Commissioner Of Income Tax vs Orissa Cricket Association
2023 Latest Caselaw 7128 Ori

                 IN THE HIGH COURT OF ORISSA AT CUTTACK

                                   ITA No. 55 of 2018


            Commissioner of Income Tax              ....             Appellant


                         Mr. R.S. Chimanka, Senior Standing Counsel (IT)
                          Mr.Avinash Kedia, Junior Standing Counsel(IT)
                                        -versus-

            Orissa Cricket Association              ....          Respondent
                                               Mr. S. Ray, Senior Advocate
                                              Mr. Amit Pattanaik, Advocate

                     CORAM:
                                JUSTICE ARINDAM SINHA
                                JUSTICE SANJAY KUMAR MISHRA
                                        ORDER

03.07.2023

Order No.

6. 1. Mr. Chimanka, learned advocate, Senior Standing Counsel appears on behalf of revenue. He submits, impugned is order dated 26th December, 2017 made by the Income Tax Appellate Tribunal (ITAT, Cuttack Bench) in ITA no.335/CTK/2017 for assessment year 1997-98 and 2011-12. He submits, the Commissioner of Income Tax (CIT) Exemption correctly appreciated the position emerging on earlier application of the assessee rejected by order dated 26th May, 2017. The CIT(E) refused to grant registration mainly on the ground that funds of the assessee were diverted for personal benefits of the executives of the society, in violation of provisions of section 13 (1)(c) of Income Tax Act, 1961. Furthermore, receipts from Board of Control for Cricket in India (BCCI) were shown as corpus fund

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instead of treating them as revenue receipts. The CIT(E) had relied on survey operation under section 133A, conducted in premises of the assessee association along with search and seizure operation under section 132 in residential premises of the honorary secretary. Incriminating documents, books of accounts were found and impounded and demand was raised for block period from assessment year 2000-2001, as confirmed by first appellate authority. In the circumstances, rejection of the application was duly made. The tribunal, setting aside the same by impugned order, gives rise to substantial questions of law, on which the appeal be admitted.

2. Mr. Ray, learned senior advocate appears on behalf of the assessee. He submits, his client has got provisional registration under section 12A for assessment years 2022-23 to 2026-27. He hands up order of provisional registration dated 28th May, 2021 along with order dated 2nd August, 2022 made by coordinate Bench. Text of said order dated 2nd August, 2022 is reproduced below.

"1. Mr. Sidhartha Ray, learned counsel for the Respondent has handed over a copy of the order for provisional registration in Form-10 AC granting registration to the Respondent under Section 12-A of the Income Tax Act, 1961 for the Assessment Years (AYs) 2022-23 to 2026-27.

2. Mr. Ray, learned counsel for the Respondent, accordingly contends that the issues raised in the present appeals have become academic. Mr. R.S. Chimanka, learned Senior Standing Counsel for the Department states that he will have to seek instructions.

3. List along with W.P.(C) No.18701 of 2016 th on 14 December, 2022."

He submits, the question has become academic.

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3. Without prejudice he relies on judgment of the Supreme Court in C. I. T. (ADDL.) v. SURAT ART SILK CLOTH MFRS. ASSN., reported in (1980) 2 SCC 31, in particular a passage from concurring judgment of Pathak, J. (paragraph 31 of the report). Said passage from the paragraph is extracted below.

"31. . . . The advancement of any other object of general public utility . . .". The object is not the purpose. The advancement of the object is the purpose. Harking back to the first three heads of charitable purpose, the definition defines purpose in terms of activity. When Sir Samuel Romilly, in the course of his argument in Morice v. Bishop of Durham summarized the main heads of charity, they included "relief of the indigent, the advancement of learning, the advancement of religion and the advancement of objects of general public utility". Note the sense of action, of something to be done in relation to an object. When Lord Macnaghten adopted the classification of charitable purposes in Special Commrs. v. Pemsel, he spoke of "trusts for the relief of poverty, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community not falling under any of the preceding heads". In the Indian law, the relief of poverty and the advancement of education were embodied as "relief of the poor" and "education". Medical relief was added. And for the fourth head, with which we are concerned, the language, an echo of Sir Samuel Romilly's classification, referred to "the advancement of any other object of general public utility. . .". It will be at once evident that the word "object' cannot by itself connote an activity. It represents a goal towards which, or in relation to which, an activity is propelled. The element of activity is embodied in the word "advancement". If "charitable purpose" is defined in terms of an activity, that is to say, the advancement of an object, the restrictive clause "not involving the carrying

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on of any activity for profit", which is also descriptive of an activity, must necessarily relate to "the advancement of an object . . .". I am of opinion, therefore, that the restrictive clause must be read with "the advancement of any other object of general public utility" and not with "the object of general public utility". En passant, it may be observed that much confusion can be avoided if in the context of the fourth head the purpose of the trust or institution is referred to as the "purpose" and not as the "object" of the trust or institution, because the purpose there is defined as "the advancement of an object".

4. He then relies on view taken by High Court of Madras in Tamil Nadu Cricket Association v. Director of Income Tax (Exemptions) reported in (2013) 40 taxmann.com 250 (Madras). Paragraph 32 is reproduced below.

"32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be."

(emphasis supplied)

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5. We have given our anxious consideration to contentions put forth at the Bar. Assessment years under consideration are 1997-98 and 2011-12. The rejection appears to have been made in respect of these two assessment years. In this context, we have perused Tamil Nadu Cricket Association (supra). We find that by clause (b) under sub-section (1) of section 12AA the Commissioner requires satisfaction about objects of the trust or institution and the genuineness of its activities. In considering the application for purpose of the satisfaction, the Commissioner had taken into consideration the facts regarding survey, search and seizure, respectively of the assessee's premises as well as its honorary secretary. The tribunal in impugned order said, inter alia, as follows.

"In view of the above, we find that, as in the instant case, it is admitted in the impugned order that the objects of the assessee society are charitable in nature and in absence of pointing out any specific activities of the assessee society which were not genuine, in our considered view, rejection of application for registration u/s. 12AA of the Act on the ground of diversion of funds for the benefit of executives of the association in violation of provisions of Section 13(1)(c) of the Act is not justified. The violation of provisions of Section 13(1)(c) of the Act is a matter which is to be looked into by the Assessing Officer while making assessment after grant of registration u/s. 12AA of the Act and the Assessing Officer has to act as per the provisions of law. We, therefore, set aside the order of the CIT(E) and direct him to grant registration to the assessee society u/s.12AA of the Act. Thus, this appeal of the assessee is allowed."

6. We admit the appeal on the following question of law to be answered.

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Where an assessee seeking registration under section 12AA in course of conducting its activities under the objects has suffered survey and, search and seizure of its honorary secretary and there has been violation of provisions in section 13(1)(c), can the facts be considered for the purpose of satisfaction on the application for grant of registration?

7. List on 13th July, 2023, for hearing of the appeal on the papers already on record.

(Arindam Sinha) Judge

(S.K. Mishra) Judge

Jyoti/RKS

Signature Not Verified Digitally Signed Signed by: RANJAN KUMAR SETHI Designation: Secretary Reason: Authentication Location: HIGH COURT OF ORISSA Date: 04-Jul-2023 19:22:51