TMI Blog2020 (12) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Rajasthan High Court. [ 2018 (8) TMI 196 - RAJASTHAN HIGH COURT] . Primary condition for availing exemption under section 11 and 12 of the Act that the assessee society should be registered u/s 12A is satisfied in the instant case. Applicability of proviso to section 2(15) for the impugned assessment year 2010-11 to the assessee society by virtue of which, can it be denied the exemption claimed u/s 11 and 12 - Assessee has given grants to various district cricket association in the nature of subsidy, grants for infrastructure development and for buying cricket equipments. We find that by incurring such expenditure by way of grants to the district cricket association, the assessee society is contributing to creation of necessary infrastructure and purchase of equipments however such infrastructure and equipments results in creation/enhancement of existing/new infrastructure or acquisition of assets in the hands of the district cricket association, however as far as the assessee society is concerned, such an expenditure doesn t result in creation of any asset or advantage of enduring benefit in the hands of the assessee society and therefore, the same cannot be ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned to 26.07.2019. On 26.07.2019 again nobody appeared on behalf of the respondent assessee and the hearing was adjourned to 11.09.2019 with the direction that notice be issued and served through ld. DR/AO. In between the matter was again adjourned due to non-functioning of the Bench and the notices were issued to the assessee as directed by the Bench through the AO. Finally the matter was listed for hearing on 2nd December, 2019 and the ld. D/R has filed the report of service of notice duly acknowledged by the assessee respondent. Despite the service of notice of hearing, nobody appeared on behalf of the assessee, however, to grant one more opportunity to the respondent assessee, the hearing was again deferred to 4th December, 2019. Despite all these opportunities given to the assessee, nobody appeared even on 4th December, 2019 and the matter was accordingly heard and disposed off ex parte. Thus as far as the opportunity of hearing to the assessee respondent is concerned, it is manifest from the record that the assessee respondent was given more than sufficient opportunities but nobody has appeared on the date of hearing. Even no authority/power of attorney was filed on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion would constitute an apparent mistake on the face of record as those decisions would certainly have some bearing on the adjudication of the matter. Therefore, without expressing any view on the merits and applicability of those decisions on the facts of the case for the assessment years under consideration, we are of the considered opinion that in the interest of justice the assessee be granted one more opportunity of hearing to present its case. Accordingly, in the facts and circumstances of the case, we recall the impugned order dated 9th December, 2019 and direct the Registry to fix the appeals of the revenue for fresh hearing and adjudication on 14th April, 2020. Notice of hearing be issued to the parties. 4. We thus note that the earlier order so passed by the Tribunal was recalled to hear the assessee as the earlier order was passed ex-parte qua the assessee and to also consider on merits, while hearing the matter a fresh, the applicability of the earlier decision of the Tribunal in the assessee s own case for the preceding assessment years as well as the decision of the Hon ble Rajasthan High Court confirming the decision of the Tribunal as well as the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are mostly attributable to sale of tickets of cricket matches which is squarely covered under the first proviso to Section 2(15) of the Act. It was further held by the A.O. that the assessee has been found to be regularly indulging in commercial activities just like any other commercial enterprise as it is organizing matches, selling tickets, selling advertisement contracts etc. which have resulted in huge profits year after year. The surplus of the assessee has increased exponentially and without fail for the past several years. Therefore, even if the assessee s activities are viewed independently of its objects, the taint of commerciality is all over. There is nothing charitable about assessee s activities and even if it were registered u/s 12A, which although it is not, the benefit of Section 11 would still not be allowed to it. The AO accordingly held that all receipts are liable to be taxed as per normal provisions and surplus of income and expenditure account amounting to ₹ 6,57,43,511/- was brought to tax at maximum marginal rate. 7. Being aggrieved, the assessee challenged the action of the AO before the ld. CIT (A) and relied upon various decisions of this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately differentiate the business, trade activity from charitable activity under the residuary category i.e. advancement of any other object of general public utility . Apart from this, the Hon'ble ITAT, Delhi in the case of Delhi and District Cricket Association vs. CIT(E), ITA No.3095/Del/2012 held as under:- 10.9. Thus respectfully following the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from a) ground booking charges, b) health club charges, c) income from corporate boxes, d) lawn booking