TaxTMI 
TaxTMI 
2017 (11) TMI 560
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....t 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 in the nature of trade, business and commerce specifically when the assessee has given these parties the sole and exclusive rights to sponsor the match and also the right to reassign the complete team sponsorship rights." 3. The brief facts of the case is that assessee is a sports Federation who filed its return of income on 07/09/2011 declaring nil income. Along with the audit report in form No. 10 B. And also balance sheet income expenditure account etc. The assessee is recognised as a charitable trust under section 12 A of the income tax act, 1961 and is also recognised under section 80 G (5)(vi) of the act. Its main object are to promote and maintain high standard of the game of the basketball all over the country. During the course of assessment proceedings it was noted by the Ld. AO that assessee is in receipt of sponsorship income from Asia Tanj....
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....us 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. The submissions of the ld. Counsel for the assessee are reproduced as under: 'Brief facts of the case are that assessee is an association registered under Rajasthan Sports (Registration, Recognition and regulation of Association) Act, 2005 and formed with the objective of promoting the sport of Cricket within the State of Rajasthan. RCA, under a Memorandum of Understanding with Rajasthan State Council has exclusive use and possession of Sawai Mansingh Stadium for the purposes of organizing national and international cricket matches. The main object of the association is to control, supervise, regulate or encourage, promote and develop the game of cricket in the areas under the jurisdiction of Association on no profit no loss basis. Assessee was holding registration u/s 12A w.e.f. 25.11.1988 and thus was claiming exemption u/s ....
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....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 of being heard by the ld. CIT. The assessee trust made it clear that this amendment in object of memorandum in 2005 was due to change made in the Rajasthan Sports (registration, Recognition and Regulation of Association) Act, 2005. The amended objects were not voluntary change. The assessee has to follow the said laws related to sports activities. The comparison given by the ld. CIT in his order dated 28.03.2013 does not show any fundamental deviation from the original charitable activities to non-charitable activities. The assessee's object to promote the cricket in State by providing / involving various activities at the district level to state level through coaching provided by coaches, ground and facilities etc. Therefore, the assessee's activities are charitable. The other activities are inciden....
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....alt 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 13. In the instant case, so far as registration u/s 12A is concerned, the same is restored by Hon'ble ITAT, thus assessee can claim exemption u/s 11 subject to the fulfilment of conditions prescribed u/s 11 r.w.s.13. 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. A summary of provisions of section 11 is as under: (i) If income is "applied" to charitable/ religious purposes in India (11(1)(a) &11(1)(b): to the extent it is actually applied to such purposes during the financial year. Even courts have held that if the expenditure is on capital account on object(s) contained in the object clause, the expenditure will am....
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.... 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 assessment year 2009-10 onwards), section 2(15) has been amended to the extent that, the "advancement of any other object of general public utility" shall not qualify as a "charitable purpose" if the same involves the carrying on of any activity in the nature of trade, commerce or business, or rendering of any service in relation to any trade, commerce or business, for a consideration. Now coming to the merits of the case, at the outset, brief background of assessee association is submitted as under: Rajasthan Cricket Association (RCA) is duly registered under the provision of Rajasthan Sports (Registration, Recognition and Regulation of Associat....
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....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 whether the same result into profit or loss. Further, all the cricket matches do not attract audience, e.g. matches between India v. South Africa and India v. New-Zealand could not even reach upto 70-80% of the collection. However, during the year under consideration, assessee organized ODI match between India v. Pakistan from which substantial surplus was earned. Your honours would appreciate the popularity of India Pakistan matches. Hon'ble Madras High Court in the case of TamilNadu Cricket Association has held that volume should not be the sole consideration to decide the activity of the society rather the nature of activity vis-a....
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....ties 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 adversely. It is also to be noted that RCA is run by a Committee, which consists of members from different walks of the Society and such members are not professional managers or businessmen. Agreement with the players is only to control and monitor their activities to bring the same in accordance with the objects. RCA is providing technical and financial support to the all DCAs (District Cricket Association) i.e. providing Equipments, nets, balls, etc. without any consideration on other side RCA is getting only affiliation fee from them which is very nominal (Rs. 200/- only). It is pe....
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....s, 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 interpreting and applying the first proviso to Section 2(15) of the Act. The relevant extract of the said judgment is as under:- "Section 2(15) defines the term "charitable purpose". Therefore, while construing the term "business" for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term "business" is intended for the purpose of interpreting and applying the first proviso to section 2(15) of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, ....
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....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 proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as under: " "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "chari....
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....ess. 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 registration u/s 12A was granted to the assessee. A number of assessment orders u/s 143(3) were passed, wherein the assessee was held as eligible for exemption u/s 11/12 of the Act. Hence this fact of the assessee being a charitable institution is not in dispute. 10.8. The core activity of the assessee is undisputedly, charitable in nature. Hence it is not the case of the Revenue that the assessee is carrying on "trade, commerce or business" under the garb of the activity being "general public utility. As regards the various receipts of the assessee, we find tha....
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....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 and the resultant activity would be determined in the other persons hands. However, that by itself, should not have any bearing at all on the nature of the transaction, as well as resultant activity in the hands of assessee. To carry out a transaction in an organized manner and to ensure that the transaction would help the assessee in achieving its charitable object, it is imperative that the terms and conditions of the transactions are clearly defined, to avoid any confusion or chaos. It will be further good, if these terms....
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....ly, 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 necessary activity as is in every organization. This cannot be termed as business activity. It is part and parcel of the charitable activity and the receipt in question cannot be termed as exempt from activity which is in the nature of "trade, commerce or business". 11.6. On advertising and contractual receipts the same explanation as was given by the assessee, as in the case of sponsorship money. Consistent with the view expressed by us, when we were dealing with sponsorship money, we hold that these c....
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..... 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 assessee is promoting cricket on charitable basis as far as real beneficiary is concerned. 6. Whenever the revenue is earned these are not earned on commercial lines and these are earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not fully. 7. The assessee has not entered any transaction with any person on profit motive. The other person may be an entrepreneur or may be doing business but the assessee has entered the transaction only for the sole....
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....bution 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 advancement of any other object of general public utility" as contained in section 2(15). The receipt of fees from the sponsorship rights and telecasting rights do not amount to carrying out of any activity in the nature of trade, commerce or business but is incidental to carrying on of the main objective of the Respondent assessee. It was further observed that no part of its surplus could be distributed to the board of its members in the form of dividend or profit....