Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Per Pramod Kumar, Vice President:
By way of this appeal, the assessee-appellant has challenged correctness of the learned CIT(A)’s order dated 22nd September 2017 in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2014-15.
Grievances raised by the appellant are as follows:-
“1. The learned Commissioner of Income Tax (Appeals) - 9, Ahmedabad ["the CIT(A)"] erred in fact and in law in confirming the action of the Deputy Commissioner of Income Tax (Exemptions), Circle-2, Ahmedabad ["the AO"] in holding that the activities carried out by Appellant are not in the nature of "charitable activities" and thereby disallowing exemption u/s 11 of the Income Tax Act, 1961 ("the Act").
The learned CIT(A) erred in fact and in law in confirming the action of the AO in taxing the net surplus of Rs. 40,33,47,248/- as per income and expenditure account as income of the Appellant.
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 2 of 15
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in holding that the activities carried out by Appellant are in the nature of trade, commerce and business and therefore covered by the proviso to section 2(15) of the Act.
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in holding the activities of promoting the game of cricket as business income u/s. 28 without establishing the said activities are in nature of business trade or commerce.
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in applying the proviso to section 2(15) r.w.s. 13(8) of the Act and thereby taxing the entire income of the Appellant despite the fact that the said proviso did not apply to the Appellant.
Without prejudice to above, The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in taxing the entire income of the Appellant as business income despite the facts that the receipts on account of sales of tickets, sponsorship income etc. did not exceed the statutory limit of Rs. 25,00,000 specified in second proviso to section 2(15).
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in not allowing benefit of section 11(1)(a) of the Act and thereby treating an amount of Rs. 1,47,98,329/- as an income of the Appellant.
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in not allowing the benefit of section 11(2) of the Act and thereby treating an amount of Rs.4,50,00,000/- as the income of the Appellant.
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in charging interest u/s. 234B of the Act.
The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in initiating penalty proceedings u/s 271(l)(c) of the Act.”
Learned representatives fairly agree that the issues in appeal are covered, in favour of the assessee, by a decision of the coordinate bench in the case of Gujarat Cricket Association & Ors* (*including Baroda Cricket Association) Vs. JCIT [(2019) 101 taxmann.com 45 (Ahd)] wherein it was, inter alia, observed as follows:-
“Our analysis: 31. As we proceed to deal with the impact of insertion of proviso to Section 2(15), we consider it appropriate to look at a coordinate bench decision, in the case of Hoshiarpur Improvement Trust v. ITO [2015] 155 ITD 570/61 taxmann.com 162 (Asr. - Trib.)], wherein, speaking through one of us (i.e. the Vice President), the coordinate bench has, inter alia, observed as follows: "14. Before we address ourselves to the facts of this case, let us analyse the relevant legal provisions. Section 2 (15), which defines 'charitable purposes' though in an inclusive rather than an exhaustive manner, had a
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 3 of 15
rather quiet existence, unaffected by the frequent amendments to the Income Tax Act 1961, till 1st April 1984. Vide Finance Act, 2013, and with effect from 1st April 1984, the words 'not involving the carrying on any activity for profit' were deleted from Section 2(15), and, with this amendment, this definition was as follows: "Charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: 15. Vide Finance Act, 2008, the words "preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest)", were added and, on a more relevant note, a new proviso (i.e. fist proviso) was added to this provision, carving out an exception in the cases of 'advancement of any other object of general utility', and, by the immediately following Finance Act 2009, there was yet another proviso (i.e. second proviso) introduced to carve out an exception from the exception itself. In essence, the effect of these provisos was that even when an assessee was pursuing 'a charitable purpose' in the event of advancement of any other object of public utility' it would cease to be for charitable purposes if it involves (a) carrying on an activity in the nature of trade, commerce or business; or (b) rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of nature of use or application or retention of the income from such activity. However, these provisions are not to apply when the activities are such a modest scale that the value of receipts in respect of the same are less than Rs 25 lakhs. These two provisos, as they stand now, are