M/s Cosmo Sports Trust, Bhimavaram V. THE CIT, Rajahmundry

ITA 141/VIZ/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8596 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Charitable institution; Question of law
• Section: 80G

Judgement Text

1 I.T.A. NOS.140 & 141 /VIZ/2014 M/S. COSMO SPORTS TRUST IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NOS.140 & 141 /VIZ/2014 M/S. COSMO SPORTS TRUST, SURYANARAYANA PURAM, JP ROAD, BHIMAVARAM. VS. THE CIT, RAJAHMUNDRY PAN/GIR NO. : AABTC 3997 R ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N. HARI RESPONDENT BY : SHRI K.V.N. CHARYA DATE OF HEARING : 04/12/2014 DATE OF PRONOUNCEMENT : 04/12/2014 O R D E R PER J.SUDHAKAR REDDY, AM I.T.A. NO.140/VIZ/2014 IS FILED BY THE ASSESSEE AGA INST THE ORDER DATED 28.3.2014 OF LD COMMISSIONER OF INCOME TAX, RAJAHMUNDRY REJECTING T HE APPLICATION OF THE ASSESSEE TO GRANT REGISTRATION U/S.12AA OF THE INCOME TAX ACT, 1961. 2. I.T.A. NO..140/VIZ/2014 IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 20.3.2014 OF LD COMMISSIONER OF INCOME TAX, RAJAHMUNDRY REJECTING T HE APPLICATION OF THE ASSESSEE TO GRANT RENEWAL OF REGISTRATION U/S.80G OF THE INCOME TAX A CT, 1961. 2 I.T.A. NOS.140 & 141 /VIZ/2014 M/S. COSMO SPORTS TRUST 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E TRUST NAMELY, COSMO SPORTS TRUST, SURYANARAYANA PURAM, BHIMAVARAM, WEST GODAVARI DIST RICT, EVIDENCED BY TRUST DEED DT.23.4.2012. THE TRUST WAS REGISTERED WITH JOINT SUB-REGISTRAR, BHIMAVARAM. THE TRUST FILED APPLICATION IN FORM NO.10A DT.16.9.2013 ON 25.9.201 3 ALONGWITH LIST OF TRUSTEES, LIST OF OBJECTIVES, DECLARATION U/S.13(1)(C), AUDITED REPOR T FOR THE YEAR 2012-2013 & STATEMENT OF ACCOUNTS AND COPY OF ACKNOWLEDGEMENT OF RETURN OF I NCOME FILED FOR THE ASSESSMENT YEAR 2013- 14. THE LD CIT REJECTED THE APPLICATION FOR REGI STRATION ON THE FOLLOWING GROUNDS: SINCE THE TRUST IS COLLECTING FEES / EARNING INCOM E BY WAY OF PROVIDING 'COACHING AND CONDUCTING SPORTS AND THE EARNED INCOME IS BEING UT ILIZED FOR ITS OBJECTIVES, IT CAN BE SAID THAT THE ACTIVITIES CONDUCTED BY THE TRUST ARE NOT ACCORDING TO DEED OF TRUST. THEREFORE, THESE ACTIVITIES ARE NOT COVERED THE PRO VISIONS OF SECTION 2(15) OF THE I.T. ACT. THE TRUST IS YET TO CONDUCT ACTIVITIES AS PER ITS O BJECTIVES. FOR GRANTING REGISTRATION U/S.12AA, THE OBJECTS OF THE TRUST AS WELL AS GENUINENESS OF THE ACTIVITIES HAVE TO BE CONSIDERED. IN VIEW OF THE FOREGOING DISCUSSION AND SINCE THE TRUST WAS FORMED IN THE MONTH OF APRIL, 2012 AN D COLLECTING FEES FOR COACHING IN VARIOUS SPORTS, THIS IS NOT CHARITABLE ACTIVITY AS PER THE AMENDED PROVISIONS OF SECTION 2(15) OF THE I.T. ACT W.E.F. 01-04-2009 AND THE APP LICATION FILED BY THE TRUST IS NOT MAINTAINABLE AND THE APPLICATION IN FORM NO.10A DA TED 16-09-2013 FILED ON 25-09- 2013 BY THE SOCIETY FOR REGISTRATION U/S.12AA OF TH E I.T, ACT 3.1 SINCE REGISTRATION U/S.12AA WAS REJECTED BY THE LD CIT, RENEWAL OF REGISTRATION U/S.80G WAS REJECTED. 4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE. THE MAIN OBJECT OF THE ASSESSEE TRUST IS SPORT ACTIVITY. THE PROVI SO TO SUB-SECTION -15 OF SECTION 2 PROVIDES THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY FIVE LAKH RUPEES OR LESS IN TH E PREVIOUS YEAR. LD CIT HAS REFUSED TO GRANT REGISTRATION BY NOT CONSIDERING THIS PROVISO. 5. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIR ECTOR OF INCOME TAX (EXEMPTION) VS. THE CHEMBUR GYMKHANA, 345 ITR 86 (BOM) HELD AS FOLL OWS: IT IS A SETTLED PRINCIPLE OF LAW THAT THE PRIMARY OR DOMINANT PURPOSE OF THE INSTITUTION MUST BE CHARITABLE. THE TEST TO BE APPLIED IS WHET HER THE OBJECT WHICH IS PURSUED IS OF THE MAIN OR PRIMARY OBJECT OR WHETHER IT IS ANCILLA RY TO A DOMINANT OBJECT IS EVIDENT FROM THE MATERIAL BEFORE THE TRIBUNAL THAT THE ASSESSEE UNDER ITS MEMORANDUM AS MENDED ESTABLISHED THAT THE AIMS AND OBJECTS ARE TO PROVID E FOR GENERAL PUBLIC UTILITY, GROUNDS BUILDINGS, CONVENIENT, DESIRABLE OR NECESSARY FOR G AMES AND SPORTS BOTH INDOOR AND OUTDOOR AND TO PROMOTE, MANAGE OR ASSIST IN THE PRO MOTION OR MANAGEMENT OF ALL FORMS 3 I.T.A. NOS.140 & 141 /VIZ/2014 M/S. COSMO SPORTS TRUST OF SOCIAL INTERCOURSE OF ATHLETIC SPORTS, PASTIMES AND/OR CULTURAL AND EDUCATIONAL ACTIVITIES FOR ITS MEMBERS. THERE IS A FINDING OF FACT THAT TH E ASSESSEE IS PROVIDING SPORTS FACILITIES AS A PART OF ITS ACTIVITIES CONSISTING OF BADMINTON , TABLE TENNIS, BILLIARDS, CRICKET AND SKATING AMONG OTHERS. DURING THE ASSESSMENT YEAR, T HE ASSESSEE HAD EXPENDED AN AMOUNT OF NEARLY RS,50 LAKHS ON CONSTRUCTING A SWIM MING POOL. THE FACT THAT THE ASSESSEE PROVIDES SERVICE TO ITS MEMBERS DOES NOT D ETRACT FROM THE POSITION THAT IT ADVANCES A GENERAL PUBLIC UTILITY. THE ADVANCEMENT OF ANY OBJECT OF BENEFIT TO THE PUBLIC OR A SECTION OF THE PUBLIC AS DISTINGUISHED FROM A BENEFIT TO AN INDIVIDUAL OR A GROUP OF INDIVIDUALS WOULD BE A CHARITABLE PURPOSE, AS THE T RIBUNAL NOTED, THE MEMBERSHIP OF THE SOCIETY IS DRAWN FROM A DIVERSE CROSS SECTION OF TH E SOCIETY. THE ASSESSEE DOES NOT EXIST ONLY FOR AN INDIVIDUAL OR A GROUP OF INDIVIDUALS. O N THESE FACTS, THE PRIMARY ISSUE WHICH HAS BEEN DECIDED BY THE TRIBUNAL MUST BE ANSWERED B Y HOLDING THAT THE ASSESSEE FOR ASSESSMENT YEAR 1996-97 FULFILLED THE DEFINITION OF THE EXPRESSION 'CHARITABLE ORGANIZATION' IN SECTION 2(15). THE FIRST QUESTION OF LAW WOULD, ACCORDINGLY, HAVE TO BE ANSWERED IN THE AFFIRMATIVE. 6. CONSISTENT WITH THE VIEW TAKEN BY THE HONBLE BO MBAY HIGH COURT IN THE CASE OF THE CHEMBUR GYMKHANA (SUPRA), WE HOLD THAT THE OBJECT O F THE ASSESSEE SOCIETY IS CHARITABLE AND WE REMAND THE MATTER BACK TO THE FILE OF LD CIT TO DETERMINE AS TO WHETHER THE PROVISO OF SECTION 2(15) IS APPLICABLE OR NOT AND TO AND DEC IDE AFRESH THE APPLICATION FOR THE GRANT REGISTRATION U/S.12AA OF THE ACT AND CONSEQUENTLY GRANT OF APPROVAL U/S. 80G OF THE ACT. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04 /12 /2014 . (D.MANMOHAN ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISHAKHAPATNAM DATED 04 / 12/2014 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. M/S. COSMO SPORTS TRUST, SURYANARAYANA PURAM, JP ROAD, BHIMAVARAM. 2. THE RESPONDENT. : THE CIT, RAJAHMUNDRY 3. THE CIT(A)-CONCERNED 4. DR, ITAT, VISHAKHAPATNAM 5. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY// 4 I.T.A. NOS.140 & 141 /VIZ/2014 M/S. COSMO SPORTS TRUST