DCIT, Mohali V. M/s Punjab Cricket Association, Mohali

ITA 1186/CHANDI/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9720 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 08-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH MARWAHA
• Keywords: Business income; Charitable institution
• Section: 12A; 148; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.467/CHD/2011 (ASSESSMENT YEAR : 2002-03) ITA NO.1186/CHD/2011 (ASSESSMENT YEAR : 2003-04) ITA NO.1187/CHD/2011 (ASSESSMENT YEAR : 2004-05) ITA NO.1188/CHD/2011 (ASSESSMENT YEAR : 2005-06) ITA NO.1189/CHD/2011 (ASSESSMENT YEAR : 2006-07) ITA NO.468/CHD/2011 (ASSESSMENT YEAR : 2007-08) AND ITA NO.1190/CHD/2011 (ASSESSMENT YEAR : 2008-09) THE D.C.I.T., VS. M/S PUNJAB CRICKET ASSOCIATION, CIRCLE-6(1), MOHALI. SAS NAGAR, MOHALI. PAN: AAATP3502C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR, CIT DR RESPONDENT BY : SHRI RAKESH MARWAHA DATE OF HEARING : 12.07.2016 DATE OF PRONOUNCEMENT : 27.07.2016 2 O R D E R PER ANNAPURNA GUPTA, A.M. : THIS GROUP OF SEVEN APPEALS HAS BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF CIT(A), CHAN DIGARH IN THE CASE OF THE SAME ASSESSEE AND PERTAIN TO ASSESSMENT YEARS 2002-03 TO ASSESSMENT YEAR 2008- 09. SINCE IDENTICAL ISSUE HAS BEEN RAISED IN ALL THE AP PEALS AND THESE WERE HEARD TOGETHER, THE SAME ARE BEING DISPOSED OFF BY THIS COMMON AND CONSOLIDATED ORDER. 2. AT THE OUTSET IT MAY BE STATED THAT DURING THE COURSE OF HEARING BEFORE US THE REVENUE HAD RAISED AN ADDITIONAL GROUND IN THE APPEALS FOR FIVE ASSESSMEN T YEARS I.E. A.Y. 2004-05 TO A.Y. 2008-09 PERTAINING TO THE ISSUE OF REOPENING UNDER SECTION 148. IT WAS POINTED OUT TO THE LD. DR THAT THIS ISSUE HAD NOT BEEN ADJUDICATED UPO N BY THE LD. CIT(A) IN HER APPELLATE ORDER, THEREFORE NO GRIEVANCE RESULTED ON THIS SCORE TO THE REVENUE. T HE LD. DR CONCEDED TO THIS FACT AND SOUGHT PERMISSION TO WITHDRAW THE ADDITIONAL GROUND RAISED. IN VIEW OF T HE SAME THE ADDITIONAL GROUND RAISED IN ASSESSMENT YEA R 2004-05 TO ASSESSMENT YEAR 2008-09 PERTAINING TO TH E ISSUE OF REOPENING UNDER SECTION 148 IS TREATED AS DISMISSED. 3 3. FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO NO. 467/CHANDI/2011 IN WHICH REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 OF THE IT ACT, 1961 WHEREAS THE A.O. HAS CLEARLY ESTABLISHED THAT THE ASSESSEE OBJECTS WERE DEVOID OF CHARITABLE NATURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 OF THE IT ACT IN VIEW OF THE FACTS THAT THE ASSESSEE WAS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT AS REQUIRED BY SECTION 11(4A) OF THE IT ACT, 1961. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11 OF THE IT ACT, WITHOUT CONSIDERING THE FACTS THE ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE AS NO INCOME WAS CHARGED FROM VENDORS WHO WERE ALLOWED TO PUT UP STALLS DURING THE CONDUCT OF INTERNATIONAL MATCHES. 