INCOME TAX ACT, 1961

Section 12AA Section 2(15), poviso

Charitable trust - Rejection/cancellation of registration - Charitable purpose - Absence of profit motive

Assessee, namely, Gujarat Cricket Association ( 'GCA') was a society registered under the Societies Registration Act, 1860. The GCA came to be registered with the Registrar of Societies. Later, the GCA was notified under section 10(23) vide Notification, dated 30-3-1999 from assessment year 1999-2000 to 2001-2002 by the Government of India, Ministry of Finance, Department of Revenue. In the absence of renewal of the notification under section 10(23), the GCA preferred an application for registration under section 12AA. The registration under section 12AA came to be granted by the DIT (Exemptions), Ahmedabad from assessment year 2004-05 onwards. CIT, after hearing the assessee, cancelled the registration under section 12AA for the period from assessment years 2004-05 till the date of his order, i.e., 6-12-2010 in exercise of his powers under section 12AA(3) by invoking the proviso to section 2(15) inserted by the Finance Act, 2010 w.e.f 1-4-2009. The ITAT allowed the appeal preferred by the GCA.Held: The main and predominant object and activity of the assessee was to promote, regulate and control the game of cricket in the State of Gujarat. The undisputed fact was that over a period of years, this activity had been recognized by the IT Department as a charitable activity and the registration under section 12A was granted to the assessee. A number of assessment orders under section 143(3) were passed, wherein the assessee was held eligible for the exemption under sections 11 and 12 . It appears that it was only after the proviso came to be inserted that, all of a sudden, the department now believes that the activity of the assessee was commercial in nature and no longer charitable. It was difficult to take the view that the assessee could be said to be carrying on 'trade, commerce or business' under the garb of the activity being 'general public utility'. Merely because an activity was performed in an organized manner, that alone, will not make such activities as business/commercial activity. The profit motive is one essential ingredient which was apparently missing in the present case. In carrying out an activity, one may earn profit or one may incur loss. But for making it as a business activity, the presence of the profit motive is sine qua non. In the present case the ultimate beneficiary was either the cricketer or the game of cricket. Thus there as no quid pro quo relationship with the cricketer. The assessee was promoting cricket on the charitable basis as far as real beneficiary was concerned. Whenever the revenue was earned, the same was not on commercial lines and the same could be said to be earned without any commercial attributes. The revenue was generated for recovering the cost, at least partly if not in full. It was not the case of the Revenue that the objects of the Trust were not charitable, but the case of the revenue was that the activities undertaken by the association were not charitable in nature. In the result, the appeal failed and was dismissed.

Relied:Tamil Nadu Cricket Association v. Director of IT (Exemptions) & Ors. (2014) 360 ITR 633 (Mad.) : 2014 TaxPub(DT) 542 (Mad-HC), GST India v. DIT (2013) 360 ITR 138 (Del) : 2013 TaxPub(DT) 2791 (Del-HC), CIT v. Sarabhai Sons Ltd., (1983) 143 ITR 473 (Guj.) : 1983 TaxPub(DT) 921 (Guj-HC). Distinguished:Maneklal Chunilal & Sons Ltd. v. CIT (1953) 24 ITR 375 (Bom.) : 1953 TaxPub(DT) 67 (Bom-HC), N.R. Paper & Board Limited v. Deputy CIT (1998) 234 ITR 733 (Guj) : 1998 TaxPub(DT) 1261 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2004-05

INCOME TAX ACT, 1961

Section 11 Section 2(15) Section 12

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