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2016 (10) TMI 537 - AT - Income TaxRegistration u/s section 12AA denied - non charitable activities - CIT (E) has invoked the proviso to section 2(15) of the I.T. Act only on the ground that the assessee is collecting sums under the heads of corporate fees, in-stadia advertisement, sale of corporate boxes etc - Held that - To be eligible for exemption u/s 11 of the Act, the assessee has to be carrying on charitable activities and has to prove that it has applied its income for charitable purposes and there is no limitation that the assessee shall not make any profit out of its activities. U/s 11, the thrust is on application of income. The definition of charitable activity has not undergone a change except for raising the limit of turnover by which the income from commercial activities would become taxable. In the case of Tamil Nadu Cricket Association 2013 (12) TMI 833 - MADRAS HIGH COURT has considered the CBDT circular 1 of 2011 and also the Hon ble Supreme Court s decision in the case of CIT vs. Andhra Chamber Of Commerce, reported in (1964 (10) TMI 19 - SUPREME Court ) to hold that if the primary or dominant purpose of the Trust or Institution is charitable, another object which by itself may not be charitable, but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the Trust or Institution from being a valid charity. DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carrying on commercial activities which are in breach of the amended definition of charitable purpose in section 2(15) and that registration can be cancelled only if the activities of the trust are not genuine or are not being carried out in accordance with its objects and further that this is clarified by Circular No.21 of 2016. Thus, it can be seen that the registration withdrawn u/s 12AA(3) of the Act is not sustainable in the case of the assessee before us. Thus, it can be seen that the alleged commercial activities carried on by the assessee were also carried on by the Tamil Nadu Cricket Association and the above judgment is clearly applicable to the facts of the case before us. Therefore, on this ground, registration could not have been invoked u/s 12AA(3) of the Act. As regards the other grounds i.e. holding of a cricket match for women in violation of the object No.(xxviii), we find that the main object of the assessee is to promote the game of cricket and particularly for men only as there is a separate cricketing body for women. The reason given by the assessee for holding women s cricket match is that it was held at the instance of the BCCI particularly since the women cricket association was not functioning. We find that this activity cannot be said to be exactly in contravention of the objects of the assessee society. Even if it is to be considered to be in violation of the object, it is a solitary deviation and the AO might consider disallowing the income derived by the assessee from conducting of such a match while computing the exempt income u/s 11 of the I.T. Act. Further, as regards the expenditure which is not supported by bills and vouchers also, we are of the opinion that it can only lead to disallowance and not for withdrawal of registration u/s 12AA(3) of the Act. In view of the above, we set aside the order of the DIT (E) and assessee s appeal is accordingly allowed. Since we have already set aside withdrawal of the registration u/s 12AA(3) of the Act, we see no reason to adjudicate the other ground of appeal i.e. the date from which the registration shall be withdrawn or cancelled. - Decided in favour of assessee.
Issues Involved:
1. Withdrawal of registration under Section 12A of the Income Tax Act. 2. Sponsorship amounts and their relation to the development of the Cricket Stadium. 3. Leasing of Corporate Boxes and its relation to the development of the Cricket Stadium. 4. Club facilities provided at the Cricket Stadium. 5. Absence of bills and vouchers for certain expenditures. 6. Conducting of Women’s Cricket Tournament. 7. Retrospective cancellation of registration under Section 12AA(3) of the Income Tax Act. Detailed Analysis: 1. Withdrawal of Registration under Section 12A of the Income Tax Act: The issue revolves around the cancellation of the registration granted to the assessee under Section 12A of the Income Tax Act by the Director of Income Tax (Exemptions) (DIT(E)). The DIT(E) observed that the assessee was carrying on activities that were not charitable in nature, such as deriving income from league fees, sale of tickets, advertisement charges, franchise fees, and sponsorship money. Consequently, the DIT(E) invoked Section 12AA(3) to withdraw the registration, citing that the assessee's activities were commercial and not aligned with its charitable objectives. 2. Sponsorship Amounts and their Relation to the Development of the Cricket Stadium: The assessee argued that the sponsorship amounts collected for the development of the Cricket Stadium were in line with its objective of promoting and developing the game of cricket. The contributions were voluntary, and the commission payments for obtaining these contributions were part of fundraising initiatives. The assessee cited decisions from the Tribunal and the Hon'ble Madras High Court to support the claim that such payments should be considered for charitable purposes. 3. Leasing of Corporate Boxes and its Relation to the Development of the Cricket Stadium: The assessee contended that leasing corporate boxes for a fixed term was done to meet the capital outlays for the development of the cricket stadium. These receipts were used for the development of cricket stadiums and had a direct nexus with the promotion of the game. The assessee cited various judicial decisions to support this contention. 4. Club Facilities Provided at the Cricket Stadium: The DIT(E) argued that providing club facilities was not in accordance with the assessee's objectives. However, the assessee maintained that the club facilities were covered by the general objects of the society and were not in contravention of any of the objects. The assessee cited the decision of the Hon'ble Supreme Court in the case of CIT vs. Kamala Towns Trust to support this argument. 5. Absence of Bills and Vouchers for Certain Expenditures: The DIT(E) noted the absence of bills and vouchers for certain expenditures and concluded that this indicated that the expenses were not incurred for the objects of the association. The assessee argued that the absence of bills and vouchers could not be a ground for cancellation of registration but could lead to disallowance of the same while granting exemption of the assessed income under Section 11 of the Act. The assessee cited the decision of the Tribunal at Chandigarh in the case of Maharshi Markendeshwar Education Trust vs. CIT to support this argument. 6. Conducting of Women’s Cricket Tournament: The DIT(E) observed that conducting a Women's Cricket Tournament was against the objects of the Trust, which were to conduct cricket matches only for men. The assessee argued that conducting the Women’s Cricket Tournament was in keeping with the overall objects of the association and was done at the behest of the BCCI. The assessee cited various judicial decisions to support this argument. 7. Retrospective Cancellation of Registration under Section 12AA(3) of the Income Tax Act: The assessee argued that the amendment to Section 12AA(3), which allows for the cancellation of registration, was brought into the statute book prospectively from A.Y. 2011-12 and could not be applied retrospectively. The assessee cited several judicial decisions and a CBDT circular to support this contention. Conclusion: The Tribunal found that the activities carried out by the assessee, such as organizing cricket matches, receiving contributions, and developing cricket stadiums, were in accordance with its objectives and were for charitable purposes. The Tribunal also noted that the DIT(E) had not provided sufficient grounds for the cancellation of registration under Section 12AA(3). The Tribunal relied on various judicial decisions and a CBDT circular to conclude that the registration could not be withdrawn based on the alleged commercial activities. Consequently, the Tribunal set aside the order of the DIT(E) and allowed the assessee's appeal, restoring the registration under Section 12A of the Act.
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