TMI Blog2017 (11) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... o District associations for conducting league tournaments and development of game and other heads such as Administrative & Maintenance. From the above, it is very clear that the receipts received by the assessee in relation to sports of cricket and also incurring expenses towards development of the stadiums, which is also related to sports of cricket and also clearing the land for the purpose of construction of stadium which is also related to the sports of a cricket. Certain funds are granted to the District Associations for the purpose of development of cricket sports. Therefore, all the receipts received by the assessee are incurred in connection with sports of the cricket. Therefore, the Assessing Officer is not justified in observing that the activities of the assessee are business activities. We find that the Assessing Officer simply observed that the activities of the assessee are converted into business activities without making any enquiry, which object is converted into business. Simply making observations without recording the reasons, is not a sufficient to constitute that the assessee is converted from charitable to business activity. Therefore, the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stadiums at various places like Mangalagiri, Kurnool Kadapa. During the year, it has also acquired land at Nellore for the purpose of constructing a stadium. The assessee has admitted the income under the major heads, such as BCCI reimbursements of Rs. 20,64,17,339/- and interest of Rs. 1,26,10,435/- on FDR‟s SB accounts. Out of these receipts, the assessee incurred expenditure towards conducting various tournaments, grants to district associations for conducting league tournaments and development of game and other heads, such as Administrative Maintenance. The assessee has shown the values of fixed assets and the infrastructure subsidy from the BCCI. 3. The Assessing Officer further observed that on verification of the copy of booklet of Memorandum and Articles of Association dated 18/07/1994, it is mentioned at page No.50 that certain amendments were made in three phases by conducting Special General Body Meetings held on 04/08/1994, 23/07/1995 10/11/2007 carried out by the Registrar of Societies, Guntur vide C.No.415/94, 159/99 978/07 respectively. However, the assessee has failed to furnish evidence with regard to approvals obtained from the jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (u) To organize a proper coaching scheme for the benefit of cricketers in the area, under the supervision of coaches from India or abroad This object is totally removed. (v) To collect funds for the purpose of the association and to utilize such funds in such manner as the Executive Committee may consider desirable for the ulfilment of the objects of the Association (t) To collect funds for the purpose of the association and to utilize such funds for the fulfilment of the objects of the Association (w) To invest monies and funds of the Association in such authorized securities and in such manner as may be decided upon by the Executive Committe or any other delegated body of the Central Body of the Members of the Association from time to time. This object has been totally removed. (x) To carry out any other business or activity which may seem to the committee capable of being conveniently carried out in connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer denied exemption under section 11 of the Act. 6. On appeal, ld. CIT(A) directed the Assessing Officer to grant exemption under section 11 of the Act by observing as under:- 5. I have gone through the facts of the case, assessment order and written submissions filled by the appellant. The Assessing Officer mainly concluded that these amendments to the Rules and Bye-laws to the Original Memorandum and Articles of Association were in the absence of prior approval of the Commissioner of Income Tax for making the amendments thereby not eligible for exemption claimed by the appellant u/s.11 and proceeded to assess the society as business concern and computed the total income at ₹ 14,91,89,110/-. Further in the amendment to rules the AO observed that the activities of the appellant have become' totally commercial and the income is derived from the business of cricket and not from the game of cricket which is wrong. With regard to this, the appellant submitted that the AO has not established as to which activity of the appellant was commercial in nature during the year. The appellant also contends that the AO has failed to bring on record necessary evidence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is to see whether assessee‟s income is exempt under section 11 of the Act or not. The Assessing Officer without giving any reasons, simply rejected the exemption under section 11 of the Act on the ground that assessee amended the objects. It is further submitted that the learned CCIT has already granted approval to the assessee under section 10(23C)(iv) of the Act. The Assessing Officer without considering the same, rejected the claim of exemption made by the assessee. Learned counsel for the assessee has further submitted that the objects of the assessee-association, originally framed and filed before the learned Commissioner and subsequently, the some changes by way of amendments were made without effecting the character of the original objects. Therefore, the Assessing Officer is not justified in rejecting exemption under section 11 of the Act. Learned counsel for the assessee mainly relied on the decision of the Hon'ble Madras High Court in the case of the Tamil Nadu Cricket Association Vs. The Director of Income Tax (Exemptions) others [(360 ITR 663) (Madras)] and submitted that the activities carried out by the assessee-association are similar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments are concerned, we have considered the original objects and subsequent amendments and found that there are no major changes, which are also not affected to the objects of the assessee. The Assessing Officer is also not able to point out which activity of the assessee is converted from charity to commerciality by virtue of subsequent amendments made by the assessee. We also observe that once the assessee is enjoying registration under section 12A as well as 10(23C)(iv), it is the duty of the Assessing Officer to see whether claim of exemption made by the assessee under section 11 or 10(23C)(iv) is eligible or not, if not, the assessee has to give reasons why the assessee‟s case is not considered for exemption under section 11 otherwise section 10(23C)(iv) of the Act. In the present case, the Assessing Officer has not given any reasons why the assessee is not eligible for exemption under section 11 or 10(23C)(iv) of the Act. The only reason given by the Assessing Officer is that assessee has amended Articles of association and there is no approval from the jurisdictional Commissioner, therefore, not eligible. In this context, it is necessary to note that the learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiving grants from BCCI partly as reimbursements for various tournaments conducted by the assessee. The assessee has already constructed a stadium at Visakhapatnam suitable for conducting test matches‟. During the year under consideration, the assessee has also commenced construction of stadiums at various places like Mangalagiri, Kurnool Kadapa. During the year, it has also acquired land at Nellore for the purpose of constructing a stadium. The assessee has admitted the incomes under the major heads such as BCCI reimbursements of Rs. 20,64,17,339/- and interest of Rs. 1,26,10,435/- on FDR‟s SB accounts. Out of these receipts, the assessee incurred expenditure towards conducting various tournaments, grants to District associations for conducting league tournaments and development of game and other heads such as Administrative Maintenance. From the above, it is very clear that the receipts received by the assessee in relation to sports of cricket and also incurring expenses towards development of the stadiums, which is also related to sports of cricket and also clearing the land for the purpose of construction of stadium which is also related to the sports of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. The Assessing Officer, in the Assessment Years 2011-12 2012-13, has expressed a view that the activities carried out by the assessee are commercial in nature, though assessee having a registration under section 12A as well as 10(23C)(iv) of the Act, therefore, he denied exemption for both the years. But, the Assessing Officer is not able to establish that the activities carried out are contrary to the objectives of the assessee-association. We find that the activities carried out by the assessee for these two assessment years are same to the Assessment Year 2010-11. We also find that all the activities carried out by the assessee in connection with the sports of the cricket. The assessee has got registration under section 12A as well as 10(23C)(iv) in connection with the sport of the cricket. The activities carried out by the assessee are only relate to the sports of the cricket and therefore, denial of exemption by the Assessing Officer is not correct when the activities carried out by the assessee have been considered by the learned Commissioner, who granted approval and also considered by the learned CCIT, who granted approval under section 10(23C)(iv) of the Act for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are not in conformity with the objects of the trust. 6.4 Page 9 para2 From the discussion, it is clear that the ACA is not acting as a charitable organization. The entire character and focus of ACA has become totally commercial. There is generation of huge profits year after year, a part of which is used, to enhance the investment and income earning infrastructure and apparatus, of ACA. 6.5 As per para 3 Further, it is clear that entire character and focus of The ACA has become totally commercial with eye on huge profits and it is no more charitable organisation as discussed supra. Therefore, even with Registration allowed to the ACA u/s. 12A of the I.T Act, since its activities are being carried on commercial lines and not in conformity with the objects of the assessee, it is not eligible for Exemption u/s. 11(1) and 11(2) of the I.T. Act. 6.5.1 These observations of the AO is not correct as there is no profit motive as the funds received from the BCCI were utilised for maintenance of the cricket academy and promotion of the cricket. The excess income deposited in the banks and disclosing interest income as per the provisions of the secl.1 of the I.T. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made. 6.7 it Is submitted that there is no statutory requirement of intimating the amendments/changes to the bye-laws to the Income Tax' Department. The requirement of intimation is mentioned only in the form No. 10A and even in the form No. 10 A there is no time limit prescribed. The appellant has already intimated the amendments to the Commissioner of Income-tax, Guntur on 26-04-2013 (copy of letter dt.26-04-2013 with ackmnt. enclosed) and therefore there is no violation on the part of the appellant. Therefore the appellant cannot be declared ineligible for exemption on the ground that the very foundation on the basis of which the appellant was registered stands removed and ceased to be operative. The important point that was missed by the A.O was that the learned CCIT granted registration u/s 10(23C) (iv) after examining these amendments, so the department is aware of the amendments Therefore I am in agreement with the submissions of the appellant. 6.8 Further the AO relayed on the case of page 8 para last It had been found by the Tribunal that the activities which produced the income in question consisted solely in arranging certain cricket matches and chargi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purpose. Thus, while we uphold the Constitutional validity of the proviso to section 2(15) of the said Act, it has to be read down in the manner indicated by us. As a consequence, the impugned order dated 23/01/2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C)(iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic utility and that exception is limited to activities 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. In the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purpose. Thus, while we uphold the Constitutional validity of the proviso to section 2(15) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic auction for selling premier players at a huge premium rate. In fact, the BCCI collects money. The role of the assessee-society is only to provide stadium for conducting matches. Other than that, the assessee society has no role in conducting the international matches and Indian Premier League matches. 16. The other activity of the assessee-society is to conduct training programmes, coaching classes for college students at district level in the State of Tamil Nadu and in the Union Territory of Puducherry. The assessee is also conducting inter-university, inter-school and Inter-association matches. Expenditures involved in such activities were met out of surplus funds remaining with the assessee-society. The Assessing Officer got confused himself with the activity carried on by the BCCI as that of the activity carried on by the assessee-society. The material available on record shows that one-day matches, T-20 matches and Indian Premier League matches are all conducted by the BCCI and the assessee, being the host In the State of Tamil Nadu, is only providing its stadium. The assessee has also received funds from BCCI for meeting the expenditure, being the host Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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