2022 (6) TMI 568 - AT - Income Tax

Assessment of trust - disallowance in the expenses incurred in organizing the golf tournament - HELD THAT - We find that the assessee is a reputed management institute existing solely for the purpose of imparting education in the field of management and approval u/s 10(23C)(vi) of the Act has been granted and is in force. The golf tournament was organized during the year. Various corporates were invited and the sponsorship was taken. Total expenditure incurred for organizing this tournament amounting to Rs. 34,31,858/-. Ld. CIT(A) has confirmed the disallowance made by ld. AO at Rs. 34,31,858/-. So far as organizing golf tournament is concerned, the said event cannot be said to be a part of the educational activity for which the Trust is established. Therefore, so far as golf tournament is concerned the said activity is not educational activity. As regards the quantum of disallowance of golf tournament expenses is concerned, we find that the golf tournament is a separate activity carried out by the assessee Trust for which it received sponsorship of Rs. 30,17,250/- from various corporates and the same is duly reflected in the credit side of income and expenditure account of the assessee Trust and this fact has been well taken note of by the ld. AO also in the assessment order. Therefore, the excess expenditure incurred by the assessee Trust on the said golf tournament amounts to Rs. 4,14,608/- sponsorship of Rs. 30,17,250/- (-) golf tournament expenditure of Rs. 34,31,858/- . Therefore, only a sum of Rs. 4,14,608/- can be considered as the amount not spent for the objects of the Trust and we, therefore, sustain the disallowance only to this extent. Thus, the sole issue raised by the assessee in ground no. 1 to 4 is partly allowed.

Summary

Issues:
1. Delay in filing appeal
2. Disallowance of expenses incurred for organizing a golf tournament
3. Educational purpose of the expenses
4. Deduction of sponsorship amount from disallowed expenses

Delay in filing appeal:
The appeal was filed by the assessee for the Assessment Year 2012-13 against the order of the Commissioner of Income-tax (Appeals)-25, Kolkata. The appeal was initially time-barred by 311 days, but the delay was condoned by the Appellate Tribunal due to the assessee receiving an incomplete order and subsequently filing the appeal upon obtaining the missing pages. The Tribunal admitted the appeal for adjudication on merit after finding reasonable cause for the delay.

Disallowance of expenses incurred for organizing a golf tournament:
The assessee, a charitable Trust providing management education, organized a golf tournament, incurring expenses of Rs. 34,31,858. The Assessing Officer disallowed these expenses as not being for educational purposes, resulting in no impact on the total income assessed at Rs. NIL. The Commissioner of Income-tax (Appeals) upheld this view, stating that the tournament's expenses were not educational as golf is a costly game and only industrial houses participated. The Tribunal noted that the tournament was not directly related to educational activities.

Educational purpose of the expenses:
The assessee argued that the tournament aimed to connect corporates with academia to provide employment avenues for students. Despite the educational nature of the Trust, the Tribunal found that organizing a golf tournament did not align with the educational objectives of the Trust, leading to the disallowance of the majority of the expenses incurred.

Deduction of sponsorship amount from disallowed expenses:
The Tribunal acknowledged that the sponsorship amount of Rs. 30,17,250 was received for the tournament and duly credited in the income and expenditure account. After deducting the sponsorship amount from the total expenses, the excess expenditure was deemed as not spent for the Trust's objectives, resulting in a partial allowance of the appeal. The disallowance was sustained only to the extent of Rs. 4,14,608, representing the amount not spent for the Trust's objectives.

In conclusion, the Tribunal partly allowed the appeal, recognizing that while the Trust was established for educational purposes, organizing a golf tournament did not align with its core objectives. The disallowed expenses were partially sustained after deducting the sponsorship amount, highlighting the importance of expenses being directly related to the Trust's educational activities to be considered allowable.