M/S. CALCUTTA CRICKET & FOOTBALL CLUB,KOLKATA vs. ITO, EXEMPTION, WARD 1(1). KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Hon’ble Accountant Member & Sri Sanjay Garg, Hon’ble Judicial Member) [VIRTUAL COURT HEARING] ITA No. 499/Kol/2019 M/s. Calcutta Cricket & Football Club......................................................................……....….....Appellant 10B, Middleton Row Kolkata – 700 071 [PAN : AACCC 6337 P] Vs. Income Tax Officer, Exemption – Ward(1), Kolkata…………….....................….…....…… Respondent Appearances by: Shri J.P. Khaitan, Sr. Advocate & Shri Manoj Kataruka, Advocate, appeared on behalf of the assessee. Shri Supriyo Pal, Addl. CIT D/R, appearing on behalf of the Revenue. Date of concluding the hearing : January 13th, 2021 Date of pronouncing the order : February 5th, 2021 ORDER Per J. Sudhakar Reddy, AM :-

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 25, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 27/12/2018, for the Assessment Year 2012-13. 2. The sole issue that arises for our consideration is the manner in which the amount is calculated for accumulation u/s 11(1)(a) of the Act. The assessee calculated 15% of the gross income for being accumulated or set apart for application u/s 11(1)(a) of the Act. The Assessing Officer deducted expenditure incurred by the assessee on audit fees, filing fees, amounting to Rs.1,35,822/- from the gross income disclosed by the assessee and granted 15% of the net income as eligible for being accumulated or set apart for application u/s 11(1)(a) of the Act. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority upheld the order of the Assessing Officer. 3. Further aggrieved, the assessee is in appeal before us. 4. The ld. Sr. Advocate, Shri J.P. Khaitan, appearing for the assessee relied on the propositions of law laid down by the ITAT Lucknow Bench of the Tribunal in the case of Krishi Utpadan Mandi Samiti v. Deputy Commissioner of Income-tax, Faizabad Circle reported in [2011] 131 ITD 335 (Lucknow) and the Hon’ble Calcutta High Court in the case of Commissioner Of Income-Tax vs Birla Janahit Trust reported in [1994] 208 ITR 372 (Cal), for the proposition that, the 15% of the gross income should allowed to be

2 ITA No. 499/Kol/2019; M/s. Calcutta Cricket & Football Club M/s. Calcutta Cricket & Football Club accumulated or set aside as per the accumulated or set aside as per the provisions of Section 11(1)(a) of the Act and that provisions of Section 11(1)(a) of the Act and that the Assessing Officer was wrong in deducting application of income of Rs.1,35,822/ the Assessing Officer was wrong in deducting application of income of Rs.1,35,822/ the Assessing Officer was wrong in deducting application of income of Rs.1,35,822/- from the income and then allowing 15% of the balance for being set aside or from the income and then allowing 15% of the balance for being set aside or from the income and then allowing 15% of the balance for being set aside or accumulated u/s 11(1)(a) of the Act. accumulated u/s 11(1)(a) of the Act. 5. The ld. D/R relied on the order of the ld. CIT(A) and submitted that 15 per cent of d. D/R relied on the order of the ld. CIT(A) and submitted that 15 per cent of d. D/R relied on the order of the ld. CIT(A) and submitted that 15 per cent of the net income computed in accordance with the commercial principles should be the the net income computed in accordance with the commercial principles should be the the net income computed in accordance with the commercial principles should be the figure which should be set aside as accumulation u/s 11(1)(a) of the Act. set aside as accumulation u/s 11(1)(a) of the Act. set aside as accumulation u/s 11(1)(a) of the Act. 6. After hearing rival contentions, we find that the Lucknow Bench of the Tribunal al contentions, we find that the Lucknow Bench of the Tribunal al contentions, we find that the Lucknow Bench of the Tribunal in the case of Krishi Utpadan Mandi Samiti Krishi Utpadan Mandi Samiti (supra), has relied on two judgments of the has relied on two judgments of the Hon’ble Supreme Court. We extract the relevant part of the judgments We extract the relevant part of the judgments We extract the relevant part of the judgments of the Hon’ble Supreme Court on this issue on this issue for ready reference:- a) Addl. CIT v. A.L.N. Rao Charitable Trust Addl. CIT v. A.L.N. Rao Charitable Trust [1995] 216 ITR 697/ 83 Taxman [1995] 216 ITR 697/ 83 Taxman wherein, it was held as follows:- 252 (SC), wherein, it was held as follows: “12. In the light of the aforesaid discussion and keeping in view the illustration which In the light of the aforesaid discussion and keeping in view the illustration which In the light of the aforesaid discussion and keeping in view the illustration which we have given earlier the combined operation of section 11(1)(a) and section 11(2) as we have given earlier the combined operation of section 11(1)(a) and section 11(2) as we have given earlier the combined operation of section 11(1)(a) and section 11(2) as applicable at the relevant time would yield the following result: applicable at the relevant time would yield the following result:

