2023 (7) TMI 616 - HC - Income Tax

Exemption u/s 11 - application for registration u/s 12AA rejected - Assessee is into promote the game of Tennis and all other sporting activities - there is no element of charity in the activities of the assessee as reflected from said order of CIT in the assessment years considered - ITAT setting aside the order gives rise to substantial questions of law, on which the appeal be admitted - HELD THAT - The accounts for assessment years considered reveal that there was construction undertaken for having tennis court. Construction of tennis court appears to be furtherance of the objectives. Another reason given by the CIT, for rejecting the application for registration, is future contingency as would appear from second paragraph of the order, reproduced above. Where section 12AA, by the sub-sections therein provides for cancellation of the registration, rejection of the application for registration based on a projection of what might happen in future, cannot be sustained. In the circumstances aforesaid we do not find that a substantial question of law arises from impugned order made by the ITAT. Decided against revenue.

Summary

Issues involved:
The issues involved in this judgment are the rejection of application for registration under section 12AA of the Income Tax Act, 1961 and the subsequent appeal by the revenue against the order passed by the Income Tax Appellate Tribunal (ITAT) Cuttack Bench.

Summary:

Issue 1: Rejection of application for registration under section 12AA
The revenue sought to prefer an appeal against the ITAT order which set aside the rejection of the application for registration under section 12AA. The Commissioner of Income Tax (CIT) had rejected the registration application based on the lack of charitable activities by the assessee, particularly in the promotion of tennis. The CIT highlighted the absence of charity or philanthropy in the activities of the association, leading to the rejection of the registration application under section 12A of the Act. The revenue contended that there was no element of charity in the activities of the assessee, as reflected in the CIT's order, justifying the rejection of registration. However, the ITAT held that the CIT was not justified in refusing registration under section 12AA, emphasizing that the nature of the activities should not be a ground for denial of registration.

Issue 2: Future contingency as a reason for rejection
Another reason cited by the CIT for rejecting the registration application was the future contingency, which was deemed insufficient by the ITAT. The CIT projected potential future events as a basis for rejection, which was not sustainable under section 12AA. The ITAT concluded that no substantial question of law arose from the impugned order made by the ITAT and subsequently dismissed the appeal and application.

In conclusion, the judgment addressed the rejection of registration under section 12AA based on the lack of charitable activities and the consideration of future contingencies as reasons for rejection. The ITAT emphasized that the nature of activities should not be a sole ground for denial of registration and that projecting future events for rejection was not sustainable under the relevant provisions.