ITAT disallows golf tournament expenditure made by Rajiv Gandhi Indian Institution of Management

Brief facts of the case as culled out from the record are that the assessee is a charitable Trust engaged in imparting education on quality management and exists solely for educational purposes. The Trust enjoys the approval u/s 10(23C)(vi) of the Act by order dated 23.12.2011. Income at Rs. NIL was declared in the return of income for AY 2011-12 filed on 22.03.2013. During the course of scrutiny proceedings carried out on account of CASS and followed by notices issued and served u/s 143(2) & 142(1) of the Act, ld. AO observed that the assessee Trust organized IIM Shillong Golf Cup tournament and expense of Rs. 34,31,858/- were incurred for arranging of golf tournament. Observing this fact, ld. AO held that since the assessee runs a Trust solely for educational purposes of providing quality management education, the said expenses incurred on golf tournament cannot be allowed and accordingly disallowed the same, assessed the income. However, since the assessee was eligible for accumulation of 15% of its income, there was no impact on the total income and the same was assessed at Rs. NIL.

Aggrieved, the assessee preferred appeal before the ld. CIT(A) but failed to succeed as ld. CIT(A) confirmed the view of the ld. AO after observing that the alleged expenditure incurred were not for educational purposes as golf is a costly game and in this case only industrial houses have appeared and participated in golf tournament and since the assessee does not maintain books of account as per Section 11(4A) of the Act, therefore, it cannot be said that the expenditure was incurred for educational purposes.

Aggrieved, the assessee is in appeal before Income Tax Appellate Tribunal (ITAT).

Ld. Counsel for the assessee submitted that it is true that the assessee exists solely for educational purposes, however, with an aim of connecting corporates and academia with the ultimate and long-standing objective in order to provide avenues for employment to students through close interaction and networking with the corporate entities, such tournament was organized. It was also stated that the assessee Trust is a management institute and the students after completing the courses work in various corporates. He, further, stated that for the said tournament sponsorship was also taken and a sum of Rs. 30,17,250/- so received has been duly credited in the income and expenditure account. It was further, prayed that though the activity was akin to the benefit of the students still ld. AO ought to have deducted the sponsorship received for such golf tournament from the said disallowance.

Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.

ITAT held that so far as organizing a golf tournament is concerned, the said event cannot be said to be a part of the educational activity for which the Trust is established. Therefore, so far as golf tournament is concerned the said activity is not educational activity.

As regards the quantum of disallowance of golf tournament expenses is concerned, ITAT found that the golf tournament is a separate activity carried out by the assessee Trust for which it received sponsorship of Rs. 30,17,250/- from various corporates and the same is duly reflected in the credit side of income and expenditure account of the assessee Trust and this fact has been well-taken note of by the ld. AO also in the assessment order.

Therefore, the excess expenditure incurred by the assessee Trust on the said golf tournament amounts to Rs. 4,14,608/- [sponsorship of Rs. 30,17,250/- (-) golf tournament expenditure of Rs. 34,31,858/-]. Therefore, only a sum of Rs. 4,14,608/- can be considered as the amount not spent for the objects of the Trust and ITAT, therefore, sustain the disallowance only to this extent.

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