4. THE FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE I.E; M/S PUNJAB CRICKET ASSOCIATION, MOHA LI IS A SOCIETY REGISTERED U/S 12A OF THE INCOME TAX ACT 19 61. AS PER THE MEMORANDUM & ARTICLE OF ASSOCIATION, THE M AIN OBJECT OF THE SOCIETY INTER ALIA IS TO CREATE, FOST ER AND MAINTAIN FRIENDLY RELATIONS WITH AND AMONGST THE POPULATION OF THE AREA UNDER ITS CONTROL THROUGH SP ORTS TOURNAMENTS AND COMPETITION CONNECTED THEREWITH AND TO CREATE HEALTHY SPIRIT OF SPORTSMANSHIP, TO RUN A CL UB 4 HOUSE, BANQUET HALL WITH CATERING FACILITIES AND TO INSTILL KEENNESS FOR GAME AND TO INSTIL THE SPIRIT OF SPORTSMANSHIP. A SURVEY WAS CONDUCTED ON THE ASSESS EE ON 19/03/2009 DURING THE COURSE OF WHICH CERTAIN PA PERS AND DOCUMENTS WERE IMPOUNDED, ACTIVITIES ANALYSED, STATEMENTS RECORDED AND VARIOUS FINDINGS GIVEN. IN THE ASSESSMENT ORDER PASSED FOR THE IMPUGNED ASSESSMENT YEAR THE AO STATED, THAT THERE WERE NO SEPARATE BOO KS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WITH REGARD TO PROMOTION OF SPORTS AND FOR COMMERCIAL ACTIVITIES. ACCORDING TO THE AO, SEPARATE BOOKS FOR ANY BUSINES S OR COMMERCIAL ACTIVITY WERE REQUIRED TO BE MAINTAINED AS PER SECTION 11(4A) OF THE INCOME TAX ACT, 1961. THE AO STATED THAT THE ASSESSEE EARNED INCOME FROM MEMBERSHIP FEE , PREMISES/CLUB FACILITIES, BANQUET HALL, RESTAURANT AND CATERING BUSINESS AND ROOMS ETC. AND THE ASSESSEE H AD FAILED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT FOR TH ESE INCOME GENERATING ACTIVITIES. FURTHER THE AO STATED THAT THE ASSESSEE HAD ALSO FAILED TO SUBMIT SEPARATE BAL ANCE SHEET FOR ITS ACTIVITIES. THE AO THEREFORE HELD THA T THE ASSESSEE WAS NOT ENTITLED TO EXEMPTION UNDER SECTIO N 11 OF THE ACT. FURTHER THE AO STATED THAT THE ASSESSEE HAD GIVEN PERMISSION TO VARIOUS VENDORS TO SELL WATER, COLD DRINKS AND SNACKS TO OPERATORS, THE PRICES OF WHICH WERE 2 TO 3 TIMES THE NORMAL MARKET PRICE AND THE ASSESSEE HAD NOT SHOWN ANY INCOME FROM THESE STALLS. THE AO THER EFORE CONCLUDED THAT THE ASSESSEE HAD MISUSED THE BENEF IT OF EXEMPTION GRANTED TO IT UNDER SECTION 11 AND 12 OF THE 5 INCOME TAX ACT 1961. ACCORDING TO THE AO, THE CHAR ITABLE OBJECT OF THE ASSESSEE HAD BEEN OVERTAKEN BY COMMER CIAL NATURE/ACTIVITIES. FURTHER THE NON BOOKING OF INCOM E FROM STALLS HAD RENDERED ITS FINANCIAL STATEMENTS UNRELI ABLE. THEREFORE THE AO TREATED THE SURPLUS EARNED BY THE ASSESSEE AS ITS BUSINESS INCOME DENYING EXEMPTION F ROM TAX UNDER SECTION 11. 5. AGGRIEVED BY THE SAME THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) CHALLENGING THE VALIDITY OF T HE PROCEEDING UNDER SECTION 148 ALONGWITH, THE DENIAL OF EXEMPTION UNDER SECTION 11 OF THE ACT. LD. CIT(A) AFTER TAKING NOTE OF THE ASSESSES SUBMISSIONS, REPRODUCED AT PARA 6 & 7 OF THE ORDER, HELD THAT THE PREDOMINANT ACTIVITIES OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION RELATED TO PROMOTION OF CRICKET SPORT AND THE OTHER ACTIVITY SUCH AS ADVERTISEMENT, MEMBERSHIP, CATERING AND RESTAURANT TO BE INCIDENTAL AND ANCILL ARY TO THE PREDOMINANT ACTIVITIES OF PROMOTION OF SPORT. L D. CIT(A) HELD THAT THE PRE DOMINANT ACTIVITIES OF PRO MOTION OF CRICKET WAS NOT CARRIED OUT WITH THE OBJECT TO E ARN PROFIT AND THE PROFIT HAD BEEN EARNED MAINLY FROM T HE INCIDENTAL AND ANCILLARY ACTIVITIES WHICH THE LD. C IT(A) FOUND HAD IN TURN BEEN USED FOR THE PROMOTION OF CR ICKET. LD. CIT(A) RELYING UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ADDITIONAL CIT VS SURA T ART SILK CLOTH MANUFACTURERS ASSOCIATION [1980] 121 ITR 1 HELD THAT THE ASESSEE WAS ELIGIBLE FOR EXEMPTION U NDER 6 SECTION 11 OF THE ACT, ON THE PROFIT EARNED AND THE REBY ALLOWED ALL THE GROUNDS OF APPEAL TAKEN. RELEVANT F INDINGS OF THE LD. CIT(A) WHICH AT PARA 8 TO 22 OF THE ORDE R ARE REPRODUCED HERE UNDER: 8. I HAVE PERUSED THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, THE SUBMISSIONS OF THE APPELLANT AND THE MATERIAL ON RECORD. BEFORE I MAKE ANY COMMENT /OPINION, I WOULD LIKE TO REPRODUCE THE PROVISIONS OF SECTION 2(15) OF THE INCOME TAX ACT, 1961, WHEREIN THE TERM CHARITABLE PURPOSE INCLUDES: RELIEF OF THE POOR EDUCATION MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 9. THE FOURTH CLAUSE OF THE DEFINITION IS VERY WIDE AND IT INCLUDES ALL THE ACTIVITIES THAT ARE FO R THE BENEIT OF THE GENERAL PUBLIC OR EVEN A SECTION OF PUBLIC. THERE ARE A NUMBER OF DECIDED CASE LAWS, WHICH HAVE RECOGNIZED, TRADE, COMMERCE AND INDUSTRY, ENCOURAGEMENT AND MANAGEMENT OF GAMES AND SPORTS UNDER THE 4 TH CLAUSE OF THE DEFINITION. THE FINANCE BILL 2008 ADDED A PROVISO TO THE ABOVE DEFINITION WHICH 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 OF FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 10. HOWEVER, IT IS MADE CLEAR THAT THE PROVISO MADE UNDER SECTION 2(15) BY FINANCE BILL, 2008 WILL NOT BE APPLICABLE IN THE INSTANT CASE. THE ACTIVITIES OF THE APPELLANT ARE REQUIRED TO BE EXAMINED IN THE LIGHT OF CLAUSE 4 OF SECTION 2(15) OF THE INCOME TAX ACT, 1961. 11. I WOULD LIKE TO RELY UPON THE RATIO OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF 7 ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1. FOLLOWING ARE THE PRINCIPLES THAT HAVE BEEN LAID BY THE HONBLE SUPREME COURT. IF THE PRIMARY OR DOMINANT PURPOSE OF A TRUT OR INSTITUTION IS CHARITABLE, ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABLE BUT WHICH IS MERELY ANCILLARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT PURPOSE WOULD NOT PREVENT THE TRUST OR INSTITUTION FROM BEING A VALID CHARITY. THE TRUE MEANING OF NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT IS THAT WHEN THE PURPOSE OF A TRUST OR INSTITUTION IS THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY, IT IS THAT OBJECT OF GENERAL PUBLIC UTILIT Y NOT ITS ACCOMPLISHMENT OR CARRYING OUT WHICH MUST NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. SO LONG AS THE PURPOSE DOES NOT INVOLVE THE CARRYING ON OF ANY ACITIVITY FOR PROFIT, THE REQUIREMENT OF THE DEFINITION WOULD BE MET AND IT IS IMMATERIAL HOW THE MONEY FOR ACHIEVING OR IMPLEMENTING SUCH PURPOSE ARE FOUND WHETHER BY CARRYING ON ANY ACTIVITY FOR PROFIT OR NOT. THE TES T WHICH HAS TO BE APPLIED IS WHETHER PRE DOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARRYING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUB SERVE TH E CHARITABLE PURPOSE OR TO EARN PROFIT. WHERE PROFIT MAKING IS THE PRE DOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD CEASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PRE DOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. 12. FROM THE PERUSAL OF THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT, FOLLOWING ARE THE STEPS THAT ARE REQUIRED TO BE SPELT OUT: 1. WHAT IS THE PRE DOMINANT ACTIVITY OF THE TRUST OR INSTITUTION ? 2. WHAT IS THE PRE DOMINANT OBJECT OF THE PRE DOMINANT ACTIVITY I.E. TO SUB SERVE THE CHARITABLE PURPOSE OR TO EARN PROFIT ? 3. AS TO WHETHER THE OTHER ACTIVITIES ARE ANCILLARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT PURPOSES? 