2022 (7) TMI 435 - AT - Income Tax

Exemption u/s 11 - rejecting the application for registration u/s 12A - As alleged activities of the appellant fell under category of advancement of any other object of general public utility u/s 2(15) - HELD THAT - Undoubtedly, the activities of the assessee are for the promotion of sporting activities. We find that whether the trust carrying on the sport activities is entitled to registration under Section 12AA of the Act or not. The objects of the trust placed before us at page no. 15 of the Paper Book shows that it is for the promotion of sport as well education, social, arts and cultural advancements. We find that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench 2022 (3) TMI 250 - ITAT MUMBAI held that income derived from the sport activities are held to be charitable in nature. The co-ordinate Bench in that decision has followed the decision of Hon'ble Bombay High Court in the case of Director of Income-tax (Exemption) vs. Chembur Gymkhana 2012 (8) TMI 611 - BOMBAY HIGH COURT - thus hold that the learned CIT (E) is not correct in holding that assessee is not eligible for registration under Section 12AA of the Act so far as the activities of the sports are concerned. Further in Assistant Commissioner of Income-tax (Exemptions) v. Surat District Cricket Association 2022 (5) TMI 540 - ITAT SURAT it is held that Where predominant object of assessee-society was to promote cricket and other sports at State as well as at National level and receipts shown under income from other sources were from activities undertaken in furtherance of various sports, profit earning was not predominant purpose of assessee and thus, proviso to section 2(15) could not be invoked to decline benefit of section 11 of The Act . Thus at least assessee which is promoting Gymnastic Sports is entitled to Registration u/s 12 AA of The ACT. We set aside the order of the learned CIT holding that the sports and activities are following under the category of advancement of other object of general public utility. We also find that assessee is not given the address of the donors to the learned CIT (E). The CIT is also required to verify the activities of the trust at the time of granting of registration under Section 12AA of the Act. In view of this, we direct the assessee to submit the requisite details called for by the learned CIT (E) with respect to the activities of the trust. In view of this, the learned CIT (E) is directed to grant registration to the assessee under Section 2(15) of the Act holding that the objects of the assessee are charitable in nature. Further, he is also directed to examine the activities of the trust and decides the application of the assessee afresh.

Summary

Issues:
1. Rejection of application for registration under Section 12AA of the Income-tax Act, 1961 by the Commissioner of Income Tax (Exemption).
2. Determination of whether the activities of the trust are charitable in nature as per the proviso to Section 2(15) of the Act.
3. Consideration of whether the trust is eligible for registration under Section 12AA of the Act based on its activities promoting sports.

Analysis:

Issue 1: Rejection of Registration Application
The appeal was filed by a trust against the order of the Commissioner of Income Tax (Exemption) rejecting the application for registration under Section 12AA of the Income-tax Act, 1961. The trust was set up for promoting the sport of gymnastics in India and applied for registration on 25th February, 2020. The Commissioner rejected the application citing that the activities were not charitable in nature as per the proviso to Section 2(15) of the Act.

Issue 2: Charitable Nature of Activities
The trust's activities included preparing players for international programs, providing foreign coaches, and supporting players' physical well-being. The Commissioner noted that the trust was charging fees for these activities, and a significant portion of its income was derived from such fees. Additionally, the trust did not provide donor addresses for certain donations. The Commissioner invoked the proviso to Section 2(15) and concluded that the activities were not charitable. The trust contended that promoting sports is a charitable purpose as per relevant circulars and case law.

Issue 3: Eligibility for Registration
The trust argued that its activities solely focused on promoting gymnastics and did not involve trade or commerce, thus not falling under the proviso to Section 2(15). It referred to circulars supporting sports promotion as charitable. The Tribunal analyzed the trust's objects, which included various social, educational, cultural, and sports initiatives. It cited a co-ordinate bench decision and a High Court case holding sport-related income as charitable. The Tribunal held that the trust's activities were charitable and directed the Commissioner to grant registration, subject to verifying donor details and trust activities.

In conclusion, the Tribunal partly allowed the appeal, directing the Commissioner to grant registration under Section 12AA, considering the charitable nature of the trust's activities and requesting verification of donor details and trust operations.