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TMI Blog2017 (11) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ARISHI, ACCOUNTANT MEMBER For The Revenue : Shri Shravan Gotru, Sr. DR For The Assessee : None ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A)-40, Exemption dated 25.05.2015 for the AY 2010-11. 2. The Revenue has raised the following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in ignoring that the assessee's activity falls under the category of advancement of any other object of General Public Utility and the last proviso to Section 2(15) is clearly applicable to it as „Income from „Sponsorshi/ Royalty' is explicitly business receipt in nature. 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in holding that the activities of the assessee are charitable in nature and not in the nature of trade, business or commerce specifically when the assessee has received substantial amount from different parties towards sponsorships. 3. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in holding that the activities of the assessee are chartiable in nature and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11 and 12 of the income tax act to the assessee. 6. Despite notice none appeared on behalf of the assessee and therefore in absence the issue is decided on the merits of the case. 7. We have carefully considered the contention raised by the Ld. assessing officer and the order of the Ld. CIT A allowing the appeal of the assessee. We have also considered the arguments raised before us by the Ld. departmental representative. Admittedly, the assessee is engaged in the activity of promotion of basketball and is carrying on charitable activities. Merely because it has received certain fund on account of royalty as well as on account of sponsorship it cannot be said that the activities of the trust are no more covered under section 2 (15) of the act. Identical issue has been considered by the coordinate bench in case of Rajasthan Cricket Association versus additional CIT in 79 Taxmann.com 464 as under:- "3. Ground nos. 2 to 8 are against denial of exemptions and computation of income as business income since the ground nos. 2 to 8 inter-related are taken up together for the disposal. The ld. Counsel for the assessee reiterated the submissions as made in the written submissions. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT against order of ld. CIT cancelling registration, was decided vide order dated 13.07.2012 in ITA No. 69/JP/2011, setting aside the order withdrawing registration and directing CIT to decide matter afresh. Ld. CIT, vide order 28.03.2013 again withdrew registration u/s 12A primarily relying upon observations of AO. Assessee filed appeal against order of CIT, which was decided by Hon'ble ITAT vide order dated 09.06.2016. Vide said order, Hon'ble ITAT at page 16 para 5, decided the appeal in favour of assessee by observing as under: "We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the assessee was granted registration u/s 12A on 25.11.1988, which has been withdrawn twice by the ld. CIT. The issue has been set aside by the Coordinate Bench to reconsider the withdrawn of registration, which was also challenged by the revenue before the Hon'ble Rajasthan High Court, who has allowed the assessee's prayer and directed to consider the application afresh without influencing any of the observation made by the appellate authority. The assessee has been provided reasonable opportunity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2016 passed by Hon'ble ITAT in ITA No. 544/JP82013 (APB 13-30), assessee is eligible to claim exemption u/s 11 subject to the fulfilment of conditions prescribed therein and further if there is no violation to section 13. Assessee's Ground of Appeal No. 1: Not pressed. Assessee's ground of Appeal Nos. 2 to 5 & 7: In grounds of appeal Nos.2 to 5, assessee has challenged the action of ld. CIT(A) in confirming the action of ld. AO in denying exemption u/s 11 and assessing the assessee in the status of AOP by applying maximum marginal rate whereas in ground of appeal No.7 assessee has challenged the action of AO in denying exemption on the allegation that activities of assessee are being run on commercial basis. All the grounds being related are being dealt herewith together for the sake of convenience: In this regard, at the outset it is submitted that all the grounds of appeal relate to denial of exemption u/s 11. Further, for claiming exemption u/s 11, preconditions are that: (i) assessee holds a valid registration u/s 12A (ii) income is applied in accordance with the provisions of section 11 and (iii) there is no violation in terms with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10. Further, section 13 provides certain circumstances under which section 11 is not applicable. These are: (i) any part of income from property held under trust for private religious purposes, which does not result into benefit of the public. (ii) any income of trust or institution created or established for the benefit of any particular religious community or caste. (iii) if any part of income directly/ indirectly benefits author/ founder/ trustee/ manager or such other person specified u/s 13(3) (iv) funds remain invested in modes other than 11(5) (v) Income of charitable institution engaged in the advancement of "any other object of general public utility" if it involves carrying