income, e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in the nature of trade, commerce or business. These receipts are intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not trade, commerce or business activities. Therefore, respectfully following the ratio laid down by abovementioned decisions of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of organizing the cricket matches particularly IPL and other matches are in the nature of trade, commerce or business. Further even if these activities are considered as incidental business activities to the main objects and activities of the assessee, when the revenue earned from these activities is more than the threshold limit then the first proviso to section 2(15) is attracted. Thus the ld. CIT D/R has relied on the decision of Chandigarh Benches of the Tribunal. It was further submitted that the principle of res judicata doesn t apply in case of income tax proceedings and facts of each year needs to be examined separately. It was further submitted that the department has not accepted the decision of the Coordinate Bench and that of Hon ble Rajasthan High Court for the earlier years and an SLP has been filed before the Hon ble Supreme Court. He accordingly supported the order and the findings of the Assessing officer. 9. In his submissions, the ld A/R submitted that from the order of the Assessing officer, it is apparent that the AO has passed the order on the basis that the registration u/s 12A of the Income Tax Act, 1961 granted to RCA was withdrawn u/s 12AA(3) on 28.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asthan including Jaipur, Udaipur, Jodhpur, Alwar, Rajsamand and Sikar. The association employ former national level cricketer as coaches for the teams with the other cricket experts for training. The RCA provide coaching for skill development, physical development, mental development to build personality of the cricketers. The RCA had been able to organise various international Matches, One day matches T20 Matches and the predominant object of these matches to promote the game of Cricket. The RCA has been able to produce various renowned players such as Salim Durrani, G.R. Sunderum, C.G. Joshi, Raj Singh Dungarpur, Hanumant Singh, Suryaveer Singh, Laxman Singh, Kailash Gattani, Parthsarthy Sharma, Gagan Khoda, Pankaj Singh and Ashok Maneria. Further, there are players like Khaleel Ahmed, Deepak Chahar, Rahul Chahar who are currently playing for Indian cricket team. The above renowned past and current cricketers provide their expert training/ guidance to the other players of the Rajasthan and thus, help promote the talent pool of cricketers in the state of Rajasthan. 11. It was further submitted that RCA organizes various National level tournaments like Ranji Trophy, Irani Trop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action would help the assessee in achieving its charitable object it is imperative that the terms and conditions of the transactions are clearly defined to avoid any confusion or chaos. 14. It was further submitted that the BCCI allot the international matches ODI/T 20 matches to RCA the AO erroneously concluded that huge money is collected distributed by them and that the recipients of the subsidy/income from BCCI becomes business entity. He has completely failed to consider that the object of RCA is to educate, update, and inspire the state cricketers and the promotion of the game of cricket in Rajasthan. One of the main objects is also to hold matches as mentioned in its Memorandum which is part of the education training having variety of benefits. The major benefit of organizing these matches are that the local team is being trained by RCA, it get opportunities to learn from the experiences of coaches of international level by assisting them during practice matches, by witnessing the matches played by international players, by spending time with them during the practice matches and after match hours. The RCA had been able to produce the national international lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f activities of the RCA in the Assessment year 2010-11 and 2011-12 as compared to Assessment year 2009-10: S.No Group Heads of Income (Figure in Lakhs) Financial Year 2008-09 2009-10 2010-11 Assessment year 2009-10 2010-11 2011-12 1. IPL Subvention by BCCI and IPL Income 1000.00 810.43 960.43 2. TV Subsidy from BCCI 1497.23 1053.56 1555.74 3. Ranji Trophy Subsidy 11.42 8.40 22.90 4. ODI and other subsidy / income from tournaments / trophies 27.29 313.41 253.45 5. Interest Income 69.52 190.26 234.36 6. Other Mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court should be followed for the impugned assessment year where there are no changes in the facts and circumstances of the case. 17. It was further submitted that besides the decision of the Hon ble Rajasthan High Court in assessee s own case, there is another decision of the Hon ble Gujarat High Court in the case of Gujarat Cricket Association and Others reported in [2019] 419 ITR 561 (Guj) wherein under identical facts and circumstances of the case, the matter has been examined at length and decided in favour of the assessee and thus, the said decision also supports the case of the assessee. 