ITAT Sends Charitable Tax Exemption Matter Back to CIT(A) for Fresh Review

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has sent back the tax exemption dispute involving Chhatrapati Shivaji Maharaj Smarak Samiti to the CIT(A) for a fresh examination. The Tribunal held that the society should be given another opportunity to produce documents supporting its claim that the disputed receipts were used for its charitable objectives.

The case relates to the Assessment Year 2018-19. The society had filed its income tax return, declaring nil income by claiming exemption under Section 11 of the Income Tax Act. However, in the course of scrutiny, the AO noticed receipts of Rs. 39,34,058 under the head “Receipts from Incidental Objects“. It included Rs 30,80,744 from cricket-related activities and Rs 8,53,314 from the RYP Invitational Sports Meet.

The AO repeatedly asked the society to explain the nature of these receipts and provide supporting documents. The tax department said the society did not provide the details required in the assessment proceedings even after issuing several notices. The officer took the view that the entire amount was taxable income and that the receipts were derived from activities outside the scope of the stated objects of the society.

The society challenged the addition before CIT(A). However, the assessment was upheld by the appellate authority, holding that the burden of proving eligibility for exemption was on the assessee. The exemption claim was not admissible, as no evidence in support thereof was produced before the Assessing Officer or the appellate authority.

Before the ITAT, the society argued that it was established to promote sports and that the receipts from cricket tournaments and sports events were directly connected with its main charitable objects. It also stated that the amount had been mistakenly shown as receipts from incidental objects in the income tax return. The society further pointed out that it had incurred expenditure of nearly Rs 19,95,980 on organising sports events and relied on its Memorandum of Association, which specifically includes promoting sports, physical culture, gymnasiums and sports complexes among its charitable objectives.

The Revenue, on the other hand, argued that the society had failed to produce the necessary evidence before the lower authorities. It is submitted that if the society now possessed supporting documents, the matter should be remanded for proper verification rather than granting relief directly.

After examining the record, the Tribunal observed that the society’s objective of promoting sports was not in dispute. However, it also noted that the society had failed to substantiate its claim with adequate documents during the assessment and appellate proceedings. According to the Bench, without evidence regarding the receipts and corresponding expenditure, the authorities could not properly verify whether the income qualified for exemption under the Income Tax Act.

Accordingly, the ITAT restored the matter to the file of the CIT(A) for a fresh decision. The Tribunal ordered that the society should be given a reasonable opportunity to produce all relevant documents and supporting evidence relating to the disputed receipts and expenditure. It also directed the society to extend full co-operation and furnish all records required to prove that the activities were being carried out in line with its charitable objects.

As a result, the Tribunal allowed the appeal for statistical purposes.