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2018 (3) TMI 939

il Nadu Cricket Association [2013 (12) TMI 833 - MADRAS HIGH COURT] after considering the proviso to Section 2(15) of the Act for assessment year 2010-11, held that the benefit of Section 11 of the Act cannot be denied. - Hon’ble High Court has considered the proviso to Section 2(15) of the Act taking into consideration the object of the institution which fits into the definition of charitable purpose defined under Section 2(15) and subsequent substitution of the Section itself with effect from 1st April, 2009. - Although the decision of Hon’ble Madras High Court is in respect of grant of registration u/s 12AA but the relevant observations reproduced above are very much relevant to the issue before us - Decided in favour of assessee. - I.T.A. Nos.500/Nag/2016 to 504/Nag/2016 - Dated:- 7-3-2018 - SHRI G.D. AGRAWAL, PRESIDENT AND SHRI MAHAVIR SINGH, JUDICIAL 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 .....

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e passed before expiry of six months from the end of the month in which application is received for grant of registration u/s 12A. In the absence of rejection of application for registration filed u/s 12A, the institution shall be deemed to have been granted registration u/s 12A as applied for. The Assessing Officer required the assessee vide questionnaire dated 10th September, 2012 on perusal of audit report and return of income along with computation filed by the assessee that it is not engaged in the activity which can be called as a charitable activity and therefore, does not fall within the ambit of charitable purpose as per the proviso to Section 2(15) of the Act. According to AO, even if the promotion of cricket is considered to be an object of general public utility, the other correlated activities 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, comme .....

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ies of the assessee can no longer be regarded as charitable activities in view of the proviso to Section 2(15) of the Act as it is evident from the activities of the society that it is making systematic profit year after year even though major chunk of the profit is utilized for investment in infrastructure and hence, its profit motive is undeniable. Hence, the assessee association was not considered a charitable organization in view of proviso to Section 2(15) of the Act and exemption claimed by the assessee u/s 11 of the Act was denied and surplus was brought to tax. Aggrieved, assessee preferred appeal before the CIT(A). 6. Learned CIT(A), after considering the facts and circumstances and also the decision of Coordinate Bench of ITAT, Chennai Bench in the case 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 t .....

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of I.T. Act 1961 in Appeal No. CIT(A)- 1/651/2010-11 vide order dated 30/03/2012. In the appeal filed by revenue in respect to said order stands dismissed by Hon'ble ITAT, Nagpur Bench, Nagpur in ITA No. 206/Nag/2012 vide order dated 22/01/2014. In view of above fact the benefit of section 11 stood allowed in the case of appellant upto assessment year 2008-09 by the appellate authorities. 6.5. In assessment year 2010-11 for the first time benefit of section 11 has been denied to appellant and for denial of such exemption provisions of section 2(15) of I.T. Act 1961 as amended by Finance Act of 2008 have been considered. The various activities carried out by appellant are looked into to hold that appellant institution is carrying on activities 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 .....

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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, this Tribunal is of the considered opinion that 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 orders of the lower authorities for assessment years 2009-10 and 2010-11 are set aside and the Asse .....

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tive of popularizing the sports by selecting the best available means of doing so, they incidentally earn some revenue, will not convert either them into commercial organizations or the right claimed by them to explore the said means, into a commercial right or interest. It must further be remembered that sporting organizations such as BCCI/CAB in the present case, have not been established only to organize the sports events or to broadcast or telecast them. The organization of sporting events is only a part of their various objects, as pointed out earlier and even when they organize the events, they are primarily to educate the sportsmen to promote and popularize the sports and also to inform and entertain 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 .....

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lated by A.O. would itself indicates that the total amount applied by the appellant association in the various years as is evident from the chart observed in the assessment order. The last column of the chart is percentage of amount spent on cricket including establishment expenses. It is seen from the chart that assessee in assessment year 2007-08 has spent 107.64% and in assessment year 2008-09 252.47% of the receipts. In the previous year under consideration appellant has spent 85.06% of the total receipts. The aforesaid amounts spent on activities of promotion of cricket including infrastructural expenses dearly depicts that the appellant association has applied the revenue derived on 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 per .....

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1 provides that income from property held in trust qualifies for income to be not exigible to tax u/s 11 of I.T. Act 1961. Deriving rent from property held in trust by institution can in no manner of consideration be considered as an activity of trade commerce or business as envisaged in proviso to sec. 2(15) of I.T. Act 1961. I do not see any thing wrong more so where revenue derived is being utilized for promotion of sports. There is nothing commercial in respect to same. The A.O. at para 7(vii) has omitted to consider capital expenditure and other expenditure of appellant institution as per Audit statements on its objects. Considering financial statements expenditure incurred 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 .....

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produced by the CIT(A) in paragraph 6.6, which we have already reproduced above. Further, we also find that this issue has been considered by Hon ble Madras High Court in the case of Tamil Nadu Cricket Association Vs. DIT(Exemptions) and Others - (2014) 360 ITR 633 (Mad), wherein Hon ble High Court has considered the proviso to Section 2(15) of the Act taking into consideration the object of the institution which fits into the definition of charitable purpose defined under Section 2(15) of the Act and subsequent substitution of the Section itself with effect from 1st April, 2009. Hon ble High Court has gone into the aspect of proviso to Section 2(15) of the 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 .....

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atory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996...... power under Section 12AA(3) can be exercised by the Commissioner in respect of a trust registered prior to 1 June 2010. The mere fact that a part of the requisites for the action under Section 12AA (3) is drawn from a time prior to its passing namely registration as a charitable trust under Section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create 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 assesse .....

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member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket 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 base .....

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