18. It was further submitted that the view taken by the Chandigarh Bench of Tribunal in the case of Punjab Cricket Association vs. ACIT (in ITA no. 427/Chd/2017 dated 12.09.2019) are not based on correct facts as well as the appreciation of facts in right perspective hence are distinguishable and not applicable in the instant case. It was submitted that at para 18 of the said order, it was mentioned that The representatives of the State Associations are at the helm of the affairs of the BCCI. The status of the BCCI under the circumstances is nothing but of an Association of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot take its colour from the nature of the activities of the donor. 19. Further, it was submitted that the decision in the case of Tamil Naidu Cricket Association [2014] 360 ITR 633 (Mad) also supports the case of the assessee where the Hon ble Madras High Court held as under: 56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking section 12AA read with section 2(15) of the Act, Revenue has to show that the activities are not fitting with the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(15) for the impugned assessment year 2010-11 to the assessee society by virtue of which, can it be denied the exemption claimed u/s 11 and 12 of the Act. In this regard, the contention of the ld A/R is that the matter relating to applicability of proviso to section 2(15) was exhaustively examined by the Coordinate Bench in assessee s own case for A.Y 2009-10 and it has been held that the said proviso is not applicable to the assessee society and the exemption claimed u/s 11 and 12 cannot be denied. It has been submitted that the said decision of the Coordinate Bench has since been affirmed by the Hon ble Rajasthan High Court in Appeal no. 252/2017 dated 21.112017. It has been further contended that there are no changes in the facts and circumstances of the case and the similar activities and operations have been conducted in A.Y 2009-10 and A.Y 2010-11 and there is no finding by the Assessing officer that the activities and operations so conducted by the assessee society during the financial year relevant to impugned assessment year i.e, A.Y 2010-11 are different or at variance to the activities and operations of the assessee society during the financial year relevant to A.Y 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to corpus fund are liable to be taxed as assessee's income in a normal course and charged to tax, in the status of AOP at maximum marginal rate.(Delhi High Court decision in the case of Kanhiyalal Punj Charitable Trust vs. DIT (2008) 171 Taxman 134 (Del.) relied upon) Notwithstanding the above, in view of the modification/amendment made to section 2(15) of the I.T. Act, 1961, 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, 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. Though the object of the trust promotion of sports is charitable in nature but its activities are tainted with commerciality. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of assessee. From the facts and figures available on record, it is clear that the activities of the assessee even in connection with undertaking or organizing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that for A.Y 2009-10, the Assessing officer has returned a finding that though the objects of the assessee society being promotion of sport is charitable in nature but the conduct of its activities and receipt of income shows that these activities and receipts are totally commercial and there is no element of charity in the conduct of these activities. And to support his said assertion, the Assessing officer has referred to the assessee s income and expenditure account and held that major sources of income are from TV subsidy, IPL subvention, bank interest etc and held that profit making is the predominant object of the activities so conducted by the assessee society and therefore, as per proviso to section 2(15), the activities of the assessee cannot be held as charitable and exemption claimed u/s 11 and 12 was denied. Similarly, for A.Y 2010-11, the Assessing officer has returned a finding that the assessee society is regularly indulging in commercial activities as it is organizing matches, selling tickets, selling advertisement contracts, etc which has resulted in huge profits and surplus has increased exponentially for past several years. The AO has also given a specific re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 810.43 lakhs in A.Y 2010-11 and therefore, these IPL revenues are being received and reflected on a consistent and regular basis in both the years. 27. Therefore, taking into considerations the aforesaid findings of the Assessing officer for A.Y 2009-10 and A.Y 2010-11 regarding the nature of the activities and the operations so undertaken by the assessee society as also reflected through the income and expenditure account for the respective years as so submitted by the ld A/R, we agree with the contention of the ld A/R that the activities and operations so conducted by the assessee society during the financial year relevant to impugned assessment year i.e, A.Y 2010-11 are consistent and not at variance to the activities and operations of the assessee society during the financial year relevant to A.Y 2009-10. 28. Having discussed the fact that there are no changes in the facts and circumstances of the case for the year under consideration as compared to the previous assessment year 2009-10, we now refer to the decision of the Coordinate Bench in ITA No. 944/JP/2013 for A.Y. 2009-10 and the decision of the Hon ble Rajasthan High Court approving the decision so taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that there is no denial that the object of the assesses s institution is promotion of sports which as per CBDT circular is charitable purpose. But the activities undertaken by the RCA clearly shows that the main activity is commercial exploitation of public craze over cricket. The assessing officer placed reliance on the judgment of the Hon ble Calcutta High Court rendered in the case of Cricket Association of Bengal Vs. Commissioner of Income Tax 371 ITR 277. 