AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (12) TMI 343
X X X X Extracts X X X X
X X X X Extracts X X X X
....356/JP/2018 were disposed off by the Tribunal vide its order dated 09/12/2019. Subsequently, the assessee moved a misc application seeking recall of the said order and the Tribunal vide its order dated 03/03/2020 in MA No. 13 & 14/JP/2020 has recalled its earlier order dated 09/12/2019. The relevant findings of the Tribunal while recalling the earlier order are contained in para 3 of its order, which read as under: "3. We have considered the rival submissions as well as the relevant material on record. There is no dispute that these two appeals were filed by the revenue on 3rd December, 2018 and were fixed for hearing on 21st February, 2019 for which notices were issued to the respondent assessee. Thereafter, the hearing was deferred to 30th April, 2019 and on that date nobody appeared on behalf of the respondent assessee. The Bench accordingly ordered for issue of notice to the respondent assessee through RPAD for 30th May, 2019. Even on 30th May, 2019 none appeared on behalf of the assessee respondent and the hearing was adjourned to 26.07.2019. On 26.07.2019 again nobody appeared on behalf of the respondent assessee and the hearing was adjourned to 11.09.2019 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....same was inadvertently forwarded to the Internal Auditor instead of Office Bearers of the Association. We fail to understand who is more familiar and competent to understand the tax matters than the auditors of the Association. Therefore, we do not find any substance in the explanation of the assessee. However, since the order was passed ex parte and the Tribunal was not having the privilege of hearing the assessee who would have presented its case along with the supporting decisions in its favour including the decision of this Tribunal in assessee's own case for the preceding assessment years. We are conscious and aware that the principle of res judicata is not applicable in the matter of taxation, however, a decision in the assessee's own case is certainly relevant material to be considered while deciding the issue in matter. Therefore, non consideration of the earlier decision of this Tribunal in assessee's own case as well as the decisions as would have been relied upon by the assessee referred during the course of hearing of the Miscellaneous application would constitute an apparent mistake on the face of record as those decisions would certainly have some bearing on the adjud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eafter after issuing notices U/s 143(2) and 142(1) of the Act calling for the necessary information/documents/explanation from the assessee, the Assessing officer denied the claim of exemption U/s 11 and 12 of the Act. As per the Assessing officer, the registration granted to the assessee society has been withdrawn by the ld CIT-I Jaipur vide order dated 28.03.2013 under section 12AA(3) of the Act from assessment year 2005-06 onwards and therefore, on this account, the assessee society is not entitled to exemption u/s 11 and 12 of the Act. Further, the Assessing officer held that the assessee society is involved in carrying on the activities in the nature of trade, commerce or business and having receipts in excess of Rs. 25,00,000/-, therefore, the first proviso to Section 2(15) of the Act is applicable in the case of the assessee. It was held by the A.O. that receipts from one day international matches are to the tune of Rs. 2,90,11,113/- which is far in excess of the quantum mentioned in the proviso to Section 2(15) of the Act. These receipts are mostly attributable to sale of tickets of cricket matches which is squarely covered under the first proviso to Section 2(15) of the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the case of ACIT vs. Surat Art Silk Cloth Manufacturers Association reported in 121 TR 1 (SC) wherein it was held that the primary or dominant purpose of the trust or institution has to be examined to determine whether the said trust /institution is involved in carrying out any activity for the profit and (ii) 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 section 2(15) of the Act. Here, the main object of the appellant was providing financial help to all the clubs and there was no commercial angle in organizing matches. It organizes various programmes to encourage cricket and appellant has produced a number of excellent cricketers of international repute and this was achieved by nurturing talent irrespective of cast, creed, status, religion etc. Further, the Hon'ble High Court, Delhi in the case of M/s GSI India vs. DIT, Delhi reported in 360 ITR 138 elaborately differentiate the business, trade activity from charitable activity under the residuary category i.e. "advancement of any other o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but the assessee's shares in the total advertisement revenues of BCCI related to commercial ventures of organizing One day & twenty-twenty cricket matches specially IPL matches. Thus the assessee is earning the revenue from advertisement receipts from BCCI being its share in the advertisement receipts. When these IPL teams of various business houses, film stars and the entire activities are conducted in a commercial manner, then the income earned by the assessee from the said activities of conducting the IPL matches is only from activity of trade, commerce or business. Therefore, the first leg of proviso to section 2(15) is attracted in the case of the assessee. The ld. D/R has relied upon the decision of the Chandigarh Benches of the Tribunal in case of Punjab Cricket Association vs. ACIT in ITA No. 427/Chd/2017 dated 12.09.2019 and submitted that the Tribunal while deciding an identical issue in case of Punjab Cricket Association has discussed all the relevant facts and nature of activities of BCCI and State Cricket Association and found that the activities of organizing the cricket matches particularly IPL and other matches are in the nature of trade, commerce or business. Furt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ness entity, it's governing body is also elected by the members and is being run as per the constitution of RCA and its aims and objects are to promote the sport of cricket in the state of Rajasthan and not to earn profit or conducting any business activity. The RCA had a history of its operations in the field of promotion of cricket and there had been no activities beyond the constitution and it is a charitable institution duly covered under section 2(15) in the limb of advancement of General Public Utility without any intent of earning profit and distribution of any surplus directly or indirectly to its members. The members of the Association holding different post are providing honorary services and are not eligible for any salary or remuneration. The association has various cricket teams for men under 14 Years, under 16 Years, under 19 Years, under 23 Years and senior Team i.e for Ranji Trophy Team, Dilip Trophy etc. There are cricket teams for women also. Further the association looks after the cricket activities in 32 districts in the State of Rajasthan including Jaipur, Udaipur, Jodhpur, Alwar, Rajsamand and Sikar. The association employ former national level cricketer as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ever distributed directly/indirectly to any of its members/office bearers who are holding honorary positions. 13. It was further submitted that BCCI giving subsidy to RCA, the teams, the suppliers, the contractors and all other persons dealing with RCA may have their own objects even of business/commerce/to earn money; which however doesn't mean under any law/facts that RCA is also covered as business entity. The fact has been considered by the Delhi Benches of Tribunal in case of Delhi & District association (ITA No. 3095/Del/2012) and the relevant findings are contained at para 11.2 of its order which read as under: "the assesse has to perform many activities and for this purpose he has to enter into transactions with various types of persons. Those persons can be commercial or non commercial, professionals, venders of goods and services and so forth and so on, merely entering into such agreements does not tantamount to the assessee being a business entity. . ............... To carry out a transaction in an organizational manner and to ensure that the transaction would help the assessee in achieving its charitable object it is imperative that the terms and conditions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Year 2009-10,wherein it was held that the proviso to section 2(15) is not applicable to RCA & that the benefits of section 11 & 12 cannot be denied. It was submitted that the said decision of the Tribunal has since been affirmed by the Hon'ble Rajasthan High Court in Appeal No. 257/2017 dated 21.11.2017. It was submitted that though the Revenue has filed an SLP before the Hon'ble Supreme Court, however, mere filing an SLP or its admittance is no bar against the binding nature of the decision of the Hon'ble jurisdictional High Court. It was submitted that the Department has failed to distinguish the activities of RCA from the earlier year i.e. A.Y 2009-10, where the matter was discussed in detail and decided on merits by the Jaipur Bench of Tribunal and which has since been affirmed by the Hon'ble Rajasthan High Court and the said decision therefore clearly applies in the instant case. In this regard, a comparative analysis of receipts and payments for AY 2009-10, 2010-11 and 2011-12 was submitted stating that there are no material changes in the revenue heads & nature of activities of the RCA in the Assessment year 2010-11 and 2011-12 as compared to Assessment year 2009-10: S.No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation and Others reported in [2019] 419 ITR 561 (Guj) wherein under identical facts and circumstances of the case, the matter has been examined at length and decided in favour of the assessee and thus, the said decision also supports the case of the assessee. 18. It was further submitted that the view taken by the Chandigarh Bench of Tribunal in the case of Punjab Cricket Association vs. ACIT (in ITA no. 427/Chd/2017 dated 12.09.2019) are not based on correct facts as well as the appreciation of facts in right perspective & hence are distinguishable and not applicable in the instant case. It was submitted that at para 18 of the said order, it was mentioned that "The representatives of the State Associations are at the helm of the affairs of the BCCI. The status of the BCCI under the circumstances is nothing but of an Association of Persons (in short 'AOP') of which State Associations including the assessee are the members." Further, it was also mentioned in the same para that "There is a complete federal structure starting from lower level i.e. District Cricket Associations to the International Cricket Council. District Cricket Associations collectively form State