NAVI MUMBAI SPORTS ASSOCIATION, NAVI MUMBAI V. DIT (E), MUMBAI

ITA 976/MUM/2012

• Counselvise Citation: 97619914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Assessee Lawyers: PRAKASH PANDIT
• Keywords: Business income; Cancellation of registration
• Section: 80G; 12A; 12AA

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , ,, , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 976/MUM./2012 ( &) * !+* / ASSESSMENT YEAR : 200910 ) NAVI MUMBAI SPORTS ASSOCIATION SECTOR1A, VASHI NAVI MUMBAI 400 703 .. ,- / APPELLANT ) V/S DIRECTOR OF INCOME TAX (EXEMP.) PIRAMAL CHAMBER, MUMBAI .... ./,- / RESPONDENT , ./ PERMANENT ACCOUNT NUMBER AAATN0457A &) *1# 2 3 / ASSESSEE BY : MR. PRAKASH PANDIT ! 2 3 / REVENUE BY : MR. PREETAM SINGH )! 2 # / DATE OF HEARING 31.07.2013 $ 4+ 2 # / DATE OF ORDER 18.09.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 5 5 5 5 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE AGA INST THE IMPUGNED ORDER DATED 7 TH DECEMBER 2011, PASSED BY THE DIRECTOR OF INCOME TA X (EXEMP.), MUMBAI UNDER SECTION 12AA(3) OF THE INCOM E TAX ACT, 1961 (FOR SHORT THE ACT). IN THE GROUNDS OF APPEAL, THE ASS ESSEE HAS CHALLENGED THE WITHDRAWAL / CANCELLATION OF REGISTRATION WHICH WAS GRANTED TO THE ASSESSEE NAVI MUMBAI SPORTS ASSOCIATION 2 UNDER SECTION 12A OF THE ACT AFTER INVOKING THE PRO VISIONS OF SECTION 12AA(3) R/W PROVISO TO SECTION 2(15). 2. THE FACTS, AS NARRATED BY THE ASSESSEE BEFORE US, A RE THAT THE ASSESSEE NAVI MUMBAI SPORTS ASSOCIATION, IS A PUBLIC CHARITA BLE TRUST REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT WITH THE FOLLOWING MAIN OBJECTIONS: TO PROVIDE FACILITIES FOR INDOOR AND OUTDOOR GAMES , SWIMMING POOL AND RECREATION ACTIVITIES; TO PROVIDE FACILITIES FOR PHYSICAL ACTIVITIES, ORGA NIZE CULTURAL PROGRAMS, ORGANIZE TRAINING CAMPS FOR YOUNGSTERS WITH A VIEW TO SERVE THE NATIONAL INTEREST AND WILL ALSO PROVIDE NECESSARY FACILITIES AND TO UTILIZE THE FUNDS TO THE MAXIMUM FOR DEVELOPING THE SPORTS AND OTHER SIMILAR FACILITIES . 3. LOOKING TO ITS ACTIVITIES, THE ASSESSEE WAS GRANTED REGISTRATION UNDER SECTION 12A ON 4 TH DECEMBER 1984, AND ALSO RECOGNITION UNDER SECTION 80G WHICH WAS RENEWED FROM TIME TO TIME. ON A PERUSAL O F THE IMPUGNED ORDER, IS SEEN THAT THE DIT(E) NOTED THAT A PROPOSAL WAS S ENT BY THE ADIT(E), MUMBAI, FOR CANCELLATION OF REGISTRATION GRANTED TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS BEEN CARRYING ON ACTIV ITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, ETC., AND GROSS RECEIP TS FROM SUCH ACTIVITIES WERE IN EXCESS OF ` 10,00,000. ACCORDINGLY, THE PROVISO TO SECTION 2(1 5) GETS ATTRACTED FROM THE ASSESSMENT YEAR 200910. IN PURS UANCE OF SUCH A PROPOSAL, A SHOW CAUSE NOTICE WAS ISSUED BY THE LEA RNED DIT FOR WITHDRAWAL OF THE REGISTRATION GRANTED EARLIER AND ALSO HIGHLI GHTING THE