TaxTMI 
TaxTMI 
2021 (11) TMI 675
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....qua non for eligibility for the income tax exemption benefits under section 11 and 12 of the Act, but then such a registration per se does not confer any tax exemption benefit under section 11 and 12; the eligibility for exemption benefits is determined on a year to year basis depending upon on the actual activities of the assessee and other considerations germane to this context. 3. Granting registration as a charitable institution is usually a one-time exercise and the assessee institution has duly been granted registration under section 12A on 12th February 1996. That registration is yet to be cancelled or withdrawn. However, the assessee has applied for fresh registration, and the event triggering the present registration application is the amendment of its 'memorandum of association, and rules and regulations', to implement the recommendations of a Committee chaired by Justice R.M. Lodha, former Chief Justice of India (hereinafter referred to as 'Justice Lodha Committee') and as approved by Hon'ble Supreme Court of India, vide judgment dated 9th August 2018. 4. The assessee has taken as many as eleven grounds of appeal, which will be taken up together....
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.... of the Income Tax Act and instead erred in relying on facts and circumstances which were totally irrelevant thereby vitiating the impugned order on matters of facts and law. 11. The appellant craves leave to add alter or amend any of the grounds of at any time before or at the time of hearing of the Appeal. 5. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a society registered at Madras, on 28th November 1940, under Societies Registration Act 1880- now repealed and substituted, so far as the State of Tamilnadu is concerned, by the Tamilnadu Societies Registration Act 1975. Until the assessment year 1996-97, the assessee was granted an exemption, as a notified institution, under section 10(23) of the Act. Section 10(23), it may be mentioned, stands omitted as of now. On 12th February 1996, the Director of Income Tax (Exemption) Mumbai issued a certificate of registration under section 12A to the assessee, with effect from 1st April 1995, i.e. financial year relevant to the assessment year 1996-97. On 1st June 2006, and then on 21st August 2007, certain amendments were made to the Memorandum of Association of t....
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....and that the amendments made in 2006 and 2007 were minor amendments without any impact on the basic objects. Copies of these show cause notices, as also replies thereto, have been placed in Volume II of the paper-books filed before us. One of the allegations against the assessee was that the assessee has not approached the Principal Commissioner with the amended memorandum of association etc and that the assessee does "not respect the Tribunal by carrying out their suggestions/directions". Implicit in these observations was the stand of the Commissioner that once there is an amendment in the memorandum of association, the assessee should approach the Principal Commissioner for re-examination of eligibility for registration. Be that as it may, the matter was, as evident from the show cause notices and replies thereto, examined in detail, and the contention of the assessee all along was that these amendments were insignificant and had no impact whatsoever on the basic objects of the institution. It appears that the further proceedings were dropped in the matter, as the proposed action was not really taken by the Commissioner, and the registration obtained by the assessee under sectio....
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....eate a monopoly over cricket. The Supreme Court appointed Committee comprising of Justice R.M. Lodha, former Chief Justice of India, Justice Ashok Bhan, former Judge of the Supreme Court and Justice R.V. Raveendran, former Judge of the Supreme Court was mandated inter alia to examine and make suitable recommendations to the BCCI for reforms in its practices and procedures and necessary amendments in the Memorandum of Association and Rules & Regulations on the matters set out in Paragraph 109 of the judgment dated 22nd January 2015..... The task assigned to the Committee is clear: recommend those changes in the Rules and Regulations of BCCI that will further the interest of the public at large in the sport of cricket, improve the ethical standards and discipline in the game, streamline and create efficiency in the management of the BCCI, provide accessibility and transparency, prevent conflicts of interest situations and eradicate political and commercial interference and abuse and create mechanisms for resolution of disputes and grievances. As the Supreme Court has reiterated that the BCCI is carrying out public functions - functions that govern the interests of t....
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....the registration of the said Constitution of BCCI, each of the members shall undertake registration of their respective Constitutions on similar lines within a period of 30 days thereafter. A compliance certificate must be furnished to the CoA, which shall file a status report before this Court with reference to the compliance undertaken by the State Associations; and 3. In the event that any State Association does not undertake compliance with the above said directions, the directions contained in the orders of this Court dated 7 October 2016 and 21 October 2016 shall revive. 41. The Committee of Administrations is at liberty to submit a further report for such future directions as may be warranted and to secure compliance. 8. On 15th September 2018, i.e. also immediately after the above directions of Hon'ble Supreme Court as above having been given effect, the assessee institution filed an application in Form 10A seeking registration under section 12AA r.w.s. 12A(1)(b). That is how the Commissioner was seized of the matter with respect to continuance of the registration. 9. Learned Principal Commissioner, however, did not accept the registration reques....
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....pplicability of proviso to Section 2(15), even if that be so, cannot be reason enough to decline registration under section 12AA, as held by a co-ordinate bench of this Tribunal, in the case of Kapurthala Improvement Trust Vs. CIT [ (2016) 154 ITD 637 (Asr)], for the reason that, the application of proviso to Section 2(15) is an annual and year to year exercise, which leads to declining of exemption under section 13(8) in appropriate cases, the grant of registration is one time exercise. It was also submitted that while granting registration, what is to be considered is whether the objects of the trust are charitable in nature having regard to the established legal principles governing the concept of 'charity', while proviso to section 2(15) can only come into play while granting the exemption under section 11. Without prejudice to this line of argument, it was also emphasized that the activities of the BCCI, in any case, were well within the ambit of the expression 'charitable purposes' under section 2(15). It was further added that genuineness of the activities of the assessee are anyway not in doubt, and all that is to be seen, for the present purposes, is whethe....
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....ion under section 12A; and (d) while revenue of IPL event is being given undue attention, what is being clearly overlooked is that it is because of the IPL that several young talented cricketers are getting opportunities for growth and recognition. Elaborate submissions were then also made on the legal and factual aspects of the matter. None of these submissions, however, impressed the learned Principal Commissioner. She rejected the application for registration, and her findings in this regard can be summarised as follows: i. In paragraphs 4 and 5 at pages 13 and 14 of the impugned Order, after referring to section 12A and section 12AA, it has been observed that the Respondent has to satisfy herself regarding the objects of the Appellant and genuineness of its activities. ii. In paragraph 6 at page 14 of the impugned order reference has been made to the fact that the Appellant, despite opportunity, did not produce the audited Accounts for the assessment year 2018-19. iii. In paragraphs 7 and 8 at pages 14 to 16, reference has been made to the proviso to section 2(15) of the Act alongwith the necessary interpretation to be placed thereon with an observati....
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....-amendment objects and the assessee had not "undertaken modifications of the objects which do not conform to the conditions of registration", it was explained by the learned senior counsel that the assessee was indeed under no obligation to approach the Commissioner as the amendments in the assessee's memorandum of association and rules and regulations did not even remotely affect its basic objects, for which registration was granted, the assessee nevertheless approached the Principal Commissioner in deference to the observations made by a co-ordinate bench to the effect that "the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law". 11. The fact that the assessee did inform the Principal Commissioner, according to the learned senior counsel, of the changes in the Memorandum of Association should be seen in this light. Learned senior counsel, however, submits that once the assessee has moved the application, the Commissioner ought to have held that since there is no material change in the objects of the assessee institution, so far....
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....was no necessity to do so and the registration as earlier granted on 12.02.1996 continues to hold good. b. Assuming without admitting that the Appellant has to obtain registration as per section 12A(1)(ab) of the Act, whether the enquiry carried out by the Respondent and the finding given by her goes beyond the scope of the relevant statutory provisions. c. Whether for fulfilling the condition relating to genuineness of the activity of the trust or institution, the only test should be whether the activities carried on by the assessee Institution are within the four corners of the objects or they go beyond it. d. Whether the proviso to section 2(15) of the Act can have no relevance for adjudicating the aspect relating to the genuineness of the activities of the Trust. Placing of reliance on this proviso for denying grant of registration under section 12A/12AA tantamounts to reading a condition in the said sections which does not exist. e. Assuming without admitting that the proviso to section 2(15) of the Act has any relevance while considering the present application, whether the predominant object pursued by the Appellant continues to be to cont....
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....ocuments are placed before us at pages 116 to 122 and pages 16-115, respectively. Learned senior counsel has meticulously taken us through the object clauses in both of these documents to demonstrate that there is no material or significant change in the new memorandum of association which does not conform to the old memorandum of association, based on which the registration Was granted. Learned senior counsel has also filed a statement comparing these two documents. This statement, inter alia, gives the following comparison: THE BOARD OF CONTROL FOR CRICKET IN INDIA COMPARISON OF THE OBJECTS AS PER ORIGINAL AND AMENDED MEMORANDUM OF ASSOCIATION (MoA) Cl. no. Relevant clauses of MoA adopted in 1994 on the basis of which registration u/s 12A was granted Corresponding clauses of MoA as amended in 2018 in accordance with direction of the Supreme Court 1. The name of the Association is "THE BOARD OF CONTROL FOR CRICKET IN INDIA" and it shall hereafter be referred to as the BOARD The name of the Association is "THE BOARD OF CONTROL FOR CRICKET IN INDIA" and it shall hereafter be referred to as the "BCCI" 2. The objects of the Board are: The obj....
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....stees appointed by it, for carrying out the objects of the BCCI (k) To carry on any other activity which may seem to the Board capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value of, or render profitable any of the properties or rights of the Board (s) To carry out any other activity which may seem to the BCCI capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value or render profitable or generate better income/revenue, from any of the properties, assets and rights of the BCCI • (l) To donate such sum or sums for such causes as would be deemed fit by the Board conducive to the promotion of the game of Cricket; the benefit of a Cricketer or his widow or children as the Board may deem fit; any other person who has served cricket or his widow or his children as the Board may consider fit • (u) To grant/donate such sum/s for: Such causes as would be deemed fit by the BCCI conducive to the promotion of the game of Cricket; The benefit of Cricketers or t....
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.... proceeds thereof towards the implementation of the objects set out herein (n) To constitute Committees, from time to time, and entrust or delegate its functions and duties to such Committees, for achieving the objects of the BCCI (r) To take such action as may be necessary to co- ordinate the activities of affiliated Associations, Institutions and their Members in relation to the Board and amongst themselves (x) To co-ordinate the activities of members and institutions in relation to the BCCI and amongst themselves (s) To select teams to represent India in test matches, official or unofficial played in India or abroad, and to select such other teams as the Board may decide from time to time (g) To select teams to represent India in Test Matches, One Day Internationals, Twenty/20 matches and in any other format in India or abroad as the BCCI may decide from time to time (w) To employ, appoint executive secretaries and assistant secretaries, clerks, managers, coaches, professional cricketers, umpires, scorers, statisticians, groundsmen, peons, servants and other service personnel and staff and to pay them and other persons in return fo....
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.... No corresponding clause in the original objects (y) To create and maintain a central repository and database of all Cricketers along with their game statistics No corresponding clause in the original objects (aa)To provide a fair and transparent grievance redressal mechanism to players, support personnel and other entities associated with Cricket 3 The income, funds and properties of the Board however acquired, shall be utilised and applied solely for the promotion of the objects of the Board as set forth above to aid and assist financially or otherwise and to promote, encourage, advance and develop and generally to assist the game of cricket throughout India The income, funds and properties of the BCCI however acquired, shall be utilised and applied solely for the promotion of the objects of the BCCI as set forth above to aid and assist financially or otherwise and to promote, encourage, advance and develop and generally to assist the game of cricket or any other sport throughout India 4. The Board shall not be dissolved unless the dissolution is decided upon by a special resolution passed at a General Meeting of the Board convened for the purpo....