Cri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ol for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking section 12AA read with section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunals view that it is an entertainment and hence offended section 2(15) of the Act does ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e's own case for A.Y 2009-10 and it has been held that the said proviso is not applicable to the assessee society and the exemption claimed u/s 11 and 12 cannot be denied. It has been submitted that the said decision of the Coordinate Bench has since been affirmed by the Hon'ble Rajasthan High Court in Appeal no. 252/2017 dated 21.112017. It has been further contended that there are no changes in the facts and circumstances of the case and the similar activities and operations have been conducted in A.Y 2009-10 and A.Y 2010-11 and there is no finding by the Assessing officer that the activities and operations so conducted by the assessee society during the financial year relevant to impugned assessment year i.e, A.Y 2010-11 are different or at variance to the activities and operations of the assessee society during the financial year relevant to A.Y 2009-10. It was accordingly submitted that following the rule of consistency, the decision of the Coordinate Bench in assessee's own case for A.Y 2009-10 may be followed for the impugned assessment year 2010-11 and further, the said decision has been affirmed by the Hon'ble Rajasthan High Court and is thus binding on this Tribunal and o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... modification/amendment made to section 2(15) of the I.T. Act, 1961, 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, 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. Though the object of the trust "promotion of sports" is charitable in nature but its activities are tainted with commerciality. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of assessee. From the facts and figures available on record, it is clear that the activities of the assessee even in connection with undertaking or organizing matches are clearly business activities within the meaning of section 2(13) of the I.T. Act, 1961, as all the elements of business are present in the said activities. On perusal of Income and expenditure A/c, it is noticed that the major sources of income are from TV subsidy, IPL subvention, bank interest etc. It is jud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement of charity in the conduct of these activities. And to support his said assertion, the Assessing officer has referred to the assessee's income and expenditure account and held that major sources of income are from TV subsidy, IPL subvention, bank interest etc and held that profit making is the predominant object of the activities so conducted by the assessee society and therefore, as per proviso to section 2(15), the activities of the assessee cannot be held as charitable and exemption claimed u/s 11 and 12 was denied. Similarly, for A.Y 2010-11, the Assessing officer has returned a finding that the assessee society is regularly indulging in commercial activities as it is organizing matches, selling tickets, selling advertisement contracts, etc which has resulted in huge profits and surplus has increased exponentially for past several years. The AO has also given a specific reference to receipts from sale of tickets from one day international match amounting to Rs. 2,90,11,113/- and held that these receipts exceeds the quantum of Rs. 25 lacs as so specified in proviso to section 2(15) and the benefit of section 11 and 12 were again denied to the assessee society. We therefore ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e operations so undertaken by the assessee society as also reflected through the income and expenditure account for the respective years as so submitted by the ld A/R, we agree with the contention of the ld A/R that the activities and operations so conducted by the assessee society during the financial year relevant to impugned assessment year i.e, A.Y 2010-11 are consistent and not at variance to the activities and operations of the assessee society during the financial year relevant to A.Y 2009-10. 28. Having discussed the fact that there are no changes in the facts and circumstances of the case for the year under consideration as compared to the previous assessment year 2009-10, we now refer to the decision of the Coordinate Bench in ITA No. 944/JP/2013 for A.Y. 2009-10 and the decision of the Hon'ble Rajasthan High Court approving the decision so taken by the Coordinate Bench. 29. The Coordinate Bench, while disposing off the assessee's society's ground regarding rejection of claim U/s 11 and 12 of the Act, held that respective representatives of the parties have adopted the same arguments and contentions as were raised in ITA NO. 388/JP/2012 and thereafter referring to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the judgment of the Hon'ble Calcutta High Court rendered in the case of Cricket Association of Bengal Vs. Commissioner of Income Tax 371 ITR 277. 5. It is observed by the AO that the entire character and focus of the RCA has become totally commercial. Therefore, the Assessing Officer proceeded to disallow expenditure and the exemption claimed by the assessee. Thus, the exemption was denied on the basis that the assessee was involved into a commercial activity. The ld. CIT(A) concurred the view of the Assessing Officer on the same basis. Before adverting to the rival contentions it would be appropriate to reproduce the relevant provision of law. The section 2(15) of the Income Tax Act that defines charitable purpose which is reproduced as under: " Section 2(15) - Charitable purpose include relief of the poor, education, medical relief, [preservation of environment( including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest] and the advancement o any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts of the trusts. It is the contention of the assessee that the sole basis of declining exemption was that there was huge surplus earned by the assessee in respect of one-day international match held between India and Pakistan. It is the contentions of the assessee that a match between India and Pakistan always generates higher receipts as the number of audience is higher. It is also pointed out that the match between other countries could not even fetch 70 to 80% of the collection. It is also contended that all the payments in the shape of sponsorship, advertisement, TV rights etc. are received directly by BCCI. Further, BCCI delegates the organization of matches to state association and in turn state association gets some funds from promotion and expansion of their charitable activities. It is also submitted that major benefits by organizing these matches is that local team, being trained by the RCA, get opportunity to learn from experience of coaches of international level by assisting them during practice matches and by witnessing the matches played by the international players, by spending time with them etc. It is submitted that organizing such matches results into the promot....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1.12 crores. It is contended that the surplus if any generated by the assessee by the assessee was merely incidental to the main object that is promotion of sport ofcricket and in no way by running business of cricket as has been alleged by the Revenue. We find that the Hon'ble Madras High Court under the identical facts, in the case of Tamil Nadu Cricket Association vs the Director of Income Tax(E) has held: "As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipts apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Income Tax Appellate Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the Commissioner had satisfied himself about the objects of the rust and the genuineness of the activities as falling within t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on the decision of the coordinate bench in the case of Rajasthan Housing Board Vs. CIT 21 taxmann.com 77 and also decision in the case of Ahemdabad Urban Development Authority vs. CIT(2016) 69 taxmann.com 381 and also the decision of coordinate bench in the case of Entertainment Society of Goa Vs. CIT 34 taxmann.com (210) (Panji) so far as the decision of the coordinate bench in the case of Rajasthan Housing Board and Ahemdabad Urban Development authority are concerned are no more binding precedents in view of the subsequent judgment of Hon'ble Jurisdictional High Court in the Jodhpur Development Authority rendered in the case of CIT Vs. Jodhpur Development Authority 287 ITR 473(Raj.) 6. The allegations of the Assessing Officer is that in the case of assessee the major income arise not from the game of Cricket but from the business of Cricket. It is alleged by the Assessing Officer that major source of income are from TV Subsidy, Sale of advertisement, surplus from one-day international between India and Pakistan income from RCA Cricket Academy and interest income. All these activities are more in the nature of business of cricket than the promotion of game of Cricket. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m ODI between India and Pakistan income from RCA Cricket academy and interest income. It is not in dispute that TV subsidy, sale on advertisement surplus from ODI between India and Pakistan income from RCA Cricket Academy are all relating to the conduct of Cricket matches by the society. It is undisputed fact that without conduct of matches income cannot be derived. Therefore, it can be safely inferred that these incomes are related to the incidental activity of the association. These incomes would not accrue without the game of Cricket. The main thrust of revenue's argument is that for allowing exemption under section 11 of the Act, the Assessing Officer need to examine whether the proviso to section 2(15) of the Act is attracted or not. It is the contention of the revenue that assessee would fall under the limb of any other object of general public utility to which category only the proviso to section 2(15) applies. It is contended that if proviso 2(15) attracted, assessee loses benefit of exemption as per section 13(8). Therefore, it is submitted that only question to be decided is to whether assessee is engaged in commercial activity for fee or other consideration. It ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lying goods. This being the position, it cannot be said that the trust carries on the business of selling and supplying goods so as to fall within the meaning of "dealer" under section 2(11) of the Act. No doubts, the definition of "business" given in section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would notnormally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on "business" connected with or incidental or ancillary sales will rest on the department. Thus, if the main activity of a person is not trade, commerce, etc., ordinarily incidental or ancillary activity may not come within the meaning of "business". To put if differently, the inclusion of....