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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI R. K. PANDA & SHRI SUDHANSHU SRIVASTAVA
This appeal filed by the Revenue is directed against the order dated 05.11.2015 of the CIT(A)- 40, New Delhi relating to assessment year 2010-11.
Facts of the case, in brief, are that the assessee is an Association of Person (AOP) and filed its return of income on 30.09.2010 declaring Nil income. The main objects for which the association was established are as under :- (i) To encourage and promote the game of Cricket in the province of Delhi and District of Karnal, Meerut, Aligarh, Bulandshahr, Gurgaon and for amongst the other purposes organize and run club and to take over the assets and liabilities of the Association. (ii) To layout any ground for playing the game of Cricket and for other purposes of the Association and to provide pavilion, refreshment rooms and other conveniences
in connection therewith and with a view purchase, lease or otherwise acquire land at such price or rent and for such period and condition as may seem expedient. (iii) To finance and assist in financing of teams. (iv) To assist in organizing or promotion of provincial Cricket Associations and Inter Provincial Tournaments.
3. The assessee association was registered u/s 12A of the I.T. Act, 1961 vide Order No.633/96 dated 06.03.1997. However, the same was withdrawn w.e.f.
01.04.2009 for assessment year 2009-10 onwards vide order dated 21.05.2012 of the DIT (Exemptions), Delhi. The Assessing Officer, during the course of assessment proceedings, observed that the assessee association is receiving income from corporate boxes, Champion League T-20 matches, income from IPL matches, membership subscription fee, tournament subsidy and sponsorship money. It is also receiving income from sale if liquor etc. The Assessing Officer observed that in the immediately preceding assessment year i.e. assessment year 2009-10 the activity of the assessee has been held to be commercial in nature and proviso to section 2(15) was attracted and income of the assessee was assessed without giving any benefit of section 11 and 12 of the I.T. Act. He, therefore, completed the assessment on 12.03.2013 determining the total income of (-) Rs.3,19,56,121/- after making addition of Rs.4,00,00,000/- as corpus fund from BCCI, Rs.14,14,000/- as corpus admission fees and Rs.52,88,235/- as depreciation to the deficit as per Income and Expenditure account of Rs.1,39,13,319/-. He, however, allowed depreciation as per the Income Tax Act of Rs.6,47,45,037/-.
4. Before the ld. CIT(A), the assessee made elaborate argument. It was submitted that the registration u/s 12AA(1) was restored by the order of the Tribunal vide order dated 13.01.2015. It was further submitted that in the immediately preceding assessment year, the ld. CIT(A) has allowed the appeal of the assessee vide appeal order dated 26.08.2014 and the addition made by the Assessing Officer was deleted.
5. Based on the arguments advanced by the assessee, the ld. CIT(A) directed the Assessing Officer to allow the claim of exemption u/s 11(1) to the assessee with all consequential benefits and thereby directing him to delete all the additions and disallowances. The relevant observation of the ld. CIT(A) from para 4.7 to 4.10 of the order reads as under :-
“4.7 I have considered the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee. The assessee is involved in the promotion of cricket games and sports and as such it is a charitable work and the assessee is eligible for exemption u/s 11(1). The case of the sports and its promotion comes under the definition of charitable purposes within the meaning of Section 11(1) and it is apparent that the provisions of the Proviso of Section 2(15) is not attracted. The mere fact that the assessee receives sponsorship fees and the telecasting rights fees does not mean that the assessee is involved in any trade, commerce or business activity. 4.8 The case laws of the assessee relied on by the assessee is also applicable. It is seen that in the case of Hamsadhwani Vs. DIT (E) (2012) 19 Taxmann.com 10 ITAT Chennai, the assessee was promoting music in Tamil Nadu for which it was receiving sponsorship and coaching fees and the Hon'ble Tribunal did not accept the argument and the exemption was allowed. 4.9 It may not be out of place to mention that the word charitable purposes is not defined in the I.T. Act, 1961 and only an inclusive definition has been provided in Section 2(15) and as per the present statute, it is apparent that any activity for public good will come within the definition of charitable purposes u/s 11(1). 4.10 After considering all the facts and circumstances of the case, I am of the view that the assessee is a charitable institution and is involved in charitable activity and the income is applied for charitable purposes within the meaning of Section 11(1) of the I.T. Act, 1961 and as such the assessee is eligible for exemption u/s 11(1) and the AO is not justified to make any addition or disallowance as the same is not consistent within the provision of Section 11(1) and accordingly the AO is directed to allow exemption u/s 11(1) to the assessee with all the consequential benefits and all the additions and disallowances made by the AO are consequently deleted and as such the appeal of the assessee is allowed.”
6. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds :-
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to allow exemption u/s 11(1) of the Act particularly when the assessee has shown receipts from Sponsorship Income. Sale of Liquor, Income from Corporate Boxes, Sale of Tickets and Advertising/Contractual Receipts which are purely commercial in nature.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the activities of the assessee are charitable within the meaning of Section 11(1) of the Act when the Registration u/s 12A ground by DIT(E) has already been withdrawn by Ld. DIT(E) by observing the activity of the assessee are no longer coming within the definition of charitable purpose after amendment of Section 2(15) of the Act w.e.f. 01.04.2009.
3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”
7. The ld. DR heavily relied on the order of the Assessing Officer.
8. The ld. counsel for the assessee on the other hand filed a copy of the order of the Tribunal in assessee’s own case in the immediately preceding assessment year i.e. assessment year 2009-10 and submitted that the Tribunal in order dated 23.06.2017 has decided the issue and appeal filed by the Revenue has been dismissed. Therefore, this being a covered matter the appeal filed by the Revenue should be dismissed.
We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Assessing Officer following his order for assessment year 2009-10 denied the benefit of exemption u/s 11 and 12 on the ground that the activities of the assessee are commercial in nature and proviso to section 2(15) are attracted. Further, the registration u/s 12A has been withdrawn by the DIT (Exemptions), Delhi. We find the ld. CIT(A) allowed the claim of exemption u/s 11 and 12, the reasons of which are already reproduced in the preceding paragraph. We find identical issue had come up before the Tribunal in assessee’s own case in the immediately preceding assessment year. We find the Tribunal in order dated 23.06.2017 for assessment year 2009-10 has passed an elaborate order and the appeal filed by the Revenue was dismissed.
The relevant observations of the Tribunal from para 6 onwards read as under :-
“6. We have heard the rival submissions and also perused the relevant finding given in the impugned order as well as order of the Tribunal as relied upon by the Learned Counsel. From the perusal of the assessment order, it is seen that the ld. Assessing Officer has denied the exemption u/s 11(1) on the ground that now in wake of newly inserted proviso to section 2(15) with effect from 1.4.2009, the assessee’s activities could no longer be held to be charitable in nature. He has analyzed the various sources of income and also various agreements through which the assessee was earning its income like sponsorship income, sale of liquor, income from corporate boxes, sale of tickets, advertising/contractual receipts, income from IPL matches and television subsidy receipt from BCCI. While analyzing these nature of incomes/receipts earned by the assessee, he also examined the various agreements entered by the assessee. After analyzing these agreements and nature of income he came to the conclusion that the assessee’s activities falls within the ambit of trade, commerce or business. After coming to such conclusion, it appears that he has made a proposal to DIT (Exemption) for withdrawal of registration u/s 12AA on the same very points. In pursuance thereof, ld. DIT (E) vide its order dated 23.5.2012 has withdrawn the registration u/s 12AA(3), precisely on the same issues which has been raised by the Assessing Officer in the impugned order. This is prima facie evident from the facts and issue discussed in detail by the Tribunal in its order dated 13.1.2015. On a plain reading of the decision of the Tribunal, we find that on exactly same points as raised by the DIT(E) and also argued from the side of the Department, this Tribunal has taken note of all these objections raised by the revenue as well as the submissions made by the assessee and after relying upon the decision of Hon’ble Madras High Court in the case of Tamil Nadu Cricket Association vs. DIT(E) reported in 360 ITR 633 and the decision of Hon’ble Delhi High Court in the case of GSI vs. DIT (supra), the Tribunal held that assessee’s activities revolves around cricket only which falls within the ambit of ‘charitable purpose’; and note of its activities fall in the nature of trade, commerce or business. The relevant observation and finding of the Tribunal in this regard reads as :- 10.6. Thus applying the principles laid down in the judgement of Hon’ble Madras High Court in the case of Tamilnadu Cricket Association (supra), the impugned order cancelling the registration u/s 12A quashed. 