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2017 (4) TMI 346 - AT - Income TaxClaim of the deduction u/s 11 declined - whether the assessee exist for purpose of earning profit and the applicant is not promoting sports on non-profit basis - Held that - In the present case, material as placed before us suggests that the Assessing Officer is swayed by the figures and volume of receipts. Admittedly, such receipts are intermittent and not regular and also is dependent on the conduct of cricket match. It is not other way round that the cricket matches are dependent upon such activities. The undisputed facts are that the assessee is registered under the Rajasthan Sports (registration, recognition and regulation) Act 2005 and formed with the objective of promoting the sports of cricket within the state of Rajasthan so main objective or activity of the assessee is promotion of the cricket. The association is organizing tournament like Ranji Trophy, Irani Trophy, Dilip Trophy, Maharan Bhagwat Singh Trophy, Salim Durrani Trophy etc. the Assessing Officer has not doubted about these activities of the association. It is also brought to our notice that in the international one day match between south Africa and India, the association suffered deficits of ₹ 1.6 crores. RCA has also incurred in various other expenses with a view to promote the game of Cricket viz. on coaching camps of ₹ 20,40,360/-, state cricket activities of ₹ 1,08,60,566/-, Ground expense of ₹ 33,97,435/- and international tournament expenses of ₹ 2,09,16,911/-. These facts go to demonstrate that the assessee has been predominantly engaged into the activity of promoting cricket match. Case of Institute of Chartered Accountant vs Director General of Income Tax 2013 (7) TMI 205 - DELHI HIGH COURT held that even though fee are charged by the petitioner Institute for providing coaching classes and holding interviews with respect of campus placement, the said activity cannot be stated to be rendering of service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which has held earlier are not trade, commerce or business. In the present case also the main activity of the assessee is conducting of the cricket match which falls under the category of general public utility. This fact is not disputed by the Revenue. All these activities an ancillary to the main activity. Therefore, we are of the considered view that the Assessing Officer was not justified in declining the exemption. - Decided in favour of assessee Depreciation on capital assets - Held that - In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available. See Commissioner of Income Tax vs. Krishi Upaz Mandi Samiti 2015 (3) TMI 11 - RAJASTHAN HIGH COURT - Decided in favour of assessee Addition made on account of non-deduction of deduction of tax at source - Held that - The appellant s submission is that the TDS has been deposited before due date of filing the return. Since the amount has been deposited by due date, the disallowance appears to be uncalled for and is, accordingly, deleted.- Decided in favour of assessee Disallowance of expenses - Held that - Once the assessee is able to prove the veracity all the expenditure same should not be disallowed merely on the basis of the conjecture. Therefore, we deemed it proper to restore this issue to the file of the assessee for decision afresh.
Issues Involved:
1. Denial of exemption under Section 11 of the Income Tax Act. 2. Confirmation of income as business income. 3. Disallowance of expenses incurred on the acquisition of capital assets. 4. Charging of tax at the maximum marginal rate. 5. Charging of interest under Sections 234A, 234B, and 234D. 6. Legality of assessment under Section 144 without adequate opportunity. 7. Validity of action under Sections 147 and 148. 8. Allowance of depreciation. 9. Allowance of TDS and interest claimed under administrative expenses. 10. Addition of donation to corpus fund. Detailed Analysis: 1. Denial of Exemption under Section 11: The primary issue was whether the assessee was eligible for exemption under Section 11 of the Income Tax Act. The Assessing Officer (AO) denied the exemption, arguing that the assessee's activities were commercial in nature, citing substantial income from TV subsidies, advertisements, and match revenues. The AO also noted that the assessee had not informed the registering authority of amendments to its memorandum, leading to the withdrawal of Section 12A registration. The Tribunal, however, observed that the predominant object of the assessee was charitable, aimed at promoting cricket, and the income generated was incidental. The Tribunal relied on various judicial precedents, including the Delhi High Court's decision in the Institute of Chartered Accountants case, to conclude that incidental income does not negate the charitable nature of the activities. Consequently, the Tribunal directed the AO to grant the exemption claimed under Section 11. 2. Confirmation of Income as Business Income: The AO treated the gross receipts as business income, arguing that the activities were carried out on commercial lines. The Tribunal, however, noted that the primary purpose of the assessee was the promotion of cricket, and any surplus generated was incidental. The Tribunal referred to the Madras High Court's decision in Tamil Nadu Cricket Association, which held that the volume of receipts alone does not determine the commercial nature of activities. The Tribunal concluded that the activities were charitable and not in the nature of trade, commerce, or business. 3. Disallowance of Expenses Incurred on the Acquisition of Capital Assets: The AO disallowed expenses incurred on acquiring capital assets, arguing they were not applied for charitable purposes. The Tribunal noted that such expenses qualify as application of income under Section 11 if they are for charitable purposes. Since the registration under Section 12A was restored, the Tribunal directed the AO to allow the expenses as claimed. 4. Charging of Tax at the Maximum Marginal Rate: The AO charged tax at the maximum marginal rate, arguing that the assessee was engaged in commercial activities. The Tribunal, however, found that the primary objective of the assessee was charitable, and the activities were not commercial. Therefore, the Tribunal directed that the income be assessed at nil. 5. Charging of Interest under Sections 234A, 234B, and 234D: The AO charged interest under Sections 234A, 234B, and 234D. The Tribunal noted that these charges were consequential to the main issues and directed the AO to adjust the interest charges accordingly. 6. Legality of Assessment under Section 144 without Adequate Opportunity: The assessee argued that the assessment under Section 144 was made without adequate opportunity. The Tribunal found that the CIT(A) had provided sufficient opportunity at the appellate stage and dismissed this ground. 7. Validity of Action under Sections 147 and 148: The assessee challenged the validity of the action under Sections 147 and 148. However, the assessee did not press this ground at the time of hearing, and it was dismissed as not pressed. 8. Allowance of Depreciation: The AO disallowed depreciation, but the CIT(A) allowed it. The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by the jurisdictional High Court's decision in the case of Krishi Upaj Mandi Samiti. 9. Allowance of TDS and Interest Claimed under Administrative Expenses: The AO disallowed TDS and interest claimed under administrative expenses. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, noting that the TDS was deposited before the due date. 10. Addition of Donation to Corpus Fund: The AO added donations to the corpus fund to the income, arguing that the assessee was not eligible for benefits under Sections 11 and 12. The Tribunal noted that since the registration under Section 12A was restored, this issue required fresh consideration by the AO and remanded it for a fresh decision. Conclusion: The Tribunal allowed the assessee's appeal in part, directing the AO to grant exemption under Section 11, allow expenses incurred on capital assets, and adjust interest charges. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on depreciation and TDS. The issue of donation to the corpus fund was remanded to the AO for fresh consideration.
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