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., by virue of first proviso to Section 2(15), their activity/object cannot be recognized as for charitable purpose so as to make them entitled for registration u/s 12A of the Act of 1961. 17. Section 2(15) of the Act of 1961 which defines 'charitable purposes' reads as under: "(15) 'charitable purpose' includes relief of the poor, education, medical relief, preservation of environment ( including watersheds, forests and wildlife) and preservation of monuments o places or objects of artistic or historic interest, and the advancement of any other object of general public utility; Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on o any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; Provided further that the first proviso shall not apply I the aggregate value of the receipts from the activities referred to therein is twenty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t object of genral public utility which must not involve carrying on of any activity for profit and not its advancement or attainment. The court observed that what is inhibited by these last ten words is the linking of activity or profit with the object of general public utility and not its linking with the accomplishment or carrying out other object. Thus, so long as purpose does not involve carrying on or any activity for profit, the requirement of definition would be met and it is immaterial how the money's for achieving or implementing such purpose are found whether by carrying on an activity for profit or not. 22. In Andhra Pradesh Road Transport Corporation's case (supra), the Hon'ble Supreme Court while relying upon the earlier decisions in the matter of "additional CIT vs. Surat Art Silk cloth Manufactures Association", (19800 121 ITR 1 and "CIT Vs. Bar Council of Maharashtra", (1981) 130 ITR 28 (SC), held that if predominant object is to carry out a charitable purpose and not earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity. 23. In Gujarat Maritime Board's case (supra), the Hon'be Supreme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the development of minor ports in the State of Gujarat. In the circumstance , in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case". (emphasis added) 24. In "Commissioner of Income Tax v. Krishi Upaj mandi Samiti, jaisalmer", (2011) 331 ITR 135 (Raj.), a Bench of this court while considering the entitlement of Krishi Upaj Mandi Samiti, a statutory body, constituted and established under the Rajasthan Agricultural Produce Market Act, 1961, observed that may be the income received by the Samiti by way of cess or mandi fees is not shown to be spent wholly for the purpose of relief of the poor, education, or medical relief, but under the scheme of the act, being the Rajasthan Agricultural Produce Markets Act, 1961, the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include advancement of "any other object of general public utility'. 25. In Lukhnow Development Authority's case (supra), while examining the question regarding applicability o proviso to Section 2(15), Allahabad High Court observed: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to affirm the view of the revenue. In the present case, material as placed before us suggests that the Assessing Officer is swayed by the figures and volume of receipts. Admittedly, such receipts are intermittent and not regular and also is dependent on the conduct of cricket match. It is not other way round that the cricket matches are dependent upon such activities. The undisputed facts are that the assessee is registered under the Rajasthan Sports (registration, recognition and regulation) Act 2005 and formed with the objective of promoting the sports of cricket within the state of Rajasthan so main objective or activity of the assessee is promotion of the cricket. The association is organizing tournament like Ranji Trophy, Irani Trophy, Dilip Trophy, Maharan Bhagwat Singh Trophy, Salim Durrani Trophy etc. the Assessing Officer has not doubted about these activities of the association. It is also brought to our notice that in the international one day match between south Africa and India, the association suffered deficits of Rs. 1.6 crores. It is also brought to our notice that the RCA has also incurred in various other expenses with a view to promote the game of Cricke....
X X X X Extracts X X X X
X X X X Extracts X X X X
....zed by the assessee society by way of organizing international one day cricket matches, domestic cricket tournaments, cricket coaching camps and taking into consideration the receipts and expenditure in relation to such activities, it was held that the assessee is predominantly been engaged in the activities of promotion of cricket. It has also been held that the Assessing officer is swayed by the figures and volume of receipts from one-day international cricket matches and subsidies received from BCCI in form of TV subsidy and other subsidy from cricket tournaments, however such receipts are intermittent and not regular and depend upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intention to carry on business and relying on the decisions of Hon'ble Supreme Court in case of Commissioner of sales tax vs Sai Publication Fund (supra), Hon'ble Rajasthan High Court decision in case of CIT vs Jodhpur Development Authority (supra), Hon'ble Madras High Court in case of Tamil Naidu Cricket Association vs DIT(E) (supra), Hon'ble Delhi High Court i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se exemption as a charitable trust. No doubt, it would be impossible for persons in charge of a trust or institution to so carry out activity that the expenditure balances the income and there is no resulting profit. But certainly, if the consideration is charged at market rate, than it can not be said that there is an element of charity. % of profit involved in the charging for the services is major factor which will decide whether the same is tainted with commerciality or charity. In the context of sports, promoting cricket would be a charitable activity if it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of RCI. Perusal of the relevant details clearly shows that the activities fall in the definition of 'Business'. The facts of A.Y. 2008-09 are indicative of the intention of the RCA that RCA is engaged in minting money in variety of ways. Annual Accounts for the F.Y. 2007-08 for income under following heads:- India V/s Pakistan (One day internation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games." 34. Thereafter taken into consideration the decision of the Hon'ble Supreme Court in the case of ACIT Vs Surat City Gymkhana (2008) 14 SCC 169, CIT-1, Jodhpur Vs Jodhpur Development Authority (2016) 287 CRT 473 (Raj), Tamil Nadu Cricket Association Vs DIT (2013) 86 CCH 212, DIT(E) Vs The Chembur Gymkhana (2012) 345 ITR 86 and DIT(E) Vs Khan Gymkhana (2016) 385 ITR 162 (Bom) has decided the matter in favour of the assessee and against the department and the findings and the directions of the Hon'ble Rajasthan High Court are contained at para 8 to 12 of its order which read as under: "8. We have heard counsel for the parties. 9. In our considered opinion, the contention which has been raised pursuant to the observations and amendment which is made under Section 12AA of the Income Tax Act and proviso whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Department to take appropriate action in respect of expenses and income which are not in accordance with approved by-laws. In other words, where the activities are not conducted in accordance with the approved by-laws, the Department is at liberty to take action as per law. In the instant case, we find that there is no finding recorded by the Assessing officer that the activities and operations of the assessee society are not in accordance with its approved objects and by-laws. Further, nothing has been brought to our notice by the ld CIT D/R during the course of hearing that any of the activities of the assessee society are not in accordance with its objects and bye-laws. Therefore, the said decision of the Hon'ble Rajasthan High Court will apply with equal force for the impugned assessment year, being the decision of the Jurisdictional High Court in assessee's own case where the facts and circumstances of the case are identical. Further, it is a well settled legal proposition, as has been laid down by the Courts from time to time and which has been reiterated by the Hon'ble Supreme Court in case of Godrej & Boyce Manufacturing Company Ltd. (394 ITR 449) that: "While it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and circumstances of the case, following the rule of consistency as upheld by the Courts from time to time and more so in view of the fact that the matter is covered by the decision of the Hon'ble Jurisdictional High Court, we are of the considered view that there is no basis to interfere with the consistent position which has been accepted in the earlier years that is, to hold that the predominant object of the assessee society is promotion of sport of cricket and all its activities are guided towards achieving the said objectives and thus, the proviso to section 2(15) doesn't apply in the instant case. 36. We also refer to the decision of the Hon'ble Gujarat High Court in case of DIT (Exemptions) vs Gujarat Cricket Association (supra) and the relevant findings read as under: "35. It appears from the line of reasoning adopted by the Assessing Officer and the CIT(A) that both are absolutely mesmerized or rather hypnotized by the word "BCCI" The corpus with the BCCI may be huge and the BCCI may be indulging in commercial transactions like TV rights, IPL matches etc. However, we fail to understand what has the BCCI to do directly with the assessee. The assessee is a regis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on the charitable basis as far as real beneficiary is concerned. Whenever the revenue is earned, the same is not on commercial lines and the same could be said to be earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not in full." "136. It is important to note that prior to the introduction of the Proviso to section 2(15) of the Act, the assessee-Association was granted registration under section 12A of the Act. From this, it is clear that prior to the introduction of the Proviso to section 2(15) of the Act, the authority, upon due consideration of all the relevant aspects, arrived at the satisfaction that the assessee-Association was established for charitable purposes... The Association continues to be recognised as a charitable institution. The certificate issued under section 12A, after due inquiry, is still in force. If the Proviso had not been introduced by virtue of the Finance Act, 2008....