2019 (1) TMI 1066 - AT - Income Tax

Eligible for exemption u/s. 11 or 10(23C) - profits on sale of tickets and advertisement space (BCCIT Reimbursements) - dominant and prime objective of the institution - utilization of accumulated funds / profit - Held that - As considered the proviso to section 2(15) and held that if the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a charitable purpose . On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established charitable purposes. Assessee-association only existed for the purpose to develop the game of the cricket in the State of Andhra Pradesh and therefore, the main character of the assessee is a charitable in nature. So far as conducting international matches on behalf of the BCCI is concerned, it is secondary or incidental to achieve the main object. Therefore, in our opinion, the dominant object of the assessee is to only develop the game of the cricket and not to carry any business activity directly or indirectly in the activities related trade, commerce, business. Therefore, assessee is entitled for claim of exemption under section 11 and section 10(23C)(iv) of the Act. No reason to interfere with the order passed by the CIT(A). - Decided against revenue. Accumulated fund utilized within the specific period basing on the statement of expenditure submitted by the society during appellate proceedings - additional evidence produced by the assessee society by way of statement of expenditure - Held that - DR is not able to point out any mistake or error committed by the CIT(A) finding in respect of accumulation of funds. However, AR has pointed out from paper book at page Nos. 12 to 15 that in respect of accumulation of profits, a detailed submission was made before the Commissioner (Exemptions) by letter dated 04/08/2017, the Commissioner (Exemptions), Hyderabad has considered the same and gave a categorical finding that there is no violation in respect of accumulation of funds pertaining to Financial Year 2007-08 and 2008-09 for treating unutilized within the specified period of five years. AO is not correct in saying that the funds are not utilized within the period of five years. We find that the CIT(A) by considering the detailed explanation given by the assessee for accumulation of funds for the Financial Years 2007-08 & 2008-09 and utilization of the same and gave a categorical finding that the assessee has not violated in respect of accumulations made under section 11(2). Therefore, CIT(E) dated 28/08/2017 and also CIT(A) examining the accumulations and utilization of funds for the Financial Years 2007-08 & 2008-09 gave a categorical finding that there is no violation committed by the assessee, all funds are utilized in time as per law. We find no reason to interfere with the order passed by the CIT(A). Thus, this ground of appeal raised by the Revenue is dismissed.

Issues Involved:
1. Delay in filing appeals.
2. Nature of activities carried out by the assessee.
3. Eligibility for exemption under section 11 and section 10(23C) of the Income Tax Act.
4. Commercial nature of activities and its impact on charitable status.
5. Accumulation and utilization of funds under section 11(2).

Detailed Analysis:

1. Delay in Filing Appeals:
The Revenue filed appeals with a delay of 4 days for ITA Nos. 279 & 280/VIZ/2018. The Tribunal condoned the delay after finding sufficient cause for the belated filing.

2. Nature of Activities Carried Out by the Assessee:
The assessee, an association for the promotion of cricket, argued that its activities were charitable. It was registered under section 12A and had approval under section 10(23C)(iv). The Assessing Officer (AO) contended that selling tickets and receiving reimbursements from the BCCI constituted commercial activities, thus disqualifying the assessee from exemptions under sections 11 and 10(23C).

3. Eligibility for Exemption Under Section 11 and Section 10(23C):
The AO denied exemptions, stating that the assessee's activities were commercial. However, the CIT(A) and the Tribunal found that the activities were in line with the charitable objectives of promoting cricket. The Tribunal noted that the assessee's main objective was to develop cricket and that conducting matches and selling tickets were incidental to this objective.

4. Commercial Nature of Activities and Its Impact on Charitable Status:
The AO argued that the assessee's activities were commercial due to the sale of tickets and receipt of reimbursements. The Tribunal, however, determined that these activities were incidental to the main charitable purpose of promoting cricket. The Tribunal emphasized that the dominant purpose of the assessee was charitable, and the incidental commercial activities did not negate this.

5. Accumulation and Utilization of Funds Under Section 11(2):
For the assessment year 2014-15, the AO added an unutilized accumulation of ?2,36,91,348 to the assessee's income, claiming it was not spent within the specified period. The CIT(A) found that the accumulated funds were utilized within the specified period, and the Tribunal upheld this finding. The Tribunal also noted that any unutilized accumulation should be considered in the subsequent year, not the year under appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, confirming that the assessee's activities were charitable and eligible for exemptions under sections 11 and 10(23C). The appeals by the Revenue were dismissed, and the Tribunal found no reason to interfere with the CIT(A)'s orders. The Tribunal also ruled that the proviso to section 2(15) did not apply as the assessee's dominant objective was charitable, and any commercial activities were incidental.

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