Income Tax Appellate Tribunal - Jaipur
M/S Rambagh Golf Club, Jaipur vs Cit, Jaipur on 27 December, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES , JAIPUR
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BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 442/JP/2012
Section 12AA read with section 293C of the I.T. Act 1961
M/s. Rambagh Golf Club cuke The CIT
Rambagh Circle Vs. Jaipur-II
Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAR 0294 A
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by: Shri P.C. Parwal, CA
jktLo dh vksj ls@Revenue by: Shri Virendra Mehta, CIT-DR
lquokbZ dh rkjh[k@ Date of Hearing : 30/11/2017
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27 /12/2017
vkns'k@ ORDER
PER BHAGCHAND, AM
The assessee has filed an appeal against the order of the ld. CIT, Jaipur-II, Jaipur dated 28-03-2012 raising following ground.
'' That the ld. CIT, Jaipur-II, Jaipur erred in withdrawing the registration granted u/s 12AA/12A vide order dated 27- 07-1999 u/s 12AA(3) read with section 293C of the I.T. Act, 1961 from the initial year, the registration was granted.'' 2.1 Brief facts of the case are that the assessee society was constituted on 18.10.1972 with the object to promote the game of golf and to run & ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur maintain the golf course (PBP 22-23). It is registered under the Society Registration Act, 1958 w.e.f. 27.04.1973 (PBP 26-32). Rambagh Golf Club was also registered u/s 12AA/12Aof the Income Tax Act, 1961 by the ld. CIT, Jaipur on 27.07.1999 w.e.f. 15.06.1999 (PB 2). The objects of the society are as under:-
(a) To provide physical and mental recreation and social entertainment for and amongst the members of the club.
(b) To diffuse social knowledge about the game of golf and to prompt, develop and popularize the game of golf and in fulfilment of this.
© To promote and maintain bonds of friendship between other golf clubs in the state of Rajasthan and even outside.
(d) To uphold and maintain the rules of golf issued from time to time.
(e) To arrange and control the conduct of such championship and other open or restricted competitions as may be approved by the club.
(f) To undertake from time to time such other special activities as may be approved by the club and fall with the purview of section 20 of Rajasthan Societies Registration Act.
(g) To collect funds for the club and to employ the same in such manner as may be considered expedient.
Further, as per the Regulations of the club, on dissolution of the society, the properties shall not be paid or distributed amongst the members of the society but shall be given to some other society as decided by the members or by the competent court PBP 32 para 58).
2.2 The Ld. CIT observed that the major source of the assessee's income includes subscription and other fees, interest income, sponsorship, 2 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur income from bar & canteen and guest charges which are not directly linked to sports activity and the expenditure is incurred mainly on salary, maintenance charges, party/function, bar running expenses, etc. which shows that no expenditure is incurred on charity or to say that for the benefit of the public at large. The income is mainly used for the entertainment of the members and the expenditure is also directed for the benefit of its members. Thus, the activities shows that the club is functioning for the mutual benefit of its members and can at best be called mutual benefit organization and not a charitable organization.
Accordingly, CIT vide show cause notice dated 01.02.2012 (PB 3-5) required the assessee to explain as to why the registration granted earlier u/s 12A/12AA should not be withdrawn. The Assessee filed the reply However, the ld. CIT did not accept the contention of the assessee by giving the following findings (Pg 4 to 7 of CIT order):-
(a) The object at S.No. (a) provide that the activity will be for and amongst the members of the club which shows that the activity is not for the benefit of public at large but for the benefit of the members of club only.
(b) The other object of the club is to promote, develop and popularize the game of golf which though is a charitable object but no substantial expenditure has been incurred for the same. Most of the expenditure has been incurred on running and maintenance of golf club where only members are allowed to play the game. No expenditure has been incurred to popularize the game in general public. Though it is 3 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur claimed that facility of playing golf can be availed by a person who is not a member but in such case more green fees is charged on daily basis in comparison to fees charged from member of club, which is subscription only.
©The objects mentioned at clause (f) & (g) authorizes the club to do any activity which may be charitable or may not be charitable. In fact the club is indulged in carrying out commercial activities such as running of bar, supply of food, providing of gym facility, etc.
(d) The charitable activities carried out by the assessee like promoting the junior golfers, conducting coaching are not substantial in nature and do not make the entire activities of the trust charitable.
(e) The club is receiving huge receipts from activity of sale of liquor and food. This activity is commercial activity like running of a bar/hotel/restaurant.
(f) Most of the receipts are from members in shape of subscription in fees in lieu of the services provided by the club to them. The income received from members is spent for the benefits of members and there is no charity involved in the entire process. Thus, the club is functioning mainly for the benefit of its own members. Whatever promotion of golf is canvassed is limited to the members of club only.
(g) The assessee may take plea that registration u/s 12AA(3) can be withdrawn only in two conditions. Since none of these conditions are attracted, registration cannot be withdrawn u/s 12AA. This plea is not tenable as when the activities do not remain charitable it is implied that the institution do not remain charitable and registration granted earlier is deemed to be withdrawn.
(h) A general power has been given to the Commissioner u/s 293C to withdraw any approval granted under the Act. This power is squarely applicable on the registration granted u/s 12A/12AA of the IT Act. As such the registration can be withdrawn u/s 293C also.
Accordingly, CIT withdrew the registration granted to the assessee u/s 12A/12AA from the initial year by holding that assessee club has not been able to prove that any charitable activity was in fact undertaken by it 4 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur subsequent to registration. Its main activity is to provide mutual benefit to its members and not for the benefit of public at large.
2.3 During the course of hearing, the ld.AR of the assessee submitted that the ld. CIT has erred in withdrawing the registration u/s 12AA/12A of the Act from the initial year which should continue to be granted. The ld.AR of the assessee filed the following written submission alongwith case laws.
''Submission:-
1. On the facts stated above, two issues arise for consideration. The first is whether the CIT has power to withdraw the registration from the initial year when the registration was granted by his predecessor CIT after satisfying himself about the objects of the society and the genuineness of its activities and the second is whether the CIT is correct in withdrawing the registration already granted by holding that activities of the society are not charitable though at the same time accepting that part of its activities are charitable.
2. So far as the first issue is concerned, power to withdraw the registration by CIT is provided in the statue by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby sub-section (3) is inserted to section 12AA to provide that where a trust or institution has been granted registration under sub-clause (b) of sub section 1 and subsequently the Commissioner is satisfied that 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. Thereafter, an amendment was made in this sub-section by FA, 2010 w.e.f 01.06.2010 to also empower the Commissioner to cancel the registration where it was obtained at any time under section 12A. Thus, w.e.f. 01.06.2010 only, the Commissioner has a power to cancel the registration granted u/s 12A. Further, section 293C referred by the CIT was inserted by Finance (No.2) Act, 2009 w.e.f. 01.10.2009 to provide that income tax authority has power to withdraw the approval even when a provision to withdraw such approval has not been specifically provided in such provision. However, both these provisions cannot have retrospective application 5 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur as a privilege or benefit once granted cannot be withdrawn from retrospective effect on the principle of promissory estoppel. Reliance in this connection is placed on the following cases:-
DIT(Exemtion) Vs. Mool Chand Khairati Ram Trust (2011) 339 ITR 0622 (Del.) (HC) Sec. 12A, as it stood at the time when it provided for registration of trust, nowhere provided for cancellation of the registration once granted. It is also pertinent to note that the words "such trust or institution is registered under s. 12AA" were also substituted in this section w.e.f. 1st April, 1997. In fact, this section even now nowhere stipulates about the cancellation or withdrawal of the registration, once granted under the said section. It is only under s. 12AA, which came in the statute book w.e.f. 1st April, 1997 that a fresh procedure for registration of the trust or institution is prescribed. Even under this s. 12AA, there was no provision for cancellation of registration once granted till the enactment of sub-s. (3) w.e.f. 1st Oct., 2004. From the conjoint reading of sub-s. (1) cl. (b) and sub-s. (3) of s. 12AA, it would be seen that the cancellation of the registration was provided where the registration was granted under cl. (b) of sub-s. (1). Further cancellation under sub-s. (3) was also provided where the registration was obtained at any time under s. 12A [may be under cl. (a) or cl. (aa) of sub-s. (1) of s. 12A]. But this power of cancellation of registration obtained under s. 12A came to be incorporated by way of amendment introduced by the Finance Act, 2010 w.e.f. 1st June, 2010. That being the interpretation of sub-s. (3), it is amply clear that the power to cancel the registration once granted was only confined to the registration granted under cl. (b) of sub-s. (1) of s. 12AA till before 1st June, 2010. Of course, now w.e.f. 1st June, 2010, the power vests with the CIT even to cancel the registration granted under any of the clauses of sub-s. (1) of s. 12A. In that view of interpretation, there was no power vested with the CIT to cancel or withdraw the registration granted to the assessee under s. 12A(a) in the year 1974.
Oxford Academy for Career Development Vs. CCIT & Ors. (2009) 315 ITR 382 (All.) (HC) Sec. 12AA(3) was incorporated w.e.f. 1st Oct, 2004, to empower the CIT to cancel the registration granted to a trust or institution. The same is not applicable retrospectively and in the assessee's case for the assessment years under consideration. The object of this provision is not clarificatory or explanatory, so prior to that date, the authorities granting registration had no inherent power to withdraw or revoke the registration already granted. The order cancelling the registration granted to a trust or institution under s. 12AA being a quasi-judicial order does not fall within the category of orders mentioned under s. 21 of the General Clauses Act, 1897, which provides that the power conferred on an authority empowers to issue orders including the power to rescind such orders 6 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur and the CIT would not have power to rescind the order passed by the CIT earlier granting the registration to a trust or institution.
Kapoor Educational Society Vs. CIT (2010) 44 DTR 97 (Lucknow) (Trib.) Amendment of s. 12AA(3) by the Finance Act, 2010, w.e.f. 1st June, 2010 is prospective in nature and if any trust/institution has been registered prior to 1st Oct., 2004, either under s. 12A or 12AA, CIT has no power to cancel the registration under s. 12AA(3). In the instant case, registration was granted to the assessee society on 1st March, 1999, i.e., much prior to 1st Oct., 2004 when s. 12AA(3) was inserted. Therefore, CIT had no jurisdiction to cancel the registration granted to the assessee society under s. 12A.
Ajit Eduation Trust Vs. CIT (2010) 46 DTR 482 (Ahd.) (Trib.) Sec. 12AA(3) cannot be termed merely a procedural introduction in the statute but this introduction has substantially made an impact on the sizeable rights of a trust or institution. Even otherwise if it is to be termed as a procedural amendment then also a procedural amendment cannot be held as retrospective in nature so as to be effective from an earlier date. Insertion of the new clause w.e.f. 1st June, 2010 should not be applicable retrospectively and its operation has to be effective from the date it was introduced and onwards.
Mumbai Cricket Association Vs. DIT(Exemption) (2013) 84 DTR 162 (Mum.) (Trib.) Where an approval had been given, its withdrawal with retrospective effect is bad and illegal. 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. There was no question, that once the registration is granted, the issue of registration becomes functus officio. Registration cannot be cancelled retrospectively. In view of the prospective amendment, the decision of the DIT was not in conformity with law. Therefore, the cancellation of registration has to be effective from 01-06-2010, i.e. the date when the amendment was inserted in the provision.
Therefore, the finding of CIT to withdraw the registration u/s 12AA from the initial year in which the registration is granted is illegal and bad in law.
(3) So far as second issue is concerned, the registration u/s 12A/12AA can be cancelled only when the CIT or DIT is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. None of the observations mentioned in the order of CIT and summarised in para 3 above, lead to any conclusion that the activity of the club are not genuine or are not carried out in accordance with its objects. The various observations of the CIT are explained as under:-
7 ITA No. 442/JP/2012M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur
(a) From the plain reading of the object of the club as stated above, it can be noted that the main object of the club is to promote, develop and popularize the game of golf as is envisaged in clause (b) to (e) of its object. Clause (a) of the object provides for physical and mental recreation and social entertainment for and amongst the members of the club. This clause cannot be interpreted to mean that the activity of the club is for the benefit of members only. In fact any person who becomes the member of the club has to pay the membership fees and such membership fees are applied for the promotion of the game of golf. From the figures of income & expenditure account mentioned at Pg 1 & 2 of the order, it can be noted that against the subscription and other fees of Rs.101.21 lacs, the expenditure on maintenance of golf course and salary and allowance is Rs.98 lacs which itself shows that the major part of the members subscription is utilised for the promotion of game of golf.
(b) It may also be pointed out that the facility of playing of golf can also be availed by the persons who are not member of club but from such persons green fee is charged on daily basis. Such fees is also utilised for promotion of the game of golf. Therefore, it cannot be held that the facility of playing of golf is restricted to the members only and not for public at large. Charging of green fees from non members which is more in comparison to fees charged from the members or not providing playing facility at concessional/free charge to weaker class of the society is not a condition precedent to categorize an institution as a charitable institution.
© The object mentioned at clause (f) & (g) simply provides that the club may undertake such other activities as may be approved by the club but fall in the purview of section 20 of the Rajasthan Societies Registration Act and also collect funds to employ in such manner as may be considered expedient. These clauses has been interpreted by CIT that the same authorize the club to do any activity whether charitable or not. However, in holding so, the Ld. CIT has not considered that as per this clause only those activities can be carried out which fall in the purview of section 20 of the Rajasthan Societies Registration Act. As per section 20 of this Act, such activities are in relation to the soldiers, orphans, literature, science, art, historic interest, education, etc. So far as running of bar, supply of food, providing of gym facility is concerned, the same is incidental to the main activity of promoting the sport of golf and the same cannot be considered as to be a commercial activity as held in case of Bombay Presidency Golf Club Ltd. 75 DTR 379 discussed below.
(d) The Ld. CIT has also observed that against the total receipts, expenditure on promoting the junior golfers and conducting coaching is negligible and therefore the charitable activities carried out are not substantial in nature. However, in doing so, he has not considered that against the total receipts, the substantial expenditure is incurred on promotion of the sport of golf as is evident from the following table:-
8 ITA No. 442/JP/2012M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur Financial Total Expenditure % of Other Surplus/Deficit Year Receipts on game of Total Incidental (in Rs.) (in Rs.) golf (in Rs.) Revenue Expenditure (in Rs.) 2004-05 47,75,829/- 37,47,282/- 78.46% 3,31,852/- 6,96,695/- 2005-06 50,36,483/- 41,52,464/- 82.44% 1,29,477/- 7,54,542/- 2006-07 58,18,782/- 48,70,949/- 83.7% 1,54,295/- 7,93,538/- 2007-08 1,01,06,556/- 81,68,511/- 80% 2,79,676/- (16,58,369/-) 2008-09 1,38,01,237/- 1,17,48,273/- 85% 9,89,150/- 10,63,814/- 2009-10 2,17,44,448/- 1,83,80,032/- 84% 9,58,771/- 24,05,645/- 2010-11 2,00,72,019/- 1,93,17,363/- 96% 7,54,656/- (18,28,551/-)
(e) It is also submitted that assessee club has been carrying out its activity in the similar manner in earlier years also. In AY 2006-07 the AO has granted the benefit of exemption u/s 12A to the assessee. Copy of order is enclosed. Therefore, without any change in the facts, the order of CIT cancelling the registration is bad in law.
4. It is submitted that various courts/tribunals in case of Golf Club itself where the registration was granted u/s 12A but subsequently cancelled by the CIT u/s 12AA(3) have disapproved such action of the CIT after making elaborate discussion on the provisions of section 12AA(3), the object of the club, the nature of the receipt and the application of such receipt. Some of these decisions are as under:-
Bombay Presidency Golf Club Ltd. Vs. DIT(Exemptions) 75 DTR 379 (Mum.) (Trib.) Facts:-
The assessee trust is established with the object to provide facilities relating to golf and to afford to the members of the club all the usual privilege, advantages and convenience associated with the game of Golf. It is also authorized to carry out activities which are incidental and auxiliary to promote the said game. It was granted registration u/s 12AA w.e.f. 01.04.2001. Its major source of income includes income from catering and bar, rental income, adoption of hole income, green fees, interest income, shooting charges, etc. The DIT(Exemptions) cancelled the registration u/s 12AA(3) by holding that these receipts are in the nature of commerce or trade and thus assessee trust is directly hit by the proviso to section 2(15).
Findings:-9 ITA No. 442/JP/2012
M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur Registration granted u/s 12AA can be cancelled in terms of section 12AA(3) only if the CIT or DIT is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects. Except for these two conditions, the CIT/DIT cannot cancel the registration which has already been granted earlier. Nowhere the DIT(E) has recorded any satisfaction that the activities of the assessee trust are not genuine or are not being carried out in accordance with the objects on the basis of which it was granted registration u/s 12AA. Once registration has been granted, section 12AA(3) does not extend to re-examination of the "objects" of the trust or institution. It becomes fait accompli, unless twin conditions provided under sub section (3) of section 12AA are satisfied. The insertion of proviso would not have any bearing on section 12AA(3) since it does not extend to the objects of the trust or institution but only to its activities as stated therein. None of the assessee's receipts, i.e. receipts from members, catering and bar, green fees, amenities income, interest, etc. can be said to be arising or accruing from the activities which have been carried out for the purpose of business, trade or commerce. All its activities are towards promotion of game of golf while other ancillary activities carried are only incidental to the said game only. Activities carried out by the assessee for promotion of the game of golf or for maintenance of its club resulting in incidental or ancillary receipts cannot be held to be in the nature of business, trade or commerce. Even otherwise, this aspect has to be examined in the course of assessment proceedings and not for the purpose of cancellation of registration u/s 12AA(3). That apart, all its activities are restricted to among its members and, therefore, principle of mutuality applies in its case. Thus, from this aspect also new proviso to section 2(15) does not apply to the case of the assessee. In view of the above, cancellation of registration u/s 12AA(3) by learned DIT(E) in the case of the assessee is not tenable either in law or on facts.
Chandigarh Golf Club Vs. CIT 156 ITD 264 (Chd.) (Trib.) Facts:-
The facts of the case are that the assessee is a club registered under section 12A of the Act vide order dated 19.12.2000 by the CIT, Chandigarh. The main reason given by the CIT for cancelling the registration u/s 12AA(3) was that the assessee club is indulged in the activities which are in the nature of trade or business and thus in view of the amended provisions of section 2(15) of the Act, the registration of the club is seriously doubted. Further, the club is being run by an elite and affluent class of people and is for the exclusive benefit of such people. The facilities being provided by the club are beyond the reach of the common man. It was further observed that the assessee club is indulged in the activities which are commercial in nature i.e. running of a bar and restaurant, advertisement and publicity, interest income, festival income, rental income, etc. Accordingly, CIT vide his order held that activities of Assessee club were not genuine and 10 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur were not being carried out in accordance with objects of trust or institution in terms of section 12AA(3) Findings:-
Assessee club was formed for the purpose of providing facilities for development of golf. For cancellation of registration u/s 12A, CIT had to be satisfied to effect regarding activities of trust or institution were genuine or not and if activities were being carried on in accordance with objects of trust. CIT was heavily weighed down by fact that assessee club was earning money by different ways including membership fee, rent, interest, etc. However, nowhere in his order, CIT had been able to bring on record that activities of club were not for furtherance of development of game of golf that was main object of assessee. CIT had also not been able to bring on record fact that assessee's activities were not being carried out in same fashion from very initiation of assessee club. CIT(A) had not commented on application of funds or income so received by assessee. Thus, CIT had not been able to make out case that activities of assessee-trust were not genuine. In case any of activities of assessee- club seems to be commercial in nature to CIT, but that was not dominant activity of assessee, it was for AO to consider while giving exemption u/s 11 and not for CIT for cancellation of registration once granted u/s 12A. Order passed by CIT u/s 12AA(3) cancelling registration granted u/s 12A was not as per law.
Tamilnadu Golf Federation Vs. ACIT ITA No.712/Mds/2014 dt. 14.01.2016 The Hon'ble ITAT at Para 7 & 8 of its order has given the following findings:-
"7. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee-society is registered u/s 12AA of the Act as charitable institution. The main object of the society is to promote the sport of golf in the State of Tamilandu. The assessee is also organizing coaching camps for the benefit of golfers in other parts of the State. In fact, the Assessing Officer has reproduced the object of the assessee-society at pages 2 & 3 of his order. This object clearly shows that the assessee is engaged in the promotion of sport of golf. In the course of carrying on its activity, the assessee collected subscription from its members towards tournament fees etc. In fact, the assessee has collected following fees:
Fees collected - Type/Receipt Rs. Annual Subscription 2,01,90,350 Tournament fee 1,30,704 Sponsorship - Tournament 7,30,981 Sponsorship - Others 2,00,000 11 ITA No. 442/JP/2012
M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur Green fee 98,87,764 Catering income 2,41,131 Round charges 42,11,130 Total 3,55,92,060 The question arises for consideration is whether collection of sponsorship fee for conducting tournament, green fee for allowing non-members to use the golf ground would be an activity in the nature of trade or commerce? This Tribunal is of the considered opinion that sponsorship fee collected for conducting tournament and green fee for use of golf ground cannot be considered to be a commercial activity and therefore, it is not in the nature of trade or commerce. It may be a commercial advertisement for the individual or institution who is paying the sponsorship fee but as far as the assessee is concerned, the sponsorship fee received is an income incidental to the main activity of promoting golf in the state of Tamilnadu, therefore, at any stretch of imagination, the collection of sponsorship fee cannot be considered as commercial activity by the assessee. Similarly, the tournament fee, annual subscription fee, green fee, catering income, round charges etc. are incidental to the main activity of promoting the sport of golf. As rightly submitted by the ld. Representative for the assessee, the non-refundable membership fee collected at the time of admission is in the nature of capital receipt, therefore, it cannot be treated as income of the assessee. Therefore, the CIT(A) is not justified in saying that the assessee is engaged in activity which is similar to commerce or trade. This Tribunal is of the considered opinion that the assessee is engaged only in promoting the sport of golf and receiving subscription, tournament fee, sponsorship fees etc. are in the course of its carrying on the charitable activity. Therefore, the activity of the assessee is not similar to commerce or trade."
CIT Vs. Delhi Golf Club Ltd. ITA No.1757 of 2010 dt. 30.03.2011 (Del.) (HC) Facts:-
The respondent/assessee is a premier Golf Club and is given charitable character by the Income-Tax authorities as it is registered u/s 12A of the Income-Tax Act because of the reason that its main activity is to promote the game of golf in India. During the assessment proceedings, the AO noticed that the assessee had received certain sum as fees from casual members at a higher rate than its permanent members. Such casual members were also not eligible for other facilities like permanent members. Therefore, the AO was of the view that the assessee was maintaining a golf course and was exploiting the same commercially by allowing non-members to play on the same for a fee. Accordingly, he treated such activity as commercial activity, though incidental for the attainment of its object. Since the assessee had not maintained separate books of accounts for such activity, the AO rejected the exemption u/s 11 to the 12 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur extent of such sum treating the same as business income. However, he allowed 25% of these receipts as expenses incurred for earning such an income. The Ld. CIT(A) deleted the addition made on account of casual membership fee as business income. The Tribunal confirmed the findings of CIT(A).
Findings:-
On appeal by the department, Hon'ble High Court allowed the exemption by holding as under:-
(a) Casual membership fee has been charged from Associate Members right from 1967 uptill the date, much in like with the global practice & procedure of Golf/Sports Clubs, and in no other year was made the basis of any assessment proceedings by the department.
(b) Even otherwise, the said activity being again carried out without any profit motive, as part of the overall functioning of the club, and part of the broader activities of the promotion of the sport of gold and as such ought to have been considered as being its integral part, especially when the character or the activities of the club or its long tradition of promotion of game of golf has not been disputed by the department.
© As per clause-9 of the articles of association, the club was entitled to admit various classes of persons which also included casual members in addition to permanent and tenure members. The casual members were also using the Golf Course in the same manner as permanent and tenure members were using.
(d) The AO has declined fees received from the casual members as income u/s 12A merely because assessee club was not maintaining separate books of accounts regarding this business activity. As per AO it was a business income and not income from the mutual interest that was not liable for exemption u/s 11. There is no merit in the AO's action for treating the fees received from the casual members as business income. The assessee club was maintaining required records with regard to income and expenditure. There is no requirement of maintaining separate accounts with respect to fees received from different kinds of members as provided in the articles of Association.
(e) The assessee is a well known club having been in Delhi for over five decades. Its main object is to promote the game of golf in India. It has members from various walks of life. Even the department all along after due examination had accepted that activity of the assessee as not for profit motive. In spite of this consistent finding of the department itself in the past, without any cogent reason, the AO has held that because the assessee was not maintaining separate books of accounts of such casual members it was a business income of the assessee not liable for exemption.
13 ITA No. 442/JP/2012M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur
(f) There is no finding by the AO to the effect that activities of the club during the year were not covered by the definition provided u/s 2(15). In order to satisfy the requirement of being an "object of general public utility" within the meaning of section 2(15) of the Act, it is not necessary that the benefit should reach each and every person of the country or the state. It is sufficient if it reaches a sizable number of members of the public.
In view thereof, promotion of sports and games is considered to be a charitable activity within the meaning of section 2(15) of the IT Act, 1961. Therefore, an association or institution engaged in the promotion of sports and games can claim exemption u/s 10(23) of the Act relating to exemption from tax of sports associations and institutions having their object the promotion control regulation and encouragement of specified sports and games.
Delhi & District Cricket Association Vs. DIT (2015) 38 ITR(Trib.) 326 (Delhi) Facts:-
Assessee was incorporated u/s 25 of Companies Act, 1956 with an aim to promote the game of cricket in and around Delhi, by taking over an association. Registration u/s 12A was granted to assessee vide order dated 6.3.1997. DIT(E) cancelled registration granted to assessee u/s 12A with retrospective effect from 1.4.2009, relying on amendment of sec. 2(15) and holding that assessee had entered into commercial agreement, with profit motive with T, giving up the right to sponsor Delhi Ranji Trophy and also right to reassign complete team sponsorship rights. That assessee sold liquor, provided playing cards and health club facilities after charging fee and activities were not charitable in nature at all.
That systematic activity of licensing earmarked special boxes by assessee to corporate entities for a specified consideration bears all attributes of business activity. That sale of tickets with pricing range too high, which was beyond reach of common man, further demonstrated that there was no charitable purpose and activities in organization. That highest heads of expenses included lunch and catering expenses which cannot be termed as charitable. That advertisement and contractual receipts and agreements entered into demonstrated that they were commercial contracts and activity was a business activity. Also that income from IPL matches cannot be considered as charitable activity.
Findings:-
(a) Power of cancellation of registration obtained u/s 12A were incorporated by way of amendment introduced u/s 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010. Registration granted u/s 12A, prior to amendment cannot be withdrawn 14 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur retrospectively. Thus withdrawal of registration with retrospective effect from 1.4.2009 by order passed u/s 12AA(3) was bad in law.
(b) Further, for cancellation of registration u/s 12AA(3), Commissioner should record a satisfaction that the activities of trust or institution were not genuine or that activities were not being carried on in accordance with the objects of the trust. In instant case main and predominant object and activity of assessee was to promote, regulate and control game of cricket in and around Delhi. Over years this activity had been recognized by revenue as a charitable activity and registration u/s 12A was granted to assessee. Thus, fact of assessee being a charitable institution was not in dispute and DIT(E) agreed that assessee was carrying on activity of "general public utility". It was also not case of DIT(E) that assessee was not carrying on its activities in accordance with the objects for which it was founded. Thus, twin conditions mandatorily required for invoking jurisdiction u/s 12AA(3) by DIT(E) were not satisfied.
© It was not case of revenue that assessee was carrying on "trade, commerce or business" under garb of the activity being "general public utility". Amount received by assessee from ground booking charges, health club charges, income from corporate boxes, lawn booking income, sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in assessee being held as undertaking activities in nature of trade, commerce or business since these receipts were intrinsically related, interconnected and interwoven with charitable activity and cannot be viewed separately.
(d) As regards sponsorship income from 'T', it was held that assessee had to perform many activities and for this purpose it had to enter into transactions with various types of persons and these persons can be commercial or non-commercial organizations, professionals, vendors of goods, vendor of services and so forth and so on. Merely entering into such agreement does not tantamount to assessee being a business entity. Other person with whom assessee had an agreement may have its own object and reason for doing transaction, however, that by itself, should not have any bearing at all on the nature of the transaction, as well as resultant activity in hands of assessee.
(e) Further, for making transaction as business activity, presence of profit motive was a sin qua non, however, facts demonstrated that despite receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by assessee and there was no profit motive and same could not be termed as business activity.
(f) As regards sale of liquor it was held that since cricket was played at international level, canteen keeps various items as per menu and liquor was just part of this menu. It was not sold independently as trading item. Eatery was available for the 15 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur use only of members, players, staff and other guests of DDCA. A walk in customer/guest could not enjoy the facility of this eatery and same cannot be termed as business activity. Running of a canteen was an incidental and necessary activity as was in every organization and cannot be termed as business activity. It is part and parcel of charitable activity and the receipt in question cannot be termed as an activity which is in nature of "trade, commerce or business".
(g) Advertising and contractual receipts reduces part of cost incurred by the assessee for its charitable activity and hence cannot be termed as business or that assessee has undertaken activity in the nature of trade, commerce or business. Receipts from IPCL and sale of tickets cannot be considered as an activity of trade, commerce or business. Further activity of playing cards was an incidental recreation activity undertaken in most clubs and what was charged by the assessee goes to recover the costs for providing such recreational facility to its member. Receipts were miniscule and hence negligible. As regard receipts from health club it was held that only a part of expenditure incurred on health club was recovered by way of charges from members who were using the health club facility and these receipts cannot be termed as an activity in the nature of "trade, commerce or business". Thus all receipts of assessee were intrinsically linked with activity of organizing matches and tournaments for the promotion of cricket. User charges were required for maintaining facilities that were provided as part of the infrastructure for conducting activities of assessee. Also contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges do not convert charitable activity into "trade, commerce or business"
activity. Thus, order passed by DIT(E) cancelling registration u/s 12A is quashed.
Rajasthan Cricket Association Vs. CIT ITA No.544/JP/13 dt. 09.06.2016 (ITAT Jaipur) The relevant finding of the Tribunal is as under:-
"At the time of (withdrawal of) registration, the ld CIT has to consider Section 12AA(3) and he has to consider two conditions for rejection of registration granted (i) the activities of the trust are not genuine, (ii) are not being carried out in accordance with the object of the trust as the case may be. The ld CIT has not found any infirmity in the activities carried out by the RCA as non genuine or not being carried out as per object of the trust. It is also a fact that the game of cricket become very potential with reference to revenue compared to other games, therefore, the revenue generated by the RCA are substantial but this ground cannot be used to cancel the registration granted by the ld CIT as predominant object of the trust is charitable and substantial revenue generated is incidental to the main object. If the ld Assessing Officer found any violation in application of fund, he can make disallowance U/s 11 of the Act. Thus, we are of the considered 16 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur view that the ld CIT was not right in withdrawing the registration granted U/s 12A of the Act. Accordingly, the assessee's appeal is allowed."
In view of above, the order passed by CIT withdrawing the registration u/s 12A already granted to the assessee be quashed and he be directed to continue the registration already granted to the assessee.'' 2.4 On the other hand, the ld. DR supported the order of the ld. CIT .
2.5 We have gone through the order passed by CIT u/s 12AA(3) of the Act, submission of the assessee and the argument put forth by both the parties along with case laws relied upon. We note that assessee is registered under Rajasthan Society Registration Act, 1958 w.e.f.
27.04.1973 and was granted registration u/s 12A of the Act w.e.f.
15.06.1999. The Ld. CIT after referring to the objects of the assessee as reproduced at Pg 4 Para 5.1 of the order. The ld. CIT also referred to its Income & Expenditure account and observed that various sources of income like subscription, interest income, sponsorship, income from bar & canteen and guest house charges. The ld. CIT withdrew the registration granted u/s 12A r.w.s. 293C of the Act from the initial year from which the registration was granted. Against the order of Ld. CIT, assessee filed detailed written submission supported by case laws, filed various 17 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur documents as required in course of appellate proceedings and also made the oral submissions.
2.5 (2) Having considered the rival submission, we note that the first issue in the present appeal is whether Ld. CIT is correct in withdrawing the registration from the initial year when the registration was granted after satisfying himself about the objects of the society and genuineness of its activities and the second issue is whether he is correct in holding that the activities of the society are not charitable.
2.5(3) In respect of the first issue, we find that power to withdraw the registration by CIT is provided in the statue by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby sub-section (3) is inserted to section 12AA to provide that where a trust or institution has been granted registration under sub-clause (b) of sub section 1 and subsequently the Commissioner is satisfied that 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. Thereafter, an amendment was made in this sub-section by FA, 2010 w.e.f. 01.06.2010 18 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur to also empower the Commissioner to cancel the registration where it was obtained at any time under section 12A. Thus, w.e.f. 01.06.2010 only, the Commissioner has a power to cancel the registration granted u/s 12A.
Further, section 293C referred by the CIT was inserted by Finance (No.2) Act, 2009 w.e.f. 01.10.2009 to provide that income tax authority has power to withdraw the approval even when a provision to withdraw such approval has not been specifically provided in such provision. We find that the assessee was granted registration u/s 12A and therefore, the amendment by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby section 12AA(3) is inserted is not applicable to withdraw the registration granted u/s 12A. We are also of the view that both these provisions have prospective application and not retrospective, as a privilege or benefit once granted cannot be withdrawn from retrospective effect. The various cases referred by the Ld. A/R (supra) particularly the decision of Hon'ble Delhi High Court in case of DIT(Exemtion) Vs. Mool Chand Khairati Ram Trust (2011) 339 ITR 0622 is squarely applicable where it was held that power to cancel the registration once granted was only confined to the registration granted under cl. (b) of sub-s. (1) of s. 12AA till before 19 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur 1st June, 2010. Of course, now w.e.f. 1st June, 2010, the power vests with the CIT even to cancel the registration granted under any of the clauses of sub-s. (1) of s. 12A. In that view of interpretation, there was no power vested with the CIT to cancel or withdraw the registration granted to the assesse under s. 12A(a) in the year 1974. Accordingly, we hold that the withdrawal of registration granted u/s 12A to the assesse since its inception is not as per law and to this extent the order passed by him to withdraw the registration from the initial year is not approved.
2.5(4) In respect of second issue we note that the object of the assesse, when it was granted registration u/s 12A w.e.f. 15.06.1999 and that when the same was withdrawn u/s 12AA(3) vide order dated 28.03.2012 remains the same. The sources of income and nature of the expenses also remains the same. In course of appellate hearing we noted from the reply filed by the assesse to CIT (PB 6-7) wherein assesse has explained as to how its activities are for promoting the game of golf and is for benefit of public at large, that there were various court cases pending against the assesse vis-à-vis State of Rajasthan. The details of these cases were called for. In response assesse submitted the various orders including that of Divisional Bench of Rajasthan High Court titled 20 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur as Rajasthan Polo Club Vs. State of Rajasthan and 7 others (D.B. Civil Special Appeal No. 847/96 dated 25-09-2001)[PBP114-{10}] where the entire matter was discussed and the decision of committee & the finding of court is given. The relevant part of the decision of the committee and the finding of court for ready reference is reproduced as under:-
"The Government in engaging in this exercise, constituted a committee, consisting of the following members:
(i) State Minister for Tourism, Art & Culture.
(ii) State Minister for sports and Youth Affairs.
(iii) Chairman, Rajasthan Sports council.
(iv) Secretary, Urban Development and Housing.
(v) Secretary, Tourism, Art & Culture.
(vi) Jaipur Development Commissioner.
(vii) President, Rambagh Golf Club.
(viii) President, Rajasthan Polo Club.
The Committee has a composite representation in as much as various departments and bodies as also associations that had concern with the utilization of the RambaghComplex,were duly represented.On 11.08.2000, after a prolonged discussion, a settlement was arrived at in the meeting, by which, it was unanimously accepted that the JDA was the owner of the entire land. The area in question would be used as a city level park, an 18-hold golf-course, including a club-house and a polo ground. The JDA would engage a golf-expert to design, including re-design, re- laying, if required, the 18-hole golf-course. It was further agreed as follows:
"1. As a part of its proposed scheme of city level park on the acquired land or Rambagh campus, JDA will have an 18-hole golf course including a club House. For this purpose, JDA will engage a golf expert to design(including redesigning/relaying, if required) a 18-hole golf course so that it is accommodated in minimum possible area and integrates and complements the polo and the public park uses of the land. A suitable site will be identified for the stables of Polo Ground and exercise of horses.
2. This 18-hole golf courses will be owned by Jaipur Development Authority and shall be known as 'JDA Golf Course' and will be managed and controlled by the 21 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur Golf Club (in accordance with its Constitution and Articles of Association) whose President would be the Secretary, Urban Development, Govt. of Rajasthan and Jaipur Development Commissioner would its Vice President. Other modalities and lease rent to be paid by the club to JDA will be decided in due course.
3. The land used by Rajasthan Polo club would be owned by Jaipur Development Authority and Secretary, Urban Development, would be the President of the Club and JDC would be the Vice President.
4. Rambagh Golf Club will arrange before 22.08.2000 the withdrawal of all the three writ petitions which led to the passing of the judgment by the Hon'ble Single Bench on 24.5.96,whereupon JDA and Polo Club will also withdraw their D.B. appeals (3 each). Hon'ble Division Bench will be requested to allow all these withdrawals and set aside the judgment passed by Hon'ble Single Bench in view of the settlement reached between the parties. Consequently, the JDA also withdraw the SLPs pending before the Hon'ble Supreme Court.
5. Pending designing of the golf course, and in anticipation of the withdrawal of the litigation as above, JDA will immediately start the development of the two parking lots (proposed along P.R. Road & B.D. Road) and development of the park from the PR Road/BD Road end in view of the forthcoming international Rajasthan/ Conclave 2000 starting from 23.09.2000 in Jaipur."