13. THERE IS NO DISPUTE WITH REGARD TO SPORTS BEING A CHARITABLE ACTIVITY. THE ONLY DISPUTE IN THE INSTANT CASE IS THAT THE APPELLANT HAS UNDERTAKEN COMMERCIAL ACTIVITIES AND HAS MADE 8 HUGE PROFITS. IN MY OPINION, THE ISSUES INVOLVED WHICH NEED TO BE DISCUSSED ARE: A. WHETHER THE COMMERCIAL ACTIVITIES UNDERTAKEN BY THE APPELLANT ARE THE PRE DOMINANT ACTIVITIES OR ANCILLARY OR INCIDENTAL TO THE PROMOTION OF CRICKET ? B. WHETHER PROMOTION OF CRICKET WAS BEING CARRIED OUT FOR THE PURPOSE OF EARNING PROFIT ? C. WHETHER THE PROFIT EARNED FROM THE INCIDENTAL AND ANCILLARY ACTIVITIES WERE PLOUGHED BACK INTO CHARITABLE ACTIVITIES OR NOT ? 14. IN ORDER TO ANSWER THE ABOVE QUESTIONS, I PERUSED THE 53 RD ANNUAL REPORT FOR THE F/Y 2001- 02. PERUSAL OF THE ANNUAL REPORT REVEALED THAT THE FOLLOWING CRICKET PROMOTIONAL ACTIVITIES WERE UNDERTAKEN BY THE APPELLANT: 1. THE APPELLANT HOSTED VARIOUS INTERNATIONAL TEST AND ONE DAY MATCHES. 2. PCA INTER DISTRICT UNDER 16 YEARS SUMMER LEAGUE TOURNAMENT. 3. PCA INTER DISTRICT UNDER 19 YEARS SUMMER LEAGUE TOURNAMENT. 4. PCA INTERPRETED DISTRICT SENIOR SUMMER LEAGUE TOURNAMENT FOR FC MITTAL TROPHY. 5. NORTH ZONE INTERPRETED STATE LEAGUE RANJI TROPHY MATCHES. 6. NORTH ZONE INTER STATE LEAGUE RANJI TROPHY 1 DAY LIMITED OVER MATCHES. 7. RANJI TROPHY KNOCK OUT MATCHES. 8. PROFESSOR DB DEODHAR TROPHY 9. UNDER 14 YEARS INTER STATE TOURNAMENT. 10. VIJAY MERCHANT TROPHY UNDER 16 YEARS. 11. UNDER 22 YEARS. INTER MINOR DISTRICT U-14 YEARS TOURNAMENT INTER MINOR DISTRICT U-16 YEARS TOURNAMENT INTER MINOR DISTRICT U-18 YEARS TOURNAMENT INTER MINOR DISTRICT U-19 YEARS TOURNAMENT INTER DISTRICT U-15 YEARS TOURNAMENTS SUSHIL BALI TROPHY INTER DISTRICT U-16 YEARS TOURNAMENTS M.L. MARKAN TROPHY INTER DISTRICT U-19 YEARS TOURNAMENTS DHRUV PANDOVE TROP HY 9 INTER DISTRICT SENIOR TOURNAMENT PCA PARLE-G INTER SCHOOL TOURNAMENT PCA PARLE-G SUPER SCHOOL TOURNAMENT PUNJAB STATE INTER COLLEGE TOURNAMENT FOR SAMEUL BANER JEE TROPHY 13 TH ALL INDIA J.P. ATRAY CRICKET TOURNAMENT 15. IN ADDITION TO THE ABOVE, THE APPELLANT ALSO UNDERTOOK VARIOUS COACHING ACTIVITIES AND HELD CAMPS ACROSS PUNJAB. THE APPELLANT FURTHER HELD EMPIRE SEMINAR, CURATOR SEMINAR AND TRAINER SEMINAR. 16. THE APPELLANT ALSO UNDERTOOK VARIOUS INFRASTRUCTURE DEVELOPMENT ACTIVITIES. I ALSO FIND THAT THE APPELLANT HAD EMPLOYED EXPERIENCED COACHES TO PROVIDE COACHING SERVICES. I ALSO FIND THAT, THE APPELLANT SPENT A SUM OF RS. 4.25 CRORE ON CRICKETING ACTIVITIES AND PROVIDING FACILITIES. THE BREAK-UP OF THESE EXPENSES ARE AS UNDER: * COACHING / INFRASTRUCTURE RS.13.75 LACS * HOLDING / PARTICIPATION IN MATCHES RS. 70.80 LAC S * PAVILION / PREMISES AND FACILITIES RS. 104.98 LA CS * EXPANSION AND OTHER FIXED ASSET RS. 40.80 LACS * OTHER EXPENSES RS. 54.11 LACS 17. I ALSO FIND THAT THE TV SUBVENTION / VARIOUS TYPES OF ADVERTISEMENT DURING INTERNATIONAL MATCHES WERE NOT UNDERTAKEN BY THE APPELLANT, RATHER IT WAS BCCI WHO UNDERTOOK THESE ACTIVITIES AND THE APPELLANT WAS GIVEN THE SHARE. 18. I FURTHER FIND THAT THE TOTAL CAPACITY OF THE STADIUM IN MOHALI IS AROUND 29000-30000 SEATS. FROM THE PERUSAL OF THE MINUTES OF THE MEETING OF THE FIRST ORGANIZING COMMITTEE, THE FOLLOWING WERE THE APPROVED RATES OF THE TICKETS FOR THE MATCHES: TYPE TICKET RATE NO.OF SEATS AC LOUNGE 5000 600 TERRACE BLOCK 1500- 3500 1800 VIP / MEMBERS BLOCK 250-500 4000 NORTH PAVILION 600 250 10 PCC MEMBER 50-75 5200 GENERAL BLOCK 50-100 9500 STUDENT BLOCK 30-50 13000 19. I FIND THAT MORE THAN 66% OF THE TOTAL CAPACITY IS FOR GENERAL BLOCK AND STUDENT BLOCK, THE TICKET RATE FOR WHICH IS VERY REASONABLE AND ANY SPORTS LOVER CAN EASILY AFFORD TO BUY THESE. 