TMI Blog2017 (11) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... e : Shri Shravan Gotru, Sr. DR For The Assessee : None ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A)-40, Exemption dated 25.05.2015 for the AY 2010-11. 2. The Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in ignoring that the assessee s activity falls under the category of advancement of any other object of General Public Utility and the last proviso to Section 2(15) is clearly applicable to it as Income from Sponsorshi/ Royalty is explicitly business receipt in nature. 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in holding that the activities of the assessee are charitable in nature and not in the nature of trade, business or commerce specifically when the assessee has received substantial amount from different parties towards sponsorships. 3. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in holding that the activities of the assessee are chartiable in nature and not in the nature of trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income tax act to the assessee. 6. Despite notice none appeared on behalf of the assessee and therefore in absence the issue is decided on the merits of the case. 7. We have carefully considered the contention raised by the Ld. assessing officer and the order of the Ld. CIT A allowing the appeal of the assessee. We have also considered the arguments raised before us by the Ld. departmental representative. Admittedly, the assessee is engaged in the activity of promotion of basketball and is carrying on charitable activities. Merely because it has received certain fund on account of royalty as well as on account of sponsorship it cannot be said that the activities of the trust are no more covered under section 2 (15) of the act. Identical issue has been considered by the coordinate bench in case of Rajasthan Cricket Association versus additional CIT in 79 Taxmann.com 464 as under:- 3. Ground nos. 2 to 8 are against denial of exemptions and computation of income as business income since the ground nos. 2 to 8 inter-related are taken up together for the disposal. The ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le ITAT against order of ld. CIT cancelling registration, was decided vide order dated 13.07.2012 in ITA No. 69/JP/2011, setting aside the order withdrawing registration and directing CIT to decide matter afresh. Ld. CIT, vide order 28.03.2013 again withdrew registration u/s 12A primarily relying upon observations of AO. Assessee filed appeal against order of CIT, which was decided by Hon'ble ITAT vide order dated 09.06.2016. Vide said order, Hon'ble ITAT at page 16 para 5, decided the appeal in favour of assessee by observing as under: We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the assessee was granted registration u/s 12A on 25.11.1988, which has been withdrawn twice by the ld. CIT. The issue has been set aside by the Coordinate Bench to reconsider the withdrawn of registration, which was also challenged by the revenue before the Hon'ble Rajasthan High Court, who has allowed the assessee's prayer and directed to consider the application afresh without influencing any of the observation made by the appellate authority. The assessee has been provided reasonable opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 09.07.2016 passed by Hon'ble ITAT in ITA No. 544/JP82013 (APB 13-30), assessee is eligible to claim exemption u/s 11 subject to the fulfilment of conditions prescribed therein and further if there is no violation to section 13. Assessee's Ground of Appeal No. 1: Not pressed. Assessee's ground of Appeal Nos. 2 to 5 7: In grounds of appeal Nos.2 to 5, assessee has challenged the action of ld. CIT(A) in confirming the action of ld. AO in denying exemption u/s 11 and assessing the assessee in the status of AOP by applying maximum marginal rate whereas in ground of appeal No.7 assessee has challenged the action of AO in denying exemption on the allegation that activities of assessee are being run on commercial basis. All the grounds being related are being dealt herewith together for the sake of convenience: In this regard, at the outset it is submitted that all the grounds of appeal relate to denial of exemption u/s 11. Further, for claiming exemption u/s 11, preconditions are that: (i) assessee holds a valid registration u/s 12A (ii) income is applied in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sums applied for purposes other than charitable or religious purposes (ii) ceases to remain invested in the modes specified u/s 11(5) (iii) not utilized for the purpose for which it was accumulated or set apart (iv) is credited or paid to any trust or institution registered u/s12AA or to any fund or institution or trust or any university or other education institution or hospital; or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10. Further, section 13 provides certain circumstances under which section 11 is not applicable. These are: (i) any part of income from property held under trust for private religious purposes, which does not result into benefit of the public. (ii) any income of trust or institution created or established for the benefit of any particular religious community or caste. (iii) if any part of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort associations including the RCA are under direct control and supervision of the Registrar under this Act. Thus, being engaged in the promotion of sport of cricket, assessee is carrying on charitable activity in the nature of advancement of any other object of general public utility