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2019 (6) TMI 1424 - AT - Income TaxExemption u/s 11 to the appellant cricket associations - whether it is hit by the proviso to Section 2(15)? - charitable activity or not HELD THAT - As decided in GUJARAT CRICKET ASSOCIATION, BARODA CRICKET ASSOCIATION AND SAURASHTRA CRICKET ASSOCIATION 2019 (1) TMI 1522 - ITAT AHMEDABAD So far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of charitable activities in the hands of the cricket associations before us- particularly as learned Commissioner has not been able to point out a single object of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are objects of general public utility under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. Conclusions - we are of the considered view that the authorities below were in error in invoking the proviso to Section 2(15) and thus in declining the benefit of Section 11 and 12 to the appellant cricket associations. To this extent, plea of the appellants must be upheld - Decided in favour of assessee
Issues Involved:
1. Charitable activities and exemption under Section 11 of the Income Tax Act, 1961. 2. Taxation of net surplus as income. 3. Activities in the nature of trade, commerce, and business under proviso to Section 2(15). 4. Classification of promoting cricket as business income under Section 28. 5. Applicability of proviso to Section 2(15) read with Section 13(8). 6. Income threshold under second proviso to Section 2(15). 7. Denial of benefit under Section 11(1)(a). 8. Denial of benefit under Section 11(2). 9. Charging of interest under Section 234B. 10. Initiation of penalty proceedings under Section 271(1)(c). Issue-wise Detailed Analysis: 1. Charitable Activities and Exemption under Section 11: The appellant challenged the CIT(A)'s decision that the activities were not charitable and thus disallowed exemption under Section 11. The Tribunal referred to the case of Gujarat Cricket Association & Ors, which clarified that activities aimed at promoting cricket fall under "objects of general public utility" and are considered charitable. The Tribunal concluded that the proviso to Section 2(15) was wrongly invoked, and the appellant's activities were indeed charitable, qualifying for exemption under Section 11. 2. Taxation of Net Surplus as Income: The CIT(A) upheld the AO's decision to tax the appellant's net surplus of ?40,33,47,248/- as income. The Tribunal, following the precedent set in the Gujarat Cricket Association case, reversed this decision, emphasizing that the surplus generated from charitable activities does not disqualify the appellant from exemption under Section 11. 3. Activities in the Nature of Trade, Commerce, and Business: The CIT(A) agreed with the AO that the appellant's activities were in the nature of trade, commerce, and business, invoking the proviso to Section 2(15). The Tribunal, however, found that the primary objective of promoting cricket is not a commercial activity but an object of general public utility. The Tribunal highlighted that the scale of operations and the surplus generated do not convert charitable activities into commercial ones. 4. Classification of Promoting Cricket as Business Income under Section 28: The CIT(A) classified the promotion of cricket as business income under Section 28. The Tribunal disagreed, stating that the promotion of cricket is a charitable activity and not a business. The Tribunal emphasized that the activities were not aimed at profit-making but at promoting a sport, which is a recognized charitable purpose. 5. Applicability of Proviso to Section 2(15) read with Section 13(8): The CIT(A) applied the proviso to Section 2(15) read with Section 13(8), taxing the entire income of the appellant. The Tribunal found this application incorrect, reiterating that the appellant's activities were charitable and not commercial. Therefore, the proviso to Section 2(15) did not apply, and the appellant should be granted the benefit of Section 11. 6. Income Threshold under Second Proviso to Section 2(15): The CIT(A) taxed the entire income despite the receipts not exceeding ?25,00,000 as specified in the second proviso to Section 2(15). The Tribunal noted that the receipts from activities like ticket sales and sponsorship did not exceed the statutory limit, and thus the proviso to Section 2(15) should not have been applied. 7. Denial of Benefit under Section 11(1)(a): The CIT(A) did not allow the benefit of Section 11(1)(a), treating ?1,47,98,329/- as income. The Tribunal reversed this decision, stating that the appellant's activities were charitable, and thus the benefit under Section 11(1)(a) should be granted. 8. Denial of Benefit under Section 11(2): The CIT(A) denied the benefit of Section 11(2), treating ?4,50,00,000/- as income. The Tribunal found this denial incorrect, emphasizing that the appellant's activities were charitable and should be granted the benefit under Section 11(2). 9. Charging of Interest under Section 234B: The CIT(A) upheld the AO's decision to charge interest under Section 234B. The Tribunal, following its decision to grant the appellant the benefit of Section 11, directed that no interest under Section 234B should be charged. 10. Initiation of Penalty Proceedings under Section 271(1)(c): The CIT(A) confirmed the initiation of penalty proceedings under Section 271(1)(c). The Tribunal, however, found no basis for such proceedings, given that the appellant's activities were charitable and directed that the penalty proceedings be dropped. Conclusion: The Tribunal upheld the appellant's plea, reversing the CIT(A)'s decisions and directing the AO to allow the benefit of Section 11. The appeal was allowed, and the judgment was pronounced on 11th June 2019.
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