M/s Visakhapatnam District Cricket Association, Visakhapatnam V. The Commissioner of Income Tax-1, Visakhapatnam

ITA 245/VIZ/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0732 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V S MURTHY
• Keywords: Charitable institution; Opportunity of being heard; Retrospective amendment; Set aside
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.245/VIZAG/2010 ASSESSMENT YEAR : N.A. M/S. VISAKHAPATNAM DISTRICT CRICKET ASSOCIATION, VISAKHAPATNAM CIT-1 VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAATV 3245L APPELLANT BY: SHRI C.V.S. MURTHY, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT CANCELING THE REGISTRATION TO THE ASSESSEE TRUST BY PASSING AN ORDER U/S 12A OF THE I.T. ACT AFTER HAVING OBSERVED THAT ASSESSEE WAS ENGAGED PURELY IN COMMERCIAL ACTIVITY, WHICH IS NOT INCIDENTAL TO THE CHARITABLE ACTIVITY. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT THE REGISTRA TION WAS GRANTED TO THE ASSESSEE IN 1993 U/S 12A OF THE I.T. ACT AND SUB-SE CTION 3 OF SECTION 12AA WHICH EMPOWERS THE CIT TO EXAMINE THE ACTIVITIES OF THE ASSESSEE WHETHER IT WAS IN ACCORDANCE WITH THE OBJECT OF TRUST OR INSTI TUTION, WAS INTRODUCED TO SECTION 12AA W.E.F. 1.10.2004. THEREFORE, THE REGI STRATION GRANTED BEFORE THE INSERTION OF THIS SUB-SECTION CANNOT BE REVIEWED OR EXAMINED BY THE CIT U/S 12AA (3) OF THE ACT. IN SUPPORT OF HIS CONTENTIONS, HE HAS PLACED A RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF NAGAR JUNA EDUCATIONAL SOCIETY VS. CIT ITA NO.93&94/VIZAG/2009 WITH THE SUBMISSION THAT THE IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN THIS CASE AND HAS F INALLY CONCLUDED THAT CIT HAS NO JURISDICTION TO CANCEL THE REGISTRATION EARL IER GRANTED U/S 12A TO THE ASSESSEE. ON MERIT THE LD. COUNSEL FOR THE ASSESSE E HAS CONTENDED THAT VDCA WAS REGISTERED AS A SOCIETY WITH THE OBJECT OF PROMOTING SPORTS 2 PARTICULARLY CRICKET IN THE STATE OF A.P. IT IS AN AUTONOMOUS BODY AND NOT AFFILIATED TO BOARD OF CRICKET CONTROL OF INDIA. E VER SINCE ITS INCEPTION IT HAS BEEN PURSUING THE OBJECTS FOR WHICH IT WAS ESTABLIS HED FOR THE BENEFIT OF THE COMMUNITY. PROMOTION OF GAMES AND SPORTS SUCH AS C RICKET IS INTENDED TO PROMOTE THE PHYSICAL WELL BEING OF MEMBERS OF THE P UBLIC AND THEREFORE, IT WOULD BE A CHARITABLE ACTIVITY AND HENCE THE SOCIET Y HAS BEEN CONSTITUTED FOR CHARITABLE PURPOSE. 3. THE LD. D.R. ON THE OTHER HAND HAS PLACED THE RE LIANCE UPON THE ORDER OF THE CIT. HE HOWEVER, DID NOT DISPUTE THE FACTUA L ASPECT THAT THIS ISSUE WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF NAGARJU NA EDUCATIONAL SOCIETY (SUPRA). 