TaxTMI 
TaxTMI 
2019 (6) TMI 1424
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....d in law in confirming the action of the AO in taxing the net surplus of Rs. 40,33,47,248/- as per income and expenditure account as income of the Appellant. 3. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in holding that the activities carried out by Appellant are in the nature of trade, commerce and business and therefore covered by the proviso to section 2(15) of the Act. 4. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in holding the activities of promoting the game of cricket as business income u/s. 28 without establishing the said activities are in nature of business trade or commerce. 5. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in applying the proviso to section 2(15) r.w.s. 13(8) of the Act and thereby taxing the entire income of the Appellant despite the fact that the said proviso did not apply to the Appellant. 6. Without prejudice to above, The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in taxing the entire income of the Appellant as business income despite the facts th....
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....al public utility: 15. Vide Finance Act, 2008, the words "preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest)", were added and, on a more relevant note, a new proviso (i.e. fist proviso) was added to this provision, carving out an exception in the cases of 'advancement of any other object of general utility', and, by the immediately following Finance Act 2009, there was yet another proviso (i.e. second proviso) introduced to carve out an exception from the exception itself. In essence, the effect of these provisos was that even when an assessee was pursuing 'a charitable purpose' in the event of advancement of any other object of public utility' it would cease to be for charitable purposes if it involves (a) carrying on an activity in the nature of trade, commerce or business; or (b) rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of nature of use or application or retention of the income from such activity. However, these provisions are not to apply when the activities....
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....r 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 the surplus returned to such persons is not chargeable to tax. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual members, these would not fall under the purview of s. 2(15) owing to the principle of mutuality. However, if such organizations have dealings with the non-members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to s. 2(15). 3.2 In the final analysis, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes. In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or renderi....
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....ch objectives of 'general public utility' cannot be hit by the proviso to s. 2(15). By the Finance Act 2015, these two provisos also stand substituted, with effect from 1st April 2016, a new proviso to Section 2(15). This new proviso is as follows: Provided that the advancement of any other 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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year 18. It may be noted that while the earlier proviso simply stated that exclusion from '....
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...."such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility" it is excluded from the scope of charitable purposes only when "the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year". In other words, even when the activities are in the course of advancement of any other object of general public utility, but in the nature of trade, commerce or business etc, the proviso seeks to exclude it only when the threshold level of activity is not satisfied. Whether such a statutory provision stands the legal scrutiny or not is another aspect of the matter, and that is none of our concern at present anyway, it is beyond doubt that the new proviso, with effect from 1st April 2016, seeks to exclude, from the scope of section 2(15), the situations in which even in the course of pursuing advancement of any objects of general public utility when any activities in the nature of trade, commerce or business etc "is undertaken in the course of actual carrying out of....
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....rom 01.04.2016. The Tribunal then dealt with the main contention of the revenue that the assessee was involved in the activities of developing and selling the residential and commercial units with the sole aim of making profits. The conclusions of the Tribunal in this regard are as follows; the profit on sale does not necessarily imply profit motive in the activities of the assessee. What is important is the motive or the predominant object of the activities. The bids are invited by the assessee who allots the plots to the highest bidders. This, however, is because it is not desirable for the State to subsidise its businesses. A bidding process ensures transparency in the functioning of the trusts and therefore, it does not make the bidding process a commercial venture. Further the bids are invited only in the context of commercial units. Under the Rules there is a formula on the basis of which the price is worked out. The revenue did not deny the same but alleged that the profit motive is embedded in this formula as shown by the adjustments for various charges. 72. The Tribunal rightly rejected the contention that to fall within the ambit of the words "advancemen....
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....pts from the activities referred to therein is twenty five lakh rupees or less in the previous year." 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term "Charitable purposes" and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of "charitable trust". However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on th....
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.... 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 chargeable 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 of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of ' general public utility' wi....
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....ale the cow milk; to hold and cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make the cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize the objects of the trust as also to open schools and hostels for imparting eduction in cow keeping and agriculture having regard to the trust objects. 12. All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal 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....
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....commercialization of cricket and the impact of this commercialization has not left Indian cricket intact. The Indian Premier League and the rules of the game being governed by the 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 assessees- something 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 donot wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the B....
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....ng on the denial of the status of 'charitable activities' in the hands of the cricket associations before us- particularly as learned Commissioner has not been able to point out a single object 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 ....
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....of Cricket Association of Bengalcase (supra), the following observations made by Hon'ble Court are relevant: "The facts of the present case are that the assessee Association merely held certain demonstration or exhibition matches. It does not provide any training in the game of cricket to novices or any advanced training for persons who are already practised players. Its activities outside the holding of the exhibition matches is limited entirely to its own members. The only contact it has with the public is by way of having them as spectators, on payment of a fee, of matches arranged by it. I find it impossible to hold that any benefit or entertainment which is thus paid for and which is availed of by only such members of the public as can or wish to pay for it can in any sense be a purpose of a charity. It is true that charity in the income-tax sense need not have any eleemosynary element in it and that an object of general public utility is under the income-tax law a charitable object. Indeed, if the objects professed by the Association are to be treated as charitable objects at all, they can be so treated only if they can be regarded as objects of general public ut....