9911796707
TMI Blog2022 (7) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee society under section 11 can not be denied. Allowance of expenses towards grants to District Cricket Associations - HELD THAT:- We allow the expenditure incurred by the assessee by way of grants given to various District Cricket Association as claimed by the assessee. Accordingly ground no. 2 of the revenue is dismissed. Adopting accrual system of accounting and not the payment system of accounting as the Trust/AOP/Society/Institution exempted under the IT Act is not employed to adopt accrual system of accounting - HELD THAT:- As perused the material available on record and it is noted that the method of accounting shall be cash or mercantile as per section 145(1) of the Income Tax Act 1961, as consistently followed is allowed. Regarding the provision of expenses, it is noted that the same is provided and adjusted from year to year and the amount shown in the Balance Sheet is the closing balance at the end of the year. Regarding the separate claim, if any, the ld. CIT (A) has already given opportunity to the AO in this matter. Accordingly, the Ground no. 3 of revenue is dismissed. - ITA Nos. 66, 67 And 68/JP/2022 - - - Dated:- 21-6-2022 - Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit u/s 11 assessed the total income of Rs 20,28,203/-. The AO mentioned in the order dated 29.03.2013 that withdrawal of registration by Ld. CIT (Exemptions) was sufficient reason to believe that surplus or expenditure which has been claimed as exempted was not exempt and the assessee society is not entitled to exemption u/s 11 and 12 of the Act. 3. Being aggrieved, the assessee challenged the action of the AO before the ld. CIT(A) and relied upon various decisions of this Tribunal including the decision in assessee s own case specifically the decision of the ITAT Jaipur in ITA no. 544/JP/2013 vide its order dated 09.06.2016 by which the registration has been restored under section 12A and further the decision of the ITAT in ITA no. 388/JP/2012, 944/JP/2013 and 921/JP/2013 and further the order of ITAT Jaipur in ITA no. 1355/JP/2018, 1356/JP/2018 and 284/JP/2020 in respect to assessment, allowing the benefit of section 11 12 of the Act. The assessee society further referred to the judgment of the Honorable Rajasthan High Court in rejecting the appeal of the Department in Appeal nos. 252/2017 and 257/2017. The relevant findings of the ld CIT(A) are contained at para 8.3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und any infirmity in the activities carried out by the RCA as non-genuine or not being carried out as per object of the trust. It is also a fact that the game of cricket become very potential which reference to revenue compare to other games, therefore, the revenue generated by the RCA are substantial but this ground cannot be used to cancel the registration granted by the Id CIT as predominant object of the trust is charitable and substantial revenue generated is incidental to the main object. If, the Id Assessing Officer found any violation in application of fund, he can make disallowance u/s 11 of the Act. Thus, we are of the considered view that the Id CIT was not right in withdrawing the registration granted u/s 12A of the Act. Accordingly, the assessee s appeal is allowed. 8.3.3 Further, The above order of ITAT has also been affirmed by Hon ble High Court vide order dated 21/11/2017 (common order for appeal no 236/2016; 252 and 257 of 2017. The relevant para is extracted as under: 11. If there is any breach of any condition/s then they may cancel the registration, however, they have to follow the procedure. The contention that non communication of changes of purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have heard the rival contentions and perused the material available on record. Firstly, it is not in dispute that the registration of the assessee society u/s 12A has been restored by the Tribunal vide its order dated 09.06.2016 and on appeal by the Revenue, the order so passed by the Tribunal has been affirmed by the Hon ble Rajasthan High Court in Appeal no. 236/2016 dated 21.112017. Therefore, the primary condition for availing exemption under section 11 and 12 of the Act that the assessee society should be registered u/s 12A is satisfied in the instant case. 6.1 At the outset, we find that the issue involved in the year under consideration has been elaborately discussed and adjudicated by the Coordinate Bench of the Tribunal, in the assessee s own case in ITA Nos. 1355 and 1356/JP/2018 dated 25.11.2020 for the assessment years 2010-11 and 11-12 following the various decisions of the ITAT Jaipur Benches and the judgments of Hon ble High Court and Hon ble Supreme Court and allowed the claim of the assessee. We feel it convenient to reproduce the relevant findings in the said order dated 25.11.2020 as under :- 29. The Coordinate Bench, while disposing off the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of sports which as per CBDT circular is charitable purpose. But the activities undertaken by the RCA clearly shows that the main activity is commercial exploitation of public craze over cricket. The assessing officer placed reliance on the judgment of the Hon ble Calcutta High Court rendered in the case of Cricket Association of Bengal Vs. Commissioner of Income Tax 371 ITR 277. 