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2018 (11) TMI 867 - AT - Income TaxCharitable activity - Rejection of the application for registration u/s 12AA - objects of encouraging cricket match by the said trust is nothing but commercial activity - Earnings by way of sponsorships, sale of broadcasting rights, ground advertisements and sale of expensive tickets are in the nature of commercial activities and hit by the proviso of Section 2(15) - Held that - CIT while dealing with the application for grant of registration of limiting its jurisdiction within the aspect of its objects unnecessarily exceeded to the issue of income derived by the Trust spend for charitable purposes and the profit earned by the Trust which is supposed to be done by the Assessing Officer at the time of considering the claim of the assessee for exemption u/s 11 of the Act if needed. No defect was detected by the Learned CIT in the application for registration of the trust so placed before it by the assessee. No reason in the order passed by the Learned CIT in rejecting the claim of Registration of the assessee s Trust in the absence of any lacuna of the details submitted by the assessee with the application u/s 12A of the Act. The order passed by the Ld CIT is therefore, quashed with a further direction upon him to allow such registration u/s 12AA of the Act. - Decided in favour of assessee
Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act. 2. Examination of the charitable nature of the trust's objectives. 3. Consideration of the trust's income and commercial activities in relation to the registration process. 4. The procedural correctness of the rejection by the Commissioner of Income Tax (CIT). Issue-wise Detailed Analysis: 1. Rejection of Application for Registration under Section 12AA: The appeal was filed against the rejection of the application for registration under section 12AA by the Commissioner of Income Tax-II, Rajkot. The application was originally filed on 09.01.2014, and the trust was established on 19.06.2013 with 26 objects, primarily focused on promoting cricket in Rajkot, including women’s cricket. The CIT rejected the application on several grounds, including overlapping objectives with the Saurashtra Cricket Association, a fake address, lack of charitable activity, and commercial nature of the activities. 2. Examination of the Charitable Nature of the Trust's Objectives: The CIT opined that the trust’s activities were commercial, citing earnings from sponsorships, broadcasting rights, advertisements, and ticket sales. However, the tribunal emphasized that the primary consideration for registration under section 12AA should be the trust's objectives, which in this case, were related to promoting cricket, a recognized charitable purpose under Circular No. 395 [F. No. 181(5) 82/I.T(A-I)] dated 24.09.1984. The tribunal referenced the definition of "charitable purpose" under Section 2(15) of the Act, which includes the advancement of any other object of general public utility, thereby supporting the trust's claim. 3. Consideration of the Trust's Income and Commercial Activities: The tribunal clarified that at the stage of granting registration under section 12AA, the CIT is not required to examine the income application or whether the trust is earning profit. This examination is the duty of the Assessing Officer on a year-to-year basis when the trust claims exemptions under section 11 of the Act. The tribunal cited several judgments, including those from the Delhi Bench and various High Courts, which support the view that the CIT should focus on the trust's objectives and the genuineness of its activities rather than its income application at the registration stage. 4. Procedural Correctness of the Rejection by the CIT: The tribunal found that the CIT exceeded his jurisdiction by examining the income application and commercial activities of the trust, which is not required at the registration stage. The tribunal noted that no defect was found in the application for registration itself, and the explanation provided by the trust regarding its address and activities was satisfactory. The tribunal quashed the CIT's order, directing the CIT to grant registration under section 12AA of the Act. Conclusion: The tribunal allowed the appeal, emphasizing that the CIT should have focused on the trust's objectives and the genuineness of its activities rather than its income application. The tribunal directed the CIT to grant registration under section 12AA, as the trust's objectives were charitable, and no procedural defects were found in the application. Order Pronouncement: The order was pronounced in open court on 16/11/2018, allowing the assessee's appeal.
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