Commissioner of Income Tax, Hyderabad V. Cuttack District Tennis Association

ITA/151/2018

AI Insights

The case revolves around the Cuttack District Tennis Association (CDTA), which sought registration under section 12AA of the Income Tax Act, 1961, to qualify for tax exemptions. The Commissioner of Income Tax (CIT) initially rejected this application, citing a lack of charitable activities as required under section 2(15) of the Act. The ITAT overturned this decision, leading to the CIT's appeal in the High Court. The High Court upheld the ITAT's decision, noting that the CIT's rejection was based on speculative future activities, which is not permissible under the law.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 798287 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 03-07-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: S RAY; AMIT PATTANAIK; DIGANTA DAS
• Assessee Lawyers: R S CHIMANKA; AVINASH KEDIA
• Keywords: Charitable Activities; Income tax appellate tribunal; Promotion of Sports; Registration Rejection
• Section: 12AA; 2(15)

Judgement Text

" Page 1 of 2 IN THE HIGH COURT OF ORISSA AT CUTTACK ITA No. 151 of 2018 Commissioner of Income Tax, Hyderabad …. Appellant Mr. R.S. Chimanka, Senior Standing Counsel (IT) Mr.Avinash Kedia, Junior Standing Counsel(IT) -versus- Cuttack District Tennis Association …. Respondent Mr. S. Ray, Senior Advocate Mr. Amit Pattanaik, Advocate Mr. Diganta Das, Advocate CORAM: JUSTICE ARINDAM SINHA JUSTICE SANJAY KUMAR MISHRA Order No. ORDER 03.07.2023 7. 1. Revenue seeks to prefer appeal against order dated 12th April, 2018 passed by the Income Tax Appellate Tribunal (ITAT) Cuttack Bench in ITA no.454/CTK/2013, whereby appeal of the assessee against rejection of application for registration under section 12AA in Income Tax Act, 1961 was set aside and the appeal allowed. 2. Mr. Chimanka, learned advocate, Senior Standing Counsel appears on behalf of appellant-revenue. He refers to order dated 29th July, 2013 made by the Commissioner of Income Tax (CIT). He relies on two paragraphs in it, extracted and reproduced below. // 2 // Page 2 of 5 “In the present case the primary purpose is the promotion of game of tennis by encouraging young persons, providing coaching facilities and organizing tournaments. In this context the financial statement of the last three financial years i.e., 2010-2011, 2011-2012 & 2012-2013 have been examined. The CDTA has stated in the Income & Expenditure accounts that Income over expenditure of Rs.886=00 for the financial year 2009-2010, Rs.2,044=00 for the financial year 2010-2011, Rs. 2,771=0 for the financial year 2011-2012 and Rs.1,72,500=46 for the financial year 2012-2013. While in the financial years 2010-2011 and 2011-2012 there was no activity excepting construction of tennis court, etc., in the financial year 2012-2013 there was one summer coaching camp. For organizing the same fees has been collected from the participants. Further from the articles of the association it is noted that the facilities are extended to members only who become a member by paying the fees. From the financial activities report it is clear that CDTA is yet to start the activities which are given in the memorandum and articles of the association. Whatever little bit of activities have been carried on there is no element of charity or philanthropy in them. As per brief notes on activities furnished by the CDTA, the said Association is looking forward to raise funds from the Sponsors and Donors in the interest of the game. It is quite possible and apprehended that when any Sponsors and Donors will be involved in organizing any tennis tournament, definitely huge amount of commercial consideration take effect by way of advertisement, ticket // 3 // Page 3 of 5 selling, having the broadcasting right over the game, etc., and the genuine activities of the Association would not be considered as “charity” under ambit of section 2(15) of the Act. Under these circumstances it cannot be concluded that CDTA is engaged in charitable activities. Therefore, the Registration applied for 12A of the Act is hereby rejected.” (emphasis supplied) 3. He refers to sub-section (15) in definitions section 2 to submit, there is no element of charity in the activities of the assessee as reflected from said order of CIT in the assessment years considered. In the circumstances, it was correct appreciation of the situation for the CIT not being satisfied to grant the registration. The ITAT setting aside the order gives rise to substantial questions of law, on which the appeal be admitted. 4. Mr. Pattanaik, learned advocate appears on behalf of the assessee. He draws attention to reasoning given by the ITAT. Paragraph 14 from impugned order is reproduced below. “14. Keeping in view the above settled position of law, we find that in the instant case, the CIT, Cuttack was not justified in refusing to grant registration u/s. 12AA of the Act on the grounds stated in the impugned order. The CIT, Cuttack could not point out that any of the objects of the assessee society was not charitable in nature or any of the activity of the assessee society was non-genuine. In our considered view, simply because the activities of the assessee society were little or not substantial cannot be a ground to not to grant // 4 // Page 4 of 5 registration u/s.12AA of the Act. Further, whether the activity of the assessee is of commercial nature or not is to be examined while granting exemption u/s. 11 & 12 of the Act by the Assessing Officer at the time of making the assessment.” He hands up circular dated 24th September, 1984 issued by the department, from which clause 2 is extracted and reproduced below. “2. The question whether promotion of sports and games can be considered as being a charitable purpose has been examined. The Board are advised that the advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individual would be an object of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports association and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games.” (emphasis supplied) 5. Perused reasoning given by the Commissioner in said order dated 29th July, 2013 made under section 12AA (1)(b)(ii). Objects of the assessee stand reproduced in paragraph 8 of impugned order. We extract and reproduce the same. “1. To promote the game of Tennis and all other sporting activities by encouraging young persons, providing coaching facilities and organizing tournaments. // 5 // Page 5 of 5 2. To acquire and hold property to serve its aims and objectives. 3. To do all such acts and things may be deemed necessary and/ or conducive and/ or convenient and incidental to execute its aims and objectives.” 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. 6. 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. 7. In the circumstances aforesaid we do not find that a substantial question of law arises from impugned order made by the ITAT. 8. The appeal and application are dismissed. (Arindam Sinha) Judge (S.K. Mishra) Judge Jyoti/RKS Digitally Signed Signed by: RANJAN KUMAR SETHI Designation: Secretary Reason: Authentication Location: HIGH COURT OF ORISSA Date: 04-Jul-2023 19:22:52 Signature Not Verified "