DETAILS OF INCOME SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT WHICH H AS BEEN ELABORATED IN PARA2 OF THE ORDER THAT IT VIOLATES PROVISO TO SEC TION 2(15). IN RESPONSE, THE ASSESSEE FINISHED A WRITTEN SUBMISSIONS VIDE LETTER DATED 18 TH OCTOBER 2011, BEFORE THE LEARNED DIT. THE SUM AND SUBSTANCE OF TH E ASSESSEES SUBMISSIONS WERE THAT ITS ACTIVITIES ARE NOT HIT BY THE PROVISO TO SECTION 2(15) AND ITS ENTIRE RECEIPTS IS IN PURSUANCE OF IT S MAIN OBJECTS ONLY IE., FOR ADVANCEMENT OF SPORTS WHICH FALLS WITHIN THE CATEGO RY OF EDUCATIONAL ACTIVITIES. IT WAS FURTHER SUBMITTED THAT THE ASSES SEE IS NOT RUNNING ANY NAVI MUMBAI SPORTS ASSOCIATION 3 RESTAURANT OR FOOD SERVICES AS ALLEGED BY THE LEARN ED DIT IN THE SHOW CAUSE NOTICE AS FOOD SERVICE WAS AT SUBSIDIZED RATES FOR ITS MEMBERS AND SPORTS PERSON AND IT IS RECEIVING INCOME BY WAY OF ROYALTY FROM THE RESTAURANT RENDERING SUCH SERVICES. INDEPENDENTLY, IT IS NOT R UNNING ANY KIND OF ACTIVITIES WHICH ARE IN THE NATURE OF TRADE OR COMM ERCE OR BUSINESS. 4. THE LEARNED DIT, AFTER REFERRING TO THE NEWLY INSER TED PROVISO TO SECTION 2(15), W.E.F. 1 ST APRIL 2009, OBSERVED THAT, IF ANY INSTITUTION OR T RUST, CARRIES OUT ANY ACTIVITIES WHICH IS IN THE NATURE O F TRADE, COMMERCE OR BUSINESS FOR A CESS FOR IF OR ANY OTHER CONSIDERATI ON, THEN IT CANNOT BE HELD THAT IT IS CARRYING OUT ANY CHARITABLE ACTIVITIES. IN THE ASSESSEES CASE, THERE ARE CLEAR CUT EARNING SHOWING THAT THE INCOME IS AL SO GENERATED BY WAY OF ROYALTY FROM RESTAURANT, DECORATORS, DECORATED AND MULTIPURPOSE HALL, WHICH ARE FAR EXCESS OF ` 10,00,000. IN ANY CASE, THE ASSESSEES INCOME IS F ROM COMMERCIAL EXPLOITATION OF ITS PROPERTY IN A SYSTEM ATIC MANNER. AFTER REFERRING TO THE DECISION OF THE HON'BLE SUPREME CO URT IN SHAMBHU INVESTMENTS LTD V/S CIT, [2003] 263 ITR 1143 (SC), HE HELD THAT SUCH AN INCOME IS BUSINESS INCOME ONLY. HE REFERRED TO VARI OUS OTHER CASE LAWS WHEREIN SIMILAR EXPLANATION OF PROPERTY HAS BEEN TR EATED AS BUSINESS INCOME. IN HIS FINDING, HE HAS ALSO NOTED THAT THE ASSESSEE HAS SHOWN FOLLOWING RECEIPTS IN THE INCOME AND EXPENDITURE AC COUNT VIZ., ROYALTY FROM R ESTAURANT FOR ` 28,14,240, ROYALTY RECEIVED FROM DECORATORS FOR ` 84,000, ROYALTY FROM MULTIPURPOSE HALL FOR ` 15,44,000, INCOME FROM ROOM RENT OF ` 77,07,668 AND FROM CONFERENCE HALL RENT OF ` 36,12,953, ETC., WHICH ARE IN THE NATURE OF BUSINESS BY WAY OF EXPLOITING ITS ASSET COMMERCIALLY. ACCORDING LY, THE ASSESSEE IS DIRECTLY HIT BY PROVISO TO SECTION 2(15) WHICH HAS BEEN INTR ODUCED FROM ASSESSMENT YEAR 200910. ON THIS PREMISE, HE HAS CANCELLED THE REGISTRATION UNDER SECTION 12AA(3) W.E.F. THE ASSESSMENT YEAR 200910. 