on of any trade, commerce or business activity. Apart from above, the most relevant provision is section 2(15), wherein the word "charitable purpose" is defined as to include: (a) relief of the poor, (b) education, (c) medical relief, and (d) advancement of any other object of general public utility. However, with effect from 01.04.2009 (i.e., from as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public utility" even if activities result into profits incidentally provided that such income is applied in accordance with the provisions of section11. Further, there no allegation regarding violation as per section13, thus withdrawal of exemption on the grounds of commerciality for the year under consideration is bad in law. It is thus prayed that exemption claimed by assessee may please be allowed. However, without prejudice to this, our submission on merits is as under: Ld. AO by observing huge surplus concluded that activities of the assessee were profit oriented and assessee was carrying its activities on commercial basis. It is noteworthy here that the term "any other activity in the nature of trade, commerce or business" is not defined and thus the same has to be understood in common parlance, and accordingly expression trade, commerce or business has to be understood as a regular and systematic activity with the primary motive to earn profit, whereas the Association never acted as a professional advertiser, TV producer etc. No matches of any game other than cricket or no other events are organized to attract audience rather only cricket matches are being organized wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus, increase in the investments, control over the players however he totally failed to appreciate that normally the surplus was the result of subsidies only and not from the conducting of tournaments on commercial basis. It is pertinent to note here that subsidies are a form of financial aid granted for promoting a specific cause, which is ultimately for the benefit of overall or a section of public but never for the benefit of an individual organization. The subsidy received was utilized in the promotion and development of sport of cricket in state at each level, i.e. from mufasils areas to big cities like Jaipur. Also, renting out premises by RCA has been viewed adversely for which it is respectfully submitted that RCA has been formed with a sole objective of promoting cricket and with the view to achieve the desired objective the resting of premises as done is wholly and exclusively for the purpose of cricket and no other activity of whatsoever nature has been carried out and neither it is engaged in the systematic activity as hotelier, thus the said act of association is fully in the direction of achieving its basic object of promoting Cricket and cannot be viewed adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket activities of ₹ 1,11,90,375/-, Ground expenses of ₹ 28,89,930/- and international tournament expenses of ₹ 9,02,441/-.(APB- 4 & 5 ) Above, data clearly reveals that surplus, if any generated by assessee was merely incidental to the main object, i.e. promotion of sport of cricket and in no way by running "business of cricket" as has been alleged by AO. At this juncture, it would be relevant to resort to the decision of Delhi High Court in the case of The Institue Of Chartered ... v. The Director General Of Income Tax ... on 4 July, 2013 defining the term "business" in relation to charitable institutions, post the amendment carried out in section 2(15) relevant extracts of which are as under: 57. After discussing various decisions with regard to the scope of the words trade, commerce & business, this court in The Institute of Chartered Accountant of India v. Director General of Income-tax (Exemption) (supra) held that while construing the term business for the purpose of Section 2(15) of the Act the object and purpose of the Section must be kept in mind and a broad and extended definition of business would not be applicable for the purpose of interpreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax and constitute the assessee as a dealer. In the case of State of Gujarat v. Raipur Manufacturing Co. Ltd.: (1967) 19 STC 1 (SC), the Supreme Court held that in order for any activity to be considered as business, there must be a course of dealings either actually continued or contemplated to be continued with the motive to earn profit and not for sport or pleasure. 67. The expressions "trade", "commerce" and "business" as occurring in the first proviso to section (15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of "charitable purpose". The purpose of introducing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o profits would not ipso facto result into denial of exemption u/s 11. Further Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association v. The Director of Income Tax, wherein reference has been made to Circular No.11 of 2008 of CBDT dated 19.12.2008, held that question of rejection of registration under section 12AA(3) would arise only in those cases where an entity uses this status of charitable with a charitable object of general public utility as a mask or a device to hide the true purpose and that object is nothing other than trade, commerce or business. Thus revenue has to substantiate absence of genuineness. Mere conducting matches or earning income from incidental activities