TaxTMI 
TaxTMI 
2019 (11) TMI 35
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..... In the tax appeals captioned above, the respondentassessee are the three Cricket Associations, namely, (I) Gujarat Cricket Association (ii) Baroda Cricket Association and (iii) Saurashtra Cricket Association. 3. In the following tax appeals, the respondent-assessee is the Gujarat Cricket Association; "(i) Tax Appeal No.268 of 2012; (ii) Tax Appeal No.317 of 2019; (iii) Tax Appeal No.318 of 2019; (iv) Tax Appeal No.319 of 2019; (v) Tax Appeal No.375 of 2019; (vi) Tax Appeal No.333 of 2019; (vii) Tax Appeal No.334 of 2019; (viii) Tax Appeal No.335 of 2019; (ix) Tax Appeal No.336 of 2019; (x) Tax Appeal No.337 of 2019; (xi) Tax Appeal No.338 of 2019; (xii) Tax Appeal No.339 of 2019; (xiii) Tax Appeal No.340 of 2019;" 4. In the following tax appeals, the respondent-assessee is the Baroda Cricket Association. "(i) Tax Appeal No.320 of 2019 (ii) Tax Appeal No.321 of 2019 (iii) Tax Appeal No.374 of 2019 (iv) Tax Appeal No.675 of 2019 5. In the following tax appeals, the respondent-assessee is the Saurashtra Cricket Association; "(I) Tax Appeal No.152 of 2019; (I) Tax Appeal No.358 of 2019; (II) Tax Appeal No.359 of 2019; (III) Tax Appeal No.3....
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....ions in the order passed by the Director of Income Tax (Exemption), Ahmedabad are quoted herein below; "The legislature in its wisdom has introduced section 12AA of the I.T. Act, 1961 by the Finance Act No.2, 1996 w.e.f 1.4.1997 i.e. A.Y.1997-98 onwards which requires the Commissioner to be satisfied with the objects of the Trust and the genuineness of its activities. As a logical corollary of the provisions of Section 12AA of the Act, the Commissioner has to examine the objects of the Trust by their reference to the definition of "charitable purpose" along with the newly inserted proviso to charitable purpose in Section 2(15) of the Act w.e.f 1.4.2009. In fact there is a mutual, symbiotic relationship between the two provisions, namely section 2(15) and section 12AA of the I.T. Act, 1961. The definition of "charitable purpose" in section 2(15) of the Act is the engine which drives the machinery of the provisions of Section 12AA of the Act. Thus it is clear that even as per pre-amended section 2(15) of the I.T. Act, the GCA is not entitled for registration u/s 12A of the I.T. Act as per ratio of judgments of Hon. Courts as discussed above. When this is the position even as per ....
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....ital expenditure of Rs. 11,37,64,313/~, Rs. 6,63,80,215.80 and Rs. 1,99,23,701/ in F.Y. 2006-07, 2007-08 and 2008-09 respectively. It is reiterated that this capital expenditure cannot be considered as charitable expenditure for promotion of sports as It is simply an act of business organization to enhance its Infrastructure and income earning apparatus. Thus the expenditure on promotion of sports as percentage .of total receipts has further declined further in F.Y.2008-09. If GCA was really a charitable organization, it should have acted as such and instead of earning huge income, it should have ensured as under: (a) There should have been no ticket for watching cricket matches so that more and more youth, students and common man are able to watch these matches. Instead there are costly tickets for general public for watching these important Cricket Matches and true to its character as an out and out commercial organisation. (b) GCA should have allowed the free use of its Cricket ground for conducting tournaments and also popularizing the game of Cricket in the state of Gujarat for the common man. viii) It is further seen from the Auditor's Report for F.Y. 2006-07 dated 20/8....
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....tration granted earlier vide this Office Order dated 16.4.2003 is cancelled w.e.f 16.4.2003 i.e. A.Y.2004-05 onwards." 8.5 The assessee, being dissatisfied with the order passed by the Director of Income Tax (Exemption), cancelling the registration, preferred an appeal before the Income Tax Appellate Tribunal, 'A' Bench, Ahmedabad. The ITAT allowed the appeal preferred by the GCA. While allowing the appeal, the ITAT observed as under; "We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal decision cited by the Ld. A.R. In the present case, the registration of the assessee was cancelled by the DIT(E) on this basis that the main source of income of the assessee is derived form sponsorship, bank interest, annual subscription, income from ICC matches, income from trophy/tournament matches, scrap sale, rental income and sale of tickets. It is observed by him that none of these sources of income has any nexus with the education of the cricketers. He also observed that in fact, the assessee has been engaged itself in transaction of commercial nature. He also observed that the assessee has ....
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....) so as to cancel the registration already granted to the assessee under section 12A of the Act. In our considered opinion registration already granted to the assessee could not have been re-visited by the Commissioner on the basis of the reasoning aforesaid, since his power to cancel registration under section 12AA(3) was confined to the examination as to whether the activities of the assessee society/association are genuine or that the same are not being carried out in accordance with the stated objects. In the light of the discussion emerging form the order of the Commissioner in our considered opinion, action taken by the Commissioner does not fall within the parameters of section 12AA(3) of the Act and, therefore, the impugned order is bad in law. 9. At this stage, we may hasten to add that we are not commenting on the merits of the issue as to whether the activities of the assessee fall within the meaning of expression charitable purpose as per section 2(15) as amended with effect from 1.4.2009. The only point decided in the appeal is to the effect that it was not within the scope and ambit of section 12AA(3) for the Commissioner to have examined the applicability of the am....
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....hatt, in view of the amendment under Section 2(15) of the Act, the DIT (Exemption) was justified in taking the view that the activities of the GCA cannot be termed as charitable and such activities were commercial in nature with the element of earning profit from the income of sale of tickets, income from the ICC, income from hosting the international cricket matches etc. Mr. Bhatt would submit that the DIT (Exemption) was justified in taking the view that though the BCCI confirmed the payment to the assessee as grant of subsidy, the same was not in the nature of grant. Mr. Bhatt would submit that most of the advertisements through TV telecasting are received by the BCCI, it being the apex body,thus the so-called subsidy given by the BCCI is nothing but some sort of sharing of the advertisement income on account of holding of international test matches and one-day international matches, due to which, the BCCI has amassed huge advertisement income. Mr. Bhatt would submit that the nature of receipt, even though called subsidy by the assessee, was necessarily in the nature of income received by the activity of the assessee. 10. Referring to Section 12AA(3) read with Section 2(15) of ....
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....n law only under the following circumstances; (I) On the Commissioner recording his satisfaction that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or institution,; thus unless and until the show cause notice issued contained the grounds and materials as prescribed under Section 12AA(3) of the Act, the question of cancellation of registration, per se, does not arise. 14. Mr. Shah, thereafter, took us through the Circular No.11 of 2008 issued by the Central Board of Direct Taxes dated 19th December, 2008. The circular was issued in the wake of the insertion of the Proviso to Section 2(15) of the Act, 1961. Mr. Shah would submit that from the reading of the circular, it is evident that the question of rejection of registration under Section 12AA(3) of the Act would arise only in those cases where an entity uses this status of charitable institution 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 then trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Mr. Shah would submit that ....
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....t inserted by Finance Act, 2010, with effect from 01.06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:- "Provision inserted under Finance Act, 2004: Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." 20. After the amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows: "Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissione....
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....f. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of the first proviso to Section 2(15) of the Act was only to curtail the institution, which under the garb of 'general public utility', carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act. 24. The sum and substance of the submissions canvassed by Mr. J.P. Shah, the learned senior counsel appearing for the assessee, may be summed up thus; (I) The Gujarat Cricket Association is an affiliated member of the BCCI which controls and regulates all the cricket activities in India. (ii) The only source of income for the Gujarat Cricket Association is the receipt of some amount from the BCCI....
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....been cancelled on an erroneous ground that the activities of the assessee are commercial in nature. For invoking Section 12AA read with Section 2(15) of the Act, the Revenue has to show that the activities are not in accordance with the objects of the Association. 30. For achieving its main charitable object, if an institution carries on some commercial activity and there is profit, it cannot be considered to be a business activity, with profit motive, so long as, the profit earned is utilized for the purpose of achieving the main charitable object. 31. The sum and substance of the submissions canvassed on behalf of the Revenue may be summed up thus; (i) It is only logical to hold that the activities of the assessee are no longer falling within the definition of charitable purposes after the amendment of Section 2(15) of the Act w.e.f 1st January, 2019. (ii) The assessee, in the name of general public utility, is engaged in business. (iii) Once the activities ceases to qualify as charitable, the same cannot be said to be genuine for the purpose of charity. (iv) Instead of promoting and developing the game of cricket, the assessee could be said to be promoting and developi....
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....se' to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The phrase "not involving the carrying on of any activity for profit" was omitted from the Section by the Finance Act 1983, with effect from 01.04.1984, consequent on the amendment to Section 11, where under profits and gains of business in the case of charitable or religious trust and institutions would not be entitled to exemption under that Section, except in cases where the business fulfilled the conditions under Section 11 (4). The Section was once again amended by substitution in the year 2008 under the Finance Act, 2008, with effect from 01.04.2009, streamlining the definition of 'charitable purpose', considering the fact that taking advantage of the phrase 'advancement of any other object of general public utility', number of entities operating on commercial lines claimed exemption on their income either under Section 20(23c) or under Section 11 of the Act. Thus, to limit the scope of this expression, Section was amended in the year 2008 that the advancement of any other ....
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....r business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." 27. Thus, the anxiety of the Parliament in introducing the proviso to Section 2(15) of the Act is only to check those institution, which attempt to gain exemption under the cloak of a trust. 28. Section 11 of the Act states that income from property held for religious or charitable purposes shall not be included in the total income of the previous year. Section 12 deals with income of trusts or institutions from contributions. Section 12A deals with making application for registration of the trust/association so that the said institution will have the benefit of exemption under Section 11 and 12 of the Act. 29. Section 12AA of the Act prescribes procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or informatio....
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....ation requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be. 33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circ....
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....cordance with the objects of the trust or institution, as the case may be, was vested with the power to pass an order in writing cancelling the registration of such trust or institution. By the Finance Act of 2010, subsection (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996). As a result of the amendment, a regulatory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996. ........... power under Section 12AA(3) can be exercised by the Commissioner in respect of a trust registered prior to 1 June 2010. The mere fact that a part of the requisites for the action under Section 12AA (3) is drawn from a time prior to its passing namely registration as a charitable trust under Section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions." 36. A....
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....t pointed out that the act of granting registration under Section 12AA(1) itself is a result of a satisfaction recorded by the Commissioner as regards the genuineness of the objects of the trust as well as the activities of the trust and once a satisfaction is arrived at by the Commissioner, the cancellation could only be in terms of Section 12AA(3) of the Income Tax Act, 1961. 39. This Court pointed out that the cancellation made in the case of assessee therein was not on the ground that the activities were not genuine, but the activities of the trust in publication and sale and spread of Sarvodaya Literature and Gandhian Ideologies was not the objects of the trust. This Court pointed out that the cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust; when the trust was registered with definite objects, carrying on such activities would be in terms of the objects for which registration was granted. 40. Referring to Section 12AA of the Income Tax Act, 1961, this Court has held as under:- " 9. Under section 12AA, the Commissioner is empowered to grant or ref....
