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Facts
The assessee, Indian Olympic Association, an apex sports body registered u/s 12A, received Rs.6,54,55,348/- from sponsorship agreements. The AO treated this income as commercial, exceeding 20% of gross receipts, thus attracting the proviso to Section 2(15) and denying exemption u/s 11 and 12. The CIT(A) had previously allowed the assessee's appeal.
Held
The Tribunal affirmed the CIT(A)'s decision, finding that the assessee's activities, including sponsorship for international sports events, were non-profit driven and aimed at motivating sportspersons, with expenses often exceeding sponsorship receipts. It was held that these activities were not commercial and the Supreme Court judgment in the AUDA case was not applicable to the assessee.
Key Issues
Whether sponsorship income received by a non-profit sports association constitutes business activity, thereby attracting the proviso to Section 2(15) and disallowing exemption under Sections 11 and 12 of the Income Tax Act.
Sections Cited
143(3), 2(15), 11, 12, 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES : C : NEW DELHI
Before: DR. B.R.R. KUMAR & SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Revenue against the order dated 25.07.2023 of the Commissioner of Income Tax (Appeals), Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) arising out of the appeal before it against the order passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), by the DCIT (E), Circle 1(1), New Delhi (hereinafter referred to as the Ld. AO).
The grounds raised
by the Revenue read as under:-
1. Whether on the facts and in circumstances of the case and in law ld.CIT(A) has erred in not appreciating the fact that activities of assessee has hit by proviso to Sec.2(15) of the Income Tax Act and in not setting aside the matter to the file of AO to adjudicate it afresh in light of the ratio laid down in the order of Hon’ble Supreme Court of India in the case of ACIT (E) vs. Ahmedabad Urban Development Authority as provided for in the Supreme Court order dated 19.10.2022. 2. the appellant craves leave to add, alter, amend, append or delete any of above grounds.”
Heard and perused the record.
On hearing both the sides, it comes up that the assessee is an organization registered under the Societies Registration Act, 1860 and is also registered u/s 12A of the Act. It is an apex sports body in India representing the country and is a member of International Olympic Association. The Associations of different disciplines in sports in India are members/affiliated to IOA. The activities of the association includes organizing sports activities under the aegis of Ministry of Youth Affairs and Sports, Government of India and International Olympic Association. Utilisation certificates were regularly submitted by IOA in connection with such grants. The assessee claimed benefits of exemption u/s 11/12 of the Act as its objects and activities fall within the meaning of section 2(15) of the Act for the year under consideration. During the year under consideration, the assessee had entered into some sponsorship agreements with few Indian Business Groups, in pursuance of which the assessee received 2 Rs.6,54,55,348/- as sponsorships from various these sponsors. AO was of belief that since the nature of activities in respect of sponsorship agreements with various sponsors was in the nature of business and as this income exceeds 20% of gross receipts, the assessee, during the assessment proceedings, was asked by the AO to furnish an explanation as to why the funds received from sponsorship agreement with various sponsors should not be treated as business venture to which the assessee had replied that it is operating on non-profit motive basis and the sports activities cannot be considered to be the business activity. It was submitted that the arrangements of entering into sponsorship was done only to partly recover the expenses incurred for participation in Rio Olympics 2016. However, the AO examined the Memorandum of Association and the kinds of receipts and concluded that the activities of the assessee do not fall under the limbs of amended proviso to section 2(15) and has to be considered falling in the category of advancement of general public utility. The AO observed that the activities are commercial in nature and accordingly held that the income from such receipts constituting its major commercial income is more than 20% of the total receipts. Therefore, the assessee is hit by the second proviso to section 2(15) of the Act and, hence not eligible for benefit of exemption u/s 11 and 12 of the Act and, accordingly, assessed assessee’s income as normal income without allowing deduction u/s 11 of the Act.
The CIT(A), however, considered the fact that on the same grounds additions were made in AYs 2019-20, 2011-12, 2013-14 and 2014-15 and the assessee preferred an appeal before the CIT(A) wherein the appeals were allowed and, thereafter, the Department carried the matter before the Tribunal wherein the Department’s appeals were dismissed and the Department’s appeal before the Hon’ble High Court for AY 2019-20 and 2011-12 were dismissed.
The ld. DR before us argued that the CIT(A) has fallen in error in not taking into cognizance the Hon’ble Supreme Court judgement in the case of ACIT (Exemptions) vs. Ahmedabad Urban Development Authority (2022) 143 taxmann.com 278 (SC). It was contended that the CIT(A) should have examined the issue in the light of the observations of the Hon’ble Supreme Court in the context to the activities of BCCI and should have restored the matter to AO. 6.1 The ld. AR has, however, relied the order of the CIT(A) and the previous decisions in favour of the assessee.
Giving thoughtful consideration to the matter on record, we are of the considered view that there is apparent error in the perception of comparing the activities of BCCI and that of the present assessee. The working model of BCCI cannot at all be equated with the present assessee which is representing the country under the aegis of the Government in amateur international sports events. The CIT(A) has specifically observed on facts of the case that in regard 4 to participation in Rio Olympics games in 2016 the expenditure incurred is more than the sponsorship amounts received. The sponsorship agreements are not long-term contracts and there was no bidding process. Thus, we are of the considered view that arranging these sponsorship contracts is in itself a great task for the assessee as the sponsors are paying out of their profits for motivating the assessee and the sportspersons of the country in participating in international events. Neither the sponsor nor the assessee can be attributed any profit motive from the outcome of these sponsorship agreements. Thus, we are of the considered view that there was no error in the findings of the ld.CIT(A) and there was no requirement of setting aside the matter to the file of the AO. The judgement of the Hon’ble Supreme Court in the case of ACIT vs. Ahmedabad Urban Development Authority was, thus, not applicable to the assessee.
In the result, as the grounds have no substance the appeal of the Revenue is dismissed.