TMI Blog2019 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... dden, the department now believes that the activity of the assessee is commercial in nature and no longer charitable. It is difficult for us to take the view that the assessee could be said to be carrying on trade, commerce or business under the garb of the activity being general public utility . Merely because an activity is performed in an organized manner, that alone, will not make such activities as business/commercial activity. The profit motive is one essential ingredient which is apparently missing in the case on hand. In carrying out an activity, one may earn profit or one may incur loss. But for making it as a business activity, the presence of the profit motive is sine qua non. In the case on hand, the ultimate beneficiary is either the cricketer or the game of cricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on the charitable basis as far as real beneficiary is concerned. Whenever the revenue is earned, the same is not on commercial lines and the same could be said to be earned without any commercial attribute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject and the activities of the assessees and not that of the BCCI. The nature of the activities of the assessee cannot take its colour from the nature of the activities of the donor. - Decided in favour of assessee - R/TAX APPEAL NO. 268 of 2012, 152 of 2019, 317 of 2019, 318, 319 of 2019, 375 of 2019,358 of 2019, 359 of 2019, 333, 334, 335, 336, 337, 338, 339, 340, 320, 321 of 2019, 374 of 2019, 675 of 2019, 123 of 2014 - - - Dated:- 27-9-2019 - MR. JUSTICE J.B. PARDIWALA AND MR. JUSTICE A.C. RAO MR. M.R. BHATT, LD. SR. COUNSEL WITH MS MAUNA M BHATT, LD. COUNSEL for the Appellants in all the Tax Appeals. MR. J. P. SHAH, LD. SR. COUNSEL WITH MR.MANISH J SHAH, LD. COUNSEL for the Gujarat Cricket Association MR. S.N. SOPARKAR, LD. SR. COUNSEL WITH MR. B.S. SOPARKAR, LD. COUNSEL for the Baroda Cricket Association MR. TUSHAR HEMANI, LD. SR. COUNSEL WITH MS. VAIBHAVI PARIKH, LD. COUNSEL for the Saurashtra Cricket Association. COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Since the issues raised in all the captioned tax appeals preferred at the instance of the Revenue are the same,those were heard analogously and are be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied under Section 10(23) of the Act, 1961 vide notification dated 30th March, 1999 from A.Y. 1999-2000 to 2001-2002 by the Government of India, Ministry of Finance, Department of Revenue. 8.2 In the absence of renewal of the notification under Section 10(23) of the Act, the GCA preferred an application for registration under Section 12AA of the Act, 1961. The registration under Section 12AA of the Act came to be granted by the DIT (Exemption), Ahmedabad vide its order dated 16th April, 2003, i.e., from A.Y.2004-05 onwards. 8.3 A show-cause notice dated 26th September, 2010 came to be issued upon the GCA under Section 12AA(3) of the Act, calling upon the GCA to show cause why the registration granted under Section 12AA of the Act should not be cancelled from 2004-05 onwards. 8.4 The Commissioner, after hearing the assessee, cancelled the registration under Section 12AA for the period from A.Ys.2004-05 till the date of his order, i.e. 6th December, 2010 in exercise of his powers under Section 12AA(3) by invoking the Proviso to Section 2(15) of the Act, 1961 inserted by the Finance Act, 2010 with effect from 1st April, 2009. The Commissioner, while cancelling the registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y including the GCA. BCCI also has commercial transactions like receipts of TV rights, IPL matches etc. This commercial chain further percolates down to the State Associations like GCA which shows the receipts of TV rights as corpus donations. This accounting procedure is incorrect as it is purely commercial receipt which falls within the ambit and scope of newly inserted proviso to section 2(15) of the I.T. Act w.e.f. 1/4/2009. It partakes the character of tax avoidance device clearly attracting the decision of Constitution Bench (5 Judges) of the Apex Court in McDowell and Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC) which fortifies the cancellation of registration of GCA. In this landmark case, their Lordships have held that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning (Per Ranganath Misra at Pg.171 of the order). A critical analysis of Receipts and Expenditure of GCA shows that there Is huge generation of income of ₹ 16,37,747.54, (-) ₹ 70,50,486.28 and (-) ₹ 5,91,708.94 in F.Ys. 2006-07, 2007-08 and 2008-09 respectively after meeting out only a nominal expenditure on promotion of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the revenue generated for the promotion of Sports. This is a clear violation of the educative object of GCA as is seen from the submission of the Id. Counsel above. From the reasons mentioned above, it is quite manifestly and palpably evident that the entire character and focus of GCA has become totally commercial with the object of earning revenue and it is no more a charitable organization. As stated above, the facts and ratio of the decision of the Uttarakhand High Court in the case of Queens Educational Society (supra) call for withdrawal of registration allowed to GCA u/s 12AA of the I.T. Act, 1961 even with pre-amended section 2(15) of the I.T. Act, 1961. Furthermore, a fortiori, with the amendment u/s 2(15) of the I.T. Act, 1961 by the Finance Act, 2008 w.e.f. A.Y.2009~10, GCA has lost the status of charitable organisation. Its activities, proprio vigore, are being carried on commercial lines. GCA, though, was granted registration in principle by this Office Order dated 16/4/03, did not carry out any activity which has charitable object and also by invoking Doctrine of Just Cause in the light of the observations of Hon Supreme Court in 259 ITR, 1 (SC) (supra), I str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner in paragraph 17 of the impugned order is pertinent, which is reproduced as under- 17. In view of the amended provisions of sec. 2(15), it Is seen that assessee s activities can no longer be regarded as charitable activities. Especially the proviso to sec. 2(15) is violated by assessee and hence, it cannot be regarded as a charitable society engaged In charitable purposes. I have duly considered the nature of activities, the sources of income, the activities on which expenditure was made, surplus generated existence of profit motive, commercial exploitation of assets, fees and Charges collected, nature of other income and other activities and case law before coming to a final conclusion, the assessee Vidarbha Cricket Association cannot be held to be an organization meant for charitable purposes in view of the above findings. 18. In the result, the deemed registration benefit under section 12AA as claimed and enjoyed by the assessee is hereby withdrawn/cancelled from assessment year 2009- 10 onwards. 8. On a perusal of the aforesaid, It is clearly established that as per the Commissioner, the activities of the assessee do not qualify to fall within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble limits of Section 12AA(3) of the Income tax Act, 1961 and therefore, the impugned order is bad in law. We also add that we are not commenting on the merits of the issue as to whether the activities of the assessee falls within the meaning of charitable purpose as per Section 2(15) of the Income tax Act, 1961 as amended and we are only deciding this aspect of matter that the order passed by the DIT(E) u/s 12AA(3) is bad in law. This issue raised by the DIT(E) is not permissible in view of the limited powers available to him U/s. 12AA(3) of the Income tax Act, 1961. However, it would be open for the A.O. to consider all the issues raised in the impugned order, if so advised, in the course of relevant assessment proceedings 6. In view of our discussion in the above para, we set aside the order of DIT(E) u/s. 12AA(3) of the Income Tax Act, 1961 and restore the registration granted to the assessee u/s.12A of the Income tax Act, 1961. 8.6 The Revenue, being dissatisfied with the order passed by the ITAT has come up with the present appeal. Submissions on behalf of the Revenue:- 9. Mr. M.R. Bhatt, the learned senior counsel appearing for the Revenue vehemently submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GCA. Mr. Shah would submit that no error, not to speak of any error of law, could be said to have been committed by the ITAT in quashing and setting aside the order passed by the DIT (Exemption). Mr. Shah would submit that since the inception of the GCA and the date of grant of the registration under the Act, the objects of the Association have remained the same and have not undergone any change to question its genuineness. Mr. Shah would submit that the view of the DIT (Exemption) that the assessee could not be said to be carrying on the charitable activity as per Section 2(15) of the Act is erroneous in law. Mr. Shah would submit that in any event all that the Section 12AA(3) of the Act prescribes for cancellation is the genuineness of the activities of the trust or that the activities are not carried on in accordance with the objects of the trust. 13. Mr. Shah took us through the various objects of the Association and pointed out to the clear distinct words used in Section12AA(1) and 12AA(3) of the Act as well as the first Proviso to Section 2(15) of the Act. Mr. Shah submitted that the grant of registration originally as early as in 2003 clearly indicates the satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the decision of the Madras High Court in the case of Tamil Nadu Cricket Association (supra), on which strong reliance is sought to be placed on behalf of the assessee, has been challenged by the Revenue before the Supreme Court . The Supreme Court is yet to hear the appeal preferred by the Revenue. ANALYSIS 17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the ITAT committed any error in passing the impugned order. 18. Section 12AA of the Act prescribes the procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of the activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied or convinced about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, the grant of registration as well as the cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Sections 12AA(1) and 12AA(3) of the Act, as the case may be. 22. The registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circumstances under which the income of the trust is not to be included in the total income of the previous year of the person. So too, Section 12 of the Act on the income derived from the property held for the charitable or religious purposes. 23. Thus, when the assessee is in receipt of income from the activities, which fits in with Sections 11 and 12 of the Act as well as from the sources wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dernizing the entire Motera Stadium at Ahmedabad. (viii) The Gujarat Cricket Association provides medical aid to its players, remuneration to Coaches, Physiotherapists, Doctors etc. (ix) It organizes various programmes to encourage the game of cricket. (x) On the ground booking charges, it was submitted that only in the special cases, it has charged exclusively for the purpose of playing cricket matches. (xi) The Ranji Trophy and other matches are open to public viewing and no tickets are sold. (xii) On the international matches, charge is levied, but the same would be a nominal charge as it would be impossible to manage the affairs if the viewing is free of cost. 25. The aforesaid indicates that there is no profit motive. 26. On income from the advertisement etc., it was submitted that the assessee has to maintain the stadium for the whole year and whereas, the international matches are played only once or twice in a year or may be in two years, the cost of maintenance of the stadium is as high as compared to the charges for transfer of interstate rights. 27. All the funds are used for building up infrastructure for promotion of cricket and for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Madras. Going by the objects , we find that the trust falls under the head of any other object of general public utility and hence falls within the meaning of charitable purpose under Section 2(15) of the Act. Section 2(15) of the Act defines charitable purpose as it originally stood at the time of grant of registration as under:- 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. 23. Section 2(15) was amended under Finance Act,2008, with effect form 1.4.2009 by substituting the following provision which reads s under: 2. Definitions. .... (15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment (including waterheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC) (referred to in the decision reported in (1980) 121 ITR 1(Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if the dominant object or the primary object was charitable, the subsidiary object for the purpose of securing the fulfillment of the dominant object would not militate against its charitable character and the purpose would not be any the less charitable. The amendment in the year 2008 made a drastic amendment to deny the status of a charitable purpose to an institution with the object of general public utility, having any activity 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. 25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, the status of the institution will not be one for 'charitable purpose'. 26. The Central Board of Direct Taxes, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. 31. After amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows: Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities 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 19.12.2008, the object of the 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 under Section 11 of the Act. 35. In the decision reported in (2012) 343 ITR 23 (Bom) (Sinhagad Technical Education Society V. Commissioner of Income Tax (Central), Pune Anr), the Bombay High Court held as follows: As a result of the amendment, which has been brought about by the Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as it stood prior to its amendment by the Finance (No.2) Act, 1996. SubSection (3) was inserted into the provisions of Section 12AA by the Finance (No.2) Act, 2004 with effect from 1 October 2004. As it originally stood, under subsection (3), a power to can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o registration keeping in mind the objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1) (b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very same provision of section 12AA(b)(i) of the Income Tax Act, 1961 to go into the genuineness of the activities of the trust. However, the Commissioner is empowered to revoke the certificate in terms of Section 12AA(3) of the Income Tax Act, 1961. As Commissioner is empowered to revoke the certificate in terms of section 12AA(3) of the Income Tax Act, 1961. As per the said provision, in the event the Commissioner is satisfied subsequently i.e., after registration that the activities of such trust or institution are not genuine or not being carried out in accordance with the objects of the trust or the institution as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. 