Case Law Details

Case Name : Mumbai Cricket Association Vs Director of Income-tax (Exemption) (ITAT Mumbai)
Appeal Number : IT Appeal No. 1700 (MUM.) OF 2011
Date of Judgement/Order : 08/08/2012
Related Assessment Year :
Courts : All ITAT (4269) ITAT Mumbai (1423)

IN THE ITAT MUMBAI BENCH ‘B’

Mumbai Cricket Association

V/s.

Director of Income-tax (Exemption)

IT APPEAL NO. 1700 (MUM.) OF 2011

AUGUST 8, 2012

ORDER

Vivek Varma, Judicial Member

The instant appeal arises from the order of DIT (exemption), Mumbai, dated 31-12-2010, wherein the DIT (Exmp). has cancelled the registration u/s 12A of the I.T. Act, 1961.

2. The basic facts emanating from the impugned order and material placed before us are that –

(1)  The Appellant, Mumbai Cricket Association (Association) is registered under 7 Societies Registration Act 1860 and Bombay Public Trust Act, 1950 under reg. No. BOM/300/74 GBBSD dtd. 21st October 1974 and No. F 34- (Mum) dtd. 30th November 1974 respectively. The Association was registered u/s 12A of the Income Tax Act, 1961 w.e.f. 14-03-1975.

(2)  The Association is a public charitable trust and is engaged in the activity of promoting and regulating the game of Cricket in Mumbai. It also has jurisdiction over the Cricket tournaments conducted in Thane District, Mumbai (City as well as Suburbs) and Navi Mumbai. It conducts various National & International cricket tournaments, First class and local tournaments for men as well as women. Various sports associations / clubs which participate in cricket tournaments organized in Mumbai are the Association’s members.

(3)  It was the intention of the Association to promote / develop a world-class cricket training and practice facility where top-level cricketers would be facilitated in improving the technical aspects of the game. Such facilities were available internationally, but nowhere in India till that date. Creation of such facilities however required significant investment of funds. The proposal for putting up an Indoor Cricket School was first mooted in the 90’s and a space earmarked for the same at the Association’s premises at Churchgate. However, due to non-availability of finance, the project which was started had to be abandoned after proceeding up to plinth level.

(4)  It was during this time that the Appellant Association, as a means to raise funds for construction of Indoor Cricket Academy, let out, vacant land earmarked for the construction of an Indoor Cricket School, and collected hire charges / donations from its users and a Contractor who was carrying out decoration for such users etc. The Department took a view that the said activities cannot be said to be incidental to the assessee’s objects of control, supervision, regulation and encouragement in India of game of cricket, however, in an appeal, Hon’ble Mumbai Tribunal considering the purpose of collection observed that such activity constitutes integral part of the bonafide activities of the Association and also opined that when an organization is a non profit seeking venture and a public organization, seeking optimal utilization of its resource per se does not change its character to a business organization.

(5)  Nonetheless, the paucity of funds continued for more than one decade. Therefore, despite the intention to do so it was only in the year 2005, that the Association was able to put together a scheme whereby such a centre would be facilitated. For this purpose the Association entered into an agreement with M/s Shirke Infrastructure (Concessionaire) for development of World Class Indoor Cricket Academy on a plot situated at Bandra Kurla Complex.

(6)  As per the concession agreement, the concessionaire was to construct the Indoor Cricket Academy (ICA) and Facilities therein at its own cost. ICA was to be handed over immediately upon completion of its construction for exclusive use, administration and maintenance by the Association. The Academy is equipped with the best sporting facilities and trained professionals. With ultra modern setup to practice under, the MCA adds a scientific touch to the game of Cricket. The Academy is created with the finest equipment and training facilities, indoor nets equipped with video cameras to facilitate coaching, viewing gallery for coaches etc.

(7)  In order to enable the Concessionaire to recoup its cost the Association granted him a ‘concession’ to operate / run certain facilities (known as ICA Facilities) in the constructed premises by admitting 7000 Associates to the facility who will be permitted to make use of such facilities on payment of charges to the Concessionaire.

(8)  The Association has right to determine and retain the Associateship fees in respect of 1000 Associates comprising of former India/Mumbai Players, cricket umpires, and such persons nominated by its member clubs etc. at a nominal sum of Rs. 10,000 per Associate. The Association has already made nomination for nearly 800 Associates, who have been admitted to the ICA Facility in the year in which facilities became operational i.e. from 11th April 2009.

(9)  Based on the proposal forwarded to the office of the Respondent by Addl. DIT (E), Range -1, a show cause notice for withdrawal of registration u/s 12A was served in person to legal representative of the appellant on 21-12-2010.

The DIT, vide order dated 31.12.2010, cancelled the registration, as per the provisions of section 12AA(3) of the Act, holding-

“Assessee has stated that the object of the assessee is charitable and its activities are also charitable however when the activities planned in the concession agreement entered between Mumbai Cricket Association and M/s Shirke Infrastructure dated 12.12.2005 are analyzed the picture is different. In the said agreement it is mentioned that M/s Shirke Infrastructure will be constructing indoor cricket academy and facilities centre. The plan for the said project has been prepared at the advise of the MCA. It is observed that what is referred as facility centre is referred as MCA Recreation Centre in practice and also in the advertisements which are appearing in newspaper. It is seen that MCA Recreation Centre consists of following things:-

Facilities :

 1.  Sports

   •  Badmiton

   •  Sqaush

   •  Billiards

   •  Semi Olympic Size Swimming Pool

   •  Unisex Gym

 2.  Fine Dining

   •  Four Restaurants

   •  Coffee Shop – Pavilion(Multicuisine) -100 Seaters

   •  Oriental – Swing (PAN Asian/Chinese) – 100 Seaters

   •  Mediterranean – Western Willow – 100 Seaters

   •  Bar-Spin

 3.  Banquet Hall

   •  Banquet Hall – 300 PAX

   •  Banquet Hall with Lawn – 1000 PAX

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 4.  Other Facilities

   •  Rooms – Total 22 including two suites

   •  Meeting rooms

   •  Card Room

   •  Lounge

COMING SOON

   •  Net Surfing

   •  Library

   •  Minitheatre

   •  Lawn Tennis Courts

Thus the simple look at the above facilities clearly points out that the total area a located for cricket is less than the total area for non-cricket activity.

 5.  The activity of running four restaurants with bar, banquets hall cannot be termed as activity incidental to cricket. Though, assessee has argued that the said activities are being run by Shrike Infrastructure. However assessee has conceived and executed the plan. The assessee had thought of starting these activities. M/s. Shrike Infrastructure is mere a contractor for few years. Actually the ownership Of the entire premises is that of the assessee. Thus the assessee has thought of carrying out business activity by entering into agreement referred above. The activity cannot be said to be said to be incidental to the cricket activity.

 6.  It is also observed that as per the said agreement the assessee was to receive 50% of associate fee for 3000 members. The associate fee is around 10 to 15 lacs per member. By no stretch of imagination it can be said that collecting such kind of substantial associate fee can be said to be non-business activity This activity is nothing but business activity. The concept of associate membership at such a huge price tag itself speak commerciality being involved in it rather than a charitable cause being undertaken by the assessee. Further M/s Shirke Infrastructure to receive the amount of fee so collected from the first 3000 associate member and if that itself is taken into account, the amount of profit being shared by M/s. Shirke Infrastructure under the agreement clearly spells out the commerciality and transaction the assessee being involved in it.

 7.  It has been argued by the assessee that even if the registration is cancelled it will be prospective. This argument is also not acceptable. Normally return of income is filed after completion of the Thus if it is presumed that this office doesn’t have authority to confer registration for the purpose of the activities which had already taken place, then the income tax department doesn’t have any authority to cancel. This is a far-fetched argument. No registration can be a permanent feature even if the activities are not genuine. It is obvious that the department has power to cancel the registration for the year when carried out in accordance with the objects of the trust or institution then he shall pass order in writing cancelling the registration of such trust or institution. The word used in the aforesaid section ‘genuine’ refers to time when the activities of the trust or institution has not become genuine or not in accordance with the objects of the trust and it clearly spells that the registration in such case has to be cancelled from the date on which the activities of such trust or institution has become non-genuine or not in accordance with the objects of the trust. It is futile to submit that the cancellation of such trust or public institution would operate from the date subsequent to the date of the order. Therefore, I am of the considered view that the cancellation of the registration of the trust/institution is required to be made effective from the date on which the activities of such trust/institutions have become non-genuine or not in accordance with the objects of such trust/institution. Therefore in the instant case, the activities of the assessee have become non-genuine from the date on which the assessee entered into agreements with M/s Shirke Infrastructure which has held to be not in accordance with the objects off the trust/institution. Since the violation in terms of making commercial activities rather than pursuing charitable activities dates back to the period earlier to assessment year 2008-09 for which the AO has referred the matter to the undersigned the registration u/s. 12A stands cancelled from the date on which the assessee has committed violation and the AO is required to take necessary action accordingly.

 8. As has been discussed in the earlier para the activity of the assessee are business activity and cannot be in any way be said to incidental to the objects being pursued by the assessee. Thus, the activities are against the objects of the trust.

 9. It is also further observed that the land at Bandra-Kurla Complex was allotted by MMRDA to MCA strictly for non-commercial activity. It was mainly allotted for the activity of cricket. However by planning, executing the activity of MCA Recreation Centre, the MCA has violated the terms of the agreement vide which MMRDA had allotted the land. Thus by violating the terms of the agreement, MCA has acted against public policy. As per the agreement of the MMRDA, the sub-lease was not permitted however by entering into concession agreement with M/s Shirke Infrastructure, MCA has actually sub-leased its rights to M/s Shirke Infrastructure. This is violation of the agreement clause of MMRDA. It is also observed no stamp duty has been paid on the said concession agreement between MCA and M/s. Shirke Infrastructure. This is violation of stamp act. If no organization which is violating the government act is allowed exemption by allowing registration, it will be against public policy.

3. The issue before us is whether the cancellation of registration was in accordance with law.

4. In the course of hearing before us, the Authorised Representative submitted that the assessee, Mumbai Cricket Association (MCA), vide a “Concession Agreement” dated 12-12-2005, granted rights to construct Indoor Cricket Academy (ICA) and ICA Facility, to M/s Shirke Infrastructure (SI), according to which SI shall construct ICA within two years and hand over the ICA project to MCA. SI shall also construct the ICA Facilities, on the vacant land and shall utilise the same for further 15 years, and at the end of 17 years (2 years and 15 years), SI shall hand over the Facilities to MCA. According to the agreement, SI shall pay to MCA an aggregate sum of Rs. 75 crores in phases, in 13 installments upto 31-03-2017, starting with Rs. 2.00 crores at the time of signing of the agreement (APB-A 80).

5. It is submitted by the AR that so far as the development of ICA is concerned, there is no dispute, but the dispute has arisen on the development of ICA Facilities, which according to the DIT, did not read in, and was not in accordance to the objects of MCA. According to the AR, ICA Facilities would include sporting facilities, health facilities, recreational facilities, cafeteria, conference facilities for relaxation, leisure, entertainment, health and fitness located at the project site,……..” (Clause 1.18 of the agreement), and in accordance with clause 4.15, SI alone shall be responsible for meeting the cost of running the ICA Facility and shall be responsible for all levies, taxes, duties, fees payable to all and sundry concerned authorities, further, in accordance with the agreement, SI shall be responsible at his own cost, for all maintenance and repairs of the ICA Facilities and engage its own staff and shall have the discretion to levy, demand, collect and retain appropriate user charges, sponsorship and advertisement charges, meaning thereby that all costs and advantage shall be borne and enjoyed by SI for the period, till the ICA Facilities shall remain with them. The AR, further pointed out that the coordinate Bench in the assessee’s own case for assessment years 1989-90 to 1991-92 had allowed the exemptions u/s 10(23) on a finding that, “The quantum of these receipts also does not justify the same being considered as in the nature of organised business activity. In our considered view, the hiring out of the vacant space cannot be treated as a business activity. Similarly, as regards advertisement income and film shooting charges, the relevant amounts were only…. The quantum and nature of these receipts can also hardly justify being considered as receipts from a business for that purpose”. The AR pointed out that, overall, MCA had inherent power within itself “To sell, improve, manage, develop, lease, mortgage, dispose of or otherwise deal with all or any part of the property of the Association whether movable or immovable”. The AR further pointed out that in order to maintain a distinct personality, no activities of ICA Facilities have been shown in the books of MCA, whereas the entire project has been shown in the books and on the website of SI. The AR thus, pleaded that the conception of the idea to develop ICA Facilities were to utilise the vacant lands and to generate funds for the construction and sustenance of MCA and ICA for the future time to come.

6. The AR objecting to the cancellation of registration, vehemently submitted that, a future take over of the facilities should not be allowed to be the reason for cancellation of Registration, now, and specially, from the date of signing of the agreement. He reiterated the submissions made before the DIT that –

(1)  The Appellant, Mumbai Cricket Association (Association) is registered under 7 Societies Registration Act 1860 and Bombay Public Trust Act, 1950 under reg. No.BOM/300/74 GBBSD dtd. 21st October 1974 and No. F 3451- (Mum) dtd. 30th November 1974 respectively. The Association was registered u/s 12A of the Income Tax Act, 1961 w.e.f. 14-03-1975.

(2)  The Association is a public charitable trust and is engaged in the activity of promoting and regulating the game of Cricket in Mumbai. It also has jurisdiction over the Cricket tournaments conducted in Thane District, Mumbai (City as well as Suburbs) and Navi Mumbai. It conducts various national & International cricket tournaments, First class and local tournaments for men as well as women. Various sports associations / clubs which participate in cricket tournaments organized in Mumbai are the Association’s members.

(3)  It was the intention of the Association to promote I develop a world-class cricket training and practice facility where top-level cricketers would be facilitated in improving the technical aspects of the game. Such facilities were available internationally, but nowhere in India till that date. Creation of such facilities however required significant investment of funds. The proposal for putting up an Indoor Cricket School was first mooted in the 90’s and a space earmarked for the same at the Association’s premises at Churchgate. However, due to non-availability of finance, the project which was started had to be abandoned after proceeding up to plinth level.

(4)  It was during this time that the Appellant Association, as a means to raise funds for construction of Indoor Cricket Academy, let out, vacant land earmarked for the construction of an Indoor Cricket School, and collected hire charges donations from its users and a Contractor who was carrying out decoration for such users etc. The Department took a view that the said activities cannot be said to be incidental to the assessee’s objects of control, supervision, regulation and encouragement in India of game of cricket, However, In an appeal, Hon’ble Mumbai Tribunal considering the purpose of collection observed that such activity constitutes integral part of the bonafide activities of the Association and also opined that when an organization is a non profit seeking venture and a public organization, seeking optimal utilization of its resource per se does not change its character to a business organization.

(5)  Nonetheless, the paucity of funds continued for more than one decade. Therefore, despite the intention to do so it was only in the year 2005, that the Association was able to put together a scheme whereby such a centre would be facilitated. For this purpose the Association entered into an agreement with M/S Shirke Infrastructure (Concessionaire) for development of World Class Indoor Cricket Academy on a plot situated at Bandra Kurla Complex.

