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2014 (6) TMI 1004 - AT - Income TaxGrant of registration u/s 12AA - charitable activity - scope of section 2(15) - Held that - No doubt applicability of the provisions of Sec. 13(1)(c) cannot be looked into at the time of registration but CIT is bound to look into whether the objects of the trust/institution are charitable/religious or not. We do not find any irregularity or infirmity so far as jurisdiction of CIT is concerned in ascertaining the purpose of the object for which the institution has been established. We have also examined the submission of the ld. AR that the Assessee is engaged in activity of education and rendering education in the game of cricket and therefore the proviso to Sec. 2(15) will not be applicable in the case of the Assessee. In our opinion this submission of the Assessee keeping in view the objects of the Assessee does not have any leg to stand in view of the decision of the Hon ble Supreme Court in the case of Sole Trustee Loka Sikhshana Trust s case 1975 (8) TMI 1 - SUPREME Court It is not the case of the Assessee that it is running a normal schooling for sports. Therefore we hold that the Assessee s activities do not fall within the term education . CIT has used material behind the back of the Assessee for rejecting the registration and has not given him proper opportunity we therefore with our above observation set aside the order of CIT and restore this issue to the file of CIT with the direction that the CIT shall look into the matter of registration of the institution afresh after giving proper and sufficient opportunity to the Assessee to prove that the objects for which the Assessee institution is created are genuine and are for charitable purposes. We may clarify that while considering the application of the Assessee for registration the CIT should not apply proviso to Sec. 2(15) retrospectively. If he so choses that in view of the proviso inserted w.e.f. 1.4.2009 the activities carried on by the Assessee no more remains charitable as per the amended definition of Sec. 2(15) he may pass an order u/s 154 rectifying his order withdrawing the registration of the Assessee in case he grants registration to the Assessee w.e.f. 1.4.2009 by passing a speaking order. Appeal of the Assessee is statistically allowed.
Issues Involved:
1. Legality and jurisdiction of the Commissioner of Income Tax (CIT)'s order. 2. Examination of accounts for financial years 2002-03 to 2008-09. 3. Application of amended section 2(15) of the Income Tax Act. 4. Examination of matters subsequent to the filing of the application. 5. Use of materials without giving an opportunity of being heard. 6. Incorporation of materials found during a survey conducted under section 133A. 7. Alleged bias and derogatory remarks by the CIT. 8. Nature of the appellant's activities as educational or general public utility. 9. Discussion on Indian Premier League (IPL) and its relevance. 10. Retrospective application of the amendment to section 2(15). 11. Application of section 13(1)(c)(ii) for refusing registration. 12. Classification of current activities as promotion of entertainment. 13. Consideration of sports activities as a business risk. 14. Refusal of registration for financial years 2002-03 to 2008-09. 15. Refusal of registration from the financial year 2002-03 instead of 01.04.1997. Issue-wise Detailed Analysis: 1. Legality and Jurisdiction of CIT's Order: The appellant argued that the order of the CIT was illegal, arbitrary, and without jurisdiction. However, the Tribunal found that the CIT had acted within his jurisdiction in examining the accounts and activities of the appellant to determine the eligibility for registration under section 12AA of the Income Tax Act. 2. Examination of Accounts for Financial Years 2002-03 to 2008-09: The appellant contended that the CIT exceeded his jurisdiction by examining accounts for these years. The Tribunal held that the CIT was within his rights to examine the accounts from the financial year 2002-03 onwards to ascertain the genuineness of the appellant's activities. 3. Application of Amended Section 2(15) of the Income Tax Act: The appellant argued that the CIT erred in applying the amended section 2(15), which was not in existence during the period for which the application was made. The Tribunal agreed with the appellant, stating that the proviso to section 2(15) inserted by the Finance Act, 2008, effective from 1.4.2009, could not be applied retrospectively. 4. Examination of Matters Subsequent to Filing of the Application: The appellant claimed that the CIT committed an error by examining matters subsequent to the filing of the application. The Tribunal found no error in the CIT's approach, as the examination was necessary to determine the genuineness of the appellant's activities. 5. Use of Materials Without Giving Opportunity of Being Heard: The appellant alleged that the CIT used materials behind their back without giving an opportunity to be heard. The Tribunal noted that the CIT had given ample opportunities to the appellant to present their case, and therefore, the claim was unfounded. 6. Incorporation of Materials Found During Survey Conducted Under Section 133A: The appellant argued that the CIT incorporated materials found during a survey conducted in 2006, which was three years subsequent to the application. The Tribunal held that the CIT was justified in considering these materials as they were relevant to assessing the genuineness of the appellant's activities. 7. Alleged Bias and Derogatory Remarks by the CIT: The appellant claimed that the CIT passed the order in a biased and derogatory manner. The Tribunal found no evidence of bias or derogatory remarks in the CIT's order. 8. Nature of the Appellant's Activities as Educational or General Public Utility: The appellant argued that their activities included education, particularly in cricket, and should be considered under the restricted meaning of education under section 2(15). The Tribunal disagreed, stating that the appellant's activities did not fall within the term "education" as defined by the Supreme Court in the case of Sole Trustee, Loka Sikhshana Trust. 9. Discussion on Indian Premier League (IPL) and Its Relevance: The appellant contended that the CIT erred in discussing the IPL, which did not exist during the period for which the application was made. The Tribunal found no error in the CIT's discussion, as it was relevant to assessing the commercial nature of the appellant's activities. 10. Retrospective Application of the Amendment to Section 2(15): The appellant argued against the retrospective application of the amendment to section 2(15). The Tribunal agreed, stating that the proviso to section 2(15) was not retrospective and could not be applied to the period before 1.4.2009. 11. Application of Section 13(1)(c)(ii) for Refusing Registration: The appellant claimed that the CIT erred in applying section 13(1)(c)(ii) to refuse registration. The Tribunal found that the CIT was justified in applying this section, given the financial irregularities and benefits conferred on the executives managing the appellant's affairs. 12. Classification of Current Activities as Promotion of Entertainment: The appellant argued that their activities were charitable and not for entertainment. The Tribunal upheld the CIT's conclusion that the appellant's activities were commercial and promotional of entertainment rather than charitable. 13. Consideration of Sports Activities as a Business Risk: The appellant contended that the CIT erred in considering their sports activities as a business risk. The Tribunal found that the CIT was correct in his assessment, given the commercial nature of the activities. 14. Refusal of Registration for Financial Years 2002-03 to 2008-09: The appellant argued that the CIT erred in refusing registration for these years. The Tribunal upheld the CIT's decision, citing financial irregularities and the commercial nature of the appellant's activities. 15. Refusal of Registration from the Financial Year 2002-03 Instead of 01.04.1997: The appellant contended that the CIT should have granted registration from 01.04.1997. The Tribunal found no error in the CIT's decision to refuse registration from 2002-03, given the delay in the application and the lack of sufficient reasons for condonation. Conclusion: The Tribunal set aside the order of the CIT and restored the issue to the CIT for fresh consideration, directing the CIT to provide a proper and sufficient opportunity to the appellant to prove the genuineness and charitable nature of their activities. The Tribunal also clarified that the proviso to section 2(15) should not be applied retrospectively and that the CIT could pass an order under section 154 to rectify the registration if necessary.
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