5. It is observed by the AO that the entire character and focus of the RCA has become totally commercial. Therefore, the Assessing Officer proceeded to disallow expenditure and the exemption claimed by the assessee. Thus, the exemption was denied on the basis that the assessee was involved into a commercial activity. The ld. CIT(A) concurred the view of the Assessing Officer on the same basis. Before adverting to the rival contentions it would be appropriate to reproduce the relevant provision of law. The section 2(15) of the Income Tax Act that defines charitable purpose which is reproduced as under: Section 2(15) - Charitable purpose include relief of the poor, education, medical relief, [preservation of en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the registration was granted in ITA No. 544/JP/2013. Our attention was drawn to the Assessee s paper book page nos. 13 to 30. It is contended that section 11 of the Income Tax Act provides exemption in respect of income of charitable or religious trusts if thesame is applied towards the objects of the trusts. It is the contention of the assessee that the sole basis of declining exemption was that there was huge surplus earned by the assessee in respect of one-day international match held between India and Pakistan. It is the contentions of the assessee that a match between India and Pakistan always generates higher receipts as the number of audience is higher. It is also pointed out that the match between other countries could not even fetch 70 to 80% of the collection. It is also contended that all the payments in the shape of sponsorship, advertisement, TV rights etc. are received directly by BCCI. Further, BCCI delegates the organization of matches to state association and in turn state association gets some funds from promotion and expansion of their charitable activities. It is also submitted that major benefits by organizing these matches is that local team, being tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harana Bhagwat Singh Trophy, Salim Durrani Trophy etc., without having any surplus rather these were organized for the development of game of cricket at national level and to identify the players who can represent the country at international level and in the year 2007-08 RCA has made expenditure of over ₹ 1.12 crores. It is contended that the surplus if any generated by the assessee by the assessee was merely incidental to the main object that is promotion of sport ofcricket and in no way by running business of cricket as has been alleged by the Revenue. We find that the Hon ble Madras High Court under the identical facts, in the case of Tamil Nadu Cricket Association vs the Director of Income Tax(E) has held: As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipts apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstance, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act. The ld. DR has strongly relied on the decision of the coordinate bench in the case of Rajasthan Housing Board Vs. CIT 21 taxmann.com 77 and also decision in the case of Ahemdabad Urban Development Authority vs. CIT(2016) 69 taxmann.com 381 and also the decision of coordinate bench in the case of Entertainment Society of Goa Vs. CIT 34 taxmann.com (210) (Panji) so far as the decision of the coordinate bench in the case of Rajasthan Housing Board and Ahemdabad Urban Development authority are concerned are no more binding precedents in view of the subsequent judgment of Hon ble Jurisdictional High Court in the Jodhpur Development Authority rendered in the case of CIT Vs. Jodhpur Development Authority 287 ITR 473(Raj.) 6. The allegations of the Assessing Officer is that in the case of assessee the major income arise not from the game of Cricket but from the business of Cricket. It is alleged by the Assessing Officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust or, as the case may be institutions and separate Books of accounts are maintained by such trust or institution in respect of such business.Now, coming to the allegation of the Assessing Officer that the major source of income are TV subsidy, sale of advertisement surplus from ODI between India and Pakistan income from RCA Cricket academy and interest income. It is not in dispute that TV subsidy, sale on advertisement surplus from ODI between India and Pakistan income from RCA Cricket Academy are all relating to the conduct of Cricket matches by the society. It is undisputed fact that without conduct of matches income cannot be derived. Therefore, it can be safely inferred that these incomes are related to the incidental activity of the association. These incomes would not accrue without the game of Cricket. The main thrust of revenue s argument is that for allowing exemption under section 11 of the Act, the Assessing Officer need to examine whether the proviso to section 2(15) of the Act is attracted or not. It is the contention of the revenue that assessee would fall under the limb of any other object of general public utility to which category only the proviso to section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and it is in a way a means to achieve the object of the trust though which the message of Saibaba is spread. It is clear from the trust deed and objects contained therein that in was not established with an intention of carrying on the business/occupation of selling or supplying goods. This being the position, it cannot be said that the trust carries on the business of selling and supplying goods so as to fall within the meaning of dealer under section 2(11) of the Act. No doubts, the definition of business given in section 2(5A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. If the main activity is not business, then any transaction incidental or ancillary would notnormally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax vs. Jodhpur Development Authority 287 CTR 0473 (Raj) has held as under: 16. As noticed hereinabove, the contention of the Revenue is that since the assessee are involved in carrying on activities in the nature of trade and commerce, by virue of first proviso to Section 2(15), their activity/object cannot be recognized as for charitable purpose so as to make them entitled for registration u/s 12A of the Act of 1961. 17. Section 2(15) of the Act of 1961 which defines charitable purposes reads as under: (15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment ( including watersheds, forests and wildlife) and preservation of monuments o 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 o 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, irrespect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue meaning of the words in section 2(15) viz. not involving carrying on any activity of profit is that when the purpose of a trust or institution is advancement of an object of general public utility, it is that object of genral public utility which must not involve carrying on of any activity for profit and not its advancement or attainment. The court observed that what is inhibited by these last ten words is the linking of activity or profit with the object of general public utility and not its linking with the accomplishment or carrying out other object. Thus, so long as purpose does not involve carrying on or any activity for profit, the requirement of definition would be met and it is immaterial how the money s for achieving or implementing such purpose are found whether by carrying on an activity for profit or not. 22. In Andhra Pradesh Road Transport Corporation s case (supra), the Hon ble Supreme Court while relying upon the earlier decisions in the matter of additional CIT vs. Surat Art Silk cloth Manufactures Association , (19800 121 ITR 1 and CIT Vs. Bar Council of Maharashtra , (1981) 130 ITR 28 (SC), held that if predominant object is to carry out a charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd is essentially with the State Government and there is no profit motive, a indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat. In the circumstance , in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case . (emphasis added) 24. In Commissioner of Income Tax v. Krishi Upaj mandi Samiti, jaisalmer , (2011) 331 ITR 135 (Raj.), a Bench of this court while considering the entitlement of Krishi Upaj Mandi Samiti, a statutory body, constituted and established under the Rajasthan Agricultural Produce Market Act, 1961, observed that may be the income received by the Samiti by way of cess or mandi fees is not shown to be spent wholly for the purpose of relief of the poor, education, or medical relief, but under the scheme of the act, being the Rajasthan Agricultural Produce Markets Act, 1961, the entire amount received by the samiti is required to be spent for the purposes mentioned therein, which obviously include 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 ..... ay be involving element of profit, would be prevent the institution from being a valid charitable trust. In the light of the above binding precedents, we are unable to affirm the view of the revenue. In the present case, material as placed before us suggests that the Assessing Officer is swayed by the figures and volume of receipts. Admittedly, such receipts are intermittent and not regular and also is dependent on the conduct of cricket match. It is not other way round that the cricket matches are dependent upon such activities. The undisputed facts are that the assessee is registered under the Rajasthan Sports (registration, recognition and regulation) Act 2005 and formed with the objective of promoting the sports of cricket within the state of Rajasthan so main objective or activity of the assessee is promotion of the cricket. The association is organizing tournament like Ranji Trophy, Irani Trophy, Dilip Trophy, Maharan Bhagwat Singh Trophy, Salim Durrani Trophy etc. the Assessing Officer has not doubted about these activities of the association. It is also brought to our notice that in the international one day match between south Africa and India, the association s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. In the aforesaid decision, the Coordinate Bench has held that the main objective of the assessee society is promotion of cricket and considering the various activities organized by the assessee society by way of organizing international one day cricket matches, domestic cricket tournaments, cricket coaching camps and taking into consideration the receipts and expenditure in relation to such activities, it was held that the assessee is predominantly been engaged in the activities of promotion of cricket. It has