Charitable trust promoting sports qualifies for tax exemption under Section 11

The Tribunal held that the assessee, a charitable trust promoting swimming and providing sports facilities to the general public, was eligible for exemption under Section 11 of the Income-tax Act. The Tribunal emphasized that the trust's activities were charitable in nature, and collecting charges did not change its character. The order of the lower authorities denying the exemption was set aside, and the assessee's appeal was allowed on 30/07/2018.

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Issues Involved:
1. Applicability of the proviso to Section 2(15) of the Income-tax Act.
2. Eligibility for exemption under Section 11 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Applicability of the proviso to Section 2(15) of the Income-tax Act:

The primary grievance of the assessee was the confirmation by the CIT(A) of the AO's decision that the proviso to Section 2(15) of the Income-tax Act was applicable, thereby declining the benefit of exemption under Section 11. The Tribunal noted that in the assessee’s own case for A.Y. 2009-10, under similar facts and circumstances, the issue was decided in favor of the assessee. The Tribunal observed that providing sports facilities to the general public without restriction to any caste, creed, religion, or profession squarely falls within the definition of "charitable purpose" as defined under Section 2(15) of the Income-tax Act, 1961. Consequently, the assessee was deemed eligible for exemption under Section 11.

The Tribunal further noted that the assessee had deficits from its core activity of promoting swimming for all the years and that the collections from its members were less than the amount spent for its objectives. The income from investments was the only source covering these deficits. Therefore, the Tribunal concluded that there was no merit in the AO's finding that the assessee was carrying out its activities on commercial lines with an intention to earn profit.

2. Eligibility for exemption under Section 11 of the Income-tax Act:

The Tribunal examined the case laws relied upon by the assessee, such as the ITAT, Mumbai Bench's decision in the case of Chembur Gymkhana. It was held that for invoking the First Proviso to section 2(15), it is necessary for the AO to provide a factual finding that the assessee derived income by engaging in trade, business, or commercial activity. The Tribunal emphasized that the assessee was registered as a charitable trust under section 12A and that the objects of the trust were for charitable purposes. The AO had not pointed out any change in the object of the assessee trust.

The Tribunal also referred to the decision in the case of Dahisar Sports Foundation vs ITO, where it was held that the main object of the trust was the promotion of sports and games. The collection of certain charges from coaching camps meant for the promotion of sports and games did not alter its character of being charitable. The Tribunal reiterated that the object or purpose of the trust was charitable and that collecting charges did not change this character.

Additionally, the Tribunal cited the Hon'ble Bombay High Court's decision in the case of DIT vs Goregaon Sports Club, which held that providing sports facilities to the general public without restriction to any caste, creed, religion, or profession is eligible for exemption under Section 11 of the Income-tax Act, 1961.

Conclusion:

The Tribunal concluded that the facts and circumstances during the year under consideration were the same as in the earlier years. Respectfully following the order of the Tribunal in the assessee’s own case, it was held that there was no merit in the decline of exemption under Section 11. Accordingly, the order of the lower authorities was set aside, and the assessee was allowed exemption under Section 11. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 30/07/2018.

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