5. It is observed by the AO that the entire character and focus of the RCA has become totally commercial. Therefore, the Assessing Officer proceeded to disallow expenditure and the exemption claimed by the assessee. Thus, the exemption was denied on the basis that the assessee was involved into a commercial activity. The ld. CIT(A) concurred the view of the Assessing Officer on the same basis. Before adverting to the rival contentions it would be appropriate to reproduce the relevant provision of law. The section 2(15) of the Income Tax Act that defines charitable purpose which is reproduced as under: Section 2(15) - Charitable purpose include relief of the poor, education, medical relief, [preservation of environment( including watersheds, forests and wildlife) and preservation of monuments o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Assessee s paper book page nos. 13 to 30. It is contended that section 11 of the Income Tax Act provides exemption in respect of income of charitable or religious trusts if the same is applied towards the objects of the trusts. It is the contention of the assessee that the sole basis of declining exemption was that there was huge surplus earned by the assessee in respect of one-day international match held between India and Pakistan. It is the contentions of the assessee that a match between India and Pakistan always generates higher receipts as the number of audience is higher. It is also pointed out that the match between other countries could not even fetch 70 to 80% of the collection. It is also contended that all the payments in the shape of sponsorship, advertisement, TV rights etc. are received directly by BCCI. Further, BCCI delegates the organization of matches to state association and in turn state association gets some funds from promotion and expansion of their charitable activities. It is also submitted that major benefits by organizing these matches is that local team, being trained by the RCA, get opportunity to learn from experience of coaches of international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se were organized for the development of game of cricket at national level and to identify the players who can represent the country at international level and in the year 2007-08 RCA has made expenditure of over Rs. 1.12 crores. It is contended that the surplus if any generated by the assessee by the assessee was merely incidental to the main object that is promotion of sport of cricket and in no way by running business of cricket as has been alleged by the Revenue. We find that the Hon ble Madras High Court under the identical facts, in the case of Tamil Nadu Cricket Association vs the Director of Income Tax(E) has held: As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipts apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Income Tax Appellate Tribunal that the twin conditions stood satisfied is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociation. In the circumstance, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act. The ld. DR has strongly relied on the decision of the coordinate bench in the case of Rajasthan Housing Board Vs. CIT 21 taxmann.com 77 and also decision in the case of Ahemdabad Urban Development Authority vs. CIT(2016) 69 taxmann.com 381 and also the decision of coordinate bench in the case of Entertainment Society of Goa Vs. CIT 34 taxmann.com (210) (Panji) so far as the decision of the coordinate bench in the case of Rajasthan Housing Board and Ahemdabad Urban Development authority are concerned are no more binding precedents in view of the subsequent judgment of Hon ble Jurisdictional High Court in the Jodhpur Development Authority rendered in the case of CIT Vs. Jodhpur Development Authority 287 ITR 473(Raj.) 6. The allegations of the Assessing Officer is that in the case of assessee the major income arise not from the game of Cricket but from the business of Cricket. It is alleged by the Assessing Officer that major source of income are from TV Subsidy, Sale of advertisement, surplus from one-day inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution in respect of such business.Now, coming to the allegation of the Assessing Officer that the major source of income are TV subsidy, sale of advertisement surplus from ODI between India and Pakistan income from RCA Cricket academy and interest income. It is not in dispute that TV subsidy, sale on advertisement surplus from ODI between India and Pakistan income from RCA Cricket Academy are all relating to the conduct of Cricket matches by the society. It is undisputed fact that without conduct of matches income cannot be derived. Therefore, it can be safely inferred that these incomes are related to the incidental activity of the association. These incomes would not accrue without the game of Cricket. The main thrust of revenue s argument is that for allowing exemption under section 11 of the Act, the Assessing Officer need to examine whether the proviso to section 2(15) of the Act is attracted or not. It is the contention of the revenue that assessee would fall under the limb of any other object of general public utility to which category only the proviso to section 2(15) applies. It is contended that if proviso 2(15) attracted, assessee loses benefit of exemption as per sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the trust deed and objects contained therein that in was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the trust carries on the business of selling and supplying goods so as to fall within the meaning of dealer under section 2(11) of the Act. No doubts, the definition of business given in section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would notnormally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business connected with or incidental or ancillary sales will rest on the department. Thus, if the main activity of a person is not tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the Revenue is that since the assessee are involved in carrying on activities in the nature of trade and commerce, by virue of first proviso to Section 2(15), their activity/object cannot be recognized as for charitable purpose so as to make them entitled for registration u/s 12A of the Act of 1961. 