M/s Escorts Sports Club vs Income Tax Officer

PER MAHAVIR SINGH, VP:

This appeal by the assessee is arising out of the order of learned CIT(Exemptions), Chandigarh dated 2nd March, 2026 passed under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), rejecting the application filed by the assessee in Form No.10AB.

The assessee has raised the issue that learned CIT(E) failed to appreciate the assessee's specific twin conditions prescribed under Section 12AB(1)(b) of the Act i.e., genuineness of the activities and compliance with all applicable laws for the purpose of achieving its objectives and therefore, is eligible for registration.

Brief facts are that the assessee trust i.e., Escorts Sports Club has been established for the purpose of promoting indoor and outdoor games, sports, conducting sports tournaments, disbursing scholarships to deserving and talented young sportsmen and for promoting and encouraging sports amongst the employees of industries of Faridabad. Since its establishment, the trust has promoted various games and sports activities including incurring capital expenditures on renovation of certain sports complexes in the region of Faridabad. The assessee before learned CIT(E) claimed that the assessee club did not get opportunity to apply its accumulated funds in the last few years and accordingly, it has paid taxes on these accumulated funds. The assessee filed application in Form 10AB on 26th September, 2026 for registration under Section 12A(1)(ac)(ii) of the Act along with provisional registration order dated 24th September, 2021, notes on activities, audited accounts for financial year 2022-23 to 2024-25, certificate of registration and bye laws. Learned CIT(E) rejected the assessee's registration application only on two premises i.e., that the donation of ₹50,000/- in financial year 2025-26 was after issuance of notice by learned CIT(E). Accordingly, learned CIT(E) held that such isolated and post-facto activities undertaken after initiation of proceedings cannot establish genuineness of activities for the preceding years. Secondly, for past three years, the assessee has not carried out any activity and hence, assessee failed to demonstrate that it had carried out genuine charitable activities in accordance with its stated objects during the relevant period. Therefore, application filed by the assessee in Form 10AB under Section 12A(1)(ac)(ii) of the Act was rejected and it was also held that this rejection would also supersede any registration granted under Section 12AB of the Act by any authority at any earlier point of time.

We have heard the arguments of both the sides and perused the material placed before us. We noted from the arguments of the learned Counsel for the assessee as well as the paper book containing 77 pages, wherein the assessee has enclosed the first evidence of contribution of ₹50,000/- towards sports contribution at pages 65 to 67, wherein this donation was made on 30th October, 2025 as against the claim made by the learned CIT(E) that it was donated after issuance of notice. The learned Counsel pointed out that the entire premise of learned CIT(E) is wrong and it is clear that this donation was made by the assessee club on 30th October, 2025. Further, learned Counsel admitted categorically that this trust is not carrying out any sports activities for the last three years but it has paid taxes on the accumulated income from financial year 2022-23 to 2024-25 relevant to assessment year 2023-24 to 2025-26 and for this, he drew our attention to pages 75 to 77 of the paper book, wherein assessee has enclosed the copy of acknowledgement, by virtue of which, assessee has paid taxes on returned income on the accumulated funds. We noted that the assessee has complied with all the conditions as mentioned in the provisions of Section 12A of the Act, and assessee's case does not fall in any of the specified violations and moreover, there is no doubt casted by the learned CIT(E) that the activities and objects of the assessee trust are not charitable in nature. Accordingly, we are of the view that the assessee is a genuine trust and rejection of registration by the learned CIT(E) is without any basis. We direct the learned CIT(E) to grant registration to the assessee trust and accordingly, the order of learned CIT(E) is reversed and the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 17th July, 2026.