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The Deputy Commissioner of Income-tax, Exemption Circle, Trivandrum. Versus M/s. Kerala Cricket Association and vice-versa

2018 (2) TMI 857 - ITAT COCHIN

Benefit of exemption u/s. 11 - AO held that the activities of the assessee falls within the limb of “any other objects of general public utility” - activities of the assessee are in the nature of trade, commerce or business, since they are in receipt of fee/cess from their activity - assessee engaged in the promotion and upliftment of the game of cricket in the State of Kerala and received ₹ 18.63 crores from BCCI as contribution - Held that:- Perusal of the objects of the Society that it .....

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mply clear that the Society has been established in order to popularize the game of cricket in the State of Kerala and provide and strengthen the players with competitive skills. It is, further, held by the CIT(A) that the source of funds for the relevant assessment year is only the grant received from the BCCI, and the interest earned on deposits of surplus amount (past year’s surplus). - It cannot be stated that the assessee was doing any activity in the nature of business, trade or comme .....

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Control of Cricket in India (BCCI in short) and is the body representing cricketing activities in Kerala. The assessee carries out various activities for the sole purpose of development of the game of cricket in Kerala. The assessee is also not providing any service to any trade, commerce or Industry. - The assessee is not created for earning profit as its motive and object of the assessee is towards the uplifment of game of cricket in the state of Kerala. The assessee is not driven with an .....

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disallowance made by the Income Tax authorities is confirmed. - Decided against assessee. - Disallowance u/s. 40a(ia) - non deduction of tds on fee given to Coaches - Held that:- Admittedly, the above payments were made to the coaches without making any TDS, thereby violating the provisions of section 40(a) (ia) of the Act and, hence, we see no reason to interfere with the orders of the Income Tax authorities and we confirm the same.- Decided against assessee. - I.T.A. No.78/Coch/20 15, C.O .....

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was a delay of 224 days in filing the appeal by the Revenue. The Revenue has filed a petition to condone the delay in filing the appeal accompanied by an affidavit of the Deputy Commissioner of Income Tax(Exemption). The reason stated in the affidavit filed by the DCIT(Exemption) for the delay in filing the present appeal reads as follows: The Last date of filing appeal before ITAT in the case of Kerala Cricket Association was 19-06-2014. Consequent to revision of jurisdiction dated, 15/11/2014 .....

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doned as it was not deliberate and the appeal may please be admitted. 2.1 The reason stated for the delay in filing the appeal is that there was revision of jurisdiction and creation of Commissioner of Income-tax (Exemption), Kochi on 15/11/2014 and, consequently, decision to file an appeal was taken only after 15/11/2014. In the instant case, the appeal ought to have been filed on 19/06/2014. Admittedly, there was a revision of jurisdiction and creation of Commissioner of Income-tax(Exemption), .....

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elevant to quote the following judicial pronouncements rendered in the context of condonation of delay in filing the appeal. (A) In the case of Collector, Land Acquisition, Anantnag and Another vs. Mst. Katiji and Others reported in 2 SCC 107, while considering whether there was sufficient cause in filing the appeal belatedly, the Hon ble Apex Court had adopted a liberal approach. It was stated by the Hon ble Apex Court that the following principles are to be kept in mind while examining whether .....

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h should be made. Why not every hour s delay, every second s delay? The doctrine must be applied in a rational commonsense pragmatic manner. (iv) When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (v) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, .....

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ples in paras 15 & 17 of the judgment: 15 In litigations to which Government is a party there is yet another aspect which, perhaps, cannot be ignored. If appeals brought by Government are lost for such defaults, no person is individually affected; but what, in the ultimate analysis, suffers is public interest. The decisions of Government are collective and institutional decisions and do not share the characteristics of decisions of private individuals. 17. Therefore, in assessing what, in a .....

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d in 3 SCC 132, while condoning the delay of 109 days in filing the appeal before the High Court, the Hon ble Apex Court has observed that certain amount of latitude within reasonable limits is permissible, having regard to impersonal bureaucratic set-up involving red-tapism. In the same decision, the Hon ble Apex Court directed the State to constitute legal cells to examine whether any legal principles are involved for decision by the courts or whether cases required adjustment at government le .....

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cepted the case of the appellant-Insurance Company by protecting the interest of the claimant and condoned the delay. 2.2 In the instant case, as mentioned earlier, there has been revision of jurisdiction and formation of Commissioner of Income-tax(Exemption), Kochi on 15/11/2014 and thereafter, a conscious decision was taken by the new Commissioner of Income-tax(Exemption), Kochi to file the appeal, in order to bring about uniformity across all jurisdictions of CCIT(Exemption) and appeal was fi .....

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stating the reasons for the delay in filing the Cross Objection by 10 days. On a perusal of the affidavit filed by the Secretary, we are of the view that there was sufficient cause for the delay in filing the Cross Objection, and latches cannot be attributed to the assessee-society. Hence we condone the delay and proceed to dispose of both the appeal filed by the Revenue and the Cross Objection filed by the assessee on merits. 4. We shall first take up for adjudication the Revenue s appeal. I.T. .....

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ral public utility shall not be a charitable purpose , if it involves carrying on activity in the nature of trade, commerce or business or any activity of rendering any service in relation to trade, commerce or business for a cess or a fee or any other consideration irrespective of the nature of or an application or retention of the income from such activities and receipts exceeds ₹ 25 lakhs. (3) The learned Commissioner of Income tax(Appeals) has erred in allowing the exemption claimed u/ .....

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ng Officer restored. 4.2 Briefly stated the facts of the case are as follows: The assessee is an AOP. It is engaged in the promotion and upliftment of the game of cricket in the State of Kerala. The assessee was registered u/s. 12AA of the I.T. Act with effect from 01/04/2006, i.e. from A.Y. 2007-08 onwards. For the assessment year 2010,11, the assessee had filed return of income, declaring a total income as Nil after claiming exemption u/s. 11 of the Act. The case of the assessee was taken up f .....

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he activities of the assessee are in the nature of trade, commerce or business, since they are in receipt of fee/cess from their activity, and, hence, the assessee-society cannot be entitled to the benefit of exemption u/s. 11 of the Act. 4.3. The AO determined the total taxable income of the assessee as under: Total receipt as per Income & Expenditure A/c. 1. Subsidy & Reimbursement of expenses Of BCCI Rs.1,02,77,795/- 2. Income from Investments & deposits Rs.1,30,54,918/- 3. Income .....

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first appellate authority. Before the first appellate authority, the assessee had filed written submission. The CIT(A), after considering the submissions of the assessee as well as the findings of the AO, partly allowed the appeal of the assessee. The CIT(A) held that the assessee s activities are charitable in nature and proviso to section 2(15) of the Act will not have application. Accordingly, the CIT(A) granted exemption u/s. 11 of the Act. The CIT(A) had, further, deleted the addition made .....

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on the order of the Assessing Officer. The Ld. AR, on the other hand, supported the findings/conclusions of the CIT(A) and reiterated the submissions made before the Income Tax authorities. 4.6 We have heard the rival submissions and perused the material on record. The assessee was granted registration u/s. 12AA of the Act vide order dated 31/03/2007 with effect from the assessment year 2007-08. On a perusal of the objects of the assessee, it is discernable that it is engaged in the activity of .....

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the assessee regularly. Undoubtedly, the assessee undertakes activities to popularize the game of cricket for the balanced development of the body and mind of the citizens. 4.6.1 The AO denied the benefit of exemption u/s. 11 of the Act stating that the assessee undertakes charitable activities in the limb of advancement of any other objects of general public utility and since aggregate receipts during the previous year exceeded the prescribed limit, the assessee is not entitled to the benefit .....

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was collecting revenue by way of advertisement fees and sale of tickets for various matches conducted by the assessee. According to the Assessing Officer, the above activities are not in conformity with the principles laid down in section 2(15) of the Act and, therefore, the assessee was not entitled to the benefit of exemption u/s. 11 of the Act. 4.6.2 The statement of the Assessing Officer was that there was sale of tickets and advertisement fee collections, is not correct. On a perusal of the .....

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ts. Even assuming that there was collection of receipts on account of sale of tickets for one day matches, it cannot be stated that there was any activity in the nature of trade, business or commerce. As such the collections were only to be meant for the conduct of matches and not with a view to earn any profit therefrom. In other words, there was no commercial activity involved in the process of conducting cricket matches. 4.6.3 As regards advertisement subsidy and IPL subvention in total of &# .....