17. Section 2(15) of the Act of 1961 which defines charitable purposes reads as under: (15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment ( including watersheds, forests and wildlife) and preservation of monuments o places or objects of artistic or historic interest, and the advancement of any other object of general public utility; Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on o any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that the first prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust or institution is advancement of an object of general public utility, it is that object of genral public utility which must not involve carrying on of any activity for profit and not its advancement or attainment. The court observed that what is inhibited by these last ten words is the linking of activity or profit with the object of general public utility and not its linking with the accomplishment or carrying out other object. Thus, so long as purpose does not involve carrying on or any activity for profit, the requirement of definition would be met and it is immaterial how the money s for achieving or implementing such purpose are found whether by carrying on an activity for profit or not. 22. In Andhra Pradesh Road Transport Corporation s case (supra), the Hon ble Supreme Court while relying upon the earlier decisions in the matter of additional CIT vs. Surat Art Silk cloth Manufactures Association , (19800 121 ITR 1 and CIT Vs. Bar Council of Maharashtra , (1981) 130 ITR 28 (SC), held that if predominant object is to carry out a charitable purpose and not earn profit, the purpose would not lose its charitable character merely because some profit arises from the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat. In the circumstance , in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case . (emphasis added) 24. In Commissioner of Income Tax v. Krishi Upaj mandi Samiti, jaisalmer , (2011) 331 ITR 135 (Raj.), a Bench of this court while considering the entitlement of Krishi Upaj Mandi Samiti, a statutory body, constituted and established under the Rajasthan Agricultural Produce Market Act, 1961, observed that may be the income received by the Samiti by way of cess or mandi fees is not shown to be spent wholly for the purpose of relief of the poor, education, or medical relief, but under the scheme of the act, being the Rajasthan Agricultural Produce Markets Act, 1961, the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include advancement of any other object of general public utility . 25. In Lukhnow Development Authority s case (supra), while examining the question regarding applicability o prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above binding precedents, we are unable to affirm the view of the revenue. 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. Theassociation 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 Rs. 1.6 crores. It is also brought to our notice that the RCA has also incurred in various other expenses with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various activities organized by the assessee society by way of organizing international one day cricket matches, domestic cricket tournaments, cricket coaching camps and taking into consideration the receipts and expenditure in relation to such activities, it was held that the assessee is predominantly been engaged in the activities of promotion of cricket. It has also been held that the Assessing officer is swayed by the figures and volume of receipts from one-day international cricket matches and subsidies received from BCCI in form of TV subsidy and other subsidy from cricket tournaments, however such receipts are intermittent and not regular and depend upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intention to carry on business and relying on the decisions of Hon ble Supreme Court in case of Commissioner of sales tax vs Sai Publication Fund (supra), Hon ble Rajasthan High Court decision in case of CIT vs Jodhpur Development Authority (supra), Hon ble Madras High Court in case of Tamil Naidu Cricket Association vs DIT(E) (supra), H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose exemption as a charitable trust. No doubt, it would be impossible for persons in charge of a trust or institution to so carry out activity that the expenditure balances the income and there is no resulting profit. But certainly, if the consideration is charged at market rate, than it can not be said that there is an element of charity. % of profit involved in the charging for the services is major factor which will decide whether the same is tainted with commerciality or charity. In the context of sports, promoting cricket would be a charitable activity if it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of RCI. Perusal of the relevant details clearly shows that the activities fall in the definition of 'Business'. The facts of A.Y. 2008-09 are indicative of the intention of the RCA that RCA is engaged in minting money in variety of ways. Annual Accounts for the F.Y. 2007-08 for income under following heads:- India V/s Pakistan (One day international) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games. 34. Thereafter taken into consideration the decision of the Hon ble Supreme Court in the case of ACIT Vs Surat City Gymkhana (2008) 14 SCC 169, CIT-1, Jodhpur Vs Jodhpur Development Authority (2016) 287 CRT 473 (Raj),Tamil Nadu Cricket Association Vs DIT (2013) 86 CCH 212, DIT(E) Vs The Chembur Gymkhana (2012) 345 ITR 86 and DIT(E) Vs Khan Gymkhana (2016) 385 ITR 162 (Bom) has decided the matter in favour of the assessee and against the department and the findings and the directions of the Hon ble Rajasthan High Court are contained at para 8 to 12 of its order which read as under: 8. We have heard counsel for the parties. 9. In our considered opinion, the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 and D.B. Income Tax appeal No. 257/2017. In the aforesaid order, the Hon ble High Court has held that it will be open for the Department to take appropriate action in respect of expenses and income which are not in accordance with approved by-laws. In other words, where the activities are not conducted in accordance with the approved by-laws, the Department is at liberty to take action as per law. In the instant case, we find that there is no finding recorded by the Assessing officer that the activities and operations of the assessee society are not in accordance with its approved objects and by-laws. Further, nothing has been brought to our notice by the ld CIT D/R during the course of hearing that any of the activities of the assessee society are not in accordance with its objects and bye-laws. Therefore, the said decision of the Hon ble Rajasthan High Court will apply with equal force for the impugned assessment year, being the decision of the Jurisdictional High Court in assessee s own case where the facts and circumstances of the case are identical. Further, it is a well settled legal proposition, as has been laid down by the Courts from time to time and which has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n activities and thus, not charitable in nature. On this ground alone, where there are no changes in the facts and circumstances of the case, following the rule of consistency as upheld by the Courts from time to time and more so in view of the fact that the matter is covered by the decision of the Hon ble Jurisdictional High Court, we are of the considered view that there is no basis to interfere with the consistent position which has been accepted in the earlier years that is, to hold that the predominant object of the assessee society is promotion of sport of cricket and all its activities are guided towards achieving the said objectives and thus, the proviso to section 2(15) doesn t apply in the instant case. 36. We also refer to the decision of the Hon ble Gujarat High Court in case of DIT (Exemptions) vs Gujarat Cricket Association (supra) and the relevant findings read as under: 35. It appears from the line of reasoning adopted by the Assessing Officer and the CIT(A) that both are absolutely mesmerized or rather hypnotized by the word BCCI The corpus with the BCCI may be huge and the BCCI may be indulging in commercial transactions like TV rights, IPL matches etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on hand, the ultimate beneficiary is either the cricketer or the game of cricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on the charitable basis as far as real beneficiary is concerned. Whenever the revenue is earned, the same is not on commercial lines and the same could be said to be earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not in full. 136. It is important to note that prior to the introduction of the Proviso to section 2(15) of the Act, the assessee-Association was granted registration under section 12A of the Act. From this, it is clear that prior to the introduction of the Proviso to section 2(15) of the Act, the authority, upon due consideration of all the relevant aspects, arrived at the satisfaction that the assessee-Association was established for charitable purposes... The Association continues to be recognised as a charitable institution. The certificate issued under section 12A, after due inquiry, is still in force. If the Proviso had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that merely because the Association puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit but the object is to promote the game of cricket and nurture the best of the talent. 148. Carrying on an 'activity in the nature of trade, commerce, or business' or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activities should be seen as to whether it is aimed at carrying on some business, trade or commerce or the furtherance of the object for which it was set up. If it falls in the first category, then, the case would be covered within the proviso to section 2(15) and, in the otherwise scenario, the assessee will be construed to have carried on its activities of general public utility. (see Society of Indian Automobile Manufactures v. ITO [2016] 71 taxmann.com 138/159 ITD 659 (Delhi - Trib.) 163.We sum up our final conclusions as under; In carrying on the charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if the assessee existed for profit. The word profit means that the owners of the entity have a right to withdraw the surplus for any purpose including the personal purpose. It is not in dispute that the three Associations have not distributed any profits outside the organization. The profits, if any, are ploughed back into the very activities of promotion and development of the sport of cricket and, therefore, the assessees cannot be termed to be carrying out commercial activities in the nature of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k into the activities of promotion and development of sport of cricket, the assessee cannot be termed to be carrying out commercial activities in the nature of trade, commerce or business. Further, making a distinction between the state cricket associations and the BCCI, it has been held that these are separate and distinct organizations and taxable entities in their individual capacity and merely on account of the fact that a state cricket association is a member body of BCCI, it cannot be held liable for activities of BCCI and what is only relevant is objects and activities of the state cricket association and not that of BCCI while deciding its taxability. It has been held that the activities of BCCI in form of exhibition of sports and earning profit out of it may be commercial in nature, however, the fact that the BCCI distributes and the state cricket association receive ashare of such receipts, the activities of BCCI cannot be construed as activities of the state cricket association. Further, it has also been held that where any state cricket association hosts any international matches at the behest of BCCI, the income from sale of tickets would not portray the character of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational and IPL matches are incidental and ancillary to its predominant object of the promotion of sport of cricket and cannot be construed as commercial in character attracting the proviso to section 2(15). Further, other receipts in form of IPL subvention, TV subsidy from BCCI and other receipts etc are dependent upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intent to carry on business and thus, doesn t attract the proviso to section 2(15) of the Act. Lastly, the assessee society generating surplus from these receipts after meeting its expenditure on year to year basis is not reflective of its intent and existence for profit. It is not the case of the Revenue that such surplus are distributed by the assessee society to its members rather the admitted facts are that such surplus is ploughed back by the assessee society for building the necessary infrastructure and conduct of other capacity building activities for the promotion of the sport of cricket in the state of Rajasthan. Similar issue has been examined at length by the Coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration of Hon'ble Supreme Court . The Revenue therein has argued that the legislature and the language employed in the statute doesn't contemplate making of large profits and if an educational institution, in fact, makes large profits, then even though it may plough such profits back into the purchase of assets for education, yet such institution cannot be said to be existing solely for educational purposes and it would really be for profit. The Hon'ble Supreme Court negated the said line of arguments put forward by Revenue and referred to its earlier decisions rendered in case of Addl. CIT v. Surat Art Silk Cloth Mfg. [1978] 121 ITR 1/[1979] 2 Taxman 501 (SC), Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310/90 Taxman 528 (SC) and American Hotel lodging Assn. Educational Institute v. CBDT [2008] 301 ITR 86/170 Taxman 306 (SC) and laid down the following principles in law as set out in paragraph 11 of its decision which reads as under: '11. the law common to section 10(23C)(iiiad) and (vi) may be summed up as follows: Where an educational institution carries on the activity of education primarily for educating persons, the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [see5 Judges constitution Bench Judgment in the case of Surat Art Silk Cloth Manufactures association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act . The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. The cases where exemption has been granted earlier and the assessment are complete with the finding that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act, 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the statusquo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 taxmann.com 287, in context of section 10(23C)(iiiab), referred to principles laid down in Queen's education society (supra) and stated that one further test as laid down in Surat Art Silk Cloth Manufacturer's Association (supra) and culled out in American Hotel Lodging Association Educational Institute (supra) may be added which is as follows: In order to ascertain whether the institute is carried on with the object of making profit or not it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established . In the said decision, it further states that the above principle has been specifically reiterated in paragraph 19 of the decision in Queen's Educational Society (supra) in the following terms: The final conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall out of Section 10(23C) is to ignore the language of the section and to ignore the tests laid down in Surat Art Silk Cloth case (CIT v. Surat Art Silk Cloth Manufacturer's Association [1980] 2 SCC 31) Aditanar case (Adi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... body of the University and has helped set up the University and its infrastructure. Here, it would be relevant to note the surplus that has been generated by the assessee society over the years starting AYs 1999-00 to 2011-12 and to what extent the same has been utilised over the years: Assessment Year Surplus as per Audited balance sheet (Rs.) Application of Funds in Fixed Assets as per Audited balance sheet (Rs.) 1999-00 1,62,46,018.00 1,50,20,208.00 2000-01 2,36,72,347.34 1,30,51,311.00 2001-02 2,84,80,341.36 2,40,39,164.00 2002-03 2,53,17,807.95 5,14,73,987.00 2003-04 2,83,71,052.55 9,65,26,288.00 2004-05 2,80,82,530.20 7,27,88,255.00 2005-06 4,18,59,223.00 4,75,03,260.00 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes unless