2012 (3) TMI 168 - AT - Income Tax

A society formed for advancement of music, other fine arts and traditional arts - assessee applied for renewal of its approval under Section 80G of the Act - Assessee registered under Section 12AA - The Department contented receipts of the assessee from sponsorship fees, sale of tickets and music coaching was in excess of Rs. 10 lakhs and application for renewal of approval under Section 80G of the Act rejected - Held that - assessee s object was development of music and other fine arts based on Indian culture and assessee was not carrying on any trade, commerce or business, when it was collecting fees from persons who were attending the programmes - denial of renewal of application under Section 80G of the Act, when its registration under Section 12AA of the Act was intact, was unjustified Mylapore Fine Arts Club v. Dy. DIT(E) in I.T. Appeal No. 1706/Mds/2010 - advancement of traditional musical culture of Tamil Nadu and conducting music programmes sponsored by various persons and sponsorship fee so received, distributed among the artists, can never be considered as an activity in the nature of trade, commerce or business - assessee was eligible for renewal of approval under Section 80G of the Act - appeal filed by the assessee is allowed.

Summary

Issues:
Renewal of approval under Section 80G of Income-tax Act, 1961 denied by ld. DIT (Exemptions), Chennai based on receipts exceeding Rs. 10 lakhs and applicability of second proviso to Section 2(15) of the Act.

Analysis:
The assessee, a society promoting music and fine arts, applied for renewal of approval under Section 80G of the Act. Ld. DIT(E) raised concerns over receipts exceeding Rs. 10 lakhs from sponsorship fees, ticket sales, and music coaching, questioning the charitable nature of these activities under the first proviso to Section 2(15) of the Act. The assessee argued that the funds were used for artists and educational purposes, not for trade or commerce. Various tribunal decisions were cited in support of the renewal application.

The dispute centered on whether the sponsorship fees and music coaching receipts could be classified as trade, commerce, or business activities under the Act. The Tribunal noted the cultural significance of music and fine arts in Tamil Nadu and held that the nature of the assessee's activities did not align with commercial intent. The Tribunal emphasized that promoting traditional arts and conducting music programs did not constitute trade or commerce. The Tribunal also highlighted that the receipts from ticket sales were below the Rs. 10 lakhs threshold. Additionally, the assessee's registration under Section 12AA of the Act further supported its eligibility for renewal under Section 80G.

The Tribunal disagreed with the DIT(E)'s narrow interpretation and concluded that the sponsorship fees and music coaching receipts were not from commercial activities. The Tribunal ruled in favor of the assessee, quashing the DIT(E)'s decision and directing the grant of renewal under Section 80G. The Tribunal's decision was based on the charitable nature of the assessee's activities and the non-commercial intent behind the funds received.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the cultural and educational aspects of the society's activities and overturning the denial of renewal under Section 80G by the DIT(E).