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cricket across the State of Kerala. Contributions received from BCCI, as shown in the books of accounts and included in the corpus fund amounting to ₹ 18,63,99,139/- were disbursed to the assessee only for the development of infrastructural facilities like construction of stadium, purchase of equipment for the use of the players. Till the year 2005, the assessee had no cricket stadium of its own and in the year 2008, the assessee had taken on lease the stadium at Kochi for a period of five .....

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y the assessee, it can be easily understood that the activities of assessee were not for the purpose of trade, business or commerce as provided by amendment to section 2(15) of the I.T. Act with effect from A.Y. 2009-10. The term business as understood in the common parlance indicates any commercial activity dealing in goods and services with the intention of making profit. The term trade indicates activities involving purchase and sale of goods and the term commerce is a broad term encompassing .....

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e citizens and activities relating to the development of sports and games cannot be treated as trade, business or commerce in any manner whatsoever. 4.6.5 The CIT(A) has also held categorically in para 8 after perusal of the objects of the Society that it is doing activities to promote the game of cricket in the State of Kerala and to arrange for coaches for the players, to train and maintain panel of umpires and to do such acts for the furtherance of the game of cricket. The CIT(A) has, further .....

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T(A) that the source of funds for the relevant assessment year is only the grant received from the BCCI, and the interest earned on deposits of surplus amount (past year s surplus). The above categorical finding of the CIT(A) for ready reference is reproduced below: 8. It is seen from the objectives of the society that the association is being run to promote the game in the State and to arrange for the coaches for the players, to train and maintain panel of empires and resort to all such measure .....

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rengthen the players with competitive skills. The sources of funds is the grant received from BCCI and, other than that, the only sources of income is the interest, earned on deposits of surplus amount. During the year under question, the association has not carried out any test matches and has got no revenue from advertisement etc. 4.6.6 The above finding/observation of the CIT(A) has not been dispelled by the Revenue by placing any contra material before us. Therefore it cannot be stated that .....

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the issue. (A) The Hon'ble Delhi High Court in the case of PHD Chamber of Commerce and Industry Vs. DIT (E) (2013) 357 ITR 296 (Delhi). The Hon'ble Court at para 17 at pages 308 & 309 relevant portion of the observation of the Hon'ble Court is as under: "In all these cases, the common thread which was noticed to run through was the absence of any profit motive of private profit. These decisions do establish that the receipts derived by a chamber of commerce and industry for .....

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held that the assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The assessee operating on no profit basis. The proviso to section 2(15) is not applicable to the case of the assessee. (C) India Vs. DGIT (Exemptions) and Another (2014) 360 ITR 138 (Delhi). The Hon'ble Court observed as follows: • Profit motive is determinative and a critical factor to discern whether an activity is business, .....

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illiberal spirit. Enrichment of oneself or self gain should be missing and the predominant purpose of the activity should be to serve and benefit others. A small contribution by way of fee that the beneficiary pays would not convert charitable activity into business, commerce or trade in the absence of contrary evidence. (D) Institute of Chartered Accountants of India and Another Vs. DGIT (Exemptions) and Others (2013) 358 ITR 91 (Delhi). The gist of relevant observations of the Hon'ble Cour .....

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for goods or goods for money". • The Supreme Court has further considered the expression "business" in the case of State of Andhra Pradesh Vs. H. Abdul Bakshi and Bros (1964) 15 STC 644 (SC), wherein it was held that the expression "business" was of indefinite import and in the taxing statute it is used for the sense of occupation and profession which occupies time, attention or labour of a person and is clearly associated with the object of making profit. • I .....

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ble purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity". (E) Bureau of Indian Standards Vs. DGIT (Exemptions) (Delhi) (2013) 358 ITR 78 (Delhi). The Hon ble Court at para 13 at page 87 of the reported decision has observed as follows: "In view of the above discussion, it cannot be said that BIS is involved in a .....

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ncidental. The BIS performs sovereign and regulatory function, in its capacity of an instrumentality of the State. Therefore, this court has no doubt in holding that it is not involved in carrying any activity in the nature of trade, commerce or business". (F) In the case of Jaipur Development Authority Vs. CIT (2014) 52 taxmann.com 25 (Jaipur-Tribu). The Hon'ble Tribunal observed as follows: • The Hon'ble Allahabad High Court in the case of Lucknow Development Authority, held .....

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ng out its activities on commercial lines with no profit motive to earn profits for fulfillment of its aims and objectives which are charitable in nature and in the process earn some profits, the same would not be hit by proviso to Section 2(15) of the Act. • As per section 2(15), the charitable activity test means activity with a view to make or earn profit. The four integrates laid down are (a) profit motive is an critical factor to discern whether the activity is business, trade or comme .....

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axmann.com 404 (Delhi). The Hon ble Court observed as follows: It is also important to note that we must examine as to what is dominant activity of the institution in question. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profits but, the object o .....

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9;business' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealing, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure." 4.6.7 In view of the aforesaid reasoning and the judicial pronoun .....

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ties in Kerala. The assessee carries out various activities for the sole purpose of development of the game of cricket in Kerala. (iii) The assessee is also not providing any service to any trade, commerce or Industry. (iv) The assessee is not created for earning profit as its motive and object of the assessee is towards the uplifment of game of cricket in the state of Kerala. The assessee is not driven with any profit motive. (v) Any excess of income over expenditure is not distributed to the m .....

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2(15) of the Act was carried out to tax entities wearing the mask of charity but in fact carrying on commercial activities. a. In the course of budget speech for 2008-2009, Hon ble Finance Minister observed that Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to .....

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that genuine charitable institutions would not be brought within the ambit of Section 2(15). (viii) It is relevant to point out that the statement made by the mover of the Finance bill can be used for demonstrating the objects of the amendment. Reliance is placed on the decision of the Apex court in the case of K.P. Varghese 131 ITR Page 597. It is also well settled law that circulars issued by the Board are binding on the revenue. (ix) The assessee has a history of distinguished record in serv .....

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al in the case of Tamil Nadu Cricket Association Vs. DDIT (Exemptions) (2015) 60 taxmann.com 287 (Chennai-Trib). was considering the case of T.N. Cricket Association which was in receipt of (i) Subscription from members (ii) Sale of tickets (iii) Revenue from advertisements (iv) Receipts from BCCI (v) Interest from Bank deposits. The Tribunal also noticed that the assessee is in receipt of funds from BCCI. The Tribunal, after considering the submissions, held that it cannot be said that the Tami .....

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enue that the assessee-society is conducting or organizing T-20, one-day matches or India Premier League matches. In fact, BCCI, the parent organization which is a national body in India, is organizing and conducting the matches. The assessee-society, being a member of BCCI, hosts the matches which are conducted by BCCI. For the purpose of meeting its expenditure, the BCCI allocates funds from the revenue it collected from advertisement and other sources. The assessee-society is allowed to sell .....

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cting 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 go .....

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at any stretch of imagination, it cannot be said that the assessee is conducting any business activity. The assessee is also not providing any service to any trade, commerce or industry. In those circumstances, this Tribunal is of the considered opinion that proviso to Section 2(15) of the Act is not applicable to the assessee. In view of the above discussion, the assessee is eligible for exemption under section 11 of the Act for all the assessment years under consideration. Accordingly, the ord .....

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ricket Association. The relevant finding of the Tribunal reads as follows: On consideration of all the facts and circumstances of the case and when viewed in totality, we have to come to a conclusion that the assessee is not carrying of the activities with any profit motive or with any self interest. The contribution received by way of sponsorship, advertisement, sale of tickets etc and user charges on the facts of the case, do not convert the charitable activity into "trade, commerce or bu .....

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he Act and consequently the assessee is entitled for exemption under section 11 and 12 of the Act. 4.6.8 No other arguments were raised by the Ld. DR or by the Ld. AR concerning the appeal filed by the assessee, hence the grounds raised in the Revenue s appeal are rejected. C.O. No. 08/Coch/201 : (Assessee s Cross Objection) 5. Two issues are involved in the assessee s Cross Objection. Firstly, the disallowance of pre-paid expenses amounting to ₹ 18.55,697/- and secondly, the disallowance .....

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repaid expenses of ₹ 18,55,697/- disallowed, even if, it was not debited to profit and account - as a matter of fact, were disallowed by the Assessing Officer by observing that details were not filed. Hence the disallowance made is upheld. 5.3 We have heard the rival submissions and perused the material on record. No details were placed before the Assessing Officer or before the CIT(A) as regards the claim of pre-paid expenses of ₹ 18,55,697/-. Even before us, no details are provided .....

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