Madras Motor Sports Club (AOP) Vs CIT (ITAT Chennai)
ITAT Chennai held that revision order u/s. 263 unjustified and liable to be quashed as no findings which proves that there is a violation of the proviso to provision of section 2(15) of the Income Tax Act, 1961. Accordingly, exemption u/s. 11 rightly claimed.
Facts- The assessee, a Society registered under the Tamil Nadu Society Act, was established in the year 1953. The assessee, M/s. MADRAS MOTOR SPORTS CLUB, is a registered Public Charitable Trust, u/s. 12AA of the Act. The primary object of the assessee is to promote the sports of Motor Car and Motor Cycle Racing.
The assessee filed its return of income for A.Y. 2018-19 on 29.09.2018 which was subsequently revised on 06.10.2018. The assessee claimed exemption u/s. 11 of the Act. Accordingly, the AO framed assessment u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act and verified the claim of exemption u/s. 11.
Subsequently, the CIT(Exemption) on perusal of income and expenditure account and proposal sent by the Range Head u/s. 263 of the Act on 31.03.2022, a show cause notice dated 06.03.2023 was issued with a proposal to revise the assessment framed by AO allowing the claim of exemption u/s. 11 of the Act. In view of the amended provisions of section 2(15) of the Act, which had not been examined by the AO and hence, the said order is prejudicial to the interest of Revenue as per CIT(Exemption).
Conclusion- CIT(Exemption) while passing revision order has not at all examined the aspect of violation of the proviso to provision of Section 2(15) of the Act and moreover the AO while framing assessment u/s. 143(3) of the Act has examined the claim of exemption u/s. 11 of the Act.
Held that the CIT(Exemption) has not at all deliberated how the assessee has violated the proviso to the provision of Section 2(15) of the Act and how the AO had not examined the issue. We could not find anything which proves that there is violation of the proviso to provision of section 2(15) of the Act. Hence, we quash the revision order and allow the appeal of assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Exemption), Chennai in ITBA/COM/F/17/2022-23/1051790055(1) dated 31.03.2023. The assessment was framed by the Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income-tax Officer, National e-Assessment Centre, Delhi for the assessment year 2018-19 u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 04.02.2021.
2. The only issue in this appeal of assessee is as regards to the revision order passed by CIT(Exemptions) u/s.263 of the Act revising the assessment order passed by AO for assessment year 2018-19 u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 04.02.2021 allowing the claim of exemption u/s.11 & 12 of the Act. For this issue, assessee has raised various grounds which are argumentative in nature but issue is only one and hence, need not be reproduced.
3. Brief facts are that the assessee, a Society registered under the Tamil Nadu Society Act, was established in the year 1953. The assessee, M/s. MADRAS MOTOR SPORTS CLUB, is a registered Public Charitable Trust, u/s.12AA of the Act vide proceedings of the Director of Income Tax (Exemptions), Chennai, in DIT (E) No.1212(54)/77 dated 06.09.2006. The primary object of the assessee is to promote the sports of Motor Car and Motor Cycle Racing. The other main objects of the assessee are as under:
1. To promote the sports of Motor Car and Motor Cycle racing and to further the interests of motorists and motor cyclist taking part in motor races and competitions in India or elsewhere to cooperate with others to this end.
2. To acquire, build or otherwise provide race tracks, club houses, dormitories, pavilions, motor house, workshops and other conveniences in connection therewith and to furnish, alter, enlarge, repair, uphold and maintain the same
3 To acquire by purchase, lease or otherwise any race track, land, buildings or hereditaments which may be deemed by the club likely to advance or benefit indirectly the objects.
4. To hire and employ all classes of persons considered necessary for the purpose of the club and to pay to them and to other persons in return for services rendered to the club, salaries, wages, gratuities and pensions.
5. To organise, promote and hold either alone or jointly with any other Association, Club or persons motor race meetings, competitions and reliability trials for motor vehicles or any other athletic sports or pass times and to offer, give or contribute towards prizes, medals and awards therefore and to promote, give or support dinners, balls, concerts and other entertainments arranged in connection thereto.
6. To establish, promote or assist in establishing or promoting, to affiliate with and to subscribe to or become a member of any other Associations or clubs whose objects are similar or in part similar to the objects of the club, or the establishment or promotion of which may be beneficial to the club. Provided that no subscriptions be paid to any such other Associations or club out of the funds of the club except bona fide in furtherance of the objects of the club.
The assessee filed its return of income for the assessment year 2018-19 on 29.09.2018 which was subsequently revised on 06.10.2018. The assessee admitted gross receipt of Rs.9,13,87,929/- and application of income was declared at Rs.7,26,47,493/- and net income was declared at ‘nil’ by claiming exemption u/s.11 of the Act. Accordingly, the AO framed assessment u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act and verified the claim of exemption u/s.11 on the following issue:-
1. Increase in TDS/TCS claim in the revised return.
2. Continuous accumulation of profit in Trust.
3. High Refund claimed by Trust.
The AO while making computation of receipts and application of funds of the assessee, computed income as under:-