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....ppearing for the Revenue placed heavy reliance on the proviso to Section 12AA(3) of the Act and submitted that when the assessee has income received from conduct of the matches, which are commercial in nature, as had been found by the Income Tax Appellate Tribunal, the objects of the trust ceased to be charitable. He submitted that going by the definition of Section 2(15) of the Act, rightly, the Commissioner assumed jurisdiction under Section 12AA(3) of the Act to cancel the registration. He further pointed out that for the finding to be recorded that the activities of the trust are not genuine, one must necessarily look into the objects of the association; if the objects of the association reveal commercial nature in the conduct of matches, the association cannot be one for charitable purpose as defined under Section 2(15) of the Act. Thus, there could be no inhibition for the Commissioner to assume jurisdiction to issue show cause notice calling upon the assessee to state whether the association is genuine or not. He further submitted that on looking at the activities of the association, the Commissioner had rightly come to the conclusion that the assessee's registration was....
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....gh Court held that to serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province; it is required to be noted that if a section of the public alone are given the benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public; it is not necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression "object of general public utility", however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utility; the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature. 46. The above said decision (2000) 246 ITR 188 - Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, the Revenue has not gone on appeal ....
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.... the appeal filed by the assessee on the rejection of the application for registration, this Court observed that it was open for the assessee Society to renew its application as and when it expanded the objects of the Society and were approved by the competent Court. The rejection order passed by the Revenue was on the ground that the objects of the trust were not charitable in character. This decision also has no relevance to the case on hand. 50. As already noted in the preceding paragraphs, considering the provision under Section 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances under Section 12AA(3) of the Act and in the background of the definition relevant to the particular year of registration. As rightly pointed out by the assessee, Revenue does not allege anything against the genuineness of the objects of the assessee or its activities. It rests its order only on the ground of the assessee receiving income from holding of matches which according to the assessee were not held by it. Thus, as regards the question as to whether the particular income qualified under Section 11 of the Act or not is not the s....
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....I worked out to 8.5% of the total receipts. It further held that 78% of the total receipt came out of advertisement revenue. 53. The Income Tax Appellate Tribunal pointed out that the physical aspect of the game was one in accordance with the objects of the assessee and the activities are genuine. However, the matches held were not in advancement of any specific object of general public utility. The pattern of receipt is commercial in character and the matches conducted are not in accordance with the objects of the Association. Thus, it rejected the assessee's case and held that both the conditions under Section 12AA(3) of the Act stood attracted. 54. 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 receipt 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 conditio....
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....e commercial character to the activity of the Association. In the circumstances, 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. 56. As regards the observation of the Income Tax Appellate Tribunal that IPL Matches and Celebrity Cricket Matches are also being held by the Association and hence it is an entertainment industry, we need not go into these aspects, for, the order of the Director of Income Tax (Exemptions) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the Assessing Officer to take note of all facts, while considering the same under Section 11 of the Income Tax Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above said circumstances, we set aside the order of the Income Tax Appellate Tribunal. " 33. The Delhi High Court, in the case of M/s. GST India vs. DIT, Delhi, reported in 360 ITR 138, held that: "Section 2(15) of the Income-tax Act, 1961, was amended by the Finance Act, 2008, with effect from April 1, 2009, and a proviso was added to it. A second proviso was inserted to section 2(15) by the Finance Act, 2010, with ret....
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.... pragmatic view is required to examine the data, which should be analysed objectively and a narrow and coloured view will be counter-productive and contrary to the language of section 2(15). The second proviso applies when business was/is conducted and the quantum of receipts exceeds the specified sum. The proviso does not seek to disqualify a charitable organization covered by the last limb, when a token fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which it is established and it undertakes." 34. The principles of law discernible from the aforesaid two decisions may be summed up thus:- (a) For the purpose of cancellation of the registration u/s 12AA(3), the Commissioner should record a satisfaction that the activities of the Trust or Institution are not genuine or that the activities are not being carried on in accordance with the objects of the Trust. In the absence of such a finding, the registration granted u/s 12A or u/s 12AA cannot be cancelled. Cancellation of registration of a charitable Trust, in a given case, is permissible, only under the circumstances stated u/s 12AA(3) of the Act. (b) For an asses....
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....ng and receiving nothing in return is outdated. (h) Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others, the mandatory features being, selflessness or illiberal spirit. (i) The quantum of fee charged, the economic status of the beneficiaries who pay, commercial values in comparison to the fee, purpose and object behind the fee etc. are several factors which decide the seminal question, is it business? (j) The Revenue cannot take a contradictory stand that, the assessee carries on charitable activity under the residuary head "general public utility", but, simultaneously record the said activity as business. (k) There is no statutory mandate that a charitable Institution falling under the residuary Clauses, should be wholly, substantially or in part be funded by voluntary contributions. (l) A pragmatic view is required to be taken while examining the data and the same should be analysed objectively. A narrow and coloured view may prove to be counter productive and contrary to S.2(15) of the Act. (m) Accumulation of money/funds over a period of two to three years may not be relevant in deter....
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.... eligible for the exemption under Sections 11 and 12 of the Act. It appears that it is only after the Proviso came to be inserted that, all of a sudden, the department now believes that the activity of the assessee is commercial in nature and no longer charitable. It is difficult for us to take the view that the assessee could be said to be carrying on "trade, commerce or business" under the garb of the activity being "general public utility". Merely because an activity is performed in an organized manner, that alone, will not make such activities as business/commercial activity. The profit motive is one essential ingredient which is apparently missing in the case on hand. In carrying out an activity, one may earn profit or one may incur loss. But for making it as a business activity, the presence of the profit motive is sine qua non. 38. In the case 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 co....
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....in the persuasive precedent relied upon. Mr. Bhatt seeks to rely upon the following observations of this Court, as contained in para- 27; "27. While the decision of any other High Court is entitled to our highest esteem and respect, the constitutional powers of the High Court in its writ jurisdiction cannot be reduced to simply matching the colours of the case at hand against the colours of many sample cases spread out upon its desk and accept the sample nearest in shade as the applicable rule. The system of law cannot be evolved by such mechanical process and no judge of a High Court worthy of his office, views the function of his place so narrowly. If that were all there was to our calling there will be little of intellectual interest about it. The choice of a path for us cannot be made so blind and unintelligent, to be followed without a survey of the route which has been travelled and of the place where it would lead. Necessarily therefore, reasons that are given in the decisions of other High Courts relied upon for the petitioners, which have great persuasive value as precedent are required to be considered and the consequences are to be noted and if it becomes impossible ....
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....ritable in nature. 43. In the result, this appeal fails and is hereby dismissed. The substantial question of law, as formulated by this Court, is answered in favour of the assessee and against the Revenue. Tax Appeal No.317 of 2019 44. We shall now take up the Tax Appeal No.317 of 2019. This tax appeal under Section 260A of the Income Tax Act, 1961 is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench 'D', Ahmedabad in the ITA No.1257/Ahd/2013 for the A.Y.2009-10. This tax appeal came to be admitted by this Court vide order dated 15th July, 2019 on the following substantial questions of law; "[A]. Whether, on the facts and in the circumstances of the case the Appellate Tribunal was justified in allowing the benefit of Sections 11 and 12 when the Assessing Officer has clearly brought on record that assessee is covered under the proviso to Section 2(15) r.w.s 13(8) of the Act? [B]. Whether, on the facts and in the circumstances of the case the Appellate Tribunal has erred in holding that the assessee is not covered under the proviso to section 2(15) when the Officer has clearly brought on recor....
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....d Associations like the assessee and preparation for conduct of such cricket matches, selection of players, coaches, venue, TV Broadcasting rights, Audio & Video Publicity, sale of tickets, issue of license for parking lots, sale of edibles and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary squarely fit in the definition of trade or services for profit as defined by the Apex Courts. Therefore, the Assessing Officer held that the activities carried out by the assessee were in the nature of advancement of any other object of general public utility. Accordingly, the Assessing Officer had invoked provisions of section 2(15) of the Act and thereby denying benefit of section 11(1)(a) or 11(1)(b) of the Act. 2) Being aggrieved, the assessee filed appeal before CIT(A). The CIT(A) had held that the assessee was not doing any charitable/educational activity by promoting game of cricket but it was in the business of entertainment of people at large by arranging/hosting national and international levels cricket tournaments and thereby received approximately 3 c....
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....I and the cricket is pursued in as commercial a manner as it can be pursued auction of players for playing matches and the format of the matches being improvised as per the requirements of commercial interests. It is submitted that cricket as it is pursued by the BCCI and its affiliates is pure entertainment, and these are the dictates of its entertainment value that decides the form and presentation of cricket. If it is a noble activity of education in a gentleman's sport, where is the need of auctioning of the players. The commerce is glaring in each facet of cricket today. It is also submitted that even imparting cricket coaching is a big business rather than a selfless education. What is being pursued by these associations is pure commercial exploitation of cricket and that is the reason that the profits of these associations needs to be brought to tax. The financial relationship between the assessees and the BCCI cannot be without quid pro quo between the BCCI and these cricket associations, or else why would anyone share such huge amounts with cricket associations. BCCI organizes the events on pure commercial lines, makes huge monies on organizing these events, and share the ....
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....y covered by the provisions of Section 2(15) read with the proviso 1 & 2 to the said section. [C] Disallowance of corpus donation. (1) During the assessment proceedings, the Assessing Officer observed that the assessee claimed to have been received amount of Rs. 20,69,60,338/being corpus from BCCI and sponsorship money of Rs. 20,00,000/ from Reliance Industries Ltd. The assessee was asked to submit documentary evidences to support its claim for corpus donation. The assessee failed to discharge its onus either by bringing anything on records or producing representative of BCCI as its witness in support of its claim of corpus donation that can be considered as corpus donation on instruction of BCCI. The auditor was also of the opinion that the amount of Rs. 20,69,60,338/ considered as corpus was not in consonance with provisions of law and facts of the case. The Assessing Officer held that the assessee had not complied with the requirements of section 11(1)(d) of the Act. Accordingly, the claim of corpus donation of Rs. 20,69,60,338/- of the assessee was rejected by the Assessing Officer. 2) Being aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) held that no w....
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....tertainment of the people at large for a fee of cess by arranging cricket tournament at various levels. Further, the DIT(E), Ahmedabad had passed speaking order considering all the relevant legal and actual position cancelling the registration u/s.12AA(3) of the Act on 06/12/2010 w.e.f. A.Y. 2004-05 onwards. On perusal of Income & Expenditure A/c., the assessee had received amount of Rs. 3,98,07,028/-. The Assessing Officer relied upon the decision of Hon. Supreme Court in the case of Sole Trustee Loka Shikshana Trust Vs CIT (1975) 101 ITR 234 (SC). The Assessing Officer held that the BCCI is the richest Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like the assessee and preparation for conduct of such cricket matches, selection of players, coaches, venue, TV Broadcasting rights, Audio & Video Publicity, sale of tickets, issue of license for parking lots, sale of edibles and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary squarely flt in the definition of tr....
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....e Act was granted on the premise that the assessee-Association is carrying on the charitable activities like promotion of sports. 47. The objects of the assessee-Association are as follows; "1. To control, supervise, regulate or encourage, promote and develop the game of cricket in the area under the jurisdiction of the Association. The Association can also undertake any other and all activities which may be beneficial to the Association. 2. To create, foster and maintain friendly and cordial relationship through sports tournaments and competitions connected therewith and to create a healthy spirit through the medium of sports in general and cricket in particular. 3. To instill the spirit of sportsmanship in students attending schools, colleges and members of other institutions and other citizens and to foster the spirit of sportsmanship and instill the ideal of cricket and educate them in the same. 4. To maintain a panel of approved Umpires who qualify themselves by passing the prescribed tests for purpose of officiating as such in the matches conducted by the Association. 5. To select teams to represent the Association in any tournaments, championship or fixture local ....
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....r conferences, seminars, talent events, symposiums connected with the game of cricket. 23. To invest moneys and funds of the Association in such a manner as may be decided upon by the Managing Committee of the Association capable of being conveniently carried on in connection with objects of the Association. 24. To carry on any other activity which may seem to the Association capable of being conveniently carried on in connection with objects of the Association. 25. To carry on any other activity for promoting the objects of the Association which are calculated directly or indirectly, to protect and/or to enhance the value of its properties or its rights and is conductive to the objects of the Association. 26. To acquire movable and immovable property and to apply both the capital and income thereof and the proceeds of the sale or mortgage thereof, for or towards, ail or any of the objects of the Board. 27. To start, assist, encourage or promote for training Cricketers and to provide for such amenities and facilities, usually provided in boarding schools. 28. To appoint Committee or Committees from time to time to organize matches for the achievement of the objects of t....
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....h circumstances, according to the Assessing Officer, the Association is not entitled to seek exemption under Section 11 of the Act. The Assessing Officer, in its order, has observed as under; "iv) The legal position as contained in the amended definition of 'Charitable Purpose' u/s 2(15) of the Act and explained vide Clause 4.3 of CBDT Circular No. 1 of 2009 dt. 27-05-2009 on I.T. Act 2008, Finance Minister's Speech, the Notes on Clauses, Memorandum Explaining the provisions of Finance Bill, CBDT circular No. 11 of 2008 dt. 19/12/2008, as well as the alternative submission of the assessee is considered but not found acceptable for the reasons stated below. (a) The assessee has claimed that it is an Educational Institute. The claim of the assessee is not acceptable in view 'Education' defined by H'ble Apex Court has in the case of Sole Trustee Loka Shikshana Trust Vs. Commissioner of Income Tax [1975] 101 ITR 234(SC) has defined 'Education' as under: "Per Khanna J. The sense in which the word 'education has been used in section 2(15) is the systematic instruction, schooling or training given to the young is preparation for the work of life. ....
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....'s claim of non collecting of fees is incorrect. (e) As discussed above, the assessee was given ample opportunities right from the issue and service of first notice issued u/s 143(2) of the Act dated 24/09/2010, which provides an opportunities to the assessee to submit any account, document, statement or evidences relying upon which it has made its return of income till last opportunity offered to it vide letter dated 8/12/2011. The assessee has avoided defining its relation with BCCI, revenue sharing with BCCI in respect of TV broadcasting rights of cricket matches played on its ground, nature of agreements made with RIL for sponsorship, nature of receipt of income from sale of tickets. The assessee has failed to discharge its onus to establish the nature of the income earned in the form of 'Sponsorship Money' 'Sharing of TV Broadcasting Income with BCCI. It has tried 'to conceal the revenue income in the garb of 'Corpus Donation'. It has failed to establish why and how BCCI is giving "Corpus Donation" It is to bring on record that as against the receipt of 'Sponsorship Money' of Rs. 20,00,000/- from Reliance Industries Ltd., the assessee has claimed ....
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....ment of knowledge, skill, mind and character of student by normal schooling. It is also clear that the term 'education' has a very specific meaning and is not used in a wide and extended sense and to be within the definition of education u/s. 2(15), the trust should be an educational institution which primarily engaged in education activity and if such trust does not have education activity as primary activity, it cannot avail examination on the basis of incidental training activity 28. In the instant case, the appellant trust is admittedly in promotion of cricket as a game in the state of Gujarat. Even the plain reading of objects of appellant does not support the view that the appellant trust is an education institution. The argument that cricket is a subject in school under the broad subject of 'Health and Physical Education' cannot make such physical training as education as it is not scholastic instruction as was held by the Hon'ble apex court. To add this chapter is only for class from Standard VI to Standard IX. Further, this subject is an optional subject in higher classes as is evident from both of the certificates from school submitted by the appella....
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....(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. Circular No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24.9. 1984. 31. I may hasten to add that in Cricket Association of Bengal Vs. CIT 37 ITR 277 (Calcutta) wherein it was held that a club formed for the development of promotion of sports or games or entertainment are held to be not charitable institution. The head note of the decision is reproduced as under: Section 11 of the Income-tax Act 1961 (Corresponding to section 4(3)(i) of the Indian Income-tax Act 1922)- Charitable or religious trust Exemption of income from property held under-Assessment years 1950-51 to 1952- 53 Whether while promotion of games as a part of education of those who participate in them may be a charitable purpose, promotion of practice of game in general either for entertainment of public or for advancement of game itself could not be held....
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....previous year." The new sub-section (8) provides that the exemption under section 11 & 12 will not be available to a Trust, in a previous year, in which the First proviso to section 2(15) becomes applicable, for that previous year. 34. Therefore, in the light of the provisions of Sec 13(8) of the Act, the appellant loses all the exemptions claimed u/s 11 & 12 of the Act. It is clear from the plain reading of the said provision that once proviso to Sec 2(15) becomes applicable to the facts of the case, all the exemptions otherwise allowable u/s 11 and 12 are not available to the appellant in that previous year. 35. Considering all the above, I am of the view that the AO has rightly invoked proviso to Section 2(15) of the Income-tax Act and denied exemptions u/s 11 & 12 of the Income tax Act as the appellant trust was engaged in pursuing objects of general public utility and it carried on activities in the nature of trade, business or commerce where the aggregate receipts exceeded Rs. 25 lacs. Accordingly, ground Nos. 1(a) & 1(b) and ground Nos. 2 & 3 are dismissed. " 50. The assessee carried the matter further in appeal before the Income Tax Appellate Tribunal, Ahmedabad, Ben....
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.... dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. The difficulty for the case of the revenue before us, however, is that these matches are not being organized by the local cricket associations. We are told that the matches are being organized by the Board of Cricket Control of India, but then, if we are to accept this claim and invoke the proviso to Section 2(15) for this reason, it will amount to a situation in which proviso to Section 2(15) is being invoked on account of activities of an entity other than the assesseessomething which law does not permit. We are not really concerned, at this stage, whether the allegations about commercialization of cricket by the BCCI are correct or not, because that aspect of the matter would be relevant only for the purpose of proviso to Section 2(15) being invoked in the hands of the BCCI. We do not wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the BCCI. Suffice to say that the very foundation of revenue's case is devoid of legally sustainable basis for the short reason that the commercialization of cricket by the BCCI, even i....
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....t of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are "objects of general public utility"under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility. 36. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is f....
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....ed under Section 2(15) of the Act. Mr. Bhatt submitted that the activities, in no manner, could be said to be for the purpose of promotion of sports (game of cricket). Mr. Bhatt would submit that the activities of the Association are in the nature of business. The Association derives huge profit by hosting international cricket matches in the stadium. Mr. Bhatt would submit that the Association receives a huge amount from the BCCI for the purpose of organizing the international matches. Mr. Bhatt would submit that the registration of the Association under Section 12A of the Act will not make the assessee automatically eligible to seek exemption under Section 11 of the Act. Mr. Bhatt submitted that howsoever laudable the objects of the trust may be, but the activities undertaken by such trust are to be looked into for the purpose of deciding whether such trust is entitled to be called a charitable trust within the meaning of Section 2(15) of the Act and is liable to claim exemption under Sections 11 and 12 of the Act or not. 53. According to Mr. Bhatt, the Tribunal has not discussed the relevant issues in their true perspective and, therefore, the matters should be remitted to the ....
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....ures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." 54. Mr. Bhatt, in support of his submissions, has placed reliance on the following decisions; Sr. No. Issue Particulars Page Nos. 1 Section 2(15) Director of Income Tax (Exemption) vs. Tamil Nadu Cricket Association, 57 taxmann.com 136 (SC) 2 2 Commissioner of Income Tax vs. Truck Operators Association, 328 ITR 636 (Punjab & Haryana) 02/05/19 3 Commissioner of Income Tax, Dehradun vs. National Institute of Aeronautical Engg. Educational Society, 315 ITR 428 (Uttranchal) 06/09/19 4 Hyderabad Race Club vs. Commissioner of Income Tax, 153 ITR 521 (Andhra Pradesh) 10/19/19 5 Dharmaposhanam Co. vs. Commissioner of Income Tax, 114 ITR 463 (SC) 20-25 6 Sole Trustee Loka Shikshana Trust vs. Commissioner of Income Tax, 101 ITR 234 (SC) 26-43 7 Cricket Association of Ben....
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.... Under 23 years (e) Seniors Ranji Trophy Team, Duleep Trophy, etc. There are cricket teams for women also. 4. GCA has employed former national level cricketers as coaches for each of all the above stated segments of cricket teams, i.e. a coach appointed for under 14 team would look after coaching of that team only. 5. GCA looks after the cricketing activities in the following eleven districts/provinces of the Gujarat State. (I) Ahmedabad (ii) Ghandhinagar (iii) Kheda (iv) Surat (v) Bulsar(Balsad) (vi) Bharuch I (vii) Anand (viii) Banaskantha (ix) Daman (x) Dadar Nagar Haveli (xi) Panchmahal. 6. Currently the GCA has employed former Indian Team Cricketer, Mr. Sairaj Bhautule, as coach for the Seniors i.e. GCA Ranji Trophy Team Players etc. He is also responsible for co-ordinating with the coaches of other age group segment teams of GCA. 7. Coaching of Cricketers encompasses the following aspects : (a) Skill development in nuances of Cricketing. (b) Physical development, (c) Mental development, (d) Building Personality of a Cricketer. 8. It is a known fact that each large size school has its own cricket team where the players are mostly und....
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....tively addressed to the Secretary of Gujarat Cricket Association were produced. The letter dated 12th October, 2001 from the BCCI draws attention to the decision in the Annual General Meeting, and the resolution incorporating the said decision as follows [reproduced at page 59 of the order of CIT (A)] "5. Chairman suggested that as already decided in working Committee henceforth the TV subsidies should be sent towards 'Corpus Fund' and this decision can also be approved by the members of this meeting. Thereafter the members unanimously approved that henceforth the TV subsidies should be sent by the Board to the Member Associations towards "Corpus Fund" instead of subsidy fund." 57. Mr. Shah submitted that the C.I.T.(Appeals), in his order, in para-18 on page 65 noted that the above "donation of Rs. 1,38,36,800/- was treated as the Corpus donation in A.Y. 2002-03.". The above resolution mentioned in the letter of BCCI dated 12th October, 2001, which used the word "henceforth", which means in future also, was not considered good enough by him as "a specific direction" as required by section 11(1)(d) and only on that reasoning, he held that It Is not the corpus donation. Th....
