Madras Motor Sports Club v. DIT (Exemptions) (2013)/141 ITD 1/ 22 ITR 175(Chennai) (Trib.)

S.12A: Registration- Trust or institution-Cancellation-Amendment of section 2(15) barring exemption where

receipts exceed Rs. 10 lakhs is not sufficient reason for cancellation of registration. (2(15), 11)

The objects of the assessee-club, a registered society, were to promote sports related to motor car and motor cycle and conduct motor races, competitions, etc. For the assessment year 2009-10, the Assessing Officer recommended cancellation of registration granted to the assessee under section 12A(a) of the Income-tax Act, 1961. The Director of Income-tax (Exemptions) held that the motor sports were for the purpose of promotion of business of sponsors. The sponsorship proceeds were commercial receipts in the hands of the assessee. Therefore, the assessee was hit by the proviso to section 2(15) inserted from April 1, 2009. Accordingly, the objects and activities of the assessee could not be considered charitable in nature. Therefore, he cancelled registration granted to the assessee. On appealthe Tribunal held that the order of the Director (Exemptions) mentioned that the assessee's objects were in the nature of advancement of object of general public utility coming within the ambit of section 2(15) of the Act. The Director (Exemptions) cancelled registration on the ground that receipts exceeded Rs.10 lakhs. If the receipts exceeded Rs. 10 lakhs under the second proviso to section 2(15) of the Act, the Assessing Officer would be justified in denying exemption under sections 11 and 12 of the Act; however, this would not be sufficient reason for cancelling the registration granted to the assessee under section 12A(a) of the Act. If in the very next year, the assessee's receipts were less than Rs. 10 lakhs, it would have to be granted the exemption under sections 11 and 12 of the Act, if other conditions were satisfied. In other words, the nature of the objects of the assessee could not fluctuate in tandem with the quantum of receipts mentioned in the first proviso. Therefore, the Director (Exemptions) fell in error in cancelling the registration granted to the assessee under section 12A(a) of the Act. (A. Y. 2009-2010)