September 2013
Khar Gymkhana vs. DIT(E) In the Income-tax Appellate Tribunal Mumbai Bench ‘A’, Mumbai Before B. Ramakotaiah, (A. M.) and Vivek Varma, (J. M.) I.T.A. No.: 373/Mum/2012 Asst. Year: 2009-10. Decided on 10-07-2013 Counsel for Assessee/Revenue: A. H. Dalal/ Surinder Jit Singh
By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
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Section 12AA—Order cancelling Registration of the trust for carrying on activities in the nature of trade, commerce or business revoked. Registration restored.
Facts: The assessee trust was granted registration under section 12A(a) since the year 1984. During the course of the assessment proceedings, the AO noticed that the assessee had earned income by the sale of liquor at Rs. 1.45 crore, canteen compensation at Rs. 20.67 lakh, Card and daily games, at Rs. 0.82 lakh, guest fees at Rs. 31.50 lakh and income from banquet. According to the AO these receipts were clearly in the nature of business income and were in excess of the monetary limit as laid down in the provisions of section 2(15) r.w. proviso which has come into effect from A.Y. 2009-10. Therefore, he concluded that such entity cannot be considered as for charitable purpose. Since the assessee is not for charitable purpose then the trust itself becomes non-genuine as it loses its public charitable status and accordingly the provision of section 12AA(3) of the Act gets attracted. Thus in view of the facts and circumstances the AO held that the assessee trust has become non-genuine and the registration as allowed to it in earlier years u/s. 12AA was cancelled/ withdrawn w.e.f A.Y. 2009-10.
Before the tribunal, the assessee contended that the rigours of section 12AA get attracted “if the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust, as the case may be.” According to the assessee just because the legislature has inserted section 2(15), registration, as allowed by the Income-tax Department cannot get cancelled, without the change of objects and character of the trust. He further placed reliance on the earlier decisions of the tribunal in ITAs no. 4315 & 4316/ Mum/2010 in assessee’s own case.
On the other hand, the revenue justified the order of the DIT and submitted that with the insertion of section 2(15), the character of the charitable trust has got very limited scope. It becomes ineligible for registration, if the trust gets into the field of trade or profit making.
Held:
The tribunal noted that the case of the department was that the assessee had crossed the twin conditions, as mentioned in section 12AA(3), viz., ”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”. However, it noted that in the instant case, the department had nowhere mentioned that “social intercourse among members” was not one of the objects of the trust, when it was originally formed on 04-10-1934. Further, it also noted that in the tribunal orders in the assessee’s own case which were relied on by the assessee, the aspect of section 2(15) had also been taken and adjudicated upon. Thus, noting that none of the revenue authorities have made any observation/comments on the objects recited as early as 04-10-1934 of the assessee trust, the twin conditions existing in section 12AA(3) and for ignoring the existing orders of the coordinate Bench in the case of the assessee and following the principles of judicial propriety, as well as the facts coming out of the documents placed before it, the tribunal held that the revenue has erred in cancelling the registration u/s. 12AA(3).
