Madras Motor Sports Club v. Director of Income Tax (Exemptions)

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The Tax PublishersITA No. 777/Mds/2012 2013 TaxPub(DT) 0740 (Chen-Trib) : (2013) 051 (II) ITCL 0495 : (2013) 141 ITD 0001 : (2013) 156 TTJ 0673 : (2013) 090 DTR 0197 : (2013) 022 ITR (Trib) 0175 INCOME TAX ACT, 1961 --Charitable trust--Registration under section 12ACancellation of registration on receipts exceeding Rs. 10 lakhs under first proviso of section 2(15)--Assessee-motor sports club, registered under section 12A since 1977, claimed benefit under section 80G. Director of Income Tax (Exemptions) viewed that objects and activities of assessee were covered under advancement of general public utility and sponsorship receipts were commercial receipts which exceeded Rs. 10 lakhs during the year, therefore, the objects and activities of assessee cannot be considered as charitable in nature, DIT(E), cancelled registration granted to assessee under section 12A(a). *Held:* Was not justified as in the year in which the receipts of nature mentioned in the first proviso exceeded Rs. 10 lakhs, the assessee will not be eligible for exemption under sections 11 and 12. it does not mean that an otherwise charitable object of general public utility will become a non-charitable one only for a reason that the aggregate receipts exceeded Rs. 10 lakhs. If in the very next year, the assessee's receipts were less than Rs. 10 lakhs, then it would have to be granted the exemption available under sections 11 and 12, if other conditions were satisfied, therefore, order was quashed. Income Tax Act, 1961 Section 12A Income Tax Act, 1961 Section 2(15) IN the ITAT, Chennai 'B' Bench Abraham P. George, A.M & Vikas Awasthy, J.M Madras Motor Sports Club v. DIT ITA No. 777/Mds/2012 A.Y. 2009-10 21 December, 2012 Appellant by : V. Lakshmi Ratan, Chartered Accountant Respondent by : Guru Bashyam ORDER *Abraham P. George, A.M.* In this appeal filed by the assessee, its grievance is that the Director of Income Tax (Exemption) cancelled the registration granted to it under section 12A (a) of the Income Tax Act, 1961 (in short 'the Act'). 2. The facts apropos are that the assessee motor sports club, registered as a society, was also having registration under section 12 A (a) of the Act since 1977, with Registration No. C. No. 1212(154)/77. The objects of the assessee, inter alia, was to promote sports of motor car and motor cycle and conduct motor races; competitions, etc. During the scrutiny proceedings, for the assessment year 2009-10, the Assessing Officer sent a proposal to the Director of Income Tax (Exemption) recommending cancellation of registration granted to the assessee under section 12A(a) of the Act. A show-cause notice was issued for this, by the Director of Income Tax (Exemption). As per the' Director of Income Tax (Exemption), though the objects and activities were covered under the category of 'advancement of general public utility' coming within the ambit of section 2(15) of the Act, the assessee had, during the previous year ended 31-3-2009, receipts of Rs. 1,52,79,521. As per the learned Director of Income Tax- (Exemption), such receipts were in the nature of business receipts and was therefore, hit by the first and the second provisos to section 2(15) of the Act. Reply of the assessee on the show-cause' notice issued was that it was a society running motor car and motor cycle races since last many years. Entry fees received from participants and sponsorship fees received from main sponsors of the events were only for the purpose of effectuating the objects of the society. To a question as to whether any benefits were derived by the sponsors on account of advertisement, the assessee submitted that the championship races were conducted over five rounds and that through this, various components used by various engine manufacturers, were tested. As per the learned Director of Income-tax (Exemption), the championship races conducted by the assessee were to test the durability and performance of components and this resulted in direct benefit to the sponsors. The sponsors of various events of the assessee like MRF, UAM, UCAL and JK Tyres derived benefit from the assessee as per the learned Director of Income-tax (Exemption). Therefore, in the opinion of the learned Director of Income-tax (Exemption) the motors sports were for the purpose of promotion of business of sponsors. The sponsorship proceeds were commercial receipts in the hands of the assessee. The contention of the assessee that the surplus earned were used for objects of the assessee, was not accepted by the learned Director of Income Tax (Exemption). The learned Director of Income-tax (Exemption) was of the opinion that the assessee was hit by the proviso to section 2(15) inserted from 1-4-2009. Therefore, according to him, the objects and activities of the assessee could no more be considered charitable in nature. In this view of the matter, he cancelled registration granted to the assessee under section 12A(a) of the Act. . SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 777/Mds/2012
2013 TaxPub(DT) 0740 (Chen-Trib) : (2013) 051 (II) ITCL 0495 : (2013) 141 ITD 0001 : (2013) 156 TTJ 0673 : (2013) 090 DTR 0197 : (2013) 022 ITR (Trib) 0175

INCOME TAX ACT, 1961

--Charitable trust--Registration under section 12ACancellation of registration on receipts exceeding Rs. 10 lakhs under first proviso of section 2(15)--Assessee-motor sports club, registered under section 12A since 1977, claimed benefit under section 80G. Director of Income Tax (Exemptions) viewed that objects and activities of assessee were covered under advancement of general public utility and sponsorship receipts were commercial receipts which exceeded Rs. 10 lakhs during the year, therefore, the objects and activities of assessee cannot be considered as charitable in nature, DIT(E), cancelled registration granted to assessee under section 12A(a). Held: Was not justified as in the year in which the receipts of nature mentioned in the first proviso exceeded Rs. 10 lakhs, the assessee will not be eligible for exemption under sections 11 and 12. it does not mean that an otherwise charitable object of general public utility will become a non-charitable one only for a reason that the aggregate receipts exceeded Rs. 10 lakhs. If in the very next year, the assessee's receipts were less than Rs. 10 lakhs, then it would have to be granted the exemption available under sections 11 and 12, if other conditions were satisfied, therefore, order was quashed.

Income Tax Act, 1961 Section 12A

Income Tax Act, 1961 Section 2(15)

IN the ITAT, Chennai 'B' Bench

Abraham P. George, A.M & Vikas Awasthy, J.M

Madras Motor Sports Club v. DIT

ITA No. 777/Mds/2012

A.Y. 2009-10

21 December, 2012

Appellant by : V. Lakshmi Ratan, Chartered Accountant

Respondent by : Guru Bashyam

ORDER

Abraham P. George, A.M.

In this appeal filed by the assessee, its grievance is that the Director of Income Tax (Exemption) cancelled the registration granted to it under section 12A (a) of the Income Tax Act, 1961 (in short 'the Act').

2. The facts apropos are that the assessee motor sports club, registered as a society, was also having registration under section 12 A (a) of the Act since 1977, with Registration No. C. No. 1212(154)/77. The objects of the assessee, inter alia, was to promote sports of motor car and motor cycle and conduct motor races; competitions, etc. During the scrutiny proceedings, for the assessment year 2009-10, the Assessing Officer sent a proposal to the Director of Income Tax (Exemption) recommending cancellation of registration granted to the assessee under section 12A(a) of the Act. A show-cause notice was issued for this, by the Director of Income Tax (Exemption). As per the' Director of Income Tax (Exemption), though the objects and activities were covered under the category of 'advancement of general public utility' coming within the ambit of section 2(15) of the Act, the assessee had, during the previous year ended 31-3-2009, receipts of Rs. 1,52,79,521. As per the learned Director of Income Tax- (Exemption), such receipts were in the nature of business receipts and was therefore, hit by the first and the second provisos to section 2(15) of the Act. Reply of the assessee on the show-cause' notice issued was that it was a society running motor car and motor cycle races since last many years. Entry fees received from participants and sponsorship fees received from main sponsors of the events were only for the purpose of effectuating the objects of the society. To a question as to whether any benefits were derived by the sponsors on account of advertisement, the assessee submitted that the championship races were conducted over five rounds and that through this, various components used by various engine manufacturers, were tested. As per the learned Director of Income-tax (Exemption), the championship races conducted by the assessee were to test the durability and performance of components and this resulted in direct benefit to the sponsors. The sponsors of various events of the assessee like MRF, UAM, UCAL and JK Tyres derived benefit from the assessee as per the learned Director of Income-tax (Exemption). Therefore, in the opinion of the learned Director of Income-tax (Exemption) the motors sports were for the purpose of promotion of business of sponsors. The sponsorship proceeds were commercial receipts in the hands of the assessee. The contention of the assessee that the surplus earned were used for objects of the assessee, was not accepted by the learned Director of Income Tax (Exemption). The learned Director of Income-tax (Exemption) was of the opinion that the assessee was hit by the proviso to section 2(15) inserted from 1-4-2009. Therefore, according to him, the objects and activities of the assessee could no more be considered charitable in nature. In this view of the matter, he cancelled registration granted to the assessee under section 12A(a) of the Act. .