as follows: 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 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; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year.' 16. Explaining the scope of these provisions, a coordinate bench of this Tribunal, in the case of Himachal Pradesh Environment Protection and Pollution Control Boardv. CIT [(2010) 9 ITR Trib 204 (Chandigarh)], has observed as follows: 13. It is also important to bear in mind that the insertion of proviso to s. 2(15) does not mean that in case an assessee is to receive any payment for anything done for trade, commerce or business, the assessee will be hit by the said proviso. It may be recalled that elaborating the scope of this amendment, CBDT, vide Circular No. 11, dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows:
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 4 of 15
"3. The newly amended s. 2(15) will apply only to the entities whose purpose is 'advancement of any other object of general public utility' i.e., the fourth limb of definition of 'charitable purpose' contained in s. 2(15). Hence, such entities will not be eligible for exemption under s. 11 or under s. 10(23C) of the Act, if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activity. 3.1 There are industry and trade associations who claim exemption from tax under s. 11 or on the ground that their objects are for charitable purposes as these are covered under the 'any other object of public utility'. Under the principle of mutuality, if trading takes place between the persons who are associated together and contribute to a common fund for the financing of some venture or object, and in this respect have no dealings or relations with any outside body, then the surplus returned to such persons is not chargeable to tax. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual members, these would not fall under the purview of s. 2(15) owing to the principle of mutuality. However, if such organizations have dealings with the non-members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to s. 2(15). 3.2 In the final analysis, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes. In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business. Each case would, therefore, have to be decided on its own facts, and generalizations are not possible. An assessee who claims that their object is 'charitable purpose' within the meaning of s. 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business. 14. As the above CBDT circular, which is binding on the CIT under s. 119(1)(a) of the Act, aptly puts it, whether the assessee has, as its object, advancement of any other object of general public utility is essentially a question of to be decided on the facts of the assessee's own case and where object of general public activity is only a mask or device to hide the true purpose of trade, business or commerce, or rendering of any service in relation thereto, the assessee cannot be said to be engaged in a charitable activity within meanings of s. 2(15) of the Act. As a corollary to this approach adopted by tax administration, in our considered view, it cannot be open to learned CIT to contend that where an 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
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 5 of 15
as purely incidental to or as subservient to the main objective of 'general public utility', the carrying on of bona fide activities in furtherance of such objectives of 'general public utility' will also be hit by the proviso to s. 2(15). 15. As CBDT rightly puts it, sweeping 'generalizations are not possible' and 'each case will have to decided on its facts'. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. 17. Therefore, as the legal position stands as on now, even after the insertion of the above two provisos, 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 s. 2(15). By the Finance Act 2015, these two provisos also stand substituted, with effect from 1st April 2016, a new proviso to Section 2(15). This new proviso is as follows: 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 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, 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 18. It may be noted that while the earlier proviso simply stated that exclusion from 'charitable purposes' will come into play "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", the requirement of exclusion clause extends even to situations "in which such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility". In other words, the exclusion clause, by proviso to Section 2 (15), was earlier triggered by "involvement in any activity in the nature of trade, commerce or business etc" but, post Finance Act 2015 amendment, it will be triggered even if "such an activity in the nature of trade, commerce or business etc is undertaken in the course of carrying out such advancement of any other object of general public utility". 19. This substitution of proviso to Section 2(15), in our considered view, may be viewed as representing a paradigm shift in the scope of the exclusion clause.
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 6 of 15
The paradigm shift is this. So far as the scope of earlier provisos is concerned, the CBDT itself has, dealing with an assessee pursing "the advancement of any object of general pubic utility", observed that "If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes" because "In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business." The advancement of any objects of general public utility and engagement in trade, commerce and business etc. were thus seen as mutually exclusive in the sense that either the assessee was pursuing the objects of general public utility or pursuing trade, commerce or business etc. in the garb of pursing the objects of general public utility. As the CBDT circular itself demonstrates, there could not have been any situation in which the assessee was pursing the objects of general public utility as also engaged in trade, commerce of business etc. In the new proviso, however, even when the assessee is engaged in the activities in the nature of trade, commerce or business etc. and "such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility" it is excluded from the scope of charitable purposes only when "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". In other words, even when the activities are in the course of advancement of any other object of general public utility, but in the nature of trade, commerce or business etc, the proviso seeks to exclude it only when the threshold level of activity is not satisfied. Whether such a statutory provision stands the legal scrutiny or not is another aspect of the matter, and that is none of our concern at present anyway, it is beyond doubt that the new proviso, with effect from 1st April 2016, seeks to exclude, from the scope of section 2(15), the situations in which even in the course of pursuing advancement of any objects of general public utility when any activities in the nature of trade, commerce or business etc "is undertaken in the course of actual carrying out of such advancement of any other object of general public utility", unless, of course, the activity level remains within the threshold limit i.e. receipts from such activities are less than twenty percent of total receipts of that year. 21. As the above provisions, which, in our humble understanding, seeks to restrict the scope of Section 2(15) is effective from the assessment year 2016-17, in our considered view, these provisions are only prospective in effect. As a corollary to this legal position, in our considered view, even if the activities in the nature of trade, commerce or business etc are undertaken in the course of actual carrying out of advancement of any object of general public utility, till the end of the previous year relevant to the assessment year 2016-17, the activities will continue to be covered by the scope of Section 2 (15). …………………'
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 7 of 15
The views so expressed by the coordinate bench were approved by Hon'ble Punjab & Haryana High Court in the case of CIT (Exemptions) v. Improvement Trust Monga [ITA No. 147 of 2016; Tribune Trust (supra) wherein Their Lordships have, inter alia, observed as follows: …………The Tribunal by the impugned order held that the stand of the authorities was unsustainable as even assuming that all the allegations of the Assessing Officer with respect to the profit motive in the activities of the assessee are correct, the same were carried out with the larger and predominant objective of general public utility. Relying upon the CBDT circular the Tribunal observed that it is only when the Assessing Officer finds that "the income is from any other business which is not incidental to the attainment of the objectives of the trust or institution", that such an income will "not be exempt from tax". The Tribunal noted that there is no finding to that effect by any of the authorities and that it is not even the case of the revenue that the activities of the trusts do not serve the objects of the general public utility. The Tribunal held that the activities of the trust fall within the category "objects of general public utility". It was also held that separate books of account for the business activities were maintained. This was not challenged before us. It is not necessary in these appeals to decide the effect of the amendment to Section 2(15) introduced with effect from 01.04.2016. The Tribunal then dealt with the main contention of the revenue that the assessee was involved in the activities of developing and selling the residential and commercial units with the sole aim of making profits. The conclusions of the Tribunal in this regard are as follows; the profit on sale does not necessarily imply profit motive in the activities of the assessee. What is important is the motive or the predominant object of the activities. The bids are invited by the assessee who allots the plots to the highest bidders. This, however, is because it is not desirable for the State to subsidise its businesses. A bidding process ensures transparency in the functioning of the trusts and therefore, it does not make the bidding process a commercial venture. Further the bids are invited only in the context of commercial units. Under the Rules there is a formula on the basis of which the price is worked out. The revenue did not deny the same but alleged that the profit motive is embedded in this formula as shown by the adjustments for various charges. 72. The Tribunal rightly rejected the contention that to fall within the ambit of the words "advancement of any other object of general public utility" the trust must necessarily be involved only in implementing poverty alleviation programs or doing other acts of charity. It is sufficient if it does precisely what the last category in Section 2(15) states namely being involved in activities for the advancement of an object of general public utility. They include a proper systematic development of certain areas. These activities are by virtue of the PTI Act undertaken by this assessee. 73. The Tribunal also rightly held that an object of general public utility does not necessarily require the activities to be funded or subsidized by the State. So long as the objects fall within the ambit of the words "object of general public utility", it is sufficient. The achievements of those objects
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 8 of 15
do not have to be as a result of State funding or State subsidy. The Tribunal accordingly rightly held that the authorities were not justified in denying the benefit of section 11 and holding that the assessee was not covered by the words "advancement of any other object of general public utility" in Section 2(15). The Tribunal, therefore, rightly directed the Assessing Officer to delete disallowance of exemption. 33. On a similar and detailed note, our jurisdictional High Court, in the case of Sabarmati Gaushala Trust (supra), has observed as follows: 5. Term "Charitable Trust" is defined in Section 2 (15) of the Act which includes the relief to the poor, education, medical relief, preservation of environment; including watersheds, forests and wildlife and preservation of monuments or places or objections of artistic or historic interest and advancement of any other object of general public utility. Proviso to Section 2 (15) and further proviso whereof inserted by Finance Act 2010 w.e.f 1st April 2009 read, thus — "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 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. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year." 6. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the 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. Such statutory amendment was explained by the Finance Minister's speech in the Parliament. Relevant portion of which reads as under :— 'I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 9 of 15
whether any entity is carrying on 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. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility".' 7. In consonance with such assurance given by the Finance Minister on the floor of the House, CBDT issued a Circular No. 11 of 2008 dated 19th December 2008 explaining the amendment as under :— "3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is ' advancement of any other object of general public utility' i.e., the fourth limb of the definition of ' charitable purpose' contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under ' any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2 (15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be chargeable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2 In the final analysis, however, whether the assessee has for its object ' the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any 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),
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 10 of 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." 8. What thus emerges from the statutory provisions, as explained in the speech of Finance Minister and the CBDT Circular, is that the activity of a trust would be excluded from the term ' charitable purpose' if it is engaged in any activity in the nature 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'. 9. 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. …………… ** ** ** 11. We are wholly in agreement with the view of the Tribunal. The objects of the Trust clearly establish that the same was for general public utility and where for charitable purposes. The main objectives of the trust are - to breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country; to produce and sale the cow milk; to hold and cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make the cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize the objects of the trust as also to open schools and hostels for imparting eduction in cow keeping and agriculture having regard to the trust objects. 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 the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 11 of 15
nature of trade, commerce or business but are carried out under the guise of activities in the nature of ' public utility'. 34. What essentially follows from the above discussions is that, even after the 2008 amendment and insertion of proviso to Section 2(15), so far as 'any other object of general public utility is concerned, as long as profit earning is not the predominant purpose of the activity of the assessee, the benefit of Section 2(15) cannot be declined. In other words, the accrual of profits to the assessee, by itself, cannot, therefore, be reason enough to hold that the assessee is 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, commerce or business. However, the case of the revenue authorities hinges on the allegation that the way and manner in which cricket matches are being organized, particularly the IPL matches, the activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from the time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and the impact of this commercialization has not left Indian cricket intact. 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 assessees- something 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 donot 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 for the short reason that the commercialization of cricket by the BCCI, even if that be so, cannot be reason enough to invoke the proviso to Section 2(15). We are alive of
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 12 of 15
learned Commissioner (DR)'s suggestion that the cricket associations cannot be seen on standalone basis as the BCCI is nothing but an apex body of these cricket associations at a collective level and whatever BCCI does is at the behest of or with the connivance of the local cricket associations, and that it is not the case that anyone can become a Member of the BCCI because only a recognized cricket association can become a Member of the BCCI. We are also alive to learned Commissioner's argument that what is 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 considerations said to be inherent in planning the matches. As we make these observations, and as we do not have the benefit of hearing the perspective of the BCCI, we make it clear that these observations will have no bearing on any adjudication in the hands of the BCCI. Suffice to say that so far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of 'charitable activities' in the hands of the cricket associations before us- particularly 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 number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 13 of 15
convert an object of general public utility into a commercial activity. We have carefully analysed the annual reports and the annual financial statements of the assessee, and we do not find any objects, other than objects of the cricket associations, being pursed by these cricket associations. 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. 37. Let us also quickly deal with the judicial precedents cited at the bar and in the orders of the authorities below. As regards the case of Jalandhar Development Authority (supra),this decision does not constitute a binding judicial precedent as contrary view in the case of Hoshiarpur Improvement Trust (supra) stands approved by Hon'ble Punjab & Haryana High Court in the case of Improvement Trust Monga (supra). Tamilandu Cricket Association decision (supra) by the coordinate bench was disapproved by Hon'ble Madras High Court in the judgment reported as Tamilnadu Cricket Association (supra). As regardsCricket Association of Bengal judgment (supra), that was a case in which admittedly no training, coaching or assistance was provided to the players or aspiring players and the association was formed only for watching the matches by making payment. It was on these facts that the association was held to be not for any object of general public utility. This case has no relevance in the present context since admittedly even the CBDT circular treats the cricket associations as pursuing objects of general public utility and the dispute is confined to the alleged element of trade, commerce and business in so pursuing the objects of general public utility. As regards peculiarities of Cricket Association of Bengalcase (supra), the following observations made by Hon'ble Court are relevant: "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 practised players. Its activities outside the holding of the exhibition matches is limited entirely to its own members. The only contact it has with the public is by way of having them as spectators, on payment of a fee, of matches arranged by it. I find it impossible to hold that any benefit or entertainment which is thus paid for and which is availed of by only such members of the public as can or wish to pay for it can in any sense be a purpose of a charity. It is true that charity in the income-tax sense need not have any eleemosynary element in it and that an object of general public utility is under the income-tax law a charitable object. Indeed, if the objects professed by the Association are to be treated as charitable objects at all, they can be so treated only if they can be regarded as objects of general public utility. I find it impossible to hold that there is any general public utility, so as to amount to a charity, in arranging for cricket matches which the public can see on payment".
The revenue thus does not derive any advantage from Cricket Association of Bengal's case (supra). The reliance of the Assessing Officer, on this judicial
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 14 of 15
precedent, is wholly misplaced and in fact contrary to the stand of the CBDT on this issue. The CBDT circular No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24- 9-1984, accepts the positions that a cricket association, being a society for promotion for sports, has its objects as "advancement of object of general public utility", and, for this reason, it falls in the category of charitable institutions. The dispute is only with respect to the activities being in the nature of trade, business or commerce. Clearly, this judicial precedent, if held to be applicable on the facts of this case, will result in a much harsher a position than accepted by the CBDT. Be that as it may, that is not the situation and this judicial precedent cannot be held to be applicable on the facts of this case.
As regards the decision of the coordinate bench in the case of Entertainment Society of Goa (supra), we are of the considered view that in the light of subsequent judgments of Hon'ble High Courts in the case of Tribune Trust (supra) and Sabarmati Gaushala Trust(supra), which uphold the contrary view, this coordinate bench decision does not constitute a binding judicial precedent.
We have noted that there are a large number of judicial precedents, in the cases of various other cricket associations- details of which are set out earlier in this order, holding that the proviso to Section 2(15) cannot be invoked in the cases of such similarly placed cricket associations. Respectfully following the same, and also for the detailed reasons set out above, we uphold the plea of the assessee. We are not reproducing extracts from these decisions, for the sake of brevity, but we adopt, and concur with, the reasoning of these decisions. When proviso to Section 2(15) cannot be invoked on the facts of these cases, the benefits of Section 11 and 12, which were declined only by invoking the proviso to Section 2 (15), could not have been declined on the facts of these cases.
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 fit 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 of the appellants must be upheld. We uphold the plea.”
ITA No. 2675/Ahd/2017 Baroda Cricket Association Vs. DCIT Assessment year: 2014-15 Page 15 of 15
Respectfully following the view so taken by the coordinate bench, we uphold the plea of the assessee. The stand of the authorities below on action under section 2(15) r.w.s. 13(8) thus stands reversed, and the Assessing Officer is directed to allow the assessee benefit of section 11.
In the result, appeal is allowed. Pronounced in the open court today on the 11th June, 2019 Sd/- Sd/-
Ms. Madhumita Roy Pramod Kumar (Judicial Member) (Vice President) Ahmedabad, the 11th day of June, 2019 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
Date of dictation: .....order prepared as per 2 pages manuscripts of Hon’ble VP-attached........ attached....11.06.2019.... 2. Date on which the typed draft is placed before the Dictating Member: .. 11.06.2019..... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: ….11.06.2019.. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .. 11.06.2019..... 5. Date on which the file goes to the Bench Clerk : . ……. 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......