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....ted to delete this addition of Rs. 1,58,00,000." 58. Mr. Shah submitted that in view of the fact that in the A.Ys. 2002-03 and 2003-04, the Assessing Officer accepted on the same facts and evidence of the above two letters and resolution, the identical donations to be corpus donations, It was not open for the revenue to take a contrary view and hold to the contrary in the succeeding assessment years i.e. A.Ys. 2004-05 to 2012-13 in view of the Supreme Court decision of CIT vs. Excel Industries Ltd. (2013) 358 ITR 295, which applied the rule of consistency of approach to the same issue arising in all other Assessment Years. The Supreme Court in the aforesaid decision has observed "the Revenue cannot be allowed to flip-flop on the issue". 59. Mr. Shah further submitted that the Tribunal has rightly construed the word "henceforth" used in the resolution as covering up all the payments in the future years by citing the decision of CIT (Exemption) vs. Mata Amrithanandamayi Math- (2017) 85 taxmann.com 261 (Ker), holding that once the assessee donated the principal and the future interest to the corpus account, every year, specific direction regarding interest is not necessary. 60. Mr.....
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....ubsidy, which is clearly relatable to the capital assets generated, we are unable to hold this receipt in the revenue field. We, therefore, uphold the plea of the assessee on this point as well and delete the addition of Rs. 2,13,34,033/-." 63. Mr. Shah, in regard to the common question In the A.Ys. 2004-05 to 2008-09 pertaining to allowing of the benefit of exemption u/s.11, submitted that if the Respondent succeeds in the Tax Appeal No.268 of 2012, the aforesaid question in the above appeals for the A.Ys 2004-05 to 2008-09 will have to be answered in favour of the assessee 64. Mr. Shah further submitted that the activity other than the International match for the A.Ys. 2009-10 to 2012-13 entrusted by the BCCI Invariably have resulted into deficit and this activity goes on round the year without a break. It is only if the activity is a one day International match or twenty-twenty or five days test match that there may be a surplus but one or two matches cannot convert the altruistic activity of the Association into trade or business. The activities carried on by the Gujarat Cricket Association are enumerated at para-19 of the Tribunal's order. 65. Mr. Shah submitted that the fi....
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....a Amrithanandamayi Math, (2017) 85 taxmann.com 261 (Kerala); 70. Mr. Shah also brought to our notice the following; "1(a) The learned Assessing Officer has not found any defect in books of account. In his Assessment Order, he starts with the figure of (-) Rs. 5,91,708/against which he has stated thus: "Excess of income over expenditure". (b) Analysis of Income and Expenditure account which is accepted by AO is as follows. 2. GCA has incurred total expenditure of Rs. 4,03,98,737/- as per audited Income and Expenditure A/c. GCA has receipts of Rs. 3,98,07,028/-. The net result is loss i.e. Excess of Expenditure over Income of Rs. 5,91,709/-, i.e. there is a deficit. 3. The Receipt side comprises of following heads of receipts as summarized from Income and Expenditure A/c. Rs. (I) International Cricket Match Surplus 1,51,97,741/- (ii) Bank FDR Interest 2,21,88,527/- (iii) Other Income 24,20,760/ 3,98,07,028/ 4. The Expenditure side comprises of following heads of Expenses as summarized: (i) Match Expenses [Local Matches] 1,70,84,594/- (ii)Cricketing Expenses as per Chart attached 1,53,90,325/- (iii) Administration and Other Expenses 79,23,818/....
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....nvolved in widespread commercial activities in nature of business and the activities of the assessee is covered under first and second proviso to section 2(15) of the Act? [B]. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made in respect of corpus donation u/s.11(1)(d) of the Act without appreciating that the assessee failed to discharge its onus by not bringing anything on record in support of its claim of corpus donation?" 75. Mr. Soparkar, the learned senior counsel appearing for the Baroda Cricket Association, by an large, adopted all the submissions of Mr. Shah, the learned senior counsel who has argued on behalf of the Gujarat Cricket Association. However, Mr. Soparkar has something to add over and above what has been submitted by Mr.J.P. Shah, the learned senior counsel appearing for the Gujarat Cricket Association. 76. Mr. Soparkar submitted that the objects as well as the actual activities carried out by the Baroda Cricket Association are for the education in the field of cricket as well as promotion and development of the sport of cricket (object of general public utility) not being in the....
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....es, shoes, drinks. etc are bought for cricketers during the year which are used in various tournaments played over the year. (vi) Medical, physical training, gym, fitness, etc expenses are incurred for the players during the year. (vii) Women cricketing expense are also incurred. (viii) Prize distribution expenses are also incurred for various tournaments organized by the association during the year. (ix) Cricketing ground maintenance expenses are incurred for the upkeep of all the cricket ground in Baroda and in the jurisdictional districts. (x) Fees are paid to professionals like coaches, trainers, physics, curators and so on whose services are used by the association during the year. (xi) All other establishment and other related expenditure are incurred to run the association." 78. Mr. Soparkar, thereafter, invited our attention to the details of income and expenditure of the assessee from the paper-book furnished by him to this Court. Assessment Year 2009-10 2010-11 2011-12 Income and Expenditure Account At Pg 57 At Pg.38 At Pg.60 Income and Expenditure from One Day International Schedule lX At Pg 58 At Pg 39 Schedule E: Cricketing and Tour....
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.... BCCI are distinct taxable units and must be treated as such, as there is no provision in the law that a member body can be held liable for taxation on account of the activities of the apex body. 84. Mr. Soparkar submitted that irrespective of the nature of the activities of the BCCI (Commercial or Charitable) what is pertinent for determining the nature of the activates of the assessee is the object and activates of the assessee and not that of the BCCI. The nature of the activities of the assessee cannot take its colour from the nature of the activities of the donor. Examples are plenty where a corporate house supports activities of a Hospital or a School. Simply because the corporate house is not a charitable organization, the Hospital or the school doesn't cease to remain charitable. 85. Mr. Soparkar submitted that even if the BCCI is held to be involved in carrying out the commercial activities, the disbursements from the BCCl to the cricket associations cannot become commercial profits of the assessee cricket associations liable to be taxed. It is again urged that the trigger for denial of Section 2(15) benefit, or for the proviso to Section 2 (15) being invoked, is the act....
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....ed by the assessee, in the light of the BCCI resolution under which the payment is made and in the light of the payment not being under any legal obligation, the conditions under section 11(1)(d) are satisfied." 88. In such circumstances, referred to above, Mr. Soparkar submits that the Tribunal has correctly found on facts and in law that the said amount is towards the corpus fund and, therefore, the same will be exempted under Section 11(1)(d) of the Act, 1961. SAURASHTRA CRICKET ASSOCIATION:- 89. We shall now take up the Tax Appeals Nos.358-360 of 2019. In these two tax appeals, the respondent-assessee is the Saurashtra Cricket Association. 90. The Tax Appeal No.358 of 2019 is treated as the lead matter. This tax appeal was ordered to be admitted on the following substantial questions of law; "[A]. Whether, on the facts and in the circumstances of the case the Appellate Tribunal was justified in allowing the benefit of Sections 11 and 12 when the Assessing Officer has clearly brought on record that assessee is covered under the proviso to Section 2(15) r.w.s 13(8) of the Act? [B]. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was ....
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.... object of general public utility shall not be a charitable purpose, if it involves the carrying on of 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 proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year; It is submitted that it is a settled position that "education" is a term with a very wide meaning, going beyond traditional classroom teaching and taking within its ambit training in sports: [CIT vs. Secretary, Regional Committee, National Sports Club of Assam [1989] 180 ITR 648 (Gauhati) is squarely applicable: "To satisfy us in this regard, we have been taken through the order of the Tribunal passed in ITA Nos. 684 (Gauhati) to 689 (Gauhati) of 1973-74 which related to the same assessee. A perusal of that judgment shows that after going through the aims and objects of the assessee, it was held t....
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....e course of the actual carrying out of the primary purpose of the trust or institution. This being the settled law by now and the finding of the learned Tribunal being that the main object of the institution falls within the head "Education", and the primary purpose being the criterion for deciding whether the income has been earned for a charitable purpose, it has to be held that the questions of law involved in the present case are concluded by a judgment of the highest court of the land. In such a situation, any direction to make a reference would be academic and the High Court would be right in refusing the same as stated in Mathura Prasad v. CIT [1966] 60 ITR 428 (SC)." (Emphasis supplied)] [It has been held in Gujarat State Co-Operative Union vs. CIT [1992] 195 ITR 279 (Gujarat) with reference to the decision of the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 that the meaning of "education" is not to be narrowly construed: "The observations of the Supreme Court only indicate the proper confines of the word "education" in the context of the provisions of section 2(15) of the Act. It will not be proper to construe these observat....
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.... the Act, it was held that assessee society whose object clause "says that the objects of the school are to teach western, classical music, to promote musical knowledge and the appreciation among the students as well as among the interested public by means of workshops, lectures/demonstrations, recitals etc., to acquire and maintain instruments for teaching purposes, to create and update a world class library of music literature both audio and video to add more class rooms and other required facilities for the purpose of musical education and to construct and maintain concert hall/auditorium for the school" was held to be an educational institute under Section 10(23C)(vi) of the Act.] In light of these decisions, it is submitted that since the objects of the Respondent include promoting the game of cricket, imparting physical education through the medium of cricket and maintaining a library and periodicals on sports and cricket, Respondent's activities pertain to "education" and hence fall under "charitable purpose" under Section 2(15) of the Act. The relevant objects are as follows (pgs.57-58 of Paper book for AY 2012-13): 3.(e) To promote the game throughout Saurashtra and Ku....
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....e issue has to be seen from the two limbs of the provisions of Section 2(15) of the Act viz.: (a) whether the promotion of sports and games, cricket in the present case is charitable or not within the definition as provided u/s 2(15) of the Act and (b) whether such promotion of sports and games of cricket are carried out with the profit - motive or not so to be treated as in the nature of trade, commerce or business or charitable purpose. Promotion of cricket is an advancement of "general public utility" and is hence a "charitable purpose" : * Insofar as the first limb as mentioned in (a) above is concerned, attention is invited to the Circular : No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24-9-1984, wherein the Board has advised that promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). It is not in dispute that the Respondent is involved only in the activity of promoting the game of cricket. The Assessing Officer himself has noted so in para 3.3 of the order on page 61 of Tax Appeal that "the assessee is admittedly involved in promotion of cricket as a game." Further, all of the objects of the assessee are related to ....
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....g out any activity for profit and (b) if the "object" of the trust or institution is to carry out object of general public utility and this is the primary or dominant purpose and not carrying on any activity for profit, the same would satisfy the requirements of S.2(15) of the Act. Since the terms trade, commerce or business is not defined under the scheme of the Act, general or dictionary meaning has to be resorted to. In order to determine whether an activity is in the nature of trade, commerce or business OR charitable, the determining factor is profit motive. The nature of activities may remain the same. However, if they are carried out for profit motive, the same are to be characterized as trade, commerce or business. Conversely, if the profit motive is absent, these very activities become charitable. * It is further submitted that (a) first proviso to S.2(15) of the act should not be generalized to each and every facts of the case where there is a surplus over the expenditure in respect of the activities or objects carried out by the Trust which are in any case of the charitable purpose, (b) the cardinal principle is the predominant object of the Trust. If the predominant o....
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.... while selling the said plots they are sold by holding the public auction, it cannot be said that activities of the assessee is profiteering, to be in the nature of trade, commerce and business. xxx... 15. Now, so far as another question which is posed for the consideration of this Court i.e. whether while collecting the cess or fees, activities of the assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for the reasons stated above, merely because the assessee is collecting cess or fees which is regulatory in nature, the proviso to Section 2(15)of the Act shall not be applicable. As observed herein above neither there is element of profiteering nor the same can be said to be in the nature of trade, commerce or business." XXX... (d) Institute of Chartered Accountants of India vs. DGIT reported in 347 ITR 99 (Delhi) The Hon'ble High Court held that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members/enrolled chartered accountants and merely because the Institute was holding coaching classes which also generate income, the Court held that p....
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....of a charitable institution u/s 11 of the Act and in that context also, the Apex Court observed that the Gujarat Maritime Board was established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of Board was essentially with the State Government and there was no profit motive and the income including reserves and surplus earned by the Board was deployed for the development of minor ports in the State of Gujarat and accordingly the Apex Court held that the Board was entitled to be registered as "Charitable Trust" within the scheme of the Act It is submitted that the insertion of proviso to s. 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. Elaborating the scope of this amendment, CBDT, vide Circular No. 11, dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows: "3. The newly amended s. 2(15) will apply only to the entities whose purpose is 'advancement of any other object of general public utility' i.e., the fourth limb of definition of 'charitable purpose' contained i....
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....ssociation [2018] 98 taxmann.com 425 (Raj) III Legally it is well settled that while adjudicating upon an appeal, where two views are possible, the view in favour of the assessee should be adopted. In the facts of the present case, there are large numbers of decisions which are in favour of the assessee and therefore, even if the view against the assessee is plausible and probable, the view in favour may kindly be adopted: (a) Mysore Minerals Ltd. V CIT 239 ITR 775 (SC) (b) Orissa State Warehousing Corporation v CIT 237 ITR 589 (SC) (c) CIT v. Podar Cement Pvt. Ltd. and Others. 226 ITR 625 (SC) (d) CIT v Gwalier Rayon Silk Mfg. Co. Ltd. 196 ITR 149 (SC) (e) CIT v Sahazada Nand 60 ITR 392 (SC) (f) CIT v Kulu Valley Transport Co. Ltd. 77 ITR 518, 530 (SC) (g) CIT v Vegetable Products Ltd. 88 ITR 192 (SC (h) CIT v Naga Hills Tea Co. Ltd. 89 ITR 236, 240 (SC) (i) Contr. ED v Kanakasabai 89 ITR 251, 257 (SC) (j) CIT v Madho Jatia 105 ITR 179, 184 (SC) In addition to the above, it is submitted with respect to Question [C] that the Tribunal has remitted the issue of infrastructure subsidy to the file of the Assessing Officer. It is submitted that for this reason, ....
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....e poor", "education" or "medical relief", it is not even material whether or not the assessee is carrying on an activity in the nature of trade, commerce or business in the course of such activities. The key factor is as to what are the activities of the assessee institution and as to what these activities seek to achieve. 35. Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends has to an activity of the assessee which is in the nature of trade, commerce or business. However, the case of the revenue authorities hinges on the allegation that the way and manner in which cricket matches are being organized, particularly the IPL matches, the activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear....
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....cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitute BCCI or not, in the event of BCCI being involved in commercial activities, the taxability of such commercial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner's arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial considerations said to be inherent in planning the matches. As we make these observations, and as we do not have the benefit of hearing the perspective of the BCCI, we make it clear that these observations will have no bearing on any adjudication in the hands of the BCCI. Suffice to say that so f....
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....it is evident that the ITAT considered the issue bearing in mind the activities of the assessee and what such activities seek to achieve. The ITAT has observed that it carefully analyzed the annual reports and the annual financial statements of the assessee, and upon perusal of the same, the ITAT reached to the conclusion that the activities undertaken by the Associations were not contrary to the objects. This is a pure finding on a question of fact. In such circumstance, referred to above, it cannot be said or argued that the ITAT passed the impugned order in a very slipshod manner or without assigning any cogent reasons. 95. We shall now proceed to examine the main issue on our own. 96. Section 2(15) of the Act defines the term "Charitable Purpose". The definition reads as under: 'Section 2(15):-"charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or 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 utili....
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....ides that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is -(between 1-4-2009 and 31-3-2012) Rs. 10 lakhs -(w.e.f. 1-4-2012) Rs. 25 lakhs or less in the previous year. 102. Legislative amendments.- I. The Finance Act, 1983-By section 3(a) of Act 11 of 1983, section 2(15) has been amended (w.e.f. 1-4-1984). II The Finance Act, 2008.-The scope and effect of the substitution (w.e.f. 1-4-2009) of section 2(15) by Act 18 of 2008, have been elaborated in the following portion of the departmental circular No. 1/2009, dated 27-3-2009, as under:- 'Streamlining the definition of "charitable purpose".- 5.1 Sub-section (15) of section 2 of the Act defines "charitable purpose" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under subsection (23C) of section 10 or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the "advancement of an obj....
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.... and wildlife) and preservation of monuments or places or objects of artistic or historic interest would be excluded from the applicability of the aforesaid proviso which is applicable to the "advancement of any other object of general public utility". 4.3 Applicability:-These amendments have been made applicable with effect from 1st April, 2009 and will accordingly apply for assessment year 2009-10 and subsequent assessment years.." IV The Finance Act, 2010:--The scope and effect of the insertion (w.e.f. 1-4-2009) of a new second proviso in section 2(15) have been elaborated in the following portion of the departmental circular No.1/2011, dated 6-4~2011, as under: 'Change in the definition of "charitable purpose".- 4.1 For the purposes of the Income-tax Act, "charitable purpose" has been defined in section 2(15) which, among others, includes "the advancement of any other object of general public utility". 4.2 However, "the advancement of any other object of general public utility" is not a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, comm....
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.... Departmental circular.-1. Definition of "Charitable purpose" under section 2(15) of the Income-tax Act, 1961-reg- Section 2(15) of the Income-tax Act, 1961 ("the Act"), defines "charitable purpose" to include the following: (i) relief to the poor (ii) education (iii) medical relief, and (iv) the advancement of any other object of general public utility. An entity with a charitable object of the above nature was eligible for exemption from tax under section Section 11 or alternatively under section 10(23C) of the Act. However. it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of "charitable purpose". Therefore. section 2(15) was amended, vide Finance Act. 2008, by adding a proviso which states that the "advancement of any other object of general public utility" shall not be a charitable purpose if it involves the carrying on of - (a) any activity in the nature of trade, commerce or business: or (b) any activity of rendering any service in relation to any trade. commerce....
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....pose as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question....
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....ny it to purely commercial and business entities which wear the mask of a charity. A number of Honourable Members have written to me expressing their concern on the possible impact of the proposal on Agricultural Produce Market Committees (APMC) or State Agricultural Marketing Boards (SAMB). Since there is no intention to tax such committees or boards, and in order to remove any doubts, I propose to insert a new clause (26AAB) in section 10 of the Income tax Act to provide exemption to any income of an APMC or SAMB constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce. I once again assure the House that genuine charitable organisations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether an entity is carrying on 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. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organisations rende....
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....uld, otherwise, accrue under the registration." 108. In the case of Assistant Commissioner of Income Tax v. Surat City Gymkhana, (2008) 300 ITR 214 (SC), the Supreme Court was called upon to deal with the question as to whether on the facts and circumstances of the said case, Income Tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fiat accompli to hold the Assessing Officer back from further probe into the objects of the trust. On a perusal of the judgment of the Gujarat High Court in the case of Hiralal Bhagwati, the Supreme Court held that the question stood concluded by the said judgment, which had attained finality since the revenue did not challenge the decision in the said case. The relevant observations made by the Supreme Court are as follows; "The respondent assessee claimed exemption under Section 10(23) of the Income Tax Act, 1961 for Assessment Years 1991-1992 and 1992-1993. The said exemption was claimed on the basis that the objects of the respondent assessee are exclusively charitable. The assessing officer rejected the claim. The appeals filed before the Commissioner of Income Tax (Appeals) were also dismissed. Aggr....
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....ted was restricted to Question 'B'." 109. This High Court in the case of Ahmedabad Urban Development Authority v. Deputy Director of Income Tax (Exemption), (supra), has held thus: "9. Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of sections 11 & 12 as provided in section 12A of the Act. Therefore, once the procedure is complete as provided in sub-section (1) of section 12AA of the Act and a Certificate is issued granting registration to the Trust or Institution it is apparent that the same is a document evidencing satisfaction about : (1) genuineness of the activities of the Trust or institution, (2) about the objects of the Trust or Institution. Section 12A of the Act stipulates that provisions of sections 11 & 12 shall not apply in relation to income of a Trust or an Institution unless conditions stipulated therein are fulfilled. Thus granting of registration under section 12AA of the Act denotes, as per legislative scheme, that conditions laid down in section 12A of the Act stand fulfilled." 110. This High Court, in the case of Agricultural Produce Market Committee vs. Income Tax Officer, reported in (2013)....
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....ourse of assessment proceedings the Assessing Officer had issued notice pursuant to which the petitioner had given its reply explaining as to why it was entitled to the said deductions. The Assessing Officer after considering the explanation given by the petitioner had passed a scrutiny assessment order under section 143(3) of the Act specifically allowing the above deductions. From the reasons recorded, it is evident that the Assessing Officer has not recorded any independent opinion regarding income having escaped assessment for the reasons stated therein. The sole ground for reopening the assessment appears to be the observations of the Revenue Audit Party that the assessee is not eligible for exemption to the tune of Rs. 77,40,212/- for the year under reference since, the Assessing Officer has not disallowed the exemption while finalizing the assessment under section 143(3) of the Act. Thus, it appears that the belief that income chargeable to tax escaped assessment is that of the Revenue Audit Party and not of the Assessing Officer. In the circumstances, the condition precedent for exercise of powers under section 147 of the Act, namely, that the Assessing Officer should have ....
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.... and action. It involves an idea of benefiting others rather than oneself. 114. For a trust to be accepted as a charitable trust for the purposes of exemption, it is necessary that the objects should be specific so as to confirm to the requirement of the income tax law in this regard. Where they are too wide, the trust may not qualify for exemption. However, a pragmatic view is required to be taken while examining the data. The material on record should be analysed objectively. 115. The onus to prove that the objects are of charitable nature is on the assessee. 116. In our considered opinion, the principle of purposive interpretation of the provision has to be adopted and when such a construction is placed, it serves the legislative intent. 117. In this context we may refer to the decision in State of T.N. v. Kodaikanal Motor Union (P) Ltd., (1986) 62 STC 272 (SC): (1989) 3 SCC 91, wherein the Supreme Court, after referring to K.P. Varghese vs. Income Tax Officer and and Luke v. Inland Revenue Commissioner, (1964) 54 ITR 692 (HL); (1963) AC 557 (HL), observed thus:- "The courts must always seek to find out the intention of the legislature. Though the courts must find out the ....
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.... 122. A brief analysis of all the provisions would show that (i) providing relief of the poor; (ii) establishing institution for education; (ii) providing medical relief; and (iv) to advance any other object of general public utility are included within the definition of 'charitable purposes'. With effect from 01.04.2009, a new definition has been substituted, in that, if the advancement of object of general public utility involves carrying on 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 cess or fee or any other consideration, such activity shall not be a charitable purpose. Except the addition of the proviso, restricting the purport of the 'advancement of any other object of general public utility', there is not much difference in section 2(15) as it existed prior to 01.04.2009, and thereafter. After the amendment the preservation of environment including the watersheds, forest and wild life, and preservation of monuments or places/objects of artistic or historic interest are also included in the definition 'charitable purpose'. Be that as it is, what is important is any insti....
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....amber of Commerce is a charitable institution although it was promoting the interest of trade and commerce, which were only ancillary and subsidiary objects. While observing that the primary object being, "to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries, and to watch over and protect the general commercial interests of India", the Court held as under. "The expression "object of general public utility" in Section 4(3) would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, is contemplated. " 125. In Addl. Commissioner of Income Tax vs. Surat Art Silk, (1980) 121 ITR 1 (SC), a Constitution B....
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....se must be genuinely and essentially charitable. " 126. In CIT vs. Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR 1 (SC), the question was whether the income of the APSRTC was exempt from income tax under section 4(3)(i). On a reference by the Income Tax Appellate Tribunal, the High Court answered the question in the affirmative in favour of the assessee. Following Trustees of the Tribune, the Supreme Court affirmed the High Court's view observing as under. "It is admitted position, as pointed out by the High Court in its judgment under appeal, that no share capital has been raised under Section 23(2) and the entire capital has been provided by the government under Section 23(1) and the Government is only paid interest thereon under Section 28(1) just as interest would be paid on any money due as a debt. That the activity of the respondent Corporation is not carried on with the object of making profit is made abundantly clear by the provisions of section 30 under which, prior to the amendment of that section by the Amendment Act of 1959, the balance of income left, after utilization of the net profits for the purpose set out in section 30, was to be made over to....
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....ng as the dominant object is of general public utility, it cannot be said that the said trust/institution is not established for charitable purposes. " 128. In CIT vs. Market Committee, (2007) 294 ITR 563 (P&H), the Punjab and Haryana High Court, after considering the provisions of the Punjab Agricultural Produce Markets Act, 1961 held that the market committee incorporated in terms of Section 18 of the Punjab Act is a body corporate and that its activities can be included within the definition of the term charitable purposes. It was also held that the exemptions under sections 10, 11 and 12 of the Act are independent of one another and merely because an assessee is not entitled to claim exemption under one of the aforesaid provisions that cannot ipso facto lead to the conclusion that the claim of the assessee cannot be considered for the grant of tax exemption in some other provisions of the IT Act. The relevant observations are as follows. "It is apparent from the duties and responsibilities of the market committees, delineated in the foregoing two paragraphs, that a market committee, in the background of the provisions of the Markets Act, should be treated as a body, discharg....
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....as no profit motive and the income earned by the Board has to be deployed for the development of minor ports in Gujarat. It was registered as 'local authority' under Section 3(31) of the General Clauses Act, 1897. Prior to 2002, it was availing exemption as local authority under Section 10(20) of the IT Act and, therefore, was not exigible to the income tax. After insertion of the explanation in Section 10(20), the expression 'local authority' was confined to Panchayats, Municipality, Municipal Committee, District Board and Cantonment Board. Maritime Board did not come within the definition of local authority. They, therefore, made an application to the Commissioner for being registered as a charitable institution as defined under section 2(15). The Commissioner rejected the application. The Tribunal as well as the High Court of Gujarat held that the Maritime Board is a charitable institution. The Supreme Court, while construing Section 2(15) and Section 11(1), relied on the Andhra Chamber of Commerce (supra), Surat Art Silk (supra) and APSRTC (supra) and held that the Maritime Board is entitled to be registered as a 'charitable trust' under Section 12A of the Act. The relevant obs....
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....fit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose (CIT v. Ahmedabad Rana Caste Assn (1983) 140 ITR 1 (SC)). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity (CIT v. Surat Art Silk Cloth Manufacturers' Assn (1980) 121 ITR 1 (SC). " 130. The apex Court in the case....
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....t, expressed an opinion as under : "............. On the contrary it becomes clear on a close reading of relevant provisions of this clause that the objects are specific and charitable in nature. The beneficiaries are also clearly indicated. There is also no ambiguity about the trustees or the trust properties. Thus all the basic requirements for creation of a public charitable trust do exist on the express language of the relevant clauses of rectified deed. ....." 134. We may also refer to and rely upon the decision of this Court in the case of Additional Commissioner of Income Tax, Gujarat vs. Ahmedabad, Millowners Association, reported in 1977 (106) ITR 725, wherein this Court held as under; "22. We now proceed to consider whether an object which serves personal interest would fall within the scope of section 2(15) of the Act. There is no dispute that the charitable purposes of relief to poor and educational and medical relief have no relevance to the facts of the present case. It is, therefore, the fourth category of the charitable purpose, namely, the object of general public utility, with which we are concerned in this case. The expression "object of general public utili....
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....problem, and, hence, the Supreme Court has pointedly referred to this problem in Commissioner of Income-tax v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) at page 727 of the report by observing as under : "It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and industry." 24. In this case, the Supreme Court has pointed out that even an object beneficial to a section of the public is an object of public utility and that to serve a charitable purpose, it is not necessary that the object should be to benefit the whole mankind or person living in a particular country or province. But, while making these observations, the Supreme Court has been careful in pointing out the distinction between " a section of the public " and specified individuals. Even so far as "a section of the public" is concerned, the Supreme Court has been particular in identifying it in the following terms (page 729) : "The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a....
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....section of the public has, so far as I am aware, been laid down, and I certainly do not propose to be the first to make the attempt to define it. In the case of many charitable gifts it is possible to identify the individuals who are to benefit, or who at any given moment constitute the class from which the beneficiaries are to be selected. This circumstance does not, however, deprive the gift of its public character. Thus, if there is a gift to relieve the poor inhabitants of a parish the class to benefit is readily ascertainable. But they do not enjoy the benefit, when they receive it, by virtue of their character as individuals but by virtue of their membership of the specified class. In such case the common quality which unites the potential beneficiaries into a class is essentially an impersonal one. It is definable by reference to what each has in common with the others, and that is something into which their status as individuals does not enter." 28. Our Supreme Court has approved of this principle in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704 (SC) and has held that members of Rana caste has a relationship which was an impersonal one dependent upon their....
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....etween the employers and the employees". This clause was exactly similar to clause (f) with which we are concerned in this reference. With regard to such a clause, the Supreme Court has observed that even assuming that in some remote and indirect manner such an object might be some public utility, it cannot be called a charitable purpose within the meaning of section 4(3)(i) of the Indian Income-tax Act, 1922. In view of this decision, even the object mentioned in clause (f) cannot be considered as the object serving any public utility. 30. If we closely scrutinise the objects contained in rule 3, we find that a substantial part of these objects benefit the association's own members, those connected with them, and their employees. It is no doubt true that the beneficiaries of these objects are also who are nonmembers but who happen to be millowners or users of motive power. But that aspect of the matter does not detract from the fact all the members, and their employees, and "those who are connected" with members, from the substantial part of the recipients of the benefits contemplated by the objects. In Commissioner of Inland Revenue v. City of Glasgow Police Athletic Associ....
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....e, commerce or business. The second part has reference to any activity of rendering any service ―in relation to any trade, commerce or business. Both these parts are further subject to the condition that the activities so carried out are for a cess or fee or any other consideration, irrespective of the nature or use or application or retention of the income from such activities. In other words, if, by virtue of a cess' or fee' or any other consideration, income is generated by any of the two sets of activities referred to above, the nature of use of such income or application or retention of such income is irrelevant for the purposes of construing the activities as charitable or not. 137. To be clear, if an activity in the nature of trade, commerce or business is carried on and it generates income, the fact that such income is applied for charitable purposes, would not make any difference and the activity would nonetheless not be regarded as being carried on for a charitable purpose. We have seen that by virtue of Section 25 of the Companies Act, the petitioner is enjoined to plough back its income in furtherance of its object and the declaration of dividends is proh....
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....therefore, was not entitled to exemption. On appeal, the AAC, relying on the main objects of the association, as laid down in the Memorandum of Association, held that the association was entitled to exemption. The AAC, relied on the decision of the Supreme Court in CIT vs. Andhra Chamber of Commerce (supra) and the decision of the Kerala High Court in CIT vs. Indian Chamber of Commerce, 1971 80 ITR 645. The AAC came to the conclusion that the association fulfilled the conditions as required under Section 11(1)(a) of the Act. The department went up in appeal to the Income Tax Appellate Tribunal. It contended, on the basis of the decision of the Mysore High Court in CIT vs. Sole Trustee Loka Shikshana Trust, 1970 77 ITR 61 and the decision of the Calcutta High Court in CIT vs. Indian Chamber of Commerce, 1971 81 ITR 147 that the conclusions of the AAC were erroneous. On the other hand, the respondent association relied on the decision of the Keral High Court in CIT vs. Cochin Chamber of Commerce & Industry, 1973 87 ITR 83. It also contended that the decision of the Supreme Court in Andhra Chamber of Commerce, 1965 55 ITR 722, despite the fact that it pertained to the provisions of th....
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....ne of the objects must be charitable in order that the trust or institution be upheld as a valid charity. But if the primary or dominant purpose of a trust or institution is charitable, another object, which by itself may not be charitable, but is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or institution from being or valid charity. 15. The fact that the members of the assessed benefited was merely incidental to the carrying out of the main or primary purpose and if the primary purpose was charitable, the subsidiary objects would not militate against its charitable character not would it make the purpose any the less charitable. 16. The Supreme Court referring to its earlier decision in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722, observed that the court had held that the dominant or primary object of the Andhra Chamber of Commerce, which was to promote and protect trade, commerce and industry and to aid, stimulate and promote the development of trade, commerce and industry and to watch over and protect the general commercial interests of India or any part thereof was clearly an object of general public utility. This w....
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..... Director General of Income Tax (Exemptions) & Ors., Writ Petition (C) No.1872 of 2013,, decided on 22nd January, 2015, in context with Section 10(23C)(iv) of the Act vis-a-vis Section 2(15) of the Act, had observed as under; "At this juncture, we may point out that we are in agreement with the argument advanced by Mr Syali that the proviso to Section 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on the one hand and genuine charitable organizations on the other. It must be remembered that we are construing the expression "charitable purpose" not in a vacuum, but in the specific context of Section 10(23C)(iv) of the said Act. As pointed out above, Section 10 deals with the incomes not included in total income. And, Section 10(23C)(iv) specifically deals with the income received by any person on behalf of, inter alia, an institution established for charitable purposes. We have to, therefore, examine the meaning of the expression "charitable purposes" in the context of Section 10(23C)(iv). Looking at the said expression from this stand point, it becomes clear ....
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....would be the need for taking any benefit under Section 10(23C)(iv) of the said Act. Therefore, if a meaning is given to the expression charitable ― purpose so as to suggest that in case an institution, having an objective of advancement of general public utility, derives an income, it would be falling within the exception carved out in the first proviso to Section 2(15) of the said Act, then there would be no institution whatsoever which would qualify for the exemption under Section 10(23C)(iv) of the said Act. And, the said provision would be rendered redundant. This is so, because, if the institution had no income, recourse to Section 10(23C)(iv) would not be necessary. And, if such an institution had an income, it would not, on the interpretation sought to be given by the revenue, be qualified for being considered as an institution established for charitable purposes. So, either way, the provisions of Section 10(23C)(iv) would not be available, either because it is not necessary or because it is blocked. The intention behind introducing the proviso to Section 2(15) of the said Act could certainly not have been to render the provisions of Section 10(23C)(iv) redundant. Wi....
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....idental 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. 142. The Latin word utilis means 'useful, beneficial, equitable, available'. Chambers Dictionary of English defines 'utility' as useful: power to satisfy the wants of people in general: a useful thing, public utility: public service or a Association providing such public service. According to 'New Oxford Dictionary of English' (1998), as a Noun, utility is the status of being useful, profitable or beneficial. 143. The Corpus Juris Secundum Volume 73 page 990 elucidates the following legal position. "A public utility" has been described as a business organization which regularly supplies the public with some commodity or service, such as electricity, gas, water, transportation or telephone or telegraph service. While the term has not been exactly defined, and, as has been said, it would be difficult to construct a definition that would fit every conceivable case, the distinguishing charac....
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....c utility and would be charitable purpose (Gujarat Maritime Board (2007) 295 ITR 561 (SC) [see Commissioner of Income Tax vs. Agricultural Market Committee, (2011) 336 ITR 641 (AP)] 146. In our opinion, this could be termed as a charitable purpose which has as its motive advancement of an object of general public utility to which the exception carved out in the first proviso to Section 2(15) of the Act would not apply. 147. We may refer to and rely upon the decision of this Court in the case of Director of Income Tax (Exemption) vs. Sabarmati Ashram Gaushala Trust, reported in (2014) 44 taxmann.com 141 (Gujarat), wherein this Court was called upon to consider whether the activities of the respondent assessee-Sabarmati Ashram Gaushala Trust could be termed as charitable having regard to the object with which the trust was constituted. We may quote the relevant observations; "What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term 'charitable purpose' if it is engaged in any activity in the nature of trade, commerce or business or renders any service in r....
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....al activity. Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19 th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of 'public utility'. " 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 between the activities undertaken by a society, otherwise satisfying the prescription .of section 2(15) 'prior to the insertion of proviso, which are aimed at earning income divorced from the objects for which it is charitable por una p....
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.... 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 vs. ITO, Delhi) 149. The Delhi High Court in the Institute of Chartered Accounts of India v. Director General of Income-tax (Exemptions), 2013 358 lTR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) , observed, while disposing of a writ petition, that holding interviews for fees for the purpose of campus placements of its students does not amount to carrying on a business so as to deny exemption u/s 11 of the Act. It further observed that if the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. The Delhi High Court further observed in para 67 that "the purport of the first proviso to section 2(15) of the Act is not to exclude the 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 the organizations which are carrying on regular business from the scope of "char....
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....is irresistible that the Tribunal has rightly held that the interest earned would qualify for exemption under Section 11(1)(d) of the Act. 151. In the aforesaid context, the findings of the Tribunal are as under; "55. On a perusal of the BCCI Infrastructure Subsidy rules, we find that what is given to the assessee as infrastructure subsidy is reimbursement of 50% of costs in respect of certain expenditure on infrastructure which is inherently in the capital field. The mere fact that it is not a reimbursement to an outside party, such as a district cricket association, does not really matter. As long as the subsidy is relatable to a capital asset created by the assessee on his own or by an eligible district cricket association, as the present subsidy undisputedly is, it is outside the ambit of revenue receipt and taxable income. The very foundation of the stand of the Assessing Officer is thus devoid of legally sustainable merits. As such, there can hardly be an occasion, in principle, to hold such a subsidy as a revenue receipt or taxable income. There is not even a whisper of a discussion by the Assessing officer to the effect that infrastructure subsidy is revenue in nature. A....
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....been treated all along as the corpus donation". 'Earlier Year' means A.Ys. 2002- 03 and 2003-04. On page 245, the Tribunal reproduced para- 15 of their order for the A.Ys. 2004-05 to 2007-08 as follows: "15. We find that, at pages 46 and 47 of the paperbook, the assessee has filed specific confirmations to the effect that these amounts were corpus donations. We have also perused the BCCI resolution no 5 dated 29th September 2001 which specifically states that the TV subsidies should henceforth be sent to the Member Associations towards "corpus funds". There is no dispute that the TV subsidy in question is sent under this resolution. On these facts, and In the light of the provisions of Section 11(1)(d) which only require the income to be "by way of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution", we are of the considered view that any payments made by the BCCI, without a legal obligation and with a specific direction that it shall be for corpus fund as admittedly the present receipt is, is required to be treated as corpus donation not includible in total income. We are unable to find any legal support....
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....ose 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." 155. Mr. Bhatt raised a strong objection as regards the aforesaid issue. According to Mr. Bhatt, although the submission in this regard was canvassed before the ITAT, the ITAT thought fit not to touch the said issue for the reason assigned in para-41 of the impugned judgment. Para-41 reads thus; "We have noted that all the learned representatives have advanced detailed arguments on the proposition that since the assessee cricket associations are engaged in educational activities, it is not really material whether or not the assessee has engaged itself in the activities in the nature of trade, commerce or business. However, in the light of our categorical finding that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or busi....
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....ere is failure of the Tribunal to decide or adjudicate the same. In a given case, a substantial question of law may arise because of the facts and findings recorded by the Tribunal, but the said issue/question is not determined. In such cases, an appeal under Section 260A of the Act can be entertained. This would depend upon the facts of each case and the reasoning and findings recorded by the Tribunal. 160. In the aforesaid context, we may refer to a decision of the Supreme Court in the case of M. Janardhana Rao vs. Joint Commissioner of Income Tax, 2005 (273) ITR 50, wherein the Supreme Court has observed as under; "Under Section 260A(2)(c) the appeal under Section 260A shall be (a) in the form of a memorandum of appeal and (b) precisely stating therein the substantial question of law involved. Under Section 260A(3) when the High Court is satisfied that a substantial question of law is involved in any case it shall formulate that question and under section 260A(4) the appeal is to be heard only on the question formulated under the preceding sub- section. It has to be noted that in terms of Section 260A(4) the respondent in the appeal is allowed to argue at the time of hearing ....
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....n the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the sense that issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact. On reading of impugned judgment of the High Court it is clear that no substantial question of the law was formulated at the time of admission of the appeal. Obviously, the High Court has formulated questions subsequently after conclusion of arguments for the purpose of adjudication. That is clearly against the scheme of Section 260A. Additionally , grievance that certain points which were urged have not been dealt with by the High Court appears to be correct. " 161. The aforesaid decision of the Supreme Court has been exhaustively discussed by a Division Bench of the....
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.... Court is under legal obligation to formulate the substantial question or questions of law, which, according to the High Court, the appeal has raised, and, then, the High Court shall hear the appeal on the question or questions so formulated. When an appeal is heard, in the light of sub-section (4) of section 260A on the substantial question or questions of law, which the court has formulated in the appeal, the respondents shall be allowed to argue, at the time of hearing of the appeal, that no such substantial question or questions of law, as formulated by the High Court, has or have arisen for being answered in the appeal. What further follows from a close reading, as a whole, of section 260A is that if the High Court decides to give notice to a respondent, in an appeal, before formulating the substantial question or questions of law, the respondent, in the appeal, shall have the right to satisfy the High Court that the substantial question or questions of law, as contended by the appellant, is, or are, not really involved; or else, there would be no meaning and purpose in giving notice to the respondent, in the appeal, before the appeal is admitted by formulating the subst....
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....arties to the appeal would have the right to place their arguments. Obviously, while the appellant would try to show, at the time of hearing of the appeal, on its admission, that the substantial question or questions of law has or have arisen for determination and needs or need to be decided, the respondent would resist that substantial question of law (as suggested by the appellant and/or formulated by the High Court), does not really arise. In short, hearing of an appeal, under section 260A, can, in a given case, be in two different stages - once, before admission of the appeal, and, once again, after admission of the appeal. We may, however, hasten to add that there is no impediment, on the part of the High Court, to admit an appeal without giving notice to the respondent; but if the High Court decides to give a notice before admitting the appeal and if it decides to hear the respondent on the admission of the appeal, the High Court cannot straight away allow the appeal on the basis of the substantial question or questions of law, which the appellant may have formulated inasmuch as section 260A provides 'that if the High Court finds that the appeal needs to be heard, the Hig....
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.... precisely state the substantial question or questions of law involved and section 260A(3) lays down that when the High Court is satisfied that a substantial question of law is involved, in a given appeal, it shall formulate that question and the appeal, in terms of the provisions of section 260A(4), has to be heard only on the question formulated by the High Court and that in terms of section 260A(4), the respondent, in appeal, has to be allowed to argue, at the time of hearing of the appeal, (wherein the substantial question or questions of law-stands or stand already formulated by the High Court), that the appeal does not involve a substantial question or questions of law as has been, or have been, formulated by the High Court. In M. Janardana Rao (supra), the Supreme Court has also clarified, at para 11, that the proviso to section 260A(4) lays down that nothing in section 260A(4) shall be deemed to take away the power of the High Court to hear, for reasons to be recorded, an appeal on any substantial question or questions of law not formulated by it provided that the High Court is satisfied that the case involves such a question. In no uncertain words, the Supreme Court has ....
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.... that the conditions, mentioned in section 260A, must be strictly fulfilled before an appeal can be maintained under section 260A meaning thereby that if the appellant is unable to show that a substantial question of law has arisen for determination, there is no impediment, on the part of the High Court, to dismiss the appeal without even admitting the appeal. Logically extended, it would mean that if the respondent has been given notice before the High Court decides to admit an appeal, it would remain open to the respondent to show that no substantial question of law has arisen and in order to show that no substantial question of law has arisen, it would be, ordinarily, necessary for the respondent to make his submission on merit if the respondent seeks to satisfy the High Court that no substantial question of law for determination has arisen in the appeal. The relevant observations, appearing in this regard, in M. Janardana Iiao (supra), read as under: "14. Without insisting on the statement of substantial question of law in the memorandum of appeal and formulating the same at the time of admission, the High Court is not empowered to generally decide the appeal under section 26....
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....me Court took the view that the procedure, so adopted, is clearly against the scheme of section 260A. In the face of the facts, as indicated above, the Supreme Court, in M. Janardana Rao, (supra) interfered with the order, which had been passed, in appeal, by the High Court. In the case at hand, too, if this court finds, in the light of the clearly laid down position of law, in M. Janardana Rao (supra), that this court formulated the substantial question or questions of law for adjudication subsequent to the admission of the appeal, as is contended by the respondent-opposite party, then, such a breach by the High Court would make its judgment and order open to review if the power of review is, otherwise, found to be available to the High Court in a case of present nature. The relevant observations, appearing at para 1.6, in M. Janardana Rao (supra), read as under: "16. On reading of the impugned judgment of the High Court it is clear that no substantial question of law was formulated at the time of admission of the appeal. Obviously, the High Court has formulated questions subsequently after conclusion of arguments for the purpose of adjudication. That is clearly against the ....
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....judication, subsequent to the conclusion of the arguments. The question, therefore, of prejudice having been caused or not does not arise. This apart, in the case at hand, it is the grievance of the review petitioners that as substantial questions of law had not been formulated for the purpose of hearing of the appeal, the review petitioners could not make their submissions on the merit of the substantial questions of law, which the High Court has, subsequent to the admission hearing, ultimately, decided inasmuch as one of the issues in the appeal has been decided against the review petitioners without according them an opportunity to have their say after making it clear to them that the substantial questions of law, which the memorandum of appeal had mentioned, were the substantial questions of law, which, even according to the High Court, had arisen for determination and these were the questions, which would be finally taken up for adjudication by the court. Coupled with the above, the decisions, which have been referred to in Kanan (dead) by Lrs. v. VS. Pandurangam (dead) by Lrs., (2007) 15 SCC 157, are not on substantial questions of law, but on the question of issues. It i....
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....tions and the BCCI are distinct taxable units and must be treated as such. It would not be correct to say that a member body can be held liable for taxation on account of the activities of the apex body. (v) Irrespective of the nature of the activities of the BCCI (commercial or charitable), what is pertinent for the purpose of determining the nature of the activities of the assessees, is the object and the activities of the assessees and not that of the BCCI. The nature of the activities of the assessee cannot take its colour from the nature of the activities of the donor. Discussion of case law: 164. We shall now proceed to deal with the decisions, upon which, strong reliance has been placed on behalf of the Revenue. 165. In the case of Truck Operators Association (supra), the assessee Truck Operators Association had filed an application in Form No.10A for registration of the Society under Section 12AA of the Act along with the certificate of registration granted by the Registrar of Societies and a copy of Memorandum and By-Laws of the Society. The Commissioner rejected the application holding that the Association was not formed for advancement of object of general public u....
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....bligation on the assessee or its members to hold the income of the assessee only for charitable purposes and the element of private gain could not be excluded. This decision, in our opinion, is of no avail to the Revenue. 167. In National Institute of Aeronautical Engg. Educational Society (supra), the assessee was an educational society. It moved an application before the Commissioner for grant of registration under Section12AA of the Act. The Commissioner, after examining the record before him, concluded that the assessee was not carrying any charitable activity within the meaning of Section 2(15) as it was charging substantial fees from the students and making huge profits from that business. Consequently, the assessee's application was rejected. The Tribunal, however, allowed the appeal of the assessee. The Revenue went in appeal before the High Court of Uttarakhand. The High Court, while allowing the appeal preferred by the Revenue, observed as under; "10. Section 12AA of the Act provides the procedure for registration. Clause (a) of sub Section (1) of Section 12AA empowers the CIT to call for such documents or information from the trust or institution as he thinks nece....
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....stantial question of law in favour of the Revenue and against the assessee, the Full Bench observed as under; "9. It would thus be seen that the scientific breeding and training of horses and the imparting of instructions relating to horse breeding in all its aspects, is shown as an incidental or ancillary object in the memorandum of association of the assessee-company which was established in April 1971. Learned counsel submits that in the memorandum of association constituting the assessee as a company in April, 1971, carrying on the business of a race club in all its branches had to be specified as the main object in order to meet the requirements of the company law, although in point of fact the main object for which the assessee-company was established, was what was stated as an incidental or ancillary object against sl. no. 4 referred to above. It is pointed out that for the purpose of incorporating a company, the business which the company carries on has to be specified as the main object and all other objects have to be specified as incidental or ancillary objects, and this classification for the limited purpose of the Companies Act should not, according to the learned co....
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....ssessee was established as a company. As we have already referred to above, the memorandum of association of the assessee after its incorporation in April, 1971, as a company clearly states that the main object to be pursued by the assesseecompany on its incorporation, is to carry on the business of a race club in all its branches. Even when the assessee was a society, carrying on the business of a race club was obviously the main object although it was mixed up with other objects, as there was no statutory requirement that the main objects and ancillary objects should be separately specified in the case of society. We are unable to appreciate the learned counsel's contention that notwithstanding the memorandum of association specifying the carrying on of the business of a race club as the main object for which the assessee-company was incorporated, we should hold that the main object for the purpose of the Companies Act is the carrying on of the business of a race club, and the main object for the purpose of the I.T. Act is the scientific breeding of horses. We must reject the contention that the main objects for which the assessee was established should be regarded differentl....
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.... C.I.T. v. Krishna Warrier, (1964) 53 ITR 176 (SC). That is also evident from the provisions of section 11 (4), and reference may be made also to section 13(1)(bb). Further, it is apparent from the terms of the Memorandum of Association and the Articles of Association that the business of conducting kuries and of money lending is held under trust. The question is : Is the business held under trust for charitable purposes ? There can be little doubt that when sub-clause (a) of clause 3 of the Memorandum says "To raise funds by conducting kuries, with company as foreman, receiving donations and subscriptions by lending money on interest and by such other means as the company deem fit". it refers to powers conferred on the appellant to raise money in aid of, and for the purpose of accomplishing, the objects mentioned in sub-clause (b) of clause 3 of the Memorandum. Upto June 6, 1965 sub-clause (b) read : "To do the needful for the promotion of charity, education, industries, etc. and public good". Can all the purposes mentioned in sub-clause (b) be described as charitable purposes ? Section 2(15) of the Act defines the expression "charitable purpose" as including "relief of the ....
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....t would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit." Beg, J., in the same case, observed "The deed puts no condition upon the conduct of the newspaper and publishing business from which we could infer that it was to be on "no profit and no loss" basis .... That character (i.e. of the deed) is determined far more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust. It is what the provisions of the trust make possible or permit coupled with what had been actually done without any illegality in the ;Nay of profit making, in the case before us, under the cover of the provisions of the deed, which enable us to decipher the predominantly profit making character of the trust." In a subsequent case, Commissioner of Income-Tax, Kerala v. Cochin Chamber of Commerce and Industry, (1975) 101 ITR 796 (SC), this Court extended the test to income derived from activities carried on in aid of, and incidental to, the primary object of the trust. We may note that no attempt has b....
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....n Kannada and other languages, all these activities being started, conducted and carried on with the object of educating the people; (c) supplying the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other language for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public utility; and (d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view. The High Court held that the income of the trust was not entitled to exemption under Section 11 read with Section 2(15) of the Act. The assessee, went in appeal before the Supreme Court. The Supreme Court, while dismissing the appeal of the assessee, observed as under; "In addition to the power which the sole trustee had to collect donations and subscriptions for the trust. he had all the powers which the sole manager of a business may have in order to carry it on profitably. He had the power of transferring trust properties and funds if he thought "it expedient in the interest of the objects of the Trust, to transfer the assests and liabilities of this T....
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.... divert its assets as well as any of the funds of the Trust to other institutions whose objects are "similar to the objects" of the trust and of "carrying out the objects and purposes of this trust either fully or partially". The whole deed appears to me to be cleverly drafted so as to make the purpose of clause 2(c) resemble the one which was held to be protected from income-tax in the Tribune case (supra). Indeed the very language used by the Privy Council in the Tribune case (supra), for describing the objects of the Trust in that case, seems to have been kept in view by the draftsman of the trust deed before us. And, we find that the power of diverting the assets and income of the Trust although couched in language which seems designed to counsel their real effect is decisive on the question whether the trust is either wholly or predominantly for a charitable purpose or not. The trustees is given the power of deciding what 485 purpose is allowed to or like an object covered by the trust and how it is to be served by a diversion of trust properties and funds. If the trustee is given the power to determine the proportion of such diversion, as he is given here, the trust could not....
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....al before the High Court of Calcutta. The High Court, while rejecting the appeal of the assessee, observed as under; "12. The question we have to consider is whether promotion of cricket as a general purpose or more particularly promotion of cricket in the form in which the Association professes to promote it can at all be a charitable purpose. In England, it has repeatedly been held that no gift or bequest made merely for the promotion of some game or pastime can be called a gift or bequest for a charitable purpose. An exception is to be found with respect to cases where provision is made for training in a game as a part of the education of youth. In those cases, the gift or bequest is regarded as charitable on the ground that it advances the cause of education. As instances of gifts or bequests for such purposes, I may refer to the case of In re, Mariette : Mariette v. Governing Body of Aldenham School, (1915) 2 Ch. 284, where a bequest was made to the Governing Body of a school for the purpose of building some squash racket courts and a further bequest was made to the Head Master for the time being upon trust to use the interest for providing a prize for some event in the scho....
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....of the game of cricket : "Now, I should say", observed the learned Judge, "that every healthy sport is good for the nation--cricket, football, fencing, yachting, or any other healthy exercise and recreation; but if it had been the idea of lawyers that a gift for the encouragement of such exercises is therefore charitable, we should have heard of it before now." It will be noticed that the learned Lord Justice included cricket among the games in the illustrations he gave. The case was decided in 1895 and it may be said that ideas have since changed and that cricket has grown so much in popularity and the general public have come to be associated so much with the game that the observations made so long ago are no longer valid. Any such contention must be overruled because even the recentmost cases have not expressed any dissent from the view taken in the Nottage case(1895-2 Ch. 649). It has often been cited and very recently it was cited in the case of Baddeley v. Inland Revenue Commissioners, (1953) 1 Ch 504 in the Court of Appeal and in the same case, Baddeley v. Inland Revenue Commra., (1955) AC 572 in the House of Lords. "In re Nottage, 1895-2 Ch 649 was cited for the proposi....
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....ons decayed". Really, however, it was a trust for the promotion of cricket among boys of the working and lower middle classes who might not be well off financially. Romer, J. who decided the case said that it might be that with the aid of the assistance provided from this trust, some boys would be enable to embark, upon life as professional cricketers, but he continued. to say : "It is, I think, reasonably clear that the object of the fund is the encouragement of the game of cricket and nothing else, and it has been held by authorities that are binding upon me that such a bequest is not charitable." He then proceeded to refer to the case of In re Nottage, 1895-2 Ch 649 as laying down the proposition to which he was giving effect. 13. I do not think I should multiply citations in order to illustrate the point that a gift or bequest merely for the promotion of a game has never been considered charitable : Clifford, In re : Mallam v. McFie, (1911) 81 LJ Ch 220 was a case of angling; Trustees of Warnher's Charitable Trust v. Commissioners of Inland Revenue, (1937) 21 Tax Cas 137, a case of playing fields. Scottish Flying Club, Ltd. v. Commissioners of Inland Revenue, (1936) 20 Ta....
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....ntioned who derive a large income by selling admission to the musical demonstrations organised by them, are also exercising themselves for a charitable purpose and that their earnings must be equally exempt from tax. 15. It was contended that the game of cricket had a place of its own among games and that it inculcated a spirit of fairness and an honourable conduct to such ah extent that the term 'cricket' had come to be a synonym for fairness and honour. That may be so, but I am unable to understand how fairness and honour can be inculcated by the game of cricket in any person other than those who actually take part in it. In the present case, we are not concerned with the players who play at the matches arranged by the Association, for they are members of the visiting teams or it might be local teams, but so far as the Association is concerned they are mostly outsiders. The Association is claiming to be advancing a charitable purpose only by providing an opportunity to the public to witness the games arranged by it. It can by no means be said that any spirit of fairness and honour is inculcated in the spectators of a game of cricket or perhaps any other game, played not....