10.7. Even otherwise the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in and around Delhi. The undisputed fact is that over the years this activity has been recognized by the Income Tax Dept. as a charitable activity and registration u/s 12A was granted to the assessee. A number of assessment orders u/s 143(3) were passed, wherein the assessee was held as eligible for exemption u/s 11/12 of the Act. Hence this fact of the assessee being a charitable institution is not in dispute. 10.8. The core activity of the assessee is undisputedly, charitable in nature. Hence it is not the case of the Revenue that the assessee is carrying on “trade, commerce or business” under the garb of the activity being “general public utility. As regards the various receipts of the assessee, we find that in the case of Tamil Nadu Cricket Association, the receipts were from:
1.
Subscription 2. Renting for hiring cricket ground rooms and premises 3. Fee for providing services for IPL 4. Income from advertisement 5. Subsidy from BCCI 6. Sale of tickets for conducting the matches and 7. Restaurant and catering income. Such receipts of money by the Tamil Nadu Cricket Association were not considered by the Hon’ble Madras High Court, as activities in the nature of “trade, commerce or business”. There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 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.
11. We now take up each of the issues raised by the Ld.DIT(E) in his order.
11.1. On the issue of sponsorship income from M/s. Twenty First Century Media (P) Ltd. (TFCM), it was explained that, despite the receipt of sponsorship money during the year of Rs.31,01,038/- and receiving a sum of Rs.14,20,000/- from BCCI as subsidy, there was a short fall of Rs.29,84,835/-, which was met by the assessee. It was specifically argued by the Ld.D.R. that the agreement with “M/s Twenty First Century Media Pvt.Ltd.” is commercial in nature. The reply of the assessee is that it should be appreciated that, for any organization to run and survive it is essential that it should augment some funds to meet the cost/expenditure, as required to be incurred, to carry out the activities meant to achieve its object. We agree with the submissions of the assessee. 11.2. The assessee has to perform many activities and for this purpose it has to enter into transactions with various types of persons. These persons can be commercial or non-commercial organizations, professionals, vendors of goods, vendor of services and so forth and so on. Merely entering into such agreement does not tantamount to the assessee being a business entity. The question is whether the activity done by assessee, would tantamount to business activity or not. This has to be viewed, from view point of the assessee. The other person with whom the assessee has an agreement, may have its own object and reason for doing transaction and accordingly, the nature of transaction and the resultant activity would be determined in the other persons hands. However, that by itself, should not have any bearing at all on the nature of the transaction, as well as resultant activity in the hands of assessee. To carry out a transaction in an organized manner and to ensure that the transaction 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. It will be further good, if these terms and conditions are reproduced in writing, in the form of an agreement. Merely because an activity is performed in an organized manner, that alone will not make these activities as business/commercial activity. Profit motive is one essential ingredient, which is apparently missing in this case. In carrying out an activity, one may earn profit, or one may incur loss. But for making it as business activity, the presence of profit motive is a sin qua non i.e. condition precedent at the time of entering into transaction. In this case the facts demonstrate that despite the receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by the assessee. Thus this adjustment resulted in subsidizing the cost of the assessee and hence there is no profit motto. This cannot be termed as business activity. Similar is the view of the Hon’ble Madras High Court in the case of Tamil Nadu Cricket Association (supra). 11.