37. After the grant of registration, if the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income-tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, considered the said decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of the Act. On appeal before the respective High Courts, the decision of the Income Tax Appellate Tribunal was confirmed. 42. Leaving that aside, there being no dispute raised by the Revenue as to the genuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3.2003, the same was made taking into consideration the objects of the institution fitting in with the definition of 'charitable purpose' defined under Section 2(150 of the Act and the substitution of the Section itself came only 2008, with effect from 01.04.2009. As rightly pointed out by the learned senior counsel appearing for the assessee, the circular clearly brings out the object of the amendment and the amended provision has no relevance to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AA is bad and hence, to be cancelled. 45. It may be of relevance to note the language used in the definition charitable purpose in Section 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee's case falls within the phrase of the definition general public utility . In the decision reported in (2000) 246 ITR 188 in the case of Hiralal Bhagwati Vs. Commissioner of Income Tax, the Gujarat High court considered the said phrase in the context of Section 12AA registration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. 48. As far as the unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, on which heavy reliance was placed by the Revenue, the said decision relates to the rejection of the registration at the threshold of the application filed for registration. So too the decision of the Apex court reported in 315 ITR 428 in the case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society, wherein, rejection was made on the threshold of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009. 51. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under Section 2(15) of the Act. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et 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 based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of2008 that a new proviso to section 2(15) of the Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of public utility to avoid tax liability. The legal terms trade, commerce, or business in section 2(15) mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is the antithesis of activity undertaken with profit motive or activity undertaken on sound or recognised business principles. The quantum of fee charged, the economic status of the beneficiaries who pay commercial value of benefits, in comparison to the fee, the purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment. (d) The scope of the term activity in the nature of trade, commerce or business would mean that: i) It is undertaken with a profit motive; ii) The activity is continued on sound and recognized business principles and is pursued with reasonable continuity; iii) There should be facts and other circumstances which justify and indicate that the activity undertaken is in fact, in the nature of business; iv). The five tests propounded in the case of Customs and Excise Commissioner vs. Lord Fisher (1981) STC 238 and the propositions in the case of CST vs. Sai Publication Fund 258 ITR 70 (SC) apply. v). Business activity is an important prevailing element of self interest. (e) From a perusal of the Circular no.11 of 2008 issued by the CBDT, it is clear that the new Proviso of S.2(15) of the Act, is applicable to the assesses who are engaged in commercial activities i.e. carrying of trade, commerce or business in the garb of public utility to avoid tax liability, and where the object of the general public utility is only a mask or device to hide the true purpose, which was trade, commerce or business. (f) Charitable activity is the anti-thesis of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions like TV rights, IPL matches etc. However, we fail to understand what has the BCCI to do directly with the assessee. The assessee is a registered charitable trust. It has its own objects. It has its own activities for the purpose of promoting the game of cricket, or in other words, imparting education in the game of cricket. The BCCI may ask the Association to host a cricket match at the international level once in a year or two. However, that by itself, is not sufficient to draw an inference that the assessee-Association is indulging in commercial activity with an element of profit motive. 36. We are quite amazed with some of the findings recorded by the Assessing Officer as well as the CIT(A). One of the findings recorded is that the Association should not sell tickets for watching the cricket matches. Are the authorities trying to convey that the Association should not sell tickets even when it comes to international matches. How does the Revenue expect the Association to distribute the tickets in such circumstances. 37. Having regard to the materials on record, we are convinced that the main and predominant object and activity of the assessee is to promote, regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... klal Chunilal Sons Ltd. vs. CIT (1953) 24 ITR 375 (Bom.) in conformity with the uniform policy, which has been laid down in income tax matters, whatever our view may be, we must accept the view taken by the another High Court on the interpretation of the section of a statute which is in all India statute. Similar view has expressed by the Bombay High Court in Ramanlal Amarnath (Agency) Ltd. vs. CIT (1973) 91 ITR 250, while following a decision of this Court in Baroda Traders Ltd. vs. CIT (1965) 57 ITR 490. Even though, we may be persuaded to take a different view, we are not inclined to do so in view of the settled practice referred to in the decision of the Madras High Court and the decision of Bombay High Court and the Madhya Pradesh High Court adverted to above. Therefore, respectfully following the decisions of the Madras High Court and the Madhya Pradesh High Court, we must answer the third question referred to us also in the affirmative and against the revenue. 40. However, Mr. Bhatt would submit, by placing reliance on the decision of this Court in the case of N.R. Paper Board Limited vs. Deputy Commissioner of Income Tax, 1998 (234) ITR 733 that while the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow the precedent which may otherwise have a persuasive value, though not binding. 41. Mr. Bhatt, the learned senior counsel appearing for the Revenue may be right in his submission that if this Court is not persuaded to follow the view taken by the High Court of Madras in the case of Tamil Nadu Cricket Association (supra), then by only following the principle as laid down in the case of Maneklal (supra), this Court may not adopt or follow the view of the High Court of Madras for the purpose of consistency. We may only say that having regard to the materials on record, we are not persuaded to take a different view than the one taken by the High Court of Madras. Therefore, we are not going much into the issue as regards the dictum as laid down in Maneklal (supra). We find the view taken by the ITAT in its impugned order quite reasonable and in accordance with law. The Tribunal, in its impugned order, has made itself very clear that it was not expressing any opinion on the merits of the issue as to whether the activities of the GCA would fall within the meaning of charitable purpose in accordance with Section 2(15) of the Act as amended. The ITAT has also clarified that the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emorandum of the appeal. The pleadings in the memo of the appeal are as under; (A) In the present case, the assessee filed its return of income on 14/09/2009 declaring total loss of ₹ 3,45,54,247/-. The summary assessment u/s.143(1) of the Act was resulted in Refund of ₹ 46,14,500/-. The assessment u/s.143(3) of the Act was completed on 30/12/2011 determining total income at ₹ 22,77,02,663/-. (B) Disallowance of benefit of section 11 of the Act. 1) During the assessment proceedings, the Assessing Officer observed that the activity of the assessee was held as in the nature of trade, business or commerce for a cess or fees in the form of tickets with profit motive and the receipt from the BCCI in the form of TV rights was not voluntary contribution but price paid for hosting cricket tournament on assessee s stadium and therefore, it was not educational activity of the assessee. The activity of the assessee was running of its business of entertainment of the people at large for a fee of cess by arranging cricket tournament at various levels. Further, the DlT(E), Ahmedabad had passed speaking order considering all the relevant legal and actual position cance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Hoshiarpur Improvement Trust Vs ACIT (2015) 155 ITD 570 (Asr) which were approved by the Hon. Punjab Haryana high Court in the case of C1T(E) Vs Improvement Trust Monga in TA No. 147 of 2016 reported as Tribune Trust Vs C1T(2017) 390 ITR 547 (P H). Further, Appellate Tribunal has relied on the decision of this Hon ble Court in the case of Sabarmati Gaushala Trust and held that accrual of profit cannot be held that the assessee is not covered by the section 2(15) of the Act. The receipts in the hands of the cricket associations are nothing but appropriation of profits and that are not taxable. Further, the Department has not been able to point out a single object of the assessee which is in the nature of trade, commerce or business. On perusal of the annual reports and annual financial statements of the assessee, the objects of the assessee exist and operate purely for the purpose of promoting cricket. The Appellate Tribunal held that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business. Accordingly, the Appellate Tribunal held that the assessee has covered by the section 2(15) of the Act and thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, to the business entities. The principle is clear. When you are here to make money from such activities on commercial lines, in the garb pursuing advancement of an object of general public utility, you may as well pay tax on the earnings from such activities. There is no dispute that the cricket is now biggest source of making money and, therefore, the income of the entities organizing cricket events should also be taxed. It is pertinent to mention that as per the CBDT Circular No.395 dated 24/09/1984, it was held that promotion of sports and games is advancement of objects of general public utility . Thus, in the instant case, the Assessee is clearly engaged in an activity that is of advancement of objects of general public utility . Since the Assessee is covered by the last limb of the definition of Section 2(15), now it is to be seen whether the conditions in the proviso 1 of the Section 2(15) are applicable to the facts of the case. It is very clear from the audited accounts of the assessee that it earns income out of sale of tickets, sale of space, A/C Cabin Ticket sale etc. out of the cricket matches conducted at the grounds of cricket association which is nothing but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction that shall be form corpus fund. Thus, the condition u/s.l 11(1)(d) of the Act are satisfied. The Appellate Tribunal has relied on the decisions in assessee s own case in orders for A.Ys. 2004- 05 to 2007-08 and thus directed the Assessing Officer to treat the TV subsidy of ₹ 20,69,60,338/received from BCCI as a corpus donation. 4) The decision of the Appellate Tribunal is erroneous. As per provisions of section 11(1)(d) of the Act voluntary contributions with a specific direction that can be used as a corpus donation. However, in the instant case there is no specific direction from the BCCI to treat the said amounts as towards the corpus fund . If the intention of the donor was to donate this amount towards the corpus fund of the assesee, then it has to be specifically mentioned. In the absence of written direction, a particular donation cannot be considered as corpus donation . In this case, as the specific direction was clearly missing, said receipt of subsidy had to be considered as the income of the assessee trust and it cannot be exempt u/s.11(1)(d) of the Act. [D] Disallowance of infrastructure subsidy 1) During the assessment proceedings, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appeal before CIT(A). The CIT(A) held that the assessee was not an educational institution within the meaning of section 2(15) of the Act. The CIT(A) partly allowed the appeal of the assessee. 3) Being aggrieved, the assessee preferred appeal before Appellate Tribunal. The Appellate Tribunal held that the Assessing Officer has not justified in holding that infrastructure subsidy as revenue in nature. The assessee was made claim for subsidy only after the expenditure having been incurred which is relatable to capital assets. The infrastructure subsidy was given to the assessee for the reimbursement of 50% of expenditure which was incurred on infrastructure related to the capital assets and therefore it was not revenue receipt. Accordingly, the Appellate Tribunal has deleted the addition of ₹ 2,13,34,033/-. 4) The decision of the Appellate Tribunal erroneous. In the cases of trusts, the trust is eligible to claim both revenue as well as capital expenses as application of income, so all expenses claimed as application of income should be first treated as income and be routed through the profit and loss accounts. The tax effect involved is ₹ 7,72,84,442/- which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Relief Funds. 12. To lay out such ground or grounds for playing the game and for other purposes and to provide pavilion, stadiums, other conveniences and amenities in connection therewith. 13. To introduce a Scheme of professionalism and to implement the same. 14. To start and maintain a journal devoted to sports in general and cricket in particular. 