The Commissioner of Income Tax, Raipur (C.G.) Vs Chhattisgarh State Cricket Sangh

This tax appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) was admitted for hearing on 15-32023 by formulating the following substantial question of law: -

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“Whether on facts & circumstances of the case, ITAT is correct in directing to CIT(E) to grant registration u/s 12 AA of the Act irrespective of the findings by the CIT(E) that the activities of the trust is in the nature of trade, commerce or business and covered by proviso to Section 2(15) of the Act."

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The assessee / respondent herein has applied for registration under Section 12AA of the Act in form No.10A which was received by the CIT (AE), Bhopal on 11.11.2013. Upon due consideration, on 30.05.2014 the Commissioner of Income Tax, Raipur rejected the application for grant of approval under Section 12AA of the Act. Feeling aggrieved against the order of Commissioner of Income Tax, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Raipur Bench, Raipur and the ITAT by the impugned order dated 16.05.2019 set-aside the order of Commissioner of Income Tax, Raipur and directed to grant the registration under Section 12 AA of the Act to the assessee Society. The order of the ITAT granting registration under Section 12 AA of the Act to the assessee/respondent herein is called in question by the appellant herein under Section 260A of the Act.

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Mr. Ajay Kumrani, learned counsel appearing for the appellant/ Revenue, would submit that the ITAT was absolutely unjustified in granting the application for registration in favour of the assessee by holding that the objects and purposes of the assessee are charitable in nature which is contrary to the facts and law available on record, therefore, the appeal deserve to be allowed.

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Mr. Neelabh Dubey, learned Counsel appearing for the assessee / respondent herein, would support the impugned order and submit that the ITAT has clearly recorded a finding that the object of the assessee Society is charitable in nature, therefore, the ITAT has rightly granted the application for registration in favour of the assessee under Section 12AA of the Act.

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We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the material available on record minutely and thoroughly as well.

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Section 12AA(1)(b)(i) of the IT Act states as under: -

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“ 12AA. Procedure for registration .—(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of subsection (1) of section 12A, shall—

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(a) xxx xxx xxx

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(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, he—

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(i) shall pass an order in writing registering the trust or institution;

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(ii) xxx xxx xxx

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and a copy of such order shall be sent to the applicant:”

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7. A careful perusal of the aforesaid provision would show that the

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Principal Commissioner or the Commissioner has to satisfy himself about the objects of the trust or institution and the genuineness of

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its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, and has to pass an order in writing registering the trust or institution and a copy of the order so passed will be sent to the applicant.

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8. The Supreme Court in the matter of Ananda Social and Educational Trust v. Commissioner of Income Tax and another 1 held that newly registered trust on basis of its objects, without any activity having been undertaken, is entitled for registration under Section 12AA of the Act, and observed as under: -

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“ 9. Section 12-AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the objects of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under Sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration.

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It was argued before us that the Commissioner is required to be satisfied about two things — firstly that the objects of the trust and secondly, its activities are genuine. If there have been no activities undertaken by the trust then the Commissioner cannot assess whether such activities are genuine and therefore, the Commissioner is bound to refuse the registration of such a trust.

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We have given our anxious consideration to the above submissions made by Ms Aishwarya Bhati, the learned Senior Counsel appearing for the appellant Director of

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1 (2020) 17 SCC 254

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Income Tax and find that it is not possible to agree with the same. The purpose of Section 12-AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the objects of the trust are genuine and that its activities are in furtherance of the objects of the trust, that is equally genuine.

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Since Section 12-AA pertains to the registration of the trust and not to assess of what a trust has actually done, we are of the view that the term “activities” in the provision includes “proposed activities”. That is to say, a Commissioner is bound to consider whether the objects of the trust are genuinely charitable in nature and whether the activities which the trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a trust under sub-section (3) of Section 12-AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the trust are not genuine being not in accordance with the objects of the trust. Similarly, the situation would be different where the trust has before applying for registration been found to have undertaken activities contrary to the objects of the trust.”

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9. The principle of law laid down in Ananda Social and Educational Trust (supra) has been followed by Supreme Court with approval in the matter of Commissioner of Income Tax Exemptions v. M/s

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International Health Care Education and Research Institute 2 in

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which it has been held in paragraphs 14 and 15 as under: -

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“14. We may agree to a certain extent with the learned ASG that the very purpose for any assessee to seek registration under Section 12AA of the Act is to claim exemption under Sections 10 and 11 respectively of the Act, as the case may be. Therefore, before seeking registration, it is essential that the Trust should adduce cogent material

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2 Special Leave Petition (Civil) Diary No.19528/2018, decided on 11-2-2025

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to the satisfaction of the Commissioner that the activities are genuinely charitable in nature.

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To the aforesaid extent there is no problem. We may only say that mere registration under Section 12-AA automatically does not entitle any charitable trust to claim exemption under Section 10 and 11 respectively of the Act, 1961. When a return is filed by any trust claiming exemption it is for the assessing officer to look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the assessing officer is not convinced it is always open for him to decline grant of exemption.“

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10. In the matter of Director of Income Tax Vs. Gujarat Cricket

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Association3, the High Court of Gujarat has categorically held that the nature of the activities of the assesse i.e. Gujarat Cricket Sangh cannot take its colour from the nature of activities of the donor. The relevant Para of the above judgment is reproduced hereunder:-

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"163. We sum up our final conclusions as under:-

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(i) In carrying on the charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if the assessee existed for profit. The word “profit” means that the owners of the entity have a right to withdraw the surplus for any purpose including the personal purpose.

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(ii) It is not in dispute that the the three Associations have not distributed any profits outside the organization. The profits, if any, are ploughed back into the very activities of promotion and development of the sport of cricket and, therefore, the assessees cannot be termed to be carrying out commercial activities in the nature of trade, commerce or business.

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(iii) It is not correct to say that as the assessees received share of income from the BCCI, their activities could be said to be the activities of the BCCI. Undoubtedly, the activities of the BCCI are commercial in nature. The activities of the

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3 (2019) 419 ITR 561 (Guj)

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BCCI are in the form of exhibition of sports and earn profit out of it. However, if the Associations host any international match once in a year or two at the behest of the BCCI, then the income of the Associations from the sale of tickets etc. in such circumstances, would not portray the character of commercial nature.

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(iv) The State Cricket Associations and the BCCI are distinct taxable units and must be treated as such. It would not be correct to say that a member body can be held liable for taxation on account of the activities of the apex body.

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(v) Irrespective of the nature of the activities of the BCCI (commercial or charitable), what is pertinent for the purpose of determining the nature of the activities of the assessees, is the object and the activities of the assessees and not that of the BCCI. The nature of the activities of the assessee cannot take its colour from the nature of the activities of the donor."

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11. In the case in hand, the ITAT after considering the submissions of parties and referring Para 14 of the order passed in ITA No.265/RPR/2017 has allowed the appeal of the assessee. For the sake brevity the said Para 14 referred by the ITAT reads as under: -

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“14. In the instant case of the assessee, the work of the business society is to promote cricket so as to bring forth new talents and provide opportunity to the people for representation the State as well as the Country. Therefore, the object of the assessee is for charitable purpose and nothing else. In view of the matter and as per the aforesaid discussion of facts and judicial pronouncements, we set aside the order of the Ld. CIT (Exemption) and direct the Ld. CIT (Exemption) to grant registration u/s. 12AA of the Act to the assessee Society.”

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In light of the law laid down by the Hon'ble Supreme Court, observation made by the High Court of Gujarat and considering the categorical finding recorded by the ITAT that the object of the assessee is charitable in nature, which could not be contradicted

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competently by learned counsel appearing for the appellant/Revenue during the course of arguments, we are of the opinion that the ITAT is absolutely justified in holding that the assessee Society is entitled for registration under Section 12AA of the Act, which is pure and simple finding of fact based on the evidence available on record and is neither perverse nor contrary to law.

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In that view of the matter, substantial question of law is answered in favour of the assessee/respondent herein and against the Revenue/appellant herein.

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Resultantly, the Appeal is dismissed leaving the parties to bear their own cost(s).

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Sd/Sd/-

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( Sanjay K. Agrawal ) ( Deepak Kumar Tiwari ) Judge Judge

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ajay.

The Commissioner of Income Tax, Raipur (C.G.) v. Chhattisgarh State Cricket Sangh

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The Commissioner of Income Tax, Raipur (C.G.) v. Chhattisgarh State Cricket Sangh

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