Commissioner of Income Tax (Exemptions), 3rd Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur V. M/s Rajasthan Cricket Association, North Block, SMS Stadium, Ambedkar Circle, New Vidhan Sabha, Jaipur

ITA/236/2016

AI Insights

The case involves multiple appeals by the Commissioner of Income Tax (Exemptions) against the Rajasthan Cricket Association concerning the cancellation of their registration under Section 12AA of the Income Tax Act. The primary legal issues revolved around whether the changes made to the association's objects and activities, which were communicated to the tax authorities, warranted the cancellation of their registration. The tribunal had earlier set aside the cancellation, leading to the present appeals. The High Court examined the legal provisions under Sections 11, 12, and 13 of the Income Tax Act, along with the relevant amendments and judicial precedents, to arrive at its decision.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 817207 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 21-11-2017
• Assessment Year: misc
• Other Referred Cases: Board of Control for Cricket in India (BCCI) vs. Income Tax Officer, Mool Chand Khairati Trust vs. Director of Income Tax (Exemptions), Allahabad Agricultural Institute vs. Union of India, Tamil Nadu Cricket Association vs. Director of Income Tax (Exemptions), Gujarat Cricket Association vs. DIT (Exemption), Vidarbha Cricket Association vs. Commissioner of Income Tax-I, Nagpur, Gowri Ashram vs. Director of Income Tax (Exemptions), Commissioner of Income Tax vs. National Institute of Aeronautical Engineering Educational Society, Commissioner of Income Tax vs. Sarvodaya Ilakkiya Pannai, Commissioner of Income Tax vs. Market Committee, Pipli, Commissioner of Income Tax vs. Tiny Tots Education Society, Commissioner of Income Tax vs. Jodhpur Development Authority
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: SANJAY JHANWAR; ARCHANA
• Assessee Lawyers: SAMEER JAIN; DAKSH PAREEK
• Keywords: Charitable purpose; Commercial activities; Exemption under section 11; Income tax appeal; Registration under section 12AA
• Section: 143(3); 11; 12AA; 2(15)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 236 / 2016 Commissioner of Income Tax ( Exemptions), 3rd Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur ----Appellant Versus M/s Rajasthan Cricket Association, North Block, SMS Stadium, Ambedkar Circle, New Vidhan Sabha, Jaipur ----Respondent Connected With D.B. Income Tax Appeal No. 252 / 2017 Commissioner of Income Tax (Exemptions), 3rd Floor Kailash Heights Lal Kothi Tonk Road, Jaipur. ----Appellant Versus M/s Rajasthan Cricket Association, North Block Sms Stadium, Ambedkar Circle, New Vidhan Sabha Jaipur. ----Respondent D.B. Income Tax Appeal No. 257 / 2017 Commissioner of Income Tax (Exemptions), 3rd Floor Kailash Heights Lal Kothi Tonk Road, Jaipur. ----Appellant Versus M/s Rajasthan Cricket Association, North Block, Sms Stadium, Ambedkar Circle, New Vidhan Sabha, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sameer Jain with Mr. Daksh Pareek For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment (2 of 43) [ITA-236/2016] 21/11/2017 1. In all these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of appeal no.236/2016, the appellant has assailed the judgment and order of tribunal whereby tribunal has allowed the appeal of the assessee. Appeal No.252/2017 & 257/2017 have been filed against the order of tribunal whereby the appeal of the department was dismissed and appeal of the assessee was partly allowed for statistical purposes. 3. This court while admitting the appeals framed following substantial question of law:- Appeal No.236/2016 admitted on 6.12.2016 “1. Whether on facts and circumstances of the case the Hon’ble ITAT was correct in law in restoring registration u/s 12AA notwithstanding assessee institution are having non-charitable/ commercial objects and activities contrary to the Sec. 2(15) of the Income Tax Act, which defines the charitable purpose in special, restricted and qualified sense? 2. Whether on the facts and the circumstances of the case the Hon’ble ITAT was correct in law in allowing 12AA registration notwithstanding that the fact that, the substantial changes were made in the original object more specifically in clause (s) and (u) which were absent at the time of granting registration u/s 12A and basis on which Registration Authority has approved the registration? 3. Whether on the facts and in the circumstances of the case the Hon’ble ITAT was correct in law in holding that the changes can be made in the objects as per the respective Governing act i.e., (3 of 43) [ITA-236/2016] Rajasthan Sports (Registration, Recognition and Regulation of Association) Act, 2005 contrary to the provisions of the Income Tax Act 1961, i.r.o. 12AA registration?” Appeal No.252/2017 admitted on 29.8.2017 “i) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing exemption u/s 11 of the IT Act, 1961 in spite of the fact that the proviso to Section 2(15) is invoked in the case of assessee as the activities of the assessee being run on commercial basis and there being no element of charity? ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in holding that the assessee is liable to claim depreciation of Rs.2,16,62,215/- on the assets which were claimed as application u/s 11 at the time of purchase?” Appeal No.257/2017 admitted on 29.8.2017 “i) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing exemption u/s 11 of the IT Act, 1961 in spite of the fact that the proviso to Section 2(15) is invoked in the case of assessee as the activities of the assessee being run on commercial basis and there being no element of charity? ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT is right in allowing the expeses of Rs.6,15,32,225/- incurred on the acquisition of the capital asset when the association has been held as non- charitable? holding that the assessee is liable to claim depreciation of Rs.2,16,62,215/- on (4 of 43) [ITA-236/2016] the assets which were claimed as application u/s 11 at the time of purchase?” 4. The facts of the case are that a return declaring total of Rs.Nil for the assessment year 2008-09 was filed by the assessee on 29.9.2008. Thereafter, the case was selected for scrutiny and while framing the assessment under section 143(3) of the Income Tax Act 1961 (hereinafter referred to as the Act) the assessing officer denied exemption claimed under section 11 for want of fresh registration, thereby the assessing officer computed net income of Rs.4,07,58,505/-. The assessing officer treated the gross receipts as income from business. Aggrieved by this, the assessee preferred an appeal before ld. CIT(A) who after considering the submission partly allowed the appeal. However, he sustained the income computed by the Assessing Officer at Rs.4,07,58,505/-. 5. Counsel for the department-appellant Mr. Sameer Jain contended that the registration was granted to the present respondent after going through amending Act, bye-laws and memorandum as on 17.02.1987 and 12AA registration was granted on 25.11.1998. However, after the registration, they have changed certain clauses in the bye laws and procedure for the expenses and income which is detrimental to the provisions of the Income Tax Act. 5.1 He further contended that after following procedure on 27.12.2010, registration under Section 12AA was cancelled, (5 of 43) [ITA-236/2016] however same was set aside by the tribunal on 13.7.2012. However, Tax appeal No.255/2012 came to be disposed of on 23.1.2013 and department was allowed to proceed further afresh. 5.2 He has taken us to the provisions of Section 2 (15) of the Income Tax Act and the proviso which was amended w.e.f. 1.4.2009 which provides as under:- Section 2(15) of the Income Tax Act,1961 “charitable purpose” includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; 5.3 He also taken us to the provision of Section 12AA of the Income Tax Act and Form 10A under Rule 17A of the Income Tax Rules 1962 which reads as under:- “Procedure for registration. 