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....lic -- the necessary corollary is that BCCI is subject to the rigours of public law, which mandates that the BCCI acts in line with the general principles of reasonableness and fairness, and also that it adheres to the basic principles of accountability and transparency. Any changes to bring out these reforms and specifically approved by Hon'ble Supreme Court, cannot, by any stretch of logic, be such changes that dilute the fundamental objective of promoting the game of cricket, and "not in conformity" with the objects all along espoused by the BCCI and as set out in the pre-amendment MoA. The very foundation of the approach implicit in the impugned order is thus wholly unsustainable in law, and clearly misconceived. 20. No material has been brought before us to controvert the above position, and neither in the impugned order passed by the learned Principal Commissioner nor in the submissions made by the learned Commissioner (DR) any effort has been made to even indicate that the modifications in the objects of the amended deed do not conform to the objects in the memorandum of association based on which the registration was granted. It is also important to bear in mind the ....
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....ng before and after the adoption of the amended Constitution. Therefore, the objects on the basis of which registration continued upto 08.08.2018 (i.e. before approval of the amended constitution by the Supreme Court), fundamentally remains the same after that date. In fact that position is accepted by the Revenue inasmuch as at page 2 of written submissions filed by the learned DR has stated that" The Hon'ble Supreme Court has only approved changes regarding better corporate governance and made it transparent within the organisation to avoid conflict of interest." A bare perusal of section 12A(1)(ab) of the Act shows that the said provision applies only when an institution which had been earlier granted registration inter alia under section 12A has adopted or undertaken modification of its objects which do not conform to the condition of the registration. As stated hereinabove, the objects of the Appellant Institution have remained unchanged. Hence, there was no requirement to make the said application. Based thereon, the Appellant submits that the Tribunal may be pleased to clarify the said position and hold that the registration as originally granted on 12.09.1996 under sect....
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.... application of registration under section 12A(1)(ab) unless the amendments are such as not in conformity with the documents based on which registration was originally granted. There is a difference in these two situations, i.e. between keeping the registration authority about the changes in the memorandum of association etc, and between making an application for fresh registration which comes into play only when the amendments in question do not conform to the objectives in respect of which registration was granted or obtained. Unless that condition is satisfied, Section 12A(1)(ab) come into play. 23. The mere fact that the assessee has filed an application under section 12A(1)(ab), even as he is all along contending that there is no material change in the object clause so as not to conform to the objects clause in the original memorandum of association, cannot vest jurisdiction in the Principal Commissioner to deal with the application on merits, unless it is established that there is indeed a modification in the object clause which does not conform to the conditions on which the original registration is granted i.e. the memorandum of association based on which the registratio....
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.... in the case of Kapurthala Improvement Trust (supra) and speaking through one of us (Vice President), has observed as follows: 10. There is, however, a much more fundamental a reason for the assessee succeeding in this appeal. In our considered view, the considerations with respect to the first proviso to Section 2(15) coming into the play and, for that reason, the objects of an assessee trust or institution being held to be not covered by the definition of 'charitable purposes', have no role to play in the matters relating to registration of a trust or institution under section 12A or 12AA - whether in respect of granting or declining of a registration or in respect of cancellation, even if otherwise permissible, of a registration. A closer look at the scheme of the Act would unambiguously show this aspect of the matter. 11. Let us begin by taking a look at Section 2(15) which defines charitable activities and first and second provisos thereto. These statutory provisions are as follows: (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and pre....
