Surat District Cricket Association eligible for Exemption of Section 11 and 12: ITAT
Deepak Gupta | May 11, 2022 |
Surat District Cricket Association eligible for Exemption of Section 11 and 12: ITAT
The appeal by Revenue (Asst. Commissioner of Income-Tax, The assessee) with Income Tax Appellate Tribunal (ITAT) is directed against the order of ld. Commissioner of Income-tax allowing the benefit of Section 11 and 12 to The Surat District Cricket Association.
Authorized Representative for the assessee and have gone through the orders of authorities below. The ld. CIT-DR for the Revenue supported the order of Assessing Officer and submits that the activities carried out by assessee clearly on the nature of trade, commerce or business with the profit-making and the gross receipt during the year exceed Rs. 25 lakhs. The assessee has not shown any activities undertaking for the promotion of sports, as per their object rather are earning income by way of maintenance funds, membership, ground rent, annual maintenance fees, guest fees, health club & swimming pool income, inter-district cricket tournament income, lawn tennis income, Ranjit Trophy matches & summer coaching camp income The Assessing Officer while passing assessment order has clearly spelt out that the case of assessee is directly covered by first proviso section 2(15) of the Income Tax Act.
Ld. AR for the assessee submits that case of assessee is covered by the decision of Hon’ble jurisdictional High Court, wherein the decisions of Ahmedabad Tribunal in various similar Cricket Associations were upheld by dismissing the appeal of Revenue. The ld AR for the assessee submits that he has filed his written submission dated 10.03.2022 and placed on record audited balance sheet with income and expenditure and the submissions made before lower authorities. He has also filed copy of following decision;
We have considered the rival submission of both the parties and have gone through the orders of authorities below. There is no dispute that the assessee is registered society having object of promotion of cricket and other sports in State as well as at national level. The assessee is also having valid registration under section 12A(a) of Income tax Act.
The registration under section 12A was granted way back in 1987. It is also settled legal position that the registration of institution or trust under section 12 is the foundation for seeking exemption of section 11 though not conclusive. In other words the registration under section 12A is sine qua non for eligibility of benefit of section 11. It is also settled position under law that the eligibility of benefit is to be determined on year to year basis depending on the actual activities undertaken by the assessee. Thus, the assessing officer is entitled to determine the eligibility of exemption under section 11 on the basis of activities carried out by the assessee during the relevant financial year.
The bone of contention on the eligibility between the assessee and the assessing officer are certain receipt received by the assessee during the relevant period under consideration viz; being the receipt income under the head “income from other sources” consisting annual maintenance fees from members of Rs.1.28 crores, ground rent (cricket) of Rs.5.97 crores, guest fees of Rs.1.27 lakhs, health club & swimming pool income of Rs .1.28 lakhs, District Cricket Tournament income of Rs.3.29 lakh, Lawn Tennis income of Rs.1.42 lakh, Ranji Trophy match income of Rs.4.45 lakhs, Surat District Cricket Association open knockout cricket tournament income of Rs.8,978/-, summer coaching camp income of Rs.1.50 lakh etc. Further the assessee received infrastructure subsidy from Gujarat Cricket association of Rs. 50.27 Lakhs. The assessing officer treated the said receipts received from commercial activities and considered as these were covered by the proviso to section 2(15) of the Act.
The coordinate bench of Tribunal in Gujarat Cricket Association Vs JCIT (E) (2019) 101 taxmann.com 453 (Ahd Trib) held that where the predominant object of various cricket associations was to promote cricket and profit earning was not the predominant purpose, proviso to section 2(15) could not have been invoked to decline benefit of sections 11 and 12. It was further held that amounts received under TV subsidy by assessee cricket association from Board of Control for Cricket in India (BCCI) being under a resolution which specifically stated that TV subsidies should henceforth be sent to Member Associations towards corpus funds and not under any legal obligation, were to be treated as corpus donations. It was also held that where infrastructure subsidy received by assessee cricket association from Board of Control for Cricket in India (BCCI) was relatable to a capital asset created by assessee on his own or by an eligible district cricket association; it was outside ambit of revenue receipt/taxable income.
The Hon’ble Gujarat High Court in DIT (E) Vs Gujarat Cricket Association (2020) 120 taxmann.com 50 (Gujarat) while affirming the order of Tribunal held that where driving force of assessee- State cricket association was not desire to earn profit but object was to promote game of cricket and nurture best of talent, merely because it put up tickets of international cricket matches for sale and earned some profit out of same and said profit was used in activities of promotion of game, it would not lose its character of having been established for a charitable purpose.
The Hon’ble Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1, held that when the object of a trust was carrying on of an object of general public utility, it is that object of general public utility which must not involve the carrying on of an activity for profit. It was pointed out that it was immaterial how the money for achieving or implementing such purpose was found. Whether, that money was obtained by the running of an activity for profit or not, did not make the charity not charitable (emphasis added by us).
Further, the Hon’ble High Court in DIT Vs Sabarmati Ashram Gaushala Trust (223 Taxman 243 Gujarat) while considering the scope of the proviso to section 2(15) held that the said proviso provides for exclusion from the main object of the definition of the term ‘Charitable purposes’ and applies only to cases of advancement of any other object of general public utility. If the conditions provided under the proviso are satisfied, any entity, even if involved in advancement of any other object of general public utility by virtue to proviso, would be excluded from the definition of ‘ charitable trust’.
However, for the application of the proviso, what is necessary is that the entity should be involved in carrying on activities in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration. In such a situation, the nature, use or application, or retention of income from such activities would not be relevant. Under the circumstances, the important elements of application of proviso are that the entity should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, for a cess or fee or any other consideration (emphasis added by us).
The Hon’ble Delhi High Court in Indian Trade promotion Organization (ITPO) Vs DGIT (371 ITR 333 Delhi) also held that the expression ‘charitable purpose’, as defined in section 2(15) cannot be construed literally and in absolute terms and it has to take colour and be considered in context of section 10(23C)(iv), thus, if dominant and prime objective of institution, was not desire to earn profits but, object of promoting trade and commerce not for itself, but for nation, it was clearly a charitable purpose (emphasis added by us).
16. We find that the predominant object of promotion of Cricket and other sports are not doubted by the assessing officer. There is no allegation of the assessing officer that the receipt shown under the head “income from other sources” was not utilised on the promotion of sports. Or no activities for promotions of sports were undertaken by the assessee. Rather on careful examination of those disputed receipt we find that those receipt were generated from various by activities undertaken in furtherance of various sports. It is also matter of fact that prior to the impugned assessment year the assessee was granted exemption under section 11 of the Act. The assessing officer for the first time on the basis of certain receipt took his view that the activities undertook by the assessee are commercial in nature.
17. We find that the ld CIT(A) granted relief to the assessee by following the decisions of Ahmedabad Tribunal, which was affirmed by Jurisdictional High Court (supra). Thus, in view of the aforesaid factual and legal discussion that the assessee when the assessee’s main dominant and prime objective was to promote the sports was not desire to earn profits but, object of promoting sports for Nation, it was clearly a charitable purpose. The important elements of application of proviso are that the assessee should be involved in carrying on the activities of any trade, commerce or business or any activities of rendering service in relation to any trade, commerce or business, which is clearly missing in the present case. Thus, we affirms the order of ld CIT(A), with these additional findings. In the result, the grounds of appeal raised by the revenue are dismissed.
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