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2013 (10) TMI 1384 - AT - Income TaxRegistration under section 12A(a) cancelled - Held that - The Registration has been cancelled by CIT Rajkot-2 Rajkot on the basis of amended provisions of Section 2(15) of the Income-tax Act 1961; therefore we are of the considered opinion that the action taken by the ld CIT Rajkot-2 Rajkot does not fall within the permissible limits of Section 12AA(3) of the Income-tax Act 1961 and therefore the impugned order is bad in law. Recently ITAT Chennai B Bench in the case of Madras Motor Sports Club v. DIT (Exemptions) 2013 (2) TMI 70 - ITAT CHENNAI in almost identical facts restored the registration which was cancelled by ld DIT (Exemptions) observing that the nature of objects of the assessee cannot fluctuate in tandem with the quantum of receipts mentioned in the first proviso to section 2(15) of the Income-tax Act 1961.
Issues Involved:
1. Cancellation of registration of the trust under section 12AA(3) of the Income-tax Act, 1961. 2. Interpretation and application of section 2(15) of the Income-tax Act, 1961. 3. Jurisdiction and authority of the Commissioner of Income-tax under section 12AA(3). 4. Consideration of precedents and judicial decisions. Issue-wise Detailed Analysis: 1. Cancellation of Registration of the Trust under Section 12AA(3): The primary issue in this case is whether the Commissioner of Income-tax (CIT) was justified in canceling the registration of the assessee-trust under section 12AA(3) of the Income-tax Act, 1961. The assessee-trust was initially granted registration under section 12A for promoting and developing sports in the Saurashtra region. However, the CIT canceled this registration, citing that the trust's activities, such as organizing one-day international cricket matches and receiving TV subsidy/subvention income, were in the nature of trade, commerce, or business, making the trust's objectives no longer charitable under the amended provisions of section 2(15). 2. Interpretation and Application of Section 2(15): The CIT's decision was based on the first proviso to section 2(15), which states that the advancement of any other object of general public utility shall not be considered a charitable purpose if it involves carrying on any activity in the nature of trade, commerce, or business. The assessee argued that the trust's activities were charitable and not conducted with a profit motive. The assessee's counsel pointed out that the promotion of sports and games is considered a charitable purpose under circular No. 395, dated 24-09-1984. The counsel also cited the Supreme Court's decision in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association, which emphasized examining the primary or dominant purpose of the trust to determine its charitable nature. 3. Jurisdiction and Authority of the CIT under Section 12AA(3): The assessee contended that the CIT's power under section 12AA(3) is limited to canceling registration if the activities of the trust are not genuine or not carried out in accordance with its objects. The CIT does not have the authority to re-examine the trust's objects once registration has been granted under section 12A. The assessee argued that the CIT's action was beyond his jurisdiction as the conditions for cancellation under section 12AA(3) were not satisfied. 4. Consideration of Precedents and Judicial Decisions: The assessee relied on several judicial decisions to support its case. These included the decisions of the Gujarat Cricket Association v. DIT (Exemption), Vidarbha Cricket Association v. CIT, and other co-ordinate benches of ITAT, which held that registration cannot be canceled unless the conditions under section 12AA(3) are met. The assessee also distinguished its case from the Mumbai Cricket Association v. DIT (Exemption), where commercial activities were found to violate the terms of land allotment. The Revenue, on the other hand, cited the ITAT Chennai Bench's decision in Tamil Nadu Cricket Association v. DIT (Exemptions) and argued that the trust's activities were commercial in nature, thus falling under the first proviso to section 2(15). Judgment: The Tribunal concluded that the CIT's action of canceling the registration was not within the permissible limits of section 12AA(3). The Tribunal noted that the CIT's decision was based solely on the amended provisions of section 2(15) and did not fall within the two conditions required for cancellation under section 12AA(3). The Tribunal also observed that the nature of the trust's objects cannot fluctuate based on the quantum of receipts. The Tribunal set aside the CIT's order and restored the registration of the assessee-trust under section 12A. The appeal of the assessee-trust was allowed, and it was noted that the Assessing Officer could examine the issues raised by the CIT during the assessment proceedings of relevant years.
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