2020 (2) TMI 366

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....to Section 2(15) ? (b) Whether the Appellate Tribunal was justified on facts and in law in sustaining the order under Section 12AA(3) particularly on grounds alien to Section 12AA(3) ? 4. According to us, if the substantial question of law at (b) above is decided in favour of the appellant, then, there will arise no necessity of deciding the substantial question of law at (a) as above. This is because if we are satisfied that the Commissioner of Income Tax (CIT) lacked jurisdiction to exercise powers under Section 12AA(3) on the sole ground that the definition of charitable purpose in Section 2(15) of the Income Tax Act, 1961 (said Act) had been amended, then, on the said ground alone, the impugned order made by the CIT on 27.12.2011 and confirmed by the Income Tax Appellate Tribunal (ITAT) on 22.06.2012 will have to be set aside. Accordingly, we proceed to deal with the substantial question of law at (b), in the present appeal. 5. The appellant in the present case is a Statutory Corporation established under the Goa, Daman and Diu Industrial Development Corporation Act, 1965 (GIDC Act) with the object of securing orderly establishment in industrial areas and industrial es....

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....e its amendment by the Finance (No.2) Act, 1996 (33 of 1996)]] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are 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. 12. From the plain reading of the aforesaid provision, it is clear that the power of cancellation of registration can be exercised by the CIT where the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be. 13. In the present case there are really no categorical findings to the effect that the activities of the appellant are not genuine or are not being carried out in accordance with the objects, which objects, have been set out in the GIDC Act, 1965. 14. In fact, Mr. Kalburgi, learned Junior Standing Counsel did not even urge that the activities of the appellant are not being carried out in accordance with the objectives spelt out under the G....

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....a Housing & Area Development Authority - 392 ITR 240 (Bombay). (iii) Director of Income-tax (Exemption), Bangalore v. Karnataka Industrial Area Development Board - [2015] 55 taxmann.com 34 (Karnataka). (iv) Tamil Nadu Cricket Association v. Director of Income-tax (Exemptions) - [2013] 40 taxmann.com 250 (Madras). 17. According to us, all the aforesaid judgments support the contentions now raised by Mr. Vaidhya in this appeal on the substantial question of law at (b) above. 18. In Khar Gymkhana (supra), the Division Bench of this Court, has in fact taken cognizance of the Circular No.21/2016 and held that merely because, in a given year, an institution, by carrying on any trade, commerce and business is in receipt of an amount in excess of Rs. 25 lakhs, would not entitle the Director of Income Tax to cancel the registration under Section 12AA(3). It is further held that the jurisdiction to cancel registration would only arise if there is any change in the nature of the activities of the institution or the activities of the institution are not genuine. In the absence of fulfillment of either of these pre-conditions, the CIT or the Director, as the case may be,....

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....1 of 2016 clearly provides that mere receipts on account of business being in excess of the limits in the proviso would not result in cancellation of Registration granted under Section 12AA of the Act unless there is a change in nature of activities of the institution. Admittedly, there is no change in nature of activities of the institution during the subject Assessment Year. The further submission on behalf of the Revenue that looking at the quantum of receipts on account of commercial activities, it is un-likely/improbable that in the subsequent Assessment Years, the receipts would fall below Rs. 25 lakhs and therefore, the Commissioner is entitled to cancel the Registration. The aforesaid submission made on behalf of the Revenue is based not on facts as existing but on probability of future events. We are unable to accept the submission based on clairvoyance. Further, we are unable to understand what prejudice is caused to the Revenue since whenever the receipts on account of commercial activities is in excess of the limits provided in proviso to Section 2(15) of the Act, the Assessing Officer is mandated/required to deny exemption under Section 11 of the Act as provided in Cir....

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....e proceedings can be decided in a proper case. With these observations, the appeal fails and it is dismissed." (Emphasis supplied) 22. In Karnataka Industrial Area Development Board (supra), the Division Bench of Karnataka High Court, in terms has held that the registration granted cannot be cancelled in view of the amendment of Section 2(15) as this is not a ground specified in the statute for cancellation of registration. In this case, the Division Bench rejected the contention that on account of the amendment to Section 2(15) of the said Act, the activities undertaken by the Karnataka Industrial Area Development Board could be styled as non-genuine activities. 23. The relevant discussion is to be found in paragraph 9 which reads as follows:- "9. It is not in dispute that there is no violation of the said two conditions by the assessee. The activities carried on by the assessee is a genuine one. As could be seen from the profits they have generated, the said profit is earned by carrying on the activities in accordance with the object of the trust. Therefore, the two conditions stipulated in subsection (3) of Section 12AA of the Act, which empowers the a....

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....onduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal's view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities a....