TMI Blog2019 (6) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... n object of general public utility. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. Conclusions - we are of the considered view that the authorities below were in error in invoking the proviso to Section 2(15) and thus in declining the benefit of Section 11 and 12 to the appellant cricket associations. To this extent, plea of the appellants must be upheld - Decided in favour of assessee - ITA No. 2675/Ahd/2017 - - - Dated:- 11-6-2019 - Pramod Kumar, VP and Ms. Madhumita Roy, JM SN Soparkar Parin Shah, for the Appellant. Aparna Agarwal, for the Respondent. ORDER Pramod Kumar, 1. By way of this appeal, the assessee-appellant has challenged correctness of the learned CIT(A) s order dated 22nd September 2017 in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2014-15. 2. Grievances raised by the appellant are as follows:- 1. The learned Commissioner of Income Tax (Appeals) - 9, Ahmedabad [ the CIT(A) ] erred in fact and in law in confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in confirming the action of the learned AO in initiating penalty proceedings u/s 271(l)(c) of the Act. 3. Learned representatives fairly agree that the issues in appeal are covered, in favour of the assessee, by a decision of the coordinate bench in the case of Gujarat Cricket Association Ors* (*including Baroda Cricket Association) Vs. JCIT [(2019) 101 taxmann.com 45 (Ahd)] wherein it was, inter alia, observed as follows:- Our analysis: 31. As we proceed to deal with the impact of insertion of proviso to Section 2(15), we consider it appropriate to look at a coordinate bench decision, in the case of Hoshiarpur Improvement Trust v. ITO [2015] 155 ITD 570/61 taxmann.com 162 (Asr. - Trib.)], wherein, speaking through one of us (i.e. the Vice President), the coordinate bench has, inter alia, observed as follows: 14. Before we address ourselves to the facts of this case, let us analyse the relevant legal provisions. Section 2 (15), which defines 'charitable purposes' though in an inclusive rather than an exhaustive manner, had a rather quiet existence, unaffected by the frequent amendments to the Income Tax Act 1961, till 1st April 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laining the scope of these provisions, a coordinate bench of this Tribunal, in the case of Himachal Pradesh Environment Protection and Pollution Control Boardv. CIT [(2010) 9 ITR Trib 204 (Chandigarh)], has observed as follows: 13. It is also important to bear in mind that the insertion of proviso to s. 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. It may be recalled that elaborating the scope of this amendment, CBDT, vide Circular No. 11, dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows: 3. The newly amended s. 2(15) will apply only to the entities whose purpose is 'advancement of any other object of general public utility' i.e., the fourth limb of definition of 'charitable purpose' contained in s. 2(15). Hence, such entities will not be eligible for exemption under s. 11 or under s. 10(23C) of the Act, if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the true purpose of trade, business or commerce, or rendering of any service in relation thereto, the assessee cannot be said to be engaged in a charitable activity within meanings of s. 2(15) of the Act. As a corollary to this approach adopted by tax administration, in our considered view, it cannot be open to learned CIT to contend that where an object of general public utility is not merely a mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of 'general public utility', the carrying on of bona fide activities in furtherance of such objectives of 'general public utility' will also be hit by the proviso to s. 2(15). 15. As CBDT rightly puts it, sweeping 'generalizations are not possible' and 'each case will have to decided on its facts'. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. 17. Therefore, as the legal position stands as on now, even after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of general public utility . 19. This substitution of proviso to Section 2(15), in our considered view, may be viewed as representing a paradigm shift in the scope of the exclusion clause. 20. The paradigm shift is this. So far as the scope of earlier provisos is concerned, the CBDT itself has, dealing with an assessee pursing the advancement of any object of general pubic utility , observed that If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes because In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business. The advancement of any objects of general public utility and engagement in trade, commerce and business etc. were thus seen as mutually exclusive in the sense that either the assessee was pursuing the objects of general public utility or pursuing trade, commerce or business etc. in the garb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to be covered by the scope of Section 2 (15). ' 32. The views so expressed by the coordinate bench were approved by Hon'ble Punjab Haryana High Court in the case of CIT (Exemptions) v. Improvement Trust Monga [ITA No. 147 of 2016; Tribune Trust (supra) wherein Their Lordships have, inter alia, observed as follows: The Tribunal by the impugned order held that the stand of the authorities was unsustainable as even assuming that all the allegations of the Assessing Officer with respect to the profit motive in the activities of the assessee are correct, the same were carried out with the larger and predominant objective of general public utility. Relying upon the CBDT circular the Tribunal observed that it is only when the Assessing Officer finds that the income is from any other business which is not incidental to the attainment of the objectives of the trust or institution , that such an income will not be exempt from tax . The Tribunal noted that there is no finding to that effect by any of the authorities and that it is not even the case of the revenue that the activities of the trusts do not serve the objects of the general publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of State funding or State subsidy. The Tribunal accordingly rightly held that the authorities were not justified in denying the benefit of section 11 and holding that the assessee was not covered by the words advancement of any other object of general public utility in Section 2(15). The Tribunal, therefore, rightly directed the Assessing Officer to delete disallowance of exemption. 33. On a similar and detailed note, our jurisdictional High Court, in the case of Sabarmati Gaushala Trust (supra), has observed as follows: 5. Term Charitable Trust is defined in Section 2 (15) of the Act which includes the relief to the poor, education, medical relief, preservation of environment; including watersheds, forests and wildlife and preservation of monuments or places or objections of artistic or historic interest and advancement of any other object of general public utility. Proviso to Section 2 (15) and further proviso whereof inserted by Finance Act 2010 w.e.f 1st April 2009 read, thus - Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as advancement of any other object of general public utility .' 7. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under :- 3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is ' advancement of any other object of general public utility' i.e., the fourth limb of the definition of ' charitable purpose' contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as ' charitable purpose'. 9. Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business - particularly if generating ' surplus' is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. ** ** ** 11. We are wholly in agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution' under section 2(15). Of course, all these discussions are relevant only for the residuary clause i.e. any other object of general public utility . In case, therefore, where the objects being pursued by the assessee is relief of the poor , education or medical relief , it is not even material whether or not the assessee is carrying on an activity in the nature of trade, commerce or business in the course of such activities. The key factor is as to what are the activities of the assessee institution and as to what these activities seek to achieve. 35. Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends, has to an activity of the assessee which is in the nature of trade, commerce or business. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the charitable status of these associations is the share of these cricket associations from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body, as we have explained earlier, cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitute BCCI or not, in the event of BCCI being involved in commercial activities, the taxability of such commercial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner's arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial considerations said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. We are, therefore, of the considered view that the proviso to Section 2(15) has been wrongly invoked in these cases. 37. Let us also quickly deal with the judicial precedents cited at the bar and in the orders of the authorities below. As regards the case of Jalandhar Development Authority (supra),this decision does not constitute a binding judicial precedent as contrary view in the case of Hoshiarpur Improvement Trust (supra) stands approved by Hon'ble Punjab Haryana High Court in the case of Improvement Trust Monga (supra). Tamilandu Cricket Association decision (supra) by the coordinate bench was disapproved by Hon'ble Madras High Court in the judgment reported as Tamilnadu Cricket Association (supra). As regardsCricket Association of Bengal judgment (supra), that was a case in which admittedly no training, coaching or assistance was provided to the players or aspiring players and the association was formed only for watching the matches by making payment. It was on these facts that the association was held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, business or commerce. Clearly, this judicial precedent, if held to be applicable on the facts of this case, will result in a much harsher a position than accepted by the CBDT. Be that as it may, that is not the situation and this judicial precedent cannot be held to be applicable on the facts of this case. 39. As regards the decision of the coordinate bench in the case of Entertainment Society of Goa (supra), we are of the considered view that in the light of subsequent judgments of Hon'ble High Courts in the case of Tribune Trust (supra) and Sabarmati Gaushala Trust(supra), which uphold the contrary view, this coordinate bench decision does not constitute a binding judicial precedent. 40. We have noted that there are a large number of judicial precedents, in the cases of various other cricket associations- details of which are set out earlier in this order, holding that the proviso to Section 2(15) cannot be invoked in the cases of such similarly placed cricket associations. Respectfully following the same, and also for the detailed reasons set out above, we uphold the plea of the assessee. We are not reproducing extracts from these decisions, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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