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MAIN ACTIVITY OF THE ASSESSEES TRUST IS PROVIDING SPORTS FACILITIES AND TRAINING IN VARIOUS KINDS OF SPORTS ACTIVITIES. FOR THIS PURPOSE, IT HAS PUT UP A SPORTS COMPLEX, NAVI MUMBAI SPORTS ASSOCIATION 4 CONSISTING OF VARIOUS INFRASTRUCTURES FOR VARIOUS K INDS OF SPORTS. BESIDES THIS, THE ASSESSEE HAS ALSO BEEN PROVIDING TRAINING AND C OACHING CLASSES IN VARIOUS FIELDS OF SPORTS AT NOMINAL FEES. FOR RUNNING SUCH ACTIVITIES, THE ASSESSEE HAS TO MAINTAIN INFRASTRUCTURE LIKE RESTAURANT FOR FOOD SERVICE, CONFERENCE HALL AND LODGING ROOMS FOR THE MEMBERS WHO ARE SPORTS PE RSONS. ALL THESE INFRASTRUCTURES ARE PART AND PARCEL OF SPORTS COMPL EX, WITHOUT WHICH SPORTS COMPLEX CANNOT BE RUN. THE ASSESSEE IS IN NO MANNER CARRYING OUT ANY INDEPENDENT ACTIVITIES OF TRADE AND COMMERCE AS GIV EN IN PROVISO TO SECTION 2(15) AS ALL THESE ACTIVITIES ARE ONLY INCIDENTAL T O RUNNING OF SPORTS COMPLEX AND ALSO FOR MAINTAINING ITS INFRASTRUCTURE IN PURS UANCE OF ITS OBJECTS. HE ALSO MADE DETAIL SUBMISSION AS TO WHY THE SAID PROVISO W ILL NOT BE APPLICABLE IN THE ASSESSEES CASE. IN SUPPORT OF HIS CONTENTION, HE HAS PLACED SPORTS ANNUAL REPORTS AND YEARLY EVENTS FOR VARIOUS YEARS WHICH WAS CARRIED OUT BY THE ASSESSEE. LASTLY, HE SUBMITTED THAT THE REGISTR ATION GRANTED UNDER SECTION 12A CAN ONLY BE CANCELLED IF THE CONDITIONS MENTIONED IN SECTION 12AA(3) HAS BEEN VIOLATED. IN THE PRESENT CASE, NOW HERE IT HAS BEEN POINTED OUT BY THE LEARNED DIT THAT ANY OF THE CONDITIONS M ENTIONED IN SECTION 12AA(3) HAS BEEN VIOLATED. FOR CANCELING THE REGIST RATION, IT IS IMPERATIVE THAT THE LEARNED DIT HAS TO RECORDED HIS SATISFACTI ON THAT THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH ITS OBJECT. IN SUPPORT OF HIS CONTENTION, HE H AS STRONGLY RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH IN BOMBAY PR ESIDENCY GOLF CLUB LTD. V/S DIT [2012] 149 TTJ (MUM.) 471 (MUM.). 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE STRONGLY RELYING UPON THE ORDER OF THE LEARNED DIT, SUBMITTE D THAT ON A PERUSAL OF THE DETAILS OF INCOME, IT IS AMPLY CLEAR THAT THE ASSES SEE IS CARRYING OUT TRADE ACTIVITIES WHICH HAVE BEEN HIGHLIGHTED IN DETAIL BY THE LEARNED DIT IN HIS ORDER. ALL THESE RECEIPTS SHOW THAT THEY ARE NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH REGISTRATION WAS GRANTED. THUS, T HE CONDITIONS MENTIONED IN SECTION 12AA(3) HAS BEEN CLEARLY VIOLATED AND, THER EFORE, THE ORDER OF THE LEARNED DIT SHOULD BE AFFIRMED. NAVI MUMBAI SPORTS ASSOCIATION 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RE LEVANT FINDINGS OF THE LEARNED DIT AND THE MATERIAL AVAILABLE IN RECOR D. THE ASSESSEE HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A LOOKING TO I TS MAIN OBJECTS, WHICH ARE MAINLY FOR PROVIDING FACILITIES FOR INDOOR AND OUTD OOR GAMES AND FOR VARIOUS PHYSICAL ACTIVITIES AND ORGANIZING TRAINING CAMPS I N THE FIELD OF SPORTS. FOR THIS PURPOSE, IT HAS PUT UP A SPORTS COMPLEX CONSIS TING OF VARIOUS INFRASTRUCTURES FOR RUNNING VARIOUS KINDS OF SPORTS ACTIVITIES. SUCH A SPORTS COMPLEX ALSO CONSISTED OF INFRASTRUCTURES INCLUDING LIKE RESTAURANT, HALL AND LODGING ROOMS. FROM THESE INFRASTRUCTURES, THE ASSE SSEE HAS RECEIVED ROYALTY INCOME WHICH HAS BEEN ADVERSELY VIEWED BY THE LEARN ED DIT ON THE GROUND THAT THEY ARE IN THE NATURE OF TRADE AND BUSINESS. THE LEARNED DIT HAS NOT EXAMINED WHETHER THESE ACTIVITIES ARE ACTUALLY INCI DENTAL TO THE MAIN OBJECTS OF CARRYING OUT SPORTS ACTIVITIES AND MAINTAINING O F SPORTS COMPLEX OR ARE PURELY FOR TRADE AND COMMERCE. THIS IS A VERY IMPOR TANT ASPECT WHICH REQUIRES DEEP SCRUTINY AND ANALYSIS. FURTHER REGIST RATION GRANTED UNDER SECTION 12A / 12AA CAN BE CANCELLED ONLY IF THE CIT / DIT IS SATISFIED THAT THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENU INE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST IN TERMS OF THE PROVISIONS OF SECTION 12AA(3). IT IS IMPERATIVE FOR THE CIT / DIT TO EXAMINE AS TO WHETHER TWIN CONDITIONS MENTIONED THEREIN HAS BEEN VIOLATED OR NOT. ON A PERUSAL OF THE IMPUGNED ORDER, IT IS SEEN THAT THE LEARNED DIT HAS NOWHERE RECORDED ANY SATISFACTION THAT THE ACTIVITIES OF THE ASSESSE E TRUST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS FOR WHICH IT WAS GRANTED REGISTRATION UNDER SECTION 12A. EVEN IF THE ASSESSEES RECEIPTS FALL IN THE NATURE OF TRADE, COMMERCE OR BUSINESS ACTIVITIE S, THEN ALSO IT NEEDS TO BE EXAMINED WHETHER THESE ACTIVITIES ARE DIRECTLY RELA TED TO PROMOTION AND CARRYING OF SPORTS ACTIVITIES AS PER THE OBJECTS OR NOT, IF THESE ACTIVITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS ON THE ACTIVITIE S OF THE TRUST ARE NOT GENUINE, THEN CERTAINLY REGISTRATION GRANTED EARLIE R CAN BE CANCELLED UNDER SECTION 12AA(3). SINCE THESE ASPECTS HAVE NOT BEEN EXAMINED PROPERLY, THEREFORE, WE SET ASIDE THE IMPUGNED ORDER PASSED B Y THE LEARNED DIT AND NAVI MUMBAI SPORTS ASSOCIATION 6 REMANDED BACK THE SAME TO HIS FILE FOR EXAMINING TH IS ISSUE AFRESH IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AND IN ACCORDA NCE WITH LAW. THUS, THE GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. 1 #6 &) *1# 2 72 89: ' '$ !# ; ) # <=> 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. $ 2 4+ ? @)6 18 TH SEPTEMBER 2013 2 A > ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPTEMBER 2013 SD/- SANJAY ARORA ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, @) @) @) @) DATED: 18 TH SEPTEMBER 2013 $ 2 .&#'B CB+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) ! / THE REVENUE; (3) D () / THE CIT(A); (4) D / THE CIT, MUMBAI CITY CONCERNED; (5) B!GA .&#&) , , / THE DR, ITAT, MUMBAI; (6) AH* I / GUARD FILE. /B# .&# / TRUE COPY $) / BY ORDER . . JK / PRADEEP J. CHOWDHURY !1L &) J! / SR. PRIVATE SECRETARY 8 / < / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI