-
IT : Mumbai Cricket Association registration under section 12AA Cancelled
FACTS
• Mumbai Cricket Association (MCA) a public
charitable trust was registered under section 12A and is engaged in the
activity of promoting and regulating the game of cricket in Mumbai.
• MCA entered into a concession agreement with
Shrike Infrastructure (Concessionaire) for development of World Class
Indoor Cricket Academy on a plot situated at Bandra Kurla complex.
• As per concession agreement, the concessionaire
was to construct Indoor Cricket Academy(ICA) 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 was 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.
• The activity undertaken at ICA includes running
four restaurants with bar, banquets hall which cannot be termed as
activity incidental to cricket.
• 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.
• The Association had 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 made nomination and nearly 800
Associates were admitted to the ICA Facility in the year in which
facilities became operational i.e. from 11th April 2009.
• The DIT vide order dated 31-12-2010 cancelled
registration on the grounds that assessee(MCA) had conceived and
executed the plan. The assessee had thought of starting these
activities. M/s. SI is mere a contractor for few years. Actually the
ownership of the entire premises was that of the assessee. The activity
cannot be said to be incidental to the cricket activity. The DIT also
held that collecting associate fee of around 10 to 15 lacs per member
could by no stretch of imagination said to be non-business activity. The concept of associate membership at such a huge price tag itself speak
commerciality rather than a charitable cause. Further M/s. SI 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. SI under the agreement clearly spells out the commerciality of
transaction.
HELD
• From the reading of the Agreement between MCA
& SI, it was clear that the reigns of the Managing Committee of ICA
Facilities shall always remain with MCA.
• MCA entered into an agreement with SI to develop two premises, i.e. ICA and ICA Facilities, which were 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 ultimately came up, was totally against the terms and conditions on which the allotment of land was taken on.
• The contentions of the AR, that once
registration is granted, it cannot be reviewed cannot be accepted. There is no bar in the review of functions of an Association, which 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. However,
registration cannot be cancelled retrospectively.
• In the result, cancellation of registration
shall not be retrospective i.e. from date of signing of concessionaire
agreement but prospective i.e. from 1-6-2010 i.e. date of amendment of
section 12AA(3).
■■■
[2012] 24
taxmann.com 99 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'B'
Mumbai Cricket Association
v.
Director of Income-tax (Exemption)
R.S. SYAL, ACCOUNTANT MEMBER
AND VIVEK VARMA, JUDICIAL MEMBER
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
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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