20. FROM PERUSAL OF THE FINANCIAL STATEMENTS I FIND THAT THE MAIN INCOME OF THE APPELLANT IS FROM THE SHARE IN TV RIGHTS AND INTERNATIONAL MATCHES. TV RIGHTS ARE OWNED BY THE BCCI AND THE APPELLANT HAS NO ROLE TO PLAY IN THIS. 21. THE ABOVE DISCUSSIONS SHOWS THAT THE PRE DOMINANT ACTIVITIES OF THE APPELLANT DURING THE YEAR UNDER CONSIDERATION RELATED TO PROMOTION OF CRICKET. THE OTHER ACTIVITIES SUCH AS ADVERTISEMENTS, MEMBERSHIP, CATERING, AND RESTAURANT ARE INCIDENTAL AND ANCILLARY TO THE PREDOMINANT ACTIVITY OF PROMOTION OF SPORTS. I FIND THAT THE MAJOR PROFITS ARE NOT FROM SALE OF TICKETS, BUT FROM THE TV RIGHTS ETC. I AM OF THE OPINION THAT THE CRICKET PROMOTIONAL ACTIVITIES WERE NOT CARRIED OUT WITH THE OBJECT / MOTIVE TO EARN PROFITS. THE APPELLANT HAS EARNED PROFIT MAINLY FROM THE INCIDENTAL AND ANCILLARY ACTIVITIES. AS PER THE RATIO OF THE DECISION OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1, CHARITABLE ACTIVITIES SHOULD NOT BE CARRIED OUT WITH THE OBJECT OF PROFIT EARNING, BUT ANCILLARY AND INCIDENTAL ACTIVITIES TO THE CHARITABLE ACTIVITIES CAN BE CARRIED OUT FOR THE PURPOSE OF EARNING PROFITS PROVIDED THE SAME IS PLOUGHED BACK INTO THE CHARITABLE ACTIVITIES. I FIND THAT THE APPELLAN T HAS UTILIZED THE PROFITS FROM SUCH ANCILLARY AND CHARITABLE ACTIVITIES FOR PROMOTION OF CRICKET AND IN THE CASE OF UNUTILIZED PROFITS, THE APPELLANT SOUGHT PERMISSION FOR ITS ACCUMULATION AND TO TAKE IT FORWARD FOR THE PURPOSE OF UTILIZATION FOR PROMOTION OF SPORTS ACTIVITIES. 22. IN VIEW OF THE ABOVE, I CONCLUDE THAT THE PREDOMINANT ACTIVITY OF THE APPELLANT WAS PROMOTION OF CRICKET AND OTHER ACTIVITIES SUCH AS ADVERTISEMENTS, RESTAURANTS, CATERING, ETC WERE INCIDENTAL AND ANCILLARY TO THE PROMOTION OF SPORTS AND FURTHER THAT THE PROMOTION OF SPORTS WAS NOT CARRIED OUT WITH THE OBJECT OF EARNING PROFIT. THEREFORE, THE APPELLANT IS HELD AS ELIGIBL E FOR EXEMPTION FROM TAX U/S 11 ON THE PROFIT 11 EARNED, THEREBY ALLOWING ALL THE GROUNDS OF APPEAL TAKEN. 6. AGGRIEVED BY THE SAME THE REVENUE CAME UP IN APPEAL BEFORE US. 7. DURING THE COURSE OF HEARING BEFORE US LD. DR POINTED OUT THAT THE ASSESSEE HAD BEEN DENIED EXEMP TION UNDER SECTION 11 FOR THE REASON THAT IT HAD VIOLATE D THE PROVISION OF SECTION 11(4A) OF THE ACT BY NOT MAINT AINING SEPARATE BOOKS OF ACCOUNT FOR ITS CHARITABLE ACTIVI TY AND COMMERCIAL ACTIVITY. 8. LD. DR STATED THAT THE ASSESSEE HAD RAISED THIS GROUND BEFORE LD. CIT(A) BUT THE ISSUE HAS NOT BEEN ADDRESSED IN THE ORDER OF THE LD. CIT(A), WHO HAS S IMPLY ALLOWED THE ASSESSEES APPEAL BY HOLDING THAT THE PR E DOMINANT ACTIVITY OF THE ASSESSEE WAS CHARITABLE WH ILE ITS OTHER ACTIVITIES WERE INCIDENTAL AND ANCILLARY TO T HE MAIN CHARITABLE ACTIVITY. LD. DR THEREFORE REQUESTED THA T THE ISSUE BE REMANDED BACK TO THE LD. CIT(A) FOR ADJUDI CATION ON THIS ASPECT. 