15. To maintain a library of books, periodicals and other literature on sports i.e. general and cricket in particular and to start journal or journals on sports in general and/or cricket in particular. 16. To engage person or persons and professional cricketers, coaches, umpires, groundsmen and to pay remuneration or honorarium to them. 17. To start, sponsor and/or to subscribe to any fund for the benefit of players, umpires, coaches, groundsmen, employees or their families. 18. To collect funds for the purpose of the Association and to utilize such in such a manner as the Managing Committee of the Association consider desirable for the fulfillment of the objects of the Association. 19. To hold and maintain the Laws of Cricket and The Rules and Regulations of the Board of Control for Cricket in India. 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest and to purchase, redeem or pay off any such securities. 32. To employ, appoint executive secretaries and assistant secretaries, clerks, managers, coaches, professional cricketers, umpires, scorers, statisticians, groundsmen, peons, servants and other service personnel and staff and to pay to them and other persons in return for their services to the Association salaries, wages, gratuities, pensions, honorariums, compensations, any ex-gratia payments and/or provident funds, other funds and to remove or dismiss such employees. 33. To promote such benevolent or other funds and to donate such sum or sums for 1. such causes as would be deem ed fit by the Association conducive to the promotion of the game of cricket; 2. the benefit of a Cricketer or his widow or children as the Association may deem fit; 3. any other person who has served cricket or his widow or his children as the Association considers fit. 34. Generally to do all such other acts and things as may seem to the Association to be convenient and/or conductive to the carrying out of the objects of the Association. 48. The Assessing Officer took the view that the activities of the Association cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricket tournament at various levels by it as well as hosting them arranged by BCCI, irrespective of the use of money. It is pertinent to note that the assessee is imparting only cricket related training. Hence the claim of the assesse that it is an 'Educational Institution' is not acceptable and hence rejected. (b) the receipt of the previous year of the assessee as reported in the Income Expenditure Account is ₹ 3,98,07,028/- which is not less than ₹ 10 lakh, (c) The assessee is in the business of entertainment of public at large by arranging/hosting/managing/executing cricket matches at national and international level for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. This issue is discussed below at length. (d) The analysis of its activities and justification of applicability of amended definition of Charitable Purpose' i.e. Carrying on activity, engaged in carrying on Trade, Commerce or Business etc. and the activities should be carried out for any fee, cess etc. as analyzed in the tabular form is misleading and contrary to the interpretation of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary activities squarely flt in the definition of trade or service for profit as defined by the Apex court. Even by stretch of imagination it cannot be considered that the BCCI had its affiliated bodies who are represented on its board through elected representative is doing any sort of chaele or educational activity. The expenses claimed by the assessee in the Income Expenditure Account for arranging various cricket tournaments in various levels round the year proves that it is a business activity as defined by Ho'ble Apex Court by the above referred judgement. 49. The assessee, being dissatisfied with the order passed by the Assessing Officer preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax partly allowed the appeal. However, the Commissioner of Income Tax (Appeals) also took the view that the activities of the Association are not charitable in nature and the Association is not entitled to claim any exemption under Sections 11 and 12 of the Act. The CIT (A), while part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.0. indicates that the appellant indeed is carrying out charitable activities which are of the nature of advancement of any other objective of the general public utility'. During the course of scrutiny by the A.O it was established that the assessee was not doing any 'charitable/educational activity but it was in the business of entertainment of people at large by arranging/hosting national and international levels cricket tournaments for a fee/cess. The A.O has rightly pointed out that the receipts by the appellant predominantly from the sale of India Vs. Sri Lanka match amounting to approximately ₹ 3 crores and also other activities indicate that the appellant is carrying out activities in the nature of trade, commerce or business. 30. At this point, it may be pointed out that CBDT has clarified that promotion of sports and games is considered to be general public utility vide Circular No.395 dated 24.09.1984. The text of circular is reproduced below: SECTION 2(15) CHARITABLE PURPOSE 11. Whether promotion of sports and games can be considered to be charitable purpose 1. The expression charitable purpose is defined in section 2(15) to include r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of fee, of matches arranged by it- Whether income that was derived from fees charged for admission to games held under auspices of association could not be said to be income derived from any property- Held, yes Whether further, there was no general public utility, so as to amount to charity, in arranging cricket matches which public could see on payment and hence, assessee was not entitled to exemption conferred by sections 4(3)(i) and 4(3)(ia) of 1922 Act- Held, yes 32. Section 2(15) of the Act defines charitable purposes'. First proviso, thereto with effect from assessment year 2009-10 laid down that, if any trust etc. (a) is engaged in pursuing objects of general public utility ('other objects') and (b) carries on any activity in the nature of trade, business or commerce or provides any services in relation to the trade, commerce services or business and (c) aggregate receipts there from exceed ₹ 25 lacs, it shall be considered that other objects is not a charitable purpose. If so, such a trust is not eligible for the exemption inasmuch as the primary condition of being existing for charitable purpose is not satisfied. 33. With the introduction of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not covered by the definition of charitable institution under section 2(15). Of course, all these discussions are relevant only for the residuary clause i.e. any other object of general public utility . In case, therefore, where the objects being pursued by the assessee is relief of the poor , education or medical relief , it is not even material whether or not the assessee is carrying on an activity in the nature of trade, commerce or business in the course of such activities. The key factor is as to what are the activities of the assessee institution and as to what these activities seek to achieve. 35. Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends has to an activity of the assessee which is in the nature of trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being sought to be protected by the Charitable status of these associations is the share of these cricket associations from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body; as we have explained earlier, cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitute BCCI or not, in the event of BCCI being involved in commercial activities, the taxability of such commercial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner s arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. We are, therefore, of the considered view that the proviso to Section 2(15) has been wrongly invoked in these cases. 41. We have noted that all the learned representatives have advanced detailed arguments on the proposition that since the assessee cricket associations are engaged in educational activities, it is not really material whether or not the assessee has engaged itself in the activities in the nature of trade, commerce or business. However, in the light of our categorical finding that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave the question open for adjudication in a flt case. Conclusions on this issue: 42. For the detailed reasons set out above, we are of the considered view that the authorities below were in error in invoking the proviso to Section 2(15) and thus in declining the benefit of Section 11 and 12 to the appellant cricket associations. To this extent, plea o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each one of them and what were the findings recorded on the evidence on record before it. According to Mr. Bhatt, when the Assessing Officer and the CIT (A) have assigned cogent reasons for the purpose of coming to the conclusion that the activities of the assessee cannot be termed as charitable and the case of the assessee is covered within the Proviso to the fourth limb of Section 2(15) of the Act, then to upset such findings, the Tribunal was expected to assign cogent reasons. Mr. Bhatt, in support of this submission, has placed reliance on a decision of the Supreme Court in the case of Omar Salay Mohamed Sait vs. CIT, reported in (1959) 371 ITR 151 (SC), in which the Supreme Court succinctly expressed the expectation from a Tribunal while deciding such appeals. The following observations of the Supreme Court have been relied upon by Mr. Bhatt; We are aware that the Income Tax Appellate-Tribunal is a fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Education Travancore Education Society vs. Commissioner of Income Tax, 369 ITR 534 (Kerala) 54-55 9 Dawn Educational Charitable Trust vs. Commissioner of Income Tax, 370 ITR 724 (Kerala) 56-57 10 Dawn Educational Charitable Trust vs. Commissioner of Income Tax, 73 taxmann.com 61 (SC) 58 11 Saurashtra Education Foundation vs. Commissioner of Income Tax, 273 ITR 139 (Gujarat) 59-67 12 Actual activities to be seen N.N. Desai Charitable Trust vs. Commissioner of Income Tax, 246 ITR 452 (Gujarat) 68-74 13 Reasons to be given by ITAT on each fact Ramesh Chandra M. Lutra vs. Assistant Commissioner of Income Tax, 257 ITR 460 (Gujarat) 75-77 14 Decision of anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule, as coach for the Seniors i.e. GCA Ranji Trophy Team Players etc. He is also responsible for co-ordinating with the coaches of other age group segment teams of GCA. 7. Coaching of Cricketers encompasses the following aspects : (a) Skill development in nuances of Cricketing. (b) Physical development, (c) Mental development, (d) Building Personality of a Cricketer. 8. It is a known fact that each large size school has its own cricket team where the players are mostly under 14 years in age. These schools play inter-school cricket and compete with each other for cricket shield for best school team. From these championships, talent is spotted by GCA and invited for coaching and training. The budding cricketers are coached by renowned past cricketers and their talent is nurtured. 9. The coach monitors the progress of players and trains them for overcoming their deficiencies so that each one of them progresses and is able to shine at national level. In Physical development, generally the following tests are done as an ongoing process. (a) Fitness Test under which the MSK is done, i.e., Muscular, Skeleton Test. (b) Endurance Test, (c ) Agility Test. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... henceforth the TV subsidies should be sent towards 'Corpus Fund' and this decision can also be approved by the members of this meeting. Thereafter the members unanimously approved that henceforth the TV subsidies should be sent by the Board to the Member Associations towards Corpus Fund instead of subsidy fund. 57. Mr. Shah submitted that the C.I.T.(Appeals), in his order, in para-18 on page 65 noted that the above donation of ₹ 1,38,36,800/- was treated as the Corpus donation in A.Y. 2002-03. . The above resolution mentioned in the letter of BCCI dated 12th October, 2001, which used the word henceforth , which means in future also, was not considered good enough by him as a specific direction as required by section 11(1)(d) and only on that reasoning, he held that It Is not the corpus donation. The Department did not file appeal against the said decision but the Association did file an appeal to the Tribunal against the finding of absence of specific direction in every year. The Tribunal, on page 242, para-49 reproduced from their order in A.Ys. 2004-05 to 2007-08 pointing out that similar amounts received in the earlier years have been treated all along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary in the succeeding assessment years i.e. A.Ys. 2004-05 to 2012-13 in view of the Supreme Court decision of CIT vs. Excel Industries Ltd. (2013) 358 ITR 295, which applied the rule of consistency of approach to the same issue arising in all other Assessment Years. The Supreme Court in the aforesaid decision has observed the Revenue cannot be allowed to flip-flop on the issue . 59. Mr. Shah further submitted that the Tribunal has rightly construed the word henceforth used in the resolution as covering up all the payments in the future years by citing the decision of CIT (Exemption) vs. Mata Amrithanandamayi Math- (2017) 85 taxmann.com 261 (Ker), holding that once the assessee donated the principal and the future interest to the corpus account, every year, specific direction regarding interest is not necessary. 60. Mr. Shah submitted that the following Question (D) is only for the A.Y.2009-10: Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made on account of infrastructure subsidy of ₹ 2,13,34,033/-, treating it as capital receipts without appreciating the findings of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining to allowing of the benefit of exemption u/s.11, submitted that if the Respondent succeeds in the Tax Appeal No.268 of 2012, the aforesaid question in the above appeals for the A.Ys 2004-05 to 2008-09 will have to be answered in favour of the assessee 64. Mr. Shah further submitted that the activity other than the International match for the A.Ys. 2009-10 to 2012-13 entrusted by the BCCI Invariably have resulted into deficit and this activity goes on round the year without a break. It is only if the activity is a one day International match or twenty-twenty or five days test match that there may be a surplus but one or two matches cannot convert the altruistic activity of the Association into trade or business. The activities carried on by the Gujarat Cricket Association are enumerated at para-19 of the Tribunal s order. 