AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 1046
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.... 2(15) is invoked in the case of the assessee as the activities of the assessee are being run on commercial basis, there being no element of charity. 2. Any other question of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon'ble Tribunal in the interest of justice. 2. The brief facts of the case are that the assessee is a society trust registered under Rajasthan Society Trust Registration Act, 1958 and also registered under Sport Association's Registration Accreditation Act, 2005 with the main object of promotion and development of the game of Cricket in the State of Rajasthan. The assessee society filed its return of income on 08.02.2006 declaring total income at NIL after claiming the exemption U/s 11/12 of the Income Tax Act, 1961. The assessment was completed u/s 143(3) of the Income Tax Act 1961 on Nil income dated 31.12.2007. The ITO reopened the assessment vide notice u/s 148 dated 20.12.2011 and completed the assessment under section 147 of the IT Act on 29.03.2013 at a total income of Rs. 20,28,203/- by making addition on account of net surplus as per income and expenditure account at Rs. 15,37,806/- and disallowance....
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....as been provided reasonable opportunity of being heard by the Id CIT .The assessee trust made it clear that this amendment in object of memorandum in 2005 was due to change made in the Rajasthan Sports (registration, Recognition and Regulation of Association) Act, 2005. The amended objects were not voluntary change. The assessee has to follow the said law related to sports activity. The comparison given by the ld. CIT in his order dated 28/03/2013 does not show any fundamental deviation from the original charitable activities to non-charitable activity. The assessee's object to promote the cricket by providing/involving various activities at the district level to state level through coaching provided by coaches, ground and facilities etc. Therefore the assessee's activities are charitable. The other activities are incidental or conducive of the main activity. The case law referred by the assessee particularly the Hon'ble Delhi High Court decision in the case of Mool Chand Khairati Trust (supra) is squarely applicable as the assessee amend the provisions, does not change the character of the assessee from charitable to non-charitable or commercial. At the time of registration, the l....
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.... appeal from No. 1 to No 5 are allowed." Hence the ld. CIT (A) has deleted the addition and accepted the claim of the assessee being eligible for exemption under Sections 11 and 12 of the Act. Aggrieved by the order of the ld. CIT(A), the Revenue has filed the present appeal. 4. Before us, the ld. D/R has submitted that the AO has reopened the assessment because of withdrawal of registration by the ld. CIT (Exemptions) under section 12AA(3). Since, the registration has been granted by the order of ITAT Jaipur Bench in ITA N0. 544/JP/2013 dated 09.06.2016 and also upheld by Honorable Rajasthan High Court, at this juncture the issue is covered in favor of the Assessee. 5. On the other hand, the Ld AR mentioned the detailed facts of the case and relevant decisions of this Coordinate Bench of the ITAT Jaipur in assessee's own case and also the decision of Hon'ble Rajasthan High Court citing the operating part of the decision, as mentioned in the order of the Ld. CIT (A). Further the Ld AR also referred the detailed order of the ITAT Jaipur Bench in ITA No. 1355 & 1356/JP/2018 dated 25.11.2020 wherein the full facts have been dealt with and the relevant cases of Hon'ble High Co....
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....st 4 or 5 years, which indicate that the assessee is earning huge surplus from the activities carried out by it. The Assessing Officer further observed that the assessee's investment is increasing, this shows that the assessee is converting the surplus into investment which in turn has strengthened its capacity to earn more. Therefore, he concluded that the assessee exist for purpose of earning profit and the applicant is not promoting sports on non-profit basis. The assessing Officer further observed that that the assessee had built a premises in the name of Rajasthan Cricket Academy, which has been given on rent to a service provider on a monthly rent of Rs. 75,000/-. The agreement executed with the service provider states that booking for 28 rooms will be made through service provider. The Assessing Officer reproduced the clause 2.2.1 of the agreement and inferred that the said clauses leave no doubt for the commercial exploitation of the property by the service provider under the direct control of the RCA. He observed that in the present case the service provider is paying to the RCA for using the premises as hotel. It is clear for the same that the motive of RCA is to maximize....
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....ls within the category of general public utility. Therefore, the proviso to section 2(15) would come into play. It is submitted that the looking to the quantum volume and nature of receipt goes to demonstrate that the assessee is engaged into commercial activity and for the purposes of making profit. Per contra it is contended that the assessee is an association registered under Rajasthan Sports (Registration, Recognition and Regulation of Association) Act, 2005 and formed with objective of promoting of sport of cricket within the state of Rajasthan. RCA, under a memorandum of understanding with Rajasthan State Council has exclusive use and possession of SwaiMansingh Stadium for the purpose of organizing national and international matches. The main object of the association is to control, supervise, regulate, or encourage, promote and develop the game of cricket in the areas under the jurisdiction of Association on no profit or no loss basis. It is contented that the assessee was holding registration under section 12A of the Act with effect from 25th Nov. 1988, and thus was claiming exemption u/s 11 on this basis. The ld. CIT, withdrew the registration under section 12A of the Inco....
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.... The subsidies are a form of financial aid granted for promoting a specific cause, which is ultimately for the benefit of overall section of public but never or the benefit of an individual organization. It is contended that the subsidy received by the RCA is utilized in the promotion and development of sports of cricket in state at each level, i.e. from mufasils areas to big cities like Jaipur. It is also contended that renting out by premise by RCA has been viewed adversely in the context it was submitted that RCA is formed with a sole objective of promoting cricket and with the view to achieve the desired objective the renting of premises as done is wholly and exclusively for the purpose of cricket and no other activity of whatsoever nature has been carried out neither it is engaged in the systematic activity as hotelier. Thus, the main act of association is fully in the direction of achieving its basic object of promoting cricket. It is contended that RCA is provide technical and financial support to the all District Cricket Association i.e. providing equipments, nets, balls, etc. without any consideration on other side RCA is getting only affiliation fee from them which is ver....
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....s in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all instadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct o the matches. BCCI earns revenue by way of sponsorship and media right 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 Tribunal's view that it is an entertainment and hence offended Section 2 (15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question ....
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.... with the statutory provision governing the issue and judicial pronouncement made in this respect. The revenue has not doubted that the assessee has conducted matches of the Cricket. The only suspicion with regard to the activity is that during the one-day international played between India and Pakistan, there was huge surplus and the assessee had rented out rooms to belonging to the society at a very higher rate. Therefore, it can be inferred that the Assessing Officer is swayed by the volume of receipts. These identical facts, were also before the Hon'ble Madras High Court in the case of Tamil Nadu Cricket V. The Director of Income Tax(E)(supra) wherein the Hon'ble Court opined that by the volume of receipt inference that activity is commercial cannot be drawn. It was observed by the Hon'ble High Court, that the basis of the decision of the Tribunal was on irrelevant consideration. It was held that these considerations are not germane in considering the question whether the activities are genuine or carried on with the object of the association. It is also noteworthy that as per section 11(4A) substituted by the Finance Act, 1983 with effect from 1/4/1984 sub section 1 o....
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....to earn profit. Whereas the association never acted as a professional advertiser, TV producer etc. No matches or any game other than Cricket or no other events are organized to attract audience rather only cricket matches are being organized whether the same result into profit or loss. It is contented that all Cricket Matches do not attract audience but due to historical background in the case of match between India and Pakistan audience for such match remains abnormally high. Therefore, under these peculiarity of fact it making inference that the assessee is engaged into commercial activities is not justified. 7. We have given our thoughtful consideration to the rival submissions of the parties. If volume of receipts and constant increase into surplus is considered, this necessity gives impression of commercial activity. Let us appreciate the facts in light of various judicial pronouncement. The Hon'ble Supreme Court in the case of Commissioner of Sale Tax vs Sai Publication Fund 258 ITR 70(SC) has held: "There is no dispute that the primary and dominant activity of the trust is to spread the message of Saibaba. This main activity does not amount to "business". T....
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....e conducted totally on commercial lines. For this reasoning the assessing officer is again considered the quantum of amounts received from BCCI as TV subsidies and subsidy from Cricket Tournament from the records. It is the contention of the assessee that the main source of receipt was the match conducted between India vs. Pakistan. This fact is not refuted by the revenue by placing any contrary material. The Coordinate Bench of this Tribunal in the case of District Cricket Association vs. DIT, wherein the Coordinate Bench has decided the issue in para 10.9 of the order as under: "Thus respectfully following the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from a) ground booking charge, b) health club charges, c) income from corporate boxes, d) lawn booking income ,e) sponsorship money and sale of ticket, advertisement, souvenirs and other such receipts do not result in the assessee being held a undertaking activities in the nature of "trade, commerce and business". These receipts are intrinsically related, interconnected and interwoven with the charitable activity and....
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.... 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 o objects of general public utility, if would remain charitable even I an incidental entry into thepolitical domain for achieving that purpose e.g. promotion of or opposition to legislation concerning that purpose, I contemplated." (emphasis added) 20. In sole Trustee, Lok Shikshana Trust vs. CIT, (1975) 101 ITR, 254, the Hon'ble Supreme Court observed: "If the profit must necessarily feed a charitable purpose under the terms of the trust, the mere facts that the activities o the trust yield profit will not alter the charitable character of the trust. The restrictive condition that purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the object." 21. In the matter of "Additional CIT vs. Surat Art Silk Cloth Manufactures Association", (1980) 121 ITR, 1, the Hon'ble Supreme Court held that if the primary or dominant pur....
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....sion would prima facie include all objects which promote the welfare of the general public. If cannot be said that a purpose would cease to 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 any 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 ( Addl. CIT v. Surat Art silk Cloth manufacturers Association [1980] 121 ITR 1 (SC). The present case in our view is squarely covered by the judgment of this court in the case of CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR1 (SC) in which it has been held that since the corporation was established for purpose of providing efficient transport system, having no profit motive, though it earns income in the process, if is not liable to income-tax. Applying the ratio of ....
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....titution are undertaking are highly relevant to decided the issue of applicability of proviso to section 2 (15)." 26. Coming to the decision of Jammu & Kashmir High Court in Jammu Development Authority's case (supra), relied upon by learned counsel for the Revenue, reveal that the appeal preferred by the Jammu Development Authority was dismissed by the court observing that there are findings of facts that the assesseeappellant has not been acting to advance any of the object concerning general public utility. Further while referring to first proviso to Section 2(15), the court has observed that "we find that no substantial question of law much less a substantial question of law would emerge from the impugned order of Income Tax Appellate Tribunal warranting admission of the appeal."A bare perusal of the order reveal that the catena of decisions of the Hon'ble Supreme Court referred to hereinabove, interpreting the effect of first proviso in context of the main provision of Section 2(15), which defines 'charitable purpose', were not brought to the notice of the court and therefore, the said order passed by the court by merely recording its ipse dixit does not help the Reven....
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....ated to be rendering of service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which has held earlier are not trade, commerce or business. In the present case also the main activity of the assessee is conducting of the cricket match which falls under the category of general public utility. This fact is not disputed by the Revenue. All these activities an ancillary to the main activity. Therefore, we are of the considered view that the Assessing Officer was not justified in declining the exemption. Ld. CIT (DR) vehemently urge that first proviso to clause (15), Section 2 of the Act, therefore, as per section 13(8) of the Act nothing contained in section 11 or Section 12 shall operate, so as to exclude of income of total income of previous year of the present. As we have held that in the light of the various judicial pronouncement proviso to clause (15) to Section 2 of the Act would not be applicable on the facts of the present case. Ld. DR has relied on the decision of the co-ordinate Bench in the case of Entertainment Society of Goa Vs. CIT (2013) 34 Taxmann.com 201(Panji). This....
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.... precedents laid down by various Courts. 31. We further note that against the said decision of the Coordinate Bench, the Revenue has thereafter moved an appeal before the Hon'ble Rajasthan High Court in D.B. Income Tax Appeal No. 252/2017 wherein the following substantial questions of law were admitted by the Hon'ble Rajasthan High Court: "i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in allowing exemption u/s. 11 of the IT Act, 1961 in spite of the fact that the proviso to Section 2(15) is invoked in the case of assessee as the activities of the assessee being run on commercial basis and there being no element of charity? ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in holding that the assessee is liable to claim depreciation of Rs.2,16,62,215/- on the assets which were claimed as application u/s. 11 at the time of purchase?" 32. The Hon'ble High Court has taken into consideration the nature of activities undertaken by the assessee society and nature of receipts being accounted for in its books of accounts in form of one day intern....
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....n Cricket Association and Hotel Radiant Star Hospitalities Pvt. Limited, Jaipur, it is seen that the activity of the RCA is being done on commercial basis. With the above discussion it is clear that the activities of the trust are not being carried out in accordance with the objects of hetrust as registered by the department on 25.11.1988. The registration u/s 12A of the I.T. Act, 1961 granted to the assessee from the A.Y. 2005-06 and onwards is therefore, withdrawn." 33. The Hon'ble High Court has also taken into consideration the CBDT Circular dated 24/09/1984 wherein promotion of sports and games were considered as charitable activities within the meaning of Section 2(15) of the Act and the relevant para reads as under: "7.1 He also relied upon the Government Circular dt. 24.9.1984 wherein CBDT has issued circular and has explained charitable purpose as under:- "SECTION 2(15) CHARITABLE PURPOSE 10. Whether promotion of sports and games can be considered to be charitable purpose 1. The expression "charitable purpose" is defined in section 2(15) to include relief of the poor, education, medical relief and the advancement of any....
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.... If there is any breach of any condition/s then they may cancel the registration, however, they have to follow the procedure. The contention that non communication of changes of purpose will automatically cancel the registration, in our considered opinion, is not a valid argument. However, in view of the specific clause which has been there under Form 10A, we are of the considered opinion that it will be open for the department while making assessment to follow provision of Section 11(5) and Section 13 to disallow the expenses of the income as the case may be, if the same is not income in expenses as per the approved bye-laws but nonetheless cancellation of registration is uncalled for. 12. In that view of the matter, all the issues are answered in favour of the assessee and against the department. However, we make it clear that earlier order which has been passed by the High Court, we are not modifying in any manner whatsoever, it will be open for the department to take appropriate proceedings in accordance with law." 35. We therefore find that the order so passed by the Coordinate Bench has been affirmed by the Hon'ble Rajasthan High Court and is thus binding on....
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....ough the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." There has to be compelling reasons for a departure from the past settled position wherein the assessee society has been held to be engaged in the field of sports and its predominant activity being the promotion of Cricket in the State of Rajasthan all these years and such reasons have to be spelt out clearly by the Assessing officer. It has been contended by the ld A/R that there is no change in the nature of activities and the activities are the same as carried out by the assessee society as in earlier year. As we have noted above, even on perusal of the assessment orders and the findings of the Assessing officer, there is no finding recorded by the Assessing officer that the nature of activities being carried on by the assessee society has changed since last years and even during the course of hearing, the ld CIT D/R has not submitted anything contrary to the contentions so advanced by the ld A/R and as found from ....
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....s. Are the authorities trying to convey that the Association should not sell tickets even when it comes to international matches. How does the Revenue expect the Association to distribute the tickets in such circumstances. 37. Having regard to the materials on record, we are convinced that the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in the State of Gujarat. The undisputed fact is that over a period of years, this activity has been recognized by the Income-tax Department as a charitable activity and the registration under section 12A of the Act was granted to the assessee. A number of assessment orders under section 143(3) were passed, wherein the assessee was held 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"....
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....o 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 prohibited. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on....
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....derstood with the help of a simple illustration. Supposing an association set up for the promotion of a particular trade, has its own premises' from which it carries out the activities for the promotion of such trade. If the association lets out its premises from time to time for enhancing its income, which letting out has no relation with the objects for which it was set up as a charitable institution, namely, the promotion of that particular trade, the resultant activity will amount to carrying on trade, commerce or business so as to fall within proviso to section 2(15). 0n the other hand, if it uses its premises for undertaking activities for which it was set up and is a charitable institution, and while doing so, there results some income, such income will not amount to carrying on any trade, commerce or business. The crux of the matter is to understand the object of carrying on the activity which resulted into income. If the object is to simply earn income de hors the promotion of objects for which it was set up, it will fall within the ambit of proviso to section 2(15) and if the object of the activity is to promote the objects for which it was set up, then it will not be....
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....mber body can be held liable for taxation on account of the activities of the apex body. 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 assesseesand 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." 37. We find that in the aforesaid decision, the Hon'ble Gujarat High Court in the context of proviso to section 2(15) held that in deciding whether any activity is in nature of trade, commerce or business or any service in relation to any trade, commerce or business, the element of profit making is essential. If the object is to simply earn income dehors the promotion of objects for which it was set up, it will fall within the ambit of the proviso to section 2(15) and if the object of the activity is to promote the objects for which it was set up, then it will not be caught within the sweep of the proviso notwithstanding the fact that there results in some income from carrying on such activity. In other words, ....
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....n so laid down by the Courts in the instant case, we find that the predominant object of the assessee society remains the promotion, organization and control of the game of cricket in the state of Rajasthan as apparent from the following objectives as per Article 5 of the memorandum of the assessee society: (a) to promote, organize, manage and control the game of cricket within its jurisdiction. (b) To control and improve quality and standards of the game of Cricket in Rajasthan, lay down policies, roadmaps, guidelines and make rules and regulations (and amend or alter them) in all matters relating to the game of Cricket, recognizing that the primary stakeholders are the Players and Cricket fans in Rajasthan, and that accountability, transparency and purity and integrity of the Game are the core values (c) To provide for measures necessary for promotion and development of the game of Cricket in Rajasthan, welfare and interest of Cricketers and elimination of unethical and unfair practices in the Game of cricket in Rajasthan; and for that purpose, organize coaching schemes, establish coaching academies, hold tournaments, exhibition matches, Test Matches, O....
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....n commercial basis by charging hefty fees and generating heavy surplus from its education activity just like a business establishment with dominant motive being to earn profits. Negating the submissions of the assessee society that it is imparting education through various institutions and therefore carrying on charitable activity within the meaning of section 2(15), the Assessing officer held that looking at the fee structure of the institutions run by the assessee society, the children of common people and weaker section cannot afford to take education in these institutes and imparting education at such high cost cannot be treated as that of general public utility. Therefore, it was held that assessee society is not carrying on any charitable activity and surplus generated every year under various heads of fees cannot be held to be 'income from property held for charitable purposes' for the purposes of section 11(1) of the Act and the assessee society is therefore not entitled to exemption u/s 11 of the Act. In addition, the Assessing officer noted that the assessee society has allowed various benefits to persons covered under section 13(3) and in view of the provisions o....
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....not be cease to be one existing solely for educational purposes The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons.' 16. The Hon'ble Supreme Court in above decision also approved the decision of Hon'ble Punjab and Haryana High Court in case of Pinegrove International Charitable Trust v. Union of India [2010] 188 Taxman 402/327 ITR 73. In that case, Chief CIT, Chandigarh withdrew the exemption under section 10(23C)(vi) stating that the profits are substantial and arising year after year and not incidental as held in case of Aditanar Educational Institution and the assessee should reduce the fees and apply a fresh. In that background, the Hon'ble Punjab and Haryana High Court held as under: "8.13 From the aforesaid discussion, the following principles of law can be summed up - It is obligatory on the part of Chief Commissioner of Income-tax or the Director which are the prescribed authorities, to comply with proviso thirteen (un-numbered). Accordingly , it has to be ascertained whether the educational institution has been applyin....
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....eir character as such and would be eligible to apply for exemption under section 10(23C)(vi) of the Act. Where more than 15% of income of an educational institution is accumulated on or after 1st April, 2002, the period of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess income has been applied or accumulated for application wholly and exclusively for the purpose of education." 17. The Hon'ble Supreme Court also approved the decision of Hon'ble Bombay High Court in case of Tolani Education Society v. Dy. DIT (Exemptions)[2013] 351 ITR 184/214 Taxman 58/30 taxmann.com 165 as under: "24. ......Also in Tolani Education Society v. Deputy Director of Income Tax (Exemption) &Ors.,[2013] 351 ITR 184, the Bombay High Court has expressed a view inline with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: .....The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the ....
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....wherein similar provisions exist in terms of accumulation and plough back of surplus for educational purposes as the intent behind both the provisions is essentially the same. The said analogy also becomes clear from the fact that the Hon'ble Supreme Court in case of Queen Education Society has itself referred to and approved its earlier decision in case of S.R.M.M.C.T.M Tiruppani Trust v. CIT [1998] 230 ITR 636/96 Taxman 635 which was rendered in context of section 11 while discussing the principle of accumulation and utilization of surplus for educational purposes in para 19 of its order as under: "...9. In the present case, the assessee is not claiming any benefit u/s 11(2) as it cannot, because in respect of this assessment year, the assessee has not complied with the conditions laid down in section 11(2). The assessee however, is entitled to claim the benefit of section 11(1)(a). In the present case the assessee has applied Rs. 8 lakhs for charitable purposes in India by purchasing a building which is to be utilized as a hospital. This income, therefore, is entitled to an exemption u/s 11(1). In addition u/s 11(1)(a), the assessee can accumulate 25% of its total i....
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....ersity. The difference between the fees collected and actual expenditure was significant and represents only a minuscule part of the fees collected. No remission, rebate or concession in the amount of fees charged under the different heads were granted to the students. At the same time, it was noted that University has grown, number of private engineering colleges affiliated to it has increased from about 64 to 194, the infrastructure of the University has increased offering educational avenues to an increasing number of students in different and varied subjects. The University has spent about Rs. 504 crores and available surplus in the year 2010 to the tune of Rs. 440 crores was also intended to be applied for different infrastructural work. In the above factual matrix, it was noted by the Hon'ble Supreme Court that there is no manner of doubt that the surplus accumulated over the years has been ploughed back for educational purposes and it was held that the appellant University exists solely for educational purposes and not for the purposes of profit. 20. In our view, the above decision of Hon'ble Supreme Court in case of Visvesvaraya Technological Unive....
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....rein, the guidance to the Field Officers has been provided precisely on the issue under consideration on generation of surplus out of gross receipt, the relevant para is reproduced as follows:- "3. Generation of surplus out of gross receipts: A doubt has been raised whether generation of surplus out of gross receipts would necessarily 'breach' the threshold condition that the educational institution should exist 'solely for educational purpose and not for the purpose of profit'. Perusal of prescribed provisions clearly reveal that mere generation of surplus cannot be a basis for rejection of application u/s 10(23C)(vi) on the ground that it amounts to an activity of the nature of profit making. In fact, the third Proviso to the said clause clearly provides that 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". Hence, it is clarified that mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes ....
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....hes referred supra, the matter is decided in favour of the assessee society and against the Revenue. In the result, the appeal of the Revenue is dismissed. " 6.2 Taking into consideration the aforesaid discussions and in the entirety of the facts and circumstances of the case and also respectfully following the decisions of the Hon'ble Supreme Court, Hon'ble Rajasthan High Court in assessee's own case and the decisions of the Coordinate Benches of the Tribunal, supra, Ground no.1 of the appeal is decided against the revenue and in favour of the assessee. Ground no. 2 is general in nature and needs no adjudication. 7. In result, the appeal of the revenue is dismissed. ITA No. 67 & 68/JP/2022 8. These two appeals of the Revenue in ITA No. 67 & 68/JP/2022 for the assessment years 2012-13 and 2013-14 are wholly on similar facts and grounds. With the consent of both the parties, the ITA no. 67/JP/2022 for the assessment year 2012-13 is taken as lead case for the purpose of adjudication and the decisions arrived at, will be applicable to other appeal i.e. ITA No. 68/JP/2022. The grounds raised by the revenue in ITA no. 67/JP/2022 are as under :- 1. "On the facts a....
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....s and Objects in the Constitution of Rajasthan Cricket Association and further that, since now, the registration has been restored under section 12A, all application are allowable under section 11 of the Act. Further, the assesee has mentioned that the very similar matter has been decided in assesee's own case in ITA no. 284/JP/2020 dated 25.11.2020 for the assessment year 2011-12 in favour of the assessee. The ld. A/R further submitted that the ld. CIT (A) while adjudicating the matter, following the decision of the Jaipur Bench of the Tribunal in the assessee's own case in ITA No. 284/JP/2020 dated 25.11.2020 for the assessment year 2011-12 decided the matter in para 8.3.1 of his order, in favour of the assessee, as under :- " 8.3.1 The issue is related to disallowing the grant of Rs. 2,85,03,980/- made to the District Associations holding that the same is of capital nature or in nature of application of income and therefore, not allowable as revenue expenditure. It is noted that similar disallowance was made for A.Y 2011-12 and CIT(Appeals) had held the matter against the appellant and appeal was filed before the Hon'ble ITAT, Jaipur in ITA no. 284/JP/2020 wherein vide ....
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...., there is no dispute that the assessee is duly registered u/s 12A of the Act and is eligible for exemption under section 11 and 12 of the Act and therefore, the said expenditure is clearly in nature of application of income as the same has a direct nexus with the objectives of the assessee society in terms of promotion of sport of cricket in the state of Rajasthan. In the result, the matter is decided in favour of the assessee and against the Revenue and the ground of appeal so taken by the assessee society is thus allowed." We, therefore, following the decision of the Coordinate Bench of the ITAT Jaipur in assessee's own case, supra, allow the expenditure incurred by the assessee by way of grants given to various District Cricket Association amounting to Rs. 2,85,03,980/- as claimed by the assessee . Accordingly ground no. 2 of the revenue is dismissed. Ground no. 3 relates to adopting accrual system of accounting and not the payment system of accounting as the Trust/AOP/Society/Institution exempted under the IT Act is not employed to adopt accrual system of accounting. 14. The brief facts of the case are that during the course of scrutiny assessment proceedings, the AO ....