On the issue of sale of liquor, it was submitted that initially DDCA was formed as a Club to take over the assets and liabilities of the Association called, “Delhi Cricket Association”. He referred to the objects and submitted as follows. “One of the objects as given in the MOA of DDCA is to lay ground for playing game of cricket and to provide pavilion, refreshment rooms and other facilities in connection therewith. Therefore, an eatery was established which was eventually shaped as a canteen for the benefit of the members as well as few
other persons associated with DDA e.g. players, coaches, staff, other guests etc.” 11.4. In our view, for the purpose of making this Canteen self sustainable, it has to follow global standards and international protocols, since cricket is played at international level. Canteen keeps various items as per menu. Liquor is just part of this menu. It is not sold independently as trading item. The eatery is available for the use only of members, players, staff, other guests of DDCA. It is not open for public. A walk in customer/guest, cannot enjoy the facility of this eatery. The basic fact is that this canteen has direct and inextricable link with one of the core activities of DDCA i.e. maintaining such a huge cricket stadium and promoting the game of cricket. The Revenue, in this case is trying to project that the assessee as a liquor dealer. This is not correct. Internationally, when facilities are provided to players, liquor is part of the menu. This is just incidental to providing food and beverages. When the Ld.DIT(E) does not find anything wrong in the assessee supplying food and beverages in the canteen to the members, we cannot find fault with liquor being part of the menu card and being served as per international customs and requirements. 11.5. Hence to meet global standards these facilities are required and these are not independent of the activity of providing food and refreshments to Members and Associated Persons. Running of a canteen is an incidental and necessary activity as is in every organization. This cannot be termed as business activity. It is part and parcel of the charitable activity and the receipt in question cannot be termed as exempt from activity which is in the nature of “trade, commerce or business”. 11.6. On advertising and contractual receipts the same explanation as was given by the assessee, as in the case of sponsorship money. Consistent with the view expressed by us, when we were dealing with sponsorship money, we hold that these contractual receipts go to reduce part of the cost incurred by the assessee for its charitable activity and hence cannot be termed as business or that the assessee has undertaken activity in the nature of “trade, commerce or business”. 11.7. On receipts from IPCL an elaborate explanation was given, the pith and substance is that expenditure has to be incurred by the DDCA on various items, as coordination has to be done and the aggregate of expenditure incurred for the same is Rs.238 lakhs. It was submitted that the DDCA, initially meets this expenditure out of its own sources and there after the BCCI and legal franchisee, contribute and compensate part of this expenses. The same arguments as were advanced by the assessee in the cases where sponsorship money received, were made here also. The summary of the submissions are as follows. “Our respectful submission is that, as we have given detailed submission in earlier part of our submissions wherein we have made analyses of receipts as well as of the expenses incurred by the assessee. The analysis of expenses have revealed that the expenses have been incurred on the promotion of the game of cricket. These expenses have been incurred either for the development of game of cricket or the development of players.
There is no other cause or item for which any amount has been spent by the assessee. Similarly, when we analyse the receipt side, we would find that the receipts are directly or inextricably linked with the organizing of matches and tournaments or for promotion of game of cricket in any other manner or for maintenance or building up the infrastructure meant for the promotion of the game of cricket. Thus, it can be safely said that the DDA exists for cricket and cricket only. The CBDT has already clarified that sports is a matter of general public utility. Therefore DDCA satisfies the condition of having a charitable object as mentioned in s.2(15) of the Income Tax Act, 1961. It does not violate any condition as mentioned in proviso to s.2(15). The apprehension that certain income received by the assessee, during the year, partake the character of business income, is ill founded. In this regard we have submitted in detail that this apprehension is misplaced on account of various submissions as per details given below.