and was claiming and being allowed exemption under said category. However, for the year under consideration, ld. AO has denied exemption holding that activities are being carried on commercial basis. In this regard, at the outset, it is humbly submitted that the amendment in section 2(15), pursuant to which AO has withdrawn status of assessee as charitable was carried out vide Finance Act,2010, w.r.e.f.1.04.2009, thus said provisions would not apply in the year under consideration. In other words, prior to amendment, exemption under section 11 was eligible in respect of charitable institutions engaged in advancement of any other object of general public utility even if activities result into profits incidentally provided that such income is applied in accordance with the provisions of section11. Further, there no allegation regarding violation as per section13, thus withdrawal of exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunity to learn from experience of coaches of international level by assisting them during practice matches and by witnessing the matches played by international players, by spending time with them etc. Your honour would appreciate that it is not possible to take the entire team to locations where matches are being played. So, ultimately, orgnising such matches results into promotion of sport of cricket and surplus if any generated, is purely incidental in nature and assessee cannot be deemed to carry out activity in the nature of trade, commerce or business. Also, association has been organizing matches even in the remote areas in Rajasthan e.g. Barmer, Dungarpur, Hanumangarh, Rajsamand etc., where there is dirth of audience and Association has to essentially incur losses. Further, the allegation of the AO for holding the activities of association as commercial was solely based on the consideration that the appellant society had accumulation of surplus, increase in the investments, control over the players however he totally failed to appreciate that normally the surplus was the result of subsidies only and not from the conducting of tournaments on commercial basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining and coaching camp for which no fee is charged from the participants. For the year under consideration a sum of ₹ 1,92,41,152/- was incurred towards RCA Cricket Academy Expenses. Besides this, the assessee had orgainsed various championship at various interior places of Rajasthan i.e. Banswara, Dungarpur, Barmer, Sirohi, Rajsamand, Dausa, Bundi, Kota etc. in order to provide opportunity to create competitive environment for the talented youth, on which it spent more than ₹ 5.00 crores in the last five years without any profit motive with the sole intention to promote the game of cricket. In the match held on 21.12.2010 between India v. SA, RCA suffered deficit over ₹ 1.6 crore (Receipts from In stadia Right ₹ 1.70 crores + Sale of Ticket ₹ 1.2 crores but Expenditures ₹ 4.15 crores). The RCA has also incurred various other expenses with a view to promote the game of cricket viz. on coaching camps of ₹ 21,45,550/-, state cricket activities of ₹ 1,11,90,375/-, Ground expenses of ₹ 28,89,930/- and international tournament expenses of ₹ 9,02,441/-.(APB- 4 5 ) Above, data clearly reveals that surplus, if any genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, has to be examined on its own facts. 58. In the case of Commissioner of Sales Tax v. Sai Publication Fund:[2002] 258 ITR 70 (SC), the Supreme Court while interpreting the word business in the context of Section 2(5A) of the Bombay Sales Tax Act, 1959 held that the inclusion of incidental or ancillary activity in the definition of business presupposes the existence of trade, commerce and business. Thus, if the dominant activity of the assessee was not business then any incidental or ancillary activity would also not fall within the definition of business. In that case, the Supreme Court was examining the issue whether the activity of the trust in bringing out and selling a publication to spread the message of Sai Baba would make the assessee trust a dealer. The Supreme Court also referred to various other decisions wherein it was held that if the principal object or purpose of an assessee was not business then an incidental activity would also not be exigible to sales tax and constitute the assessee as a dealer. In the case of State of Gujarat v. Raipur Manufacturing Co. Ltd.: (1967) 19 STC 1 (SC), the Supreme Court held that in order for any activity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parting education in the field of accountancy and conducting courses both at pre-qualification as well as post-qualification level are activities in furtherance of the objects for which the petitioner has been constituted. Activities of providing coaching classes or undertaking campus placement interviews for a fee are in relation to the main object of the petitioner which as stated earlier cannot be held to be trade, business or commerce. Accordingly, even though fees are charged by the petitioner institute for providing coaching classes and for holding interviews with respect to campus placement, the said activities cannot be stated to be rendering 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 as held earlier are not trade, commerce or business. A perusal of above clarifies that so far as predominant object of institution is charitable , any incidental activity thereto resulting into profits would not ipso facto result into denial of exemption u/s 11. Further Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association v. The Director of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 10.9. 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 charges, b) health club charges, c) income from corporate boxes, d) lawn booking income, e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in the nature of trade, commerce or business. These receipts are intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not trade, commerce or business activities. 11. We now take up each of the issues raised by the ld. DIT(E) in his order. 11.1. On the issue of sponsorship income from M/s. Twenty First Century Media (P) Ltd. (TFCM), it was explained that, despite the receipt of sponsorship mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts demonstrate that despite the receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by the assessee. Thus this adjustment resulted in subsidizing the cost of the assessee and hence there is no profit motto. This cannot be termed as business activity. Similar is the view of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra). 11.3. On the issue of sale of liquor, it was submitted that initially DDCA was formed as a Club to take over the assets and liabilities of the Association called, Delhi Cricket Association . He referred to the objects and submitted as follows. One of the objects as given in the MOA of DDCA is to lay ground for playing game of cricket and to provide pavilion, refreshment rooms and other facilities in connection therewith. Therefore, an eatery was established which was eventually shaped as a canteen for the benefit of the members as well as few other persons associated with DDA e.g. players, coaches, staff, other guests etc. 11.4. In our view, for the purpose of making this Canteen self sustainable, it has to follow global standards and international protocols, since cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this expenditure out of its own sources and there after the BCCI and legal franchisee, contribute and compensate part of this expenses. The same arguments as were advanced by the assessee in the cases where sponsorship money received, were made here also. The summary of the submissions are as follows. Our respectful submission is that, as we have given detailed submission in earlier part of our submissions wherein we have made analyses of receipts as well as of the expenses incurred by the assessee. The analysis of expenses have revealed that the expenses have been incurred on the promotion of the game of cricket. These expenses have been incurred either for the development of game of cricket or the development of players. There is no other cause or item for which any amount has been spent by the assessee. Similarly, when we analyse the receipt side, we would find that the receipts are directly or inextricably linked with the organizing of matches and tournaments or for promotion of game of cricket in any other manner or for maintenance or building up the infrastructure meant for the promotion of the game of cricket. Thus, it can be safely said that the DDA exists for cricket and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of sponsorship and such other receipts, we agree with the arguments made by the assessee. Regarding sale of tickets the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, ₹ 200/- per ticket are levied, with a sole intention to control the crowds and that the cost incurred per ticket is much more than the amount which is charged for ticket. Under these circumstances, the sale of tickets cannot be considered as an activity of trade, commerce or business . We agree with the submissions of the assessee. 11.9. Regarding playing cards, it is an incidental recreation activity undertaken in most Clubs and what is charged by the assessee, goes to recover the costs for providing such recreational facility to its member. The receipts are miniscule and hence negligible. 11.10. Similarly as far as receipts from health club is concerned, we find that, only a part of the expenditure incurred on health club is recovered by way of charges from Members, who are using the health club facility. These are all, at best be called user charges. In our view these receipts cannot be termed as an activity in the nature of trade, comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/ss. 11 12 of the Act and the provisions of the first proviso to section 2(15) do not apply to the case of the appellant. Coming to the facts of the case, as submitted earlier RCA was set up under statute only for the promotion of the sports and in particular cricket and had it been not carrying out activities in accordance with its objects, registration could have been withdrawn. Chapter V of Rajasthan Sports (Registration, Recognition and Regulation of Association) Act, 2005 contains provisions regarding Accounts, Audit and Inspection of books of account of Sports Association registered under said Act, whereas Chapter VI thereof contains specific provisions regarding Disaffiliation, Inquiry and Disqualification . In other words, RCA is not an independent private organization, which can carry out activities as per convenience of its officials, rather it works under strict regulations and thus any deviation from primary objective of promotion of sport of cricket may cost disaffiliation/ disqualification to the association. Thus, in the absence of any adverse finding by the concerned authority, conclusion drawn that RCA was being run on commercial basis does not have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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