(6)  As per the concession agreement, the concessionaire was to construct the Indoor Cricket Academy (ICA) and Facilities therein at its own cost. ICA was to be handed over immediately upon completion of its construction for exclusive use, administration and maintenance by the Association. The Academy is equipped with the best sporting facilities and trained professionals. With ultra modern setup to practice under, the MCA adds a scientific touch to the game of Cricket. The Academy is created with the finest equipment and training facilities, indoor nets equipped with video cameras to facilitate coaching, viewing gallery for coaches etc.

(7)  In order to enable the Concessionaire to recoup its cost the Association granted him a ‘concession’ to operate / run certain facilities (known as ICA Facilities ) in the constructed premises by admitting 7000 Associates to the facility who will be permitted to make use of such facilities on payment of charges to the Concessionaire.

(8)  The Association has right to determine and retain the Associateship fees in respect of 1000 Associates comprising of former India/Mumbai Players, cricket umpires, and such persons nominated by its member clubs etc. at a nominal sum of Rs.10,000 per Associate. The Association has already made nomination for nearly 800 Associates, who have been admitted to the ICA Facility in the year in which facilities became operational i.e from 11th April 2009.

The AR, to support his arguments, placed reliance on the decision of the co-ordinate Bench at Lucknow in the case of Kapoor Education Society v. CIT in I.T.A. No. 482/Luck/2010, wherein it had been observed, that if any trust/institution has been registered prior to 1st October, 2004 either u/s 12A or 12AA, the CIT has no power to cancel the registration u/s 12AA(3), as the provision for cancellation of registration, i.e. section 12AA(3) has been inserted in the statute book with prospective application from 1st June, 2010, and where the registration had been granted to the society/institution prior to that date, the registration cannot be cancelled. The AR pointed out that in the instant case registration u/s 12A had been granted on 14-03-1975. He, therefore, pleaded that registration cannot be cancelled, at least, from the date of signing of the concession Agreement, i.e. from 12-12-2005.

7. The AR also placed reliance on the decision of Hon’ble Allahabad High Court in the case of K.M. Scientific Research Centre v. Lakshman Prasad & Others, reported in 229 ITR (All), wherein it was held, (head notes), “Exemption u/s 10(21)-Retrospective withdrawal-Various scientific research activities being carried on by the petitioner getting due approval by prescribed authority-Association can be approved even though no actual research work has started-It is in process of establishing infrastructure for scientific research yet approval can be granted-For grant of approval no condition can be imposed-Having once granted the approval, prescribed authority becomes fuctus officio and revocation of approval with retrospective effect is illegal and unsustainable. The AO also referred to the case of CIT v. General Magnets Ltd, reported in 256 ITR 471 (Cal), wherein Hon’ble Calcutta High Court held, “withdrawal of approval u/s 35CCA with retrospective effect is bad….”.

8. The AR, thus concluded that in the instant case, when the two projects, i.e. ICA and ICA Facilities are demarcated and no added or adverse advantage has been acquired by the assessee on the date of signing of the agreement, which went or could have gone against the objects and other recitals of the Association (MCA), then keeping in view the above cited decisions and the decision in the case of the assessee, by the co-ordinate Bench wherein, also, the issue for commercial utilisation of vacant land had been considered, in favour of the assessee, the cancellation of registration, granted under section 12A, that too, from a retrospective date, is neither in accordance with law or through judicial interpretation and appreciation.

9. The Department, being represented by Special Counsel, Mr. G.C. Srivastva, on the other hand, very strongly supported the order passed by the DIT, Mumbai, cancelling the registration granted to the assessee. He submitted that, at the out set, the assessee violated the usage of clause of the letter for allotment of land in favour of MCA, for the purpose of ICA, dated 26-05-2001, wherein, the first clause said,  “(a) This plot shall not be used for commercial purposes”. He further pointed out that President of MCA had requested MMRDA for allotment of land for “Cricket Academy” and the allotment was made with a specific clause in the lease agreement, which said “(m) To use the demised premises for the purpose of ICA in accordance with Bandra Kurla Notified Area Development Control Regulations, 1978 and Development Control Regulations, for Greater Mumbai, 1991 and for no other purpose”. He submitted that the idea of ICA Facility was that of the assessee from the very beginning, because in the agreement between the MCA and SI, the expression “project” has been defined as, “Project shall mean (i) the development, financing, design, construction of the ICA and ICA Facilities; (i) Hand over the ICA; (ii) operation and maintenance of the ICA Facilities and all activities incidental thereto such as providing the requisite infrastructure, staff, development support, maintaining quality support and other such services necessary for the purpose of providing the services on a continuous basis and (iv) hand over the ICA Facilities at the end of the term of the concession”. He further pointed out that ICA and structure for the ICA Facilities shall be constructed by the concessionaire (SI) as per the designs and specifications and the building plans which are prepared by Mr. Shashi Prabhu, Architect appointed by the Concessioning Authority (MCA). He also pointed out that clause 1.1.10 of the Concession Agreement, commercial operations or commercial purposes means making available by the concessionaire of the ICA facilities for usage by Associates against payment of Associateship fees and user charges in terms of this concession Agreement. According to clause 1.1.44, Managing Committee shall mean managing committee framed, for supervision, management and operations of the ICA Facilities and is different from the committee of MCA framed under the rules framed by the MCA as per their meeting held on 31-12-2002 and he noted that functions and constitution of the Managing Committee had been recited in clause 20.1 of the Concessionaire Agreement.

10. The DR pointed out that as a consequence of this Agreement, SI was allowed to induct 7000 members, for membership of ICA (which included ICA Facilities). He pointed out, that out of this 7000 Associate Members, 6000 associates shall be at the discretion of concessionaire (SI) and 1000 shall be recommended by the Concessioning Authority (MCA) and even out of these 1000 associates, only 300 were earmarked for former test players, former umpires and persons of stature, and 700 shall be affiliated clubs. Therefore, out of total prospective enrolments of 7000 memberships, only 300 were under the discretion of MCA. Whereas, SI shall also have the right to recommend honorary associates. The DR also pointed to clause 20.4(ii) wherein SI shall determine the Associateship Fee for the 6000 members.

11. The DR pointing to all these clauses, within the Agreement, suggest, that, in fact what was conceived, and what has been given the shape of, is an ultra modern and high class club, for higher echelons of the society. He concluded that construction and running of the ICA Facilities were, in clear violations of the allotment of land from MMRDA. Even from the point of view, that ICA Facilities, occupied more space in the land allotted to MCA by the MMRDA. The entire idea to garner funds, for the running of ICA and its authorized usage, has ultimately formed an illegal application of the land, allotted to MCA. He therefore submitted that the cancelling of Registration u/s 12AA(3) of the Act, was a correct decision, taken by the DIT.

12. In the rejoinder, the AR submitted that the role of the Managing Committee was two fold, i.e. having full control over the premises and managing the ICA. He also submitted that till the end of the stipulated 17 years, the running of the club facility, including commercial and profit motive shall remain with SI, and only after the completion of this tenure, would the reigns of the profit making/commercial activities shall come to MCA and only at that time, the issue of registration should be seen. He finally submitted that there is a difference between power of the trustees and objects of the trust, which has been explained by the Hon’ble Bombay High Court, in the case of Deccan Gymkhana v. CIT reported in, 262 ITR 459, wherein the Hon’ble High Court (head notes) held, “..dominant object of trust was charitable”. He, therefore, submitted that cancellation of registration at this stage was incorrect. He also urged and reiterated, that the DIT erred in cancelling the registration from a retrospective date, submitting that section 12AA(3), the provision, giving the authority for cancellation, was brought into the statute books w.e.f. 01-06-2010, meaning thereby prospectively.