4. HAVING CAREFULLY EXAMINED THE ISSUE INVOLVED AND THE ORDER OF THE TRIBUNAL IN THE CASE OF NAGARJUNA EDUCATIONAL SOCIE TY (SUPRA), WE FIND THAT THE IDENTICAL ISSUES WAS EXAMINED BY US IN THE SAID CASE AND THE TRIBUNAL HAS TAKEN A VIEW THAT ONCE THE REGISTRATION WAS GRANTED U/S 12A BEFORE THE INTRODUCTION OF SUB-SECTION 3 TO SECTION 12AA, THE CIT HAS NO JURISDICTION TO CANCEL THE REGISTRATION. THE OBSERVATION OF THE TR IBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: HAVING HEARD THE RIVAL SUBMISSIONS AND CAREFULLY P ERUSED THE ORDERS OF CIT AND THE RELEVANT PROVISIONS OF THE ACT AND W E FIND THAT SECTION 12A DEALS WITH THE CONDITIONS OF THE APPLICABILITY OF S ECTION 11 & 12 AND UNDER THIS SECTION A PERSON WHO IS IN RECEIPT OF INCOME AS PER SECTION 11 & 12 MAKES AN APPLICATION FOR REGISTRATION OF THE TRUST OR INS TITUTION IN THE PRESCRIBED FORM. BEFORE THE INTRODUCTION OF SECTION 12AA THE REGISTR ATION WAS GRANTED U/S 12A OF THE ACT BUT W.E.F. 1.4.97 WHEN SECTION 12AA WAS INTRODUCED, THE REGISTRATION WAS GRANTED U/S 12AA AS IT DEALS WITH THE PROCEDURE FOR REGISTRATION. SUB-SECTION 3 OF SECTION 12AA CONFER S THE POWER UPON A COMMISSIONER TO EXAMINE THE ACTIVITIES OF SUCH TRUS T OR INSTITUTION AND IF HE IS SATISFIED THAT IT IS NOT GENUINE OR NOT BEING CARRI ED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUTION AS THE CASE MAY BE, HE MAY CANCEL THE REGISTRATION OF SUCH TRUST. THE POWER OF CANCELLAT ION WAS NOT CONFERRED WITH THE COMMISSIONER U/S 12A WITH RESPECT TO THOSE CASE S WHERE THE REGISTRATION 3 WAS GRANTED U/S 12A. FOR THE SAKE OF REFERENCE AND ALSO TO UNDERSTAND THE SCOPE OF BOTH THESE SECTIONS, WE REPRODUCE THEM AS UNDER: 12A. [(1)] THE PROVISIONS OF SECTION 11 AND SECTIO N 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY:- (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE A N APPLICATION FOR REGISTRATION OF THE TRUST OR INSTIT UTION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER BEFORE THE 1 ST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF A PERIO D OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION, [WHICHEVER IS LAT ER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA]: [ PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE T RUST OR INSTITUTION IS MADE AFTER THE EXPIRY OF THE PERIOD AFORESAID, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN REL ATION TO THE INCOME OF SUCH TRUST OR INSTITUTION,- (I) FROM THE DATE OF THE CREATION OF THE TRUST OR T HE ESTABLISHMENT OF THE INSTITUTION IF THE COMMISSIONER IS, FOR REASONS TO BE RECORDED IN WRITING, SATISFIED THAT THE PERSON IN RECEIPT OF TH E INCOME WAS PREVENTED FROM MAKING THE APPLICATION BEFORE THE EX PIRY OF THE PERIOD AFORESAID FOR SUFFICIENT REASONS; (II) FROM THE 1 ST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION IS MADE, IF THE COMMISSIONER IS NOT SO SATISFIED: [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IN RELATION TO ANY APPLICATION MADE ON OR AFT ER THE 1 ST DAY OF JUNE, 2007;] [(AA) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION ON OR AFTER THE 1 ST DAY OF JUNE, 2007 IN THE PRESCRIBED FORM AND MANNER TO THE COMMISSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER S ECTION 12AA;] (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUT ION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO [THE PROVIS IONS OF SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX IN ANY PREVIOUS YEAR], THE ACCOUNTS OF THE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITE D BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES ALONG WITH THE RETURN OF INCOME FURNISHES ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH AC COUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED .] 4 [ PROCEDURE FOR REGISTRATION. 12AA. (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE (A) [OR CLAUSE (ASSESSING AUTHORITY) 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 SATI SFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTI TUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY I N THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUS T OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTI ON. AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT: PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OP PORTUNITY OF BEING HEARD. [(1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF CO MMISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SECTION (1) BEFORE THE 1 ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON THAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PR OCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE S TAGE AT WHICH THEY WERE ON THAT DAY.] [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTL Y THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLIN G THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD.] FROM A CAREFUL PERUSAL OF BOTH THE SECTIONS, IT IS AMPLY CLEAR THAT PRIOR TO THE INSERTION OF SECTION 12AA THE APPLICATIONS F OR REGISTRATION RECEIVED U/S 5 12A WERE TO BE PROCESSED UNDER THE SAME SECTION ITS ELF. BUT LATER ON SEPARATE PROVISION I.E. 12AA WAS INTRODUCED TO DEAL WITH THE PROCEDURE FOR REGISTRATION. SECOND PROVISO TO SUB-SECTION 1 OF S ECTION 12A FURTHER STATES THAT PROVISIONS OF CLAUSE 1(A) SHALL NOT APPLY IN R ELATION TO ANY APPLICATIONS MADE ON OR AFTER THE FIRST DAY OF JUNE, 2007. MEAN ING THEREBY, AFTER FIRST DAY OF JUNE, 2007 ALL APPLICATIONS FOR REGISTRATION U/S 12A ARE TO BE RECEIVED U/S 12AA AND THERE AFTER TO BE PROCESSED ONLY U/S 12AA OF THE ACT. TURNING TO THE FACTS OF THE CASE, WE FIND THAT ASSE SSEE WAS GRANTED REGISTRATION U/S 12A ON 4.11.1974. AT THE TIME OF GRANT OF REGISTRATION SECTION 12AA WAS NOT ON THE STATUTE, AS SUCH, THE REGISTRAT ION WAS PROCESSED U/S 12A OF THE ACT. NOW THE QUESTION ARISE WHETHER THE GEN UINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION WHICH WERE REGISTER ED U/S 12A CAN BE EXAMINED BY THE COMMISSIONER U/S 12AA (3) OF THE ACT. THE A NSWER IS CERTAINLY NO. THE REASON IS THAT SUB-SECTION 3 CATEGORICALLY DEAL S WITH THOSE REGISTRATIONS WHICH WERE GRANTED UNDER CLAUSE (B) OF SUB-SECTION 1 OF SECTION 12AA OF THE ACT. IT HAS NO RELEVANCE WITH RESPECT TO THE REGIST RATIONS WHICH WERE GRANTED U/S 12A OF THE I.T. ACT. MEANING THEREBY, ONCE THE REGISTRATION IS GRANTED U/S 12A, IT CANNOT BE CANCELLED BY THE CIT IN AS MUCH A S IN THIS REGARD, WE DO NOT FIND ANY PROVISIONS U/S 12A OF THE ACT. THE ONLY P ROVISION AVAILABLE IN THE ACT IS SUB-SECTION 3 OF SECTION 12AA OF THE ACT. THIS ISSUE WAS ALSO EXAMINED BY THE VARIOUS BENCHES OF THE TRIBUNAL. IN THE CASE OF BHARATHI VIDYAPEETH VS. ITO 119 TTJ 261, THE TRIBUNAL HAS HELD THAT THE REG ISTRATION GRANTED U/S 12A CANNOT BE WITHDRAWN OR CANCELLED BY THE CIT BY INVO KING THE PROVISIONS OF SECTION 12AA(3). THE PROVISIONS OF SUB-SECTION 3 O F SECTION 12AA WHICH WERE BROUGHT ON THE STATUTE BOOK BY THE FINANCE ACT (NO. 2, 2004) ARE SUBSTANTIVE IN NATURE AND HAVE NO RETROSPECTIVE EFFECT. THE SI MILAR VIEW WAS TAKEN BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF ST. DO N BOSCO EDUCATIONAL SOCIETY VS. CIT 90 ITD 477. THE UTTARANCHAL HIGH C OURT IN THE CASE OF WELHAM BOYS SCHOOL SOCIETY VS. CBDT 285 ITR 74 HAS ALSO TAKEN THE SIMILAR VIEWS. THEIR LORDSHIP HAVE CATEGORICALLY HELD THAT THE SUB-SECTION 3 WAS INCORPORATED IN SECTION 12AA W.E.F. 1.10.2004. THE REFORE PRIOR TO THE SAID DATE, THE AUTHORITY GRANTING REGISTRATION U/S 12AA HAD NO INHERENT POWERS TO WITHDRAW OR REVOKE THE REGISTRATION ALREADY GRANTED . WHILE DEALING WITH THE 6 ARGUMENT THAT PARTY WHICH GRANTS THE REGISTRATION I S ALSO EMPOWERED TO CANCEL THE SAME, THEIR LORDSHIP HAVE HELD THAT WHAT IS TO BE RESCINDED BY THE CIT IS NOT A NOTIFICATION, RULE OR BY-LAW. WHAT IS RESCINDED IS A QUASI-JUDICIAL ORDER WHICH HAD BEEN PASSED BY THE CIT U/S 12A. SU CH A QUASI-JUDICIAL ORDER DOES NOT FALL IN THE CATEGORY OF ORDERS MENTIONED I N THE SECTION 21 OF THE GENERAL CLAUSES ACT, 1897. THUS BY VIRTUE OF SECTI ON 21, THE CIT HAD NO POWER TO RESCIND THE ORDER PASSED EARLIER BY THE CI T GRANTING REGISTRATION TO THE ASSESSEE/PETITIONER SOCIETY. WE HAVE ALSO GONE THROUGH THE OTHER CASE LAWS REFERRED TO BY THE ASSESSEES AND WE FIND THAT IN ALL THOSE CASE LAWS SIMILAR VIEW WAS EXPRESSED EITHER BY THE TRIBUNAL O R THE HIGH COURT. FOLLOWING THE AFORESAID CASES, WE ARE OF THE CONSID ERED VIEW THAT CIT HAS NO JURISDICTION TO CANCEL THE REGISTRATION, EAR LIER, GRANTED U/S 12A TO THE ASSESSEES. WE THEREFORE SET ASIDE THE ORDER OF THE CIT DENYING THE REGISTRATION. ONCE THE ORDER OF THE CIT DENYING TH E REGISTRATION U/S 12A IS SET ASIDE, THE ASSESSEE IS ENTITLED FOR THE RENEWAL OF EXEMPTION U/S 80G OF THE ACT BECAUSE IT WAS ONLY DENIED FOR THE REASONS THAT REGISTRATION U/S 12A WAS CANCELLED. WE THEREFORE, SET ASIDE THIS ORDER OF T HE CIT DENYING THE EXEMPTION U/S 80G OF THE ACT AND DIRECT THE CIT TO GRANT RENEWAL OF EXEMPTION U/S 80G OF THE ACT. ACCORDINGLY, BOTH THE APPEALS OF THE ASSESSEES ARE ALLOWED. 5. SINCE THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW I N A SIMILAR SET OF FACTS, WE FIND NO REASON TO TAKE A CONTRARY VIEW IN THIS A PPEAL. ACCORDINGLY, FOLLOWING THE SAME, WE SET ASIDE THE ORDER OF THE C IT CANCELLING THE REGISTRATION U/S 12A OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 2.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND JUNE, 2010 7 COPY TO 1 VISAKHAPATNAM DISTRICT CRICKET ASSOCIATION, MUNIC IPAL STADIUM, VISAKHAPATNAM 2 CIT-1, VISAKHAPATNAM 3 THE CIT(A), VISAKHAPATNAM 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM