MIG Cricket Club vs. DIT (E) (ITAT Mumbai)

The assessee was granted registration by the Revenue on the grounds that the assessee is carrying on the activities which are in the nature of advancement of objects of general public utility. Later on, a proposal was received by learned DIT(E) from learned ADIT(E)-1(2), Mumbai for cancellation of registration as the activities of the assessee are in the nature of trade, commerce or business , and gross receipts are in excess of Rs. 10 lacs and hence newly inserted proviso to Section 2(15) of 1961 Act, w.e.f. assessment year 2009-10, is hit, consequentially, applicable for the impugned assessment year 2009-10. The learned DIT(E) sent show cause notice, dated 20-12-2011, to the assessee asking to explain why registration earlier granted to the assessee by the Revenue u/s 12A of 1961 Act should not be withdrawn on the above grounds. The assessee during the previous year relevant to the impugned assessment year 2009- 10 has shown receipt from Banquet Hall Hiring Charges of Rs. 587.59 lacs and receipt of Rs. 132.90 lacs from Hospitality (Restaurants) and Rs. 35.53 lacs from Permit Room (Bar). The DIT(E) rejected the contentions of the assessee and cancelled the registration by invoking newly inserted proviso to Section 2(15) of 1961 Act by holding that the assessee’s main object is not for advancement of any other object of general public utility as the assessee is carrying on the activities which are in the nature of trade, commerce or business for consideration, therefore, in view of amended provisions of Section 2(15) of 1961 Act. Section 2(15) of 1961 Act, the assessee is not entitled for exemption u/s 11 of 1961 Act. On appeal by the assessee to theTribunal HELD by the Tribunal:

(i) We find that the Hon’ble Bombay High Court in a recent decision in DIT(Exemption) v. North Indian Association, (2017) 79 taxman.com 410 (Bom.) dated 14-2-2017, wherein, a significant observations in context of amended provisions of Section 2(15) of 1961 Act in para-9 was made contemplating that if the transactions are in the nature of trade, commerce and business are consistent and continuous/regular basis and exceeds threshold limit, as prescribed by statute u/s 2(15) of 1961 Act , then it is a matter of probe / investigation to come to conclusion that the activities of the trust/institution is not genuine, in the light of amended provisions of Section 2(15) of 1961 Act., which is reproduced hereunder:-

“9. However, the issue of the trust not being genuine cannot be concluded by merely giving a finding in one year that income earned from activities of trade, business or commerce are in excess of the limit specified in the proviso to Section 2(15) of the Act. This is so held by us in Khar Gymkhana (supra). However, if this happens on continuous / regular basis, it could justify further probe / inquiry before concluding that the trust is not genuine.”

(ii) In the light of the above observation and respectfully following the same, we are prima facie of the opinion that the activities of the assessee of Banquet Hall Hiring, Hospitality (Restaurants) and Permit Room (Bar) are in the nature of carrying on trade, commerce, or business for consideration, which are hit by proviso to Section 2(15) of 1961 Act. We further observe that the receipts from these activities, during the previous year relevant to the impugned assessment year 2009-10, are far in excess of minimum prescribed threshold limit. This requires detailed enquiry and examination by the Ld. DIT(Exemption) as to the various activities undertaken by the assessee over a period of time and its nexus with activity of rendering of trade commerce or business as contemplated and mandated by amended Section 2(15) of 1961 Act read in conjunction with significant observations made in the above order dated 14-2-2017 in North Indian Association(supra). Thus, enquiry and examination by learned DIT(E) is further required to arrive at a conclusion whether activities of the assessee are genuine or not in context of Section 11 of the Act read with amended Section 2(15) of the Act and breach of threshold limit over a period of time. The learned DIT(E) shall also examine whether services were only rendered to members or was it also rendered to non-members. The learned DIT(E) shall also examine every activity carried on by the assessee before concluding on merits as to whether activities of the assessee are hit by amended provisions of Section 2(15) of the Act. We would like to clarify that the learned DIT(E) shall denovo adjudicate this issue and give its finding on merits uninfluenced by our prima-facie findings as given by us in this order. Thus this matter/issue needs to be restored to the file of the Ld. DIT(Exemption) for denovo determination of the issue on merits in the light of the amended Section 2(15) of the Act read with Section 11 of the Act, considering the decision of Hon’ble Bombay High Court in the case of DIT(Exemption) v. North Indian Association (supra).