the prescribed form and in the prescribed manner to the Commissioner before the expiry of 01 year from the date of the constitution of the Trust or institution. In case application is made after the expiry of the period of 01 year the provisions of section 11 & 12 are not applicable. For an application made prior to 1st day of June 2007, the commissioner has the power to condone the delay, if he satisfied that the person was prevented from making the application before the expiry of aforesaid period for sufficient reason. Such Trust or institution has also to get its account audited by an accountant as define....
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....f the services rendered and also by receiving incidental service charges for commercial exploitation of its premises from various commercial enterprises towards advertisement/publicity/broadcasting and telecasting facilities. The CIT was of the view that so far as the proviso to Sec. 2(15) is concerned, it was merely clarificatory in nature and was applicable to the earlier assessment year and therefore he took the view that the Assessee was not engaged in charitable purposes. We noted that the CIT did not deny that the Assessee was engaged in advancement of any other objects of public utility. The ld. DR vehemently relied before us on the retrospective operation of the proviso to Sec. 2(15). In our opinion, the proviso under Sec. 2(15) is not retrospective. It has been added by the Finance Act, 2008 w.e.f. 1.4.2009 i.e. from A.Y 2009-10. A provision can be regarded to be clarificatory when there is an ambiguity in the interpretation of the provision. Sec. 2(15), as it stood prior to the insertion of the proviso, did not have any ambiguity. The section defines "charitable purpose" by giving an inclusive definition mentioning therein "....
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....e clarifying the ambiguity, it would have a retrospective effect. In the case of Sec. 2(15), as it existed prior to the insertion of the proviso, there was no ambiguity on the interpretation of Sec. 2(15) - what does the advancement of any object of general public utility mean? Whether it includes therein carrying on of any activity in the nature of trade, commerce or business. In fact, by putting the proviso by Finance Act, 2008 w.e.f. 2009 the legislature specified that advancement of any other general public utility shall not be a charitable purpose if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any services in relation to a trade, commerce or business for cess or fee or any other consideration irrespective of the nature of the use or application or retention of the income from such activity. From the notes and clauses of the Finance Bill, 2008 we noted that proviso was inserted in Sec. 2(15) so as to exclude from advancement of any other object of general public utility - (i) Any activity in the nature of trade, commerce or business or, (ii) Any activity of rendering any se....
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.... are engaged in advancement of object of general public utility. The memorandum does not speak of ambiguity in the existing definition of charitable purpose as given u/s 2(15). The amendment is not by way of clarification but limits the scope of the phrase „advancement of any other objects of general public utility‟ so that the benefit may not be available to any activity in the nature of trade, commerce or business or any activity of rendering of any service in relation to trade, commerce or business for a fee, cess or any other consideration irrespective of the nature of the use or application of the income from such activity or retention of such income by the concerned entity. Therefore, in our opinion, CIT has to look into the definition of charitable purpose as on the date when the application has been made for registration by the Assessee for deciding whether the Assessee is engaged in charitable purposes or not if the Assessee is engaged in any activity in the nature of trade, commerce or business for consideration and hit by the proviso to Sec. 2(15). 5.5 Subsequently, as there has been amendment in the definition of charitable p....
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.... interpret the words „carrying on of any activity in the nature of trade, commerce or business‟ equivalent to the words „carrying on trade, commerce or business‟ there would have been no need of incorporating in the proviso, the words „of any activity in the nature of‟ prior to the words „trade, commerce or business‟. The legislature is fully aware of that an institution which is incorporated for charitable purpose cannot not have profit motive. Due to this reason, if we go to the background of Sec. 2(15), the Hon'ble Supreme Court interpreted Sec. 2(15) in the case of Addl. CIT Vs. Surat Art Silk Cloth Manufacturers Association 121 ITR 1 when the Section 2(15) contained the words "not involving the carrying on of any activity for profit" after "advancement of any other object of general public utility". Profit motive in respect of an institution cannot be main object but it may be ancillary and incidental to the main objects due to which Sec. 11(4A) was also incorporated under the Income Tax Act initially by Finance Act, 1983 w.e.f. 1.4.1984. The decision of Hon'ble Supreme Court in case of ACIT Vs. Su....
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....object of general public utility of "charitable purpose" was further explained by the Supreme Court in C.I.T vs. Federation of Indian Chambers of Commerce & Industry, 130 ITR 186 (SC). The question involved in this case was whether the income derived by a Chamber of Commerce from (a) arbitration fees levied by the chamber (b) fees collected for issuing certificates of origin and (c) share of profit in Messers, Calcutta Licenced Measures for issue of certificate of weighment and measurement, was exempt from income-tax under Section 11 read with Section 2(15) of the Act. Explaining the new qualifying words in the 1961 Act "not involving the carrying on of any activity for profit" added in Section 2(15), Krishna Iyer J. who delivered the judgement of the Court Observed as under: ―The true test is to ask for answers to the following questions: (a) Is the object of the assessee one of general public utility? (b) Does the advancement of the object involve activities bringing in moneys? (c) If so, are such activities undertaken, (i) for profit, or (ii) without profit? Even if (a) and (b) are answered affirmatively, if clause (i) is answered affirmatively,&....
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....ciary and at the end of year some surplus is left behind, does not lose the benefit of Section 2 (15). For then, one cannot conceive of any object of general public utility, which can be advanced by the Chamber of Commerce. The Court went on to add that in the absence of any "magna carta" binding the Chamber not to sell arbiter justice, it is not entitled to claim exemption from tax in respect of income from such activities. 5.7 An attempt was made by the Counsel for the assessee in Sole Trustee, Loka Shikshana Trust v. C.I.T, 101 ITR 234 to claim that "profit" under Section 2(15) of the Act means private profit. The Supreme Court, however, repelled the said contention on the ground that the word used in the definition given in Section 2(15) is profit and not private profit and it would not be permissible to read in the above definition the word "private" as qualifying "profit" even though such word is not there. The Supreme Court pointed out further that if it was the sole purpose of amendment in the definition as introduced in 1961, the amendment was not necessary at all for it had been declared by the Courts even before the amendment that activities motivated by private....
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....ctivity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration irrespective of the nature of use or application or retention of the income from such activity. This amendment is not retrospective in operation, therefore, on that basis, CIT cannot reject the application for registration provided the Assessee complies with all other conditions. CIT, if he thinks that the Assessee is hit by the proviso to Sec. 2(15) w.e.f. 1.4.2009, can pass order u/s 154 rectifying the order granting registration to the Assessee as that will tantamount to a mistake of law apparent on record. 5.10 We noted that the provisions of Sec. 12AA(1)(a) & (b) 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 has applied any income for charitable purpose or not. At this stage, all that the Commissioner should examine is whether the application is made in accordance with the requirement of Sec. 12A r.w.r 17A of the Income Tax Rules, 1962 and whether Form no. 10A has been properly filled up. The Commissioner may a....
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....tion has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of traveling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight, you learn by experience and thus add to your knowledge of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler who cheats you teach you a lesson and in the process make you wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But this is not the sense in which the word ―education is used in clause (15) of Section 2. What education connotes in that clause is the process of training and developi....