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....ic.in/budget2012-2013/ub2012-13/mem/meml.pdFI explained the reasons and backdrop of this legislative amendment as follows: Assessment of charitable organization in case commercial receipts exceed the specified threshold Sections 11 and 12 of the Act exempt income of any charitable trust or institution, if such income is applied for charitable purposes in India and such institution is registered under section 12AA of the Act......Section 2(15) of the Act provides definition of charitable purpose. It includes "advancement of any other object of general public utility" as charitable purpose provided that it does not involve carrying on of any activity in the nature of trade, commerce or business. 2nd proviso to said section provides that in case where the activity of any trust or institution is of the nature of advancement of any other object of general public utility, and it involves carrying on of any activity in the nature of trade, commerce or business; but the aggregate value of receipts from the commercial activities does not exceed Rs. 25,00,000 in the previous year, then the purpose of such institution shall be considered as charitable, and according....
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....he objects of the assessee may be hit by the proviso to section 2(15) cannot have any bearing on the grant, denial or withdrawal of the registration under section 112AA. 15. It is also important to bear in mind the fact that in terms of the second proviso to Section 2(15), which was introduced by the Finance Act 2010 with retrospective effect from 1st April 2009, the legal prescription set out in first proviso to section 2(15) cannot come into play "if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year". Clearly, therefore, in order that the benefits under section 11 are declined to the assessee on the ground that it is engaged in such activities as may be hit by the first proviso to Section 2(15), not only the assessee must be engaged in carrying out such activities as may hit the first proviso to Section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of the grant o....
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....is only elementary that a statutory provision is to be interpreted ut res magis valeat quant pereat, i.e., to make it workable rather than redundant. 18. The considerations about the possibilities of the first proviso to Section 2(15) coming into play affecting the grant, decline or withdrawal of registration under section 12AA will thus lead to wholly avoidable undue hardships to the assessee, will be unworkable in practice and be contrary to the scheme of the Act. 19. In view of the above discussions, in our considered view, the considerations about the possibilities of first proviso to Section 2(15) into play are wholly extraneous in the present context. As the withdrawal of registration is solely based on these considerations, the very foundation of the learned Commissioner's action is unsustainable in law and consists of reasons which are not at all relevant in the context of registration status under section 12A or 12AA of the Act. For this reason also, the action of the learned Commissioner is wholly devoid of any legally sustainable merits. 26. What essentially follows is that the remedy to the proviso to Section 2(15) coming into play is not denial....
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....e application of proviso to Section 2(15). Therefore, irrespective of what was observed by the Commissioner cancelling the registration or the Tribunal upholding the cancellation, this decision of Hon'ble Kerala High Court cannot be an authority for the proposition that application of proviso to Section 2(15) has a role to play in cancellation or registration of a trust or an institution. As held by Hon'ble jurisdictional High Court in the case of CIT v. Sudhir Jayantilal Mulji [ (1995) 214 ITR 154 (Bom)], a judicial precedent is only "an authority for what it actually decides and not what may come to follow from some observations which find place therein". The propositions which are assumed by the Court to be correct for the purpose of deciding the same are, according to this judgment of the Hon'ble jurisdictional High Court, lack precedence value and are not binding in nature. In the present case, there is not even a mention of the proviso to Section 2(15) in the operative portion of the order. The entire operative portion of the said judgment is as follows: 9. The appellant-trust obviously was engaged in executing contracts as awarded by the Indian Railways ....
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....ch the assessee had employed such people. 11. The Tribunal correctly found that for cancellation of registration, there are two conditions to be satisfied; one that there is a registration granted earlier and the other the satisfaction of the Commissioner that the trust or the institution is not genuine or the activity of the trust is not being carried on in accordance with the objects of the trust. The activity specifically carried on by the assessee is execution of contract awarded by the Indian Railways. This does not come within any of the objects as professed by the assessee in its MoA. The provision of employment is an incidental and necessary corollary to the execution of the contract awarded by the Indian Railways to the assessee. Various High Court judgments as proffered before the Tribunal were discussed by the Tribunal to distinguish them on facts. We would not further labour on the same, since the only argument was on the basis of the aforesaid judgment of the Division Bench of this Court itself. The Commissioner, according to us, has rightly found that the activities carried on by the assessee being in the nature of execution of a contract work as obtained fro....