would not entail cancellation of registration. Hon'ble Delhi Bench of ITAT in the case of Delhi & District Cricket Association v. DIT(E) has observed as under: (relevant extracts) 10.7. Even otherwise the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in and around Delhi. The undisputed fact is that over the years this activity has been recognized by the Income Tax Deptt. as a charitable activity and registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of ₹ 29,84,835/-, which was met by the assessee. It was specifically argued by the ld.D.R. that the agreement with "M/s Twenty First Century Media Pvt.Ltd." is commercial in nature. The reply of the assessee is that it should be appreciated that, for any organization to run and survive it is essential that it should augment some funds to meet the cost/expenditure, as required to be incurred, to carry out the activities meant to achieve its object. We agree with the submissions of the assessee. 11.2. The assessee has to perform many activities and for this purpose it has to enter into transactions with various types of persons. These persons can be commercial or non-commercial organizations, professionals, vendors of goods, vendor of services and so forth and so on. Merely entering into such agreement does not tantamount to the assessee being a business entity. The question is whether the activity done by assessee, would tantamount to business activity or not. This has to be viewed, from view point of the assessee. The other person with whom the assessee has an agreement, may have its own object and reason for doing transaction and accordingly, the nature of transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dently as trading item. The eatery is available for the use only of members, players, staff, other guests of DDCA. It is not open for public. A walk in customer/guest, cannot enjoy the facility of this eatery. The basic fact is that this canteen has direct and inextricable link with one of the core activities of DDCA i.e. maintaining such a huge cricket stadium and promoting the game of cricket. The Revenue, in this case is trying to project that the assessee as a liquor dealer. This is not correct. Internationally, when facilities are provided to players, liquor is part of the menu. This is just incidental to providing food and beverages. When the Ld.DIT(E) does not find anything wrong in the assessee supplying food and beverages in the canteen to the members, we cannot find fault with liquor being part of the menu card and being served as per international customs and requirements. 11.5. Hence to meet global standards these facilities are required and these are not independent of the activity of providing food and refreshments ITA No. 3095/Del/2012 Delhi & District Cricket Association, New Delhi to Members and Associated Persons. Running of a canteen is an incidental and neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a charitable object as mentioned in s.2(15) of the Income-tax Act, 1961. It does not violate any condition as mentioned in proviso to s.2(15). The apprehension that certain income received by the assessee, during the year, partake the character of business income, is ill-founded. In this regard we have submitted in detail that this apprehension is misplaced on account of various submissions as per details given below. 1. The entire receipts have been received for the promotion of game of cricket. 2. The assessee is not free to use it as per its convenience for any purpose other than for promotion of cricket. Thus, the amounts received in this manner cannot be characterized as business receipts. The amount has been received as the voluntary contribution on discretion of the contributor (for e.g. BCCI). These have been received for raising the funds for meeting its costs and expenses. 4. In none of the cases there is any quid pro quo. The ultimate beneficiary is either the cricketer or the game of the cricket. 5. The assessee is not charging any fees or revenue from the cricketer who is ultimate beneficiary. Thus, there is no quid pro quo relationship with the cricketer. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the activity of organizing matches and tournaments for the promotion of cricket. User charges are required for maintaining the facilities that are provided as part of the infrastructure, for conducting the activities of the assessee. 11.12. On consideration of all the facts and circumstances of the case and when viewed in totality, we have to come to a conclusion that the assessee is not carrying of the activities with any profit motive or with any self interest. The contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges on the facts of this case, do not convert the charitable activity into "trade, commerce or business" activity 11.13. In view of the above discussion and in view of the binding judgments cited above, we have to necessarily quash the impugned order passed by the DIT(E) u/s 12AA(3) r.w.s. 12 of the Act, as it is bad in law. DDIT v. All India Football Federation [2015] 62 taxmann.com 362 (Delhi-Trib.). S. 2(15) Activity of Society to promote football The main objective of the assessee was to promote the game of football in India which certainly amounts to charitable purpose, being covered under the limb "the adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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