(i) If the income derived from property held under trust wholly for charitable or religious derived from property held under trust wholly for charitable or religious derived from property held under trust wholly for charitable or religious purposes during the previous year is Rs. 1 lakh and if Rs. 20,000 therefrom are actually purposes during the previous year is Rs. 1 lakh and if Rs. 20,000 therefrom are actually purposes during the previous year is Rs. 1 lakh and if Rs. 20,000 therefrom are actually applied to such purposes in India then those Rs. 20,000 will get exempted from payment of applied to such purposes in India then those Rs. 20,000 will get exempted from payment of applied to such purposes in India then those Rs. 20,000 will get exempted from payment of income-tax as per the first part of section 11(1)(a) . tax as per the first part of section 11(1)(a) . (ii) Out of the remaining accumulated income of Rs. 80,000 for the previous year, a further sum Out of the remaining accumulated income of Rs. 80,000 for the previous year, a further sum Out of the remaining accumulated income of Rs. 80,000 for the previous year, a further sum of Rs. 25,000 will get exempted from payment of income of Rs. 25,000 will get exempted from payment of income-tax as per second part of section tax as per second part of section 11(1)(a). Thus, out of the total income derived from property as aforesaid d 11(1)(a). Thus, out of the total income derived from property as aforesaid d 11(1)(a). Thus, out of the total income derived from property as aforesaid during the previous year, that is, Rs. 1 lakh, Rs. 45,000 in all, will get excluded from the tax net on a previous year, that is, Rs. 1 lakh, Rs. 45,000 in all, will get excluded from the tax net on a previous year, that is, Rs. 1 lakh, Rs. 45,000 in all, will get excluded from the tax net on a combined operation of first and second part of section 11(1)(a). combined operation of first and second part of section 11(1)(a). (iii) The aforesaid ceiling of Rs. 25,000 of accumulated income from property of pr The aforesaid ceiling of Rs. 25,000 of accumulated income from property of pr The aforesaid ceiling of Rs. 25,000 of accumulated income from property of previous year, will get lifted under section 11(2) to the extent the balance of such accumulated income is will get lifted under section 11(2) to the extent the balance of such accumulated income is will get lifted under section 11(2) to the extent the balance of such accumulated income is invested as laid down by section 11(2). To take an illustration if, say, an additional amount invested as laid down by section 11(2). To take an illustration if, say, an additional amount invested as laid down by section 11(2). To take an illustration if, say, an additional amount of Rs. 20,000 out of the balance of accumulated income of of Rs. 20,000 out of the balance of accumulated income of Rs. 55,000 is invested as per Rs. 55,000 is invested as per section 11(2) then this additional amount of Rs. 20,000 of accumulated income will get section 11(2) then this additional amount of Rs. 20,000 of accumulated income will get section 11(2) then this additional amount of Rs. 20,000 of accumulated income will get excluded from the tax net as per section 11(2). excluded from the tax net as per section 11(2). (iv) The remaining balance of the accumulated income out of Rs. 55,000, that is, Rs. 35 The remaining balance of the accumulated income out of Rs. 55,000, that is, Rs. 35 The remaining balance of the accumulated income out of Rs. 55,000, that is, Rs. 35,000 if not invested as per sub not invested as per sub-section (2) of section 11 will be added to the taxable income of the section (2) of section 11 will be added to the taxable income of the trust and will not get exempted from the tax net. trust and will not get exempted from the tax net. (v) If on the other hand the entire remaining accumulated income of Rs. 55,000 is wholly If on the other hand the entire remaining accumulated income of Rs. 55,000 is wholly If on the other hand the entire remaining accumulated income of Rs. 55,000 is wholly invested as per section 11(2) the said entire amount of Rs. 55,000 will get exempted from per section 11(2) the said entire amount of Rs. 55,000 will get exempted from per section 11(2) the said entire amount of Rs. 55,000 will get exempted from the tax net.

