TMI Blog2018 (3) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... ICIAL MEMBER For The Appellant : Shri Gitesh Kumar, Senior DR. For The Respondent : Shri K.P. Dewani, Advocate ORDER PER BENCH : These appeals by the Revenue for the assessment years 2009-10 to 2013-14 are directed against the order of learned CIT(A)-4, Nagpur dated 22nd June, 2016 and 28th June, 2016. 2. The only common issue in these five appeals of the Revenue is as regards to the order of learned CIT(A) allowing exemption under Section 11 of the Income-tax Act, 1961 (hereinafter the Act ) disregarding the applicability of proviso to Section 2(15) of the Act. For this, Revenue has raised following two grounds :- 1. On the facts and in the circumstances of the case and in law, even though the assessee was granted registration u/s 12AA of the I.T. Act, whether the CIT(A) was right in allowing the benefit of sec.11 12 to the assessee, particularly since the Proviso to sec. 2(15) of the I.T. Act was applicable in the assessee s case, as the assessee was involved in carrying out commercial activities? 2. On the facts and in the circumstances of the case and in law, whether the decision of the CIT(A), of allowing exemption u/s 11 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in the nature of carrying on of the business/trade/commerce with the object of earning of profits and, in view of proviso to Section 2(15) of the Act as introduced by the Finance Act, 2008 with effect from 1st April, 2009, the advancement of any other object of public utility shall not be charitable purpose if it involves carrying of any 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 fee or for any other consideration, irrespective of the nature of use or application or retention of the income from such activity. The assessee before the Assessing Officer replied to the show cause notice vide reply dated 30th October, 2012 and the gist of submissions as reproduced by the CIT(A) in paragraph 6 reads as under :- i) Copy of memorandum and article of association were submitted to demonstrate that the assessee is engaged in the activities of development of cricket. ii) As per the Board s Circular No.395 dated 24.09.1984, it was clarified that promotion of sports and games is an object of general public utility and institutions engaged in such activity are eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of DCIT Vs. Tamil Nadu Cricket Association (2017) 50 CCH 0128 allowed the claim of the assessee vide paragraph Nos.6.3 to 6.13 as under :- 6.3 I have considered the submissions made by counsel for the appellant and perused evidence on record. The appellant association engaged in the activity of development of cricket. The appellant association is registered under the Societies Registration Act 1860 and is affiliated to the Board of Cricket Control of India which is an Apex Body for development of cricket in India. The appellant a charitable institution has maintained regular books of account which are duly audited and audit report as prescribed has been submitted before the A.D. and copy of the same is placed before me. The appellant has constructed a Stadium at Jamtha on the lines of standard of International Stadiums which is utilized for playing various International cricket matches to be viewed by public at large. 6.4 In the case of appellant application for registration under section 12A of I.T. Act 1961 was submitted on 1/4/2003. The aforesaid application had not been disposed off within a period of six months as provided under the provisions of section 12AA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties with profit motive. In view of above A.O. has concluded that activities of the appellant can no longer be regarded as charitable activities in view of proviso to section 2(15) of I.T. Act 1961. The A.O. has further observed that the benefit of section 11 of I.T. Act 1961 is denied and the surplus is subjected to tax. 6.6. The appellant is association for development of Cricket and such similar associations are existing across the country in various States. In the case of Tamil Nadu Cricket Association the issue as to applicability of proviso to section 2(15) of I.T. Act 1961 introduced by Finance Act 2008 was considered by the Hon'ble ITAT, Chennai Bench. In the aforesaid case the benefit of section 11 of I.T. Act 1961 was denied by observing that the various activities carried on by the said institution is not charitable activity in view of the proviso to section 2(15) of I.T. Act 1961. The activities of the aforesaid institution are similar to that carried on by the appellant association in Vidarbha. The Hon'ble ITAT, Chennai after considering proviso to section 2(15) of I.T. Act 1961 has held that benefit of section 11 cannot be denied in the said case. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 orders 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. The ratio laid down by the Hon'ble ITAT, Chennai squarely applies to the facts in the case of appellant and is binding precedent. There is no contrary view available. The ratio laid down by the Hon'ble ITAT, Chennai squarely applies to the facts in the case of appellant and considering the same benefit of section 11 of LT. Act 1961 cannot be denied to the appellant. 6.7. The appellant association is similar to that of Cricket Association of Bengal which is carrying out its activities in the State of Kolkatta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the viewers. The organization of such events involves huge costs. Whatever surplus is left after defraying all the expenses is ploughed back by them in the organization itself It will be taking a deliberately distorted view of the right claimed by such organizations to telecast the sporting event to call it an assertion of a commercial right. Yet the MIB has chosen to advance such contention which can only be described as most unfortunate. It is needless to state that we are, in the circumstances, unable to accept the ill-advised argument. It does no credit to the Ministry or to the Government as a whole to denigrate the sporting organizations such as BCCI/CAB by placing them on a par with business organizations sponsoring sporting events for profit and the access claimed by them to telecasting as assertion of commercial interest. The observation of Hon ble Apex Court reproduced hereinabove from the judgement dated 09.02.1995 fully supports the submission of the appellant that the activities carried out by the appellant cannot be ascribed as activities of business for which the benefit of section 11 of I.T. Act 1961 can be denied. The ratio laid down fully supports the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objects of association and thus the observation of the A.O. that the appellant association is incurring meager expenses are unjustified and contrary to evidence on record. On above undisputed factual position denial of benefit of Sec. 11 to appellant institution is unjustified and unsustainable. 6.10. The A.O. at para 7 of the assessment order has given various reasons so as to conclude that the appellant is carrying on activities which are in the nature of trade, commerce or business. The perusal of the observations would show that the activities carried on by the appellant are similar to that prior to assessment year 2008-09. The appellant has not carried out any new activity which was not being carried out by the appellant association in the assessment year 2008-09. In the case of appellant upto assessment year 2008-09, the Hon'ble I TAT, Nagpur Bench, Nagpur has concluded that the appellant is eligible for the benefit of exemption under section 11 of LT. Act 1961. In the appellate orders for the past assessment years no where in the assessments as well as in the appellate orders ever there has been any allegation as to that the appellant association is carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by appellant institution can not be termed as meager as observed by A.O. more so where A.O. himself at para 11 of page 9 has observed in tabulation that percentage of amount spent on cricket including establishment expenses is 85.06%. Thus I am of considered opinion that conclusion of A.O. that appellant is engaged in activity of trade commerce or business is unjustified and unsustainable. 6.12. The A.O. at para 10 of the assessment order has made certain observation as regard to collecting of ticket money during the course of matches or amount collected from the members of the club. The A.O. has referred the decision of Uttarakhand High Court in the case of Queen Educational Society reported at 319 ITR 160. In the case of appellant it is evident that the various receipts from which the revenue is derived are applied on the objects of the association. In the case of appellant there is no allegation of any misuse of fund or any allegation as to application of money for other than the objects of the association. The expenditure incurred on objects of the appellant association are in the nature of expenses to that considered by the Hon'ble IT AT, Chennai Bench in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and observed in paragraph 34 as under :- Thus, when the assessee is in receipt of income from activities, which fits in with sections 11 and 12 of the Act as well as from sources which do not fall strictly with the objects of the trust, would not go for cancellation of registration under section 12AA of the Act on the sole ground that the assessee is in receipt of income which does not qualify for exemption straightaway by itself. All that ultimately would arise in such cases is the question of considering whether section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008, dated December 19, 2008, the object of insertion of first proviso to section 2(15) of the Act was only to curtail institution, which under the garb of general public utility , carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new obligations in respect of past actions. 9. Hon ble Madras High Court also held that the volume of receipt cannot be a factor for deciding the nature of activity whether it is commercial or of general public utility. Hon ble Madras High Court, in paragraph Nos.52 to 55 held as under :- 52. On going through the materials, the Income Tax Appellate Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of Section 12AA(3) were satisfied. The Income Tax Appellate Tribunal agreed with the Director of Income Tax (Exemptions) that the expression 'subsidy from BCCI' was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast rights. The surplus from IPL Season-I worked out to 8.5% of the total receipts. It further held that 78% of the total receipt came out of advertisement revenue. 53. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal's view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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