9. LD. AR COUNTERED THIS BY STATING THAT THE AO IN HIS ASSESSMENT ORDER HAD SPECIFICALLY STATED THAT S EPARATE BOOKS OF ACCOUNT OF THE ASSOCIATION AND OF THE CLUB ACTIVITY BEING CARRIED OUT ON COMMERCIAL LINES WERE MAINTAINED ON TWO COMPUTERS THEREFORE NO QUESTION A ROSE THAT SEPARATE BOOKS OF ACCOUNT RELATING TO THE TWO ACTIVITIES WERE NOT MAINTAINED BY THE ASSESSEE. LD . AR POINTED OUT THAT THE APPARENTLY THE ONLY GRIEVANCE OF THE 12 AO APPEARED TO BE THAT SEPARATE BALANCE SHEET HAD N OT BEEN PREPARED OF THE TWO ACTIVITIES AND THUS HE HEL D THAT THE ASSESSEE HAD NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT VIOLATING THE PROVISIONS OF SECTION 11(4A) OF THE ACT. LD. AR STATED THAT BALANCE SHEETS ARE ONLY FI NANCIAL STATEMENTS COMPILED FROM THE BOOKS OF ACCOUNT AND CANNOT BE TERMED AS BEING THE BOOKS OF ACCOUNTS IN THEMSELVES. LD.AR FURTHER POINTED OUT THAT THERE W AS A CLEAR FINDING IN THE ASSESSMENT ORDER THAT COMPUTER ONE CONTAINED ACCOUNT OF THE CRICKET ASSOCIATION WHILE COMPUTER TWO CONTAINED ACCOUNT OF THE CRICKET CLUB AND THEREFORE CAN BE NO DOUBT ABOUT THE FACT THAT SEPAR ATE BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE. L D. AR DREW OUR ATTENTION TO THE RELEVANT PARA NO.4 AT PAG E 3 OF THE ASSESSMENT ORDER STATING SO. FOR A CLEAR UNDERSTANDING THE DETAILS OF FILES MAINTAINED IN THE TWO COMPUTERS ARE AS FOLLOWS. COMPUTER- ONE CONTAINED ACCOUNTS OF PCA UNDER THE NAME PCA-GENERAL AND CONTAINED DETAILS OF INCOME UNDER THE FOLLOWING HEADS: - INCOME FROM BANKS - INTEREST FROM BANK - INTEREST ON FDRS - INCOME PREMISES / FACILITIES - BANQUET HALL BOOKING - BOOKING OF SPECTATOR BOX - COMMISSION ON CATERING - GROUND BOOKING - LAWN TENNIS FEE - T.V. RIGHT SUBSIDY - INCOME (REVENUE) - IPL - SUBVENTION - SPONSORSHIP OF PCA TEAMS -OTHER INCOME - ANNUAL SUBSCRIPTION - MISCELLANEOUS INCOME 13 - SALE OF APPLICATION FORM PCA - SALE OF SCRAP -TOURNAMENT SUBSIDIES OTHERS - PARLE-G SUBSIDY COMPUTER TWO CONTAINED BOOKS OF ACCOUNTS UNDER THE TITLE PUNJAB CRICKET CLUB AND CONTAINED PARTICULARS OF SALES ON ACCOUNT OF SILVER SERVICE AND INCOME FROM SOME FACILITIES PROVIDED BY PCA LIKE LAWN TENNIS, POOLSIDE LAWN BOOKING, ROOM CHARGES, GUESTS CHARGES ETC. LD. AR ALSO DREW OUR ATTENTION TO THE REPLY FURNISH ED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS STAT ING THAT THE AFORESAID OBSERVATION OF THE AO THAT NO SE PARATE BOOKS OF ACCOUNT WERE MAINTAINED WAS INCORRECT. THE REPLY DT. 25/11/2009 IS REPRODUCED IN THE ASSESSMENT ORDE R AS FOLLOWS: ..THAT THE BENEFIT OF SECTION 11 OF THE I.T. ACT. 1961 CANNOT BE DENIED TO THE ASSESSEE AND PROVISIONS OF SECTION 11(4A) ARE NOT APPLICABLE. IT IS INCORRECT ON YOUR PART TO OBSERVE THAT NO SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED. THE STATEMENT OF SH. RAMESH BHARDWAJ, CHIEF ACCOUNTS OFFICER IS BEING TWISTED AT YOUR OWN END. HE HAD STATED AT THE TIME OF SURVEY ON 19/03/2009 THAT SEPARATE ACCOUNTS ARE MAINTAINED IN RESPECT OF PCA AND PCC ONLY COMMON BALANCE SHEET IS PREPARED FOR BOTH. NON MAINTAINED OF TWO BALANCE SHEET IN RESPECT OF PCA AND PCC WILL NOT DISENTITLE THE ASSESSEE FOR EXEMPTION GRANTED U/S 11 TO 13 OF THE I.T. ACT. IT IS VERY CLEAR AT THE TIME OF SURVEY THAT THERE WERE TWO COMPUTERS ONE CONTAINING ACCOUNTS OF THE PCA AND OTHER OF PCC. IT IS SURPRISING AS HOW IT HAS BEEN CONCLUDED THAT SEPARATE BOOKS ACCOUNTS HAVE NOT BEEN MAINTAINED.. 10. THUS THE LD. AR STATED THAT THE FACT OF MAINTAINING SEPARATE BOOKS OF ACCOUNT IS EVIDENT FR OM THE ASSESSMENT ORDER ITSELF AND EVEN IF THE ISSUE HAS N OT BEEN DECIDED BY THE LD. CIT(A) THE SAME MAY BE DEALT WIT H 14 DURING THE PRESENT HEARING. ALTERNATIVELY LD. AR ST ATED THAT SINCE THE LD. CIT(A) HAD HELD THAT THE PRE DOM INANT ACTIVITY OF THE ASSESSEE WAS CHARITABLE AND THE OTH ER ACTIVITIES WERE INCIDENTAL AND ANCILLARY TO THE MAI N OBJECTIVES AND SINCE THIS FINDING HAS NOT BEEN CONT ESTED BY THE REVENUE IN THE PRESENT APPEAL THE ASSESSEE B Y VIRTUE OF THESE FINDINGS OF THE LD. CIT(A) IS NOT R EQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNTS FOR ITS OTHER ACTIVITIES IN VIEW OF THE DECISION OF THE BOMBAY HI GH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI VS LALA LAJPATRAI MEMORIAL TRUST. 11. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL PLACED ON REC ORD BEFORE US. 12. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CIT (APPEALS) HAS NOT ADJUDICATED THE ISSUE OF MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR ITS COMME RCIAL ACTIVITIES AS REQUIRED BY SECTION 11(4A) OF THE ACT AND HENCE, THE MATTER BE RESTORED BACK TO THE CIT (APPE ALS). AT THE OUTSET, IT MAY BE POINTED OUT THAT SECTION 1 1(4A) OF THE ACT, STIPULATES THE CONDITIONS TO BE FULFILLED BY A CHARITABLE TRUST OR SOCIETY, FOR CLAIMING EXEMPTION U/S 11 OF THE ACT OF ITS INCOME IN THE NATURE OF PROFITS A ND GAINS OF BUSINESS AND PROFESSIONS. THE SECTION STATES THA T ONLY IF THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AND SEPARATE BOOKS OF ACCOUNT OF THE 15 SAME ARE MAINTAINED, EXEMPTION UNDER SECTION 11 OF THE ACT SHALL BE GRANTED. 13. A PERUSAL OF THE ORDER OF THE LD. CIT(A) REVEA LS THAT, THE FACT THAT ASSESSEE WAS CARRYING ON COMMER CIAL ACTIVITIES, HAS NOT BEEN CONTROVERTED. THIS IS EVI DENT FROM THE QUESTIONS FRAMED BY THE LEARNED CIT (APPEALS), TO BE ADJUDICATED UPON BY HER AT POINT NO.(A) AS FOLLOWS : A . WHETHER THE COMMERCIAL ACTIVITIES UNDERTAKEN BY THE APPELLANT ARE THE PREDOMINANT ACTIVITIES OR ANCILLARY OR INCIDENTAL TO THE PROMOTION OF CRICKET? 14. FURTHER, UNDENIABLY, THE LEARNED CIT (APPEALS) HAS IN HER ORDER DEALT ONLY WITH THE ISSUE RELATING TO THE NATURE OF ACTIVITIES CARRIED OUT BY THE ASSESSEE AN D HELD THAT WHILE THE PREDOMINANT ACTIVITY OF THE ASSESSEE WAS CHARITABLE IN NATURE, RELATING TO PROMOTION OF CRIC KET, THE OTHER ACTIVITIES WERE INCIDENTAL AND ANCILLARY TO T HE PREDOMINANT ACTIVITIES. THUS, WE FIND THAT THOUGH THERE IS A FINDING RELATING TO ONE LIMB OF THE CONDITION TO BE FULFILLED FOR THE PURPOSE OF SECTION 11(4A) OF THE ACT, THE OTHER LIMB BEING MAINTENANCE OF SEPARATE BOOKS OF ACCOUNTS OF THE COMMERCIAL ACTIVITIES HAS BEEN LEFT UNADJUDICATED UPON, THOUGH, A SPECIFIC GROUND WAS R AISED BEFORE THE LEARNED CIT (APPEALS). THERE IS NO DISP UTE ABOUT THIS FACT AND EVEN THE LEARNED COUNSEL FOR TH E ASSESSEE ADMITTED TO THE SAME DURING THE COURSE OF HEARING BEFORE US. BUT HAVING SAID SO, WE FIND THA T THE 16 LD. AR HAS STATED THAT IN VIEW OF THE CLEAR CUT FIN DINGS OF THE AO IN THE ASSESSMENT ORDER TO THE EFFECT THAT S EPARATE BOOKS OF ACCOUNT WERE MAINTAINED THE ISSUE NEED NOT BE RESTORED TO THE FILE OF THE CIT(A) BUT BE ADJUDICAT ED BY THE BENCH. WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LD. AR. A PERUSAL OF THE RELEVANT PARA OF THE AS SESSMENT ORDER TO WHICH THE LD. AR DREW OUR ATTENTION WHICH HAS BEEN REPRODUCED ABOVE AND WHICH ALLEGEDLY STATED TH AT SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED OF THE TW O ACTIVITY, WOULD REVEAL THAT THERE IS NO CLEAR CUT F INDING TO THIS EFFECT. LD. AO INFACT HAS POINTED OUT THAT IN COME FROM CERTAIN COMMERCIAL ACTIVITIES LIKE BANQUET HAL L BOOKING, COMMISSION ON CATERING, BOOKING OF SPECTAT OR BOX, LAWN TENNIS FEE, AND T.V. RIGHT SUBSIDY, AND S ALE OF APPLICATION FORM WERE CONTAINED IN COMPUTER ONE WHI CH ALSO CONTAINED ACCOUNTS OF THE CRICKET ASSOCIATION. THUS THE AO HAD HELD FROM THE PERUSAL OF THE AFORESTATED DETAILS THAT THE ACCOUNTS OF THE COMMERCIAL ACTIVIT IES WERE CONTAINED ON THE BOTH THE COMPUTERS. IN VIEW OF THE SAME IT CANNOT BE CATEGORICALLY SAID THAT SEPARATE ACCOU NTS FOR ITS ACTIVITIES IN RELATION TO PROMOTION OF SPORT AN D ACTIVITY RUN ON COMMERCIAL LINES WAS MAINTAINED BY THE ASSES SEE AND THE RELIANCE PLACED BY THE LD. AR ON THIS OBSE RVATION OF THE AO, WE FIND IS MISPLACED. FURTHER, WE FIND THAT ALL FACTS RELATING TO THE ISSUE ARE NOT THERE BEFORE US , THEREFORE, WE AGREE WITH THE CONTENTION OF THE LD.D R THAT THE LD.CIT(A) HAVING NOT ADJUDICATED THE ISSUE OF DENIAL OF EXEMPTION IN VIEW OF THE PROVISIONS OF SECTION 1 1(4A), 17 THE ISSUE BE RESTORED BACK TO THE CIT(A) TO BE DECI DED IN ACCORDANCE WITH LAW. 15. FURTHER, WE FIND THAT THE DECISION OF THE BOMB AY HIGH COURT IN THE CASE OF LALA LAJPAT RAI MEMORIA L TRUST (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, IN SUPPORT OF HIS CONTENTION THAT WHEN TH E COMMERCIAL ACTIVITIES HAVE BEEN FOUND TO BE INCIDEN TAL TO THE DOMINANT CHARITABLE ACTIVITY, PROVISIONS OF SEC TION 11(4A) OF THE ACT ARE NOT ATTRACTED, NEEDS TO BE CO NSIDERED IN THE LIGHT OF THE FACTS OF THE PRESENT CASE. WE FIND THAT THE HON'BLE HIGH COURT IN THAT CASE HAD CONCLUDED T HAT THE BUSINESS INCOME RECEIVED WAS ON ACCOUNT OF THE DOMINANT ACTIVITY OF THE ASSESSEE TRUST AND HENCE, SEPARATE BOOKS OF ACCOUNTS WERE NOT REQUIRED TO BE MAINTAINED FOR THE SAME AS PER SECTION 11(4) OF THE ACT. IN THE PRESENT CASE THERE IS NO SUCH FINDING THAT T HE COMMERCIAL ACTIVITIES CARRIED OUT BY THE ASSESSEE W ERE IN THE NATURE OF ITS DOMINANT ACTIVITY OF PROMOTING SP ORTS. THE LEARNED CIT (APPEALS) HAS MERELY HELD THE COMME RCIAL ACTIVITIES TO BE INCIDENTAL TO THE MAIN OBJECTION O F THE ASSESSEE SOCIETY. IN VIEW OF THE SAME, WE DIRECT T HE LEARNED CIT (APPEALS) TO ADJUDICATE THE ISSUE IN TH E LIGHT OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF LALA LAJPATRAI MEMORIAL TRUST (SUPRA). 16. IN VIEW OF THE ABOVE, WE RESTORE THE ISSUE OF DENIAL OF EXEMPTION UNDER SECTION 11(4A) OF THE ACT TO THE FILE OF THE LEARNED CIT (APPEALS) TO BE DECIDED IN 18 ACCORDANCE WITH LAW AND IN THE LIGHT OF THE DECISIO N OF THE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME -TAX (EXEMPTIONS) VS.. LALA LAJPATRAI MEMORIAL TRUST (SU PRA). WE MAY ADD THAT WHILE ADJUDICATING THE ISSUE THE AS SESSEE BE GRANTED FULL OPPORTUNITY OF HEARING AND IS FREE TO PRODUCE ALL EVIDENCE ON WHICH IT WISHES TO PLACE RE LIANCE. 17. IN VIEW OF THE ABOVE THE APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1186/CHD/2011 (ASSESSMENT YEAR 2003-04) ITA NO.1187/CHD/2011 (ASSESSMENT YEAR 2004-05) ITA NO.1188/CHD/2011 (ASSESSMENT YEAR 2005-06) ITA NO.1189/CHD/2011 (ASSESSMENT YEAR 2006-07) ITA NO.468/CHD/2011 (ASSESSMENT YEAR 2007-08) & ITA NO.1190/CHD/2011 (ASSESSMENT YEAR 2008-09) 18. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS AND CIRCUMSTANCES IN THESE CASES ARE SIMILAR TO THE FA CTS AND CIRCUMSTANCES IN ITA NO.467/CHD/2011 AND THE FINDIN GS GIVEN IN ITA NO.467/CHD/2011 SHALL APPLY TO THESE C ASES ALSO WITH EQUAL FORCE. 19. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH JULY, 2016 *AG* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH