ITO (Exemptions), New Delhi V. Basketball Federation of India, New Delhi

ITA 4958/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4809 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Capital asset; Business income; Charitable institution; Opportunity of being heard; Maximum Marginal Rate; Cancellation of registration
• Section: 143(3); 12A; 12

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4958/DEL/2015 (ASSESSMENT YEAR: 2010 - 11 ) ITO (EXEMPTIONS), WARD - 1(3), E - 2, BLOCK, ROOM NO. 2419, 24 TH FLOOR, PRATYAKSH KAR BHAWAN, CIVIC CENTRE, JAWAHAR LAL BEHRU MARG, NEW DELHI VS. BASKETBALL FEDERATION OF INDIA, D - 6, DEFENCE COLONY, NEW DELHI PAN:AAAJB0708L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHRAVAN GOTRU, SR. DR ASSESSEE BY: NONE DATE OF HEARING 21/08 / 2017 DATE OF PRONOUNCEMENT 21 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - 40, EXEMPTION DATED 25.05.2015 FOR THE AY 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN IGNORING THAT THE ASSESSEES ACTIVITY FALLS UNDER THE CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THE L AST PROVISO TO SECTION 2(15) IS CLEARLY APPLICABLE TO IT AS INCOME FROM SPONSORSHI/ ROYALTY IS EXPLICITLY BUSINESS RECEIPT 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 ACTIVITIE S OF THE ASSESSEE ARE CHARITABLE IN NATURE AND NOT IN THE NATURE OF TRADE, BUSINESS OR COMMERCE SPECIFICALLY WHEN THE ASSESSEE HAS RECEIVED SUBSTANTIAL AMOUNT FROM DIFFERENT PARTIES TOWARDS SPONSORSHIPS. 3. 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 CHARTIABLE IN NATURE AND NOT IN THE NATURE OF TRADE, BUSINESS AND COMMERCE SPECIFICALLY WHEN THE ASSESSEE HAS GIVEN THESE PARTIES THE SOLE AND EXCLUSIVE RIGHTS TO SPONS OR THE MATCH AND ALSO THE RIGHT TO REASSIGN THE COMPLETE TEAM SPONSORSHIP RIGHTS. PAGE 2 OF 18 3. THE BRIEF FACTS OF THE CASE IS THAT ASSESSEE IS A SPORTS FEDERATION WHO FILED ITS RETURN OF INCOME ON 07/09/2011 DECLARING NIL INCOME. ALONG WITH THE AUDIT REPORT IN FORM NO. 10 B. AND ALSO BALANCE SHEET INCOME EXPENDITURE ACCOUNT ETC. THE ASSESSEE IS RECOGNISED AS A CHARITABLE TRUST UNDER SECTION 12 A OF THE INCOME TAX ACT, 1961 AND IS ALSO RECOGNISED UNDER SECTION 80 G (5)(VI) OF THE ACT. ITS MAIN OBJECT A RE TO PROMOTE AND MAINTAIN HIGH STANDARD OF THE GAME OF THE BASKETBALL ALL OVER THE COUNTRY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE LD. AO THAT ASSESSEE IS IN RECE IPT OF SPONSORSHIP INCOME FROM ASIA TANJANIA CHINA AS WELL AS SPONS ORSHIP FOR NBC, LUDHIANA. THEREFORE, THE LD. ASSESSING OFFICER TOOK THE VIEW THAT ASSESSEE IS ENGAGED IN THE OBJECT OF GENERAL PUBLIC UTILITY AND HENCE PROVISIONS OF SECTION 2 (15) DO NOT APPLY TO THE ASSESSEE. AND THEREFORE, THE LD. AO DENIED THE EXEMPTIO N TO THE ASSESSEE UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT AND WILL OF THE SURPLUS GENERATED FROM THE BUSINESS ACTIVITY OF THE ASSESSEE WAS LIABLE TO TAX UNDER THE PROVISIONS OF SECTION 164 OF THE INCOME TAX ACT. THE MAXIMUM MARGINAL RATE. ACCORDINGLY , THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT ON 25/03/2013 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 8204259/ . 4. ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE LD. C IT A. HE WIDE ORDER DATED 25/05/2015 ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN TRADE PROMOTION ORGANISATION VERSUS DGIT (E) 53 TAXMANN.COM 404 (DELHI). HE FURTHER RELIED UPON THE DECISIO N OF COORDINATE BENCH REPORTED AT 19 TAXMANN.COM 10. THEREFORE, REVENUE. AGGRIEVED BY THE ORDER OF THE LD. CIT A IS IN APPEAL BEFORE US. 5. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER AND SUBMITTED THAT ASSESSEE IS IN RECEIPT OF VARIOUSS INCOME, SUCH AS ROYALTY, SPONSORSHIP ETC THEREFORE, ASSESSEE IS NOT ENGAGED IN ANY CHARITABLE ACTIVITIES AND HENCE LD. ASSESSING OFFICER IS CORRECT IN NOT GRANTING EXEMPTION UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT TO THE ASSESSEE. 6. DESPITE NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE IN ABSENCE THE ISSUE IS DECIDED ON THE MERITS OF THE CASE. 7. WE HAVE CAREFULLY CONSIDERED THE CONTENTION RAISED BY THE LD. ASSESSING OFFICER AND THE ORDER OF THE LD. CIT A ALLOWING THE APPEAL OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE ARGUMENTS RAISED BEFORE US BY THE LD. DEPARTMENTAL REPRESENTATIVE. ADMITTEDLY, T HE ASSESSEE IS ENGAGED IN THE ACTIVITY OF PROMOTION OF BASKETBALL AND IS CARRYING ON CHARITABLE ACTIVITIES. MERELY BECAUSE IT HAS RECEIVED CERTAIN FUND ON PAGE 3 OF 18 ACCOUNT OF ROYALTY AS WELL AS ON ACCOUNT OF SPONSORSHIP IT CANNOT BE SAID THAT THE ACTIVITIES OF THE TRUST ARE NO MORE COVERED UNDER SECTION 2 (15) OF THE ACT. IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN CASE OF RAJASTHAN CRICKET ASSOCIATION VERSUS ADDITIONAL CIT IN 79 TAXMANN.COM 464 AS UNDER: - 3. GROUND NOS. 2 TO 8 ARE AGAINST DENIAL OF EXEMPTIONS AND COMPUTATION OF INCOME AS BUSINESS INCOME SINCE THE GROUND NOS. 2 TO 8 INTER - RELATED ARE TAKEN UP TOGETHER FOR THE DISPOSAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE SUBMISSIONS O F THE LD. COUNSEL FOR THE ASSESSEE ARE REPRODUCED AS UNDER: 'BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN ASSOCIATION REGISTERED UNDER RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) ACT, 2005 AND FORMED WITH THE OBJECTIVE OF PROMOTING THE SPORT OF CRICKET WITHIN THE STATE OF RAJASTHAN . RCA, UNDER A MEMORANDUM OF UNDERSTANDING WITH RAJASTHAN STATE COUNCIL HAS EXCLUSIVE USE AND POSSESSION OF SAWAI MANSINGH STADIUM FOR THE PURPOSES OF ORGANIZING NATIONAL AND INTERNATIONAL CRICKET MATCHES. THE MAIN OBJECT OF THE ASSOCIATION IS TO CONTROL, SUPERVISE, REGULATE OR ENCOURAGE, PROMOTE AND DEVELOP THE GAME OF CRICKET IN THE AREAS UNDER THE JURISDICTION OF ASSOCIATION ON NO PROFIT NO LOSS BASIS. ASSESSEE WAS HOLDING REGISTRATION U/S 12A W .E.F. 25.11.1988 AND THUS WAS CLAIMING EXEMPTION U/S 11. FOR THE YEAR RELEVANT TO APPEAL, ASSESSEE FILED RETURN OF INCOME ON 29.09.2008 DECLARING TOTAL INCOME AT NIL . CASE GOT SELECTED FOR SCRUTINY AND LD. AO COMPLETED THE ASSESSMENT U/S 143(3) WITHDRAWING EXEMPTION U/S 11 FOR THE REASON THAT HE OBSERVED CERTAIN AMENDMENTS WERE CARRIED OUT IN MEMORANDUM OF ASSOCIATION AND RULES OF ASSESSEE ASSOCIATION IN F.Y.1998 - 99 & LATER IN 2004 - 05, WHICH WERE NOT INTIMATED TO LD. CIT, THUS, REGISTRATION GRANTED ON THE B ASIS OF MEMORANDUM AND RULES AS THEY STOOD PRIOR TO AMENDMENT, DESERVED TO BE CANCELLED. ON THE BASIS OF INFORMATION OF LD. AO, LD. CIT WITHDREW REGISTRATION U/S 12A OF THE INCOME - TAX ACT, 1961 TO THE ASSESSEE FROM A.Y. 2005 - 06 AND ONWARDS. ALSO, LD. AO OB SERVED THAT ASSESSEE HAD EARNED SUBSTANTIAL INCOME IN THE SHAPE OF SUBSIDY FROM BCCI, ADVERTISEMENT INCOME, MEMBERSHIP FEES ETC . AND CONCLUDED THAT SINCE ASSESSEE WAS EARNING HUGE SURPLUS, THE SAME WAS NOT IN THE NATURE OF CHARITABLE PURPOSE AND RATHER IN THE NATURE OF BUSINESS. ACCORDINGLY, ASSESSMENT WAS COMPLETED BY LD. AO BY WITHDRAWING EXEMPTION U/S 11 AND THEREBY COMPUTING THE TOTAL INCOME OF ASSOCIATION AT RS. 4,07,58,510/ - CONSIDERING THE SAME AS AOP. AN APPEAL WAS FILED BEFORE LD. CIT(A) AGAINST AS SESSMENT ORDER, WHICH WAS DECIDED VIDE ORDER DATED 15.02.2012, UPHOLDING THE ORDER OF AO WITH RESPECT OF DENIAL OF EXEMPTION U/S 11,HOWEVER ISSUE WITH RESPECT TO REGISTRATION U/S 12A WAS NOT ADJUDICATED BY LD. CIT(A) AS THE MATTER OF WITHDRAWAL OF EXEMPTIO N WAS PENDING BEFORE ITAT. APPEAL FILED BEFORE HON'BLE ITAT AGAINST ORDER OF LD. CIT CANCELLING REGISTRATION, WAS DECIDED VIDE ORDER DATED 13.07.2012 IN ITA NO. 69/JP/2011, SETTING ASIDE THE ORDER WITHDRAWING REGISTRATION AND DIRECTING CIT TO DECIDE MATTER AFRESH. LD. CIT, VIDE ORDER 28.03.2013 AGAIN WITHDREW REGISTRATION U/S 12A PRIMARILY RELYING UPON OBSERVATIONS OF AO. ASSESSEE FILED APPEAL AGAINST ORDER OF CIT, PAGE 4 OF 18 WHICH WAS DECIDED BY HON'BLE ITAT VIDE ORDER DATED 09.06.2016. VIDE SAID ORDER, HON'BLE ITAT AT PAGE 16 PARA 5, DECIDED THE APPEAL IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 'WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEE WAS GRANTED REGISTRATION U /S 12A ON 25.11.1988, WHICH HAS BEEN WITHDRAWN TWICE BY THE LD. CIT. THE ISSUE HAS BEEN SET ASIDE BY THE COORDINATE BENCH TO RECONSIDER THE WITHDRAWN OF REGISTRATION, WHICH WAS ALSO CHALLENGED BY THE REVENUE BEFORE THE HON'BLE RAJASTHAN HIGH COURT, WHO HAS ALLOWED THE ASSESSEE'S PRAYER AND DIRECTED TO CONSIDER THE APPLICATION AFRESH WITHOUT INFLUENCING ANY OF THE OBSERVATION MADE BY THE APPELLATE AUTHORITY. THE ASSESSEE HAS BEEN PROVIDED REASONABLE OPPORTUNITY OF BEING HEARD BY THE LD. CIT. THE ASSESSEE TRU ST MADE IT CLEAR THAT THIS AMENDMENT IN OBJECT OF MEMORANDUM IN 2005 WAS DUE TO CHANGE MADE IN THE RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) ACT, 2005. THE AMENDED OBJECTS WERE NOT VOLUNTARY CHANGE. THE ASSESSEE HAS TO FOLL OW THE SAID LAWS RELATED TO SPORTS ACTIVITIES. THE COMPARISON GIVEN BY THE LD. CIT IN HIS ORDER DATED 28.03.2013 DOES NOT SHOW ANY FUNDAMENTAL DEVIATION FROM THE ORIGINAL CHARITABLE ACTIVITIES TO NON - CHARITABLE ACTIVITIES. THE ASSESSEE'S OBJECT TO PROMOTE THE CRICKET IN STATE BY PROVIDING / INVOLVING VARIOUS ACTIVITIES AT THE DISTRICT LEVEL TO STATE LEVEL THROUGH COACHING PROVIDED BY COACHES, GROUND AND FACILITIES ETC . THEREFORE, THE ASSESSEE'S ACTIVITIES ARE CHARITABLE. THE OTHER ACTIVITIES ARE INCIDENTAL OR CONDUCTIVE OF THE MAIN ACTIVITY. THE CASE LAWS REFERRED BY THE ASSESSEE PARTICULARLY THE HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF MOOL CHAND KHAIRATI TRUST ( SUPRA ) IS SQUARELY APPLICABLE AS THE ASSESSEE AMENDED THE PROVISIONS, DOES NOT CHANGE THE CHARACTER OF THE ASSESSEE FROM CHARITABLE TO NON - CHARITABLE OR COMMERCIAL. AT THE TIME OF REGISTRATION, THE LD. CIT HAS TO CONSIDER SECTION 12AA(3) AND HE HAS TO CONSIDER TWO CONDITIONS FOR REJECTION OF REGISTRATION GRANTED (I) THE ACTIVITIES OF THE TRUST ARE NOT GENUINE, (II) ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST AS THE CASE MAY BE. THE LD. CIT HAS NOT FOUND ANY INFIRMITY IN THE ACTIVITIES CA RRIED OUT BY THE RCA AS NON - GENUINE OR NOT BEING CARRIED OUT AS PER OBJECT OF THE TRUST. IT IS ALSO A FACT THAT THE GAME OF CRICKET BECOME VERY POTENTIAL WITH REFERENCE TO REVENUE COMPARED TO OTHER GAMES, THEREFORE, THE REVENUE GENERATED BY THE RCA ARE SUB STANTIAL BUT THIS GROUND CANNOT BE USED TO CANCEL THE REGISTRATION GRANTED BY THE LD. CIT AS PREDOMINANT OBJECT OF THE TRUST IS CHARITABLE AND SUBSTANTIAL REVENUE GENERATED IS INCIDENTAL TO THE MAIN OBJECT. IF, THE LD. ASSESSING OFFICER FOUND ANY VIOLATION IN APPLICATION OF FUND, HE CAN MAKE DISALLOWANCE U/S 11 OF THE ACT. THUS, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT WAS NOT RIGHT IN WITHDRAWING THE REGISTRATION GRANTED U/S 12A OF THE ACT. ACCORDINGLY, THE ASSESSEE'S APPEAL IS ALLOWED.' IN VIEW OF A BOVE, IT IS SUBMITTED THAT NOW SINCE THE REGISTRATION GRANTED U/S 12A HAS BEEN RESTORED PURSUANT TO ORDER DATED 09.07.2016 PASSED BY HON'BLE ITAT IN ITA NO. 544/JP82013 (APB 13 - 30), ASSESSEE IS ELIGIBLE TO CLAIM EXEMPTION U/S 11 SUBJECT TO THE FULFILMENT O F CONDITIONS PRESCRIBED THEREIN AND FURTHER IF THERE IS NO VIOLATION TO SECTION 13. ASSESSEE'S GROUND OF APPEAL NO. 1: NOT PRESSED. ASSESSEE'S GROUND OF APPEAL NOS. 2 TO 5 & 7: PAGE 5 OF 18 IN GROUNDS OF APPEAL NOS.2 TO 5, ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT (A) IN CONFIRMING THE ACTION OF LD. AO IN DENYING EXEMPTION U/S 11 AND ASSESSING THE ASSESSEE IN THE STATUS OF AOP BY APPLYING MAXIMUM MARGINAL RATE WHEREAS IN GROUND OF APPEAL NO.7 ASSESSEE HAS CHALLENGED THE ACTION OF AO IN DENYING EXEMPTION ON THE ALLEG ATION THAT ACTIVITIES OF ASSESSEE ARE BEING RUN ON COMMERCIAL BASIS. ALL THE GROUNDS BEING RELATED ARE BEING DEALT HEREWITH TOGETHER FOR THE SAKE OF CONVENIENCE: IN THIS REGARD, AT THE OUTSET IT IS SUBMITTED THAT ALL THE GROUNDS OF APPEAL RELATE TO DENIAL OF EXEMPTION U/S 11. FURTHER, FOR CLAIMING EXEMPTION U/S 11, PRECONDITIONS ARE THAT: ( I ) ASSESSEE HOLDS A VALID REGISTRATION U/S 12A ( II ) INCOME IS APPLIED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 AND ( III ) THERE IS NO VIOLATION IN TERMS WITH SECTION 13. IN THE INSTANT CASE, SO FAR AS REGISTRATION U/S 12A IS CONCERNED, THE SAME IS RESTORED BY HON'BLE ITAT, THUS ASSESSEE CAN CLAIM EXEMPTION U/S 11 SUBJECT TO THE FULFILMENT OF CONDITIONS PRESCRIBED U/S 11 R.W.S.13. SECTION 11 OF THE INCOME TAX ACT PROVIDES EXEMPTION IN RESPECT OF INCOME OF CHARITABLE OR RELIGIOUS TRUSTS IF THE SAME IS APPLIED TOWARDS THE OBJECTS OF THE TRUSTS. A SUMMARY OF PROVISIONS OF SECTION 11 IS AS UNDER: ( I ) IF INCOME IS 'APPLIED' TO CHARITA BLE/ RELIGIOUS PURPOSES IN INDIA (11(1)(A) &11(1)(B): TO THE EXTENT IT IS ACTUALLY APPLIED TO SUCH PURPOSES DURING THE FINANCIAL YEAR. EVEN COURTS HAVE HELD THAT IF THE EXPENDITURE IS ON CAPITAL ACCOUNT ON OBJECT(S) CONTAINED IN THE OBJECT CLAUSE, THE EXPENDITURE WILL AMOUNT TO APPLICATION OF INCOME. FURTHER, TO BE ELIGIBLE TO CLAIM EXEMPTION, AT LEAST 85 % OF INCOME HAS TO APPLIED TOWARDS CHARITABLE/ RELIGIOUS PURPOSES, HOWEVER CERTAIN RELAXATIONS ARE PROVIDED IN THE ACT. ( II ) INCOME APPLIED OUTSIDE INDIA 11(1)(C): IS EXEMPT PROVIDED SUCH APPLICATION OF IN COME PROMOTES INTERNATIONAL WELFARE IN WHICH INDIA IS INTERESTED SUBJECT TO PRIOR PAGE 6 OF 18 APPROVAL OF BOARD. ( III ) CORPUS DONATION 11(1)(D): I.E. VOLUNTARY CONTRIBUTIONS RECEIVED WITH SPECIFIC DIRECTION FROM THE DONOR THAT THEY SHALL FORM PART OF CORPUS. ( IV ) CAPITAL GAINS 11(1A): WILL BE DEEMED TO HAVE BEEN APPLIED TO CHARITABLE PURPOSES AND WILL BE EXEMPT TO THE EXTENT THEY ARE REINVESTED IN A NEW CAPITAL ASSET. ( V ) INCOME 'ACCUMULATED OR SET APART FOR APPLICATION': TO THE EXTENT OF 15% OF INCOME DERIVED DURING THE YEAR. SECTION 11(2) : PERMITS ACCUMULATION OF INCOME IN ADDITION TO 15% AS STATED ABOVE, FOR SPECIFIC PURPOSE (S). SUCH ACCUMULATION OR SETTING APART HAS TO BE FOR DEFINITE AND CONCRETE PURPOSES AND SHOULD NOT BE VAGUE. SECTION 11(3) PROVIDES C IRCUMSTANCES UNDER WHICH INCOME SET APART TO BE APPLIED IN FUTURE, I.E. SET APART U/S 11(2) SHALL BE DEEMED TO BE INCOME OF ASSESSEE, WHICH ARE PRIMARILY: ( I ) SUMS APPLIED FOR PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS PURPOSES ( II ) CEASES TO REMAIN INVESTED IN THE MODES SPECIFIED U/S 11(5) ( III ) NOT UTILIZED FOR THE PURPOSE FOR WHICH IT WAS ACCUMULATED OR SET APART ( IV ) IS CREDITED OR PAID TO ANY TRUST OR INSTITUTION REGISTERED U/S12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATION INSTITUTION OR HOSPITAL; OR OTHER MEDICAL INSTITUTION REFERRED TO IN SUB - CLAUSE (IV) OR SUB - CLAUSE (V) OR SUB - CLAUSE (VI) OR SUB - CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10. FURTHER, SECTION 13 PROVIDES CERTAIN CIRCUMSTANCES UNDER WHICH SE CTION 11 IS NOT APPLICABLE. THESE ARE: PAGE 7 OF 18 ( I ) ANY PART OF INCOME FROM PROPERTY HELD UNDER TRUST FOR PRIVATE RELIGIOUS PURPOSES, WHICH DOES NOT RESULT INTO BENEFIT OF THE PUBLIC. ( II ) ANY INCOME OF TRUST OR INSTITUTION CREATED OR ESTABLISHED FOR THE BENE FIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. ( III ) IF ANY PART OF INCOME DIRECTLY/ INDIRECTLY BENEFITS AUTHOR/ FOUNDER/ TRUSTEE/ MANAGER OR SUCH OTHER PERSON SPECIFIED U/S 13(3) ( IV ) FUNDS REMAIN INVESTED IN MODES OTHER THAN 11(5) ( V ) INCOME OF CHARITABLE INSTITUTION ENGAGED IN THE ADVANCEMENT OF 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' IF IT INVOLVES CARRYING ON OF ANY TRADE, COMMERCE OR BUSINESS ACTIVITY. APART FROM ABOVE, THE MOST RELEVANT PROVISION IS SECTION 2(15), WHEREIN TH E WORD 'CHARITABLE PURPOSE' IS DEFINED AS TO INCLUDE: ( A ) RELIEF OF THE POOR, ( B ) EDUCATION, ( C ) MEDICAL RELIEF, AND ( D ) ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. HOWEVER, WITH EFFECT FROM 01.04.2009 (I.E., FROM ASSESSMENT YEAR 2009 - 10 ONWARDS), SECTION 2(15) HAS BEEN AMENDED TO THE EXTENT THAT, THE 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' SHALL NOT QUALIFY AS A 'CHARITABLE PURPOSE' IF THE SAME INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, C OMMERCE OR BUSINESS, OR RENDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CONSIDERATION. NOW COMING TO THE MERITS OF THE CASE, AT THE OUTSET, BRIEF BACKGROUND OF ASSESSEE ASSOCIATION IS SUBMITTED AS UNDER: RAJASTHAN CRICKET ASS OCIATION (RCA) IS DULY REGISTERED UNDER THE PROVISION OF RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) ACT, 2005. THE ASSOCIATION WAS FORMED SOLELY WITH THE OBJECTIVE OF PROMOTING PAGE 8 OF 18 THE SPORT OF CRICKET WITHIN THE STATE OF RAJAST HAN . THE STATE GOVERNMENT THROUGH THIS LAW REGULATES, RECOGNIZES AND FACILITATES SPORT ACTIVITIES IN THE STATE. RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) RULES, 2004, VIDE RULE 6(1) NECESSARILY REQUIRED THE EXISTING SPORT ASSOCIATIONS TO AMEND THEIR CONSTITUTION TO BRING THE SAME IN CONFORMITY WITH THE ORDINANCE (ACT). A REGISTRATION UNDER THE ACT WAS ALSO MADE MANDATORY AND ACCORDINGLY, RCA WAS ALSO GRANTED REGISTRATION VI DE REGISTRAR CO - OPERATIVE SOCIETIES DATED 27.04.2005 AT KRI. SAN. / RAJYA / 020/2005 (APB 75 - 75A). STRINGENT PROVISIONS FOR ENQUIRY AND WITHDRAWAL OF REGISTRATION ARE AVAILABLE IN THE ACT. THUS, THE SPORT ASSOCIATIONS INCLUDING THE RCA ARE UNDER DIRECT CON TROL AND SUPERVISION OF THE REGISTRAR UNDER THIS ACT. THUS, BEING ENGAGED IN THE PROMOTION OF SPORT OF CRICKET , ASSESSEE IS CARRYING ON CHARITABLE ACTIVITY IN THE NATURE OF 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' AND WAS CLAIMING AND BE ING ALLOWED EXEMPTION UNDER SAID CATEGORY. HOWEVER, FOR THE YEAR UNDER CONSIDERATION, LD. AO HAS DENIED EXEMPTION HOLDING THAT ACTIVITIES ARE BEING CARRIED ON COMMERCIAL BASIS. IN THIS REGARD, AT THE OUTSET, IT IS HUMBLY SUBMITTED THAT THE AMENDMENT IN SEC TION 2(15), PURSUANT TO WHICH AO HAS WITHDRAWN STATUS OF ASSESSEE AS 'CHARITABLE' WAS CARRIED OUT VIDE FINANCE ACT,2010, W.R.E.F.1.04.2009, THUS SAID PROVISIONS WOULD NOT APPLY IN THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, PRIOR TO AMENDMENT, EXEMPTION UNDER SECTION 11 WAS ELIGIBLE IN RESPECT OF CHARITABLE INSTITUTIONS ENGAGED IN 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' EVEN IF ACTIVITIES RESULT INTO PROFITS INCIDENTALLY PROVIDED THAT SUCH INCOME IS APPLIED IN ACCORDANCE WITH THE PROVI SIONS OF SECTION11. FURTHER, THERE NO ALLEGATION REGARDING VIOLATION AS PER SECTION13, THUS WITHDRAWAL OF EXEMPTION ON THE GROUNDS OF COMMERCIALITY FOR THE YEAR UNDER CONSIDERATION IS BAD IN LAW. IT IS THUS PRAYED THAT EXEMPTION CLAIMED BY ASSESSEE MAY PLE ASE BE ALLOWED. HOWEVER, WITHOUT PREJUDICE TO THIS, OUR SUBMISSION ON MERITS IS AS UNDER: LD. AO BY OBSERVING HUGE SURPLUS CONCLUDED THAT ACTIVITIES OF THE ASSESSEE WERE PROFIT ORIENTED AND ASSESSEE WAS CARRYING ITS ACTIVITIES ON COMMERCIAL BASIS. IT IS NO TEWORTHY HERE THAT THE TERM 'ANY OTHER ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS' IS NOT DEFINED AND THUS THE SAME HAS TO BE UNDERSTOOD IN COMMON PARLANCE, AND ACCORDINGLY EXPRESSION TRADE, COMMERCE OR BUSINESS HAS TO BE UNDERSTOOD AS A REGULAR AND SYSTEMATIC ACTIVITY WITH THE PRIMARY MOTIVE TO EARN PROFIT, WHEREAS THE ASSOCIATION NEVER ACTED AS A PROFESSIONAL ADVERTISER, TV PRODUCER ETC . NO MATCHES OF ANY GAME OTHER THAN CRICKET OR NO OTHER EVENTS ARE ORGANIZED TO ATTRACT AUDIENCE RATHER ONLY C RICKET MATCHES ARE BEING ORGANIZED WHETHER THE SAME RESULT INTO PROFIT OR LOSS. FURTHER, ALL THE CRICKET MATCHES DO NOT ATTRACT AUDIENCE, E.G. MATCHES BETWEEN INDIA V. SOUTH AFRICA AND INDIA V. NEW - ZEALAND COULD NOT EVEN REACH UPTO 70 - 80% OF THE COLLECTION . HOWEVER, DURING THE YEAR UNDER CONSIDERATION, ASSESSEE ORGANIZED ODI MATCH BETWEEN INDIA V. PAKISTAN FROM WHICH SUBSTANTIAL SURPLUS WAS EARNED. YOUR HONOURS WOULD APPRECIATE THE POPULARITY OF INDIA PAKISTAN MATCHES. HON'BLE MADRAS HIGH COURT IN THE CASE OF TAMILNADU CRICKET ASSOCIATION HAS HELD THAT VOLUME SHOULD NOT BE THE SOLE CONSIDERATION TO DECIDE THE ACTIVITY OF THE SOCIETY RATHER THE NATURE OF ACTIVITY VIS - A - VIS THE PREDOMINANT OBJECT IS TO BE SEEN WHICH IN OUR CASE IS CHARITABLE IN NATURE. FURTHER , BEING REGISTERED UNDER RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) ACT, 2005, ASSESSEE IS AUTHORIZED AS WELL AS PAGE 9 OF 18 WELL EQUIPPED FOR ORGANIZING ALL THE CRICKET MATCHES TAKING PLACE IN THE STATE OF RAJASTHAN . AT THIS JUNCTURE, IT WOULD BE PERTINENT TO STATE THAT ALL THE PAYMENTS IN THE SHAPE OF SPONSORSHIP, ADVERTISEMENT, T.V. RIGHTS ETC . ARE RECEIVED DIRECTLY BY BCCI. FURTHER, BCCI DELEGATES THE ORGANIZATION OF MATCHES TO STATE ASSOCIATION AND IN TURN STATE ASSOCIATION GETS SOM E FUNDS FOR PROMOTION AND EXPANSION OF THEIR CHARITABLE ACTIVITIES. APART FROM THIS, MAJOR BENEFIT BY ORGANIZING THESE MATCHES IS THAT LOCAL TEAMS, BEING TRAINED BY RCA, GET OPPORTUNITY TO LEARN FROM EXPERIENCE OF COACHES OF INTERNATIONAL LEVEL BY ASSISTIN G THEM DURING PRACTICE MATCHES AND BY WITNESSING THE MATCHES PLAYED BY INTERNATIONAL PLAYERS, BY SPENDING TIME WITH THEM ETC . YOUR HONOUR WOULD APPRECIATE THAT IT IS NOT POSSIBLE TO TAKE THE ENTIRE TEAM TO LOCATIONS WHERE MATCHES ARE BEING PLAYED. SO, ULTI MATELY, ORGNISING SUCH MATCHES RESULTS INTO PROMOTION OF SPORT OF CRICKET AND SURPLUS IF ANY GENERATED, IS PURELY INCIDENTAL IN NATURE AND ASSESSEE CANNOT BE DEEMED TO CARRY OUT 'ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS.' ALSO, ASSOCIATION HAS BEEN ORGANIZING MATCHES EVEN IN THE REMOTE AREAS IN RAJASTHAN E.G. BARMER, DUNGARPUR, HANUMANGARH, RAJSAMAND ETC ., WHERE THERE IS DIRTH OF AUDIENCE AND ASSOCIATION HAS TO ESSENTIALLY INCUR LOSSES. FURTHER, THE ALLEGATION OF THE AO FOR HOLDING THE ACTIVITI ES OF ASSOCIATION AS COMMERCIAL WAS SOLELY BASED ON THE CONSIDERATION THAT THE APPELLANT SOCIETY HAD ACCUMULATION OF SURPLUS, INCREASE IN THE INVESTMENTS, CONTROL OVER THE PLAYERS HOWEVER HE TOTALLY FAILED TO APPRECIATE THAT NORMALLY THE SURPLUS WAS THE RE SULT OF SUBSIDIES ONLY AND NOT FROM THE CONDUCTING OF TOURNAMENTS ON COMMERCIAL BASIS. IT IS PERTINENT TO NOTE HERE THAT SUBSIDIES ARE A FORM OF FINANCIAL AID GRANTED FOR PROMOTING A SPECIFIC CAUSE, WHICH IS ULTIMATELY FOR THE BENEFIT OF OVERALL OR A SECTI ON OF PUBLIC BUT NEVER FOR THE BENEFIT OF AN INDIVIDUAL ORGANIZATION. THE SUBSIDY RECEIVED WAS UTILIZED IN THE PROMOTION AND DEVELOPMENT OF SPORT OF CRICKET IN STATE AT EACH LEVEL, I.E. FROM MUFASILS AREAS TO BIG CITIES LIKE JAIPUR. ALSO, RENTING OUT PREMI SES BY RCA HAS BEEN VIEWED ADVERSELY FOR WHICH IT IS RESPECTFULLY SUBMITTED THAT RCA HAS BEEN FORMED WITH A SOLE OBJECTIVE OF PROMOTING CRICKET AND WITH THE VIEW TO ACHIEVE THE DESIRED OBJECTIVE THE RESTING OF PREMISES AS DONE IS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF CRICKET AND NO OTHER ACTIVITY OF WHATSOEVER NATURE HAS BEEN CARRIED OUT AND NEITHER IT IS ENGAGED IN THE SYSTEMATIC ACTIVITY AS HOTELIER, THUS THE SAID ACT OF ASSOCIATION IS FULLY IN THE DIRECTION OF ACHIEVING ITS BASIC OBJECT OF PROMOTING CRICKET AND CANNOT BE VIEWED ADVERSELY. IT IS ALSO TO BE NOTED THAT RCA IS RUN BY A COMMITTEE, WHICH CONSISTS OF MEMBERS FROM DIFFERENT WALKS OF THE SOCIETY AND SUCH MEMBERS ARE NOT PROFESSIONAL MANAGERS OR BUSINESSMEN. AGREEMENT WITH THE PLAYERS IS ONLY T O CONTROL AND MONITOR THEIR ACTIVITIES TO BRING THE SAME IN ACCORDANCE WITH THE OBJECTS. RCA IS PROVIDING TECHNICAL AND FINANCIAL SUPPORT TO THE ALL DCAS (DISTRICT CRICKET ASSOCIATION) I.E. PROVIDING EQUIPMENTS, NETS, BALLS, ETC. WITHOUT ANY CONSIDERATION ON OTHER SIDE RCA IS GETTING ONLY AFFILIATION FEE FROM THEM WHICH IS VERY NOMINAL (RS. 200/ - ONLY). IT IS PERTINENT TO NOTE THAT THE RCA HAS PROVIDED GRANTS TO DISTRICTS OF A SUBSTANTIAL AMOUNT RS. 39,20,763/ - (APB 5) I.E . RS. 5, 69,763/ - ON CRICKET EQUIPMENT TO DCA, INFRASTRUCTURE DEVELOPMENT IN DISTRICTS AND RS. 32,00,000/ - ON SUBSIDY TO DISTRICTS (APB 14). PAGE 10 OF 18 ALSO, RCA IS ORGANIZING VARIOUS MATCHES OF NATIONAL LEVEL TOURNAMENTS LIKE RANJI TROPHY, IRANI TROPHY, DILIP TROPHY, MAHARAN A BHAGWAT SINGH TROPHY, SALIM DURRANI TROPHY, LAXMAN SINGH DUNGARPUR TROPHY, SURYAVEER SINGH TROPHY, U - 14, U - 15, U - 19, U - 22, ETC. WITHOUT HAVING ANY SURPLUS RATHER THESE WERE ORGANIZED FOR THE DEVELOPMENT OF GAME OF CRICKET AT NATIONAL LEVEL AND TO IDENTIFY THE PLAYERS WHO CAN REPRESENT THE COUNTRY AT INTERNATIONAL LEVEL. (IN THE YEAR 2007 - 08 RCA HAS MADE EXPENDITURE OVER RS. 1.12 CRORES). RCA IS UTILIZING A LARGE AMOUNT IN TRAINING AND COACHING CAMP FOR WHICH NO FEE IS CHAR GED FROM THE PARTICIPANTS. FOR THE YEAR UNDER CONSIDERATION A SUM OF RS. 1,92,41,152/ - WAS INCURRED TOWARDS RCA CRICKET ACADEMY EXPENSES. BESIDES THIS, THE ASSESSEE HAD ORGAINSED VARIOUS CHAMPIONSHIP AT VARIOUS INTERIOR PLACES OF RAJASTHAN I.E. BANSWARA, D UNGARPUR, BARMER, SIROHI, RAJSAMAND, DAUSA, BUNDI, KOTA ETC . IN ORDER TO PROVIDE OPPORTUNITY TO CREATE COMPETITIVE ENVIRONMENT FOR THE TALENTED YOUTH, ON WHICH IT SPENT MORE THAN RS. 5.00 CRORES IN THE LAST FIVE YEARS WITHOUT ANY PROFIT MOTIVE WITH THE SOL E INTENTION TO PROMOTE THE GAME OF CRICKET . IN THE MATCH HELD ON 21.12.2010 BETWEEN INDIA V. SA, RCA SUFFERED DEFICIT OVER RS. 1.6 CRORE (RECEIPTS FROM IN STADIA RIGHT RS. 1.70 CRORES + SALE OF TICKET RS. 1.2 CRORES BUT EXPENDITURES RS. 4.15 CRORES). THE R CA HAS ALSO INCURRED VARIOUS OTHER EXPENSES WITH A VIEW TO PROMOTE THE GAME OF CRICKET VIZ. ON COACHING CAMPS OF RS. 21,45,550/ - , STATE CRICKET ACTIVITIES OF RS. 1,11,90,375/ - , GROUND EXPENSES OF RS. 28,89,930/ - AND INTERNATIONAL TOURNAMENT EXPENSES OF RS. 9,02,441/ - .(APB - 4 & 5 ) ABOVE, DATA CLEARLY REVEALS THAT SURPLUS, IF ANY GENERATED BY ASSESSEE WAS MERELY INCIDENTAL TO THE MAIN OBJECT, I.E. PROMOTION OF SPORT OF CRICKET AND IN NO WAY BY RUNNING 'BUSINESS OF CRICKET ' AS HAS BEEN ALLEGED BY AO. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO RESORT TO THE DECISION OF DELHI HIGH COURT IN THE CASE OF THE INSTITUE OF CHARTERED ... V. THE DIRECTOR GENERAL OF INCOME TAX ... ON 4 JULY, 2013 DEFINING THE TERM 'BUSINESS' IN RELATION TO CHARITABLE INSTITUTIONS, POST TH E AMENDMENT CARRIED OUT IN SECTION 2(15) RELEVANT EXTRACTS OF WHICH ARE AS UNDER: 57. AFTER DISCUSSING VARIOUS DECISIONS WITH REGARD TO THE SCOPE OF THE WORDS TRADE, COMMERCE & BUSINESS, THIS COURT IN THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA V. DIREC TOR GENERAL OF INCOME - TAX (EXEMPTION) (SUPRA) HELD THAT WHILE CONSTRUING THE TERM BUSINESS FOR THE PURPOSE OF SECTION 2(15) OF THE ACT THE OBJECT AND PURPOSE OF THE SECTION MUST BE KEPT IN MIND AND A BROAD AND EXTENDED DEFINITION OF BUSINESS WOULD NOT BE A PPLICABLE FOR THE PURPOSE OF INTERPRETING AND APPLYING THE FIRST PROVISO TO SECTION 2(15) OF THE ACT. THE RELEVANT EXTRACT OF THE SAID JUDGMENT IS AS UNDER: - 'SECTION 2(15) DEFINES THE TERM 'CHARITABLE PURPOSE'. THEREFORE, WHILE CONSTRUING THE TERM 'BUSINE SS' FOR THE SAID SECTION, THE OBJECT AND PURPOSE OF THE SECTION HAS TO BE KEPT IN MIND. WE DO NOT THINK THAT A VERY BROAD AND EXTENDED DEFINITION OF THE TERM 'BUSINESS' IS INTENDED FOR THE PURPOSE OF INTERPRETING AND APPLYING THE FIRST PROVISO TO SECTION 2 (15) OF THE ACT TO INCLUDE ANY TRANSACTION FOR A FEE OR MONEY. AN ACTIVITY WOULD BE CONSIDERED 'BUSINESS' IF IT IS UNDERTAKEN WITH A PROFIT MOTIVE, BUT IN SOME CASES THIS MAY NOT BE DETERMINATIVE. NORMALLY, THE PROFIT MOTIVE TEST SHOULD BE SATISFIED BUT IN A GIVEN CASE ACTIVITY MAY BE REGARDED AS BUSINESS EVEN WHEN PROFIT MOTIVE CANNOT BE ESTABLISHED/ PROVED. IN SUCH CASES, THERE SHOULD BE EVIDENCE AND MATERIAL TO SHOW THAT THE ACTIVITY HAS CONTINUED ON SOUND AND RECOGNIZED BUSINESS PRINCIPLES, AND PURSUED WITH REASONABLE CONTINUITY. THERE SHOULD BE PAGE 11 OF 18 FACTS AND OTHER CIRCUMSTANCES WHICH JUSTIFY AND SHOW THAT THE ACTIVITY UNDERTAKEN IS IN FACT IN THE NATURE OF BUSINESS. THE TEST AS PRESCRIBED IN RAIPUR MANUFACTURING COMPANY [1967] 19 STC 1 (SC) AND SAI PUBLICAT ION FUND [2002] 258 ITR 70 (SC) ; [2002] 126 STC 288 (SC) CAN BE APPLIED. THE SIX INDICIA STIPULATED IN LORD FISHER [1981] STC 238 ARE ALSO RELEVANT. EACH CASE, THEREFORE, HAS TO BE EXAMINED ON ITS OWN FACTS.' 58. IN THE CASE OF COMMISSIONER OF SALES TAX V. SAI PUBLICATION FUND: [2002] 258 ITR 70 (SC) , THE SUPREME COURT WHILE INTERPRETING THE WORD 'BUSINESS' IN THE CONTEXT OF SECTION 2(5A) OF THE BOMBAY SALES TAX ACT, 1959 HELD THAT THE INCLUSION OF INCIDENTAL OR ANCILLARY ACTIVITY IN THE DEFINITION OF BUSINESS PRESUPPOSES THE EXISTENCE OF TRADE, COMMERCE AND BUSINESS. THUS, IF THE DOMINAN T ACTIVITY OF THE ASSESSEE WAS NOT BUSINESS THEN ANY INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE DEFINITION OF BUSINESS. IN THAT CASE, THE SUPREME COURT WAS EXAMINING THE ISSUE WHETHER THE ACTIVITY OF THE TRUST IN BRINGING OUT AND SELLI NG A PUBLICATION TO SPREAD THE MESSAGE OF SAI BABA WOULD MAKE THE ASSESSEE TRUST A DEALER. THE SUPREME COURT ALSO REFERRED TO VARIOUS OTHER DECISIONS WHEREIN IT WAS HELD THAT IF THE PRINCIPAL OBJECT OR PURPOSE OF AN ASSESSEE WAS NOT BUSINESS THEN AN INCIDE NTAL ACTIVITY WOULD ALSO NOT BE EXIGIBLE TO SALES TAX AND CONSTITUTE THE ASSESSEE AS A DEALER. IN THE CASE OF STATE OF GUJARAT V. RAIPUR MANUFACTURING CO. LTD.: (1967) 19 STC 1 (SC), THE SUPREME COURT HELD THAT IN ORDER FOR ANY ACTIVITY TO BE CONSIDERED AS BUSINESS, THERE MUST BE A COURSE OF DEALINGS EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH THE MOTIVE TO EARN PROFIT AND NOT FOR SPORT OR PLEASURE. 67. THE EXPRESSIONS 'TRADE', 'COMMERCE' AND 'BUSINESS' AS OCCURRING IN THE FIRST PROVISO TO SECTION (15) OF THE ACT MUST BE READ IN THE CONTEXT OF THE INTENT AND PURPORT OF SECTION 2(15) OF THE ACT AND CANNOT BE INTERPRETED TO MEAN ANY ACTIVITY WHICH IS CARRIED ON IN AN ORGANISED MANNER . THE PURPOSE AND THE DOMINANT OBJECT FOR WHICH AN INSTITU TION CARRIES ON ITS ACTIVITIES IS MATERIAL TO DETERMINE WHETHER THE SAME IS BUSINESS OR NOT . THE PURPORT OF THE FIRST PROVISO TO SECTION 2(15) OF THE ACT IS NOT TO EXCLUDE ENTITIES WHICH ARE ESSENTIALLY FOR CHARITABLE PURPOSE BUT ARE CONDUCTING SOME ACTIVI TIES FOR A CONSIDERATION OR A FEE. THE OBJECT OF INTRODUCING THE FIRST PROVISO IS TO EXCLUDE ORGANIZATIONS WHICH ARE CARRYING ON REGULAR BUSINESS FROM THE SCOPE OF 'CHARITABLE PURPOSE'. THE PURPOSE OF INTRODUCING THE PROVISO TO SECTION 2(15) OF THE ACT CAN BE UNDERSTOOD FROM THE BUDGET SPEECH OF THE FINANCE MINISTER WHILE INTRODUCING THE FINANCE BILL 2008. THE RELEVANT EXTRACT TO THE SPEECH IS AS UNDER: ' 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GE NERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGHT TO CLAIM T HAT THEIR PURPOSES WOULD ALSO FALL UNDER 'CHARITABLE PURPOSE'. OBVIOUSLY, THIS WAS NOT THE INTENTION OF PARLIAMENT AND, HENCE, I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED.' THE EXPRESSIONS 'BUSINESS', 'TRADE' OR 'COMMERCE' AS USED IN THE FIRST PROVISO MUST, THUS, BE INTERPRETED RESTRICTIVELY AND WHERE THE DOMINANT OBJECT OF AN ORGANISATION IS CHARITABLE ANY INCIDENTAL ACTIVITY FOR FURTHERANCE OF THE OBJECT WOULD NOT FALL WITHIN THE EXPRESSIONS ' BUSINESS', 'TRADE' OR 'COMMERCE'. PAGE 12 OF 18 77. AFTER GOING THROUGH THE PROVISIONS OF THE ICAI ACT AND THE REGULATIONS FRAMED THEREIN AS WELL AS VARIOUS ACTIVITIES CARRIED ON BY THE PETITIONER, WE ARE OF THE VIEW THAT THE PETITIONER INSTITUTE DOES NOT CARRY ON ANY BUSINESS, TRADE OR COMMERCE. THE ACTIVITY OF IMPARTING EDUCATION IN THE FIELD OF ACCOUNTANCY AND CONDUCTING COURSES BOTH AT PRE - QUALIFICATION AS WELL AS POST - QUALIFICATION LEVEL ARE ACTIVITIES IN FURTHERANCE OF THE OBJECTS FOR WHICH THE P ETITIONER HAS BEEN CONSTITUTED. ACTIVITIES OF PROVIDING COACHING CLASSES OR UNDERTAKING CAMPUS PLACEMENT INTERVIEWS FOR A FEE ARE IN RELATION TO THE MAIN OBJECT OF THE PETITIONER WHICH AS STATED EARLIER CANNOT BE HELD TO BE TRADE, BUSINESS OR COMMERCE. ACC ORDINGLY, EVEN THOUGH FEES ARE CHARGED BY THE PETITIONER INSTITUTE FOR PROVIDING COACHING CLASSES AND FOR HOLDING INTERVIEWS WITH RESPECT TO CAMPUS PLACEMENT, THE SAID ACTIVITIES CANNOT BE STATED TO BE RENDERING SERVICE IN RELATION TO ANY TRADE, COMMERCE O R BUSINESS AS SUCH ACTIVITIES ARE UNDERTAKEN BY THE PETITIONER INSTITUTE IN FURTHERANCE OF ITS MAIN OBJECT WHICH AS HELD EARLIER ARE NOT TRADE, COMMERCE OR BUSINESS. A PERUSAL OF ABOVE CLARIFIES THAT SO FAR AS PREDOMINANT OBJECT OF INSTITUTION IS 'CHARITAB LE', ANY INCIDENTAL ACTIVITY THERETO RESULTING INTO PROFITS WOULD NOT IPSO FACTO RESULT INTO DENIAL OF EXEMPTION U/S 11. FURTHER HON'BLE MADRAS HIGH COURT IN THE CASE OF TAMIL NADU CRICKET ASSOCIATION V. THE DIRECTOR OF INCOME TAX, WHEREIN REFERENCE HAS BE EN MADE TO CIRCULAR NO.11 OF 2008 OF CBDT DATED 19.12.2008, HELD THAT QUESTION OF REJECTION OF REGISTRATION UNDER SECTION 12AA(3) WOULD ARISE ONLY IN THOSE CASES WHERE AN ENTITY USES THIS STATUS OF CHARITABLE WITH A CHARITABLE OBJECT OF GENERAL PUBLIC UTIL ITY AS A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE AND THAT OBJECT IS NOTHING OTHER THAN TRADE, COMMERCE OR BUSINESS. THUS REVENUE HAS TO SUBSTANTIATE ABSENCE OF GENUINENESS. MERE CONDUCTING MATCHES OR EARNING INCOME FROM INCIDENTAL ACTIVITIES WOULD NOT EN TAIL CANCELLATION OF REGISTRATION. HON'BLE DELHI BENCH OF ITAT IN THE CASE OF DELHI & DISTRICT CRICKET ASSOCIATION V. DIT(E) HAS OBSERVED AS UNDER: (RELEVANT EXTRACTS) 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 DEPTT. AS A CHARITABLE ACTIVITY AND REGISTRATION U/S 12A WAS GRANTED TO THE ASSESSEE. A NU MBER 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 UND ISPUTEDLY, 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 T HAT 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 PAGE 13 OF 18 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 BUSIN ESS'. 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 CO URT 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 WIT H 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 SUBSI DY, THERE WAS A SHORTFALL 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 O F 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 PAGE 14 OF 18 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 PERSO NS 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 T HE 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 CARR YING 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 SINE 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 ). 11.3. ON THE ISSUE OF SALE OF LIQUOR, IT WAS SUBMITTED THAT INITIALLY DDCA WAS FORMED AS A CLUB TO TAKE OVER THE ASSETS AND LIABI LITIES 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. I N 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. I T 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 TH IS 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 AC TIVITY OF PROVIDING FOOD AND REFRESHMENTS ITA NO. 3095/DEL/2012 DELHI & DISTRICT CRICKET ASSOCIATION, NEW DELHI TO MEMBERS AND ASSOCIATED PERSONS. RUNNING OF A CANTEEN IS AN INCIDENTAL AND NECESSARY ACTIVITY AS IS IN EVERY ORGANIZATION. THIS CANNOT BE TERM ED AS BUSINESS ACTIVITY. IT IS PART AND PARCEL OF THE CHARITABLE ACTIVITY AND THE RECEIPT PAGE 15 OF 18 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 E XPLANATION 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 ASSES SEE 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 TH AT 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 A ND 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 FOL LOWS. '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 T HE 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 GAM E 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. THE AMOUNT HAS BEEN RECEIVED AS THE VOLU NTARY CONTRIBUTION ON DISCRETION OF THE CONTRIBUTOR (FOR E.G. BCCI). THESE HAVE BEEN RECEIVED FOR RAISING THE FUNDS FOR MEETING ITS COSTS AND EXPENSES. 4. IN NONE OF THE CASES THERE IS ANY QUID PRO QUO . THE ULTIMATE BENEFICIARY IS EITHER THE CRICKETER OR T HE GAME OF THE CRICKET. 5. 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. 6. 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 HA S NOT ENTERED ANY TRANSACTION WITH ANY PERSON ON PROFIT MOTIVE. THE OTHER PERSON MAY BE AN ENTREPRENEUR OR MAY BE DOING PAGE 16 OF 18 BUSINESS BUT THE ASSESSEE HAS ENTERED THE TRANSACTION ONLY FOR THE SOLE AND DEDICATED PURPOSE I.E. FOR THE PROMOTION OF CRICKET. 8. THES E 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 OUT SIDE ITS OBJECTS AND (D) THERE IS NO CHANGE IN FACTS SO AS TO DEVIATE FROM THE STAND TAKEN BY LD. AO 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 CONT ROL 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 SUBMISSION S 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 MINIS CULE 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 AR E 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. ALL THE RECEIPTS OF THE ASSESSEE AR E 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 ASSE SSEE. 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 BI NDING JUDGMENTS 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. DDIT V. ALL INDIA FOOTBALL FEDERATION [2015] 62 TAXMANN.COM 362 (DELHI - TRIB.) . S. 2(15) ACTIVITY OF SOCIETY TO PROMOTE FOOTBALL THE MAIN OBJECTIVE OF THE ASSESSEE WAS TO PROMOTE THE GAME OF FOOTBALL IN INDIA WHICH CERTAINLY AMOUNTS TO CHARITABLE PURPOSE, BEING COVERED UNDER THE LIMB 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' AS CONTAINED IN SECTION 2(15). THE RECEIPT OF FEES FROM THE SPONSORSHIP RIGHTS AND TELECASTING RIGHTS DO NOT AMOUNT TO CARRYING OUT OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS BUT IS INCIDENTAL TO CARRYING ON OF THE MAIN OBJECTIVE OF THE RESPONDENT ASSESSEE. IT WAS FURTHER OBSERVED THAT NO PART OF ITS SURPLUS PAGE 17 OF 18 COULD BE DISTRIBUTED TO THE BOARD OF ITS MEMBERS IN THE FORM OF DIVIDEND OR PROFIT. THE MERE FACT THAT THE APPE LLANT SOCIETY HAD GENERATED SPONSORSHIP FUNDS, DURING THE COURSE OF CARRYING ON THE ANCILLARY OBJECTS, SHALL NOT ALTER THE CHARACTER OF THE MAIN OBJECTS SO LONG AS THE PREDOMINANT OBJECT CONTINUES TO BE CHARITABLE AND NOT TO EARN THE PROFIT. FURTHER THE PR OVISO TO SECTION 2(15) OF THE ACT CANNOT BE APPLIED TO THE APPELLANT SOCIETY AS IT IS NOT ENGAGED IN ANY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. THEREFORE, THE SOCIETY HAS TO BE NECESSARILY CONSIDERED A GENUINE CHARITABLE ORGANIZAT ION ELIGIBLE TO CLAIM EXEMPTION U/SS. 11 & 12 OF THE ACT AND THE PROVISIONS OF THE FIRST PROVISO TO SECTION 2(15) DO NOT APPLY TO THE CASE OF THE APPELLANT. COMING TO THE FACTS OF THE CASE, AS SUBMITTED EARLIER RCA WAS SET UP UNDER STATUTE ONLY FOR THE PRO MOTION OF THE SPORTS AND IN PARTICULAR CRICKET AND HAD IT BEEN NOT CARRYING OUT ACTIVITIES IN ACCORDANCE WITH ITS OBJECTS, REGISTRATION COULD HAVE BEEN WITHDRAWN. CHAPTER V OF RAJASTHAN SPORTS (REGISTRATION, RECOGNITION AND REGULATION OF ASSOCIATION) ACT, 2005 CONTAINS PROVISIONS REGARDING ACCOUNTS, AUDIT AND INSPECTION OF BOOKS OF ACCOUNT OF SPORTS ASSOCIATION REGISTERED UNDER SAID ACT, WHEREAS CHAPTER VI THEREOF CONTAINS SPECIFIC PROVISIONS REGARDING 'DISAFFILIATION, INQUIRY AND DISQUALIFICATION'. IN OTHE R WORDS, RCA IS NOT AN INDEPENDENT PRIVATE ORGANIZATION, WHICH CAN CARRY OUT ACTIVITIES AS PER CONVENIENCE OF ITS OFFICIALS, RATHER IT WORKS UNDER STRICT REGULATIONS AND THUS ANY DEVIATION FROM PRIMARY OBJECTIVE OF PROMOTION OF SPORT OF CRICKET MAY COST DI SAFFILIATION/ DISQUALIFICATION TO THE ASSOCIATION. THUS, IN THE ABSENCE OF ANY ADVERSE FINDING BY THE CONCERNED AUTHORITY, CONCLUSION DRAWN THAT RCA WAS BEING RUN ON COMMERCIAL BASIS DOES NOT HAVE BASIS. IN VIEW OF ABOVE, IT IS PRAYED THAT ACTIVITIES OF AS SESSEE ARE COMPLETELY FOR THE PURPOSE OF ATTAINMENT OF ITS OBJECTIVE OF PROMOTING CRICKET AND IN NO WAY BEING RUN ON COMMERCIAL LINES. IT IS THEREFORE PRAYED THAT EXEMPTION U/S 11 MAY BE ALLOWED TO ASSESSEE. 8. IN VIEW OF THE ABOUT DECISION OF THE COORDINATE BENCH WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT A, IN ALLOWING EXEMPTION TO THE ASSESSEE TRUST UNDER SECTION 11 AND 12 OF THE INCOME TAX ACT. 9. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN COURT ON 2 1 / 08 / 2017 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 / 0 8 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) PAGE 18 OF 18 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI