Orissa Olympic Association, Cuttack V. CIT, Cuttack

ITA 334/CTK/2011

• Counselvise Citation: 33422114 RSA 2011
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2014
• Assessment Year: misc
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K DASH
• Assessee Lawyers: P K MISHRA; R P KAR D DAS
• Keywords: Gift; Search and seizure; Charitable institution; Opportunity of being heard; Principle of natural justice; Retrospective amendment; Block assessment; Benefit of exemption; Onus to prove; Cancellation of registration
• Section: 133A; 12A; 12AA; 10; 154; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 334/CTK/2011 ORISSA OLYMPIC ASSOCIATION, BARABATI STADIUM CANTONMENT ROAD, CUTTACK (APPELLANT) PAN : AAAAO0318E VS. COMMISSIONER OF INCOME TAX, CUTTACK CHARGE, CUTTACK (RESPONDENT) ASSESSEE BY : R.P. KAR, D. DAS & P.K. MISHRA REVENUE BY : P.K. DASH, DR DATE OF HEARING : 02/05/2014 DATE OF PRONOUNCEMENT : 04 /0 7 /2014 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT DT. 22.3.2010 BY WHICH THE CIT HAS REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SEC. 12AA OF THE INCOME TAX ACT. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THAT, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX, CUTTACK IS ILLEGAL, ARBITRARY, WITHOUT JURISDICTION AND FOR THAT MATTER THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX IS LIABLE TO BE QUASHED AND/OR ANNULLED. 2. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS EXCEEDED IN HIS JURISDICTION BY EXAMINING THE ACCOUNTS OF THE APPELLANT FOR THE FINANCIAL YEAR 2001 - 02 TO 2008 - 09 AND COMING TO AN IRRELEVANT AND ABSURD CONCLUSION IN REFUSING TO GR ANT THE REGISTRATION TO THE APPELLANT AND FOR THAT MATTER THE ORDER OF THE LEARNED CIT BEING ILLEGAL IS LIABLE TO BE QUASHED. 3. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY INVOKING THE AMENDED SECTION 2 (15) OF THE INCOME - TAX ACT. 1961 (HEREINAFTER 2 ITA NO. 334/CTK/2011 REFERRED AS THE ACT) WHICH WAS NOT IN EXISTENCE IN THE YEAR UNDER CONSIDERATION FOR WHICH THE APPELLANT HAS FILED THE APPLICATION FOR GRANT OF REGISTRATION U/S 12A OF THE ACT AND FOR THAT MATTER THE ORDER OF THE LEARNED COMMISS IONER OF INCOME - TAX IS LIABLE TO BE QUASHED. 4. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY CITING THE ACTIVITIES CONDUCTED BY ORISSA CRICKET ASSOCIATION WHICH IS NOTHING TO DO WITH THE ACTIVITIES OF THE APPELLANT AND FOR THAT MATTER THE REFUSAL TO GRANT REGISTRATION U/S 12A OF THE ACT IS A CASE OF NON - APPLICATION OF MIND AND IS BASED ON PRECONCEIVED NOTION AND THEREFORE IS LIABLE TO BE QUASHED. 5. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY EXAMINING THE MATTERS SUBSEQUENT TO FILING OF THE APPLICATION AND THEREBY REFUSED TO GRANT THE REGISTRATION WHICH IS CONTRARY TO THE ORDER OF HONBLE HIGH COURT OF ORISSA IN THE CASE OF SRIKHETRA A.C. BHAKTI VEDANT SWAMY CHARITABLE TRUST VRS ACIT AND ANOT HER [2006 (2) OLR 75] AND FOR THAT MATTER THE ORDER OF REFUSAL TO GRANT THE REGISTRATION U/S 12A OF THE ACT BY THE COMMISSIONER OF INCOME - TAX IS LIABLE TO BE QUASHED. 6. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS USED THE MATERIALS BEHIND THE BACK O F THE APPELLANT WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD AND FOR THAT MATTER THE ORDER OF REFUSAL TO GRANT THE REGISTRATION U/S 12A OF THE ACT BY THE COMMISSIONER OF INCOME - TAX IS ILLEGAL, ARBITRARY AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND IS LIABLE TO BE QUASHED AND/OR ANNULLED. 7. THAT, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX IS ILLEGAL, ARBITRARY AND WITHOUT JURISDICTION BY INCORPORATING THE MATERIALS FOUND DURING THE COURSE OF SURVEY CONDUCTED U/S 133A OF THE ACT ON 28.03.2 006 WHICH IS NINE YEARS SUBSEQUENT TO THE APPLICATION FILED BY THE APPELLANT AND FOR THAT MATTER THE LEARNED COMMISSIONER OF INCOME - TAX HAS EXCEEDED IN HIS JURISDICTION BY EXAMINING THE MATTER NOT RELATING TO THE PERIOD FOR WHICH THE APPLICATION FOR REGIST RATION HAS BEEN FILED. 8. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY NOT CONSIDERING THAT THE APPELLANTS ACTIVITY INCLUDES EDUCATION OF SPORTS AND FOR THAT MATTER THE ACTIVITIES OF THE APPELLANT IS COMING WITHIN THE RESTRICTED MEANING OF EDUCATION U/S 2 (15) OF THE ACT AND NOT WITH WIDER MEANING I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 9. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BOTH IN LAW AS WELL AS IN FACTS BY APPLYING THE PROVISION OF SECTION 13(1)(C)(II) OF THE ACT FOR REFUSING TO GRANT THE REGISTRATION U/S 12AA OF THE ACT AND FOR THAT MATTER THE ORDER OF REFUSAL BY THE LEARNED COMMISSIONER OF INCOME - TAX IS LIABLE TO BE QUASHED AND/OR ANNULLED. 3 ITA NO. 334/CTK/2011 10. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY GIVING AN OPINION REGARDING THE CHARITABLE ACTIVITIES FOR LAST 63 YEARS ON THE BASIS OF SURMISE, CONJECTURE AND WHISPER AND FOR THAT MATTER CONCLUSION BASED ON SUCH PAST 63 YEARS IS FALLACI OUS, NON - APPLICATION OF MIND, PRECONCEIVED NOTION AND MOTIVATED ONE WHICH IS LIABLE TO BE QUASHED AND/OR ANNULLED. 11. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY MENTIONING THE AGREEMENT BETWEEN THE APPELLANT WITH THE INC ON ASSOCIATES WHICH IS VERY MUCH BENEFICIAL TO THE APPELLANT AND THERE IS NOTHING ADVERSE BROUGHT INTO RECORD FOR WHICH IT CAN BE CONCLUDED THAT SUBSTANTIAL FINANCIAL GAIN HAS BEEN PROVIDED TO THE AUTHOR, FOUNDER OF THE TRUST OR THE PERSONS INTERESTED WITH IN THE MEANING OF SAID SECTION AND FOR THAT MATTER THE CONCLUSION BASED ON SUCH IRRELEVANT APPRECIATION OF FACTS AND LAW IS LIABLE TO BE QUASHED. 12. THAT, THE EARNED COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY MENTIONING THAT THE ACTUAL CON TRIBUTION OF THE ASSOCIATION FOR THE DEVELOPMENT OF ANY SPORTS AND GAMES TO THE STANDARD OF OLYMPIC GAMES HAS NEVER BEEN MATERIALIZED IN THE LAST SIX DECADES WHICH IS HIGHLY UNCALLED FOR AND FOR MATTER THE REJECTION OF APPLICATION U/S 12AA OF THE ACT IS LI ABLE TO BE DECLARED IS A CASE OF NON - APPLICATION OF MIND AND THE APPLICATION FOR REGISTRATION IS TO BE ALLOWED U/S 12A OF THE ACT. 13. THAT, THE LEARNED COMMISSIONER OF INCOME - TAX HAS NOT CONSIDERED THE CBDT INSTRUCTION AND 10(23)(C) APPLICATION WHEREIN T HE APPELLANTS ACTIVITY HAS BEEN CONSIDERED AND ACCEPTED AS GENUINE ONE AND FOR THAT MATTER THE DENIAL OF REGISTRATION BY THE LEARNED COMMISSIONER OF INCOME - TAX IS A CASE OF NON - APPLICATION OF MIND AND IS LIABLE TO BE ALLOWED. 2. THE BRIEF FACTS OF THE CA SE ARE THAT THE ASSESSEE ASSOCIATION IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 W.E.F. 8.1.1947. IT FILED APPLICATION FOR REGISTRATION U/S 12A BEFORE THE COMMISSIONER OF INCOME TAX, ODISHA, BHUBANESWAR IN APRIL. THE CIT POINTED OUT THE DEFE CTS. IN COMPLIANCE THEREOF, THE ASSESSEE VIDE LETTER DT. 26.5.1997 SUBMITTED COPY OF THE APPLICATION IN FORM NO. 10A, AUDIT REPORT FOR F.Y 1994 - 95 TO 1996 - 97. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE RESIDENTIAL PREMISES OF THE SECRETARY OF TH E ASSOCIATION ON 28.3.2006. SURVEY OPERATION U/S 133A WAS ALSO CONDUCTED ON THE BUSINESS PREMISES OF THE ASSOCIATION. INCRIMINATING DOCUMENTS WERE IMPOUNDED AND SEIZED FROM THE BUSINESS PREMISES/OFFICE PREMISES OF THE ASSOCIATION AS WELL AS 4 ITA NO. 334/CTK/2011 CERTAIN RELAT ED DOCUMENTS WERE FOUND FROM THE RESIDENCE OF THE HON. SECRETARY. BLOCK ASSESSMENT WAS COMPLETED. SUBSEQUENTLY, DEMAND WAS RAISED AGAINST THE ASSESSEE. WHEN THE MATTER TRAVELLED TO THE TRIBUNAL IN RESPECT OF ASSESSMENT S , THE TRIBUNAL SET ASIDE THE ASSES SMENT FOR THE A.Y 2002 - 03 TO 2007 - 08 FOR MAKING DE NOVO EXAMINATION AFTER DECIDING THE PENDING PETITION FILED BY THE ASSESSEE U/S 12A. IN CONSEQUENCE THEREOF, THE CIT ASKED CERTAIN CLARIFICATION VIDE LETTER DT. 6.1.2010. THE ASSESSEE SUBMITTED ITS WRITTE N SUBMISSION ON 27.1.2010. ULTIMATELY, CIT REJECTED THE APPLICATION FILED U/S 12A BY HOLDING THAT THE ASSESSEE WAS NOT ENGAGED IN CHARITABLE ACTIVITIES IN THE FOLLOWING MANNER : PARA 44 IN ANY CASE AS IT HAS BEEN PROVED IN THE RECORDS FOR ALL PAST ASSESSMENT YEARS FROM THE 2001 - 2002 TO 2008 - 2009 THAT THE ACTIVITIES OF LETTING OUT CERTAIN IMMOVABLE AND MOVABLE PROPERTY TO VARIOUS TENANTS BY THE ORISSA OLYMPIC ASSOCIATION INVOLVED NO ACTIVITIES OF GENUINE PUBLIC CHARITY BUT CLEARLY COMPRISED OF COMMER CIAL EXPLOITATION OF ITS PROPERTY FOR BUSINESS GAIN. PARA 45 SIMILARLY IT HAS BEEN PROVED IN THE RECORDS THAT THE ORISSA OLYMPIC ASSOCIATION HAD VIRTUALLY NOT FULFILLED ANY OF THE OBJECTS STATED IN ITS MEMORANDUM OF ASSOCIATION COMPRISING OF PROMOTION O F VARIOUS GAMES AND SPORTS IN THE LAST 63 YEARS. EVEN THE SMALL AMOUNTS PAYABLE BY THE ORISSA OLYMPIC ASSOCIATION TO AFFILIATED GAMES AND SPORTS ASSOCIATION ARE FOUND NOT TO HAVE BEEN FULLY DISBURSED BUT HAVE BEEN SHOWN AS UNPAID LIABILITY IN THE BOOKS OF THE ASSOCIATION YEAR AFTER YEAR. THE ACTUAL CONTRIBUTION OF THE ASSOCIATION FOR THE DEVELOPMENT OF ANY SPORTS AND GAMES TO BE OF THE STANDARDS OF OLYMPIC GAMES HAS NEVER MATERIALIZED IN THE LAST 6 DECADES. PARA 46 FROM THE SUM TOTAL OF SUCH INSTRUCTIO NS/ GUIDELINES/CIRCULARS WHEN APPLIED TO THE FACTUAL MATRIX OF THE FUNCTIONING OF THE ASSOCIATION - INFERENCES CAN BE DRAWN THAT THE ACTIVITIES OF THE ASSOCIATION NEITHER RESULTED IN ANY CHARITY AS UNDERSTOOD IN A COMMON SENSE NOR CAN BE CATEGORIZED AS ACTIVI TIES FOR CHARITABLE PURPOSE AS DEFINED IN THE SECTION 2(15) OF THE INCOME TAX ACT, 1961. PARA 47 CONCLUSION ON THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPLICATION CLAIMED TO HAVE BEEN PENDING AND NOT DISPOSED OFF FROM APRIL, 1997 ONWARDS IS 5 ITA NO. 334/CTK/2011 HEREBY DISMISSED AB INITIO AND THE ORISSA OLYMPIC ASSOCIATION IS CONSIDERED NOT TO BE INVOLVED IN ANY CHARITABLE ACTIVITIES IN TRUE SENSE OF THE TERM. 3. THE LD. AR CONTENDED THAT THE CIT MUST HAVE DISPOSED OFF THE APPLICATIO N WITHIN 6 MONTHS AND SHOULD NOT HAVE KEPT IT PENDING OTHERWISE REGISTRATION WILL BE DEEMED TO HAVE BEEN ALLOWED. RELIANCE WAS PLACED IN THIS REGARD TO THE PROVISIONS OF SEC. 12AA(1)(B). OUR ATTENTION WAS DRAWN TOWARDS THE OBJECTS OF THE ASSOCIATION, A C OPY OF WHICH IS AVAILABLE AT PG. 2 - 37 OF THE PAPER BOOK, AND IT WAS CONTENDED THAT THE OBJECTS OF THE ASSOCIATION ARE CLEARLY CHARITABLE. ASSOCIATION WAS EXEMPTED U/S 10(23C) OF THE INCOME TAX ACT W.E.F. 1.4.1974. NO DOUBT, FROM F.Y 2007 - 08 THE PROVISO T O SEC. 2(15) HAS BEEN INSERTED BUT THAT IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ACTIVITIES OF THE ASSOCIATION COMPRISES OF CARRYING ON ACTIVITIES OF OLYMPIC MOVEMENT/AMATEUR SPORTS REGULATION AND ENCOURAGEMENT OF VARIOUS GAMES AND SPORTS RELATI NG TO HOCKEY, VOLLEY BALL, BASKET BALL, FOOTBALL, CRICKET, TENNIS, TABLE TENNIS, BADMINTON, SWIMMING, ATHLETICS, WRESTLING, KABBADI ,WEIGHTLIFTING, GYMNASTICS, BOXING, CYCLING, KHO KHO, JUDO, RIFLE SHOOTING, ARCHERY AND HAND BALL ETC., ESSENTIALLY MEAN VAR IOUS ACTIVITIES IN DIFFERENT GAMES. ALL THESE ACTIVITIES ARE FOR THE ADVANCEMENT OF ANY OTHER OBJECTS OF PUBLIC UTILITY. THE TRUST IS NOT CREATED FOR EARNING PROFIT AND IS ALSO NOT CARRYING ON ANY BUSINESS ACTIVITIES. CIT, WITHOUT GIVING PROPER AND SUFF ICIENT OPPORTUNITY TO THE ASSESSEE, REJECTED THE REGISTRATION. PROVISION OF SEC. 13(1)(C)(II) IS NOT TO BE EXAMINED AT THE STAGE OF REGISTRATION. AT THE TIME OF THE REGISTRATION CIT HAS ONLY TO SEE WHETHER THE ASSESSEE HAS BEEN CREATED FOR CHARITABLE PUR POSES OR NOT, WHETHER THE ASSESSEE HAS CARRIED OUT ITS ACTIVITIES GENUINELY OR NOT. CIT HAS CONSIDERED EVEN T S WHICH HAVE OCCURRED AFTER THE FILING OF THE APPLICATION FOR REGISTRATION. THE ASSESSEE HAS NOT DONE ANY COMMERCIAL EXPLOITATION OF ITS IMMOVEABLE PROPERTIES. THE PROPERTIES HAVE BEEN UTILIZED FOR THE PURPOSE OF PROMOTION OF GAMES AND ALL THE EXPENDITURE HAS BEEN INCURRED AS A KIND OF GRANT TO VARIOUS SPORTS ASSOCIATION, ATHLETICS ASSOCIATI ON, AMATEUR ATHLETIC ASSOCIATION. WHATEVER LEASE RENT HAS BEEN 6 ITA NO. 334/CTK/2011 RECEIVED BY THE ASSESSEE, SAME HAS BEEN UTILIZED FOR THE PURPOSE OF PROMOTION OF SPORTS. MERELY THAT THE GRANTS COULD NOT BE DISBURSED IN A PARTICULAR YEAR WILL NOT MEAN THAT THE ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITIES. CIT WAS NOT CORRECT IN LAW IN TAKING THE AMENDMENT TO SEC. 2(15) TO BE CLARIFICATORY IN NATURE AND ITS APPLICABILITY RETROSPECTIVELY. OUR ATTENTION WAS DRAWN TOWARDS THE PROFIT & LOSS ACCOUNT AND THE REPORT OF THE HO N. GENERAL SECRETARY AS PREPARED AND PUBLISHED IN THE ANNUAL ACCOUNTS, COPY OF WHICH WAS FILED BEFORE US IN PAPER BOOK . 4. THE LD. DR SUBMITTED THE FOLLOWING WRITTEN SUBMISSION : THE FIRST GROUND OF APPEAL IS THAT THE ORDER OF THE LD. COMMISSIONER OF IN COME - TAX, CUTTACK IS ILLEGAL, ARBITRARY, WITHOUT JURISDICTION AND FOR THAT MATTER THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX IS LIABLE TO BE QUASHED AND/OR ANNULLED. IT IS SUBMITTED THAT, THIS IS A GENERAL GROUND AND NO REASON WHATSOEVER IS GIVEN WHY AND HOW THE ORDER OF CIT, CUTTACK IS ILLEGAL, ARBITRARY AND WITHOUT JURISDICTION. 2. THE SECOND OF APPEAL IS THAT THE LD. COMMISSIONER OF INCOME - TAX HAS EXCEEDED IN HIS JURISDICTION BY EXAMINING THE ACCOUNTS OF THE APPELLANT FOR THE FINANCIAL YEAR 2001 - 0 2 TO 2008 - 09 AND COMING TO AN IRRELEVANT AND ABSURD CONCLUSION IN REFUSING TO GRANT THE REGISTRATION TO THE APPELLANT AND FOR THAT MATTER THE ORDER OF THE LD. CIT BEING ILLEGAL IS LIABLE TO BE QUASHED. IT IS SUBMITTED THAT, IT IS CLEAR FROM THE ORDER OF THE CIT CUTTACK DATED. 22.03.2010 THAT THE ASSESSEE FOR THE FIRST TIME HAD FILED AN APPLICATION FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT 1961 (HEREINAFTER CALLED THE ACT) CLAIMING THE STATUS OF A CHARITABLE INSTITUTION WITH CIT, CUTTACK IN APRIL 9 7. SINCE REGISTRATION IS TO BE GRANTED, IF THE ASSESSEE FULFILLS THE CONDITIONS STIPULATED IN THE ACT W.E.F. 01.04.1997 I.E. FROM THE PREVIOUS YEAR RELEVANT TO A.Y. 1998 - 1999, IN WHICH THE ASSESSEE HAD FILED THE APPLICATION, THE CIT HAS TO EXAMINE THE ACCO UNTS OF THE ASSESSEE FROM THE F.Y. 2001 - 2002 TILL THE F.Y. 2008 - 09. HAD THE CIT CUTTACK PASSED THE ORDER 12AA OF THE ACT WITHOUT EXAMINING THE ACCOUNTS FOR THE PERIOD 01.04.2001 TO 22.03.2010, I.E. F.YS. 2001 - 2002 TO 2008 - 2009, THE CIT WOULD HAVE FAILED IN HIS DUTY WHILE IMPLEMENTING THE ACT. HENCE, IT IS SUBMITTED THAT THE CIT, CUTTACK HAD NOT EXCEEDED HIS JURISDICTION BY EXAMINING THE ACCOUNTS OF THE ASSESSEE FOR THE F.Y. 2001 - 02 TO 2008 - 09 AND THERE IS NOTHING ILLEGAL ABOUT IT. 7 ITA NO. 334/CTK/2011 3. THE THIRD GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY INVOKING THE AMENDED SECTION 2 (15) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) WHICH WAS NOT IN EXISTENCE IN THE YEAR UNDER CONSIDERATION FOR WHICH THE AP PELLANT HAS FILED THE APPLICATION FOR GRANT OF REGISTRATION U/S 12A OF THE ACT AND FOR THAT MATTER THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX IS LIABLE TO BE QUASHED. IT IS SUBMITTED THAT THE CIT HAS COMMITTED SERIOUS ERROR BY INVOKING THE AMEND ED SEC.2(15), OF THE ACT WHICH WAS NOT IN EXISTENCE IN THE YEAR UNDER CONSIDERATION IN WHICH THE ASSESSEE HAS FILED THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT IN FROM NO - 10A READ WITH 17A OF THE RULES. THE RATIONALE BEHIND AMENDMENT TO S EC 2(15) BY THE FINANCE ACT, 2008 AS COULD BE SEEN FROM THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2008 REPORTED IN 298 ITR(ST) 200 - 201 WHICH READ AS IT HAS BEEN NOTICED THAT A NUMBER OF ENTITIES OPERATING ON COMMERCIAL LINES ARE CLAIMIN G EXEMPTION ON THEIR INCOME EITHER U/S 10 (23C) OR SEC - 11 OF THE ACT ON THE GROUND THAT THEY ARE CHARITABLE INSTITUTIONS. THIS IS BASED ON THE ARGUMENT THAT THEY ARE ENGAGED IN THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY AS INCLUDED IN THE FOU RTH LIMB OF THE CURRENT DEFINITION OF CHARITABLE PURPOSE. SUCH A CLAIM WHEN MADE IN RESPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES IS CONTRARY TO THE INTENTION OF THE PROVISION. WITH A VIEW TO LIMITING THE SCOPE OF THE PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, IT IS PROPOSED TO AMEND SECTION 2( 15 ) SO AS TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF FOLLOWING ACTIVITIES: (A ) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR, ( B ) ANY ACTIVITY OF RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A FEE OR CESS OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICAT ION OF THE INCOME FROM SUCH ACTIVITY, OR THE RETENTION OF SUCH INCOME, BY THE CONCERNED ENTITY. IT HAS BEEN STATED IN THE CBDTS CIRCULAR NO. 11 OF 2008, DATED 19TH DECEMBER, 2008 (REPORTED IN 308 ITR (ST.5) THAT AN ENTITY WITH A CHARITABLE OBJECT, INTER ALIA, CONSISTING OF ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC WAS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. HOWEVER, IT WAS SEEN THAT A NUMBER OF ENTITIES WHO WERE ENGAGED IN COMMERCIAL ACTIVITIES WERE ALSO CLAIMING EXEMPTION ON THE GROUND TH AT SUCH ACTIVITIES WERE FOR THE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY IN TERMS OF THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE. THEREFORE, SECTION 2(15) WAS AMENDED VIDE FINANCE ACT, 2008, BY ADDING A PROVISO.. FURTHER, PARA 3 OF T HE SAID CIRCULAR READ AS THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, I.E., THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HENCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OR UNDER SECTION 8 ITA NO. 334/CTK/2011 10(23C) OF THE ACT IF THEY CARRY ON COMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. A CONJOINT READING OF THE MEMO EXPLAINING THE PROVISION OF FINANCE BILL, 2008 AND CBDTS CIRCULAR DATED 19.12.2008 WILL MAKE IT ABUNDANTLY CLEAR FIRS TLY, THAT THE ENTITY NOT ENGAGED IN COMMERCIAL ACTIVITIES WILL NOT BE HIT BY PROVISO TO SEC 2(15) OF ACT AND SECONDLY, WHETHER AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT. THEREFORE IT WOULD APPEA R THAT THE PROVISO OF SEC. 2(15) OF THE ACT WAS INTENDED TO CLARIFY THE POSITION OF ACTIVITIES CARRIED ON IN COMMERCIAL LINES NOT TO BE CHARITABLE IN NATURE. THE CLARIFICATION PARAGRAPH ADDED TO SEC 2(15) OF THE IT ACT 1961 CAN AS WELL BE CONSIDERED APPLIC ABLE TO ALL PAST FINANCIAL YEARS IN SO FAR AS THE ACTIVITIES OF THE ASSOCIATION REMAIN UNCHANGED. THIS IS CLEAR FROM THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SOFT BEVERAGES PVT. LTD 1993, 272 ITR 270 AND THE DECISION OF THE HON BLE KOLKATA HIGH COURT IN THE CASE OF CIT VS ANANDA MARGA PRACHARAK SANGHA 218 ITR 254 WHEREIN IT WAS HELD THAT WHEN A PROVISION IS CAPABLE OF INTERPRETING WITHOUT ANY CLARIFICATION THE AMENDMENT WOULD ONLY CLARIFY THE SAME. IN SUCH CASES THE AMENDMENT MAY BE DEEMED TO BE RETROSPECTIVE IN ITS APPLICATION. THEREFORE INVOKING OF THE AMENDED SECTION 2(15) OF THE ACT WHICH WAS NOT EXISTING IN THE YEAR IN WHICH THE ASSESSEE FILED THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA IS VERY MUCH IN ORDER. 4. THE FOUR TH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY CITING THE ACTIVITIES CONDUCTED BY ORISSA CRICKET ASSOCIATION WHICH HAS NOTHING TO DO WITH THE ACTIVITIES OF THE APPELLANT AND FOR THAT MATTER THE REFUSAL TO GRA NT REGISTRATION U/S 12A OF THE ACT IS A CASE OF NON - APPLICATION OF MIND AND IS BASED ON PRECONCEIVED NOTION AND THEREFORE IS LIABLE TO BE QUASHED. IT IS SUBMITTED THAT THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED NO ERROR BY CITING THE ACTIVITIES CON DUCTED BY ORISSA CRICKET ASSOCIATION. IN FACT THE STATEMENT OF THE LD.AR THAT THE ACTIVITIES CONDUCTED BY ORISSA CRICKET ASSOCIATION HAVE GOT NOTHING TO DO WITH THE ACTIVITIES OF THE APPELLANT IS NOT CORRECT BECAUSE AS COULD BE SEEN FROM PARA - 22 OF 12AA(1 )(B)(I) ORDER OF THE CIT CUTTACK DATED 22 - 3 - 2010 IT IS STATED THAT THE ACTIVITIES OF THE ORISSA OLYMPIC ASSOCIATION AS PUT FORTH BY THE LD. COUNSEL IN WRITING IN THE PETITION DATED 27.01.2010 COMPRISING OF CARRYING ON THE ACTIVITIES OF OLYMPIC MOVEMENTS/A MATEUR SPORTS REGULATION AND ENCOURAGEMENT OF VARIOUS GAMES AND SPORTS RELATING TO HOCKEY, VOLLEY BALL, BASKET BALL, FOOTBALL, CRICKET, TENNIS, TABLE TENNIS, BADMINTON, SWIMMING, ATHELTICS, WRESTLING, KABADI, WEIGHTLIFTING, GYMNASTICS, BOXING, CYCLING, KHO KHO, JUDO, RIFLE SHOOTING, ARCHERY AND HAND 9 ITA NO. 334/CTK/2011 BALL ETC., ESSENTIALLY MEAN VARIOUS ACTIVITIES IN DIFFERENT GAMES. FURTHER THE COMMISSIONER OF INCOME - TAX AT PARA 37 NOTED THAT THE ORISSA CRICKET ASSOCIATION HAS SOME SORT OF ARRANGEMENT WITH ORISSA OLYMPIC AS SOCIATION TO ADD CIVIL CONSTRUCTIONS AND VARIOUS INFRASTRUCTURE RELATING TO CRICKETING ACTIVITIES FOR WHICH CERTAIN SHARES OR SERVICE CHARGES ARE PAID BY THE ORISSA CRICKET ASSOCIATION TO ORISSA OLYMPIC ASSOCIATION. IT IS CLEAR FROM THE ABOVE THAT THE ASSE SSEE IS VERY MUCH ASSOCIATED WITH THE GAME OF CRICKET. THEREFORE HE CANNOT NOW SAY THAT THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY CITING THE ACTIVITIES CONDUCTED BY ORISSA CRICKET ASSOCIATION WHICH HAS NOTHING TO DO WITH THE A CTIVITIES OF THE APPELLANT. 5. THE FIFTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY EXAMINING THE MATTERS SUBSEQUENT TO FILING OF THE APPLICATION AND THEREBY REFUSED TO GRANT THE REGISTRATION WHICH IS CONTRARY TO THE ORDER OF HONBLE HIGH COURT OF ORISSA IN THE CASE OF SRIKHETRA AC BHAKTI VEDANT SWAMY CHARITABLE TRUST VRS ACIT AND ANOTHER [2006(2) OLR 75] AND FOR THAT MATTER THE ORDER OF REFUSAL TO GRANT THE REGISTRATION U/S 12A OF THE ACT BY THE COMMISSIONER O F INCOME - TAX IS LIABLE TO BE QUASHED. IT IS SUBMITTED THAT, THE REPLY TO THIS GROUND IS ALREADY STATED IN THE REPLY TO GROUND TWO. THE DECISION OF THE HONBLE ORISSA HIGH COURT IN THE CASE M/S SRIKHETRA A.C. BHAKTI VEDANTA SWAMY CHARITABLE TRUST VS. ACIT AND ANOTHER 2006(11) OLR - 75 W.P.(C) NO. 12437 OF 2005 DOES NOT SAY THAT MATTERS SUBSEQUENT TO FILING OF THE APPLICATION CAN NOT BE EXAMINED. THEREFORE, CIT, CUTTACK COMMITTED NO ERROR IN EXAMINING THE MATTERS SUBSEQUENT TO FILING OF APPLICATION FOR REGIS TRATION U/S 12AA OF THE ACT. 6. THE SIXTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS USED THE MATERIALS BEHIND THE BACK OF THE APPELLANT WITHOUT GIVING AN OPPORTUNITY OF BEING HEARD AND FOR THAT MATTER THE ORDER OF REFUSAL TO GRANT THE REGISTRATION U/S 12A OF THE ACT BY THE COMMISSIONER OF INCOME - TAX IS ILLEGAL, ARBITRARY AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND IS LIABLE TO BE QUASHED AND/OR ANNULLED. IT IS SUBMITTED THAT, THE CIT CUTTACK GAVE AMPLE OPPORTUNITY TO THE ASS ESSEE TO EXPLAIN ITS CASE, AS COULD BE SEEN FROM PARA 11 OF THE ORDER U/S 12AA WHICH READS AS FOLLOWS: AFTER ASSUMPTION OF JURISDICTION OVER THE PETITION ORIGINALLY FILED IN APRIL 1997 A FRESH HEARING WAS GIVEN TO THE ASSOCIATION AND CLARIFICATIONS HAVE BEEN CALLED FOR FROM THE ASSOCIATION BY THE COMPETENT INCOME - TAX AUTHORITIES VIDE LETTER DATED 10.08.2009 ON VARIOUS ISSUES RAISED IN THE QUESTIONNAIRE TO BE FILED BY 25.08.2009. ON BEHALF OF THE ORISSA CRICKET ASSOCIATION THE AUTHORIZED REPRESENTATIVE SR I DIGANTA DAS, ADVOCATE HAD APPEARED AND SUBMITTED A WRITTEN 10 ITA NO. 334/CTK/2011 CLARIFICATION TO THE QUESTIONNAIRE ISSUED BY THE COMMISSIONER OF INCOME TAX, CUTTACK ON 27.01.2010. AS COULD BE SEEN FROM THE ABOVE, THE CIT CUTTACK BEFORE PASSING HIS ORDER U/S 12AA DATED 22.03.2010 GAVE OPPORTUNITY AND A REPLY HAS ALSO BEEN FILED BY THE AUTHORIZED REPRESENTATIVE. HENCE THE STATEMENT OF THE ASSESSEES COUNSEL THAT CIT USED THE MATERIAL BEHIND THE BACK OF ASSESSEE WITHOUT GIVING OPPORTUNITY OF BEING HEARD IS NOT CORRECT. 7. THE SEVENTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX IS ILLEGAL, ARBITRARY AND WITHOUT JURISDICTION BY INCORPORATING THE MATERIALS FOUND DURING THE C OURSE OF SURVEY CONDUCTED U/S 133A OF THE ACT ON 28.03.2006 WHICH IS NINE YEARS SUBSEQUENT TO THE APPLICATION FILED BY THE APPELLANT AND FOR THAT MATTER THE LD. COMMISSIONER OF INCOME - TAX HAS EXCEEDED IN HIS JURISDICTION BY EXAMINING THE MATTER NOT RELATIN G TO THE PERIOD FOR WHICH THE APPLICATION FOR REGISTRATION HAS BEEN FILED. IT IS SUBMITTED THAT, THE HONBLE HIGH COURT OF ODISHA IN THE CASE OF M/S SRIKHETRA, A.C. BHAKTI - VEDANTA VS. ACIT AND ANOTHER [2006 (II) OLR - 75 W.P.(C) NO. 12437 OF 2005] WHERE IN THE HONBLE JURISDICTIONAL HIGH COURT ANSWERING THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONER THAT ONCE THE PERIOD OF SIX MONTHS EXPIRES, THE AUTHORITY LOOSES ITS RIGHT TO REFUSE REGISTRATION OF TRUST THE COURT HELD THAT THEY ARE UNABLE TO UPHO LD SUCH CONTENTION AND HELD AT PARA - 5 AS UNDER: IN OUR VIEW THE PERIOD OF SIX MONTHS AS PROVIDED IN SUB - SECTION (2) OF SECTION 12AA IS NOT MANDATORY. THOUGH THE WORD SHALL HAS BEEN USED BUT IT IS WELL KNOWN THAT TO ASCERTAIN WHETHER A PROVISION IS MAN DATORY OR NOT, THE EXPRESSION SHALL IS NOT ALWAYS DECISIVE. IT IS ALSO WELL KNOWN THAT WHETHER A STATUTORY PROVISION IS MANDATORY OR DIRECTORY HAS TO BE ASCERTAINED NOT ONLY FROM THE WORDING OF THE STATUTE BUT ALSO FROM NATURE AND DESIGN OF THE STATUTE A ND THE PURPOSE WHICH IT SEEKS TO ACHIEVE. HEREIN THE TIME FRAME UNDER SUB - SECTION (2) OF SECTION 12AA OF THE ACT HAS BEEN SO PROVIDED TO EXCLUDE ANY DELAY OR LETHARGIC APPROACH IN THE MATTER OF DEALING WITH SUCH APPLICATION. SINCE THE CONSEQUENCE FOR NON - C OMPLIANCE WITH THE SAID TIME FRAME HAS NOT BEEN SPELT OUT IN THE STATUTE, THIS COURT CANNOT HOLD THAT THE SAID TIME LIMIT IS MANDATORY IN NATURE NOR THE PERIOD OF SIX MONTHS HAS BEEN COUCHED IN NEGATIVE WORDS. MOST OF THE TIME NEGATIVE WORDS INDICATE A MAN DATORY INTENT. THIS COURT IS ALSO OF THE OPINION THAT WHEN PUBLIC DUTY IS TO BE PERFORMED BY THE PUBLIC AUTHORITIES, THE TIME LIMIT WHICH IS GRANTED BY THE STATUTE IS NORMALLY NOT MANDATORY BUT IS DIRECTORY IN THE ABSENCE OF ANY CLEAR STATUTORY INTENT TO T HE CONTRARY. (KINDLY REFER MONTREAL STREET RAILWAY COMPANY V. NORMANDIN, AIR 1917 PRIVY COUNCIL 142 AT PAGE 144). HERE THERE IS NO SUCH EXPRESS STATUTORY INTENT, NOR DOES IT FOLLOW FROM NECESSARY IMPLICATION. 11 ITA NO. 334/CTK/2011 FOR THIS REASON WE CANNOT ACCEPT THE CONTENTI ON OF THE LEARNED COUNSEL FOR THE PETITIONER ON THE INTERPRETATION OF SECTION 12AA(2). THEREFORE IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT AS ABOVE, AS NO ORDER WAS PASSED BY THE CIT CUTTACK GRANTING OR REFUSING REGISTRATION ON THE APPLICATIO N OF APPELLANT FOR REGISTRATION U/S 12A, THOUGH FILED ON IN APRIL 1997 TILL MARCH 2010, THE CIT, CUTTACK HAD PASSED AN ORDER U/S I2AA, IN THE CASE OF THE APPELLANT ON 22.03.2010 DISMISSING THE APPLICATION IN PARA 47 AS UNDER: ON THE TOTALITY OF THE FACT S AND CIRCUMSTANCES OF THE CASE THE APPLICATION CLAIMED TO HAVE BEEN PENDING AND NOT DISPOSED OFF FROM APRIL, 1997 ONWARDS IS HEREBY DISMISSED AB INITIO AND THE ORISSA OLYMPIC ASSOCIATION IS CONSIDERED NOT TO BE INVOLVED IN ANY CHARITABLE ACTIVITIES IN TRU E SENSE OF THE TERM. IN VIEW OF THE ABOVE, WHEN THE COMMISSIONER IS EXAMINING AN APPLICATION FOR REGISTRATION IN THE YEAR 2010, HE HAS TO EXAMINED THE MATERIAL BEFORE HIM AND THE CIT DID WELL IN INCORPORATING THE MATERIALS FOUND DURING THE COURSE OF SUR VEY CONDUCTED U/S 133A OF THE ACT ON 28.03.2006 WHICH IS NINE YEARS SUBSEQUENT TO THE APPLICATION FILED BY THE APPELLANT 8. THE EIGHTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY NOT CONSIDERING THAT THE APPELLANTS ACTIVITY INCLUDES EDUCATION OF SPORTS AND FOR THAT MATTER THE ACTIVITIES OF THE APPELLANT IS COMING WITHIN THE RESTRICTED MEANING OF EDUCATION U/S 2 (15) OF THE ACT AND NOT WITH WIDER MEANING I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. IT IS SUBMITTED THAT, THE HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE, LOKA SIKSHANA TRUST VS. CIT (SC) 101 ITR 234 HAS GIVEN A RESTRICTED MEANING TO EDUCATION IN THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN SECTION 2(15) IS THE SYSTEMIC INSTRUCTION, SCHOOLING OR TRAINING GIVEN TO THE YOUNG IN PREPARATION FOR THE WORK OF LIFE. IT ALSO COMMITS THE WHOLE COURSE OF SCHOLASTIC INSTRUCTION. THEREFORE, THE SENSE IN WHICH EDUCATION IS USED IN SECTION 2(15) IS DIFFERENT FROM WHAT IS REFERRED TO BY THE APPELLANT. 9. THE NINTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BOTH IN LAW AS WELL AS IN FACTS BY APPLYING THE PROVISION OF SECTION 13(1) (C) (II) OF THE ACT FOR REFUSING TO GRANT THE REGISTRATION U/S 12AA OF THE ACT AND FOR THAT MATTER THE ORDER OF REFUSAL BY THE LD. COMMISSIONER OF INCOM E - TAX IS LIABLE TO BE QUASHED AND/OR ANNULLED. IT IS SUBMITTED THAT, THE CIT, CUTTACK HAS CORRECTLY INVOKED THE PROVISION OF SECTION 13(1)(C) (II) OF THE ACT AND REFUSED TO GRANT REGISTRATION. IT IS SEEN FROM THE EXAMINATION OF ACCOUNTS BY THE CIT, CUTTA CK THAT THE FUNCTIONING OF ORISSA 12 ITA NO. 334/CTK/2011 OLYMPIC ASSOCIATION DURING THE PERIOD UNDER CONSIDERATION IS FOUND TO HAVE APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF FOUNDER OF THE INSTITUTION /FOR ANY PERSON WHO HAD MADE SUBSTANTIAL CONTRIBUTION IN FINANCIAL TER MS TO THE INSTITUTION OR TO THE RELATIVES OF THE FOUNDERS OF THE INSTITUTION OR TO THE MANAGER OF THE INSTITUTION BY WHATEVER NAMES THEY MAY BE CALLED OR TO ANY RELATIVE OF THE FOUNDER MEMBER OR MANAGER OF THE INSTITUTION OR TO ANY CONCERN IN WHICH THE FOU NDER OR MEMBER OR THE RELATIVE OF THE FOUNDER OF THE INSTITUTION HAS SUBSTANTIAL INTEREST. THE CIT CUTTACK IN HIS ORDER U/S 12AA FROM PARAS 32 TO 34 HELD AS UNDER: FROM EXAMINATION OF THE STATEMENTS OF AFFAIRS AND AUDITED ACCOUNTS OF ORISSA OLYMPIC ASSO CIATION FOR THE FINANCIAL YEAR 2006 - 2007 TO 2008 - 2009 AS WELL AS ALL PAST FINANCIAL YEARS IT IS EVIDENT THAT DURING THE LAST 63 YEARS THE ORISSA OLYMPIC ASSOCIATION HAS COME TO POSSESS CERTAIN IMMOVABLE ASSETS COMPRISING OF BARABATI STADIUM, SHOP COMPLEXES NO. 1 & 2, BANK BUILDING COMPLEX, TICKET COUNTERS, SELF CONSTRUCTED BUILDING, BARABATI PALACE, BARABATI GUEST HOUSE, OVER HEAD TANK AND MOVEABLE ASSETS IN THE FORM OF FURNITURE & FIXTURES AND PLANT & MACHINERY, SPORTS MATERIALS ETC. THE VALUE OF LAND INSI DE THE BARABATI STADIUM AND ADJOINING AREAS IS REFLECTED TO BE RS.84,54,46,875.00 AS ON 31.03.2009. THE VALUE OF BARABATI STADIUM AND ITS SHOPPING COMPLEXES AND THE BARABATI PALACE AND BARABATI GUEST HOUSE ARE REFLECTED AT RS.3,83,92,323.00 AS ON 31.03.200 9 WHEREAS THE SUM TOTAL OF MOVABLE ASSETS IS SHOWN AT RS.25,67,100.00. OVER THE LAST 10 YEARS PERIOD THE ONLY ACTIVITY THE ORISSA OLYMPIC ASSOCIATION HAS BROADLY DONE IS COMMERCIAL EXPLOITATION OF ITS IMMOVABLE PROPERTY IN THE FORM OF BARABATI STADIUM, SHO P COMPLEXES NO.1 & 2, BANK BUILDING COMPLEX, TICKET COUNTERS, SELF CONSTRUCTED BUILDING, BARABATI PALACE, BARABATI GUEST HOUSE GIVEN TO VARIOUS TENANTS UNDER COMMERCIAL LEASE UNDER WHICH MONTHLY LEASE RENTALS ALONG WITH ELECTRICITY CHARGES WATER CHARGES AR E BEING RECEIVED. PARA - 33 THE ORISSA OLYMPIC ASSOCIATION OVER THE LAST 10 YEARS HAS NO SOURCE OF INCOME OTHER THAN SUCH LEASE RENTS FROM LETTING OUT ITS VARIOUS ASSETS TO LARGE NUMBER OF TENANTS. SUBSTANTIAL PORTION OF SUCH LEASE RENT FROM EXPLOITATION OF ITS COMMERCIAL ASSETS ARE CLAIMED TO BE UTILIZED FOR ESTABLISHMENT EXPENSES AND OTHER EXPENSES LIKE MAINTENANCE OF ITS COMMERCIAL ASSETS COMPRISING OF IMMOVABLE PROPERTY OF BARABATI STADIUM AND OTHER ALLIED BUILDINGS. OUT OF THE SUMS REALIZED THE ACTUAL AMOUNT OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED AS A KIND OF GRANT TO VARIOUS SPORTS ASSOCIATION, ATHLETIC ASSOCIATION, AMATEUR ATHLETIC ASSOCIATION ARE FOUND TO BE INSIGNIFICANT. THE ACTUAL FULFILLMENT OF THE OBJECTIVES AS STATED IN THE MEMORANDUM OF ASSOCIATION AS AMENDED IN 1996 NARRATED ABOVE ARE FOUND NOT TO HAVE BEEN ACHIEVED TO ANY SIGNIFICANT EXTENT. THE LAST 7 YEARS COMPARATIVE ACCOUNT OF THE RECEIPTS FROM THE BUSINESS OF LEASING OUT OF ITS IMMOVABLE AND MOVEABLE PROPERTIES CAN BE SUMMARIZED A S UNDER: 13 ITA NO. 334/CTK/2011 FINANCIAL YEAR COMMERCIAL LEASE RENT RECEIVED (RS.) FUNDS CLAIMED TO HAVE BEEN UTILIZED FOR GIVING GRANT TO SPORTS ASSOCIATION (RS.) 2001 - 2002 57,91,198 18,53,779 2002 - 2003 55,64,616 14,94,222 2003 - 2004 60,87,277 14,67,951 2004 - 2005 62,37,630 14,10,230 2005 - 2006 60,92,606 18,00,683 2006 - 2007 87,58,063 19,94,145 2007 - 2008 91,01,011 16,84,648 2008 - 2009 1,07,51,250 23,76,816 PARA - 34. AN ANALYSIS OF THE CURRENT LIABILITIES FOR THE FINANCIAL YEAR 200 1 - 2002 ONWARDS WOULD REVEAL THAT THE SO CALLED GRANT TO SPORTS ORGANIZATION HAD ACTUALLY NOT BEEN DISBURSED AND THE LIABILITIES HAVE BEEN CARRIED FORWARD YEAR AFTER YEAR IN THE NAMES OF THE DISTRICT LEVEL SPORTS ASSOCIATION AS SUMMARIZED BELOW: FINANCIAL YEAR OUTSTANDING UNPAID GRANTS TO SPORTS ASSOCIATION CLAIMED AS EXPENSES (RS.) 2001 - 2002 9,54,793 2002 - 2003 12,91,280 2003 - 2004 15,53,080 2004 - 2005 20,3 7,080 2005 - 2006 25,87,144 2006 - 2007 30,37,024 2007 - 2008 34,64,524 2008 - 2009 31,56,404 FROM THE ABOVE ANALYSIS IT WOULD BE APPEAR THAT YEAR AFTER YEAR THE SO CALLED GRANTS TO DISTRICT LEVEL SPORTS ASSOCIATION HAVE ACTUALLY NOT BEEN DISBURSED FULLY SO THAT THE LIABILITIES BOOKED IN THE ACCOUNTS HAVE INCREASED FROM RS.954793.00 TO RS.3156404.00. THE ACTUAL DISBURSEMENT TO A VERY SMALL EXTENT HAS BEEN SHOWN IN ACCOUNTS. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED NO ERROR BOTH IN LAW AS WELL AS ON FACTS BY APPLYING THE PROVISION OF SECTION 13(1) (C) (II) OF THE ACT FOR REFUSING TO GRANT THE REGISTRATION U/S 12AA OF THE ACT. 14 ITA NO. 334/CTK/2011 10. THE TENTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY GIVING AN OPINION REGARDING THE CHARITABLE ACTIVITIES FOR LAST 63 YEARS ON THE BASIS OF SURMISE, CONJECTURE A ND WHISPER AND FOR THAT MATTER CONCLUSION BASED ON SUCH PAST 63 YEARS IS FALLACIOUS, NON - APPLICATION OF MIND, PRECONCEIVED NOTION AND MOTIVATED ONE WHICH IS LIABLE TO BE QUASHED AND/OR ANNULLED. THE COMMISSIONER OF INCOME TAX, CUTTACK IN PAR 35 OF THIS O RDER STATED AS UNDER : PARA - 35 WITH SUCH STATEMENT OF AFFAIRS THE CRUCIAL QUESTION ARISES AS TO WHETHER THE COMMERCIAL ACTIVITIES OF LETTING OUT CERTAIN IMMOVEABLE PROPERTY AND MOVEABLE PROPERTY TO TENANTS ON THE BASIS OF COMMERCIAL LEASE AGREEMENTS FOR HOUSE, PLANT & MACHINERY ETC. AND CHARGING FIXED ELECTRICITY DUES AND OTHER RENTALS WOULD CONSTITUTE ANY ACTIVITY BEING ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY OR IT WOULD BE IN THE NATURE OF ANY KIND OF RELIEF TO THE POOR/EDUCATION/MEDICAL REL IEF. OBVIOUSLY THE ORGANIZED ACTIVITY OF CONSTRUCTING AND LETTING OUT BUILDINGS, ROOM SPACE, PLANT & MACHINERY, FURNITURE & FIXTURES OVER THE LAST 63 YEARS TO VARIOUS TENANTS WOULD NOT IN ITSELF CONSTITUTE ANY KIND OF ACTIVITIES RELATABLE TO RELIEF OF THE POOR/EDUCATION/MEDICAL RELIEF AS DEFINED UNDER SECTION 2(15) OF THE INCOME TAX ACT, 1961. WHETHER THE OTHER INGREDIENT OF CHARITABLE PURPOSE RELATING TO THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS APPLICABLE TO THE FUNCTIONING OF THE ASSOCIATION HAS TO BE TESTED IN TERMS OF THE REAL DAY TO DAY ACTIVITIES OF THE OLYMPIC ASSOCIATION. AS CAN BE SEEN FROM THE ABOVE THERE IS NO SUBJECTIVE OPINION EXPRESSED REGARDING THE CHARITABLE ACTIVITIES FOR LAST 63 YEARS . WHATEVER CONCLUDED IS ON TH E BASIS OF THE ACTIVITY CARRIED ON BY THE ASSESSEE BASED ON THE BOOKS OF ACCOUNT A FACT WHICH CANNOT BE DENIED. THEREFORE TO CONCLUDE THAT THE COMMISSIONER HAD GIVEN HIS OPINION ON THE BASIS OF SURMISE, CONJECTURE IS BASELESS. SO ALSO IS THE CONTENTION THA T THE COMMISSIONER HAD NOT APPLIED HIS MIND, HAD PRECONCEIVED NOTION AND MOTIVATED IS BASELESS IN VIEW OF THE ABOVE. 11. THE ELEVENTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED SERIOUS ERROR BY MENTIONING THE AGREEMENT BETWEEN THE APPELLANT WITH THE INCON ASSOCIATES WHICH IS VERY MUCH BENEFICIAL TO THE APPELLANT AND THERE IS NOTHING ADVERSE BROUGHT INTO RECORD FOR WHICH IT CAN BE CONCLUDED THAT SUBSTANTIAL FINANCIAL GAIN HAS BEEN PROVIDED TO THE AUTHOR, FOUNDER OF THE TRUST OR THE PERSONS INTERESTED WITHIN THE MEANING OF SAID SECTION AND FOR THAT MATTER THE CONCLUSION BASED ON SUCH IRRELEVANT APPRECIATION OF FACTS AND LAW IS LIABLE TO BE QUASHED. THE COMMISSIONER OF INCOME TAX, CUTTACK IN PARA 36 TO 41 OF HIS ORDER STATED AS U NDER: 15 ITA NO. 334/CTK/2011 PARA - 38 FROM EXAMINATION OF THE IMPOUNDED DOCUMENTS FOUND THE SURVEY OPERATION ON 28.03.2008 IN THE OFFICE PREMISES OF THE ORISSA OLYMPIC ASSOCIATION IT APPEARS THAT THE HONORARY SECRETARY OF THE ORISSA OLYMPIC ASSOCIATION IS ALSO THE HONORARY SECRE TARY OF ORISSA CRICKET ASSOCIATION. THE ORISSA OLYMPIC ASSOCIATION WHOSE ONLY ACTIVITIES FOR THE LAST 6 DECADES HAVE BEEN TO PROVIDE ON COMMERCIAL LEASE ITS HOUSES, BUILDINGS, PREMISES TO VARIOUS TENANTS HAD ENTERED INTO AN AGREEMENT WITH A PARTNERSHIP FIR M M/S. INCON ASSOCIATES IN WHICH THE OWNERS ARE THE TWO SONS OF THE HONORARY SECRETARY OF ORISSA OLYMPIC ASSOCIATION AS WELL AS ORISSA CRICKET ASSOCIATION. BY SUCH AGREEMENT THE ORISSA OLYMPIC ASSOCIATION HAS LEASED OUT 10,000 SQ. FT. OF SPACE TO M/S INCON ASSOCIATES FOR CONSTRUCTION OF A KALYAN MANDAP NAMED BARABATI PALACE FOR WHICH M/S INCON ASSOCIATES HAS TO PAY MONTHLY RENT OF RS.21,000/ - ONLY TO ORISSA OLYMPIC ASSOCIATION. THE PARTNERSHIP FIRM OWNED BY THE FAMILY MEMBERS OF THE HONORARY SECRETARY OF OR ISSA OLYMPIC ASSOCIATION IS FOUND TO BE USING THIS SPACE OF BARABATI PALACE IN WHICH A KALYAN MANDAP HAS BEEN CONSTRUCTED FOR BUSINESS PURPOSES FROM WHICH NOT LESS THAN RS.80,000/ - PER DAY IS THE RENTAL RECEIPTS FROM THE GENERAL PUBLIC. IN RESPECT OF THE T OTAL EXPENDITURE OF ABOUT RS.84 LAKHS INCURRED BY M/S. INCON ASSOCIATES ON CONSTRUCTION OF THE KALYAN MANDAP THE MONTHLY LEASE RENT OF RS.21,000/ - HAS TO BE ADJUSTED TO THE EXTENT OF 50% TOWARDS COST AND 50% AS MONTHLY RENT IS PAID TO THE ORISSA OLYMPIC AS SOCIATION. PARA - 39 SUCH FINANCIAL TRANSACTIONS AND TRANSFER OF RIGHTS OF IMMOVABLE PROPERTY BELONGING TO ORISSA OLYMPIC ASSOCIATION APPEARS NOT TO HAVE BEEN DONE KEEPING IN VIEW OF THE OBJECTS OF THE ORISSA OLYMPIC ASSOCIATION. IT HAS RATHER BEEN DESIGNED TO FACILITATE SUBSTANTIAL FINANCIAL GAIN TO THE FAMILY MEMBERS OF THE HONORARY SECRETARY OF THE ORISSA OLYMPIC ASSOCIATION WHO HAD ACQUIRED LEASE RIGHTS OF OVER 10,000 SQ.FT. OF PRIME LAND IN THE MIDDLE OF THE CITY AT A MINIMAL LEASE RENT OF RS.21,000/ - P ER MONTH. PARA - 40 IT IS ALSO OBSERVED THAT ORISSA OLYMPIC ASSOCIATION HAD LEASED OUT ITS BARABATI GUEST HOUSE HAVING 16 ROOMS AND MAHATAB HALL TO M/S. INCON ASSOCIATES IN WHICH THE FAMILY MEMBERS OF THE HONORARY SECRETARY ARE OWNERS FOR RENOVATION AND RECONSTRUCTION AT THEIR COST WHICH WOULD BE RECOVERED FROM THE LEASE RENTS PAYABLE BY M/S. INCON ASSOCIATES TO ORISSA OLYMPIC ASSOCIATION. IN RETURN M/S. INCON ASSOCIATES HAD BEEN GIVEN THE RIGHT TO USE SUCH 16 ROOMS AND MAHATAB HALL FOR COMMERCIAL PURPOSES OF LETTING OUT TO THE GENERAL PUBLIC. SUCH TRANSACTIONS WOULD CLEARLY INDICATE THAT THE AFFAIRS OF THE ORISSA OLYMPIC ASSOCIATION HAVE BEEN ADMINISTERED AND S UPERVISED IN A MANNER TO FACILITATE SUBSTANTIAL FINANCIAL GAINS TO THE FAMILY MEMBERS OF THE HONORARY SECRETARY OF THE ORISSA OLYMPIC ASSOCIATION RATHER THAN FOR GENERAL PUBLIC UTILITY. THE FINDINGS IN IMPOUNDED DOCUMENTS ON 28.03.2006 WOULD EQUALLY BE APP LICABLE TO THE FACTS IN THE FINANCIAL YEAR 2008 - 2009. FOR SUCH REASON IT MAY BE STATED THAT 16 ITA NO. 334/CTK/2011 THE ASSOCIATION MEMBERS SPECIFICALLY THE HONORARY SECRETARY CONTINUES TO DERIVE SUBSTANTIAL FINANCIAL GAIN TO HIS FAMILY MEMBERS FROM THE TRANSFER OF PROPERTY RIGHT S OF ORISSA OLYMPIC ASSOCIATION COMPRISING OF 10,000 SQ.FT. SPACE OF LAND IN THE BARABATI STADIUM PREMISES AND ALSO COMPRISING OF BARABATI GUEST HOUSE AND MAHATAB HALL. SUCH ACTIVITIES OF THE ORISSA OLYMPIC ASSOCIATION ONLY INDICATE THAT NO GENUINE PUBLIC CHARITABLE ACTIVITIES HAD BEEN CARRIED OUT IN ALL THESE LAST 63 YEARS. PARA - 41 EVEN IF FOR THE SHAKE OF ARGUMENTS IT MAY BE HELD THAT THE CONSTRUCTION AND THE MAINTENANCE OF THE BARABATI STADIUM IN WHICH THE ORISSA CRICKET ASSOCIATION HAS BEEN PUTTING UP SUBSTANTIAL CIVIL CONSTRUCTION AND OTHER INFRASTRUCTURE CAN LEAD INDIRECTLY TO THE PROMOTION OF THE GAME OF CRICKET IN VIEW OF THE AMENDED PROVISION OF SECTION 2(15) OF THE INCOME TAX ACT, 1961 SUCH ARGUMENTS CAN HAVE NO VALIDITY. THE BARABATI STADIUM OWNE D BY ORISSA OLYMPIC ASSOCIATION HAS BEEN PROVIDED FOR USE BY ORISSA CRICKET ASSOCIATION ON MUTUAL AGREEMENT BASIS ORISSA CRICKET ASSOCIATION HAS BEEN PAYING CERTAIN FIXED SHARE OF THE INCOME GENERATED IN THE HANDS OF THE ORISSA CRICKET ASSOCIATION FROM VAR IOUS CRICKETING ACTIVITIES AND ALSO IN FORM OF PROVIDING CERTAIN FIXED PAYMENTS. IN OTHER WORDS THE PROVIDING OF SERVICES, FACILITIES, AMENITIES OF BARABATI STADIUM OWNED BY THE ORISSA OLYMPIC ASSOCIATION FOR USE BY THE ORISSA CRICKET ASSOCIATION HAS BEEN FOR A FEE OR SERVICE CHARGES OR MONETARY CONSIDERATION. FOR SUCH REASONS EVEN SUCH EXTENDED ARGUMENTS WOULD NOT JUSTIFY THE ACTIVITIES OF THE ORISSA OLYMPIC ASSOCIATION TO BE CHARITABLE IN NATURE WITH IN THE MEANING OF THE SECTION OF 2(15) OF THE INCOME TA X ACT, 1961. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE LD. COMMISSIONER OF INCOME - TAX HAS COMMITTED NO BY MENTIONING THAT THE AGREEMENT BETWEEN THE APPELLANT WITH THE INCON ASSOCIATES IS VERY MUCH BENEFICIAL TO THE APPELLANT IN VIEW OF THE MATERIAL BROU GHT INTO RECORD FROM WHICH IT CAN BE CONCLUDED THAT SUBSTANTIAL FINANCIAL GAIN HAS BEEN PROVIDED TO THE AUTHOR, FOUNDER OF THE TRUST OR THE PERSONS INTERESTED WITHIN THE MEANING OF SAID SECTION. 12. THE TWELFTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER O F INCOME - TAX HAS COMMITTED SERIOUS ERROR BY MENTIONING THAT THE ACTUAL CONTRIBUTION OF THE ASSOCIATION FOR THE DEVELOPMENT OF ANY SPORTS AND GAMES TO THE STANDARD OF OLYMPIC GAMES HAS NEVER BEEN MATERIALIZED IN THE LAST SIX DECADES WHICH IS HIGHLY UNCALLED FOR AND FOR MATTER THE REJECTION OF APPLICATION U/S 12AA OF THE ACT IS LIABLE TO BE DECLARED IS A CASE OF NON - APPLICATION OF MIND AND THE APPLICATION FOR REGISTRATION IS TO BE ALLOWED U/S 12A OF THE ACT. THE COMMISSIONER OF INCOME - TAX, CUTTACK AT PARA - 37 & 40 OF HIS ORDER MENTIONED THAT IN THE LAST 6 DECADES OF OPERATION THERE HAS BEEN HARDLY ANY SUBSTANTIAL CONTRIBUTION OF ORISSA OLYMPIC ASSOCIATION TO DEVELOP THE SPORTING ACTIVITIES RELATING TO DEVELOPMENT OF ANY GAME OR SPORTS OF OLYMPIC STANDARD OR 17 ITA NO. 334/CTK/2011 OF NATIONAL LEVEL. THIS IS ONLY A REMARK MADE BY THE COMMISSIONER ON THE STATE OF AFFAIRS OF THE ASSESSEE WHICH IS CORRECT IN VIEW OF THE MATERIAL SEEN BY HIM. 13. THE THIRTEENTH GROUND OF APPEAL IS THAT, THE LD. COMMISSIONER OF INCOME - TAX HAS NOT CONSIDERED TH E CBDT INSTRUCTION AND 10(23) (C) APPLICATION WHEREIN THE APPELLANTS ACTIVITY HAS BEEN CONSIDERED AND ACCEPTED AS GENUINE ONE AND FOR THAT MATTER THE DENIAL OF REGISTRATION BY THE LD. COMMISSIONER OF INCOME - TAX IS A CASE OF NON - APPLICATION OF MIND AND IS LIABLE TO BE ALLOWED. THE COMMISSIONER OF INCOME TAX, CUTTACK IN PARAS 42 TO 43 OF HIS ORDER STATED AS UNDER: PARA - 42 IN THE WRITTEN SUBMISSION, IT HAS BEEN ARGUED ON BEHALF OF THE ORISSA OLYMPIC ASSOCIATION THAT NOTIFICATION UNDER SECTION 10(23) WAS IS SUED BY THE CBDT ALLOWING EXEMPTION U/S 10(23) FROM 01.04.1974. IN THE VIEWS OF THE LD. COUNSEL FOR SUCH REASON THE APPLICATION FILED ON APRIL, 1997 U/S 12A OF THE INCOME TAX ACT, 1961 SHOULD BE ALLOWED. SUCH A REASON HAS NO RELEVANCE. SUBSTANTIVE CHANGES HAVE BEEN MADE IN THE STATUTORY PROVISIONS OF THE SECTION 2(15) OF THE INCOME TAX ACT, 1961 UNDER WHICH ANY ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY WHICH INVOLVES ANY COMMERCIAL ACTIVITIES IN TRUE SENSE WOULD NOT BE ACTIVITIES FOR CHARITABLE PURPOS E. PARA - 43 THE LD. COUNSEL HAD MADE REFERENCE TO THE CBDT CIRCULAR NO. 395 DATED 24.09.1984 IN WHICH PROMOTION OF SPORTS AND GAMES HAS BEEN HELD TO BE ACTIVITIES OF CHARITABLE PURPOSE WITHIN THE MEANING OF THE SECTION 2 (15) OF THE INCOME TAX ACT, 1961. I N THE OPINION OF THE LD. COUNSEL THE CONTENT OF SUCH CIRCULAR MAY BE APPLICABLE TO HOLD THE ACTIVITIES OF THE ORISSA OLYMPIC ASSOCIATION FOR ALL THE PAST PERIODS FROM 1997 - 1998 TO 2008 - 2009 TO BE CHARITABLE IN NATURE. HOWEVER, THIS CIRCULAR ONLY STATES TH AT ASSOCIATIONS WHICH ARE NOT NOTIFIED U/S 10(23 C) CAN CLAIM EXEMPTION U/S 11. THIS CIRCULAR DOES NOT SAY THAT ALL KINDS OF ASSOCIATION INVOLVED IN A SPORTS ACTIVITIES WOULD ENTITLED TO REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961, ONCE THE APPLICATIO N IS FILED. FURTHER VERY CONCEPT OF CHARITABLE PURPOSE HAS GONE DRASTIC CHANGES AFTER AMENDMENT OF THE SECTION 2 (15) OF THE INCOME TAX ACT, 1961. UNDER THE AMENDED PROVISION THE COMPETENT INCOME TAX AUTHORITIES WHILE EXAMINING THE ADMISSIBILITY OR OTHERWI SE OF AN APPLICATION FILED U/S 12A OF THE INCOME TAX ACT, 1961 HAVE TO BE GUIDED BY THE CBDT INSTRUCTION 1981 ISSUED IN APRIL, 2000 AND EXAMINE THE GENUINENESS OF THE ACTIVITIES OF THE ASSOCIATION AND THE IMPLICATION OF THE TERM CHARITABLE PURPOSE. AS PER THE VARIOUS MATERIAL FACTS ON RECORDS THE FUNCTIONING OF THE ORISSA OLYMPIC ASSOCIATION ARE FOUND NOT TO BE CHARITABLE IN NATURE. 18 ITA NO. 334/CTK/2011 THE COMMISSIONER OF INCOME - TAX, HAS GIVEN SUFFICIENT REASON FOR NOT CONSIDERING CBDT INSTRUCTION AFTER APPLYING HIS MIND. T HEREFORE, THE ORDER OF CIT DOES NOT SUFFER FROM ANY ERROR. 14. THE FOURTEENTH GROUND OF APPEAL IS THAT, THE APPELLANT MAY ADD, DELETE, ALTER OR MODIFY ANY OF THE GROUNDS WITH THE LEAVE OF THE HONBLE TRIBUNAL AT THE TIME OF HEARING OF THE MATTER. IT IS SUBMITTED THAT, THIS IS A GENERAL GROUND AND DOES NOT REQUIRE ANY COMMENT. FULFILLING THE CRITERIA OF CHARITABLE PURPOSE IS THE FUNDAMENTAL PREREQUISITE FOR THE PURPOSES OF INCOME TAX REGISTRATION AND AVAILING OF THE EXEMPTIONS U/S 11 OF THE INCOME TAX ACT.1961. IN THE CASE OF CIT VS. SARVODAYA LLAKKIYA PANNAI [2012] 343 ITR 300(MAD) THE HONBLE MADRAS HIGH COURT HELD THAT IN ORDER TO AVAIL THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE INCOME - TAX TAX ACT, 1961, A TRUST CAN MAKE AN APPLICATION TO T HE COMMISSIONER FOR REGISTRATION UNDER SECTION 12A OF THE INCOME - TAX ACT, 1961. ON RECEIPT OF THE SAID APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION, THE COMMISSIONER SHOULD SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR I NSTITUTION. IN ORDER TO SATISFY HIMSELF, THE COMMISSIONER MAY ALSO MAKE SUCH ENQUIRY AS HE MAY DEEM NECESSARY IN THAT BEHALF. IN THE EVENT THE COMMISSIONER SATISFIES HIMSELF THAT THE TRUST IS ENTITLED TO REGISTRATION KEEPING IN MIND THE OBJECTS, SHALL GRAN T REGISTRATION IN WRITING IN TERMS OF SECTION I2AA(1)(B)(I) OF THE INCOME - TAX ACT, 1961. IN THE EVENT THE COMMISSIONER IS NOT SATISFIED, HE SHALL REFUSE SUCH REGISTRATION IN TERMS OF SECTION 12AA(1)(B)(II) OF THE INCOME - TAX ACT, 1961. FURTHER IN THE CAS E OF HIRALAL BHAGWATI V. CIT [2000] 246 ITR 188 THE HONBLE GUJRAT HIGH COURT HELD IN THE CONTEXT OF SECTION 12AA REGISTRATION THAT REGISTRATION OF THE CHARITABLE TRUST UNDER SECTION 12AA OF THE ACT IS NOT AN IDLE OR EMPTY FORMALITY; THE COMMISSIONER OF IN COME - 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. FOR THE R EASONS STATED ABOVE IT IS REQUESTED THAT THE ORDER OF THE CIT CUTTACK IS A WELL REASONED AND SPEAKING ORDER WHICH MAY KINDLY BE CONFIRMED IN VIEW OF THE FOLLOWING DECISIONS: 1. HONBLE ITAT, CHENNAI BENCH IN THE CASE OF TAMILNADU CRICKET ASSOCIATION VS. DIT (EXEMPTION) REPORTED IN 32 TAXMANN.COM 50 (CHENNAI TRIB) 2013. 19 ITA NO. 334/CTK/2011 2. HONBLE ITAT, PANAJI BENCH IN THE CASE OF ENTERTAINMENT SOCIETY OF GOA VS. CIT REPORTED IN (2013) 23 ITR (TRIB) 635 (PANAJI) 3. HONBLE ITAT, MUMBAI BENCH B IN THE CASE OF MUMBAI CRICKET ASSOCIATION VS. DIT (EXEMPTION), MUMBAI REPORTED IN [2012] 24 TAXMANN.COM 99(MUM) 4. HONBLE ITAT, HYDERABAD BENCH IN THE CASE OF OPERATION EYESIGHT UNIVERSAL VS. DIRECTOR OF INCOME - TAX (EXEMPTION) HYDERABAD REPORTED IN 142 LTD 641, HYDERABAD 1 IN FACT IN A CASE WHERE REGISTRATION WAS GRANTED, THE SAME WAS CANCELLED BY THE DIT(EXEMPTIONS) U/S 12AA(3) AND HON'BLE CHENNAI BENCH HAS UPHELD THE ORDER OF DIT(EXEMPTION) CANCELLING THE REGISTRATION U/S 12A OF THE ACT. IN FACT THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THAT OF TAMILNADU CRICKET ASSOCIATION EXCEPT THAT IN ASSESSEES CASE REGISTRATION HAS NOT BEEN GRANTED. SIMILARLY, HONBLE ITAT PANAJI BENCH IN THE CASE OF ENTERTAINMENT SOCIETY OF GOA VS. CIT IN ITA NO. 90/PNJ/20L2 DATED 05.04.2013 RE PORTED IN (2013) 23 ITR (TRIB) 635(PANAJI) , ALSO UPHELD CANCELLATION OF REGISTRATION BY THE CIT U/S 12AA(3). THE HONBLE BENCH AT PARA - 20 HELD AS UNDER: THE CASE OF THE ASSESSEE IS DIFFERENT. THE CIT ISSUED NOTICE TO THE ASSESSEE AS THE DEFINITION OF CHARITABLE PURPOSE UNDERGOES A CHANGE BY THE FINANCE ACT, 2008. WE HAVE ALREADY HELD THAT IT IS A CASE WHERE THE ELIGIBILITY OF THE ASSESSEE TO GET THE REGISTRATION UNDERGOES A CHANGE DUE TO THE FACT THAT THE ASSESSEE NO MORE REMAINS BEING ESTABLISHED FOR CHARITABLE PURPOSE AFTER THE AMENDMENT BEING MADE IN THE DEFINITION OF CHARITABLE PURPOSE GIVEN U/S 2(15) OF THE INCOME - TAX ACT. THE ASSESSEE WHEN APPLIED FOR REGISTRATION WAS VERY MUCH A CHARITABLE INSTITUTION AS PER THE DEFINITION OF THE CHARITABLE PURP OSE GIVEN U/S 2(15) AT THAT TIME, THEREFORE ENTITLED FOR THE REGISTRATION U/S 12A. ONCE, IN OUR OPINION, THE ASSESSEE NO MORE REMAINS BEING ESTABLISHED FOR CHARITABLE PURPOSE AFTER THE INSERTION OF PROVISO IN SECTION 2(15), THE ELIGIBILITY OF THE ASSESSEE FOR REGISTRATION STANDS CANCELLED. THE CIT IS THE LAW IMPLEMENTING AUTHORITY U/S 12A AND THEREFORE, IT HAS POWER TO RECTIFY ITS ORDER BY CANCELLING/WITHDRAWING THE REGISTRATION BY RECTIFYING THE ORDER PASSED U/S 12A FROM THE DATE WHEN THE ASSESSEE NO MORE REMAINS TO BE CHARITABLE INSTITUTION AS IS HELD BY US IN THE PRECEDING PARA. IN OUR OPINION, A LEGAL MISTAKE HAS OCCURRED IN THE ORDER OF THE CIT DTD. 13.04.2006 FROM THE DATE WHEN THE PROVISO UNDER SECTION 2(15) HAS BEEN INSERTED AS THE INSTITUTION NO MOR E REMAINS TO HAVE BEEN CREATED/ESTABLISHED FOR CHARITABLE PURPOSES OR RELIGIOUS PURPOSES. IT IS NOT THE CASE OF THE ASSESSEE INSTITUTION THAT IT HAS BEEN CREATED OR ESTABLISHED FOR RELIGIOUS PURPOSES. IF THE REGISTRATION WILL REMAIN CONTINUED, THE PURPOSE OF AMENDMENT MADE IN SECTION 2(15) WILL BE DEFEATED AND INJUSTICE WILL BE CAUSED TO THOSE INSTITUTIONS HAVING THE SIMILAR OBJECTS AS THE ASSESSEE HAS BUT CREATED OR 20 ITA NO. 334/CTK/2011 ESTABLISHED AFTER THE AMENDMENT IN SECTION 2(15) OF THE INCOME - TAX ACT. WE CANNOT READ THE PROVISO IN THIS MANNER. (COPY OF THE ORDER IS ENCLOSED) SIMILAR VIEW WAS ALSO TAKEN BY THE HONBLE ITAT, MUMBAI BENCH B IN THE CASE OF MUMBAI CRICKET ASSOCIATION VS. DIT (EXEMPTION), MUMBAI REPORTED IN [2012] 24 TAXMANN.COM 99(MUM) WHEREIN DIT (EXEMP. ) HAS CANCELLED THE REGISTRATION U/S 12A OF THE ACT AND THE HONBLE TRIBUNAL, MUMBAI B BENCH UPHELD HIS ORDER (COPY ENCLOSED). IN THE CASE OF OPERATION EYESIGHT UNIVERSAL VS. DIRECTOR OF INCOME - TAX (EXEMPTION) HYDERABAD REPORTED IN 142 ITD 641, HYDERABAD TRIBUNAL AT PARA - 31 HELD AS UNDER. SECTION 13(1)(C) PROVIDES THAT WHERE PART OF THE INCOME OF CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION ENSURES OR IS USED OR APPLIED DIRECTLY FOR THE BENEFIT OF THOSE PERSONS SPECIFIED IN SECTION 13(3) SUCH A TRUST OR INSTITUTION SHALL FORFEIT THE EXCLUSION UNDER SECTION 11. EVEN IF ONLY SMALL PORTION OF THE INCOME ENSURES OR IS USED OR APPLIED FOR THE BENEFIT OF A PERSON MENTIONED 13(3); THE ENTIRE INCOME OF THE TRUST IS DENIED THE EXCLUSION EXCEPT IN THE CASE PROVI DED IN SECTION 13(4). IN THE CASE OF APPELLANT SUBSTANTIAL FINANCIAL GAIN HAS PASSED ON FROM THE APPELLANT TO THE RELATIVES OF THE SECRETARY OF THE ASSOCIATION. AS DISCUSSED BY THE CIT IN HIS ORDER AND IN THIS SUBMISSION WHILE DISCUSSING GROUND 11. FOR THE REASONS STATED ABOVE, IT IS SUBMITTED THAT THIS IS A CASE WHERE THE CIT CUTTACK AFTER CONSIDERING THE FACTS AND CIRCUMSTANCE OF THE CASE, HAS REJECTED THE APPLICATION OF THE ASSESSEE IN VIEW OF THE IRREGULARITIES POINTED OUT IN THE FINANCIAL AFFAIRS O F THE ASSOCIATION AND HELD THAT THE ASSOCIATION IS NOT ELIGIBLE FOR REGISTRATION U/S 12AA OF THE INCOME - TAX ACT 1961. IT IS PRAYED TO CONFIRM THE ORDER OF CIT CUTTACK, IN TOTO AND DISMISS THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF CIT PASSED U/S 12A. THE ASSESSEE SOCIETY WAS INCORPORATED UNDER THE SOCIETIES REGISTRATION ACT, 1860 AND REGISTERED WITH REGISTRAR UNDER NO. 34 4 /4 2 OF 1960 - 61 ON 24.2.1961 AS PER THE CERTIFICATE ISSUED BY THE REGISTRAR OF SOCIETIES, MR. B. SIVARAMAN, COPY OF WHICH IS PLACED AT PG. 1 OF THE PAPER BOOK WITH THE FOLLOWING AIMS AND OBJECTS : 3. THE OBJECTS OF THE ASSOCIATION ARE : A) TO AFFILIATE ITSELF TO THE INDIAN OLYMPIC ASSOCIATION AND TO ENFORCE ALL RULES AND REGULATIONS OF THE IOA AND TO DO EVERYTHING THAT MAY BE NECESSARY OR EXPEDIENT 21 ITA NO. 334/CTK/2011 TO KEEP THE OLYMPIC MOVEMENT COMPLETELY INDEPENDENT, AUTONOMOUS AND ENTIRELY FREE FROM ALL POL ITICAL, RELIGIOUS OR COMMERCIAL INFLUENCES WITHIN ITS JURISDICTION; B) TO FURTHER THE CAUSE OF THE OLYMPIC MOVEMENT AND OF AMATEUR SPORTS AND TO GUARD AND ENFORCE RULES OF AMATEURISM; C) TO BE THE OFFICIAL ORGANIZATION IN COMPLETE AND SOLE CHARGE OF OLYMPIC MATT ERS IN THE STATE OF ORISSA AND IN SUCH CAPACITY HAVE THE CONTROL, SUPERVISION, REGULATION OR ENCOURAGE IN INDIA THE GAMES AND SPORTS AS MENTIONED HEREUNDER: (I) HOCKEY, (II) VOLLEY BALL, (III) BASKET BALL, (IV) FOOTBALL, (V) CRICKET, (VI) TENNIS, (VII) TAB LE TENNIS, (VIII) BADMINTON, (IX) SWIMMING, (X) ATHLETICS, (XI) WRESTLING, (XII) KABBADI, (XIII) WEIGHT LIFTING, (XIV) GYMNASTICS, (XV) BOXING, (XVI) CYCLING, (XVII) KHO KHO, (XVIII) JUDO, (XIX) RIFLE SHOOTING, (XX) ARCHERY AND (XXI) HAND BALL. D) TO HAVE FUL L AND COMPLETE JURISDICTION OVER ALL MATTERS PERTAINING TO THE PARTICIPATION OF ORISSA IN THE NATIONAL AND ANY OTHER GAMES, HELD UNDER THE INDIAN OLYMPIC ASSOC IA TION AND BY OTHER ALL INDIA FEDERATIONS WHICH ARE NAMED AND NOTIFIED BY GOVERNMENT OF INDIA VI DE NOTIFICATION NO. F197/7/70 - IT (AI) DT. 20.1.1973 OR ON FOREIGN TOURS RELATING TO THE GAMES AND SPORTS REFERRED IN ARTICLE 3(C); E) TO DIFFUSE USEFUL KNOWLEDGE OF THE SPORTS AND GAMES NAMED IN THE ARTICLE 3(C) AND PARTICULARLY OF THOSE WHICH COME WITHIN THE OLYMPIC PROGRAMME. F) TO FOSTER AND DEVELOP KNOWLEDGE OF THE SPORTS AND HEALTH; G) TO ESTABLISH LIBRARY AND READING ROOMS WHERE ONE CAN READ BOOKS, JOURNALS AND PAPERS ON SPORT AND HEALTH; H) TO PROMOTE, ENCOURAGE AND IMPROVE GAMES AND SPORTS LISTED IN THE ARTICLE 3(C) WITH SPECIAL ATTENTION TO WHOSE WHICH ARE INCLUDED IN THE OLYMPIC PROGRAMME; I) TO PROCURE FROM THE GOVERNMENT OF ORISSA, THE ORISSA COUNCIL OF SPORTS AND SUCH OTHER BODIES SUCH FACILITIES, AS MAY BE NECESSARY FOR THE ACHIEVEMENT OF ITS OBJECTS; J) TO BE RESPONSIBLE FOR : (I) THE OLYMPIC FLAG DAY COLLECTION ARRANGEMENTS IN ORISSA. (II) ORGANIZING A STATE SPORTS FESTIVAL EVERY YEAR. K) TO SIMULATE INTEREST OF THE PEOPLE OF THE STATE IN THE PROMOTION OF THE SPORTS AND GAMES ENLISTED IN ARTICLE 3(C) WITH SPECIAL ATTENTION TO THOSE WHICH ARE INCLUDED IN THE OLYMPIC PROGRAMME AND TO THAT END THE FORMATION OF A STATE SPORTS CONTROLLING BODY F OR ITEMS INCLUDED IN THE OLYMPIC PROGRAMME AND ALSO THE FORMATION OF OLYMPIC ASSOCIATION IN EACH DISTRICT, SUB - DIVISION, TALUK AND PANCHAYAT; L) TO GIVE FINANCIAL ASSISTANCE AS AND WHEN POSSIBLE TO ITS AFFILIATED MEMBERS IN NEED OF SUCH HELP; M) TO DIRECTLY MANA GE IF NECESSARY, ANY GAME OR SPORTS FROM THE LIST MENTIONED IN ARTICLE 3(C) AND FOR WHICH THERE MAY NOT BE EXISTING AND AFFILIATED ASSOCIATION; N) TO FOSTER THE SPIRIT OF SPORTSMANSHIP AMONGST STUDENTS AND MEMBERS OF AFFILIATED ORGANIZATIONS; 22 ITA NO. 334/CTK/2011 O) TO FRAME, ADD, A LTER, MAINTAIN AND ENFORCE RULES, BYELAWS AND REGULATIONS IN PURSUANCE AND SUBJECT TO THIS MEMORANDUM OF ASSOCIATION FOR THE CONTROL AND GOVERNANCE OF THE GAMES AND SPORTS MENTIONED IN ARTICLE 3(C) AND RUN UNDER THE OLYMPIC PROGRAMME IN ORISSA AND TO MAINT AIN DISCIPLINE. P) TO TAKE SUCH ACTION AS MAY BE NECESSARY TO COORDINATE THE ACTIVITIES OF ITS MEMBERS AND AFFILIATED ORGANIZATIONS IN RELATION TO THIS ASSOCIATION OR AMONGST THEMSELVES; 4. FOR THE ATTAINMENT OF THE AFORESAID OBJECTS, THE ASSOCIATION MAY A) E DIT, COMPILE, PRINT AND PUBLISH ANY NEWSPAPERS, PERIODICALS OR LEAFLETS; B) E STABLISH OR SUPPORT OR ADD IN THE ESTABLISHMENT OR SUPPORT OF ANY OTHER ASSOCIATION HAVING SIMILAR OBJECTS IN THE DISTRICT, SUB - DIVISION, TALUK AND PANCHAYAT LEVELS; C) E NTER INTO AGREEMENT WITH OTHER ASSOCIATIONS OR ORGANIZATIONS FOR FULFILMENT OF ITS OBJECTS; D) A SSIST, SUBSCRIBE, COOPERATE WITH, AFFILIATE OR GIVE AFFILIATION TO OR AMALGAMATE WITH ANY OTHER INSTITUTION, SOCIETY OR ASSOCIATION WHETHER INCORPORATE TO OR REGISTERED OR NOT, HAVING OBJECTS ALTOGETHER OR IN PART SIMILAR TO IT; E) A CCEPT OR PROCURE SUBSCRIPTIONS, DONATIONS OR OTHER CONTRIBUTIONS ON SUCH TERMS AS IT MAY CONSIDER REASONABLE; F) P ROCURE, COLLECT AND ACCEPT GIFTS AND ENDOWMENTS ON SUCH TERMS AS IT MAY CONSID ER REASONABLE; G) B ORROW OR RAISE MONEY FOR THE PURPOSE OF THE ASSOCIATION INCLUDING THE ISSUE OF OR UPON BONDS, DEBENTURES, BILLS OF EXCHANGE, PROMISSORY NOTES OR OTHER OBLIGATIONS OR SECURITIES OF THE ASSOCIATION; H) A CQUIRE MOVEABLE OR IMMOVEABLE PROPER TIES ON BEHALF OF THE ASSOCIATION AND SELL, LEASE, EXCHANGE, DISPOSE OFF OR OTHERWISE DEAL WITH ALL OR ANY PART OF SUCH PROPERTIES; I) O RGANIZE COACHING SCHEMES FOR THE BENEFIT OF ALL PLAYERS, SPORTSMAN AND ATHLETES OF THE STATE OF ORISSA AND TO GIVE TRAIN ING IN VARIOUS GAMES AND SPORTS AND TO IMPART PHYSICAL EDUCATION; J) T O DO ALL OTHER THINGS INCLUDING THE BUILDING UP OF A STADIA FOR GAMES AND SPORTS MENTIONED IN ARTICLE 3(C) WITHIN ORISSA AS MAY BE NECESSARY OR EXPEDIENT TO PROMOTE THE DEVELOPMENT OF AM ATEUR SPORTS AND GAMES IN ORISSA AND FOR THE CONDUCT OF ITS BUSINESS, AND GENERALLY TO DO ALL SUCH THINGS AS MAY BE NECESSARY OR EXPEDIENT, LAWFUL, INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF THE FOREGOING OBJECTS OR ANY OF THEM. 5 . THE INCOME AND PROPERTY OF THE ASSOCIATION HOWEVER DERIVED SHALL BE APPLIED SOLELY TOWARDS THE PROMOTION OF ITS OBJECTS AS SET FORTH IN THIS MEMORANDUM OF ASSOCIATION AND NO PORTION THEREOF SHALL BE PAID OR TRANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDENDS, BONUS OR OTHERWISE BY WAY OF PROFIT TO ITS MEMBERS, PROVIDED THAT NOTHING THEREIN SHALL PREVENT THE PAYMENT OF REMUNERATION TO ITS OFFICERS OR STAFF OR OTHER PERSONS IN RETURN FOR ANY SERVICES AC TUALLY RENDERED BY THEM TO IT. 23 ITA NO. 334/CTK/2011 THE ASSESSEE HAS APPLIED FOR REGISTRATION U/S 12A IN APRIL, 1997 AS PER THE ORDER OF CIT. THE COPY OF THE APPLICATION WAS NOT FILED BY THE LD. AR BEFORE US. THE ASSESSEE CLAIMED THAT HE HAS FILED COPY OF THE INCOME & EXPENDITURE AS WELL AS THE BALANCE SHEET BEFORE CI T FROM FINANCIAL YEAR ENDED 31.3.1995 TILL 31.3.2008, COPIES OF WHICH WERE ALSO PLACED BEFORE US. ON GOING THROUGH THE INCOME AND EXPENDITURE ACCOUNT WE NOTED THAT T HE MAIN SOURCE OF INCOME OF THE ASSESSEE IS NOT ONLY THE MEMBERSHIP FEES BUT THE ASSESSEE HAS INCOME FROM DISPLAY OF ADVERTISEMENT, AFFILIATION FEES, RENTAL INCOME, ELECTRICITY AND WATER CHARGES, RECEIPT FROM TENANTS, INCOME FROM LEASE COCONUT S, FISH , DECORATION, RENT OF FURNITURE. ASSESSEE ALSO GOT GRANT FROM GOVERNMENT OF ODISHA THROUGH DI RECTOR OF SPORTS, STADIUM ADVERTISEMENT , ADMINISTRATIVE CHARGES FROM ORISSA CRICKET ASSOCIATION, SHARE MONEY FROM ORISSA CRICKET ASSOCIATION, ROYALTY INCOME AND CASUAL RENTAL INCOME. THE ASSESSEE HAS CONDUCTED SEVERAL STATE, NATIONAL AND INTERNATIONAL GAM ES AT BARABATI STADIUM INCLUDING CRICKET TOURNAMENT. ORISSA HOCKEY ASSOCIATION, ORISSA ARCHERY ASSOCIATION AND OTHER SUCH ASSOCIATIONS HAVE SUCCESSFULLY ORGANIZED THEIR CHAMPIONSHIP TOURNAMENTS, COMPETITIONS AT BARABATI STADIUM. THE ASSESSEE IS THUS COND UCTING MATCHES. IT IS NOT DENIED THAT TICKETS ARE SOLD OR THE STADIUM OWNED BY THE ASSESSEE IS LET OUT. THE ASSESSEE WAS RECO GNIZED U/S 10(23) FROM 1.4.1974. 5.1 THE ASSESSEE MADE APPLICATION U/S 12A FOR THE FIRST TIME FOR GRANT OF REGISTRATION W.E.F. 1 .4.1997. THE PROVISIONS REGARDING REGISTRATION AND PROCEDURE FOR REGISTRATION ARE GIVEN UNDER THE INCOME TAX ACT, 1961 U/S 12A, 12AA AND RULE 17 WHICH ARE REPRODUCED AS UNDER : SECTION 12 A THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY: - 24 ITA NO. 334/CTK/2011 (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF T HE TRUST OR INSTITUTION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER BEFORE THE 1ST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTIO N IS REGISTERED UNDER SECTION 12AA] : PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IS MADE AFTER THE EXPIRY OF THE PERIOD AFORESAID, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUS T OR INSTITUTION, - (I) FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION IF THE COMMISSIONER IS, FOR REASONS TO BE RECORDED IN WRITING, SATISFIED THAT THE PERSON IN RECEIPT OF THE INCOME WAS PREVENTED FROM MAKING THE APPL ICATION BEFORE THE EXPIRY OF THE PERIOD AFORESAID FOR SUFFICIENT REASONS; (II) FROM THE FIRST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION IS MADE, IF THE CHIEF COMMISSIONER OR COMMISSIONER IS NOT SO SATISFIED; PROVIDED FURTHER THAT THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IN RELATION TO ANY APPLICATION MADE ON OR AFTER THE 1 ST DAY OF JUNE, 2007. (A) 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 T HE PRESCRIBED FORM AND MANNER TO THE COMMISSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUTION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO THE PROVISIONS 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 AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB SECTION (2) OF SECTION 288 A ND THE PERSON IN RECEIPT OF THE 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 ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESC RIBED. (C) [***] (2) WHERE AN APPLICATION HAS BEEN MADE ON OR AFTER THE 1 ST DAY OF JUNE, 2007 THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH YEAR IN WHICH SUCH APPLICATION IS MADE PROCEDURE FOR REGISTRATION SECTION 12 AA 12AA. (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB - SECTION (1)] OF SECTION 12A, SHALL 25 ITA NO. 334/CTK/2011 (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTIO N 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 O R 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 O F 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 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 COMMISSIONER AND THE 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) 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 1 2A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996)]] AND SUBSEQUENTLY THE 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 RE ASONABLE OPPORTUNITY OF BEING HEARD.] APPLICATION FOR REGISTRATION OF CHARITABLE OR RELIGIOUS TRUSTS, ETC. 17A. AN APPLICATION UNDER [CLAUSE (AA) OF SUB - SECTION (1)] OF SECTION 12A FOR REGISTRATION OF A CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION SHALL BE MADE IN DUPLICATE IN FORM NO. 10A AND SHALL BE ACCOMPANIED BY THE FOLLOWING DOCUMENTS, NAMELY : (A) WHERE THE TRUST IS CREATED, OR THE INSTITUTION IS ESTABLISHED, UNDER AN INSTRUMENT, THE INSTRUMENT IN ORIGINAL, TOGETHER WITH ONE COPY THEREOF; AND WHERE THE TRUST IS CREATED, OR THE INSTITUTION IS ESTABLISHED, OTHERWISE THAN UNDER AN INSTRUMENT, THE DOCUMENT E VIDENCING THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION, TOGETHER WITH ONE COPY THEREOF : 26 ITA NO. 334/CTK/2011 PROVIDED THAT IF THE INSTRUMENT OR DOCUMENT IN ORIGINAL CANNOT CONVENIENTLY BE PRODUCED, IT SHALL BE OPEN TO THE [***] COMMISSIONER] TO ACCEPT A C ERTIFIED COPY IN LIEU OF THE ORIGINAL; (B) WHERE THE TRUST OR INSTITUTION HAS BEEN IN EXISTENCE DURING ANY YEAR OR YEARS, PRIOR TO THE FINANCIAL YEAR IN WHICH THE APPLICATION FOR REGISTRATION IS MADE, TWO COPIES OF THE ACCOUNTS OF THE TRUST OR INSTITUTION RELATING TO SUCH PRIOR YEAR OR YEARS (NOT BEING MORE THAN THREE YEARS IMMEDIATELY PRECEDING THE YEAR IN WHICH THE SAID APPLICATION IS MADE) FOR WHICH SUCH ACCOUNTS HAVE BEEN MADE UP.] 5.2 FROM THE PROVISION OF THE SECTION 12A, IT IS CLEAR THAT THIS SECT ION STATES THAT PROVISION OF SECTION 11 AND 12 ARE NOT APPLICABLE UNLESS CONDITION FOR REGISTRATION OF THE TRUST OR INSTITUTION IS FULFILLED. SECTION 12 (1) (A) REQUIRES MAKING OF AN APPLICATION FOR REGISTRATION; IN THE PRESCRIBED FORM AND IN THE PRESCRIBE D MANNER TO THE COMMISSIONER BEFORE THE EXPIRY OF 01 YEAR FROM THE DATE OF THE CONSTITUTION OF THE TRUST OR INSTITUTION. IN CASE APPLICATION IS MADE AFTER THE EXPIRY OF THE PERIOD OF 01 YEAR THE PROVISIONS OF SECTION 11 & 12 ARE NOT APPLICABLE. FOR AN APPL ICATION MADE PRIOR TO 1 ST DAY OF JUNE 2007, THE COMMISSIONER HAS THE POWER TO CONDONE THE DELAY, IF HE SATISFIED THAT THE PERSON WAS PREVENTED FROM MAKING THE APPLICATION BEFORE THE EXPIRY OF AFORESAID PERIOD FOR SUFFICIENT REASON. SUCH TRUST OR INSTITUTIO N HAS ALSO TO GET ITS ACCOUNT AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SECTION 288 (2) IN THE CASE THE TOTAL INCOME OF THE TRUST OR INSTITUTION WITHOUT CONSIDERING THE PROVISION SECTION 11 & 12 EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX IN ANY PREVIOUS YEAR. SUCH TRUST OR INSTITUTION WAS BOUND TO FURNISH SUCH AUDIT REPORT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT. EXPLANATION TO SECTION 288 (2) DEFINES ACCOUNTANT TO MEAN A CHARTERED ACCOUNTANT AND WHO IS CO MPETENT TO ACT AS AN AUDITOR U/S 226 (2) OF THE COMPANYS ACT. 5 . 3 THE PROVISIONS OF SECTION 11 ARE APPLICABLE ONLY TO THE PERSONS DERIVING INCOME FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THEY ARE NOT APPLICABLE IF THE PERSON IS NOT IN RECEIPT OF THE INCOME DERIVED 27 ITA NO. 334/CTK/2011 FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. SECTION 12 AA LAYS DOWN THE PROCEDURE FOR THE REGISTRATION OF SUCH TRUST OR INSTITUTION. RULE 17A OF THE IT ACT LAYS DOWN HOW AN APPLICATION FOR REGISTRATION O F CHARITABLE OR RELIGIOUS TRUST IS TO BE MADE. IT ALSO PRESCRIBES FORM NO. 10A AND ALSO REQUIRES THAT THE APPLICATION FOR REGISTRATION CAN BE MADE ONLY BY A CHARITABLE OR RELIGIOUS TRUST OR INSTITUTION. THIS RULE ALSO PRESCRIBES THE VARIOUS DOCUMENTS WHICH ARE TO BE ENCLOSED ALONG WITH THE APPLICATION. THE COPY OF THE INSTRUMENT BY WHICH THE TRUST IS CREATED OR INSTITUTION IS ESTABLISHED HAS TO BE FILED. IF THE TRUST OR INSTITUTION WAS IN EXISTENCE PRIOR TO THE YEAR IN WHICH THE APPLICATION IS MADE, TWO COP IES OF THE ACCOUNTS OF THE TRUST SUCH PRIOR YEAR BEING NOT MORE THAN 3 YEARS HAS TO BE FILED. ACCOUNTS IN OUR OPINION HERE MEANS THE AUDITED ACCOUNTS IN CASE THE PROVISION OF SECTION 12 (1) (B) ARE APPLICABLE. 5 . 4 THEREFORE, IN OUR OPINION, IT IS ESSENTI AL FOR THE ASSESSEE FOR THE PURPOSE OF THE REGISTRATION UNDER THE INCOME TAX ACT TO PROVE THAT IT HAS BEEN ESTABLISHED FOR CHARITABLE OR RELIGIOUS PURPOSE. IT IS NOT THE CASE OF THE ASSESSEE SOCIETY THAT IT IS A RELIGIOUS SOCIETY. SECTION 2(15) DEFINES THE CHARITABLE PURPOSE. THIS SECTION WAS AMENDED BY THE FINANCE ACT 2008. CIT TOOK THE VIEW THAT THE AMENDING PROVISO TO SEC. 2(15) WOULD BE APPLICABLE TO THE ACTIVITIES OF THE ASSOCIATION FOR THE EARLIER FINANCIAL YEARS 1997 - 98 TO 2007 - 08. THE ASSESSEE WAS PROVIDING CERTAIN SERVICES TO THE GENERAL PUBLIC OVER THE LAST 10 YEARS. THE ONLY ACTIVITY THE ASSESSEE HAS BROADLY DONE IS COMMERCIAL EXPLOITATION OF ITS IMMOVEABLE PROPERTIES IN THE FORM OF BARABATI STADIUM, SHOP COMPLEXES NO. 1 & 2, BANK BUILDING COMP LEX, TICKET COUNTERS, SELF - CONSTRUCTED BUILDING, BARABATI PALACE, BARABATI GUEST HOUSE GIVEN TO VARIOUS TENANTS UNDER COMMERCIAL LEASE UNDER WHICH MONTHLY LEASE RENTAL ALONGWITH ELECTRICITY AND WATER CHARGES ARE BEING RECEIVED. SUBSTANTIAL PORTION OF SUCH LEASE RENT FROM EXPLOITATION OF ITS COMMERCIAL ASSETS ARE CLAIMED TO BE UTILIZED FOR ESTABLISHMENT EXPENSES AND OTHER EXPENSES LIKE MAINTENANCE OF ITS COMMERCIAL ASSETS COMPRISING OF 28 ITA NO. 334/CTK/2011 IMMOVEABLE PROPERTY OF BARABATI STADIUM AND OTHER ALLIED BUILDINGS. OUT OF THE SUM REALIZED, THE ACTUAL AMOUNT OF EXPENDITURE CLAIMED TO HAVE BEEN INCURRED AS GRANT TO VARIOUS SPORTS ASSOCIATION, ATHLETIC ASSOCIATION, AMATEUR ATHLETIC ASSOCIATION ARE FOUND TO BE INSIGNIFICANT. CIT MADE COMPARATIVE ANALYSIS OF THE LAST 7 YEARS OF THE RECEIPT OF THE BUSINESS OF LEASING OUT OF IMMOVEABLE AND MOVEABLE PROPERTIES WHICH ARE SUMMARIZED AS UNDER : FINANCIAL YEAR COMMERCIAL LEASE RENT RECEIVED (RS.) FUNDS CLAIMED TO HAVE BEEN UTILIZED FOR GIVING GRANT TO SPORTS ASSOCIATION (RS.) 2001 - 2002 57,91,198 18,53,779 2002 - 2003 55,64,616 14,94,222 2003 - 2004 60,87,277 14,67,951 2004 - 2005 62,37,630 14,10,230 2005 - 2006 60,92,606 18,00,683 2006 - 2007 87,58,063 19,94,145 2007 - 2008 91,01,011 16,84,648 2008 - 2009 1,07,51,250 23,76,816 CIT ALSO MADE ANALYSIS OF THE CURRENT LIABILITIES FOR THE FINANCIAL YEAR 2001 - 02 ONWARDS AND WAS OF THE VIEW THAT THE SO - CALLED GRANTS TO THE SPORTS ASSOCIATION HAD ACTUALLY NOT BEEN DISBURSED AND THE LIABILITIES HAVE BEEN CARRIED FORWARD YEAR AFTER YEAR I N THE NAME OF DISTRICT LEVEL SPORTS ASSOCIATION. THE CUMULATIVE LIABILITIES WERE SUMMARIZED AS UNDER : FINANCIAL YEAR OUTSTANDING UNPAID GRANTS TO SPORTS ASSOCIATION CLAIMED AS EXPENSES (RS.) 2001 - 2002 9,54,793 2002 - 2003 12,91,280 2003 - 2004 15,53,080 2004 - 2005 20,3 7,080 2005 - 2006 25,87,144 2006 - 2007 30,37,024 2007 - 2008 34,64,524 2008 - 2009 31,56,404 29 ITA NO. 334/CTK/2011 THEREFORE, CIT WAS OF THE VIEW THAT THE MAIN PART OF THE ACTIVITY OF ORISSA OLYMPIC ASSOCIATION COMPRISE OF LEASING OUT OF IMMOVEABLE PROPERTIES, LEASE RENTAL AND MAINTENANCE OF LET OUT ASSETS. THIS, IN NO WAY, CAN BE CONSIDERED TO BE RELATABLE TO THE GEN ERATION OF ANY PUBLIC UTILITY. CIT ALSO NOTED THAT THE ASSESSEES ONLY ACTIVITIES FOR THE LAST 6 DECADES HAVE BEEN TO PROVIDE ON COMMERCIAL LEASE, ITS HOUSES, BUILDING PREMISES TO VARIOUS TENANTS. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH A PARTNERSHIP FIRM, M/S. INCON ASSOCIATES IN WHICH THE OWNERS ARE THE TWO SONS OF THE HON. SECRETARY OF ORISSA OLYMPIC ASSOCIATION AS WELL AS ORISSA CRICKET ASSOCIATION. AS PER THIS AGREEMENT, THE ASSESSEE HAS LEASED OUT 10,000 SQ. FT. OF ITS SPACE TO M/S. INCON ASSOC IATES FOR CONSTRUCTION OF KALYAN MANDAP NAMED BARABATI PALACE FOR WHICH M/S. INCON ASSOCIATES HAS TO PAY A RENT OF ONLY RS. 21,000/ - P.M. TO THE ASSESSEE. IN RETURN, THE SAID PARTNERSHIP FIRM HAS LET OUT THIS KALYAN MANDAP AT RATE NOT LESS THAN RS. 80,000 / - PER DAY. THE LEASE RENT OF RS.21,000/ - HAS TO BE ADJUSTED TO THE EXTENT OF 50% TOWARDS THE COST AND 50% OF THE RENTAL INCOME THE ASSESSEE WAS PROVIDING THE FACILITIES, AMENITIES OF BARABATI STADIUM OWNED BY IT FOR A FEE OR SERVICE CHARGES AND THEREFORE , THE CIT WAS OF THE VIEW THAT ORISSA OLYMPIC ASSOCIATION WAS INVOLVED IN NO ACTIVITIES OF GENERAL PUBLIC UTILITY BUT CLEARLY COMPRISED OF COMMERCIAL EXPLOITATION OF ITS PROPERTY FOR BUSINESS GAIN. THE CIT WAS OF THE VIEW THAT SO FAR AS THE PROVISO TO SEC. 2(15) IS CONCERNED, IT WAS MERELY CLARIFICATORY IN NATURE AND WAS APPLICABLE TO THE EARLIER ASSESSMENT YEAR AND THEREFORE HE TOOK THE VIEW THAT THE ASSESSEE WAS NOT ENGAGED IN CHARITABLE PURPOSES. WE NOTED THAT THE CIT EVEN DEN IED THAT THE ASSESSEE WAS ENGAGED IN ADVANCEMENT OF ANY OTHER OBJECTS OF PUBLIC UTILITY. THE LD. DR VEHEMENTLY RELIED BEFORE US ON THE RETROSPECTIVE OPERATION OF THE PROVISO TO SEC. 2(15). IN OUR OPINION, THE PROVISO UNDER SEC. 2(15) IS NOT RETROSPECTIVE. IT HAS BEEN ADDED BY THE FINANCE ACT, 2008 W.E.F. 1.4.2009 I.E. FROM A.Y 2009 - 10. A PROVISION CAN BE REGARDED TO BE CLARIFICATORY WHEN THERE IS AN AMBIGUITY IN THE INTERPRETATION OF THE PROVISION. SEC. 2(15), AS IT STOOD PRIOR TO THE INSERTION OF 30 ITA NO. 334/CTK/2011 THE PROVISO, DID NOT HAVE ANY AMBIGUITY. THE SECTION DEFINES CHARITABLE PURPOSE BY GIVING AN INCLUSIVE DEFINITION MENTIONING THEREIN CHARITABLE PURPOSE INCLUDES RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. WE HAVE GONE THROUGH THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SOFT BEVERAGES P. LTD. , 272 ITR 270. WE ARE OF THE VIEW THAT THIS DECISION WILL NOT ASSIST THE DR BECAUSE IN THIS CASE , WE NOTED, THAT THE ELEVENTH SCHEDULE TO THE INCOME TAX ACT CONTAINS A LIST OF ARTICLES AND THINGS FOR THE MANUFACTURE OR PRODUCTION OF WHICH MACHINERY IS INSTALLED WHICH WOULD NOT BE ELIGIBLE FOR GRANT OF INVESTMENT ALLOWANCE. ITEM NO. 5 IN THAT ELEVENT H SCHEDULE READS AS UNDER AERATED WATERS IN THE MANUFACTURE OF WHICH BLENDED FLAVOURING CONCENTRATES IN ANY FORM ARE USED. THE EXPLANATION WAS ADDED THEREIN BY THE FINANCE ACT, 1987, WHICH CAME INTO FORCE FROM APRIL 1, 1988 . THIS E XPLANATION READS A S UNDER : BLENDED FLAVOURING CONCENTRATES SHALL INCLUDE, AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED, SYNTHETIC ESSENCES IN ANY FORM. THE AMENDMENT THAT WAS EFFECTED IN THE YEAR 1988 FOR THE PURPOSE OF INTRODUCING AN E XPLANATION UNDER ENTRY NO. 5, WAS INTRODUCED, AS SET OUT IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL 1987 IN THE FOLLOWING MANNER : IT HAS BEEN FOUND THAT CERTAIN TAXPAYERS MANUFACTURING AERATED WATERS IN WHICH SYNTHETIC ESSENCE IS BEING USED, ARE CLAIMING THE A BOVE BENEFITS ON THE GROUND THAT THE SYNTHETIC ESSENCE CANNOT BE INCLUDED IN THE EXPRESSION BLENDED FLAVOURING CONCENTRATES IN ANY FORM. AS THIS WAS NEVER THE LEGISLATIVE INTENT, WITH A VIEW TO COUNTERACTING THE TAX AVOIDANCE AND PLACING THE MATTER BEY OND DOUBT, THE PROPOSED AMENDMENT SEEKS TO PROVIDE THAT THE BLENDED FLAVOURING CONCENTRATE APPEARING IN ITEM 5 WOULD INCLUDE SYNTHETIC ESSENCE IN ANY FORM. 31 ITA NO. 334/CTK/2011 ON INTERPRETATION OF THIS EXPLANATION, THE HON'BLE COURT HELD THAT THE FACT THAT THIS AMENDMENT WA S MADE EFFECTIVE FROM APRIL 1, 1988, THEREFORE, DOES NOT IN ANY WAY HAVE THE EFFECT OF DENUDING THE ORIGINAL ENTRY OF A PART OF ITS CONTENT. THE SYNTHETIC ESSENCE BEING BUT ONE FORM OF A BLENDED FLAVOURING CONCENTRATE WAS A BLENDED FLAVOURING CONCENTRATE B EFORE THE AMENDMENT AS ALSO AFTER THE AMENDMENT. THIS DECISION RECOGNIZES THAT WHEREVER THERE IS AN AMBIGUITY IN THE INTERPRETATION AND IF AN AMENDMENT IS MADE CLARIFYING THE AMBIGUITY, IT WOULD HAVE A RETROSPECTIVE EFFECT. IN THE CASE OF SEC. 2(15), AS I T EXISTED PRIOR TO THE INSERTION OF THE PROVISO, THERE WAS NO AMBIGUITY ON THE INTERPRETATION OF SEC. 2(15) - WHAT DOES THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY MEAN? WHETHER IT INCLUDES THEREIN CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. IN FACT, BY PUTTING THE PROVISO BY FINANCE ACT, 2008 W.E.F. 2009 THE LEGISLATURE SPECIFIED THAT ADVANCEMENT OF ANY OTHER GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES CARRYING ON OF ANY ACTIVITY IN TH E NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO A TRADE, COMMERCE OR BUSINESS FOR CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION OR RETENTION OF THE INCOME FROM S UCH ACTIVITY. FROM THE NOTES AND CLAUSES OF THE FINANCE BILL, 2008 WE NOTED THAT PROVISO WAS INSERTED IN SEC. 2(15) SO AS TO EXCLUDE FROM ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY (I) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR, (II) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A FEE OR CESS OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE, APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. IN THE PROPOSAL IT IS CLEA RLY MENTIONED THAT THE AMENDMENT WILL TAKE EFFECT FROM 1.4.2009 AND WILL ACCORDINGLY APPLY IN RELATION TO A.Y 2009 - 10 AND SUBSEQUENT ASSESSMENT YEARS. THE MEMORANDUM EXPLAINING THE PROVISION IN THE FINANCE 32 ITA NO. 334/CTK/2011 BILL, 2008 EXPLAINS THAT THE AMENDMENT HAS BEEN P ROPOSED IN THE FOLLOWING MANNER : SECTION 2(15) OF THE ACT DEFINES 'CHARITABLE PURPOSE' TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT HAS BEEN NOTICED THAT A NUMBER OF ENT ITIES OPERATING ON COMMERCIAL LINES ARE CLAIMING EXEMPTION ON THEIR INCOME EITHER UNDER SECTION 10(23C) OR SECTION 11 OF THE ACT ON THE GROUND THAT THEY ARE CHARITABLE INSTITUTIONS. THIS IS BASED ON THE ARGUMENT THAT THEY ARE ENGAGED IN THE 'ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY' AS IS INCLUDED IN THE FOURTH LIMB OF THE CURRENT DEFINITION OF 'CHARITABLE PURPOSE'. SUCH A CLAIM, WHEN MADE IN RESPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES, IS CONTRARY TO THE INTENTION OF THE PROVISION. WI TH A VIEW TO LIMITING THE SCOPE OF THE PHRASE 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', IT IS PROPOSED TO AMEND SECTION 2(15) SO AS TO PROVIDE THAT 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF - (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR, (B) ANY ACTIVITY OF RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A FEE OR CESS OR ANY OTHER CONSIDERATION, IRRESP ECTIVE OF THE NATURE OF USE OR APPLICATION OF THE INCOME FROM SUCH ACTIVITY, OR THE RETENTION OF SUCH INCOME, BY THE CONCERNED ENTITY. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1ST DAY OF APRIL, 2009 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2009 - 10 AND SUBSEQUENT ASSESSMENT YEARS. FROM THE EXPLANATION, IT IS APPARENT THAT THE INTENTION OF THE LEGISLATURE IS CLEAR THAT THE ENTITIES OPERATING ON COMMERCIAL LINES SHOULD NOT BE ALLOWED EXEMPTION ON THEIR INCOME EITHER U/S 10(23C) OR UNDER SEC. 11 ON THE GROUND THAT THEY ARE CHARITABLE INSTITUTIONS AND THEY ARE ENGAGED IN ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. THE MEMORANDUM DOES NOT SPEAK OF AMBIGUITY IN THE EXISTING DEFINITION OF CHARITABLE PURPOSE AS GIVEN U/S 2(15). THE AMEN DMENT IS NOT BY WAY OF CLARIFICATION BUT LIMITS THE SCOPE OF THE PHRASE ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY SO THAT THE BENEFIT MAY NOT BE AVAILABLE TO ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF 33 ITA NO. 334/CTK/2011 RE NDERING OF ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS FOR A FEE, CESS OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATION OF THE INCOME FROM SUCH ACTIVITY OR RETENTION OF SUCH INCOME BY THE CONCERNED ENTITY. THEREFO RE, IN OUR OPINION, CIT HAS TO LOOK INTO THE DEFINITION OF CHARITABLE PURPOSE AS ON THE DATE WHEN THE APPLICATION HAS BEEN MADE FOR REGISTRATION BY THE ASSESSEE FOR DECIDING WHETHER THE ASSESSEE IS ENGAGED IN CHARITABLE PURPOSES OR NOT IF THE ASSESSEE IS E NGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS FOR CONSIDERATION AND HIT BY THE PROVISO TO SEC. 2(15). 5.5 SUBSEQUENTLY, AS THERE HAS BEEN AMENDMENT IN THE DEFINITION OF CHARITABLE PURPOSE, CIT IS WITHIN ITS POWER TO RECTIFY ITS ORD ER PASSED U/S 12A INVOKING THE PROVISIONS OF SEC. 154 AS THAT WILL TANTAMOUNT TO BE A MISTAKE OF LAW. THE PROVISO TO SEC. 2(15) PUTS AN EMBARGO AND IS APPLICABLE, IN OUR OPINION, W.E.F. 1.4.2009 AND NOT PRIOR TO THAT. IN FACT, THIS PROVISO PUTS AN EMBARG O ON THE INSTITUTION THAT IN CASE THE INSTITUTION FALLS WITHIN THE PROVISO, IT WILL NO LONGER BE REGARDED TO HAVE BEEN ENGAGED FOR CHARITABLE PURPOSE EVEN IF IT IS ENGAGED IN THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE EMBARGO STATE S THAT IF THE INSTITUTION IS ENGAGED IN CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OR RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR CESS OR FEE OR ANY OTHER CONSIDERATION, THE INSTITU TION SHALL NOT BE REGARDED TO HAVE BEEN INVOLVED IN CARRYING ON CHARITABLE PURPOSE. THIS PROVISO IN THE LAST SENTENCE FURTHER STATES THAT NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME BY THE INSTITUTION FROM SUCH ACTIVITY WILL NOT BE A RELEVANT CONSIDERATION. IN VIEW OF THIS SPECIFIC PROVISION, WE ARE NOT CONCERNED TO LOOK INTO HOW AN INSTITUTION HAS USED, APPLIED OR RETAINED ITS INCOME, IF THE INCOME HAS BEEN RECEIVED BY THE INSTITUTION FROM ANY ACTIVITY CARRIED OUT IN THE NATURE OF TRADE, COMM ERCE OR BUSINESS OR FROM ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. 34 ITA NO. 334/CTK/2011 THE WORDS USED IN THE PROVISO ARE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS NOT THE WORDS CARRYING ON TRADE COMMER CE OR BUSINESS. USING OF THE WORDS ANY ACTIVITY IN THE NATURE OF PRIOR TO TRADE, COMMERCE OR BUSINESS IN OUR OPINION HAS A SPECIFIC MEANING WHILE INTERPRETING THE PROVISO. THESE WORDS CANNOT BE IGNORED. THIS IN OUR OPINION MANDATES THAT THE INSTITU TION NEED NOT ACTUALLY BE CARRYING ON TRADE, COMMERCE OR BUSINESS BUT THE ACTIVITY CARRIED ON BY HIM ARE SIMILAR TO TRADE, COMMERCE OR BUSINESS. THE PROFIT MOTIVE IS REQUIRED WHILE AN INSTITUTION IS CARRYING ON TRADE, COMMERCE OR BUSINESS. THE USE OF WOR DS CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IN OUR OPINION WILL MEAN THAT THERE NEED NOT BE PROFIT MOTIVE IN CARRYING ON THE ACTIVITY BY THE INSTITUTION. IF WE INTERPRET THE WORDS CARRYING ON OF ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS EQUIVALENT TO THE WORDS CARRYING ON TRADE, COMMERCE OR BUSINESS T HERE WOULD HAVE BEEN NO NEED OF INCORPORATING IN THE PROVISO, THE WORDS OF ANY ACTIVITY IN THE NATURE OF PRIOR TO THE WORDS TRADE, COMMERCE OR BUSINESS. THE LEGISLATURE IS FULLY AWARE OF THAT AN INSTITUTION WHICH IS INCORPORATED FOR CHARITABLE PURPOSE CANNOT NOT HAVE PROF IT MOTIVE. DUE TO THIS REASON, IF WE GO TO THE BACKGROUND OF SEC. 2(15), THE HON'BLE SUPREME COURT INTERPRETED SEC. 2(15) IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION 121 ITR 1 WHEN THE SECTION 2(15) CONTAINED THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT AFTER ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. PROFIT MOTIVE IN RESPECT OF AN INSTITUTION CANNOT BE MAIN OBJECT BUT IT MAY BE ANCILLARY AND INCIDENTAL TO THE MAIN OBJECTS DUE TO WH ICH SEC. 11(4A) WAS ALSO INCORPORATED UNDER THE INCOME TAX ACT INITIALLY BY FINANCE ACT, 1983 W.E.F. 1.4.1984. THE DECISION OF HON'BLE SUPREME COURT IN CASE OF ACIT VS. SURAT ART SILK MANUFACTURERS ASSOCIATION 121 ITR 1 (SUPRA) IS NOT APPLICABLE IN THE CA SE OF THE ASSESSEE AT ALL AS IT RELATES TO THE INTERPRETATION OF SEC. 2(15) PRIOR TO ITS AMENDMENT BY THE FINANCE ACT, 1983 WHEN THE WORDS NOT INVOLVING ANY ACTIVITY FOR PROFIT WERE THERE UNDER SECTION 2(15) AFTER THE WORDS ADVANCEMENT 35 ITA NO. 334/CTK/2011 OF ANY OTHER OBJE CTS OF GENERAL PUBLIC UTILITY. IN THIS DECISION, THE HONBLE SUPREME COURT APPROVING THE FINDING OF JUSTICE BEG IN THE CASE OF SOLE TRUSTEE, LOKA SIKHSHANA TRUSTS CASE [1975] 101 ITR 234, 256 (SC) HELD AS UNDER : THE TEST WHICH HAS, THEREFORE, NOW TO B E APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARRYING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUBSERVE THE CHARITABLE PURPOSE OR TO EARN PROFIT. WHERE PROFIT MAKING IS THE PREDOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD CEASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MEREL Y BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. THE EXCLUSIONARY CLAUSE DOES NOT REQUIRE THAT THE ACTIVITY MUST BE CARRIED ON IN SUCH A MANNER THAT IT DOES NOT RESULT IN ANY PROFIT. IT WOULD INDEED BE DIFFICULT FOR PERSONS IN CHARGE OF A TRUST OR INSTITUTI ON TO SO CARRY ON THE ACTIVITY THAT THE EXPENDITURE BALANCES THE INCOME AND THERE IS NO RESULTING PROFIT. THAT WOULD NOT ONLY BE DIFFICULT OF PRACTICAL REALISATION BUT WOULD ALSO REFLECT UNSOUND PRINCIPLE OF MANAGEMENT. WE, THEREFORE, AGREE WITH BEG. J. WH EN HE SAID IN SOLE TRUSTEE, LOKA SIKHSHANA TRUSTS CASE [1975] 101 ITR 234, 256 (SC) THAT: IF THE PROFITS MUST NECESSARILY FEED A CHARITABLE PURPOSE UNDER THE TERMS OF THE TRUST, THE MERE FACT THAT THE ACTIVITIES OF THE TRUST YIELD PROFIT WILL NOT ALTER THE CHARITABLE CHARACTER OF THE TRUST. THE TEST NOW IS, MORE CLEARLY THAN IN THE PAST, THE GENUINENESS OF THE PURPOSE TESTED BY THE OBLIGATION CREATED TO SPEND THE MONEY EXCLUSIVELY OR ESSENTIALLY ON CHARITY. THE LEARNED JUDGE ALSO ADDED THAT THE RESTRIC TIVE CONDITION THAT THE PURPOSE SHOULD NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT WOULD BE SATISFIED IF PROFIT - MAKING IS NOT THE REAL OBJECT. 5.6 THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY OF CHARITABLE PURPOSE WAS FURT HER EXPLAINED BY THE SUPREME COURT IN C.I.T VS. FEDERATION OF INDIAN CHAMBER S OF COMMERCE & INDUSTRY, 130 ITR 186 (SC). THE QUESTION INVOLVED IN THIS CASE WAS WHETHER THE INCOME DERIVED BY A CHAMBER OF COMMERCE FROM (A) ARBITRATION FEES LEVIED BY THE CHAMB ER (B) FEES COLLECTED FOR ISSUING CERTIFICATES OF ORIGIN AND (C) SHARE OF PROFIT IN MESSERS, CALCUTTA LICENCED MEASURES FOR ISSUE OF CERTIFICATE OF WEIGHMENT AND MEASUREMENT, WAS EXEMPT FROM INCOME - TAX UNDER SECTION 11 READ WITH SECTION 36 ITA NO. 334/CTK/2011 2(15) OF THE ACT. E XPLAINING THE NEW QUALIFYING WORDS IN THE 1961 ACT NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT ADDED IN SECTION 2(15), KRISHNA IYER J. WHO DELIVERED THE JUDGEMENT OF THE COURT OBSERVED AS UNDER: THE TRUE TEST IS TO ASK FOR ANSWERS TO THE FOLLOWING QUESTIONS: (A) IS THE OBJECT OF THE ASSESSEE ONE OF GENERAL PUBLIC UTILITY? (B) DOES THE ADVANCEMENT OF THE OBJECT INVOLVE ACTIVITIES BRINGING IN MONEYS? (C) IF SO, ARE SUCH ACTIVITIES UNDERTAKEN, (I) F OR PROFIT, OR (II) WITHOUT PROFIT? EVEN IF (A) AND (B) ARE ANSWERED AFFIRMATIVELY, IF CLAUSE (I) IS ANSWERED AFFIRMATIVELY,THE CLAIM FOR EXEMPTION COLLAPSES. THE SOLUTION TO THE PROBLEM OF AN ACTIVITY BEING ONE FOR OR IRRESPECTIVE OF PROFIT IS GATHERED ON A FOOTING OF FACTS. WHAT IS THE REAL NATURE OF THE ACTIVITY? ONE WHICH IS ORDINARILY CARRIED ON BY ORDINARY PEOPLE FOR GAIN? IS THERE A BUILT - IN PRESCRIPTION IN THE CONSTITUTION AGAINST MAKING A PROFIT? HAS THERE BEEN, IN PRACTICE, PROFIT FROM THIS VENTUR E? ALTHOUGH THE LAST IS A WEAK TEST, THE MERE FACT THAT A SERVICE IS RENDERED IS NO ANSWER TO CHARGEABILITY BECAUSE ALL INCOME IS OFTEN DERIVED BY RENDERING SOME SERVICE OR OTHER. A PRAGMATIC CONDITION, WRITTEN OR UNWRITTEN, PROVED BY A PRESCRIPTION OF PROFITS OR BY LONG YEARS OF INVARIABLE PRACTICE OR SPELT FROM STRONG SURROUNDING CIRCUMSTANCES INDICATIVE OF ANTI - PROFIT MOTIVATION - SUCH A CONDITION WILL QUALIFY FOR CHARITABLE PURPOSE AND LEGITIMATELY GET ROUND THE FISCAL HOOK. SHORT OF IT, THE TAX TAC KLE HOLDS YOU FAST. A WORD ABOUT THE BURDEN OF PROOF IS NECESSARY HERE. INCOME, ORDINARILY CHARGEABLE, CAN BE FREE FROM EXIGIBILITY ONLY IF THE ASSESSEE DISCHARGES THE ONUS OF BRINGING HIMSELF WITHIN SECTION 2 (15). IN SO DOING, HE HAS TO ATTRACT AND REPEL ATTRACT THE CONDITION THAT HIS OBJECTS ARE OF GENERAL PUBLIC UTILITY AND REPEL THE CHARGE THAT HE IS ADVANCING THESE OBJECTS BY INVOLVEMENT IN ACTIVITIES FOR PROFIT. ONCE THIS BROAD DUAL BASIS IS MADE OUT, THE REVENUE WILL NOT GO INTO METICULOUS MATHEMA TICS AND CHARGE EVERY CHANCE EXCESS OR RANDOM SURPLUS. IF THE ACTIVITY IS PRONE TO YIELDING INCOME AND IN FACT RESULTS IN PROFITS, THE REVENUE WILL EXAMINE THE REALITY OR PRETENSE OF THE CONDITION THAT THE ACTIVITY IS NOT FOR PROFIT. HERE, ONE MAY WELL SAY : SUIT THE ACTION TO THE WORD, THE WORD, TO THE ACTION. IN THIS BACKGROUND, THE COURT HELD THAT THE ACTIVITIES OF CHARGING FEES AND ISSUING CERTIFICATES OF ORIGIN AS ALSO SETTLEMENT OF DISPUTES AMONG TRADERS BY ARBITRATION ARE UNDOUBTEDLY SERVICES OF GENERAL PUBLIC UTILITY. BUT ALL THESE ACTIVITIES ARE AMENABLE TO TAX AS BEING CARRIED ON FOR PROFIT, THERE BEING NOTHING TO SHOW THAT THE CHAMBER WAS UNDERTAKING THESE JOBS ON A NO PROFIT BASIS. IF THE FEE CHARGED FOR DOING SO IS MORE OR LESS COMMENSURATE WITH THE EXPENSE, THE CHAMBER HAD TO INCUR, A MINOR SURPLUS WILL NOT ATTRACT 37 ITA NO. 334/CTK/2011 TAX. EVERY TYPE OF SERVICE ORIENTED ACTIVITY WHERE SOME CHARGE IS LEVIED FROM THE BENEFICIARY AND AT THE END OF YEAR SOME SURPLUS IS LEFT BEHIND, DOES NOT LOSE THE BENEFIT OF SECTION 2 (15). FOR THEN, ONE CANNOT CONCEIVE OF ANY OBJECT OF GENERAL PUBLIC UTILITY, WHICH CAN BE ADVANCED BY THE CHAMBER OF COMMERCE. THE COURT WENT ON TO ADD THAT IN THE ABSENCE OF ANY MAGNA CARTA BINDING THE CHAMBER NOT TO SELL ARBITER JUSTICE, IT IS NOT ENTITLED TO CLAIM EXEMPTION FROM TAX IN RESPECT OF INCOME FROM SUCH ACTIVITIES. 5.7 AN ATTEMPT WAS MADE BY THE COUNSEL FOR THE ASSESSEE IN SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. C.I.T , 101 ITR 234 TO CLAIM THAT PROFIT UNDER SECTION 2(15) OF THE ACT MEANS PRIVATE PROFIT. THE SUPREME COURT, HOWEVER, REPELLED TH E SAID CONTENTION ON THE GROUND THAT THE WORD USED IN THE DEFINITION GIVEN IN SECTION 2(15) IS PROFIT AND NOT PRIVATE PROFIT AND IT WOULD NOT BE PERMISSIBLE TO READ IN THE ABOVE DEFINITION THE WORD PRIVATE AS QUALIFYING PROFIT EVEN THOUGH SUCH WORD IS NOT THERE. THE SUPREME COURT POINTED OUT FURTHER THAT IF IT WAS THE SOLE PURPOSE OF AMENDMENT IN THE DEFINITION AS INTRODUCED IN 1961, THE AMENDMENT WAS NOT NECESSARY AT ALL FOR IT HAD BEEN DECLARED BY THE COURTS EVEN BEFORE THE AMENDMENT THAT ACTIVITIES M OTIVATED BY PRIVATE PROFIT MAKING FELL OUTSIDE THE CONCEPT OF CHARITY ALTOGETHER. THE NEW WORD NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT CLEARLY IMPOSED A NEW QUALIFICATION ON PUBLIC UTILITIES ENTITLED TO EXEMPTION FOR IT WAS OBVIOUS THAT UNLESS SUCH A LIMITATION WAS INTRODUCED, THE FOURTH AND LAST CATEGORY WOULD BECOME TOO WIDE TO PREVENT ITS ABUSE. THIS DECISION DOES NOT DEFINE THE WORDS CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OR RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. 5.8 THE WORDS NOT INVOLVING CARRYING ON OF ANY ACTIVITY FOR PROFIT APPEARING AT THE END WERE OMITTED BY THE FINANCE ACT, 1983 W.E.F. 1.4.1984. 38 ITA NO. 334/CTK/2011 THE SCOPE OF AMENDMENT HAS BEEN EXPLAI NED BY THE CBDT CIRCULAR NO. 372 DT. 8.12.1983, 146 ITR (ST.) 9B AS UNDER : UNDER SECTION 2(15) OF THE INCOME - TAX ACT, CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. SECTION 3(A) OF THE FINANCE ACT HAS OMITTED THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT FROM THE DEFINITION. THIS AMENDMENT IS CONSEQUENTIAL TO THE AMENDMENT MADE I N SECTION 11 OF THE INCOME - TAX ACT BY SECTION 6(B) OF THE FINANCE ACT, WHEREUNDER PROFITS AND GAINS OF BUSINESS IN THE CASE OF CHARITABLE OR RELIGIOUS TRUSTS AND INSTITUTIONS WILL NOT BE ENTITLED TO EXEMPTION UNDER THAT SECTION, EXCEPT IN CASES WHERE THE B USINESS FULFILS THE CONDITIONS SPECIFIED IN SECTION 11(4) OF THE ACT. THE AMENDMENT TAKES EFFECT FROM 1 ST APRIL 1984, AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 1984 - 85 AND SUBSEQUENT YEARS. 5.9 SUBSEQUENTLY, BY THE FINANCE ACT, 2008 W.E.F. 1.4.2009 FIRST PROVISO TO SEC. 2(15) WAS INSERTED. THE SCOPE OF THE AMENDMENT HAS BEEN EXPLAINED BY THE CBDT CIRCULAR NO. 1 DT. 27.3.2009, 310 ITR (ST.) 42. THIS AMENDMENT WAS MADE WITH A VIEW TO LIMITING THE SCOPE OF THE PHRASE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY. CLAUSE (15) OF SECTION 2 HAS BEEN AMENDED TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES CARRYING ON ANY ACTIVITY IN THE NATURE OF T RADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. THIS AMENDMENT IS NOT RETROSPECTIVE IN OPERATION, THEREFORE, ON THAT BASIS, CIT CANNOT REJECT THE APPLICATION FOR REGISTRATION PROVIDED THE ASSESSEE COMPLIES WITH ALL OTHER CONDITIONS. CIT, IF HE THINKS THAT THE ASSESSEE IS HIT BY THE PROVISO TO SEC. 2(15 ) W.E.F. 1.4.2009, CAN PASS ORDER U/S 154 RECTIFYING THE ORDER GRANTING REGISTRATION TO THE ASSESSEE AS THAT WILL TANTAMOUNT TO A MISTAKE OF LAW APPARENT ON RECORD. 5.10 WE NOTED THAT THE PROVISIONS OF SEC. 12AA(1)(A) & (B) MANDATES THAT WHEN A CHARITABLE TRUST/INSTITUTION MAKES AN APPLICATION FOR REGISTRATION, THE CIT 39 ITA NO. 334/CTK/2011 AT THIS STAGE IS NOT REQUIRED TO EXAMINE WHETHER THE APPLICANT TRUST HAS APPLIED ANY INCOME FOR CHARITABLE PURPOSE OR NOT. AT THIS STAGE, ALL THAT THE COMMISSIONER SHOULD EXAMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENT OF SEC. 12A R.W.R 17A OF THE INCOME TAX RULES, 1962 AND WHETHER FORM NO. 10A HAS BEEN PROPERLY FILLED UP. THE COMMISSIONER MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. IT IS NOT THE REQUIREMENT OF SEC. 12A THAT ANY ACTIVITY SHOULD BE CARRIED ON BY THE CHARITABLE TRUST BEFORE OBTAINING REGISTRATION. WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 11 OR WHETHER THERE IS DEFAULT OF SEC. 13 HAS TO BE LOOKED INTO AT THE TIM E OF FRAMING ASSESSMENT. THE CIT, FOR SATISFYING HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST/INSTITUTION CAN MAKE SUCH INQUIRY AS HE MAY DEEM FIT AND CAN ALSO ASK FOR THE EVIDENCE AS HE DESIRES. IN VIEW OF THIS, WE DO NOT AGREE WITH THE PLEA OF THE LD. AR THAT THE CIT HAS EXCEEDED HIS JURISDICTION BY EXAMINING THE ACCOUNTS OF THE ASSESSEE FOR F.YS 2002 - 03 TO 2008 - 09. THE GENUINENESS OF THE ACTIVITIES OF THE TRUST/INSTITUTION HAS TO BE ASCERTAINED ON THE BASIS OF THE EVIDENCE PLACED BY TH E ASSESSEE. THE ASSESSEE, IN OUR OPINION, IS DUTY BOUND TO COMPLY WITH AND SUBMIT THE NECESSARY DOCUMENTS AND PAPERS AS ARE REQUIRED. NO DOUBT, APPLICABILITY OF THE PROVISIONS OF SEC. 13(1)(C) CANNOT BE LOOKED INTO AT THE TIME OF REGISTRATION BUT CIT IS BOUND TO LOOK INTO WHETHER THE OBJECTS OF THE TRUST/INSTITUTION ARE CHARITABLE/RELIGIOUS OR NOT. WE DO NOT FIND ANY IRREGULARITY OR INFIRMITY SO FAR AS JURISDICTION OF CIT IS CONCERNED IN ASCERTAINING THE PURPOSE OF THE OBJECT FOR WHICH THE INSTITUTION HA S BEEN ESTABLISHED. WE HAVE ALSO EXAMINED THE SUBMISSION OF THE LD. AR THAT THE ASSESSEE IS ENGAGED IN ACTIVITY OF EDUCATION AND RENDERING EDUCATION IN THE S P O R T S AND THEREFORE, THE PROVISO TO SEC. 2(15) WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. IN OUR OPINION, THIS SUBMISSION OF THE ASSESSEE, KEEPING IN VIEW THE OBJECTS OF THE ASSESSEE, DOES NOT HAVE ANY LEG TO STAND IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE, LOKA SIKHSHANA TRUSTS CASE [1975] 101 ITR 234 40 ITA NO. 334/CTK/2011 (SC) IN WHICH HON'BLE J. KHANNA EXPLAINED THE MEANING OF THE TERM EDUCATION AS USED IN SEC. 2(15) OF THE INCOME TAX ACT BY OBSERVING AS UNDER : THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN SECTION 2(15) IS THE SYSTEMATIC INSTRUCTIO N, SCHOOLING OR TRAINING GIVEN TO THE YOUNG IN PREPARATION FOR THE WORK OF LIFE. IT ALSO CONNOTES THE WHOLE COURSE OF SCHOLASTIC INSTRUCTION, WHICH A PERSON HAS RECEIVED. THE WORD EDUCATION HAS NOT BEEN USED IN THAT WIDE AND EXTENDED SENSE, ACCORDING TO WHICH EVERY ACQUISITION OF FURTHER KNOWLEDGE CONSTITUTES EDUCATION. ACCORDING TO THIS WIDE AND EXTENDED SENSE, TRAVELLING IS EDUCATION, BECAUSE AS A RESULT OF TRAVELING YOU ACQUIRE FRESH KNOWLEDGE. LIKEWISE, IF YOU READ NEWSPAPERS AND MAGAZINES, SEE PICTUR ES, VISIT ART GALLERIES, MUSEUMS AND ZOOS, YOU THEREBY ADD TO YOUR KNOWLEDGE. AGAIN, WHEN YOU GROW UP AND HAVE DEALINGS WITH OTHER PEOPLE, SOME OF WHOM ARE NOT STRAIGHT, YOU LEARN BY EXPERIENCE AND THUS ADD TO YOUR KNOWLEDGE OF THE WORLD. IF YOU ARE NOT CA REFUL, YOUR WALLET IS LIABLE TO BE STOLEN OR YOU ARE LIABLE TO BE CHEATED BY SOME UNSCRUPULOUS PERSON. THE THIEF WHO REMOVES YOUR WALLET AND THE SWINDLER WHO CHEATS YOU TEACH YOU A LESSON AND IN THE PROCESS MAKE YOU WISER THOUGH POORER. IF YOU VISIT A NIGH T CLUB, YOU GET ACQUAINTED WITH AND ADD TO YOUR KNOWLEDGE ABOUT SOME OF THE NOT MUCH REVEALED REALITIES AND MYSTERIES OF LIFE. ALL THIS IN A WAY IS EDUCATION IN THE GREAT SCHOOL OF LIFE. BUT THIS IS NOT THE SENSE IN WHICH THE WORD EDUCATION IS USED IN CL AUSE (15) OF SECTION 2. WHAT EDUCATION CONNOTES IN THAT CLAUSE IS THE PROCESS OF TRAINING AND DEVELOPING THE KNOWLEDGE, SKILL, MIND AND CHARACTER OF STUDENTS BY NORMAL SCHOOLING. IT MAY BE MENTIONED HERE THAT THEIR LORDSHIPS OF THE SUPREME COURT IN THE S AID CASE APPLIED THE TESTS LAID DOWN BY THE PRIVY COUNCIL IN RE TRUSTEES OF THE TRIBUNE 7 ITR 415 WHERE IN THE QUESTION INVOLVED WAS, WHETHER A TRUST, THE OBJECT OF WHICH IS TO SUPPLY THE PEOPLE WITH AN ORGAN OF EDUCATED PUBLIC OPINION, SHOULD BE CONSIDERE D TO BE ONE FOR EDUCATION OR FOR ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THEIR LORDSHIPS IN TRIBUNES CASE HAD UNEQUIVOCALLY EXPRESSED THE VIEW THAT THEY WERE NOT PREPARED TO HOLD THAT THE PROPERTY IN QUESTION WAS HELD FOR THE PURPOSE OF EDUCATION IN THE SENSE THAT WORD WAS USED IN SECTION 4 OF THE INDIAN INCOME - TAX ACT, 1922. IT IS NOT THE CASE OF THE ASSESSEE THAT IT IS RUNNING A NORMAL SCHOOLING FOR SPORTS. THEREFORE, WE HOLD THAT THE ASSESSEE S ACTIVITIES DO NOT FALL WITHIN THE TERM EDUCATION. 5.11 WE HAVE ALSO EXAMINED THE ARGUMENTS OF THE ASSESSEE THAT IN CASE THE APPLICATION FOR REGISTRATION IS NOT DISPOSED OFF BY THE CIT WITHIN A PERIOD OF 6 41 ITA NO. 334/CTK/2011 MONTHS IT WILL BE DEEMED AS IF THE REGISTRATION HAS BEEN GRANTED U/S 12A . WE NOTED THAT THIS ISSUE IS DULY COVERED IN FAVOUR OF THE REVENUE BY THE ORDER OF THE JURISDICTION HIGH COURT IN THE CASE OF M/S SRIKHETRA, A.C. BHAKTI - VEDANTA VS. ACIT AND ANOTHER [2006 (II) OLR - 75 W.P.(C) NO. 12437 OF 2005] WHERE IN THE HONBLE JURISDICTIONAL HIGH COURT ANSWERING THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONER THAT ONCE THE PERIOD OF SIX MONTHS EXPIRES, THE AUTHORITY LOOSES ITS RIGHT TO REFUSE REGISTRATION OF TRUST THE COURT HELD THAT THEY ARE UNABLE TO UPHOLD SUCH CONTENTION AND HELD AT PARA - 5 AS UNDER: IN OUR VIEW THE PERIOD OF SIX MONTHS AS PROVIDED IN SUB - SECTION (2) OF SECTION 12AA IS NOT MANDATORY. THOUGH THE WORD SHALL HAS BEEN USED BUT IT IS WELL KNOWN THAT TO ASCERTAIN WHETHER A PROVISION IS MANDATORY OR NOT, THE EXPRESSION SHALL IS NOT ALWAYS DECISIVE. IT IS ALSO WELL KNOWN THAT WHETHER A STATUTORY PROVISION IS MANDATORY OR DIRECTORY HAS TO BE ASCERTAINED NOT ONLY FROM THE WORDING OF THE STATUTE BUT ALSO FROM NATURE AND DESIG N OF THE STATUTE AND THE PURPOSE WHICH IT SEEKS TO ACHIEVE. HEREIN THE TIME FRAME UNDER SUB - SECTION (2) OF SECTION 12AA OF THE ACT HAS BEEN SO PROVIDED TO EXCLUDE ANY DELAY OR LETHARGIC APPROACH IN THE MATTER OF DEALING WITH SUCH APPLICATION. SINCE THE CON SEQUENCE FOR NON - COMPLIANCE WITH THE SAID TIME FRAME HAS NOT BEEN SPELT OUT IN THE STATUTE, THIS COURT CANNOT HOLD THAT THE SAID TIME LIMIT IS MANDATORY IN NATURE NOR THE PERIOD OF SIX MONTHS HAS BEEN COUCHED IN NEGATIVE WORDS. MOST OF THE TIME NEGATIVE WO RDS INDICATE A MANDATORY INTENT. THIS COURT IS ALSO OF THE OPINION THAT WHEN PUBLIC DUTY IS TO BE PERFORMED BY THE PUBLIC AUTHORITIES, THE TIME LIMIT WHICH IS GRANTED BY THE STATUTE IS NORMALLY NOT MANDATORY BUT IS DIRECTORY IN THE ABSENCE OF ANY CLEAR STA TUTORY INTENT TO THE CONTRARY. (KINDLY REFER MONTREAL STREET RAILWAY COMPANY V. NORMANDIN, AIR 1917 PRIVY COUNCIL 142 AT PAGE 144). HERE THERE IS NO SUCH EXPRESS STATUTORY INTENT, NOR DOES IT FOLLOW FROM NECESSARY IMPLICATION. FOR THIS REASON WE CANNOT ACCEPT THE CONTENTION OF THE LEARNED COUNSEL FOR THE PETITIONER ON THE INTERPRETATION OF SECTION 12AA(2). RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT, WE REJECT THE CONTENTION OF THE LD. AR. 5.1 2 SINCE THE ASSESSEE HAS STRESSED GROUND NO. 6 THAT THE CIT HAS USED MATERIAL BEHIND THE BACK OF THE ASSESSEE FOR REJECTING THE REGISTRATION AND HAS 42 ITA NO. 334/CTK/2011 NOT GIVEN HIM PROPER OPPORTUNITY, WE, THEREFORE, WITH OUR ABOVE OBSERVATION SET ASIDE THE ORDER OF CIT AND RESTO RE THIS ISSUE TO THE FILE OF CIT WITH THE DIRECTION THAT THE CIT SHALL LOOK INTO THE MATTER OF REGISTRATION OF THE INSTITUTION AFRESH AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PROVE THAT THE OBJECTS FOR WHICH THE ASSESSEE INSTITUTIO N IS CREATED ARE GENUINE AND ARE FOR CHARITABLE PURPOSES. WE MAY CLARIFY THAT WHILE CONSIDERING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION, THE CIT SHOULD NOT APPLY PROVISO TO SEC. 2(15) RETROSPECTIVELY. IF HE SO CHOSES THAT IN VIEW OF THE PROVISO INSERTED W.E.F. 1.4.2009 THE ACTIVITIES CARRIED ON BY THE ASSESSEE NO MORE REMAINS CHARITABLE AS PER THE AMENDED DEFINITION OF SEC. 2(15), HE MAY PASS AN ORDER U/S 154 RECTIFYING HIS ORDER WITHDRAWING THE REGISTRATION OF THE ASSESSEE IN CASE HE GRANTS REGI STRATION TO THE ASSESSEE W.E.F. 1.4.2009 BY PASSING A SPECAKING ORDER. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS STATISTICALLY ALLOWED. 7. ORDER PRONOUNCED IN PURSUANCE OF RULE 34(4) OF ITAT RULES, 1963 BY PUTTING ON NOTICE BOARD OF THE BENCH AT CUTTACK ON 0 4 / 0 7 /201 4 . S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI DATED : 0 4 / 07 /201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) D.R (5) GUARD FILE TRUE COPY, BY ORDER