12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or (6 of 43) [ITA-236/2016] clause (aa) [or clause (ab)] 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 being heard. (1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub- section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub- section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) [or clause (ab)] of sub-section (1) of section 12A. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal (7 of 43) [ITA-236/2016] 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: 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. (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub- section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.” FORM NO. 10A [See rule 17A] Application for registration of charitable or religious trust or institution under [clause (aa) of sub-section (1) of section 12A] of the Income-tax Act, 1961 To, The [***] Commissioner of Income Tax ……………………………………………………. Sir, I…………………………………………..on behalf of …………………………………...hereby apply for the registration of the said trust / institution under section 12A of the Income -tax Act, 1961. The following particulars are furnished herewith: (8 of 43) [ITA-236/2016] 1. Name of the *trust / institute in full [ in block letters] ………………………. 2. Address ..……………………. 3. Name(s) and address(es) of author(s) / founder(s) ……..………………. 4. Date of creation of the trust or establishment of the Institution ………………………. 5. Name(s) and address(es) of trustee(s) / manager(s) ………………………. I also enclosed the following documents: 1. (a) *Original / Certified copy of the instrument under which the trust / institution was created / established together with a copy thereof. (b) *Original / Certified copy of document evidencing the creation of the trust or the establishment of the institution, together with a copy thereof. [The original, if enclosed, will be returned ]. 2. Two copies of the accounts of the *trust / institution for the latest *one/two/three years. I undertake to communicate forthwith any alteration in the terms of the trust, or in the rules governing the institution, made at any time hereunder. Date………………. ………………………………. Signature ……………………………….. Designation ……………………………….. Address Address *Strike out whichever is not applicable. 5.7 He contended that unless the provision of clause which is mandatory is complied, the registration deemed to be cancelled. 5.8 He has taken us to the order of the AO where AO observed as under:- “(1) Amendments in objects:- Assessee contended that amendment in 2005 are nothing but a redrafting/modify the main objects keeping in mind the changing scenario, socio techno, economic, advancement so to effectively manifest the main objects. The argument of the assessee is not acceptable as actual picture of the original objects and modified objects are as under:- (9 of 43) [ITA-236/2016] Objects as per memorandum ad rules of Association-1999 Objects of 2005 Objects of the Association:- Following are the objections of this association:- (A) To create, foster ad maintain friendly and cordial relationship through tournaments and competitions connected therewith and to create a healthy spirit in the country through the medium of Cricket. (a) To promote, organize, manage and control the game of cricket within its jurisdiction. (B) To instill the spirit of sportsmanship deserving students at lending schools and colleges and members of other institutions and to develop a good standard physique of the students and to foster the apirit of sportsmanship and instill the ideal of Cricket amongst students of colleges and schools and members of affiliated clubs and other institutions and educate them in the game. (b) To select teams to represent the Association in any tournament, championship or fixture, local or otherwise, and to incur an pay the expenses thereof. (c) To select teams to represent the Association in a tournament championship, or fixtures local or otherwise. (c) To arrange proper training/coaching for the benefit of cricketers, to provide suitable coaches and to acquire and maintain play grounds and cricket nets, etc. either directly or through District Cricket Association etc. (D) To arrange, supervise and regulate visits of teams. (d) To maintain general control of the game of cricket under the jurisdiction and take decision in all matters concerning the game either when referred to by affiliated association or other parties. (E) To arrange and manage tournaments or (e) To establish and maintain a library of books, (10 of 43) [ITA-236/2016] leagues at least one’s in a year and to arrange regular nets for practice. periodicals and publications on sports in general and cricket in particular, and to diffuse knowledge of cricket and deals of sportsmanship. (F) To improve, control, regulate and manage all tournaments and matches. (f) To install keenness for the game of cricket and foster the apirit of sportsmanship in students of schools, colleges and universities and members of affiliated units and thus enable them to develop their ability and caliber. (G) To maintain a library. (g) To encourage the formation of District Cricket Association in such areas of Rajasthan as the Association may deem fit. (District as per Government Rules) (H) To engage coaches to coach deserving persons in the department of Cricket. (h) To acquire by all lawful means, movable and immovable properties on behalf of the Association and to sell, manage, hire, lease out, exchange, dispose of or otherwise deal with all or any of its properties and/or any income accruing there from. (I) To engage persons as professional cricketers and to pay remuneration or honorarium to them, if necessary. (I) To initiate and pursue such actions as may be considered for the fulfillment of the objects of the Association. (J) To collect funds for purposes of the association at to utilized much funds by the permission of Manager & Trustee of the Association for the fulfillment of the objects of the Association. (j) To initiate and pursue such actions as may be considered for the fulfillment of the objects of the Association. (K) To invest money and funds of the association in such authorized securities and in such manner as may be decided upon by the (k) To maintain a panel of approved cricket umpires and coaches and to take all such steps as may be necessary for efficient umpiring and (11 of 43) [ITA-236/2016] Man Committee of the association from time to time. coaching. (L) To hold and maintain the laws of Cricket and the regulations of the Board of Control for Cricket in India. (l.) To take such action as may be necessary t co- ordinate the activities of affiliated units/association and their members in relation to the Association and amongst themselves. (m) To arrange, stage participate in any match of cricket for the benefit of any cause as the association may deem fit. (n) To stage matches and to subscribe income to funds for philanthropic purposes i.e. for helping a disabled and/or diseased player of any game, athlete or any other deserving individual, for relief of a persons, localities village/villages, town suffered from natural calamities like flood, famine, fire etc. (o) To award scholarships to needy and promising young cricketers. (P) To stage or organize Test and/or other matches, official or unofficial, allotted to the association by the Board of Control for Cricket in India or by any other body controlling cricket in India as the association may deem expedient and on such ground/field as the association may deem fit or expedient. (q) To appoint representative or representatives of the association on the Board of Control for Cricket in India and in other conferences, Seminars and work shops connected with the game of Cricket. (12 of 43) [ITA-236/2016] (r) To employ personnel and staff and to pay to them and other persons in return for their services rendered to the association, salaries, wages gratuities, pensions Honorarium, compensations, any ex-gratia payments and/ or provident fund and to remove or dismiss such employees. (s) To receive monies and donations from any persons clubs associations or institutions and tu utilize and/or invest the same in any manner and for any purpose as per the decision of the Executive Committee. (t) To give