THE issues before the Bench are - Whether when a society is once granted registration u/s 12A, the same cannot be withdrawn with retrospective effect even if there is tangible evidence to establish that the society has entered into commercial agreement with profit motive for a considerably long period - Whether the registration is once granted, it
becomes functus officio and Revenue cannot review the same. And the verdict partly goes in favour of assessee.
becomes functus officio and Revenue cannot review the same. And the verdict partly goes in favour of assessee.
Facts of the case
Assessee i.e Mumbai Cricket Association (MCA), is a Society registered under Societies Registration Act. It has been enjoying registration of section 12A since 1975. For the year under consideration the DIT (Exemption) denied the registration of section 12A on the ground that assessee was no more charitable as it had entered into commercial activities, with some other concern namely (SI), such as running of Banquet Halls, recreation clubs Etc. Aggrieved with the order of the DIT assessee filed appeal before the Tribunal and raised a plea that provision of section 12AA(3) were prospective and could not be applied for those years when the same was not in the statute book. The DR pointed out that though the assessee has delegated the commercial activities to some other entity however the assessee was fully controlling the commercial activities as was evident from the clauses of the agreement. It was also pointed out that the MMRDA had allotted land only for carrying out charitable activities.
After hearing the parties the ITAT held that,
++ the reading of the Agreement between MCA & SI clearly shows that despite the fact that the costs, running development & repairs shall be borne by the SI, till the concessional agreement is in operation, but according to the clauses, the assessee, i.e. MCA shall always have the reigns of the entire ICA, which included ICA and ICA Facilities, in its own hands, and MCA would, never ever, become a ring side viewer even for the ICA Facilities;
++ 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 at least 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 by the legal citations, referred to by the AR, wherein coordinate Bench of Lucknow ITAT in the case of Kapoor Educational Society v/s CIT, 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;
++ the case of C.M. Scientific Research Centre, reported in 229 ITR 23 (All) wherein Allahabad High Court held that revoking approval with retrospective effect was illegal and unsustainable. This issue, was examined by Calcutta High Court in the case of CIT v/s General Magnets Ltd, wherein it was held that withdrawal of approval u/s 35CCA with retrospective effect is bad;
++ 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;
Assessee i.e Mumbai Cricket Association (MCA), is a Society registered under Societies Registration Act. It has been enjoying registration of section 12A since 1975. For the year under consideration the DIT (Exemption) denied the registration of section 12A on the ground that assessee was no more charitable as it had entered into commercial activities, with some other concern namely (SI), such as running of Banquet Halls, recreation clubs Etc. Aggrieved with the order of the DIT assessee filed appeal before the Tribunal and raised a plea that provision of section 12AA(3) were prospective and could not be applied for those years when the same was not in the statute book. The DR pointed out that though the assessee has delegated the commercial activities to some other entity however the assessee was fully controlling the commercial activities as was evident from the clauses of the agreement. It was also pointed out that the MMRDA had allotted land only for carrying out charitable activities.
After hearing the parties the ITAT held that,
++ the reading of the Agreement between MCA & SI clearly shows that despite the fact that the costs, running development & repairs shall be borne by the SI, till the concessional agreement is in operation, but according to the clauses, the assessee, i.e. MCA shall always have the reigns of the entire ICA, which included ICA and ICA Facilities, in its own hands, and MCA would, never ever, become a ring side viewer even for the ICA Facilities;
++ 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 at least 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 by the legal citations, referred to by the AR, wherein coordinate Bench of Lucknow ITAT in the case of Kapoor Educational Society v/s CIT, 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;
++ the case of C.M. Scientific Research Centre, reported in 229 ITR 23 (All) wherein Allahabad High Court held that revoking approval with retrospective effect was illegal and unsustainable. This issue, was examined by Calcutta High Court in the case of CIT v/s General Magnets Ltd, wherein it was held that withdrawal of approval u/s 35CCA with retrospective effect is bad;
++ 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.
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