INCOME TAX APPELLATE TRIBUNAL,MUMBAI - `C' BENCH.
Before S/Sh.Vijay Pal Rao, Judicial Member & Rajendra,Accountant Member
/.ITA No.1193/Mum/2012,[ [/Assessment Year-2009-10
Chembur Gymkhana, DIT (E),
The Chembur Gymkhana, 16th Vs 6th Floor, Piramal Chambers,
Road, Chembur, Mumbai-400071 Parel, Mumbai-400012
PAN:AAATT4163F
(/ Appellant) (× / Respondent)
[ / Assessee by : Shri Rajesh S. Athavale
/ Revenue by : Shri A.C.Tejpal
/ Date of Hearing : 29-09-2014
/ Date of Pronouncement : 29-09-2014
, 1961 ( 1 ) 254 Û[
Order u/s.254(1)of the Income-tax Act,1961(Act)
Per Rajendra,AM Û] :
Challenging the order dated 28.12.2011 of the Director of Income Tax(Exemptions),
Mumbai,passed u/s.12AA(3)of the Act,assessee-trust has filed following grounds of
appeals:
On the facts and in the circumstances of the case, the learned Director of Income Tax
(Exemptions) has erred in cancelling/withdrawing the registration granted to the assessee Trust by
invoking the provisions of Section 12AA(3) of the Income tax Act with effect from A Y 2009-10.
Without prejudice to the generality, the learned Director of Income Tax (Exemptions), besides
holding that no attendance was made on the date of hearing of the show cause notice by
disregarding specific request made in the reply to the show cause notice, has, on the merits of the
case and as per the records, erred in:
a)Assuming jurisdiction under Section 12AA(3) of the Act;
b)Holding that the assessee Trust has become non-genuine for the purpose of Section 11 of the
Act;
Your appellant prays for the leave to add to or alter or amend the above grounds, if necessary.
Brief facts of the case:
2.As per the Director of Income-tax-Exemption,Mumbai(DIT-E),he received a proposal from the
ADIT-(E)(1)(2),Mumbai for cancellation of registration granted to the assessee u/s.12A of the Act
on the ground that the assessee-trust had been carrying on activities in the nature of trade,
commerce or business and gross receipts there-from were in excess of Rs. 10 lacs,that the
Expenditure account showed that the assessee had received Rs.50.12 lakhs as Goodwill from
Caterers.DIT-E was of the opinion that the proviso to section 2(15) of the Act was attracted in the
case under consideration,that registration granted to the assessee had to be withdrawn.He issued a
show cause vide this office letter No.DIT(E)/ITO(HQ)/ Withdrawal/68/2011-12 dated
20.12.2011 was issued to the assessee as to why should the registration as granted to it not be
withdrawn. The assessee in response to the show cause has furnished its written submission vide
its letter dated 24.12. 2011.After considering the reply of the assessee-trust,DIT-E held that an
amount of Rs.50,12,000/ was received from four caterers,that the amount consisted of fixed
2 ITA No. 1193/M/2012 Chembur Gymkhana
monthly rental for using the premises of the Gymkhana to provide catering services to members
and fixed royalty per function for catering to the function conducted by members inside the
Gymkhana premises.Referring to the provisions of the section 2(15)of the Act, he further held that
if any trust;whose main object was for advancement of any other object of general public
utility;carried out any activities which were in the nature of any trade/commerce/business then all
actions of such a trust were covered by the aforesaid proviso. He further held that in the assessee's
case there were clear-cut earnings which was shown as income by way of Goodwill from Caterers
of Rs.50.12 lakhs and additional facilities charges for Rs. 116.79 laks,that such receipts were in
excess of Rs.10 lacs,that the assessee was receiving income towards commercial exploitation of
its property in a systematic manner which was nothing but a business income,that the assessee
trust was directly hit by the proviso to section 2(15) which had been introduced from AY. 2009-
10,that once a charitable trust was hit by aforesaid proviso there was change in the status of such
trust and it was to be held that it was not for charitable purpose.He finally held that the assessee
trust had become non genuine for the purposes of sectin 11of the Act and the registration as
allowed to it in earlier years u/s.12AA was to be cancelled or withdrawn w.e.f. AY. 2009-10.
3.Before us,Authorised Representative(AR)submitted that trust was registered in April,1981, that
registration was granted to the assessee u/s.12A of the Act,that the it was not covered by the
provisions of section 12AA(3)of the Act,that said provisions were applicable from 01.06.2010
i.e.from AY. 2011-12 only,that there was no element of commercially involved as the amount
received was towards using the property of the Gymkhana to provide services to the members of
the Gymkhana,that the Gymkhana had received an amount of Rs.116.79 lakhs towards additional
facility charges,that the amount was collected from members to provide room facility to conduct
personal function like marriages, get-togethers etc.,that the Gymkhana provided the facilities only
to members and hence there was no commerciality involved in those services,that catering and
additional facility charges were in compliance with item no. 3 of details of object.He relied upon
the cases of M/s.The Bombay Presidency Golf Club Ltd.(ITA/319/m/2012),Agra Development
Authority(141ITD 336), Kodava Samaj(57SOT73)and Khar Gymkhana(ITA/373/ Mum/2011).He
also referred to the pages no.31,33,34 of the paper-book.
Departmental Representative (DR) supported the order of the DIT-E.
4.We have heard the rival submissions and perused the material before us.Undisputed facts of the
case under consideration are that the assessee-trust was granted registration on 01 .04.1981,that
DIT-E,vide his order dtd.28.12.2011withdrew the registration granted to it for the year 2009 -
10,that the amended provisions of section12AA(3)were effective from AY.2011-12.We are of the
opinion that the DIT(E) could cancel the registration granted u/s.12A of the Act by invoking the
provisions of section 12AA(3) of the Act only if he was satisfied that the activities of the trust
were not genuine or the activities of the trust were not being carried out in accordance with the
objects of the trust,that section 12AA(3) of the Act did not authorise the DIT-E to cancel
registration u/s.12A,if he was of the opinion that the activities of the assessee trust involved the
carrying on of any activity in the nature of trade,commerce or business,that DIT-E had failed to
bring out any fact that the activities of the assessee trust were not genuine or were not carried out
as per the objects of the trust.
We will also like to mention that because of amendment to section 2(15)w.e.f.01.04.2009 certain
changes have been introduced in the provisions governing the trusts and the definition of the
phrase charitable activities has not remained same.Similarly,certain amendments have been
brought in the statute,as power was given to the departmental authorities to cancel the registration
as per the provisions of section 12 AA(3)of the Act.We find that the Explanatory Notes to the
provisions of the Finance Act, 2010(Circular No.1/2011[F.No.142/l/2011-SO(TPL)-I,dated 6-4-
2011) has explained the background for bringing change in the section as under:
"7.Cancellation of registration obtained under section 12A
3 ITA No. 1193/M/2012 Chembur Gymkhana
7.1.Section 12AA provides the procedure relating to registration of a trust or institution engaged
in charitable activities.Section 12AA(3)previously provided that if the activities of the trust or
institution are found to be non-genuine or its activities are not in accordance with the objects for
which such trust or institution was established,the registration granted under section 12AA can be
cancelled by the Commissioner after providing the trust or institution an opportunity of being
heard.
7.2.The power of cancellation of registration is inherent and flows from the authority of granting
registration.However,judicial rulings in some cases have held that the Commissioner does not
have the power to cancel the registration which was obtained earlier by any trust or institution
under provisions of section 12A as it is not specifically mentioned in section 12AA.
7.3.Therefore,section 12AA has been amended to provide that the Commissioner can also cancel
the registration obtained under section 12A as it stood before amendment by Finance (No.2)
Act,1996.
7.4.Applicability-This amendment has been made applicable with effect from 1st June, 2010 and
shall accordingly apply for assessment year2011-12 and subsequent assessment years."
From the above it is clear that DIT(E)can cancel the registration granted to a trust if the activities
of the trust or institution are found to be non-genuine or its activities are not in accordance with
the objects for which such trust or institution was established.In the case of Sarvodaya Ilakkiya
Pannaj(343ITR300)the Hon'ble Madras High Court took a view that once a registration u/s. 12A
of the Act was granted, the same could be cancelled only on satisfaction of two conditions laid
down in section 12AA(3) of the Act, viz.,(a) that the activities of the trust or institution are not
genuine; and (b) that the activities of the trust or institution are not being carried out in accordance
with the objects of the trust or institution.The Hon'ble High Court expressed the view that there
must be specific findings with regard to the aforesaid two conditions.We find that the DIT(E) has
not given specific finding as required by the Hon'ble Madras High Court.
Receipt of Rs.50.12 lakhs from four caterers can be subject matter of the assessment order to be
passed by the AO.But,same cannot be,in any condition,the basis for invoking provisions of
section 12AA(3).Circular issued by the CBDT on 06.04.2011 clearly mentions that amendment
would be applicable from the AY.2011-12 and subsequent assessment years.In the case of Agra
Development Authority(supra)the assessee was granted registration under section 12A of the Act
w.e.f. 01.04.2003 and said registration was cancelled by the CIT w.e.f. assessment year 2009-
10.Deciding the appeal,the Tribunal held as under:
From the conjoint reading of sub-section (1) clause (b) and sub-section (3) of section 12AA,it
would be seen that the cancellation of the registration was provided where the registration was
granted under clause (b) of sub-section (1). Further cancellation under sub-section (3) was also
provided where the registration was obtained at any time under section 12A [may be under clause
(a) or clause (aa) of sub-section (1) of section 12A]. But this power of cancellation of registration
obtained under section 12A came to be incorporated by way of amendment introduced by the
Finance Act, 2010 with effect from 01.06.2010. That being the interpretation of sub-section (3), it
is amply clear that the power to cancel the registration once granted was only confined to the
registration granted under clause (b) of sub-section (1) of section 12AA till before 01.06.2010. Of
course, now with effect from 01.06.2010, the power vests with the Commissioner even to cancel the
registration granted under any of the clauses of sub-section (1) of section 12A......Section 12AA(3)
of the Act empowers the CIT to cancel such registration if he satisfy that activities of the trust or
institutions are not genuine or are not being carried out in accordance with objects of the trust or
institution as the case may be. The combined reading of both the sections makes it clear that
before 01.06.2010 registration can be cancelled only on those cases where the registration has
been granted under section 12AA(1)(b) of the Act.Before 01.06.2010 this section 12AA(3) nowhere
empowers the CIT to cancel or withdraw registration under section 12A of the Act. In absence of
such power,the registration granted under section 12A cannot be withdrawn or cancelled before
1.6.2010. The power of cancellation of registration under section 12A of the Act came to be
incorporated by way of amendment introduced by Finance Act 2010 w.e.f. 01.06.2010. The
C.B.D.T. Circular No.1/2011 dated 06.04.2011 explains that this amendment will apply for A.Y.
4 ITA No. 1193/M/2012 Chembur Gymkhana
2011-12 and subsequent years. Whereas, in the case under consideration, the CIT cancelled
registration under section 12A of the Act for A.Y. 2009-10 which is not in accordance with the
law."
Facts of the case under consideration,are almost similar to the facts of the matter of Agra
Development Authority(supra).In this case registration was granted in 1981 and was withdrawn
for the AY.2009-10 i.e. before the AY. 2011-12.As the cancellation is against the provisions of
law,so same cannot be endorsed.Here,we would also like to mention the case of Maharashtra
Housing and Area Development Authority(33taxmann.com 604),DIT-E, Mumbai had withdrawn
the registration granted to the assessee on the similar grounds.While deciding the appeal in favour
of the assessee,Tribunal held that even though the objects of the institutions were no longer
towards a charitable purpose in view of the amended law,registration u/s.12A could not be
reviewed or withdrawn in absence of stipulation in section12AA(3)regarding continuing
satisfaction.
Considering the facts and circumstances of the case;date of registration of the trust and the
effective date of applicability of the amendment;and following the decisions of the coordinating
benches we decided the effective ground of appeal in favour of the assessee-trust.
As a result,appeal filed by the assessee stands allowed.
[ .
Order pronounced in the open court on 29th September,2014.
Û 29 flracj,2014
Sd/- Sd/-
( /Vijay Pal Rao) (Û]/Rajendra)
Û /JUDICIAL MEMBER /ACCOUNTANT MEMBER
/Mumbai,/Date: 29.09.2014.
SK
/Copy of the Order forwarded to :
1. Assessee / 2. Respondent /×
3. The concerned CIT(A)/ ,4.The concerned CIT /
5. DR "C" Bench, ITAT, Mumbai / lh ,..Û.
6. Guard File/[ × //True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai
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