financial assistance to the member District for such purposes as may be decided upon by the Association from time to time. (u) To invest monies and funds of the association in authorized securities or in any way and manner as may be decided upon from time to time. (v) To maintain and enforce the spirit of impartially in formation of committees, selection players of the team/teams, places of stage of matches, delegation of powers of the functionaries of the Association, and in investment of association funds. Considerations on the basis of regions etc. will be totally discouraged. (w) To establish/maintain harmony of relationship with the Rajasthan State Sports Council, Central and State Ministers of games (13 of 43) [ITA-236/2016] and sports, with other related institutions and persons. (x) To engage persons as professional cricketers and to pay remuneration or honorarium to them, if necessary. (y) To frame, add, delete, alter, maintain and enforce rules for the control and governance of the game under its jurisdiction and to maintain discipline amongst players, officials and districts under its jurisdiction. (z) To encourage the sports and sports person of every section of society without any discrimination and generally to do all other acts, deeds, matters and things as are incidental in the object of the Association or as the Association may deem conducive to the attainment of the objects specified above. From the above table it is evident that it can not be said that there is no substantial amendment in the constitution of the assessee. Therefore, there are no merits in the contention of the assessee.” 5.9 He also contended that the clauses which are amended are very detrimental and is changing the original purpose of the object of the trust and now jurisdiction under the same cannot be misused in any manner whatsoever. 6. In that view of the matter, he contended that the view taken by the AO is required to be upheld. (14 of 43) [ITA-236/2016] 6.1 He drew our attention to clause (iii) which reads as under:- “(iii) As regards the plea that there is no mandatory requirement to intimate the change, it is mentioned that it is for the assessee to take a decision to intimate the change and also apply for fresh registration. It is the basic principle of law that registration is granted on the basis of the objects of an institution. If there is change in the objects the registration would not survive. After such an event if the institution does not want to communicate the changes, the only consequences is that the benefit of registration will not be available. It is not necessary that every society should be registered under IT Act. It can function without getting registered under the IT Act, 1961. It is only when an institution wants to avail exemption as charitable institution that registration is required under the IT Act, 1961. (iv) Most of the objects were amended and added many new objections were added as indicated in the above table. Perusal of the above amended/substituted objects shows that the change is very substantive. Objects clause (s) is as under:- “To receive monies and donations from any persons clubs associations or institutions and to utilize and/or invest the same in any manner and for any purpose as per the decision of the Executive Committee.” Further object clause (u) is as under:- “To invest monies and funds of the association in authorized securities or in any way and manner as may be decided upon from time to time.” The above two objects at S.No. (s) & (u) are not covered by the definition of ‘charitable’ as per provision of Section 2(15) of the I.T. Act, 1961. Further, assessee can invest or deposit the money as per provisions of section 11(5) only. But the above clauses of the assessee “in any manner” and “in any way and manner as may be decided upon from time to time” are not as per provisions of Income Tax Act, 1961. (15 of 43) [ITA-236/2016] (v) The same issue has also been decided by Hon’ble ITAT “B” Bench Mumbai, in the case of the Board of Control for Cricket in India (BCCI), Mumbai v/s Income Tax Officer in ITA No. 1285/Mum/2010 vide order dated 30.03.2012 held as under- “We are of the opinion that the registration granted under section 12A, on 12th Feb, 1966, and the benefits flowing therefrom, cannot be extended to the amended objects of the society unless the DIT examinhes the same and comes to a conclusion that the registration under section 12A, can be extended to the revised objects, memorandum and by-laws. It would be illogical to hold that once an institution is registered under section 12A, no matter whatever may be the changes in the objects, rules and regulations, for any number of times, the institution should be given the benefit of section 11 to 13 of the Act, in view of the original registration granted under section 12A. In our opinion, 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.” In view of the above, it is clear that the object, on the basis of which registration was granted, has been amended. As such the very basis of registration has been removed. Further, some objects are not charitable at all as discussed above and therefore, the registration should not survive.” 6.2 He contended that the following income which is received by the assessee through Commercial Activity reads as under:- (4) Commercial Activity:- Besides that, it is seen that the activities of the RCA is commercial. It is judicially accepted proposition that where profit making is the predominant object of the activity, the trust would lose exemption as a charitable trust. No doubt, it would be impossible for (16 of 43) [ITA-236/2016] persons in charge of a trust or institution to so carry out activity that the expenditure balances the income and there is no resulting profit. But certainly, if the consideration is charged at market rate, than it can not be said that there is an element of charity. % of profit involved in the charging for the services is major factor which will decide whether the same is tainted with commerciality or charity. In the context of sports, promoting cricket would be a charitable activity if it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of RCI. Perusal of the relevant details clearly shows that the activities fall in the definition of ‘Business’. The facts of A.Y. 2008-09 are indicative of the intention of the RCA that RCA is engaged in minting money in variety of ways. Annual Accounts for the F.Y. 2007-08 for income under following heads:- India V/s Pakistan (One day international) Income from Advertisement 2,92,50,000/- Income from Canteen 3,15,000/- Income from Tickets 4,66,32,500/- T.V. Subsidy 6,83,46,048/- Sale of Advertisement 10,00,000/- Further, during the course of assessment proceedings of A.Y. 2008-09, it is found by the A.O. that the assessee has let out hotel situated near SMS Stadium on following consideration. “The RCA will receive fees of Rs.75,000/- (Rupees Seventy Five thousand Only) per month from the service provider as for grant of facilities to the service provider. This sum (17 of 43) [ITA-236/2016] shall be enhanced by @ 15% per year for each subsequent year.” On going through the agreement made between Rajasthan Cricket Association and Hotel Radiant Star Hospitalities Pvt. Limited, Jaipur, it is seen that the activity of the RCA is being done on commercial basis. With the above discussion it is clear that the activities of the trust are not being carried out in accordance with the objects of he trust as registered by the department on 25.11.1988. The registration u/s 12A of the I.T. Act, 1961 granted to the assessee from the A.Y. 2005- 06 and onwards is therefore, withdrawn. 6.3 The same is of commercial nature and required to be taxed. 6.4 He further contended that in view of the observations made by the tribunal, this amendment was mandatory in view of provisions under the Rajasthan Sports (registration, Recognition and Regulation of Association) Act, 2005 and the judgment of Delhi High Court in Mool Chand Khairati Trust reported in 377 ITR 650 which is sought to be relied upon by the tribunal was in relation to medicine, cannot be applied in the present case. 6.5 He also relied upon the decision of the Allahabad High Court in Allahabad Agricultural Institute vs. Union of India reported in (2007) 291 ITR 116 (All.) where Division Bench of Allahabad High Court while considering the matter observed as under:- “10. The argument is misconceived. The registration is granted by the Commissioner. It can be cancelled by the Commissioner under Section 12-AA(3) However, the words of that statutory provision show that it applies where the objects of the trust or institution remain the same on paper, but the actual activities of (18 of 43) [ITA-236/2016] such trust or institution are contrary to the said objects or are fictitious or fraudulent or not genuine or not within the scope of those objects However, where the objects of the trust or institution, which were the basis of grant of registration, are altered after such grant of registration, the very foundation of the registration having been removed by a voluntary act of the assessee, the registration would not survive. The immediate intimation required to be given by the assessee to the Commissioner of Income Tax is perhaps merely to enable him to keep his (Commissioner's) records updated. If, for the sake of argument, it is assumed that the intimation is required to be given to enable the Commissioner to exercise the power of cancellation, even then where the petitioners had failed to give such intimation, they cannot be permitted, in the discretionary jurisdiction under Article 226 of the Constitution of India, to plead the defence that the Commissioner has not cancelled the registration. Further, in a situation where the objects of the trust or institution have been altered wholesale after the grant of registration and intimation of the alteration has not been given to the Commissioner the order of the assessing authority on the assumption that the registration, which was granted on the basis of a particular representation, held out by the assessee no longer survives or holds good, would not call for interference by this Court in exercise of its equitable and discretionary jurisdiction To sum up, we are unable to exercise our discretion to enable the assessee to continue to utilize and enjoy the registration despite the wholesale change in the objects without giving its immediate intimation to the Commissioner. 13. The appellate authority, where the appeal of the petitioner against the assessment order dated 26.12.2006 is pending, has not yet granted an interim order. Prima facie, when a person deliberately makes an alteration in the objects or in the memorandum of association, it will be presumed that the alteration has been made because some change is required. Alterations are not made for the fun of it. Thus the petitioners will therefore be under a heavy burden to demonstrate similarity if they wish (19 of 43) [ITA-236/2016] to press such a plea. We have no reason to doubt that if pressed, this aspect whether the alteration of the objects does or does not take the activities of the petitioners now permissible under the new objects outside the scope of the original objects will be considered by the appellate authority on the next date while considering whether the petitioners have a prima facie case for grant of an interim order.” 6.6 He further contended that taking into consideration the department was right in cancelling the registration. 6.7 Regarding depreciation, he has relied upon the decision of this court in ITA No.262/2017 and other connected appeals (CIT vs. Mahima Shiksha Samiti) decided on 3.10.2017 wherein it has been held as under:- “14. On depreciation he has relied upon the judgment in Commissioner of Income Tax-II, Jodhpur vs. Krishi Upaj Mandi Samiti (2016) 388 ITR 605 wherein it has been held as under:- “4. The assessee is a charitable institution registered under Section 12-A of the Act of 1961 and 100% capital expenditure was availed by it against the asset concerned i.e. a building. Section 32(1) of the Act of 1961 provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. Income of a charitable trust like the present assessee derived from the depreciable heads is also liable to be computed on commercial basis, however, while doing so it is to be kept in mind that ultimately assessee is a charitable institution and its income for tax purposes is required to be determined by taking into consideration provisions of Section 11 of the Act of 1961 after extending normal depreciation and deductions from its gross income. In computing the income of a charitable institution/trust depreciation of (20 of 43) [ITA-236/2016] assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available. 5. In view of the discussions made above, we find ourselves in agreement with the view taken by Bombay High Court in Director of Income Tax v. Framjee Cawasjee Institute (supra) and in CIT v. Institute of Banking Personnel (supra). The substantial question framed in the instant matter, thus, is answered in the terms that the Income Tax Appellate Tribunal rightly allowed depreciation claimed by the assessee on capital assets for which capital expenditure was already given in the year under consideration.” 14.1 Decision of Punjab and Haryana High Court in Commisioner of Income Tax vs. Market Committee, Pipli (2011) 330 ITR 16 wherein it has been held as under:- 7. The Karnataka High Court in Commissioner of Income Tax, Karnataka v. Society of the Sisters of St. Anne. MANU/KA/0045/1983MANU/KA/0045/1983 : [1984] 146 ITR 28 drawing support from Madras High Court in Rao Bahadur Calavala Cunnan Chetty Charities (supra) had recorded that if depreciation is not allowed as a necessary deduction for computing the income of a charitable institution then the corpus of the trust for deriving the income cannot be preserved and that the amount of depreciation debited to the account of a charitable institution is to be deducted to arrive at the income available for application to charitable and religious purposes. This decision was followed by Madhya Pradesh High Court in CIT v. Raipur Pallottine Society MANU/MP/0335/1989MANU/MP/0335/1989 : [1989] 180 ITR 579. Similar view was taken by Gujarat High Court in CIT v. Seth Manilal Ranchhoddas Vishram Bhawan Trust MANU/GJ/0026/1992MANU/GJ/0026/1992 : [1992] 198 ITR 598 by relying upon the aforesaid decisions. We are in respectful agreement with the view taken by Madras, M.P., Karnataka, Gujarat and Bombay High (21 of 43) [ITA-236/2016] Courts referred to above. No contrary view has been brought to our notice. 8. In all fairness to the learned Counsel for the Revenue, reference is made to the judgment of the Hon'ble Apex Court in Escort Limited's case (supra), on which reliance has been placed by the learned Counsel for the Revenue. The Hon'ble Supreme Court in that case was dealing with a case relating to two deductions both under Sections 10(2)(vi) and 10(2)(xiv) of the 1922 Act or both under Sections 32(1)(ii) and 35(1)(iv) of the Act. The assessee therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assessee had sought to claim a specified percentage of the written down value of the asset as depreciation and at the same time claimed deduction, in five consecutive years of the expenditure incurred on the acquisition of the asset. The apex Court observed: Where a capital asset used for scientific research related to the business of the assessee is also ipso facto an asset used for the purpose of the business, it is impossible to conceive of the Legislature having envisaged a double deduction in respect of the same expenditure, one by way of depreciation under Section 32 of the Income Tax Act, 1961 and other by way of allowance under Section 35(1) (iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions....It was further recorded that: There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions.… 9. In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be (22 of 43) [ITA-236/2016] reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd. and Anr. (supra) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answered against the revenue and in favour of the assessee. 14.2 Decision of Delhi High Court in Director of Income Tax (Exemption) vs. Indraprastha Cancer Society (2015) 53 Taxman.com 463 wherein it has been held as under:- 10. The aforesaid paragraph refers to the decision in the case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. The consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlooked the fact that the cost of asset had been allowed as a \"deduction\" and thereafter depreciation was being claimed. The said case, therefore, appears to be a peculiar one wherein deduction as expenditure and depreciation was being claimed simultaneously, while computing the taxable income under the head \"profits and gains from business\". The said decision dated 18th March, 2014 does not refer to the decision in Indian Trade Promotion Organisation (supra) which was decided on 27th November, 2013. The judgment in the case of Indian Trade Promotion Organisation (supra) was not cited and referred to. The judgment in the case of Charanjiv Charitable Trust (supra) is authored by the same Judge, who has also authored the decision in the case of Vishwa Jagriti Mission (supra) . It is obvious that in Charanjiv Charitable Trust (supra) , the Division Bench could not have taken a (23 of 43) [ITA-236/2016] different view on the legal ratio as interpreted in Vishwa Jagriti Mission (supra) . Further, the decisions in the case of Vishwa Jagriti Mission and Indian Trade Promotion Organisation (supra) being prior in point of time would act as binding precedents and could not have been overruled or dissented from by a coordinate Division Bench. 11. By Finance (No. 2) Act of 2014, subsection (6) to Section 11 stands inserted with effect from 1st April, 2015 to the effect that where any income is required to be applied, accumulated or set apart for application, then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this Section in the same or any other previous year. The legal position, therefore, would undergo a change in terms of Section 11(6) , which has been inserted and applicable with effect from 1st April, 2015 and not to the assessment years in question. The newly enacted sub- section relates to application of income. 14.3 Decision of Punjab & Haryana High Court in Commissioner of Income Tax vs. Tiny Tots Education Society (2011) 330 ITR 21 wherein it has been held as under:- 6. The matter was discussed in our recent judgment dated July 5, 2010 in I. T. A. No. 535 of 2009 CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P and H). After referring to the judgments in CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust [1992]198 ITR 598 (Guj) and CIT v. Institute of Banking Personnel Selection (IBPS) [2003] 264 ITR 110 (Bom) : [2003] 131 Taxman 386 (Bom), CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982]135 ITR 485 (Mad), CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Kar)and CIT v. Raipur Pallottine Society [1989]180 ITR 579 (MP), the judgment of the hon'ble Supreme Court in Escorts Ltd. [1993]199 ITR 43, was held not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds (24 of 43) [ITA-236/2016] applied for the purposes of charitable objects. It was observed (page 20 supra): 9. In the present case, the Assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the Assessee being exempt, the Assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the Assessee as canvassed by the Revenue. The judgment of the hon'ble Supreme Court in Escorts Ltd. [1993]199 ITR 43 is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the Assessee. 15. He contended that the jurisdictional high court has considered the Kerala High Court judgment which has been sought to be relied upon and allowed the expenses. 16. However, Mr. Jain has contended that in view of the tax limit, the same has not been challenged. He also contended that in view of the amendment u/s 11 subclause (6) w.e.f. 1.4.2015, they have not claimed any benefit after 1.4.2015 and all appeals are prior to 1.4.2015. In that view of the matter, the law which was prevailing prior to 31.3.2015 will be covered by the jurisdictional high court judgments.“ 7. Mr. Sanjay Jhanwar appearing for the respondent contended that provisions of Section 11 (5) read with Section 13 of the Income Tax Act are very clear that at the most any income of the expenses which are contrary to object of the legislature itself requires provision but that is not ground for cancelling the registration. After High Court order these are all procedures to be followed prior to the withdrawal i.e. 27.12.2010, therefore, after (25 of 43) [ITA-236/2016] the withdrawal of the appeal on 23.1.2013, it will be open for them to apply for subsequent year not for previous year. 7.1 He also relied upon the Government Circular dt. 24.9.1984 wherein CBDT has issued circular and has explained charitable purpose as under:- “SECTION 2(15) CHARITABLE PURPOSE 10. Whether promotion of sports and games can be considered to be charitable purpose 1.The expression \"charitable purpose\" is defined in section 2(15) to include relief of the poor, education, medical relief and the advancement of any other object of general public utility. 2.The question whether promotion of sports and games can be considered as being a charitable purpose has been examined. The Board are advised that the advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individuals would be an object of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games.” 7.2 Counsel for the respondent has relied upon the following decisions:- (26 of 43) [ITA-236/2016] (i) In Assistant Commissioner of Income Tax vs. Surat City Gymkhana reported in (2008) 14 SCC 169, Supreme Court has been held as under:- “5. On a perusal of the judgment of the Gujarat High Court in the case of Hiralal Bhagwati (supra), we now find that question No. 'B' is also concluded by the said judgment (refer to 1st para of p. 196). Since the revenue did not challenge the decision in the said case, the same has attained finality. Question No. 'B' therefore, is to meet the same fate as question No. 'A as this court had declined to grant leave in respect of question No. 'A' on the ground that the revenue did not challenge the correctness of the decision in the case of Hiralal Bhagwati (supra). It appears that the fact that question No. 'B' was also covered by the aforementioned judgment, was not brought to the notice of their Lordships and, therefore, leave was granted restricted to question No. 'B'. 6. In this view of the matter, these appeals deserve to be dismissed. Ordered accordingly.” (ii) In Commissioner of Income Tax-I, Jodhpur vs. Jodhpur Development Authority (2016) 287 CTR 473 (Raj.), it has been held as under:- “28. In the backdrop of settled position of law discussed hereinabove, adverting to the facts of the present case, indubitably, JDA is a statutory body constituted and established under the provisions of s. 3 of JDA Act with a main object to secure the integrated development of Jodhpur Region and for that purpose to discharge inter alia the functions of urban planning including preparation of Master Development Plan and Zonal Development Plans; (27 of 43) [ITA-236/2016] formulation and sanction of the projects and schemes for the development of Jodhpur Region or any part thereof; execution of the project and schemes directly by itself or through a local authority or other agency; coordinating execution of projects or schemes for the development of Jodhpur Region supervision or otherwise ensuring adequate supervision over the planning and execution of any project or scheme the expenses of which in whole or in part are to be met from Jodhpur Region Development Funds; preparing schemes and advising the concerned authorities, department and agencies in formulating and undertaking schemes for development of agriculture horticulture, forestry, dairy development, transport, communication, schooling, cultural activities, sports, medicine, tourism and similar other activities; to prepare Master Plan for traffic control and management; devise policy and programmes of action for smooth flow of traffic and matters connected therewith; undertaking housing activity in Jodhpur Region etc., are essentially the functions, which promote the welfare of the general public. Of course, while discharging the said functions, the JDA also discharges function to acquire, hold, manage and dispose of property movable or immovable as may be deemed necessary and also enters into contract, agreements or arrangements with any person or organization may deem necessary for performing its function and in this process, it might be earning income but the primary object of the JDA certainly does not involve any profit motive whatsoever. It is pertinent to note that as per the provisions of s. 51 of the JDA Act, for the purpose of discharging the statutory functions, \"The Jodhpur Region Development Fund\" is created to which all money received by the authority is credited including amount of contribution to be made by the State Government, such other money as may be paid to the authority by the State Government, Central (28 of 43) [ITA-236/2016] Government or any other authority or agency by way of grant, loans advances or otherwise, income derived from premium on second and subsequent sale of vacant land, income from levy on vacant land, all fees, costs and charges received by the JDA under the JDA Act or any other law for time being in force, all money received by the JDA from the disposal of land buildings and other property movable and immovable and other transactions including lease money, urban assessment development charges and other similar charges and all money received by way of rents and profits or in any other manner or from any other source. A fortiori, as per the mandate of s. 54 of the JDA Act, all property funds and other assets vesting in the JDA shall be held and applied by it for the purposes and subject to the provisions of the Act. Suffice it to say that the entire funds of the JDA is mandatory required to be utilized for discharging the functions to achieve the object of integrated development of Jodhpur Region. Thus, predominant object of the JDA being to secure the integrated development of the Jodhpur Region which is undoubtedly falls within the expression 'advancement of any other objects of general public utility' within the definition of s. 2(15) of the Act of 1961 and therefore, on account of profit being earned by it through some of the activities, undertaken by it, which are ancillary or incidental to the main object of general public utility, it does not cease to be charitable in character so as to render it ineligible to claim registration under s. 12A r/w s. 12AA of the Act of 1961. As a matter of fact,' it is not even the case of the Revenue that the object of general public utility sought to be achieved by constitution and establishment of the JDA as such, involve carrying on of any activity for profit and therefore, it is immaterial if some income is earned by ancillary and incidental activities, which as per the mandate of the relevant statute, is used for achieving or implementing such (29 of 43) [ITA-236/2016] object. The genuineness of the activities of the JDA, which are regulated by the provisions of the JDA Act and the Rules made thereunder, cannot be doubted. Thus, the order passed by the Tribunal holding the JDA, Jodhpur entitled for registration under s. 12A r/w s. 12AA of the Act of 1961, does not suffer from any infirmity or illegality.” (iii) In Tamil Nadu Circket Association vs. Director of Income Tax (Exemptions) (2013) 86 CCH 212 ChenHC, it has been held as under:- “14. The Income Tax Appellate Tribunal pointed out that the physical play of cricket game was not the sole point which would decide as to whether the asssessee association was carrying on its activities as stated in the memorandum of association or the activities were genuine or not. The Tribunal pointed out that the activities were genuine; however the matches conducted did not go to the extent of \"advancement of any other object of general public utility\". The Tribunal also pointed out that the activities did not come within the conceptual framework of charity, vis-a-vis the activity of general public utility as given under Section 2(15) and the activities were all commercial in character. Thus the matches conducted were not conducted in accordance with the objects of the association and as explained in the proviso to the provision in Section 2(15). Thus, according to the Tribunal, when the assessee's case was fully covered by the proviso, the proceedings taken under Section 12AA(3) were justified. Thus the Tribunal viewed that the provisions under Section 12 AA (3) could not be read in disregard of Section 2(15) first proviso. It further held that after the insertion of first proviso to Section 2(15) of the Income Tax Act, 1961, effective from 1st April, 2009, every activity on the advancement of the general public utility to be called as for \"charitable purpose\" has to qualify (30 of 43) [ITA-236/2016] itself as charitable activity within the meaning of the expression 'charitable purpose'. As such, the activities of the assessee could not be considered as for a charitable purpose. The Income Tax Appellate Tribunal pointed out that the proviso inserted with effect from 01.04.2009 clearly pointed out that advancement of any other object of general public utility shall not be a charitable purpose, if it involved the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Considering the said amendment and looking at the activities of the assessee, the Income Tax Appellate Tribunal held that the conduct of the matches by cricket associations could be nothing but in the nature of commercial ventures and the assessee was selling the game for the highest amount of revenue and the effect and the thrust of the assessee was towards maximising the revenue. Citing IPL matches held and the manner of selection of players, the Income Tax Appellate Tribunal held that the matches were big game with big money involved; in the words of the Income Tax Appellate Tribunal, \"In fact it is an entertainment industry by itself\". It pointed out that 78% of the total receipts came out of advertisement revenue and in the background of the nature of activity undertaken, the entire activity of commercial nature were oriented towards earning hyper profits and these activities contributed 86.5% of the receipts of the assessee in the Financial Year 2008-09. In this background, the Income Tax Appellate Tribunal referred to the decision reported in 77 ITR 435 in the case of Bangalore Race Club Vs. Commissioner of Income Tax, which related to the case of horse racing and held the same could not be held to be of public utility or interest. After referring to the decision of this (31 of 43) [ITA-236/2016] Court reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai, wherein, this Court considered the effect of Section 12AA(3) of the Act, the Income Tax Appellate Tribunal held that this Court had not considered the effect of Section 2(15) proviso and the necessary facts of the case relating to charitable purpose was not highlighted. It also referred to the decision of the Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 as well as other decision of the Nagpur Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income Tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, which were against the similar rejection order passed and reversed by the Income Tax Appellate Tribunal and held that these orders had considered only the physical aspect of the cricket game promoted by the assessee; however, all the assessee's activities centered around the celebrated game of cricket. 19. Going by the tenor of the language in Section 12AA(3) of the Act and Section 12AA(1) of the Act, the cancellation of the registration under Section 12AA of the Income Tax Act, 1961 is without any substance. He further pointed out that when in a similar assessee's case viz., Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 and in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income Tax-I, Nagpur the Income Tax Appellate Tribunal Ahmedabad Bench-A dated 31.01.2012 and in I.T.A.No.3/Nag/10 dated 30.05.2011 of the Nagpur Bench, respectively on the very same allegations for cancellation of registration under Section 12AA(3) had held that the cancellation of the registration under Section 12AA of the Income Tax Act, 1961 was contrary to law, the Chennai Bench of the ITAT ought to have followed these decisions, which were rendered as early as 2011 and 2012. He further pointed out to the unreported (32 of 43) [ITA-236/2016] decision of this Court in the case of Gowri Ashram Vs. Director of Income Tax (Exemptions) in T.C(A).No.91 of 2013 dated 29.04.2013 as well as 315 ITR 428 in the case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society and submitted that they stand on a different line, they being the decisions rendered on the rejection of the application for registration. He also referred to the decision of this Court reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai, wherein, under similar circumstances, this Court had held that when a trust is registered with definite objects to carry on its activities and under Section 12AA of the Income Tax Act, 1961, the Commissioner is empowered to cancel registration only on two conditions laid down under Section 12AA(3) of the Income Tax Act, 1961. He further pointed out that whether the income derived from such transaction would be assessed to tax or whether the trust would be entitled to exemption under Section 11 of the Income Tax Act, 1961 are entirely matters to be considered at the time of assessment. Thus, placing reliance on the decision of this Court reported in 343 ITR 300 (CIT Vs. Sarvodaya Ilakkiya Pannai), learned Senior Counsel appearing for the assessee submitted that the Income Tax Appellate Tribunal committed serious error in upholding the rejection order passed by the Director of Income Tax (Exemptions). 46. It may be of relevance to note the language used in the definition \"charitable purpose\" in Section 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee's case falls within the phrase of the definition general public utility . In the decision reported in (2000) 246 ITR 188 in the case of Hiralal Bhagwati Vs. Commissioner of Income Tax, the Gujarat High court considered the said phrase in (33 of 43) [ITA-236/2016] the context of Section 12AAregistration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the objects of the trust as well as an empirical study of the past activities of the applicant; the Commissioner of Income-tax has to examine that it is really a charitable trust or institution eligible for registration; the object beneficial to a section of the public is an object of \"general public utility\". The Gujarat High Court held that to serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province; it is required to be noted that if a section of the public alone are given the benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public; it is not necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression \"object of general public utility\", however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utility; the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature. 47. The above said decision (2000) 246 ITR 188 - Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, the Revenue has not gone on appeal as against this judgment. In the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, reference was made about this decision and the Apex Court pointed out that the Revenue did (34 of 43) [ITA-236/2016] not challenge this case and it attained finality. 48. It is no doubt true that the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, was in the context of Section 10(23) of the Income Tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression \"general public utility\" would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. 56.The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct 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 (35 of 43) [ITA-236/2016] 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 are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act. 57. As regards the observation of the Income Tax Appellate Tribunal that IPL Matches and Celebrity Cricket Matches are also being held by the Association and hence it is an entertainment industry, we need not go into these aspects, for, the order of the Director of Income Tax (Exemptions) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the Assessing Officer to take note of all facts, while considering the same under Section 11 of the Income Tax Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above said circumstances, we set aside the order of the Income Tax Appellate Tribunal.” (36 of 43) [ITA-236/2016] (iv) In Director of Income Tax (Exemption) vs. The Chembur Gymkhana (2012) 345 ITR 86, it has been held as under:- “6. Since the decision of the Supreme Court in Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association MANU/SC/0296/1979 : (1979) 13 CTR (SC) 378 : (1980) 2 SCC 31 it is a settled principle of law that the primary or dominant purpose of the institution must be charitable. The test to be applied is whether the object which is pursued is of the main or primary object or whether it is ancillary to a dominant object. These principles were reiterated by the Supreme Court in Director of IT vs. Bharat Diamond Bourse MANU/SC/1153/2002 : (2003) 179 CTR (SC) 225 : (2003) 1 SCC 741. In CIT vs. Gujarat Maritime Board (2008) 1 DTR (SC) 1 : MANU/SC/8188/2007 : (2008) 214 CTR (SC) 81 : (2007) 14 SCC 704, the Supreme Court, after adverting to its earlier decision, interpreted the words \"any other object of public general utility\" in s. 2(15) and held that the following principle emerges : From the said decisions it emerges that the said expression is of the widest connotation. The word 'general' in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose--CIT vs. Ahmedabad Rana Caste Assn. MANU/SC/0293/1981 : (1982) 2 SCC 542. The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the (37 of 43) [ITA-236/2016] interest of a particular trade or industry that object becomes an object of public utility, but not so if it seeks to promote the interest of those who conduct the said trade or industry [CIT vs. Andhra Chamber of Commerce MANU/SC/0135/1964 : (1965) 55 ITR 722 (SC)]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity [Addl. CIT vs. Swat Art Silk Cloth Manufacturers Association MANU/SC/0296/1979 : (1979) 13 CTR (SC) 378 : (1980) 2 SCC 31]. 7. In the present case, it is evident from the material before the Tribunal that the assessee under its memorandum as amended established that the aims and objects are to provide for general public utility, grounds and buildings, convenient, desirable or necessary for games and sports both indoor and outdoor and to promote, manage or assist in the promotion or management of all forms of social intercourse of athletic sports, pastimes and/or cultural and educational activities for its members. There is a finding of fact that the assessee is providing sports facilities as a part of its activities consisting of badminton, table tennis, billiards, cricket and skating among others. During the assessment year, the assessee had expended an amount of nearly Rs. 50 lakhs on constructing a swimming pool. The fact that the assessee provides service to its members does not detract from the position that it advances a general public utility. The advancement of any object of benefit to the public or a section of the public as distinguished from a benefit to an individual or a group of individuals would be a charitable purpose [CIT vs. Gujarat Maritime Board (supra)]. As the Tribunal noted, the membership of the society is drawn from a diverse cross section of the society. (38 of 43) [ITA-236/2016] The assessee does not exist only for an individual or a group of individuals. On these facts, the primary issue which has been decided by the Tribunal must be answered by holding that the assessee for asst. yr. 1996-97 fulfilled the definition of the expression \"charitable organization\" in s. 2(15). The first question of law would, accordingly, have to be answered in the affirmative. 8. Sec. 11(1)(a) of the Act provides inter alia that income derived from property held under trust wholly for charitable purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property shall not be included in the total income of the previous year. The quantum of fifteen per cent was substituted by the Finance Act, 2002 w.e.f. 1st April, 2003, prior to which the prescribed percentage was twenty-five per cent. The AO in the present case, did not determine whether the requirements of s. 11 were fulfilled in view of the fact that he came to the conclusion that the assessee would be governed by the principle of mutuality and is not a charitable organization. The same finding was affirmed by the CIT(A). In the view which we have taken, we have confirmed the finding of the Tribunal that the assessee for the relevant assessment year fulfilled the requirements of s. 2(15). The AO would, however, have to determine whether the requirements of s. 11 of the IT Act, 1961 were duly fulfilled. In order to enable the AO to do so, we remand the proceedings back to the AO. The questions of law as framed shall stand answered accordingly. The appeal is accordingly disposed of. There shall be no order as to costs.” (v) In Director of Income Tax (Exemptions) vs. Khar Gymkhana (2016) 385 ITR 162 (Bom.), it has been held as under:- (39 of 43) [ITA-236/2016] “10. We find that the Circular No. 21 of 2016 : MANU/DTCR/0021/2016 when read as a whole, specifically lists out in paragraphs 4 and 5 reproduced herein above that the registration granted under section 12AA could not be cancelled, only when the receipts on account of business exceeded the cut off, specified in the proviso to section 2(15) of the Act. The jurisdiction to cancel the registration only arises if there is change in the nature of activities of the institution or the activities of the institution, are not genuine. The aforesaid Circular by placing reliance upon section 13(8) of the Act inter alia provides that the registration granted to the trust would continue even when the receipts on account of business is in excess of Rs. 25 lakhs. In such case, the Assessing Officer while framing the assessment for the subject assessment year would be entitled to deny the benefit of exemption to such a trust for that year. 11. The submission made on behalf of the Revenue that the Circular No. 21 of 2016 : MANU/DTCR/0021/2016 would have only prospective effect in respect of assessment made subsequent to the amendment under section 2(15) of the Act, with effect from April 1, 2016 is also not sustainable. The amendment in section 2(15) of the Act brought about by Finance Act, 2016, with effect from April 1, 2016, is essentially that where earlier the receipts in excess of Rs. 25 lakhs on commercial activities would exclude it from the definition of 'charitable purpose' is now substituted by receipts from commercial activities in excess of 20 per cent, of the total receipts of the institution. In the above view, Circular No. 21 of 2016 : MANU/DTCR/0021/2016 directs the Officer of the Revenue not to cancel Registration only because the receipts on account of business are in excess of the limits in the proviso to section 2(15) of the Act would also apply in the present case. The impugned order has held that cancellation of a registration under (40 of 43) [ITA-236/2016] section 12AA(3) of the Act, can only take place in case where the activities of the trust or institution are not genuine and/or not carried on in accordance with its objects. The aforesaid Circular No. 21 of 2016 : MANU/DTCR/0021/2016 is in line of the finding of the Tribunal in the impugned order. The submission on behalf of the Revenue that the trust is not genuine because it is hit by proviso to section 2(15) of the Act, is in fact, negatived by Circular No. 21 of 2016 : MANU/DTCR/0021/2016. In fact, the above Circular No. 21 of 2016 : MANU/DTCR/0021/2016 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 unlikely/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 Circular No. 21 of 2016 : MANU/DTCR/0021/2016, dated May 27, 2016. Accordingly, the issue stands covered in favour of the Revenue by virtue of Circular No.21 of 2016. (41 of 43) [ITA-236/2016] 7.3 He also relied upon the observations made by the tribunal in ITA No.69/JP/2011 for A.Y. 2005-06 decided on 13.7.2012 which reads as under:- “We, therefore, i.e., on the basis of the foregoing, conclude by setting side the impugned order, and directing a fresh consideration of the assessee's case for registration u/s.12A of the Act in view of the extensive amendments effected by it to its memorandum, bye laws, etc. in accordance with law. The law itself contemplates such a course when it prescribes the communication to the Revenue of any alteration/s carried out, post registration, by the assessee. If the amendments, if reported timely to the Revenue, would have resulted in the extension or continuation of its registration, there is no question of it being denied to the assessee solely for the reason of delayed communication. Of course, the onus, prima facie, would be on the assessee to show that its objects and rules, despite revision, are still charitable, so that it remains entitled for a continuation of its registration; the same being essentially an exemption provision, so that it is for the assessee to exhibit its entitlement thereto. Per contra, the onus to show otherwise would be on the Revenue; the assessee claiming no substantial change, which though raises the question – as indeed stands raised by the Revenue, as to its purpose. This is as no presumption, either way, could hold. Further, the law having been amended prospectively, i.e., w.e.f. 01-04-2009, restricting the scope of charitable purpose, where the same is in relation to the advancement of an object of general public utility, as in the instant case, the Revenue would be well within its powers to examine the issue of continuation of the assessee's registration u/s. 12A for the assessment year commencing on or after 01-04-2009 with reference to the amended law. The ld. CIT shall adjudicate per a speaking order; his order being (42 of 43) [ITA-236/2016] appealable. Needless to add, the assessee shall be allowed due opportunity to present its case before it by the ld. CIT. We decide accordingly.” 7.4 He contended that the appeals deserve to be dismissed. 8. We have heard counsel for the parties. 9. In our considered opinion, the contention which has been raised pursuant to the observations and amendment which is made under Section 12AA of the Income Tax Act and proviso which is impressed by the counsel for the department and Section 2(15) of the Act and proviso to Section 12AA which has been amended w.e.f. 1.4.2009 which has been introduced in the Finance Act w.e.f. 1.4.2012, will not apply in the present case inasmuch as all proceedings are for the financial year 2005-06, 2008-09 & 2009-10. 10. However, it is true that in one of the case where it has been made effective from 1.4.2009 therefore, in one of the appeal for the assessment year 2009-10 the same will apply to proviso. While considering the matter, the real purpose of registration is to be seen that the object falls within the definition of Section 12AA and proviso. 11. If there is any breach of any condition/s then they may cancel the registration, however, they have to follow the procedure. The contention that non communication of changes of purpose will automatically cancel the registration, in our (43 of 43) [ITA-236/2016] considered opinion, is not a valid argument. However, in view of the specific clause which has been there under Form 10A, we are of the considered opinion that it will be open for the department while making assessment to follow provision of Section 11(5) and Section 13 to disallow the expenses of the income as the case may be, if the same is not income in expenses as per the approved bye-laws but nonetheless cancellation of registration is uncalled for. 12. In that view of the matter, all the issues are answered in favour of the assessee and against the department. However, we make it clear that earlier order which has been passed by the High Court, we are not modifying in any manner whatsoever, it will be open for the department to take appropriate proceedings in accordance with law. 13. The appeals stand dismissed. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J. Brijesh 68-70. "