the accumulation is contrary to the manner prescribed under law. 22. A perusal of the above clarification issued by CBDT clearly shows that while examining that an educational institute exists solely for educational purpose or for the purpose of the profit, mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established. In our view, the view of the CBDT is in consonance with the express wordings provided and intended by the legislature in 10(23C)(vi) and in conformity with the law laid down by the Hon'ble Supreme Court in case of Queens Education Society where it is provided that where the surplus is ploughed back for education purposes, the educational institution exists solely for educational purposes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, will be applicable to other appeal i.e. ITA No. 68/JP/2022. The grounds raised by the revenue in ITA no. 67/JP/2022 are as under :- 1. On the facts and the circumstances of the case and in law the Ld. CIT (Appeals) has erred in allowing exemption u/s 11 of the I. T. Act, 1961 to the assessee despite the fact that the proviso of section 2 (15) is invoked in the case of assessee as the activities of the assessee are being run on commercial basis, there being no element of charity . 2. On the facts and circumstances of the case and in law, the Id. CIT (A) has erred in allowing the expense towards grand to District Cricket Association (DCA) of Rs. 2,85,03,980/- without appreciation of the fact that the activities of the assessee society cannot be treated as charitable activity and accordingly provisions of section 11 and 12 of the Income Tax Act were not applicable in the assessee scase . 3. On the facts and circumstances of the case the assessee has erred in adopting the accrual and not the payment system of accounting as the Trust/AOP/Society Institution exempted under the Income Tax Act is not employed to adopt Accrual system of Accounting. 4. Any other question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) had held the matter against the appellant and appeal was filed before the Hon ble ITAT, Jaipur in ITA no. 284/JP/2020 wherein vide order dated 25.11.2020 has decided the issue in favour of the appellant. The gist of the decision has already been extracted in the reply of the appellant reproduced in the preceding para. In view of the similar facts involved in the current year and respectfully following the decision of the Hon ble ITAT in favour of the appellant, the issue is decided in favour of the appellant and the Ground No. 3 is allowed. Therefore, the ld. A/R prayed that the expenditure incurred by way of grants to various district cricket association may be allowed to the assessee. 12. On the other hand, the Ld. D/R. submitted that this issue is covered in favor of the assessee by the decision of Coordinate Bench of the Tribunal in ITA no. 284/JP/2020. 13. We have heard the rival contentions and perused the material available on record. At the outset, we find that the matter under consideration is squarely covered by the decision of Coordinate Bench of the ITAT Jaipur in the assessee s own case in ITA No. 1355, 1356/JP/2018 and ITA No. 284/JP/2020 dated 25.11.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem of accounting. 14. The brief facts of the case are that during the course of scrutiny assessment proceedings, the AO noticed that in the Balance Sheet the assessee has shown provision for expenses of Rs. 2,30,26,342/-. As per the AO, the provisions are not allowable and thus the assessee was required to furnish the details of the provisions made as well as justification for the claim. The AO held that for claiming any expenditure it should have been incurred and provisions are not the expenditure incurred. It is an estimate for the expenses to be incurred in subsequent period. In absence of details furnished by the assessee, the AO disallowed the provision for expenses of Rs. 2,30,26,342/- and added to the total income of the assessee. Aggrieved by the order, the assessee preferred appeal before the ld. CIT (A). The assessee furnished the written submissions dated 14.01.2021 before the ld. CIT (A) explaining the provision of expenses. The ld. CIT (Appeals) considering the submissions of the assessee, allowed the claim of the assessee by observing in para 10.3.1 as under :- 10.3.1. The issue is disallowance of provision of expenses of Rs. 2,30,26,342/- on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regarding the provision of expenses, it is noted that the same is provided and adjusted from year to year and the amount shown in the Balance Sheet is the closing balance at the end of the year. Regarding the separate claim, if any, the ld. CIT (A) has already given opportunity to the AO in this matter. Accordingly, the Ground no. 3 of revenue is dismissed. Ground no. 4 is general in nature and needs no separate adjudication. 18. In the result, appeal of the Department is dismissed. ITA No. 68/JP/2022 20. All the grounds taken by revenue in this appeal are exactly similar to grounds taken in ITA No. 67/JP/2022, except figures, supra. As stated herein above in para 9, and agreed by both the parties, since all the grounds taken in this appeal are covered by our decision arrived at in ITA No. 67/JP/2022, shall apply mutatis mutandis to this appeal also. Therefore, considering the similar facts and circumstances of the case and following our decision in ITA No. 67/JP/2022, we allow the claims of the assessee and dismissed the appeal of the revenue. 21. In the result, all the appeals of the Revenue are dismissed. Order pronounced in the open Court on 21/06/2022. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