He, therefore, concluded by pleading that the DIT erred in cancelling the registration granted u/s 12A, as the objects of the Association remained unchanged, even on the signing of the concession agreement and even otherwise, legally too, the registration could not have been cancelled from the date of signing of the concession agreement and hence the impugned order, dated, 31.12.2010, should be cancelled.

13. We have heard both the parties at length, and we find that none of the facts, as mentioned/narrated during the course of hearing from either side, had been disputed, therefore, the issue is entirely based on the interpretation of facts. At this stage, we are required to interpret the clauses in two agreements which have been discussed before us extensively, first one being lease agreement dated 05-03-2004 entered into between MMRDA and MCA.

14. MCA required land for construction and development of world class Indoor Cricket Academy, which could house and cater not only to the cricket fraternity but also provide facilities for development of other sports like Badminton, Squash and other sports and shall be for the benefit of sports students all over Maharashtra and also past and present cricketers, umpires, donors and associates.

15. This land was made available by MMRDA to MCA, wherein MMRDA allotted the land measuring 52,157 sq. mtrs., with conditions, including the condition for usage, which stipulated, “(m) To use the demised premises for the purpose of ICA ……, and for no other purpose”.

16. Clause 8 stipulated that the demised plot shall not be used for commercial purposes. In sub clause (b), “the permissible are shall be utilised for ICA, Gym, Library, Hostel and catering facilities for students of the academy…”, being the basic stand points.

17. On the 2nd agreement, i.e. between MCA and SI, it was agreed that SI being SPV, on behalf of Shirke group shall utilise its affiliates and experience to build and hand over the ICA to MCA within two years from the date of signing of the agreement and shall retain ICA Facilities for the next 15 years, wherein, it shall have multifarious sporting facilities, health and recreational facilities, cafeterias, conference facilities for relaxation, leisure, entertainment, health and fitness, located at the project site.

18. We find, that so far as building and developing of ICA was concerned there was no dispute, the dispute arose with the development and functioning of ICA Facilities, i.e. whether the ICA Facilities conform to the basic idea of an Association/Trust/Society, where the profit and commercial motive is never at the forefront, but what is desired and delivered is a public good and not individual good. What we find here is that MCA entered into an agreement with SI to develop two premises, i.e. ICA and ICA Facilities, which we find are entirely different in their own functioning. The facilities, as developed cannot, but be called as commercial and profit sharing venture undertaken, primarily by SI, but with the assessee to stand on. What we see from conjoint reading of both the agreements, is, that what ultimately came up, was totally against the terms and conditions on which the allotment of land was taken on. We do find that in the assessee’s own case, at times commercial activities were undertaken on the unutilized land, and was being used for giving on hire even for film shooting, and still the exemption u/s 10(23) had been allowed, but we find that, that commercial/rental activity took place for film shooting, where a film was shot and after the film was shot, the lessees exited after giving the rent for the targeted usage. This was held to be not a commercial activity for the purpose of earning commercial income, but in the case at hand, what is done is that there is a permanent establishment, with permanent structure that had been developed for the purpose of creating a club, wherein the club membership itself would be hefty amounts (in fact DIT mentions the club membership amounts are to the tune of Rs. 15 lacs), for the creation/admission of its members (associates).

19. We also find from the reading of the Agreement between MCA & SI that the reigns of the Managing Committee of ICA Facilities shall always remain with MCA, which is given as under:

 a.  The Concessionaire and the Concessioning Authority shall together form a Managing Committee within a period of 90 days from the Commencement Date for the supervision, management and administration of the ICA Facilities and such Managing Committee shall consist of all the office bearers of the Concessioning Authority and 4 members to be nominated by the Concessionaire.

 b.  Functions of the Managing Committee shall be restricted only to the managing and supervising the day-to-day affairs of the ICA Facilities, recommendation of Associates and formulation of the Facilities Area Rules.