65. Mr. Shah submitted that the findings of the Tribunal are very clear on the controversy. The Tribunal, after due consideration of all the relevant aspects, concludes; We are, therefore, of the considered view that the Proviso to section 2(15) had been wrongly Invoked In these cases. 66. Mr. Shah submitted that even prior to the amendment of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he has stated thus: Excess of income over expenditure . (b) Analysis of Income and Expenditure account which is accepted by AO is as follows. 2. GCA has incurred total expenditure of ₹ 4,03,98,737/- as per audited Income and Expenditure A/c. GCA has receipts of ₹ 3,98,07,028/-. The net result is loss i.e. Excess of Expenditure over Income of ₹ 5,91,709/-, i.e. there is a deficit. 3. The Receipt side comprises of following heads of receipts as summarized from Income and Expenditure A/c. Rs. (I) International Cricket Match Surplus 1,51,97,741/- (ii) Bank FDR Interest 2,21,88,527/- (iii) Other Income 24,20,760/ 3,98,07,028/ 4. The Expenditure side comprises of following heads of Expenses as summarized: (i) Match Expenses [Local Matches] 1,70,84,594/- (ii)Cricketing Expenses as per Chart attached 1,53,90,325/- (iii) Administration and Other Expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 94560 18 Supervision Fee 91000 19 Level Trainer Exam Expense 82281 20 NCA Camp Expense 53435 21 Suspect Action Expense 18266 22 Balling Action Workshop Expense 17953 23 MRF Camp Expense 9087 24 Trainer fee Expense 6000 25 Umpire Medical Exam Expense 3780 26 Cricket Equipment Purchase 3403 Total 1,53,90,325 BARODA CRICKET ASSOCIATION:- 72. We shall now proceed to the Tax Appeals Nos.320 of 2019, 321 of 2019, 374 of 2019 and 675 of 2019 respectively. 73. In these tax appeals, the assessee is the Baroda Cricket Association. In these appeals also Mr. Bhatt, the learned senior counsel has reiterated the very same su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and/or conducting and/or controlling tournaments and matches. (g) To select teams to represent the Association in any tournament Championship or fixture local or otherwise. (h) To start or sponsor and/or to subscribe to funds or to stage a match for the benefit of cricketers or persons who have rendered services to the game of cricket or for their families or to a sporting cause or institution. (i) To borrow or raise money which may be required for the purpose of the Association. (j) To collect funds and to utilize the same in such manner as may be considered fit for the fulfillment of the objects of the Association. (k) To invest moneys and funds of the Association in such manner as may be decided upon from time to time. (l) To train umpire and to form a panel of umpires. (m) To collect all the cricket statistics of different players and clubs so as to give guidance in the selection of players for important matches. (n) To do any other acts in furtherance of the above objects not inconsistent there with. 77. Mr. Soparkar, thereafter, invited our attention to the fact that to meet with the aforesaid objects, the Baroda Cricket Association incurs the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et. Mr. Soparkar also invited our attention to the annual report of the Association. Mr. Soparkar, in support of his submissions, has placed reliance on three decisions;. (i) Ahmedabad Urban Development Authority, 2017 396 ITR 323 (Gujarat); (ii) Gujarat Industrial Development Corporation, 2017 83 taxmann.com 366 (Gujarat) (iii) Naroda Enviro Projects Limited (Gujarat), Tax Appeal No. 189 of 2019; 80. Mr. Soparkar submitted that in carrying on the activities, certain surplus may ensue. The earning of surplus itself would not mean that the appellant existed for profit. Profits means that surplus over which the owners of the entity have a right to withdraw for any purpose including the personal purpose. Profit making would therefore means private profit. Profit making would not mean the surplus that results from certain activities for which the organization is devoted is ploughed back for the promotion of the very same activities. 81. Mr. Soparkar submitted that the Assessee Association has not distributed any profits outside the organization. All the profits are ploughed back into the very activities of education and promotion and development of the sport of cricket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame cannot be considered as corpus donation and the same should be treated as income of the assessee not exempt under Section 11(1)(d) of the Act. According to Mr. Soparkar, such stance of the Revenue is not sustainable in law. 87. Mr. Soparkar submitted that the ITAT has followed its earlier decision in the case of Gujarat Cricket Association for the A.Ys.2004-05 to 2007-08 (ITA 1253/Ahd/2013), wherein the ITAT held as under; 1. The assessee has filed specific confirmations to the effect that these amounts were corpus donations. 2. BCCI resolution no 5 dated 29th September 2001 specifically states that the TV subsidies should henceforth be sent to the Member Associations towards corpus funds . There is no dispute that the TV subsidy in question is sent under this resolution. This resolution includes the present assessee-Baroda Cricket Association as well. 3. On these facts, and in the light of the provisions of Section 11(1)(d) which only require the income to be by way of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution , Tribunal was of the considered view that any payments made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was justified in remitting the issue of infrastructure subsidy of ₹ 4,57,95,448/- back to the file of the Assessing Officer, without appreciating the findings of the Assessing Officer? 91. Mr. Tushar Hemani, the learned senior counsel appearing for the respondent-assessee has, by and large, adopted all the submissions canvassed by Mr. J.P. Shah, the learned senior counsel appearing for the Gujarat Cricket Association and Mr. Soparkar, the learned senior counsel appearing for the Baroda Cricket Association. However, Mr. Hemani added something important of his own to what has been submitted on behalf of the other two Associations. His submissions are broadly as under; I) Imparting training in sports is an educational activity and hence not an object of general public utility. Hence, the proviso to Section 2(15) of the Act is not applicable at all. II) Alternatively and without prejudice: a. The activities carried out by the Respondent are in the nature of general public utility. b. Mere generation of surplus does not add the element of trade, commerce or business to an otherwise charitable activity. III) Where two views are possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion has been invited by Shri Bhattacharjee to Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) in which it has been held that if the primary or dominant purpose of a trust or institution is charitable, the subsidiary object would not militate against its charitable character and the purpose of the assessee would not be any the less charitable. It thus seems that, to decide whether the purpose of an assessee is charitable or not within the meaning of section 2(15) of the Act, attention has to be paid to the dominant or primary purpose of the assessee. As, in this case, it has been held by the learned Tribunal in its earlier judgment which was followed in the present case that the main object of the assessee falls within the head Education , it has to be accepted that the purpose of the assessee is charitable. Shri Choudhury, however, contends that the assessee is also carrying on an activity for profit by running a guesthouse. As to this, it has been brought to our notice by Shri Bhattacharjee that the words not involving the carrying on of any activity for profit which found place in section 2(15) of the Act at the relevant time are relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not confine the word education only to scholastic instructions but other forms of education also are included in the word education . As noticed above, the word schooling also means instructing or educating. It, therefore, cannot be said that the word education has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provision of section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift for the better in the institutional setup. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary method of sitting in a classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of cricket and take all steps to assist the citizens to develop their physique. 3. (p) To start and maintain a library of books, periodicals and museum on Sports in general and cricket in particular and to start journal or journals in cricket. Respondent has incurred expenses to hold various tournaments including the Inter District tournaments for the various age groups, Women s matches and various Trophy tournaments which squarely fall under the educational activity. The Details of Tournament Expenses are on pg.12 of the Paperbook for the Assessment Year 2012-13. Further details of such Tournament Expenses were submitted to the Assessing Officer vide letter dated 07.03.2015. Copy of the same is at pgs.72-76 and details are on pgs. 77-144 of the Paperbook for Assessment Year 2012-13. II Alternatively and without prejudice, the activities carried out by the Respondent-Trust are charitable in nature, being general public utility and not in the nature of trade, commerce or business in view of amended provisions of Section 2(15) of the Act : It has been observed by the lower authorities that the Respondent Trust has arranged one day international matches of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motion of cricket: The Expenses are as follows (pg.3 of Paperbook for Assessment Year 2012-13): Establishment Expenses : pg.11 Stadium Expenses : pg.12 Tournament Expenses : pg.12 Depreciation : pg.9 Cricket Infrastructure Fund* : pg.4, Resolution is on pg.21 * Accumulation (pgs.20-21 of Paperbook for AY 2012- 13) Even from the Computation of Income on pg.15 of Paperbook for AY 2012-13, it can be seen that none of the expenses have been incurred for non-trust purposes. Moreover, details and evidences of all the various incomes and expenses related to the objects of the Respondent have been submitted to the Assessing Officer vide letter dated 07.03.2015, reproduced on pgs. 72 to160 of Paperbook for AY 2012-13. Even after perusal of the same, it is not the case of the lower authorities that the Respondent has conducted activities or incurred expenses outside of the objects of the Respondent. Even the Income Tax Appellate Tribunal has held that the Commissioner has not been able to point out a single object of the Respondent which is in the nature of trade, commerce or business and that it is not even in dispute that the objects are objects o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess is profit motive and absence thereof makes such activities charitable. It is further submitted that even after insertion of proviso to S.2(15) of the Act wef 01/04/2009, the following authorities, after following the law laid down by Apex Court in Surat Art Silk (supra), have taken a view that if the predominant object of the Trust is of charitable nature and with no-profit motive, the said activities cannot be treated as trade, commerce or business merely because some surplus has remained left over the expenditure to carry out such activities : (a) CIT v. Gujarat industrial Development Corporation [2017] 83 taxmann.com 366 (Gujarat) Where collection of fees and cess was incidental to the main charitable object of the trust, it would not fall under the second part of the proviso to Section 2(15) of the Act. (b) Sabarmati Ashram Gaushala Trust vs. ADIT (Exemption) [2014] 362 ITR 539 (Gujarat) 12. All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. Merely because while carrying out the activities for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r matches etc. The attention is further invited to the clause 3(j) of MOA which provides to organize matches for the achievements of the objects of the Association and utilize the net proceeds thereof towards the implementation of the object set therein . It is submitted that all the receipts arising or accruing to the Respondent-Trust are on account of the activities carried out to meet the object of the Respondent i.e to promote and encourage the game of cricket in Saurashtra and Kutch by organizing coaching schemes, tournaments, exhibition matches and other matches etc, and they are not with the intention to carry out any trade, commerce or business with profit motive. Such receipts should be strictly confined to the attainment of the objects of the Respondent-Trust and with the intention to carry out any trade, commerce or business. Details of all the receipts were submitted to the Assessing Officer, as reproduced in the Assessment Order on pgs. 4 to 9 of Tax Appeal. As can be seen from the nature of the receipts, none of the incomes pertain to any activity other than promoting the game of cricket. It is submitted that promotion of sports is itself not an activity in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a question of fact which will be decided based on the nature, scope, extent and frequency of activity. As long as the object of general public utility is not merely a mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to the main objective of 'general public utility', the carrying on of bonafide activities in furtherance of such objectives of 'general public utility' cannot be hit by the proviso to Section 2(15). Respondent also draws support from Circular no.194/16- 17 II(AI) in which the question referred to board is; whether an educational institution existing solely for educational purpose but which shows some surplus at the end of the year is eligible for exemption? The board had replied this question in the following manner: If the profit of the educational institution can be diverted for the personal use of the proprietor thereof, then the income of the educational institution will be subject to tax. However, there may be cases where the educational institutions may be owned by the trusts or societies to whom the provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of the issues in question. This submission of Mr. Bhatt is canvassed in the wake of the fact that, according to Mr. Bhatt, the ITAT ought to have assigned cogent reasons in its impugned order for the purpose of disagreeing with the concurrent findings recorded by the lower revenue authorities, namely, the Assessing