The Haryana Rifle Association, based in Sonipat, faced rejection for its application for charitable status under sections 12AA and 80G of the Income Tax Act. The Commissioner of Income Tax (Exemptions) in Chandigarh determined that the association’s activities, which include the sale of ammunition and collection of match fees, exhibited a commercial motive rather than a charitable purpose.
In a detailed examination of the case, the tribunal assessed the financial activities of the association for the fiscal years 2016-2019. Notably, the association reported significant income from ammunition sales and match fees, including a notable amount from the Haryana State Championship fees. The CIT(E) argued that these activities are commercial in nature and lack the essential characteristics of charity.
The association contested this finding, arguing that its operations are not profit-driven and that it relies on support from the Haryana government. It also highlighted that ammunition provided during tournaments is not commercially available and is necessary for conducting these events.
The tribunal upheld the CIT(E)’s decision, agreeing that the nature of the activities carried out by the Haryana Rifle Association are commercial rather than charitable. The sale of ammunition and the collection of match fees were seen as steps beyond mere facilitation of sports, entering into the realm of regular commercial enterprise.
This case sets a significant precedent for sports associations and similar organizations seeking charitable status. It underscores the importance of clearly delineating charitable activities from commercial operations, particularly when the latter could overshadow the stated charitable objectives.
The decision prompts organizations to evaluate their operations and possibly restructure to ensure compliance with the criteria for charitable status under the Income Tax Act.
The rejection of the Haryana Rifle Association’s application for charitable status serves as a reminder of the strict scrutiny that organizations face regarding their source of income and activities. Associations engaged in similar activities may need to reassess their operations to align more closely with charitable purposes if they seek tax exemptions and benefits under the law.As a result of this case, the Haryana Rifle Association and similar entities must carefully consider the balance between supporting sports and conducting commercial transactions.
Appeal of Haryana Rifle Association for Charitable Status Denied Due to Commercial Activities
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