 c.  Members of the Managing Committee shall by voting elect one amongst themselves as the Chairman of the Managing Committee and such Chairman shall preside over the meetings of the Managing Committee.

 d.  The post of the Chairman shall be held by the nominees of Concessioning Authority who will preside over the meetings of Management Committee and the Chairman will have the casting vote.

 e.  The Managing Committee shall meet at least two times during every three months and prior written notice of such meeting shall be given by the Convener to be appointed for this purpose to each Party at least eight days before such meeting.

 f.  The quorum required for any meeting of the Managing Committee to be held valid and shall be the presence of five Associates of the Managing Committee and such quorum must include at least one Associate nominated by the Concessionaire.

 g.  Any decisions taken during the meetings of the Managing Committee with the requisite quorum shall be valid and binding on the Parties subject to the ……..

These clauses, clearly show, that despite the fact that the costs, running development, repairs shall be borne by the SI, till the concession agreement is in operation, but according to these clauses, the assessee, i.e. MCA shall always have the reigns of the entire ICA, which include ICA and ICA Facilities, in its own hands, and MCA would, never ever, become a ring side viewer even for the ICA Facilities.

20. From the facts as seen, we find that there has been a complete violation of basic condition for allotment of land and its utilization by MCA, and so far as its conduct is considered, MCA has entered into commercial and profit motive for a longer duration, covering atleast 17 years, which, we feel, that MCA, as an Association crossed its line, and entered into the territory of profit motive and not pursuing only charitable and welfare activities. But, here, we find ourselves bound from the legal citations, referred to by the AR, wherein coordinate Bench of Lucknow ITAT in the case of Kapoor Educational Society v. CIT, reported in 44 DTR 97 (Luck Trib) held that insertion of section 12AA is prospective, w.e.f. 01-06-2010 and where registration has been granted u/s 12A, provisions of section 12AA(3), cannot be applied.

21. The case of C.M. Scientific Research Centre, reported in 229 ITR 23 (All) wherein Hon’ble Allahabad High Court held that revoking approval with retrospective effect was illegal and unsustainable. This issue, was examined by Hon’ble Calcutta High Court in the case of CIT v. General Magnets Ltd, reported in 256 ITR 471 (Cal), wherein it was held that withdrawal of approval u/s 35CCA with retrospective effect is bad.

22. We are in total agreement with the crux arrived at, in all these cases, that where an approval had been given, its withdrawal with retrospective effect is bad and illegal. We are also in agreement with the arguments of the AR that sub section (3) was introduced in the statute books only with effect from 01.06.2010, i.e. its function shall only be prospective and it cannot be applied retrospectively. Till this point of view, we are in agreement with the arguments of the AR. However, the contentions of the AR, that once registration is granted, it cannot be reviewed, we would not be able to support this contention, because, we do not see any bar in the review of functions of an Association, which according to us, the department can do at any time, in fact the CIT can review the grant of registration at any time because the words used in the provision are, “and subsequently the Commissioner is satisfied”, which means that registration can be reviewed at any given point of time. There is no question, that once the registration is granted, the issue of registration becomes functus officio. The only thing now left is whether the registration can be revoked/cancelled retrospectively, for this, we are in agreement with the AR, that registration cannot be cancelled retrospectively. We certainly hold that in view of the prospective amendment, the decision of the DIT was not in conformity with law. We, therefore, direct that the cancellation of registration has to be effective from 01-06-2010, i.e. the date when the amendment was inserted in the provision. Even the impugned order is dated 31.12.2010, i.e. after the impugned provision was inserted.

23. The cancellation of registration granted to MCA, shall not date back to the date of signing of the Concessionaire Agreement, i.e. 12.12.2005, but shall be effective from 01.06.2010.

24. In the result, the appeal filed by the assessee is partly allowed.

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Category : Income Tax (25154)
Type : Featured (4133) Judiciary (9976)
Tags : ITAT Judgments (4449) section 12a (66)

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