The Ahmedabad bench of the Gujarat High Court in the case of Director of Income Tax v Gujarat Cricket Association ruling in favour of the assessee held the assessee society to be engaged in charitable activity and not in an activity of commercial nature. Further that once a certificate for registration has been granted under Section 12AA, the AO cannot go behind it.
The assessee is a society registered under the Societies Registration Act, 1860 and Section 12AA of the 1961 Act. The Commissioner after duly hearing the assessee cancelled the registration of the assessee on the ground that the activities of the trust were commercial in nature. The ITAT, while setting aside the above and restoring the registration, has held that the action taken by the DIT does not fall within the permissible limits of Section 12AA(3).
The Bench constituting of Justices J.B. Pardiwala and A.C. Rao held that the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in the State of Gujarat. Further that over a period of years, this activity has been recognized by the Income Tax Department as a charitable activity and the registration under Section 12A of the Act was granted to the assessee. Further, it was held that once the certificate has been granted, it is not permissible for the AO to go behind the registration obtained by the assessee under Section 12AA of the Act.
For the purposes of determination of whether the activity is commercial in nature, is the element of ‘profit’ motive which is apparently missing in the case on hand. Implying, there shall be an integrated activity of the buying and disposal. In the present case, the ultimate beneficiary is either the cricketer or the game of cricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo.
The Bench took notice of the fact that the Association merely held certain demonstration or exhibition matches. It did not provide any training in the game of cricket to novices or any advanced training for the persons who were already practised, players. Also, the activities of the Association outside the holding of the exhibition matches was limited entirely to its own members.
Subscribe Taxscan Premium to view the Judgment
