ORISSA OLYMPIC ASSOCIATION,CUTTACK vs. CIT(EXEMPTIONS), HYDERABAD

per financial statement of the appellant in the form of commercial lease rent

was incurred for the charitable objects of the appellant association and it is

not an allegation of the ld CIT(E) hat the funds including commercial lease

rent amount have been diversified or used beyond the charitable objectives

of the Association of the Memorandum of Trust.

High Court in the case of Director of Income Tax (Exemptions) vs Khar

Gymkhana(2016) 385 ITR 162 (Bom), ld counsel submitted that once

registration u/s.12A has been granted considering the charitable objectives

of the general public utility of the applicant, then disqualification without

examination where receipts from commercial activities exceeds Rs.25 lakhs

P a g e 8 | 19 is not tenable in a case where there is no change in the nature of activities

of the appellant and keeping in view the effect of CBDT Circular No.21 of

2016 dated 27th may, 2016, the assessee is entitled to continue the

registration u/s.12A of the Act.

of Mumbai Port Trust vs DIT (Exemptions) in ITA No.262/Mum/2012 order

dated 23.2.2018 and drawing our attention to para 5 of the said order, ld

counsel submitted that once it has been held that the assessee is entitled

for registration u/s.12A of the Act, then, the cancellation of registration

granted u/s.12A of the Act can be done by following procedures laid down

in sub-section (3) of Section 12AA of the Act and cancellation of registration

without justifiable reasons may, therefore, cause additional hardship to an

assessee institution due to attraction of tax liability on accreted income. Ld

counsel submitted that as per provisions of section 11(1)(a) of the Act, the

income derived from the property held by or under trust wholly for

charitable or religious purposes to the extent to which such income is

applied to such purposes in India, and, where any such income is

accumulated or set apart for application to such purposes in India, to the

extent to which the income so accumulated or set apart, is not in excess of

15% of the income from such property, shall not be included in the total

income of the previous year of the institution or trust for the purpose of

taxation. Ld counsel submitted that keeping in view the observation of ld

P a g e 9 | 19 CIT(E) in paras 8 & 9 of the impugned order, restriction put by him on the

basis of baseless and unsustainable grounds on the registration u/s.12A of

the Act, and discontinuing the same from assessment year 2009-2010

onwards is not sustainable and correct. Therefore, the ld CIT(E) should be

directed to continue the registration from 2009-2010 onwards.

and submitted that if it is found just and proper and necessary then the

case may kindly be remanded to the file of the ld CIT(E) for redressal of the

grievance of the assessee regarding continuance of registration from 2009-

2010 onwards.

originally, the assessee filed application seeking registration u/s.12AA of the

Act way back in 1997 and thereafter two round of proceedings have been

completed at the end of the Tribunal and if the case is restored back to the

file of the ld CIT(E) third time, then it would be a great unjustified to the

assessee especially when the ld CIT(E) has already in para 8 of the

impugned order noted that the objects of the Orissa Olympic Association

would fall in the advancement of any other object of general public utility.

Ld counsel submitted that from the objects of the Association, it is ample

clear that precisely, the Association has been formed to act as official

organization in Olympic matters in the State of Odisha to control, supervise,

regulate or encourage various sports and have jurisdiction over all matters

P a g e 10 | 19 pertaining to the participation of sportsmen/sportswomen of Orisha in the

national and international events and any other games held under the

control & supervision of Indian Olympic Association and there is no profit

motive therein. Therefore, ld CIT(E) was not correct in restricting the

registration upto the assessment year 2008-09 only and not continuing the

same from the subsequent assessment year 2009-2010 onwards.

Therefore, it was his prayer that the CIT(E) may kindly be directed to

continue the registration from 2009-2010 onwards.

considered opinion that the main grievance of the assessee is that the ld

CIT(E) granted registration for the assessment years 1998-99 to 2008-09

and in the same order from assessment year 2009-2010 denied to continue

the registration u/s.12AA of the Act.

appropriate to reproduce section 12AA of the Act, wherein, the procedure

for grant of registration and cancellation of registration has been provided

by the legislature. Thus, section 12AA of the Act reads as follows:

“12AA. (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) of sub-section (1) of section 12A, shall-

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the

P a g e 11 | 19 genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-

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

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

(1A) All applications, pending before the [Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the [Principal Commissioner or] Commissioner and the [Principal Commissioner or] Commissioner may proceed with such applications under that sub- section from the stage at which they were on that day.

(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) of sub-section (1) of section 12A.

(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

P a g e 12 | 19 [(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution:

Provided that the registration shall not be cancelled under this sub- section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.]”

clearly observe that the procedure for grant of registration has been

provided in sub-section (1)& (2) and the procedure for cancellation of

registration has been provided in sub-section (3) & (4) of Section 12A of

the Act. Sub-section (1) of Section 12AA provides that on receipt of an

application for registration of a trust or institution made under clause (a) or

(aa) or clause (ab), the Pr. Commissioner or Commissioner shall call for

such documents or information from the trust or institution as he thinks

necessary in order to satisfy himself about the genuineness of the activities

of the trust or institution and may also make such inquiries as he may deem

necessary in this behalf.

registration u/s. 12A of the Act has been provided in sub-section(3) of

P a g e 13 | 19 Section 12AA of the Act, which provides that where a trust or an institution

has been granted registration under clause (b) of sub-section (1) or has

obtained registration at any time under section 12A [as it stood before its

amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and

subsequently the [Principal Commissioner or] Commissioner is satisfied that

the activities of such trust or institution are not genuine or are not being

carried out in accordance with the objects of the trust or institution, as the

case may be, he shall pass an order in writing cancelling the registration of

such trust or institution. Proviso to sub-section(3) also provides that no

order under this sub-section shall be passed unless such trust or institution

has been given a reasonable opportunity of being heard.

providing procedure for grant of registration and cancellation of registration,

when we consider the facts of the present case and evaluate the validity of

the impugned order on the touchstone of the provisions of the Act, then we

find that the ld CIT(E) considering the objects of the appellant that they are

charitable in nature and not carried out with any object to earn profits,

granted registration u/s.12AA of the Act from assessment year 1998-99 to

2008-09. However, in subsequent para 10 and 11 of the impugned order,

the ld CIT (E) considering the amended proviso to section 2(15) of the Act

and keeping in view the income of the appellant received in the form of

commercial lease rent did not continue the registration from assessment

P a g e 14 | 19 year 2009-2010 onwards and this action of the CIT (E) gave rise to this

appeal.

that the appellant is enjoying exemption u/s.10(23) of the Act w.e.f.

1.4.1974 and in para 9, ld CIT(E) further noted that the objects of the

appellant are charitable in nature and are not being carried out with any

object to earn profits and with these observations, he granted registration

under section 12A of the Act from 1998-99 to 2008-09. At thus juncture,

we are in agreement with the contention of ld counsel that as per section

11(1)(a) of the Act the lease rent incomes from the property held under the

trust are wholly for charitable or religious purposes which is applied for the

charitable purposes of trust income then, same is not taxable and exempt in

the hands of trust or institution. From the vigilant reading of the impugned

order, we clearly see that except lease rent income, there is no allegation of

the ld CIT(E) to support that the incomes received by the assessee as

commercial lease rent are in the nature of trade or commerce or trade,

which violate the provisions of section 2(15) of the Act as amended w.e.f.

1.4.2009.

Foundation (supra), it is clear that if the objects of the trust are charitable,

the fact that the institution collects certain charges or receipts or income

P a g e 15 | 19 does not alter the character of the institution and it is necessary that it

should provide something for nothing or for less than it costs or for less

than the ordinary price.

the case of Khar Gymkhana (supra), wherein, it is held that where there is

no change in the nature of activities of the trust and the registration already

granted u/s.12A of the Act, then same cannot be disqualified without

examination where receipts from commercial activities exceeds Rs.25 lakhs

as per Circular No.21 of 16 dated 27.5.2016.

Port Trust (supra), the process of cancellation of registration has to be done

in accordance with the provisions of section 12AA(3) & (4) of the Act after

carefully examining the applicability of these provisions.

registration to the assessee from assessment year 1998-99 to 2008-09 and

also denied continuance of registration w.e.f 2009-10 onwards without

affording an opportunity to the assessee regarding the doubts arisen in the

minds of the CIT(E). Therefore, keeping in view the fact that the assessee

has already move upto the Tribunal in three rounds of proceedings seeking

grant of registration u/s.12AA of the Act, we are of the considered view that

it would be a great injustice to the appellant if the case is restored to the

P a g e 16 | 19 file of the CIT(E) for third time. Thus, we decline to accept the prayer of ld

CIT DR for restoring the matter to the file of the CIT(E) for fresh

consideration.

opinion that the income earned by the assessee from commercial lease

rent, which is the only point of denying the continuance of registration from

assessment year 2009-2010 is not a sustainable ground for dis-continuing

the registration already granted to the assesse. In our humble and

considered opinion, when the registration u/s.12A of the Act has been

granted to the appellant and ld CIT (E) is satisfied that the activities of the

assessee trust falls within the ambit of charitable and OF general public

utility and on the same basis, he has granted registration u/s.12A of the Act

to the appellant from the assessment years 1998-99 to 2008-09. The

barriers created by the ld CIT(E) from 2009-2010 onwards , where he

denied to continue the same registration is also not sustainable on this

count that the assessee was not provided proper opportunity of hearing

before passing such order denying continuance of registration as per

mandate of sub-section(3) of Section 12AA of the Act. We dismiss the

observation of ld CIT(E) recorded for the purpose of restricting the

registration u/s.12AA of the Act from 2009-2010 onwards. However, we are

cautious that the powers of granting registration and cancelling the

registration are emanating in sub-section (3) & (4) of Section 12AA are

P a g e 17 | 19 always in existence and in subsequent period if it is found that the activities

are not genuine and are not being carried out in accordance with the

objects of the trust or institution as the case may be, he shall pass an order

in writing cancelling the registration of such trust or institution after

allowing due opportunity of hearing to the assessee

that once the ld CIT (E) has granted registration u/s.12A of the Act, then,

same is required to be continued till it is cancelled by way of following the

procedure provided in sub-section (3) & (4) of Section 12AA of the Act and

without following such procedure, the registration cannot be restricted or

upto the specified time and cannot be discontinued by way of cancelling

the same for subsequent period in the same order. Therefore, we set

aside the order of ld CIT (E) and hold that the registration granted for

the assessee w.e.f. A.Y. 1998-99 to 2008-09 is also continued direct him to

grant registration from 2009-10 onwards. Hence, the grounds of appeal of

the assessee are allowed in the terms as indicated above,.

Order pronounced on 6/12/2019.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 6 /12/2019

P a g e 18 | 19 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Orissa Olympic Association, Barabati Stadium, Cuttack

By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 19 | 19