2019 (7) TMI 931 - AT - Income Tax

Exemption u/s. 11 (1) - assessee has shown receipts from Sponsorship Income Sale of Liquor, Income from Corporate Boxes, Sale of Tickets and Advertising/Contractual Receipts which are purely commercial in nature - HELD THAT - Coordinate Bench of the Tribunal in AYs 2009-10 2010-11 2015 (1) TMI 608 - ITAT DELHI and 2018 (9) TMI 1311 - ITAT DELHI has addressed exactly similar kinds of objections raised by the revenue before us and after dealing with each and every issue Tribunal has come to conclusion that the assessee is not carrying out any business activities and none of its receipts can be termed as an activity in the nature of 'trade, commerce and business'. Once such a finding of fact has been given on similar set of facts, then we do not find any reason to deviate from such a finding in assessee s own case, therefore, following the aforesaid decision, we find no illegality or perversity in the impugned order passed by the CIT (A) extending benefit of sections 11 12, hence findings returned by the CIT (A) in the impugned order are upheld. Consequently, the appeal filed by the Revenue is hereby dismissed.

Issues Involved:
1. Denial of exemption under Section 11(1) of the Income Tax Act, 1961.
2. Classification of assessee's activities as commercial under Proviso 1 & 2 of Section 2(15) of the Act.
3. Withdrawal of registration under Section 12AA.
4. Depreciation on assets.
5. Disallowance under Section 40A(3).
6. Treatment of membership fees.
7. Disallowance of provision for gratuity and prior period expenses.

Detailed Analysis:

1. Denial of Exemption under Section 11(1):
The primary issue was whether the assessee, an association promoting cricket, was entitled to exemption under Section 11(1) of the Income Tax Act. The Assessing Officer (AO) had denied the exemption on the grounds that the assessee's activities, including sponsorship fees, membership fees, and other income sources, were commercial in nature as per Proviso 1 & 2 of Section 2(15) of the Act. However, the Tribunal had previously restored the assessee's registration under Section 12AA, and similar issues for AYs 2009-10 and 2010-11 had been decided in favor of the assessee. The Tribunal reiterated that the assessee's activities were charitable and not commercial, thus entitling them to the exemption under Section 11(1).

2. Classification of Activities as Commercial:
The AO classified the assessee's activities as commercial, invoking Proviso 1 & 2 of Section 2(15). The Tribunal reviewed the nature of the income, including sponsorships, ticket sales, and advertising, and concluded that these were intrinsically linked to the charitable purpose of promoting cricket. The Tribunal emphasized that the presence of profit motive was absent, and the activities were conducted to meet the costs of promoting cricket, not as business ventures.

3. Withdrawal of Registration under Section 12AA:
The AO had withdrawn the assessee's registration under Section 12AA, impacting their eligibility for exemptions. However, the Tribunal had restored this registration in a previous order. The Tribunal reiterated that the assessee's activities were charitable, and the withdrawal of registration was not justified. The Tribunal referenced similar cases, such as the Tamil Nadu Cricket Association, to support this conclusion.

4. Depreciation on Assets:
The AO allowed depreciation on assets purchased from FY 2009-10 onwards but denied it for earlier years. The Tribunal upheld this approach, allowing depreciation as per the Income Tax Act for the relevant assessment year.

5. Disallowance under Section 40A(3):
The AO disallowed certain cash expenditures exceeding ?20,000 under Section 40A(3). The Tribunal upheld this disallowance, noting that while some payments were exempt, the remaining expenditures contravened the provisions of Section 40A(3).

6. Treatment of Membership Fees:
The AO added the membership fees to the total income, treating it as revenue rather than corpus. The Tribunal upheld this addition, agreeing that the membership fees were of a revenue nature and should be included in the total income.

7. Disallowance of Provision for Gratuity and Prior Period Expenses:
The AO disallowed provisions for gratuity and prior period expenses, adding them to the total income. The Tribunal upheld these disallowances, agreeing with the AO's treatment of these provisions.

Conclusion:
The Tribunal, following its previous decisions in the assessee's own case, upheld the CIT(A)'s order granting the exemption under Sections 11 and 12 of the Income Tax Act. The Tribunal dismissed the appeal filed by the Revenue, confirming that the assessee's activities were charitable and not commercial, and thus eligible for the claimed exemptions. The order was pronounced in open court on July 16, 2019.

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