Officer and the CIT(A). We are not impressed by such submission of Mr. Bhatt. We are of the view that there is no good reason to remit the matters for fresh consideration. As discussed above, the only circumstance that weighed with the CIT(A) is the revenue earned by the Associations through the subsidy paid by the BCCI. We have dealt with this issue at length while deciding the Tax Appeal No.268 of 2012. We take notice of the fact that the issue with regard to the Proviso to Section 2(15) of the Act has been elaborately dealt with by the ITAT in its own way. The ITAT has conveyed, in so many words, that for the purpose of invoking the Proviso to Section 2(15) of the Act, many other aspects need to be looked into and the subsidy paid by the BCCI cannot be the sole factor for brining the case within the Proviso to Section 2(15) of the Act. 93. At the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tact. The Indian Premier League and the rules of the game being governed by the dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. The difficulty for the case of the revenue before us, however, is that these matches are not being organized by the local cricket associations. We are told that the matches are being organized by the Board of Cricket Control of India, but then, if we are to accept this claim and invoke the proviso to Section 2(15) for this reason, it will amount to a situation in which proviso to Section 2(15) is being invoked on account of activities of an entity other than the assesseessomething which law does not permit. We are not really concerned, at this stage, whether the allegations about commercialization of cricket by the BCCI are correct or not, because that aspect of the matter would be relevant only for the purpose of proviso to Section 2(15) being invoked in the hands of the BCCI. We do not wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the BCCI. Suffice to say that the very foundation of revenue s case is devoid of legally sustainable basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly as learned Commissioner has not been able to point out a single object of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are objects of general public utility under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility. 36. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year; 97 . S.2(15) of the 1961 Act::- Charitable purpose, defined (upto 31-3-2009).- According to section 2(15), the expression charitable purpose has been defined by way of an inclusive definition so as to include- -relief to the poor, -education, -medical relief, and -the advancement of any other object of general public utility [(upto 31-3-1984) not involving the carrying on of any activity for profit]. 98. The subject-matter of this definition has been dealt with under section 11, post. 99. Charitable purpose, defined (operative from 1-4- 2009).-As per section 2(15), newly substituted (w.e.f. 1-4- 2009) by the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity carried out on commercial lines, is is contrary to the intention of the provision. 5.2 With a view to limiting the scope of the phrase advancement of any other object of general public utility , sub-section (15) of section 2 has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity. Scope of this amendment has further been explained by the CBDT vide its Circular 11/2008 dated December 19, 2008. 5.3 Applicability: This amendment has been made applicable with effect from 1st April, 2009, and shall accordingly apply for the assessment year 2009-10 and subsequent assessment years. . III The Finance (No.2) Act, 2009-The scope and effect of the substitution (w..e.f. 1-4-2009) of section 2(15) by Act 33 of 2009 have been elaborated in the following portion of the departmental circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from such activity. 4.3 The absolute restriction on any receipt of commercial nature may create hardship to the organizations which receive sundry considerations from such activities. Therefore, section 2(15) has been amended to provide that the advancement of any other object of general public utility shall continue to be a charitable purpose if the total receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business do not exceed ₹ 10 lakhs in the previous year. 4.4 Applicability: This amendment has been made effective retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent years. . V. The Finance Act, 2011.-The second proviso to section 2(15) has been amended (w.e.f. 1-4-2012) by section 3 of Act 8 of 2011. The scope and effect of the amendment made in section 2(15) by the Finance Act, 2011 have been elaborated in the following portion of the departmental circular No.2 of of 2012 dated 22-05-012. as follows: Definition of charitable purpose :- 4.1 For the purpose of the 1961 Act, charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the income from such activity. 2. The following implications arise from this amendment 2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. 2.2. Relief of the poor encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that (i) the business should be incidental to the attainment of the objectives of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is charitable purpose within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. 103. In the course of the hearing of these appeals, our attention was drawn to the following extract from the speech of the Minister of Finance on 29th February, 2008. 180. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be regarded as ―advancement of any other object of general public utility. (underlining added) 105. Thus, prima facie, it appears from the above that the object of the introduction of the Proviso to clause (15) of Section 2 of the said Act was to deny the benefit of the Income Tax Act exemption to purely commercial and business entities which wear the mask of a charity. The genuine charitable organizations were not affected in any way. 106. The first and the foremost thing we want to clarify is that the registration of the assessee as a Charitable Institution would, prima facie, clothe the assesseee with the character of a charitable institution. However, the game, by itself, is not conclusive and the question whether the assessee is established for a charitable purpose or not must be examined independently with reference to the provisions of the Act. The registration of the assessee as a charitable institution under Section 12A of the Act, 1961 is a relevant factor in reaching an appropriate conclusion. Unless the positive requirements of law are satisfied, the assessee, only by virtue of the aforesaid event, cannot be regarded as a Charitable Institution. The ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal). The Tribunal, by order dated 20-1-2000, allowed the appeals filed by the respondent assessee. The appellant filed appeals before the High Court of Gujarat. The Revenue claimed that the following two substantial questions of law arise from the order of the Tribunal: (A) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that the objects of the trust restricting benefit to the members of the club would fall within the purview of the act of general public utility under Section 2(15) of the Income Tax Act constituting as a section of public and not a body of individuals? (B) Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that registration under Section 12-A was a fait accompli to hold the assessing officer back from further probe into the objects of the trust? 2. By the impugned order, the High Court dismissed the appeals, in limine, relying on a decision of the same Court in Hiralal Bhagwati v. CIT 2000 246 ITR 188, holding that the questions raised in the appeals are covered by the aforesaid decision. 3. Being dissatis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment is sought to be reopened on the ground that even if the petitioner has obtained registration under section 12AA of the Act as an institution carrying on charitable activities, the petitioner is not entitled to the status of trust carrying out charitable activities since the petitioner is conducting the business as an Association of Persons and not as a Trust . Thus, though the petitioner has been granted registration under section 12AA of the Act by the Commissioner of Income-tax, the assessment is sought to be reopened on the basis of revenue audit objection that the petitioner is not eligible for exemption for the aforesaid reasons. The grounds for reopening the assessment are clearly contrary to the settled legal position as laid down by this Court in the case of Hiralal Bhagwati v. Commissioner of Income Tax, (supra) as well as in the case of Ahmedabad Urban Development Authority v. Deputy Director of Income Tax (Exemption), wherein the Court has held that section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of sections 11 and 12 as provided in section 12A of the Act. Therefore, once the procedure is com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, does not appear to be fulfilled in the present case. Besides, in the light of the above referred decisions of this Court, it is not permissible for the Assessing Officer to go behind the registration obtained by the assessee under section 12AA of the Act. The Assessing Officer while framing original assessment having taking into consideration the registration under section 12AA of the Act as well as having examined the admissibility of the claims made by the petitioner, has allowed the deduction under section 11 of the Act. Under the circumstances, the reopening of assessment appears to be based on a mere change of opinion, that too, the opinion of the Revenue Audit Party and not that of the Assessing Officer. 111. The ratio discernible from the aforesaid decision is that once the procedure is completed as provided under subsection (1) of Section 12AA of the Act and a certificate is issued granting registration to the trust or institution, it is apparent that the same is a document evidencing satisfaction about (i) the genuineness of the activities of the trust or institution and (ii) about the objects of the trust or institution. While framing the assessment order, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but language more often than not is an imperfect instrument of expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make a fortress out of dictionary but remember that statutes must have some purpose or object, whose imaginative discovery is judicial craftsmanship. We need not always cling to literalness and should seek to endeavour to avoid an unjust or absurd result. We should not make a mockery of legislation. To make sense out of an unhappily worded provision, where the purpose is apparent to the judicial eye some violence to language is permissible. 118. In Keshavji Ravji and Co. v. CIT, (1990) 183 ITR 1 (SC); (1990) 2 SCC 231, it has been held by the Supreme Court that when in a taxation statute where literal interpretation leads to a result that does not sub-serve the object of the legislation another construction in consonance with the object can be adopted. 119. We now propose to examine the matter, keeping in mind the fourth limb of Section 2(15) of the Act, i.e., the advancement of any other object of general public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advancement of object of general public utility is also considered as an institution or trust for charitable purpose. Section 11 exempts various categories of incomes as enumerated under section 11(1)(a) to (d) from the total income of the previous year. Section 12 exempts the voluntary contributions received by a trust created for charitable purposes from the total income. The benefit of Section 11 and/or 12 can be claimed only when the conditions as stipulated under Section 12A are satisfied. One such condition is that a person in receipt of the income has to apply for the registration of the trust or institution in the prescribed form on or before the expiry of a period of one year from the date of creation of the trust or establishment of institution. The proviso to Section 12A(1) confers the power on the Commissioner to entertain an application under Section 12A (1) even after the expiry of period of one year if he is satisfied that the person was prevented from making an application before the expiry of period of one year for sufficient reasons. 123. Section 11(5) requires every trust or institution for a charitable purpose to invest or deposit the money only in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpreting the words not involving the carrying on of any activity for profit occurring in section 2(15) (as it existed), held that the test of predominant object has to be applied while deciding whether an entity is a charitable trust/institution and that profit making by such institution is not excluded. The relevant observations are as follows. Therefore, for a purpose to fall under the fourth head of charitable purpose , it must constitute the advancement of an object of general public utility in which the activity of advancement must not involve a profit making activity. The word involving in the restrictive clause is not without significance. An activity is involved in the advancement of an object when it is enwrapped or enveloped in the activity of advancement. In another case, it may be interwoven into the activity of advancement, so that the resulting activity has a dual nature or is twin faceted. Since we are concerned with the definition of charitable purpose , and the definition defines in its entirety a purpose only, it will be more appropriate to speak of the purpose of profit making being enwrapped or enveloped in the purpose of the advancement of an object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of road development and after the Amendment Act of 1959 is to be utilized for financing the expansion programmes of the respondent corporation and the remainder, if any, is to be made over to the State Government for the purpose of road development. As pointed out by this Court in Andhra Pradesh Road Transport Corporation v ITO (1964) 52 ITR 524 (SC), the amount handed over to the State Government does not become a part of the general revenues of the State but is impressed with an obligation that it should be utilized only for the purpose for which it is entrusted, namely, road development. It is not, and cannot be, disputed that road development is an object of general public utility. 