also been held that the Assessing officer is swayed by the figures and volume of receipts from one-day international cricket matches and subsidies received from BCCI in form of TV subsidy and other subsidy from cricket tournaments, however such receipts are intermittent and not regular and depend upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intention to carry on business and relying on the decisions of Hon ble Supreme Court in case of Commissioner of sales tax vs Sai Publication Fund (supra), Hon ble Rajasthan High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e activities of the RCA is commercial. It is judicially accepted proposition that where profit making is the predominant object of the activity, the trust would lose exemption as a charitable trust. No doubt, it would be impossible for persons in charge of a trust or institution to so carry out activity that the expenditure balances the income and there is no resulting profit. But certainly, if the consideration is charged at market rate, than it can not be said that there is an element of charity. % of profit involved in the charging for the services is major factor which will decide whether the same is tainted with commerciality or charity. In the context of sports, promoting cricket would be a charitable activity if it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of charity in the conduct of RCI. Perusal of the relevant details clearly shows that the activities fall in the definition of 'Business'. The facts of A.Y. 2008-09 are indicative of the intention of the RCA that RCA is engaged in mint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individuals would be an object of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games. 34. Thereafter taken into consideration the decision of the Hon ble Supreme Court in the case of ACIT Vs Surat City Gymkhana (2008) 14 SCC 169, CIT-1, Jodhpur Vs Jodhpur Development Authority (2016) 287 CRT 473 (Raj), Tamil Nadu Cricket Association Vs DIT (2013) 86 CCH 212, DIT(E) Vs The Chembur Gymkhana (2012) 345 ITR 86 and DIT(E) Vs Khan Gymkhana (2016) 385 ITR 162 (Bom) has decided the matter in favour of the assessee and against the department and the findings and the directions of the Hon ble Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble Rajasthan High Court while passing aforesaid consolidated order dated 21.11.2017 in D.B. Income Tax Appeal No. 236/2016, D.B. Income Tax appeal No. 252/2017 and D.B. Income Tax appeal No. 257/2017. In the aforesaid order, the Hon ble High Court has held that it will be open for the Department to take appropriate action in respect of expenses and income which are not in accordance with approved by-laws. In other words, where the activities are not conducted in accordance with the approved by-laws, the Department is at liberty to take action as per law. In the instant case, we find that there is no finding recorded by the Assessing officer that the activities and operations of the assessee society are not in accordance with its approved objects and by-laws. Further, nothing has been brought to our notice by the ld CIT D/R during the course of hearing that any of the activities of the assessee society are not in accordance with its objects and bye-laws. Therefore, the said decision of the Hon ble Rajasthan High Court will apply with equal force for the impugned assessment year, being the decision of the Jurisdictional High Court in assessee s own case where the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities are treated as promotion of sport of cricket in all the past years and for the year under consideration, the Assessing officer hold that these are not sport promotion activities and thus, not charitable in nature. On this ground alone, where there are no changes in the facts and circumstances of the case, following the rule of consistency as upheld by the Courts from time to time and more so in view of the fact that the matter is covered by the decision of the Hon ble Jurisdictional High Court, we are of the considered view that there is no basis to interfere with the consistent position which has been accepted in the earlier years that is, to hold that the predominant object of the assessee society is promotion of sport of cricket and all its activities are guided towards achieving the said objectives and thus, the proviso to section 2(15) doesn t apply in the instant case. 36. We also refer to the decision of the Hon ble Gujarat High Court in case of DIT (Exemptions) vs Gujarat Cricket Association (supra) and the relevant findings read as under: 35. It appears from the line of reasoning adopted by the Assessing Officer and the CIT(A) that both are absolutely mesme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 38. 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 attributes. The revenue is generated for recovering the cost, at least partly if not in full. 136. It is important to note that prior to the introduction of the Proviso to section 2(15) of the Act, the assessee-Association was granted registration under section 12A of the Act. From this, it is clear that prior to the introduction of the Proviso to section 2(15) of the Act, the authority, upon due consideration of all the relevant aspects, arrived at the satisfaction that the assessee-Association was established for charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. 141. From the aforesaid decisions, it is apparent that merely because the Association puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit but the object is to promote the game of cricket and nurture the best of the talent. 148. Carrying on an 'activity in the nature of trade, commerce, or business' or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the object of doing some trade, commerce or business, etc., or it was in furtherance of the objects (non-business) etc., for which the assessee was set up. In other words, the predominant object of the activities should be seen as to whether it is aimed at carrying on some business, trade or commerce or the furtherance of the object for which it was set up. If it falls in the first category, then, the case would be covered within the proviso to section 2(15) and, in the otherwise scenario, the assessee will be construed to have carried on its activities of general public utility. (see Society of Indian Automobile Manufactures v. ITO [2016] 71 taxmann.com 138/159 ITD 659 (Delhi - Trib.) 163. We sum up our final conclusions as under; (i) In carrying on the charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if the assessee existed for profit. The word profit means that the owners of the entity have a right to withdraw the surplus for any purpose including the personal purpose. (ii) It is not in dispute that the three Associations have not distributed any profits outside the organization. The profits, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if the assessee existed for profit and what is relevant to determine is whether the profits and surplus so generated has been distributed outside the organization and where on facts, the profits and surplus are ploughed back into the activities of promotion and development of sport of cricket, the assessee cannot be termed to be carrying out commercial activities in the nature of trade, commerce or business. Further, making a distinction between the state cricket associations and the BCCI, it has been held that these are separate and distinct organizations and taxable entities in their individual capacity and merely on account of the fact that a state cricket association is a member body of BCCI, it cannot be held liable for activities of BCCI and what is only relevant is objects and activities of the state cricket association and not that of BCCI while deciding its taxability. It has been held that the activities of BCCI in form of exhibition of sports and earning profit out of it may be commercial in nature, however, the fact that the BCCI distributes and the state cricket association receive a share of such receipts, the activities of BCCI cannot be construed as activities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, team officials, umpires and administrators; and to ban doping, age fraud, sexual harassment and all other forms of in-equality and discrimination. 39. And therefore, the receipts from sale of tickets from one day international and IPL matches are incidental and ancillary to its predominant object of the promotion of sport of cricket and cannot be construed as commercial in character attracting the proviso to section 2(15). Further, other receipts in form of IPL subvention, TV subsidy from BCCI and other receipts etc are dependent upon the conduct of the cricket matches itself and are therefore incidental and ancillary to the conduct of cricket matches and are not independent activities being carried on with an independent intent to carry on business and thus, doesn t attract the proviso to section 2(15) of the Act. Lastly, the assessee society generating surplus from these receipts after meeting its expenditure on year to year basis is not reflective of its intent and existence for profit. It is not the case of the Revenue that such surplus are distributed by the assessee society to its members rather the admitted facts are that such surplus is ploughed back by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here relevant principles of law have been laid down to determine whether an educational institution exists solely for educational purposes and not for profit. In that case, the provisions of section 10(23C)(iiiad) of the Act were under consideration of Hon'ble Supreme Court . The Revenue therein has argued that the legislature and the language employed in the statute doesn't contemplate making of large profits and if an educational institution, in fact, makes large profits, then even though it may plough such profits back into the purchase of assets for education, yet such institution cannot be said to be existing solely for educational purposes and it would really be for profit. The Hon'ble Supreme Court negated the said line of arguments put forward by Revenue and referred to its earlier decisions rendered in case of Addl. CIT v. Surat Art Silk Cloth Mfg. [1978] 121 ITR 1/[1979] 2 Taxman 501 (SC), Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310/90 Taxman 528 (SC) and American Hotel lodging Assn. Educational Institute v. CBDT [2008] 301 ITR 86/170 Taxman 306 (SC) and laid down the following principles in law as set out in paragraph 11 of its decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are analogous to the erstwhile section 10(22) of the Act, as has been laid down by Hon'ble Supreme Court in the case of American Hotel and Lodging association (supra). To decide the entitlement of an institution for exemption u/s 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [see5 Judges constitution Bench Judgment in the case of Surat Art Silk Cloth Manufactures association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act . The parameters of earning profit beyond 15% and its investment wholly for educational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act, 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71.Therefore, the assessee is entitled to accumulate this income and claim exemption from Income tax u/s 11(1)(a). 19. Subsequently, the Hon'ble Supreme Court in its subsequent decision in case of Visvesvaraya Technological University v. Asstt. CIT [2016] 384 ITR 87/239 Taxman 395/68 taxmann.com 287, in context of section 10(23C)(iiiab), referred to principles laid down in Queen's education society (supra) and stated that one further test as laid down in Surat Art Silk Cloth Manufacturer's Association (supra) and culled out in American Hotel Lodging Association Educational Institute (supra) may be added which is as follows: In order to ascertain whether the institute is carried on with the object of making profit or not it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established . In the said decision, it further states that the above principle has been specifically reiterated in paragraph 19 of the decision in Queen's Educational Society (supra) in the following terms: The final conclusion that if a surplus is made by an educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upgrading them from time to time for further benefits to the students at large. The society has also established a university, Jaipur National University for the promotion of technical and other higher education where the Society is the sponsoring Mahima Shiksha Samiti, Jaipur v. ACIT,(Exemption), Jaipur body of the University and has helped set up the University and its infrastructure. Here, it would be relevant to note the surplus that has been generated by the assessee society over the years starting AYs 1999-00 to 2011-12 and to what extent the same has been utilised over the years: Assessment Year Surplus as per Audited balance sheet (Rs.) Application of Funds in Fixed Assets as per Audited balance sheet (Rs.) 1999-00 1,62,46,018.00 1,50,20,208.00 2000-01 2,36,72,347.34 1,30,51,311.00 2001-02 2,84,80,341.36 2,40,39,164.00 2002-03 2,53,17,807.95 5,14,73,987.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the nature of profit making. In fact, the third Proviso to the said clause clearly provides that accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established . Hence, it is clarified that mere generation of surplus by educational institution from year to year cannot be a basis for rejection of application u/s 10(23C)(vi) if it is used for educational purposes unless the accumulation is contrary to the manner prescribed under law. 22. A perusal of the above clarification issued by CBDT clearly shows that while examining that an educational institute exists solely for educational purpose or for the purpose of the profit, mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established. In our view, the view of the CBDT is in consonance with the express wordings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the Revenue is dismissed. ITA No. 284/JP/2020 42. In the appeal for the A.Y. 2011-12, the assessee has raised following grounds of appeal: 1. The learned Assessing officer has erred in law as well as in facts in disallowing grants to district association amounting to ₹ 18770025/- allegedly on the ground that these expenses are not related to the income generating activities of the assessee while holding that the expenditure is in nature of application of income. 2. The learned Assistant Commissioner of Income Tax (Exemptions), Jaipur has erred in law as well as in facts not providing proper opportunity of being heard to the appellant before passing the order. 43. In this regard, the ld A/R submitted that the AO has erred in law as well as in facts in disallowing grants to district cricket association amounting to ₹ 1,87,70,025/- allegedly on the ground that these expenses are not related to the income generating activities of the assessee while holding that the expenditure is in nature of application of income. 44. It was submitted that the district associations are affiliated to the RCA and the survival of the District Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the ld CIT(A) in the order dated 20.09.2018 has held that I am of the view that these expenses were not directly related to the income generating activities of the appellant. Even the assets were created in the name of district cricket association, all the above expenses of ₹ 1,88,53,747/- except DA/TA to DCA amounting to ₹ 83,722/ was either capital expenditure or was in the nature of application of income and same cannot be admissible as revenue expenditure u/s 37(1) of the Act. Therefore, the AO rightly added ₹ 1,87,70,025/- to the total income of the assessee. It was submitted that ld CIT (A) has completely misunderstood the whole issue and largely contradicted his own order by disallowing the expenditure of ₹ 1,88,70,025/-, as the ground relating to the benefit of section 11/12 to the RCA was allowed in favor of the assessee in the same order, while the application of expense was disallowed. 48. Further in view of the CBDT instruction No 1132 dated 05/01/1978 inter-trust donations from one charitable trust to another for utilization by the donee trust for charitable purposes was proper application of income for charitable purposes in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X
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