2018 (5) TMI 227 - AT - Income Tax

Exemption granted u/s 11 - Registration granted to the assessee u/s 12A cancelled with retrospective effect - Held that - The assessee should be granted exemption u/s 11 of the Act for assessment year 2008-09, since the Tribunal has held that the cancellation of registration shall take effect from 01-06-2010 only. Accordingly we set aside the order passed by Ld CIT(A) for assessment year 2008-09 and restore all the matters to the file of the assessing officer with the direction to compute the total income of the assessee by applying the provisions of exemption granted u/s 11 of the Act. Applicability of the proviso to sec. 2(15) - cricket matches conducted by the assessee by selling tickets was a commercial activity - claim for exemption u/s 11 rejected - Held that - There is no dispute that the promotion of cricket falls within the scope of objects of the assessee. Further, the recreational facilities did not become operational during the year under consideration. - Decided against revenue

Summary

Issues:
1. Exemption u/s 11 for assessment year 2008-09 due to retrospective cancellation of registration.
2. Applicability of proviso to sec. 2(15) regarding commercial activities for assessment year 2009-10.

Exemption u/s 11 for assessment year 2008-09:
The assessee, a public charitable trust engaged in promoting cricket in Mumbai, had its registration u/s 12A retrospectively withdrawn by Ld DIT (Exemption). The AO rejected exemption u/s 11 for assessment year 2008-09 due to the cancellation of registration. However, the ITAT had previously ruled that the cancellation of registration could not be retrospective, taking effect only from 01-06-2010. Consequently, the ITAT granted exemption u/s 11 for assessment year 2008-09, setting aside the Ld CIT(A)'s order and directing the AO to compute the total income based on the provisions of exemption u/s 11.

Applicability of proviso to sec. 2(15) for assessment year 2009-10:
The revenue challenged the direction of the CIT(A) to compute the income of the assessee under sec. 11, 12 r.w.s. 13 of the Income Tax Act, claiming that the activities were commercial and did not fall under "charitable purpose" as per sec. 2(15). The AO rejected the exemption u/s 11 based on two grounds: the retrospective cancellation of registration and the commercial nature of activities. However, the CIT(A) upheld the exemption, stating that promoting cricket aligned with the trust's objectives and the recreational facilities were not operational during the relevant year. The ITAT confirmed the CIT(A)'s decision, finding no fault in promoting cricket and no commercial activities during the year under consideration.

In conclusion, the ITAT allowed the assessee's appeal for AY 2008-09 for statistical purposes and dismissed the revenue's appeal for AY 2009-10. The judgment clarified the retrospective effect of registration cancellation and upheld the promotion of cricket as a charitable activity, ensuring exemption u/s 11 for the relevant assessment years.