3 ITA No. 499/Kol/2019; M/s. Calcutta Cricket & Football Club M/s. Calcutta Cricket & Football Club 13. We may also at this stage mention that the Kerala High Court in H.H. Marthanda We may also at this stage mention that the Kerala High Court in H.H. Marthanda We may also at this stage mention that the Kerala High Court in H.H. Marthanda Varma Elayaraja of Travancore Trust's case (supra ), the Madhya Pradesh High Cour Varma Elayaraja of Travancore Trust's case (supra ), the Madhya Pradesh High Cour Varma Elayaraja of Travancore Trust's case (supra ), the Madhya Pradesh High Court in Mohanlal Hargovinddas Public Charitable Trust's case (supra) , the Bombay High in Mohanlal Hargovinddas Public Charitable Trust's case (supra) , the Bombay High in Mohanlal Hargovinddas Public Charitable Trust's case (supra) , the Bombay High Court in Trustees of Bhat Family Research Foundation's case (supra) and the Madras Court in Trustees of Bhat Family Research Foundation's case (supra) and the Madras Court in Trustees of Bhat Family Research Foundation's case (supra) and the Madras High Court in C.M. Kothari Charitable Trust's case (supra) have taken the same view as High Court in C.M. Kothari Charitable Trust's case (supra) have taken the same view as High Court in C.M. Kothari Charitable Trust's case (supra) have taken the same view as the Karnataka High Court in the present case. We approve the view taken in the e Karnataka High Court in the present case. We approve the view taken in the e Karnataka High Court in the present case. We approve the view taken in the aforesaid decisions. We also approve the similar view taken by the Jammu & Kashmir aforesaid decisions. We also approve the similar view taken by the Jammu & Kashmir aforesaid decisions. We also approve the similar view taken by the Jammu & Kashmir High Court in Shri Krishen Chand Charitable Trust's case (supra) . The learned counsel High Court in Shri Krishen Chand Charitable Trust's case (supra) . The learned counsel High Court in Shri Krishen Chand Charitable Trust's case (supra) . The learned counsel for the revenue, therefore, has made out no case for our interference with the decision evenue, therefore, has made out no case for our interference with the decision evenue, therefore, has made out no case for our interference with the decision rendered by the Division Bench of the Karnataka High Court. rendered by the Division Bench of the Karnataka High Court. 6.1. In the above case, the Hon’ble Supreme Court has by way of illustration laid In the above case, the Hon’ble Supreme Court has by way of illustration laid In the above case, the Hon’ble Supreme Court has by way of illustration laid down that 15% of Rs.1 Lakh, i.e., of Rs.1 Lakh, i.e., the income before deducting application of income of the income before deducting application of income of Rs.20,000/-, should be allowed for accumulation or set aside u/s 11(1)(a) of the Act , should be allowed for accumulation or set aside u/s 11(1)(a) of the Act , should be allowed for accumulation or set aside u/s 11(1)(a) of the Act.

b) CIT v. Programme for Community Organisation CIT v. Programme for Community Organisation [2001] 248 ITR 1/ 116 [2001] 248 ITR 1/ 116 wherein, it was held as follows:- Taxman 608 (SC),

“3. The question that really requires consideration is whether, for the purposes of The question that really requires consideration is whether, for the purposes of The question that really requires consideration is whether, for the purposes of section 11(1)(a) of the Income section 11(1)(a) of the Income-tax Act, 1961 ('the Act'), the amount for the grant tax Act, 1961 ('the Act'), the amount for the grant of exemption of twenty of exemption of twenty-five per cent should be the income of the trust or it should five per cent should be the income of the trust or it should be its total income determined for the purposes of assessment to income otal income determined for the purposes of assessment to income otal income determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts: the assessee question has to be answered in the light of these facts: the assessee question has to be answered in the light of these facts: the assessee-trust received donations in the aggregate sum of Rs. 2,57,376. It applied thereout for its donations in the aggregate sum of Rs. 2,57,376. It applied thereout for its donations in the aggregate sum of Rs. 2,57,376. It applied thereout for its charitable purposes t charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. he aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. The question is whether the assessee is entitled to accumulate twenty 87,010. The question is whether the assessee is entitled to accumulate twenty 87,010. The question is whether the assessee is entitled to accumulate twenty-five per cent of Rs. 2,57,376, as it contends, or twenty per cent of Rs. 2,57,376, as it contends, or twenty-five per cent of Rs. 87,010, as five per cent of Rs. 87,010, as the revenue appeared to contend the revenue appeared to contend. Section 11(1)(a) reads thus : Section 11(1)(a) reads thus : "11. Income from property held for charitable or religious purposes. "11. Income from property held for charitable or religious purposes. "11. Income from property held for charitable or religious purposes.—(1)(a ) Income derived from property held under trust wholly for charitable or religious Income derived from property held under trust wholly for charitable or religious Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes, to the extent to which such income is applied to such purposes in India; purposes in India; and, where any such income is accumulated or set apart for application to such and, where any such income is accumulated or set apart for application to such and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart purposes in India, to the extent to which the income so accumulated or set apart purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty is not in excess of twenty-five per cent of the income from such property;" five per cent of the income from such property;" 4. Having regard to the plain language of the above provision, it is clear that a Having regard to the plain language of the above provision, it is clear that a Having regard to the plain language of the above provision, it is clear that a charitable or religious trust is entitled to accumulate twenty charitable or religious trust is entitled to accumulate twenty-five per cent of its five per cent of its income derived from property held under trust. For the present purposes, the income derived from property held under trust. For the present purposes, the income derived from property held under trust. For the present purposes, the donations, the assessee received, in the sum of Rs. 2,57,376, would constitute its assessee received, in the sum of Rs. 2,57,376, would constitute its assessee received, in the sum of Rs. 2,57,376, would constitute its property and it is entitled to accumulate twenty property and it is entitled to accumulate twenty-five per cent thereout. It is five per cent thereout. It is unclear on what basis the revenue contended that it was entitled to accumulate unclear on what basis the revenue contended that it was entitled to accumulate unclear on what basis the revenue contended that it was entitled to accumulate only twenty-five per cent of five per cent of Rs. 87,010. 5. For the aforesaid reasons, the civil appeal is dismissed. For the aforesaid reasons, the civil appeal is dismissed. 6. No order as to costs.” No order as to costs.”

4 ITA No. 499/Kol/2019; M/s. Calcutta Cricket & Football Club M/s. Calcutta Cricket & Football Club 6.2. In the above judgment also, the Hon’ble Supreme Court has held that u/s In the above judgment also, the Hon’ble Supreme Court has held that u/s In the above judgment also, the Hon’ble Supreme Court has held that u/s 11(1)(a) of the Act, 25% of the aggregate sum of Rs.2,57,376/ 11(1)(a) of the Act, 25% of the aggregate sum of Rs.2,57,376/- may be accumulate may be accumulated or set apart and not 25% of Rs.87,010/ set apart and not 25% of Rs.87,010/- which was on the net figure after deducting the which was on the net figure after deducting the application of income. The Hon’ble Jurisdictional High Court has in the case of . The Hon’ble Jurisdictional High Court has in the case of . The Hon’ble Jurisdictional High Court has in the case of Commissioner Of Income-Tax vs Birla Janahit Tax vs Birla Janahit (supra), followed these propositions of la followed these propositions of law laid down by the Hon’ble Supreme Court. laid down by the Hon’ble Supreme Court. 7. Respectfully following the Respectfully following the judgments of the Hon’ble Supreme Court in the above of the Hon’ble Supreme Court in the above judgments, we hold that the assessee is entitled judgments, we hold that the assessee is entitled to accumulate or set aside to accumulate or set aside of 15% of the income prior to deduction of expenditure income prior to deduction of expenditure which was application of income, which was application of income, u/s 11(1)(a) of the Act. In the result, appeal of the assessee is allowed. 8. In the result, appeal of the assessee is allowed. Kolkata, the Kolkata, the 5th day of February, 2021.

Sd/- Sd/- [Sanjay Garg] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 05.02.2021 {SC SPS} Copy of the order forwarded to: 1. M/s. Calcutta Cricket & Football s. Calcutta Cricket & Football Club 10B, Middleton Row Kolkata – 700 071 2. Income Tax Officer, Exemption Income Tax Officer, Exemption –Ward(1), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.