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2014 (11) TMI 1013 - AT - Income TaxEligibility for exemption U/s.11 - whether there is violation to the newly inserted proviso to Sec.2(15) of the Act since the objects of the Assessee society falls under General Public Utility as envisaged in the Act? - assessee society is a society formed for promoting the sports of swimming and related activities - Held that - Considering the scope of sports development in India we are of the view that the recognized sports association in India who impart knowledge in sports promotion of sports by conducting various sports activities in all branches to fall within the scope of education as defined under the amended provisions of Section-2(15) of the Act . Accordingly we hold that the objects of the assessee society will fall within the scope of the first limb of the amended provisions of section 2(15) of the Act viz. education . Further on analyzing the activities of the assessee society with regard to FIDE trainer coach fee AICF chronicle Prize money share Rent on Monrai system Title fees, Telecast charges Doordarshan and FIDE remittances we find that all of them relate to the activities which are incidental to the main objects of the assessee s society and therefore proviso to section 2(15) of the Act will not be attracted. Based on our aforesaid decision the learned Assessing Officer is hereby directed to modify his order accordingly. We hereby hold that the objects of the assessee trust falls within the scope of the first limb of Sec.2(15) of the Act viz. Education and therefore the proviso to Sec.2(15) of the Act will not be attracted and accordingly the order of the Ld. CIT (A) stands confirmed in allowing exemption - Decided in favour of assessee.
Issues Involved:
1. Eligibility for exemption under Section 11 of the Income Tax Act. 2. Interpretation of the term "General Public Utility" under Section 2(15) of the Income Tax Act. 3. Examination of the commercial nature of activities conducted by the assessee society. 4. Validity of the cancellation of registration under Section 12AA of the Income Tax Act. 5. Applicability of the proviso to Section 2(15) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Eligibility for Exemption under Section 11 of the Income Tax Act: The primary issue revolves around whether the assessee society is eligible for exemption under Section 11 of the Income Tax Act. The Revenue contended that the society's activities were commercial in nature, thus violating the provisions of Section 2(15). However, the Commissioner of Income Tax (Appeals) [CIT(A)] held that the society's activities were solely for the promotion of swimming, which qualifies as a charitable activity under Section 2(15). The CIT(A) emphasized that the society did not engage in any trade, commerce, or business, and any profits earned were used towards the fulfillment of its charitable objectives. 2. Interpretation of the Term "General Public Utility" under Section 2(15) of the Income Tax Act: The Revenue argued that the assessee's activities fall under "General Public Utility," which is not considered a charitable purpose if it involves trade, commerce, or business. The CIT(A) referred to the Board's Circular No.395 dated 24.09.1984, which clarified that the promotion of sports and games is considered a charitable purpose under Section 2(15). The CIT(A) concluded that the society's activities in promoting swimming qualify as a charitable purpose, thus making it eligible for exemption under Section 11. 3. Examination of the Commercial Nature of Activities Conducted by the Assessee Society: The Assessing Officer (AO) observed that the society had substantial receipts from coaching fees and swimming academy fees, which he deemed commercial. However, the CIT(A) found no evidence of profit motive or violation of the society's objectives. The CIT(A) noted that the society's activities were solely focused on training swimmers and any profits were used to further its charitable objectives, thus maintaining its charitable nature. 4. Validity of the Cancellation of Registration under Section 12AA of the Income Tax Act: The AO recommended the cancellation of the society's registration under Section 12AA, treating it as an Association of Persons (AOP) and taxing its income. However, the CIT(A) upheld the society's registration under Section 12AA, emphasizing that its activities were charitable and aligned with its registered objectives. The CIT(A) directed the AO to accept the society's income as nil and delete all additions made in the assessment order. 5. Applicability of the Proviso to Section 2(15) of the Income Tax Act: The Revenue contended that the proviso to Section 2(15) applied, as the society's activities were commercial. The CIT(A) and the Tribunal both held that the society's activities were educational and charitable, falling within the first limb of Section 2(15) and not attracting the proviso. The Tribunal referred to the case of M/s. All India Chess Federation, concluding that the promotion of sports is akin to education and qualifies as a charitable activity. Conclusion: The Tribunal, after considering the submissions and materials on record, upheld the CIT(A)'s decision. It concluded that the assessee society's activities were charitable, focusing on the promotion of swimming, and did not involve any trade, commerce, or business. The society's objectives fell within the scope of "education" under Section 2(15), and thus, the proviso to Section 2(15) was not applicable. The Tribunal dismissed the Revenue's appeal, confirming the society's eligibility for exemption under Section 11 and maintaining its registration under Section 12AA. The order was pronounced on 13th November 2014 at Chennai.
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