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit but the object is to promote the game of cricket and nurture the best of the talent." "148. Carrying on an 'activity in the nature of trade, commerce, or business' or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn between the activities undertaken by a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to whether it is aimed at carrying on some business, trade or commerce or the furtherance of the object for which it was set up. If it falls in the first category, then, the case would be covered within the proviso to section 2(15) and, in the otherwise scenario, the assessee will be construed to have carried on its activities of general public utility. (see Society of Indian Automobile Manufactures v. ITO [2016] 71 taxmann.com 138/159 ITD 659 (Delhi - Trib.)" "163. We sum up our final conclusions as under; (i) In carrying on the charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if the assessee existed for profit. The word "profit" means that the owners of the entity have a right to withdraw the surplus for any purpose including the personal purpose. (ii) It is not in dispute that the three Associations have not distributed any profits outside the organization. The profits, if any, are ploughed back into the very activities of promotion and development of the sport of cricket and, therefore, the assessees cannot be termed to be carrying out commercial activities in the nature of trade, com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s are ploughed back into the activities of promotion and development of sport of cricket, the assessee cannot be termed to be carrying out commercial activities in the nature of trade, commerce or business. Further, making a distinction between the state cricket associations and the BCCI, it has been held that these are separate and distinct organizations and taxable entities in their individual capacity and merely on account of the fact that a state cricket association is a member body of BCCI, it cannot be held liable for activities of BCCI and what is only relevant is objects and activities of the state cricket association and not that of BCCI while deciding its taxability. It has been held that the activities of BCCI in form of exhibition of sports and earning profit out of it may be commercial in nature, however, the fact that the BCCI distributes and the state cricket association receive a share of such receipts, the activities of BCCI cannot be construed as activities of the state cricket association. Further, it has also been held that where any state cricket association hosts any international matches at the behest of BCCI, the income from sale of tickets would not portray....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale of tickets from one day international and IPL matches are incidental and ancillary to its predominant object of the promotion of sport of cricket and cannot be construed as commercial in character attracting the proviso to section 2(15). Further, other receipts in form of IPL subvention, TV subsidy from BCCI and other receipts etc are dependent upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intent to carry on business and thus, doesn't attract the proviso to section 2(15) of the Act. Lastly, the assessee society generating surplus from these receipts after meeting its expenditure on year to year basis is not reflective of its intent and existence for profit. It is not the case of the Revenue that such surplus are distributed by the assessee society to its members rather the admitted facts are that such surplus is ploughed back by the assessee society for building the necessary infrastructure and conduct of other capacity building activities for the promotion of the sport of cricket in the state of Rajasthan. Similar issue has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions of section 10(23C)(iiiad) of the Act were under consideration of Hon'ble Supreme Court . The Revenue therein has argued that the legislature and the language employed in the statute doesn't contemplate making of large profits and if an educational institution, in fact, makes large profits, then even though it may plough such profits back into the purchase of assets for education, yet such institution cannot be said to be existing solely for educational purposes and it would really be for profit. The Hon'ble Supreme Court negated the said line of arguments put forward by Revenue and referred to its earlier decisions rendered in case of Addl. CIT v. Surat Art Silk Cloth Mfg. [1978] 121 ITR 1/[1979] 2 Taxman 501 (SC), Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310/90 Taxman 528 (SC) and American Hotel & lodging Assn. Educational Institute v. CBDT [2008] 301 ITR 86/170 Taxman 306 (SC) and laid down the following principles in law as set out in paragraph 11 of its decision which reads as under: '11. the law common to section 10(23C)(iiiad) and (vi) may be summed up as follows: (1) Where an educational institution carries on the ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Lodging association (supra). To decide the entitlement of an institution for exemption u/s 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [see5 Judges constitution Bench Judgment in the case of Surat Art Silk Cloth Manufactures association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act . The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those condit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act, 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11(1)(a)." 