1. The entire receipts have been received for the promotion of game of cricket.
2. The assessee is not free to use it as per its convenience for any purpose other than for promotion of cricket. Thus, the amounts received in this manner cannot be characterized as business receipts.
3. The amount has been received as the voluntary contribution on discretion of the contributor (for e.g. BCCI). These have been received for raising the funds for meeting its costs and expenses.
In none of the cases there is any quid pro quo. The ultimate beneficiary is either the cricketer or the game of the cricket.
The assessee is not charging any fees or revenue from the cricketer who is ultimate beneficiary. Thus, there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on charitable basis as far as real beneficiary is concerned.
Whenever the revenue is earned these are not earned on commercial lines and these are earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not fully.
7. The assessee has not entered any transaction with any person on profit motive. The other person may be an entrepreneur or may be doing business but the assessee has entered the transaction only for the sole and dedicated purpose i.e. for the promotion of cricket.
These facts are worth noting that (a) the assessee has not diverted its funds for any purpose other than promotion of cricket; (b) the assessee has not done any activity or transaction with profit motive, (c) the assess has not done any activity beyond and outside its objects and (d) there is no change in facts so as to deviate from the stand taken by Ld.A.O. in all the past years accepting the claim of the assessee all along on facts as well as on law. 11.8. In view of our decision of sponsorship and such other receipts, we agree with the arguments made by the assessee. Regarding sale of tickets the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, Rs.200/- per ticket are levied, with a sole intention to control the crowds and that the cost incurred per ticket is much more than the amount which is charged for ticket. Under these circumstances, the sale of tickets cannot be considered as an activity of “trade, commerce or business”. We agree with the submissions of the assessee. 11.9. Regarding playing cards, it is an incidental recreation activity undertaken in most Clubs and what is charged by the assessee, goes to recover the costs for providing such recreational facility to its member. The receipts are miniscule and hence negligible. 11.10. Similarly as far as receipts from health club is concerned, we find that, only a part of the expenditure incurred on health club is recovered by way of charges from Members, who are using the health club facility. These are all, at best be called user charges. In our view these receipts cannot be termed as an activity in the nature of “trade, commerce or business”. In fact Health Club facility is recognized to promote the game of cricket. 11.11. All the receipts of the assessee are intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. User charges are required for maintaining the facilities that are provided as part of the infrastructure, for conducting the activities of the assessee. 11.12. On consideration of all the facts and circumstances of the case and when viewed in totality, we have to come to a conclusion that the assessee is not carrying of the activities with any profit motive or with any self interest. The contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges on the facts of this case, do not convert the charitable activity into “trade, commerce or business” activity. 11.13. In view of the above discussion and in view of the binding judgements cited above, we have to necessarily quash the impugned order passed by the DIT(E) u/s 12AA(3) r.w.s. 12 of the Act, as it is bad in law.
On a plain reading of the aforesaid decision and conclusion of the Tribunal, we find that the Tribunal has addressed exactly similar kinds of objections raised by the revenue before us and after dealing with each and every issue Tribunal has come to conclusion that the assessee is not carrying out any business activities and none of its receipts can be termed as an activity in the nature of ‘trade, commerce and business’. Once such finding of fact has been given on similar set of facts, then we do not find any reason to deviate from such a finding in assessee’s own case, therefore, following the aforesaid decision we reject the grounds raised
by the revenue and uphold the order of the Learned CIT (Appeals) for restoring the exemption u/s 11(1) to the assessee for the A.Y. 2009-10.
8. In the result, the appeal of the revenue is dismissed.”
Since the Assessing Officer following his order for assessment year 2009-10 has denied the benefit of section 11 and 12 of the assessee and since the order for assessment year 2009-10 has already been decided in favour of the assessee by the Tribunal, therefore, in absence of any contrary material brought to our notice by the ld. DR against the order of the Tribunal, the order of the ld. CIT(A) allowing the benefit of section 11 and 12 to the assessee is upheld. The grounds raised by the Revenue are accordingly dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on this 19th day of September, 2018.