It was also decided that the Hon'ble Division Bench would be requested to allow withdrawal of the original Writ Petitions Nos. 6826/94, 6855/94 and 1162/95 and set aside the judgment passed by the Hon'ble Single bench in view of the settlement, arrived at between the parties. Thereafter in Para 106 & 107, the Hon'ble Court held as under [PBP 114 {47}]:-
''106. Rajasthan Polo Club and Rambagh Golf have acquired for itself, international fame and recognition, in relation to polo game and golf game. Few such clubs in the world can rival its reputation and standing. The present polo ground has come in for appreciation by high dignitaries like General K.S. Thimayya; the first President of the 22 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur Union, Late Dr.Rajendra Prasad; Prince Phillips of Buckingham Palace of U.K. and prominent polo players. It is known to everybody that important and prestigious poloevents of international and national level have been regularly taking place at the present polo-ground under the aegis of the Rajasthan Polo club. There can be no doubt or dispute that the games of polo and golf have immensely contributed toward making Jaipur an important tourist attraction and the role of the Rajasthan Polo Club and Rambagh Golf Course cannot be over-emphasized.The role of both the clubs in serving public interest and making significant contribution to the cause of tourism in Rajasthan hascome to be acclaimed on numerous occasions.
107. In our opinion, the decision, now taken by the Government, is just and fair, in the interest of both the clubs, which are in continuous possession and enjoyment of the lands in question, for the last so many decades.
For the foregoing reasons, we hold:
(a) The decision to enter into a settlement is wednesbury reasonable.
(b) No mala fide, in fact, is alleged or proved.
(c) The arrangement does not create any title or proprietary rights in the clubs in question, which shall be under the close and pervasive control of the Authority.
(d) The arrangement is consistent with and fulfils the Master Plan.
(e) The scope of judicial review is limited. The decision is wednesbury reasonable and suffers from no procedural impropriety or illegality, this Court will not substitute its view for that of the Authority and play a secondary role; and there is no legal infirmity in the decision to settle and achieve the developmental purposes of recreation and sports, through golf and polo clubs.
(f) The settlement, arrived at by the State Government, Rambagh Golf Club and Rajasthan Polo Club, is valid.23 ITA No. 442/JP/2012
M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur
(g) The State is directed to implement and execute the settlement.
(h) Both the Writ Petitions Nos. 4114/2000 and 4692/2000, filed by petitioners JitendraShrimali& another and VedPrakashBishnoirespectively, are dismissed. No costs. The Writ petitions Nos. 6826/94; 6855/94 and 1162/95, filed by Shri K.K. Sharma, M/s. Rambagh Golf Club and Dr. S.C. Kabra and another, are permitted to be withdrawn as the agreement arrived at between the State Government, Ram Bagh Golf Club and Rajasthan Polo Club is in accordance with law. By virtue of our holding that the settlement is valid and our permitting the petitioners to withdraw the writ petitions, judgment passed by the learned Single Judge dated, 24.5.96 shall not remain in force from today."
From the above we note that JDA is the owner of land and the assesse has no title/ right in the land. The assesse is only running & managing the golf course in public interest. Golf Club is also making contribution to the development of tourism in Rajasthan. We, therefore, conclude that the assesse is promoting the sports of golf. The assessee in his written submission as reproduced above has also explained the various objections of CIT in withdrawing the registration u/s 12AA. The assesse has also provided a table giving the percentage of expenditure in the game of golf with reference to its receipts for FY 2004-05 to 2010-11 according to which such expenditure ranges from 78.46% to 96%. In AY 2006-07, AO while passing the order u/s 143(3) has granted the benefit of registration u/s 12A to the assessee (PB 50-52). In respect of the objection 24 ITA No. 442/JP/2012 M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur of CIT that the club is receiving huge receipts from the activity of sale of liquor and in lieu of receipt of fees/ subscription from the members, services is provided to them with regard to playing of game, providing of food, liquor, etc., the same are only incidental to the promotion of game of golf. In any case this aspect can be examined in course of assessment proceedings. Similar activities carried out by various golf clubs in India including the sale of liquor have been granted registration u/s 12A/ 12AA The orders of ld. CIT for cancelling such registration u/s 12AA(3) in such cases have been disapproved by the Hon'ble ITAT/ High Court as referred by ld. A/R supra. The facts & findings of these cases have been provided by ld. A/R in written submission (supra). Considering the fact that assesse is engaged in promoting the game of golf and having been granted registration u/s 12A w.e.f. 15.06.1999, we see no reasons to cancel the same particularly when the objects and the activitiesof assessee at the time of grant of registration and cancellation thereof remains the same. In these circumstances, we do not concur with the order of ld. CIT withdrawing, the registration u/s 12AA(3) of the Act. The ground of assessee is allowed.
25 ITA No. 442/JP/2012M/s. Rambagh Golf Club, Jaipur vs CIT, Jaipur-II, Jaipur 3.0 In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 27-12-2017.
Sd/- Sd/- ¼dqy Hkkjr½ ¼HkkxpUn½ (KUL BHARAT) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 27/12/ 2017 *Mishra
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant-M/s. Rambagh Golf Club, Rambagh Circle, Jaipur
2. izR;FkhZ@ The Respondent- The ld. CIT, Jaipur-II, , Jaipur
3. vk;dj vk;qDr@ CIT,
4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
5. xkMZ QkbZy@ Guard File (ITA No. 442/JP/2012) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 26