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2018 (2) TMI 857

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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rce. In other words, the assessee is not driven by any profit motive, on the contrary its primary objective is only to promote the game of cricket in the State of Kerala. - Thus we hold that the activity of the assessee is not hit by the proviso to sub-section (15) of section 2 of the Act. - The receipts from BCCI are not in the nature of trade, business or commerce and consequently the proviso to section 2(15) of the Act was not applicable.The assessee is an affiliate of the Board for .....

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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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and creation of Commissioner of Income tax(Exemption), Kochi, the matter of filing of appeal in Kerala Cricket Association was reviewed. As all other exemption units at various parts of India have challenged the verdict except in Kerala in order to take a uniform view in the matter, appeal to ITAT is pursued. According to the above, in order to bring uniformity across all jurisdictions of CCIT(exemption), this appeal is being filed. Hence it is prayed that the delay of 224 days may kindly be con .....

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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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or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. (vi) It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. (B) In the case of G. Ramegowda, Major and Others vs. Special Land Acquisition Officer, Bangalore reported in 2 SCC 142, , the Hon ble Apex Court has enunciated the following princi .....

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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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led within a reasonable period thereafter. In view of the above factual narrations and the principles laid down by the various judicial pronouncements, we are of the view that there was reasonable cause for the delay in filing this appeal and we condone the same. Thus, this appeal of the Revenue is admitted for adjudication. 3. There was a delay of 10 days in filing the Cross Objection by the assessee. The assessee has filed a petition to condone the delay as well an affidavit of the Secretary, .....

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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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or scrutiny by issuance of notice u/s. 143(2) of the Act. The assessment u/s. 143(3) of the Act was completed vide order dated 26/03/2013. The AO denied the benefit of exemption u/s. 11 of the Act. The Assessing Officer held that the activities of the assessee falls within the limb of any other objects of general public utility . It was, further, held by the Assessing Officer that in view of the amendment to section 2(15) and introduction of proviso to section 2(15) of the Act w.e.f. 1.4.2009, t .....

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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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promoting and regulating the game of cricket in the State of Kerala. It also has jurisdiction over the cricket tournaments conducted in the State of Kerala. It conducts various national and international cricket tournaments for both men as well as women. Various District Cricket Associations which participate in cricketing activities organized in Kerala are the affiliated units of the assessee. The District Cricket Associations in all the districts in the State receive financial assistance from .....

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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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8377; 18,63,99,139/- (Refer para 4 of sub-clause (iii) of the assessment order), the same cannot be stated to be receipts from trade, business or commerce in any manner since it was only a contribution/donation/subsidy received from BCCI for promotion of the game of cricket in the State of Kerala. There was a no legal or contractual right/agreement with BCCI for the assessee to demand or claim receipt of subsidy and, hence, it is only a contribution by the BCCI towards upliftment of the game of .....

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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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, held that the income and the property of the assessee-Society shall be applied solely for the promotion of the objects of the Society and no portion of such income shall be paid or transferred directly or indirectly by way of dividend or otherwise. According to the CIT(A), this makes it amply 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 CI .....

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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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performing specific services to its members, though treated as business income under section 28(iii) would still be entitled to the exemption under section 2(15) read with section 11, provided there is no profit motive. (B) The Hon'ble Bangalore Tribunal in the case of M/s. Karnataka Industrial Area Development Board Vs. ACIT in ITA No.378/Bang/2013 dated O4/09/2015 by applying the principles laid down in the decision of the Delhi High Court in the case of India Trade Promotion Organization .....

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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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n the case of Addl.CIT Vs. Surat Art silk Cloth Manufactures Association (1980) 121 ITR 1 (SC), the Supreme Court held as under: " The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility would cease to be a charita .....

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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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rce, (b) Charitable activity should be devoid of selfishness or illiberal spirit, (c) the underline propelling motive is not for commercial exploitation but general public good and (d) fees charged if any should be nominal and based on commercial principle. • The appellant is a Government agency and engaged in the coordinate and planned development of Jaipur region and which is predominant object of it. (G) In the case of Indian Trade promotion organization Vs. DGIT (Exemptions) (2015) 53 t .....

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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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embers, as the same is absent i.e. distribution of surplus among the members the object of the assessee is one of charitable in nature and the proviso to section 2(15) of the Act is not attracted. (vi) The one day international matches T-20 matches and IPL matches are all conducted by the BCCI and the assessee is only providing the infrastructural facilities available in the stadium. The assessee receives funds from BCCI for meeting the expenditure being the host. (vii) The amendment to section .....

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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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l Nadu Cricket Association is conducting any business activity, nor was it rendering any service in relation to any trade, commerce or industry. In those circumstances, the Tribunal concluded that proviso to section 2(15) of the Act is not applicable to the assessee. Further the Tribunal had observed as under: 15. Now, let s examine whether the activity of conducting one-day matches, T-20 matches and Indian Premier League matches would amount to doing business or trade. It is the case of the Rev .....

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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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ers of the lower authorities for assessment years 2009-10 and 2010-11 are set aside and the Assessing Officer is directed to grant exemption under Section 11 of the Act. The Assessing Officer is also directed to grant exemption under Section 11 of the Act for the assessment year 2008-09 also . (xii) The Delhi Tribunal in the case of Delhi & District Cricket Association Vs. DIT (E) in ITA No.3095/Del/2012 dated 13/01/2015 held that proviso to section 2(15) does not have application to Delhi C .....

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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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and, hence, the disallowance made by the Income Tax authorities is confirmed. Disallowance u/s. 40(a)(ia) amounting to ₹ 16,65,453/- 5.4 The Assessing Officer in the assessment order in para 10 observed that in the P&L a/c, the assessee claimed ₹ 16,65,453/- as fee given to Coaches. But, it is found that no TDS has been made on this payment. Hence, the AO disallowed the above payment by invoking the provisions of section 40(a)(ia) of the Act and added the same to the total incom .....

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