127. CIT vs. Agricultural Produce and Market Committee, (2007) 291 ITR 419 (Bom) is a case wherein the Bombay High Court considered the question whether the market committees constituted under the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 are established for charitable purposes and whether they can be registered under section 12A/12AA of the Act. After referring to the various provisions of the Maharashtra Act the preamble, the powers and duties of market com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (s) within the meaning of Section 13(7) of the Income Tax Act. The duties and responsibilities discharged by a market committee, envisaged under the provisions of the Markets Act, referred to above, also lead us to conclude, that the activities of a market committee can be included within the definition of the term charitable purpose , defined by Section 2(15) of the Income Tax Act. The instant conclusion is inevitable from a cumulative reading and interpretation of Sections 13, 26 and 28 of the Markets Act (analysed in paragraphs 3, 4 and 5 hereinabove). Briefly stated, it may be noticed, that the obligations discharged by a market committee include the regulation of purchase, sale, storage and processing of agricultural produce with the intention of benefiting the producers, as well as, the consumers of agricultural products. A market committee is also obliged to provide for conveniences for the activities of a market area like construction of buildings, sheds, plinths, etc. A market committee is also obliged to provide conveniences for persons visiting a market area, like providing for shelter, shade and parking facilities. A market committee is also obliged to look after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows. ; For the purposes of this section property held under trust includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the assessing officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. According to section 2(15), the expression charitable purpose has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. In this case we are concerned with the interpretation of the expression advancement of any other object of general public utility. Under Section 11(1), income from property held for charitable purposes is not includible and does not form part of total income. Section 11(1) has three sub-sections, (a), (b) and (c). In all the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Art Silk Cloth Manufacturers Association (supra) has pointed out that the restriction must be read with the advancement of any other object of general public utility and not object of general public utility . The Supreme Court, considering the English decisions and the Indian law, has pointed out in the aforesaid decision that : ......... There is no such limitation so far as Indian law is concerned even if a purpose is not within the spirit and intendment of the preamble to the statute of Elizabeth, it would be charitable if it falls within the definition of charitable purpose given in the statute Every object of general public utility would, therefore, be charitable under the Indian law, subject only to the condition imposed by the carrying on of any activity for profit added in the present Act. ...... 131. The apex Court in the case of CIT vs. Federation of Indian Chambers of Commerce Industry (1981) 130 ITR 186 (SC), after applying the principle laid down in the case of Surat Art Silk Cloth Manufacturers Association (supra), held as under : .......... the income derived by the respondent from the activities, such as holding the Indian Trade Fair and sponsor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility appearing in section 2(15) would include only those objects which promote the welfare of general public and not the personal and individual interests of some persons. It is not uncommon to find the objects of general public utility being in conflict with the object of personal welfare of some specified individuals. It is true, as held by the Supreme Court in the case of Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), that personal welfare of specified individuals would be incidental or consequential to the main purpose of general public utility, but a converse of this proposition is not always true. Now, if we examine the objects contained in clauses (a), (b) and (c) from this point of view, it will be at once noticed that these objects seek to protect the interest of millowners and users of motive power and also of those concerned with them. Clause (b) contemplates the promotion of good relations between the persons and bodies using such powers and clause (c), which is consequential to clause (a) and (b), contemplates doing of those acts and things by which the objects covered by clause (a) and (b) may be attained. Thus, all these three clause aim at protecting person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of a public or impersonal nature : where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid. 25. These observations are repeated by the Supreme Court in the subsequent decision in Ahmedabad Rana Caste Association v. Commissioner of Income-tax [1971] 82 ITR 704 (SC). 26. These observations supply a complete answer to the contention of the learned Advocate-General that the category of persons covered by the expression millowners and users of motive power constitutes a section of the public, which can legitimately form the object of a charitable purpose. The observations make it clear that the section of the public which is to be benefited to make the purpose a charitable one should have a common quality of either a public nature or an impersonal nature. Can it be said that millowners and users of motive power have a common quality of a public nature ? If they have any common quality the same is obviously of a private nature, as each one of them is concerned with his own interest and shares nothing in common with the public. It was contended that their common quality is the fact that each one of them is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon their status a members of that caste. No such relationship of impersonal nature can be found amongst the millowners and users of motive power, and, hence, none of the objects mentioned in clause (a), (b) and (c) can be treated as objects of public utility. 29. We have already dealt with the object found in clause (d). So far as the object contained in clause (e) is concerned it consists of two parts. This first part contemplates establishment or the creation of funds to benefit employees of the association or the dependents of such persons while the second part contemplates subscriptions, donations or guarantees or charitable or benevolent purposes at the discretion of the association. Now, so far as the first part is concerned, it is covered by the decision in Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (HL), to which reference is made by the Supreme Court in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704 (SC) at page 710 of the report. The facts of that English decision were that the trustees were directed to apply certain income in providing for the education of children of employees or former employees of a British limited company o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thletic Association [1953] 34 TC 76 (HL) Lord Cohen has summarised the legal position in such cases as under at page 105 of the report : (1) If the main purpose of the body of persons is charitable and the only elements in its constitution and operations which are non-charitable are merely incidental to that main purpose, that body of persons is a charity notwithstanding the presence of those elements - Royal College of Surgeons of England v. National Provincial Bank [1952] AC 631 (HL). (2) If, however, a non-charitable object is itself one of the purposes of the body of persons and is not merely incidental to the charitable purposes, the body of persons is not a body of persons formed for charitable purposes only, within the meaning of the Income Tax Acts - Oxford Group v. Inland Revenue Commissioner [1949] 2 All ER 537; 31 TC 221 (CA). (3) If a substantial part of the objects of the body of person is to benefit its own members, the body of persons is not established for charitable purposes only - Inland Revenue Commissioner v. Yorkshire Agricultural Society [1928] 1 KB 611 (CA). 135. In our opinion, the case on hand falls within the first category mentioned by Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of dividends is prohibited. If a literal interpretation is to be given to the proviso, then it may be concluded that this fact would have no bearing on determining the nature of the activity carried on by the petitioner. But, we feel that in deciding whether any activity is in the nature of trade, commerce or business, it has to be examined whether there is an element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. 138. The Delhi High Court in the case of Addl. Commissioner of Income Tax, Delhi vs. Delhi Brick Kiln Owners Association, reported in 1981 (130) ITR 55. In the said case, M/s. Delhi Brick Kiln Owners Association was the respondent assessee. The association had obtained a license from the Central Government for its registration under Section 26 of the Indian Companies Act, 1913. The following were the objects of the company; (a) To promote, develop and protect the brick kiln trade, commerce and industries. (b) To watch and protect the interest of brick kiln owners, contractors, customers and brick deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtained to the provisions of the Indian I.T. Act, 1922, was still good law as there was no change in the substantive provisions relating to the exemption of income from a trust in the I.T. Act, 1961. The Tribunal dismissed the appeal of the department. The department, being dissatisfied, preferred an appeal before the High Court. The High Court took notice of the fact that the Tribunal did not consider the matter relating to the dominant intention but construed the words not involving the carrying on of any activity for profit which had been added by the 1961, Act to the definition of the term charitable purpose . The High Court also took notice of the fact that the Tribunal held that an activity for profit would imply that there should be a profit motive in the activities of the assessed. In other words, the activities should be commercial in nature. Further, the motive to make profit should be in the integrated activity of the buying and disposal. The High Court of Delhi, while dismissing the appeal of the department, held as under; 12. The question referred for our opinion is dependent on the construction and interpretation of charitable purpose as defined in s. 2(15) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of general public utility. This was despite the fact that one of the objects included in the memorandum was the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture, which by itself, might be considered non-charitable. However, as it was merely incidental to the dominant or primary object, it did not prevent the Andhra Chamber of Commerce from being a valid charity. Therefore, if the primary purpose was the advancement of an object of general public utility, it would remain charitable, even if an incidental entry into the political domain for achieving that purpose, such as promotion of or opposition to legislation concerning that purpose, was contemplated. Applying that very test, the Supreme Court held that the Surat Art Silk Cloth Manufacturers Association was also a valid charity. 17. The true meaning of the ten words not involving the carrying on of any activity for profit was held to be, that when the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility, and not its accomplishment or carrying out, which must not involve the carrying on of any activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on from this stand point, it becomes clear that it has a reference to income. Because, it is only when such an institution has an income that the question of not including that income in its total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption under Section 10(23C)(iv) would have to be determined by the prescribed authority having regard to the objects of the institution and its importance throughout India or throughout any State or States. There is no denying that having regard to the objects of the petitioner and its importance throughout India in the field of advancement of promotion of trade and commerce, the petitioner would be entitled to be regarded as an institution which would qualify for that exemption. The only thing that we have to examine is - whether the petitioner had been established for charitable purposes? The fact that it derives income does not, in any way, detract from the position that it is an institution established for charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of Section 10(23C)(iv) redundant. With this in mind, it is to be seen as to what is meant by the expressions trade , commerce or business . The word trade was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd and Others v. State of Karnataka and Others: 1995 (1) SCC 574, whereby the Supreme Court held that the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money . Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi and Bros: 1964 (5) STC 644 (SC), the Supreme Court held that ―the word business was of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit . This court, in ICAI (I) (supra) held that, while construing the term business as appearing in the proviso to Section 2(15), the object and purpose of the Section has to be kept in mind. It was observed therein that a very broad and extended definition of the term business was not intended for the purpose of interpreting and applying the first proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit every conceivable case, the distinguishing characteristic of a public utility is the devotion of private property by the owner or person in control thereof to such a use that the public generally, or that part of the public which has been served and has accepted the service, has the right to demand that the use or service, s long as it is continued shall be conducted with reasonable efficiency and under proper charges. The term is sometimes used in an extended sense to include a great many matters of general welfare to the State and its communities. 144. The words public utility or general public utility are not capable of a precise meaning. The question whether service is public utility or not has to be discharged in the context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon the context in which it is used in the statute or the Rules. Indeed, in some decisions, public utility is considered very similar to one for public purpose (Hunter v A.G. 1909 AC 323, Babu Bankya Thakur v State of Bombay AIR 1960 SC 1203 and Jhandu Lal v State of Punjab AIR 1961 SC 343). 