19. Subsequently, the Hon'ble Supreme Court in its subsequent decision in case of Visvesvaraya Technological University v. Asstt. CIT [2016] 384 ITR 87/239 Taxman 395/68 taxmann.com 287, in context of section 10(23C)(iiiab), referred to principles laid down in Queen's education society (supra) and stated that one further test as laid down in Surat Art Silk Cloth Manufacturer's Association (supra) and culled out in American Hotel & Lodging Association Educational Institute (supra) may be added which is as follows: "In order to ascertain whether the institute is carried on with the object of making profit or not it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established ." In the said decision, it further states that the above principle has been specifically reiterated in paragraph 19 of the decision in Queen's Educational Society (supra) in the following terms: "The final conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall out of Section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty has also established a university, "Jaipur National University" for the promotion of technical and other higher education where the Society is the sponsoring Mahima Shiksha Samiti, Jaipur v. ACIT,(Exemption), Jaipur body of the University and has helped set up the University and its infrastructure. Here, it would be relevant to note the surplus that has been generated by the assessee society over the years starting AYs 1999-00 to 2011-12 and to what extent the same has been utilised over the years: Assessment Year Surplus as per Audited balance sheet (Rs.) Application of Funds in Fixed Assets as per Audited balance sheet (Rs.) 1999-00 1,62,46,018.00 1,50,20,208.00 2000-01 2,36,72,347.34 1,30,51,311.00 2001-02 2,84,80,341.36 2,40,39,164.00 2002-03 2,53,17,807.95 5,14,73,987.00 2003-04 2,83,71,052.55 9,65,26,288.00 2004-05 2,80,82,530.20 7,27,88,255.00 2005-06 4,18,59,223.00 4,75,03,260.00 2006-07 5,96,81,354.00 5,12,75,041.00 2007-08 6,77,92,066.00 11,25,15,384.00 2008-09 12,44,29,983.15 9,87,57,585.00 2009-10 6,36,87,969.81 1,89,47,976.00 Sub Total 50,76,20,693.36 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established. In our view, the view of the CBDT is in consonance with the express wordings provided and intended by the legislature in 10(23C)(vi) and in comfirmity with the law laid down by the Hon'ble Supreme Court in case of Queens Education Society where it is provided that where the surplus is ploughed back for education purposes, the educational institution exists solely for educational purposes and not for purposes of profit. The same will apply with equal force in context of section 11 as similar safeguards have been provided in terms of accumulation and utilisation of surplus so generated for the purposes of charitable purposes in terms of section 11(2) of the Act. 23. It is further noted that similar issue has come up in the past right from AYs 2001-02 to 2009-10 wherein the exemption u/s 11 has been denied to the assessee society on account of generating surplus year on year. However, the Coordinate Benches have consistently taken a view that looking at the scheme of exemption as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses are not related to the income generating activities of the assessee while holding that the expenditure is in nature of application of income. 44. It was submitted that the district associations are affiliated to the RCA and the survival of the District Associations depends upon the RCA only. The grants provided to the District associations are for the sole purpose of promotion, organization, management and for controlling the game of cricket, which is the prime objective of the RCA also. The break-up of expenditure is provided as below: Subsidy to District Associations 48,00,000/- Infrastructure Development 41,27,634/- Cricket equipments to DCA 98,42,391/- Total 1,87,70,025/- 45. The issue was discussed in detail in the assessment order where it was mentioned by the AO that " During the course of assessment proceedings, it was found that the assessee has given grants to the district amounting to Rs. 1,88,53,747/- ( including TA/DA of Rs. 83722/-). The assessee was asked vide note sheet entry dated 29/01/2014 to show cause why the entire grants of Rs. 1,88,53,747/- given to districts may not be disallowed as these expenses are not directly related t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rust for charitable purposes was proper application of income for charitable purposes in the hands of the donee trust and it would not affect the exemption claimed as application by the Donor trust. In case of Divya Yog Mandir Trust, the Delhi Bench of ITAT in its order dated 30.04.2019 has held that " we are of the considered opinion that donation by one charitable trust to another for utilization by Donee trust towards charitable objects is proper application of Income for charitable purposes in the hands of the donee trust and it would not affect the exemption claimed by the assessee under section 11 of the Act." From the facts as recorded by the AO are very clear & there was no dispute that the done trust has applied it for the charitable purpose & apparently all the expenses are for promotion of the game of Cricket. It is therefore, apparently clear from the facts that the disallowance of the grants to district cricket association was wrongfully disallowed as it should have been allowed as application of income by the assessee. 49. Per contra, the ld D/R relied on the findings of the lower authorities. 50. We have heard the rival contentions and purused the material avai....