145. In cases arising under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of trade, commerce or business or renders any service in relation to trade, commerce or business for a cess, fee and/or any other consideration. It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are masked as charitable purpose . Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration for judging whether any activity is trade, commerce or business particularly if generating surplus is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. We are wholly in agreement with the view of the Tribunal. The objects of the Trust clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come divorced from the objects for which it is charitable por una parte and the activities which are aimed at the attainment of the objects for which It was set up por otra parte. Whereas the former fall within the mandate of the proviso to section 2(15), the latter do not. The obvious reason is that the latter activities are in furtherance of the charitable objects of such society and income, if any, resulting from such activities and does not convert the otherwise charitable activity [within the definition of section 2(15)] into carrying on of a business, trade or commerce. It can be understood with the help of a simple illustration. Supposing an association set up for the promotion of a particular trade, has its own premises from which it carries out the activities for the promotion of such trade. If the association lets out its premises from time to time for enhancing its income, which letting out has no relation with the objects for which it was set up as a charitable institution, namely, the promotion of that particular trade, the resultant activity will amount to carrying on trade, commerce or business so as to fall within proviso to section 2(15). 0n the other hand, if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations which are carrying on regular business from the scope of charitable purpose' . The High Court also noticed the purpose of introducing the proviso to section 2(15) of the Act from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008 and reproduced the relevant extract to the Speech as under:' .....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 any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose . Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organizations will not in any way be affected. The expressions business , trade or commerce as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organization is charitable any incidental activity for furtherance of the object wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer to the effect that infrastructure subsidy is revenue in nature. As a matter of fact, the claim is made for the subsidy only after the expenditure having been incurred. The authorities below have simply brushed aside the case and the submissions of the assessee and proceeded to hold it as an income. Looking to the nature of the subsidy, which is clearly relatable to the capital assets generated, we are unable to hold this receipt in the revenue field. We, therefore, uphold the plea of the assessee on this point as well and delete the addition of ₹ 2,13,34,033/-. 152. The Gujarat Cricket Association received corpus donation of ₹ 20,69,60,338/- from the BCCI. The Assessing Officer held that it is not corpus donation and added the same to the income. Before the C.I.T (Appeals), the Association drew the attention to a letter addressed to the Officer dated 28th December, 2011 where two specific letters from the BCCI dated 12th October, .2001 and 13th October, 2001 respectively addressed to the Secretary of the Gujarat Cricket Association were produced. The letter dated 12th October, 2001 from the BCCI draws attention to the decision in the Annual General Meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as corpus donation not includible in total income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by a separate written document. The contribution has to be voluntary and it has to be with specific direction that it will form corpus of the trust . These conditions are clearly satisfied. Any payment which the assessee is not under an obligation to make, whatever be the mode of its computation, is a voluntary payment, and, any payment which is with a specific direction that it for corpus fund is a corpus donation. In our considered view, even without the two specific confirmations filed by the assessee, in the light of the BCCI resolution under which the payment is made and in the light of the payment not being under any legal obligation, the conditions under section 11(1)(d) are satisfied. We, therefore, uphold the plea of the assessee. The Assessing Officer is accordingly directed to delete this addition of ₹ 1,58,00,000. 154. In the course of the hearing of these tax appeals, the learned counsel appearing for the respective assessee also submitted that the promotion of sports and games would fall within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur categorical finding that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave the question open for adjudication in a flt case. 156.. In such circumstances, referred to above, Mr. Bhatt, the learned senior counsel, submitted that this Court may not go into the issue whether the activities of the Association could be termed as imparting education in sports. In other words, imparting training in sports whether could be termed as an educational activity falling within the ambit of Section 2(15) of the Act. In this regard, the submission canvassed on behalf of the assessees is that imparting training in sports is nothing but an education activity and, therefore, the assessees would fall in the first limb of the definition of charitable purpose as defined under Section 2(15) of the Act and not under the residual clause of advancement of any other object of general public utility . The argument canvassed on behalf of the assessee is that if that be the situation, the Proviso to Section 2(15) would not apply at all. At this stage, we deem it approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the preceding sub- section. It has to be noted that in terms of Section 260A(4) the respondent in the appeal is allowed to argue at the time of hearing of the appeal that the case does not involve a substantial question of law as formulated. However, proviso to Section 260A(4) specifically lays down that nothing in Section 260A(4) shall be deemed to take away the power of the High Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, in case it is satisfied that the case involves such question. Section 260A(5) provides that the High Court to decide the question of law as formulated and to deliver the judgment thereon containing grounds on which such decision is founded. Sub-section (6) empowers the High Court to determine any such issue which has not been determined by the Appellate Tribunal or has been wrongly determined by the Appellate Tribunal by reasons of a decision of such question of law as is referred to in sub-section (1) It is important to note that appeal to the High Court lies only when a substantial question of law is involved. It is essential for the High Court to first formulate question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt with by the High Court appears to be correct. 161. The aforesaid decision of the Supreme Court has been exhaustively discussed by a Division Bench of the Gauhati High Court in the case of Meghalaya Steels Ltd. Ors. vs. Commissioner of Income Tax, 2013 (358) ITR 551, wherein the following has been observed; It follows, therefore, that the satisfaction of the High Court that the appeal involves substantial question of law is sine qua non for the appeal to be admitted for hearing. This position of law will not remain in doubt, when we proceed to minutely examine the provisions embodied in section 260A. Sub-section (2) of section 260A permits the Chief Commissioner or Commissioner as well as an assessee, who may feel aggrieved by the order passed by an appellate Tribunal, to appeal to the High Court provided that the appeal is filed within one hundred and twenty days from the date on which the order, appealed against, is received by the assessee or the Chief Commissioner or the Commissioner, as the case may be. This apart, as indicated above, the appeal has to be in the form of memorandum of appeal precisely stating therein the substantial question or questions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot really involved; or else, there would be no meaning and purpose in giving notice to the respondent, in the appeal, before the appeal is admitted by formulating the substantial question or questions of law on which, in the view of the High Court, the appeal needs to be heard. In other words, if a respondent, in appeal, made under section 260A, is given notice before admission of the appeal, it necessarily follows that the respondent has been given an opportunity by the High Court to satisfy the High Court that no substantial question or questions of law, as contended by the appellant, has or have arisen for determination and it would be thereafter that the High Court would take a decision whether the appeal has or has not given rise to any substantial question of law and if the High Court finds that the substantial question or questions of law has or have arisen, it shall admit the appeal by formulating, for hearing, such substantial question or questions of law, which, according to the High Court, the appeal has given rise to for adjudication and, then, answer the question or questions, so formulated, by according opportunity of hearing to the parties concerned on the substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question or questions of law, which the appellant may have formulated inasmuch as section 260A provides that if the High Court finds that the appeal needs to be heard, the High Court is legally bound to formulate the substantial question or questions of law, which, according to the High Court, has or have arisen for determination. Put shortly, an appeal, under section 260A, can be heard subsequent to the formulation of the substantial question of questions of law, which, according to the High Court, has or have arisen for determination. We may hastily add that the proviso to sub-section (4) of section 260A empowers the High Court to formulate any other substantial question of law if it is satisfied that the case involves such a question, though the appellant may not have raised such a substantial question of law. Sub-section (5) of section 260A makes it crystal clear that the appeal can be decided only on the substantial question of law, which has been formulated by the High Court, and not on the basis of the substantial question or questions of law, which the appellant may have mentioned in the memorandum of appeal, and the High Court has to deliver the judgment not on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial question or questions of law not formulated by it provided that the High Court is satisfied that the case involves such a question. In no uncertain words, the Supreme Court has held, at para 11, in M. Janardana Rao (supra), that the High Court cannot, but decide the substantial question of law, as formulated by it under section 260A, and deliver judgment thereon containing the grounds on which its decision is founded. The observations, appearing at para 11, in M. Janardana Rao (supra), read as under: 11. Various essentials as culled out from the relevant provisions of the Act are as follows: Under section 260A(2)(c) the appeal under section 260A shall be (a) in the form of a memorandum of appeal, and (b) precisely stating therein the substantial question of law involved. Under section 260A(3) when the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question and under section 260A(4) the appeal is to be heard only on the question formulated under the preceding sub-section. It has to be noted that in terms of section 260A(4) the respondent in the appeal is allowed to argue at the time of hearing of the appeal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of substantial question of law in the memorandum of appeal and formulating the same at the time of admission, the High Court is not empowered to generally decide the appeal under section 260A without adhering to the procedure prescribed under section 260A. Further, the High Court must make every effort to distinguish between a question of law and a substantial question of law. In exercise of powers under section 260A, the findings of fact of the Tribunal cannot be disturbed. It has to be kept in mind that the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive statutory right, it has to be regulated in accordance with law in force at the relevant time. The conditions mentioned in section 260A must be strictly fulfilled before an appeal can be maintained under section 260A. Such appeal cannot be decided on merely equitable grounds. (emphasis is added) A three Judge Bench, in M. Janardana Rao (supra), culled out the test to determine as to what question can be treated as a substantial question of law. Having referred, in this regard, to the case of Sir Chunilal V. Mehta and Sons Ltd. v. Century Spg. and Mfg. Co. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulated at the time of admission of the appeal. Obviously, the High Court has formulated questions subsequently after conclusion of arguments for the purpose of adjudication. That is clearly against the scheme of section 260A. Additionally, grievance that certain points which were urged have not been dealt with by the High Court appears to be correct. (emphasis is added) Relying heavily on the case of Kanan (dead) by Lrs. v. V.S Pandurangam (dead) by Lrs., (2007) 15 SCC 157, Mr. Pathak, learned Additional Solicitor General, has submitted that the mere omission to frame substantial question of law before hearing of the appeal cannot be a reason for interfering with the impugned, judgement and order, dated 16.9.2010, unless prejudice is shown to have been caused. In Kanan (Dead) (supra), the Supreme Court has held that when the parties, in appeal, go to appeal knowing fully well the issue, the order, which is finally passed in the second appeal, cannot be interfered with unless prejudice is shown to have been caused as a result of omission to frame a substantial question of law. While considering the case of Kanan (supra), it may be noted that, while the decision, in Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the above, the decisions, which have been referred to in Kanan (dead) by Lrs. v. VS. Pandurangam (dead) by Lrs., (2007) 15 SCC 157, are not on substantial questions of law, but on the question of issues. It is trite that even if an issue was not framed, it would not disable the court from refusing to interfere with a decree if the parties were, otherwise, well aware of the issues and if the omission to frame the issues has not caused any prejudice to either of the parties. In the face of the fact that no substantial question of law was formulated by the High Court before the appeal was heard for the purpose of disposal and this court had not made it clear to the parties, in the appeal, that the appeal would be disposed of on hearing the parties concerned at the admission stage itself, it logically follows that the decision, rendered in the appeal, was contrary to, and in violation of, the mandatory requirements as regards the procedure to be followed in an appeal under section 260A. Consequently, the impugned judgment and order, dated 16.9.2010, cannot survive. 162. In view of the aforesaid discussion, we are not going into the question whether the assessees could be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration granted by the Registrar of Societies and a copy of Memorandum and By-Laws of the Society. The Commissioner rejected the application holding that the Association was not formed for advancement of object of general public utility within the meaning of Section 2(15) of the Act. The Tribunal allowed the assessee's appeal and directed the Commissioner to grant the registration under Section12AA to the assessee- Society. The Revenue went in appeal before the High Court of Punjab Haryana. The High Court thought fit to allow the appeal, observing as under; 9. On examination of the objects and the purpose of the Association in the present case, it emerges that the respondent-Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved as under; 10. Section 12AA of the Act provides the procedure for registration. Clause (a) of sub Section (1) of Section 12AA empowers the CIT to call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such inquiries, as he may deem necessary in this behalf. Said provision in Section 12AA makes it clear that CIT is not supposed to allow registration with blind eyes. In the present case, CIT has considered the relevant papers before him, which included the income and expenditure accounts of the previous years after the society got registered with the Assistant Registrar Firms, Societies and Chits. The CIT, after considering the record before him, has observed that the society (present respondent) is charging substantial fees from the students and making huge profits. 11. After considering the submissions of the learned Counsel for the parties, we are of the view that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity. We are of the firm view that, in the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company carries on has to be specified as the main object and all other objects have to be specified as incidental or ancillary objects, and this classification for the limited purpose of the Companies Act should not, according to the learned counsel, be confused with the real object for which the assessee-company was established. According to the learned counsel, the basic or dominant object for which the assessee was established, whether as a society prior to April, 1971, or as a company from April, 1971, was to encourage and promote the scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to the learned counsel, are objects of general public utility. The other objects specified, whether in the memorandum of association relating to the assessee as a society or in the memorandum of association relating to the assessee as a company, are all subservient to the main object of scientific horse breeding . Consequently, the doctrine of dominant or primary object should be invoked in the present case in order to examine whether the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on of the business of a race club, and the main object for the purpose of the I.T. Act is the scientific breeding of horses. We must reject the contention that the main objects for which the assessee was established should be regarded differently for the purpose of the companies Act and the I.T. Act. The provision contained in the memorandum of association is unlearned counsel. We have, therefore, no difficulty in coming to the conclusion that the main object for which the assessee was established whether as a society or as a company, was to carry on the business of a race club and all other objects are either incidental or ancillary to the above main object. Thus, even invoking the doctrine of dominant or primary object, we must hold that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting a races which, on the own admission of the learned counsel, is not charitable in character. This itself is sufficient to demolish the assessee's claim that it must be regarded as having been established for charitable purposes by invoking the doctrine of dominant or primary object. 170. Thus, on the facts of that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promotion of charity, education, industries, etc. and public good . Can all the purposes mentioned in sub-clause (b) be described as charitable purposes ? Section 2(15) of the Act defines the expression charitable purpose as including relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. Two objects in sub-clause (b) of clause (3) of the Memorandum need to be considered, industries and public good . As regards the latter, the decision on what should be the purposes of common good was left to the general meeting by Article 58 of the Articles of Association. Having regard to the context in which these words appear in the Memorandum and the Articles, they must evidently be referred to the residue general head in the definition in section 2(15) of the Act, that is to say, the advancement of any other object of general public utility............ But this head is qualified by the restrictive words not involving the carrying on of any activity for profit. The operation of an industry ordinarily envisages a profit making activity, and so far as the advancement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-Tax, Kerala v. Cochin Chamber of Commerce and Industry, (1975) 101 ITR 796 (SC), this Court extended the test to income derived from activities carried on in aid of, and incidental to, the primary object of the trust. We may note that no attempt has been made by the appellant before us to cast doubt on the validity of the observations made in those two cases, and we proceed on the footing that they convey the true content of the law. It is, therefore, apparent that among the objects contained in the original unamended sub-clause (b) of clause (3) of the Memorandum are objects which, while referable to the residual general head in the definition of charitable purpose in section 2(15) of the Act, nonetheless do not satisfy the condition that they should not involve the carrying on of any activity for profit. The result is that the objects industries and common good cannot be described as charitable purposes . What follows then is this, that the said sub-clause (b) can be said to contain some objects which are charitable and others which are non- charitable. They are all objects which appear to enjoy an equal status. It is open to the appellant, in its discretion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which the sole manager of a business may have in order to carry it on profitably. He had the power of transferring trust properties and funds if he thought it expedient in the interest of the objects of the Trust, to transfer the assests and liabilities of this Trust to any other Charitable Trust or institution conducted by such Trust which in the opinion of the original Trustee or the Board of Trustee has objects similar to the objects of this Trust and is capable of carrying out the objects and purposes of this Trust either fully or partially (Paragraph 17 of the Trust deed). Although, the original trustee was not to take any remuneration for discharging his duties as a trustee, yet, he was not precluded from being paid out of the Trust fund such remuneration as may be deemed propellor carrying out any work and duty in connection with the conduct or management of institutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust . He was to be paid expenses incurred in travelling or otherwise in connection with his duties as a trustee (paragraph 16 of the Trust deed). The original trustee could invest trust monies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding what 485 purpose is allowed to or like an object covered by the trust and how it is to be served by a diversion of trust properties and funds. If the trustee is given the power to determine the proportion of such diversion, as he is given here, the trust could not be said to be wholly charitable. He could divert as much as to make the charitable part or aspect, if any, purely illusory. Indeed, this was the law even before the qualifying words introduced by the 1961 Act. [See: East India Industries (Madras) Pvt. Ltd. v. Commissioner of Income-tax, Madras, (1967) 65 ITR 611 (SC), Commissioner of Income-tax, Madras v. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC) and Md. Ibrahim Riza v. Commissioner of Income-tax, Nagpur, AIR 1930 PC 226. Such a trust would be of doubtful validity, but I refrain from further comment or any pronouncement upon the validity of such a trust as that was neither a question referred to the High Court in this case nor argued anywhere. 174. Thus, it appears that the Supreme Court looked into the trust deed of the trust in details and noticed that the sole trustee had not only wide powers of utilization of the trust funds for the purposes of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 2 Ch. 284, where a bequest was made to the Governing Body of a school for the purpose of building some squash racket courts and a further bequest was made to the Head Master for the time being upon trust to use the interest for providing a prize for some event in the school athletic sports every year. This bequest was upheld as charitable, because it was considered essential in a school of learning that there should be organised games as a part of the daily routine in order that the boys might not be left to themselves and that their bodily welfare might be promoted. Another instance is the case of Dupree's Deed Trusts, In re, Daley v. Lloyds Bank, Ltd., (1945) 114 LJ Ch L where a deed of gift, expressed to be for the encouragement of chess playing by holding an annual chess tournament limited to boys and, young-men under the age of 21 years resident in a particular area, was held to be a good gift for a charitable purpose. It appears that Vaisey, J. who decided the case had to struggle a good deal against his own inclinations in order to arrive at the conclusion which he ultimately reached, but he said that in view of the evidence before him that chess was included in the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and very recently it was cited in the case of Baddeley v. Inland Revenue Commissioners, (1953) 1 Ch 504 in the Court of Appeal and in the same case, Baddeley v. Inland Revenue Commra., (1955) AC 572 in the House of Lords. In re Nottage, 1895-2 Ch 649 was cited for the proposition observed Jenkins L. J. in the Court of Appeal. that the encouragement of mere sport is not a charitable purpose. With regard to this authority, I need only say that in my view, neither of the trust here in question is a trust for the encouragement of mere sport . It is noticeable that the learned Lord Justice did not dissent from the decision cited before him. A more elaborate reference to the case was made in the House of Lords and among the other Lords, Lord Reid made comments on it. Referring to the view taken in the Court of Appeal of the Nottage case, 1895-2 Ch 649, Lord Reid observed as follows : In re Nottage, 1895-2 Ch 649 is clearly distinguishable : money was bequeathed to provide annually a cup for yacht racing, so the only possible beneficiaries were yacht owners who would be somewhat strange objects of charity. But what the appellants found on is the reasoning in the Court of App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Clifford, In re : Mallam v. McFie, (1911) 81 LJ Ch 220 was a case of angling; Trustees of Warnher's Charitable Trust v. Commissioners of Inland Revenue, (1937) 21 Tax Cas 137, a case of playing fields. Scottish Flying Club, Ltd. v. Commissioners of Inland Revenue, (1936) 20 Tax. Cas 1, a case of an Aviation Club which held aerial pageants and charged fees for admission to the display and Inland Revenue Commissioners v. City of Glasgow Police Athletic Association, 1953 AC 380, a case of athletic sports of a police club. It is true that some of the decisions ultimately turned on the point that the beneficiary was not the public or a section of it, as understood in law, but incidentally observations were made in all of them as regards when promotion of a game can be a charitable purpose and when it cannot be. 14. The facts of the present case are that the assessee Association merely held certain demonstration or exhibition matches. It does not provide any training in the game of cricket to novices or any advanced training for persons who are already practiced players. Its activities outside the holding of the exhibition matches is limited entirely to its own members. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming to be advancing a charitable purpose only by providing an opportunity to the public to witness the games arranged by it. It can by no means be said that any spirit of fairness and honour is inculcated in the spectators of a game of cricket or perhaps any other game, played not by individuals but by teams. Indeed, there is a school of opinion, now growing in volume, which thinks that games played by rival teams drawn from different parts of the country or different countries and witnessed by multitudes do not serve any beneficial purpose, but, on the other hand cause a deterioration of the mind by fostering fanatical partisanships or generating mass hatreds. This, however, is a matter of opinion. Whether this extreme view is right or wrong, I find it impossible to hold that any benefit of a public character is conferred on the society or a section of it merely by the arrangement of exhibition games of cricket or tournaments and the admission of the public thereto for a fee, on the basis of which the purpose of arranging for such matches can be said to be a charitable purpose. 16. There is another ground too upon which the Association's claim must fail. I have already ..... X X X X Extracts X X X X X X X X Extracts X X X X
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