DCIT, Trivandrum V. M/s.Kerala Cricket Association, Trivandrum

ITA 78/COCH/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5472 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 30-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANTHAM BOSE
• Assessee Lawyers: ANNAMALAI CAS
• Keywords: Business income; Charitable institution; Source of fund; Reasonable cause; Benefit of exemption; Condonation of delay; Capital expenditure
• Section: 143(3); 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I.T.A. NO.78/COCH/20 15 ASSESSMENT YEAR : 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME-TAX, EXEMPTION CIRCLE, TRIVANDRUM. VS. M/S. KERALA CRICKET ASSOCIATION, TC 24/131(1), KCA COMPLEX, SASTHANKOVIL ROAD, THYCAUD P.O., TRIVANDRUM. [PAN:AAATK 8881B] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) C.O. NO. 08/COCH/2015 (ARISING OUT OF I.T.A. NO.78/COCH/2015) ASSESSMENT YEAR : 2010 - 11 M/S. KERALA CRICKET ASSOCIATION, TC 24/131(1), KCA COMPLEX, SASTHANKOVIL ROAD, THYCAUD P.O., TRIVANDRUM. [PAN:AAATK 8881B] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, EXEMPTION CIRCLE, TRIVANDRUM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) REVENUE BY SHRI SHANTHAM BOSE, CIT(DR) ASSESSEE BY SHRI NAREN DRA SHARMA AND SHRI ANNAMALAI, CAS DATE OF HEARING 16/11 / 201 7 DATE OF PRONOUNCEMENT 18 TH /12/2017 ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 2 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF T HE CIT(A), TRIVANDRUM DATED 24/02/2014. THE RELEVANT ASSESSMENT YEAR IS 2010-1 1. 2. THERE WAS A DELAY OF 224 DAYS IN FILING THE A PPEAL BY THE REVENUE. THE REVENUE HAS FILED A PETITION TO CONDONE THE DELAY I N FILING THE APPEAL ACCOMPANIED BY AN AFFIDAVIT OF THE DEPUTY COMMISSIO NER OF INCOME TAX(EXEMPTION). THE REASON STATED IN THE AFFIDAVIT FILED BY THE DCIT(EXEMPTION) FOR THE DELAY IN FILING THE PRESENT APPEAL READS AS FOLLOWS: THE LAST DATE OF FILING APPEAL BEFORE ITAT IN THE CASE OF KERALA CRICKET ASSOCIATION WAS 19-06-2014. CONSEQUENT TO REVISION OF JURISDICTION DATED, 15/11/2014 AND CREATION OF COMMISSIONER OF INCOME T AX(EXEMPTION), KOCHI, THE MATTER OF FILING OF APPEAL IN KERALA CRICKET ASSOCI ATION WAS REVIEWED. AS ALL OTHER EXEMPTION UNITS AT VARIOUS PARTS OF INDIA HAVE CHAL LENGED THE VERDICT EXCEPT IN KERALA IN ORDER TO TAKE A UNIFORM VIEW IN THE MATTE R, APPEAL TO ITAT IS PURSUED. ACCORDING TO THE ABOVE, IN ORDER TO BRING UNIFORMIT Y ACROSS ALL JURISDICTIONS OF CCIT(EXEMPTION), THIS APPEAL IS BEING FILED. HENCE IT IS PRAYED THAT THE DELAY OF 224 DAYS MAY KINDLY BE CONDONED AS IT WAS NOT DELIB ERATE AND THE APPEAL MAY PLEASE BE ADMITTED. 2.1 THE REASON STATED FOR THE DELAY IN FILING THE APPEAL IS THAT THERE WAS REVISION OF JURISDICTION AND CREATION OF COMMISSION ER OF INCOME-TAX (EXEMPTION), KOCHI ON 15/11/2014 AND, CONSEQUENTLY, DECISION TO FILE AN APPEAL WAS TAKEN ONLY AFTER 15/11/2014. IN THE INSTANT CASE, THE AP PEAL OUGHT TO HAVE BEEN FILED ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 3 ON 19/06/2014. ADMITTEDLY, THERE WAS A REVISION OF JURISDICTION AND CREATION OF COMMISSIONER OF INCOME-TAX(EXEMPTION), KOCHI ON 15/1 1/2014. THE NEW COMMISSIONER OF INCOME-TAX(EXEMPTION) IN ORDER TO TA KE AN UNIFORM VIEW ON THE ISSUE, ACROSS ALL JURISDICTIONS OF CCIT(EXEMPTION), HAD RECOMMENDED FOR FILING AN APPEAL. FROM THE DATE OF REVISION OF JURISDICTION ON 15/11/2014, THE APPEAL WAS FILED BEFORE THE TRIBUNAL WITHIN A REASONABLE PERIO D OF 75 DAYS. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THERE CANN OT BE ANY LATCHES ATTRIBUTABLE FOR THE DELAY IN FILING THE PRESENT APPEAL. IN THIS CONTEXT, IT IS RELEVANT TO QUOTE THE FOLLOWING JUDICIAL PRONOUNCEMENTS RENDERED IN T HE CONTEXT OF CONDONATION OF DELAY IN FILING THE APPEAL. (A) IN THE CASE OF COLLECTOR, LAND ACQUISITION, AN ANTNAG AND ANOTHER VS. MST. KATIJI AND OTHERS REPORTED IN 2 SCC 107, WHIL E CONSIDERING WHETHER THERE WAS SUFFICIENT CAUSE IN FILING THE APPEAL B ELATEDLY, THE HONBLE APEX COURT HAD ADOPTED A LIBERAL APPROACH. IT WAS STATED BY THE HONBLE APEX COURT THAT THE FOLLOWING PRINCIPLES ARE TO BE KEPT IN MIND WHILE EXAMINING WHETHER THERE IS SUFFICIENT CAUSE FOR THE DELAY I N FILING THE APPEAL: (I) ORDINARILY A LITIGANT DOES NOT STAND TO BENEFI T BY LODGING AN APPEAL LATE. (II) REFUSING TO CONDONE DELAY CAN RESULT IN A MERI TORIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEIN G DEFEATED. AS AGAINST THIS WHEN DELAY IS CONDONED THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. (III) EVERY DAYS DELAY MUST BE EXPLAINED DOES NO T MEAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOURS DELA Y, EVERY SECONDS DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL COMMONSE NSE PRAGMATIC MANNER. (IV) WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDE RATIONS ARE PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEIN G DONE BECAUSE OF A NON- DELIBERATE DELAY. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 4 (V) THERE IS NO PRESUMPTION THAT DELAY IS OCCASION ED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES . A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT HE RUNS A S ERIOUS RISK. (VI) IT MUST BE GRASPED THAT JUDICIARY IS RESPECTE D NOT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. (B) IN THE CASE OF G. RAMEGOWDA, MAJOR AND OTHERS VS. SPECIAL LAND ACQUISITION OFFICER, BANGALORE REPORTED IN 2 SCC 14 2, , THE HONBLE APEX COURT HAS ENUNCIATED THE FOLLOWING PRINCIPLES IN PA RAS 15 & 17 OF THE JUDGMENT: 15 IN LITIGATIONS TO WHICH GOVERNMENT IS A PARTY THERE IS YET ANOTHER ASPECT WHICH, PERHAPS, CANNOT BE IGNORED. IF APPEALS BROU GHT BY GOVERNMENT ARE LOST FOR SUCH DEFAULTS, NO PERSON IS INDIVIDUALLY AFFECT ED; BUT WHAT, IN THE ULTIMATE ANALYSIS, SUFFERS IS PUBLIC INTEREST. THE DECISION S OF GOVERNMENT ARE COLLECTIVE AND INSTITUTIONAL DECISIONS AND DO NOT SHARE THE CH ARACTERISTICS OF DECISIONS OF PRIVATE INDIVIDUALS. 17. THEREFORE, IN ASSESSING WHAT, IN A PARTICULAR CASE, CONSTITUTES SUFFICIENT CAUSE FOR PURPOSES OF SECTION 5, IT MIGHT, PERHAPS , BE SOMEWHAT UNREALISTIC TO EXCLUDE FROM THE CONSIDERATIONS THAT GO INTO THE JU DICIAL VERDICT, THESE FACTORS WHICH ARE PECULIAR TO AND CHARACTERISTIC OF THE FUN CTIONING OF THE GOVERNMENT. GOVERNMENTAL DECISIONS ARE PROVERBIALLY SLOW ENCUMB ERED, AS THEY ARE, BY A CONSIDERABLE DEGREE OF PROCEDURAL RED TAPE IN THE P ROCESS OF THEIR MAKING. (C) IN THE CASE OF STATE OF HARYANA VS. CHANDRA M ANI AND OTHERS REPORTED IN 3 SCC 132, WHILE CONDONING THE DELAY OF 109 DAYS IN FILING THE APPEAL BEFORE THE HIGH COURT, THE HONBLE APEX COURT HAS O BSERVED THAT CERTAIN AMOUNT OF LATITUDE WITHIN REASONABLE LIMITS IS PERM ISSIBLE, HAVING REGARD TO IMPERSONAL BUREAUCRATIC SET-UP INVOLVING RED-TAPISM . IN THE SAME DECISION, THE HONBLE APEX COURT DIRECTED THE STATE TO CONSTI TUTE LEGAL CELLS TO EXAMINE WHETHER ANY LEGAL PRINCIPLES ARE INVOLVED FOR DECIS ION BY THE COURTS OR WHETHER CASES REQUIRED ADJUSTMENT AT GOVERNMENT LEV EL. (D) IN THE CASE OF STATE OF U.P. AND OTHERS VS. HA RISH CHANDRA AND OTHERS REPORTED IN 9 SCC 309, BY GIVING SIMILAR REASONS AS MENTIONED IN CHANDRA MANIS CASE (SUPRA), THE HONBLE APEX COURT, CONDON ED THE DELAY OF 480 DAYS IN FILING THE SLP. (E) IN THE CASE OF NATIONAL INSURANCE CO. LTD. VS. GIGA RAM AND OTHERS, REPORTED IN 10 SCC 176, THE HONBLE APEX COURT, AFT ER FINDING THAT THE HIGH COURT WAS NOT JUSTIFIED IN TAKING TOO TECHNICAL A V IEW OF THE FACTS AND ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 5 REFUSING TO CONDONE THE DELAY, ACCEPTED THE CASE OF THE APPELLANT-INSURANCE COMPANY BY PROTECTING THE INTEREST OF THE CLAIMANT AND CONDONED THE DELAY. 2.2 IN THE INSTANT CASE, AS MENTIONED EARLIER, THE RE HAS BEEN REVISION OF JURISDICTION AND FORMATION OF COMMISSIONER OF INCOM E-TAX(EXEMPTION), KOCHI ON 15/11/2014 AND THEREAFTER, A CONSCIOUS DECISION WAS TAKEN BY THE NEW COMMISSIONER OF INCOME-TAX(EXEMPTION), KOCHI TO FILE THE APPEAL, IN ORDER TO BRING ABOUT UNIFORMITY ACROSS ALL JURISDICTIONS OF CCIT(EXEMPTION) AND APPEAL WAS FILED WITHIN A REASONABLE PERIOD THEREAFTER. IN VIEW OF THE ABOVE FACTUAL NARRATIONS AND THE PRINCIPLES LAID DOWN BY THE VARI OUS JUDICIAL PRONOUNCEMENTS, WE ARE OF THE VIEW THAT THERE WAS REASONABLE CAUSE FOR THE DELAY IN FILING THIS APPEAL AND WE CONDONE THE SAME. THUS, THIS APPEAL O F THE REVENUE IS ADMITTED FOR ADJUDICATION. 3. THERE WAS A DELAY OF 10 DAYS IN FILING THE CROS S OBJECTION BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION TO CONDONE THE DE LAY AS WELL AN AFFIDAVIT OF THE SECRETARY, STATING THE REASONS FOR THE DELAY IN FIL ING THE CROSS OBJECTION BY 10 DAYS. ON A PERUSAL OF THE AFFIDAVIT FILED BY THE S ECRETARY, WE ARE OF THE VIEW THAT THERE WAS SUFFICIENT CAUSE FOR THE DELAY IN FILING THE CROSS OBJECTION, AND LATCHES CANNOT BE ATTRIBUTED TO THE ASSESSEE-SOCIETY. HENCE WE CONDONE THE DELAY AND PROCEED TO DISPOSE OF BOTH THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ON MERITS. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 6 4. WE SHALL FIRST TAKE UP FOR ADJUDICATION THE RE VENUES APPEAL. I.T.A. NO. 78/COCH/2015: (REVENUES APPEAL) 4.1 THE GROUNDS RAISED IN THE REVENUES APPEAL REA D AS FOLLOWS: (1) THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX, TRIVANDRUM IS SO FAR AS ON THE POINTS MENTIONED BELOW ARE CONCERN ED IS OPPOSED TO LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. (2) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE NOTED THAT AS PER RECENT AMENDMENT IN SECTION 2(15) WITH EFFECT FROM A.Y. 2009-10, IT IS CLARIFIED THAT ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMER CE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TR ADE, COMMERCE OR BUSINESS FOR A CESS OR A FEE OR ANY OTHER CONSIDERA TION IRRESPECTIVE OF THE NATURE OF OR AN APPLICATION OR RETENTION OF THE INC OME FROM SUCH ACTIVITIES AND RECEIPTS EXCEEDS RS.25 LAKHS. (3) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN ALLOWING THE EXEMPTION CLAIMED U/S. 11 ON THE BASIS THAT THEIR ACTIVITIES ARE CHARITABLE NATURE WHEN THE ASSESSEE ITSELF HA S ADMITTED THAT IT HAS RECEIVED RS.18.63 CRORES FROM BCCI AS CONTRIBUTION. (4) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN ALLOWING THE AMOUNT OF RS.24.67 CRORES AS CAPITAL E XPENDITURE. (5) FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANC ED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF A PPEALS, TRIVANDRUM ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE A SSESSING OFFICER RESTORED. 4.2 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN AOP. IT IS ENGAGED IN TH E PROMOTION AND UPLIFTMENT OF THE GAME OF CRICKET IN THE STATE OF KERALA. THE AS SESSEE WAS REGISTERED U/S. 12AA OF THE I.T. ACT WITH EFFECT FROM 01/04/2006, I .E. FROM A.Y. 2007-08 ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 7 ONWARDS. FOR THE ASSESSMENT YEAR 2010,11, THE ASSE SSEE HAD FILED RETURN OF INCOME, DECLARING A TOTAL INCOME AS NIL AFTER CLA IMING EXEMPTION U/S. 11 OF THE ACT. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCR UTINY BY ISSUANCE OF NOTICE U/S. 143(2) OF THE ACT. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 26/03/2013. THE AO DENIED THE BEN EFIT OF EXEMPTION U/S. 11 OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ACTIV ITIES OF THE ASSESSEE FALLS WITHIN THE LIMB OF ANY OTHER OBJECTS OF GENERAL PUBLIC UT ILITY. IT WAS, FURTHER, HELD BY THE ASSESSING OFFICER THAT IN VIEW OF THE AMENDMENT TO SECTION 2(15) AND INTRODUCTION OF PROVISO TO SECTION 2(15) OF THE ACT W.E.F. 1.4.2009, THE ACTIVITIES OF THE ASSESSEE ARE IN THE NATURE OF TRADE, COMMERC E OR BUSINESS, SINCE THEY ARE IN RECEIPT OF FEE/CESS FROM THEIR ACTIVITY, AND, HE NCE, THE ASSESSEE-SOCIETY CANNOT BE ENTITLED TO THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT. 4.3. THE AO DETERMINED THE TOTAL TAXABLE INCOME OF THE ASSESSEE AS UNDER: TOTAL RECEIPT AS PER INCOME & EXPENDITURE A/C. 1. SUBSIDY & REIMBURSEMENT OF EXPENSES OF BCCI RS.1,02,77,795/- 2. INCOME FROM INVESTMENTS & DEPOSITS RS.1 ,30,54,918/- 3. INCOME FROM OTHER SOURCES RS. 1,41,199/- TOTAL RS.2,34,73,912/- LESS : EXPENDITURE CLAIMED RS.8,62,38 ,403/ - BALANCE [-] RS.6,27,64,491/- ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 8 ADD: ADDITIONS 1. AMOUNT RECEIVED FROM BCCI RS.18 ,63,99,139/- 2. CAPITAL EXPENDITURE DISALLOWED RS.2 4,67,06,336/- 3. AMOUNT DISALLOWED U/S.40(A)(IA) RS. 16,65,453/- 4. PREPAID EXPENSES DISALLOWED RS. 18,55,697/- TOTAL ADDITIONS RS.43,66,26,625/- TAXABLE INCOME RS.37,38,62,134/- 4.4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSES SEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELL ATE AUTHORITY, THE ASSESSEE HAD FILED WRITTEN SUBMISSION. THE CIT(A), AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE FINDINGS OF THE AO, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE CIT(A) HELD THAT THE ASSESSEES ACTIV ITIES ARE CHARITABLE IN NATURE AND PROVISO TO SECTION 2(15) OF THE ACT WILL NOT HA VE APPLICATION. ACCORDINGLY, THE CIT(A) GRANTED EXEMPTION U/S. 11 OF THE ACT. THE C IT(A) HAD, FURTHER, DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF CAPITAL E XPENDITURE, AMOUNTING TO RS.24,67,06,336/-. THE CIT(A) HOWEVER CONFIRMED TH E DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT, AMOUNTING TO RS.16,65,453/- A ND PREPAID EXPENSES AMOUNTING TO RS.18,55,697/-. 4.5 AGGRIEVED BY THE ORDER OF THE CIT(A), TO THE EXTENT WENT AGAINST THE DEPARTMENT, AN APPEAL HAS BEEN FILED IN I.T.A. NO.7 8/COCH/2015 BY THE REVENUE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 9 AND THE ASSESSEE HAS PREFERRED A CROSS OBJECTION IN C.O. NO.08/COCH/2015. THE LD. DR STRONGLY RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. THE LD. AR, ON THE OTHER HAND, SUPPORTED THE FINDINGS/CONCLUSIONS OF T HE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. 4.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE ASSESSEE WAS GRANTED REGISTRATION U/S. 12AA OF THE ACT VIDE ORDER DATED 31/03/2007 WITH EFFECT FROM THE ASSESSMENT YEAR 200 7-08. ON A PERUSAL OF THE OBJECTS OF THE ASSESSEE, IT IS DISCERNABLE THAT IT IS ENGAGED IN THE ACTIVITY OF PROMOTING AND REGULATING THE GAME OF CRICKET IN THE STATE OF KERALA. IT ALSO HAS JURISDICTION OVER THE CRICKET TOURNAMENTS CONDUCTED IN THE STATE OF KERALA. IT CONDUCTS VARIOUS NATIONAL AND INTERNATIONAL CRICKET TOURNAMENTS FOR BOTH MEN AS WELL AS WOMEN. VARIOUS DISTRICT CRICKET ASSOCIATIO NS WHICH PARTICIPATE IN CRICKETING ACTIVITIES ORGANIZED IN KERALA ARE THE A FFILIATED UNITS OF THE ASSESSEE. THE DISTRICT CRICKET ASSOCIATIONS IN ALL THE DISTRI CTS IN THE STATE RECEIVE FINANCIAL ASSISTANCE FROM THE ASSESSEE REGULARLY. UNDOUBTEDL Y, THE ASSESSEE UNDERTAKES ACTIVITIES TO POPULARIZE THE GAME OF CRICKET FOR TH E BALANCED DEVELOPMENT OF THE BODY AND MIND OF THE CITIZENS. 4.6.1 THE AO DENIED THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT STATING THAT THE ASSESSEE UNDERTAKES CHARITABLE ACTIVITIES IN TH E LIMB OF ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY AND SINCE AGGREGATE RECEIPTS DURING THE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 10 PREVIOUS YEAR EXCEEDED THE PRESCRIBED LIMIT, THE AS SESSEE IS NOT ENTITLED TO THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT IN VIEW OF THE PROVISO TO SECTION 2(15) OF THE ACT. ACCORDING TO THE AO, THE ASSESSEE WAS ENG AGED IN THE ACTIVITIES IN THE NATURE OF TRADE, BUSINESS AND COMMERCE AND IS IN RE CEIPT OF FEE OR CESS. THE AO NOTICED THAT THE ASSESSEE RECEIVED FROM THE BOARD O F CONTROL FOR CRICKET IN INDIA (BCCI) TELEVISION SUBSIDY AND SHARE OF IPL AMOUNTIN G TO RS. RS.10,53,55,933/- AND RS.8,10,23,117 RESPECTIVELY. IT WAS ALSO STATE D BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS COLLECTING REVENUE BY WAY OF ADVER TISEMENT FEES AND SALE OF TICKETS FOR VARIOUS MATCHES CONDUCTED BY THE ASSESS EE. ACCORDING TO THE ASSESSING OFFICER, THE ABOVE ACTIVITIES ARE NOT IN CONFORMITY WITH THE PRINCIPLES LAID DOWN IN SECTION 2(15) OF THE ACT AND, THEREFOR E, THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT. 4.6.2 THE STATEMENT OF THE ASSESSING OFFICER WAS THAT THERE WAS SALE OF TICKETS AND ADVERTISEMENT FEE COLLECTIONS, IS NOT CORRECT. ON A PERUSAL OF THE FINANCIAL STATEMENTS FOR THE RELEVANT ASSESSMENT YEAR WHICH I S PLACED ON RECORD AT PAGES 2 TO 27 OF THE PAPER BOOK FILED BY THE ASSESSEE, IT IS CLEAR THAT THERE IS NO SALE OF TICKETS AND COLLECTION OF ADVERTISEMENT FEES BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE CONCERNED ASSESSMENT YEAR. TH E CIT(A), ALSO IN THE IMPUGNED ORDER AT PARA 8, HAD CATEGORICALLY HELD TH AT FOR THE RELEVANT ASSESSMENT YEAR THE ASSESSEE WAS NOT IN RECEIPT OF ANY REVENUE FROM ADVERTISEMENTS AND SALE OF TICKETS. EVEN ASSUMING T HAT THERE WAS COLLECTION OF ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 11 RECEIPTS ON ACCOUNT OF SALE OF TICKETS FOR ONE DAY MATCHES, IT CANNOT BE STATED THAT THERE WAS ANY ACTIVITY IN THE NATURE OF TRADE, BUSINESS OR COMMERCE. AS SUCH THE COLLECTIONS WERE ONLY TO BE MEANT FOR THE CONDU CT OF MATCHES AND NOT WITH A VIEW TO EARN ANY PROFIT THEREFROM. IN OTHER WORDS, THERE WAS NO COMMERCIAL ACTIVITY INVOLVED IN THE PROCESS OF CONDUCTING CRIC KET MATCHES. 4.6.3 AS REGARDS ADVERTISEMENT SUBSIDY AND IPL S UBVENTION IN TOTAL OF RS.18,63,99,139/- (REFER PARA 4 OF SUB-CLAUSE (III) OF THE ASSESSMENT ORDER), THE SAME CANNOT BE STATED TO BE RECEIPTS FROM TRADE, BU SINESS OR COMMERCE IN ANY MANNER SINCE IT WAS ONLY A CONTRIBUTION/DONATION/SU BSIDY RECEIVED FROM BCCI FOR PROMOTION OF THE GAME OF CRICKET IN THE STATE OF KE RALA. THERE WAS A NO LEGAL OR CONTRACTUAL RIGHT/AGREEMENT WITH BCCI FOR THE ASSES SEE TO DEMAND OR CLAIM RECEIPT OF SUBSIDY AND, HENCE, IT IS ONLY A CONTRIB UTION BY THE BCCI TOWARDS UPLIFTMENT OF THE GAME OF CRICKET ACROSS THE STATE OF KERALA. CONTRIBUTIONS RECEIVED FROM BCCI, AS SHOWN IN THE BOOKS OF ACCOUN TS AND INCLUDED IN THE CORPUS FUND AMOUNTING TO RS.18,63,99,139/- WERE DIS BURSED TO THE ASSESSEE ONLY FOR THE DEVELOPMENT OF INFRASTRUCTURAL FACILITIES L IKE CONSTRUCTION OF STADIUM, PURCHASE OF EQUIPMENT FOR THE USE OF THE PLAYERS. TILL THE YEAR 2005, THE ASSESSEE HAD NO CRICKET STADIUM OF ITS OWN AND IN T HE YEAR 2008, THE ASSESSEE HAD TAKEN ON LEASE THE STADIUM AT KOCHI FOR A PERIO D OF FIVE YEARS FROM GCDA AND INCURRED AN EXPENDITURE OF RS.12.85 CRORES ON T HE STADIUM FROM THE FUNDS RECEIVED FROM BCCI AS SUBSIDY. THE ASSESSEE HAS AL SO UTILIZED FUNDS FROM THE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 12 BCCI FOR THE ACQUISITION OF LAND AND SETTING UP OF CRICKET STADIUMS AT KOLLAM, ALAPPUZHA, MALAPPURAM ETC. THE BCCI IS ACTING AS A N APEX BODY AT THE NATIONAL LEVEL AND LENDING SUPPORT FOR THE PROMOTION OF THE GAME OF CRICKET IN ALL THE STATES IN THE UNION OF INDIA. 4.6.4 ON A PERUSAL OF THE OBJECTS AND PROJECTS UN DERTAKEN BY THE ASSESSEE, IT CAN BE EASILY UNDERSTOOD THAT THE ACTIVITIES OF ASS ESSEE WERE NOT FOR THE PURPOSE OF TRADE, BUSINESS OR COMMERCE AS PROVIDED BY AMEND MENT TO SECTION 2(15) OF THE I.T. ACT WITH EFFECT FROM A.Y. 2009-10. THE TER M BUSINESS AS UNDERSTOOD IN THE COMMON PARLANCE INDICATES ANY COMMERCIAL ACTIVI TY DEALING IN GOODS AND SERVICES WITH THE INTENTION OF MAKING PROFIT. THE TERM TRADE INDICATES ACTIVITIES INVOLVING PURCHASE AND SALE OF GOODS AND THE TERM COMMERCE IS A BROAD TERM ENCOMPASSING BUSINESS AND TRADE. THE ASSESSEE IS N OT ENGAGED IN ANY ACTIVITY WHICH IS CONNECTED WITH THE BUSINESS OR TRADE GOING BY THE MEANING OF THE ABOVE TERMS AS GENERALLY UNDERSTOOD. THERE IS NO DEFINIT ION OF THE TERMS BUSINESS, TRADE AND COMMERCE IN THE INCOME TAX ACT, 1961 AND, THEREFORE, THE MEANING OF THE ABOVE TERMS HAVE TO BE RECKONED IN T HE NORMALLY UNDERSTOOD PARLANCE. THE PROMOTION OF SPORTS LIKE CRICKET INV OLVES DEVELOPMENT OF PHYSICAL AND MENTAL FACULTIES LEADING TO OVERALL WELL-BEING OF THE CITIZENS AND ACTIVITIES RELATING TO THE DEVELOPMENT OF SPORTS AND GAMES CAN NOT BE TREATED AS TRADE, BUSINESS OR COMMERCE IN ANY MANNER WHATSOEVER. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 13 4.6.5 THE CIT(A) HAS ALSO HELD CATEGORICALLY IN PA RA 8 AFTER PERUSAL OF THE OBJECTS OF THE SOCIETY THAT IT IS DOING ACTIVITIES TO PROMOTE THE GAME OF CRICKET IN THE STATE OF KERALA AND TO ARRANGE FOR COACHES FOR THE PLAYERS, TO TRAIN AND MAINTAIN PANEL OF UMPIRES AND TO DO SUCH ACTS FOR T HE FURTHERANCE OF THE GAME OF CRICKET. THE CIT(A) HAS, FURTHER, HELD THAT THE IN COME AND THE PROPERTY OF THE ASSESSEE-SOCIETY SHALL BE APPLIED SOLELY FOR THE PR OMOTION OF THE OBJECTS OF THE SOCIETY AND NO PORTION OF SUCH INCOME SHALL BE PAID OR TRANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIVIDEND OR OTHERWISE. ACCORD ING TO THE CIT(A), THIS MAKES IT AMPLY CLEAR THAT THE SOCIETY HAS BEEN ESTABLISHE D IN ORDER TO POPULARIZE THE GAME OF CRICKET IN THE STATE OF KERALA AND PROVIDE AND STRENGTHEN THE PLAYERS WITH COMPETITIVE SKILLS. IT IS, FURTHER, HELD BY T HE CIT(A) THAT THE SOURCE OF FUNDS FOR THE RELEVANT ASSESSMENT YEAR IS ONLY THE GRANT RECEIVED FROM THE BCCI, AND THE INTEREST EARNED ON DEPOSITS OF SURPLUS AMOUNT ( PAST YEARS SURPLUS). THE ABOVE CATEGORICAL FINDING OF THE CIT(A) FOR READY R EFERENCE IS REPRODUCED BELOW: 8. IT IS SEEN FROM THE OBJECTIVES OF THE SOCIETY T HAT THE ASSOCIATION IS BEING RUN TO PROMOTE THE GAME IN THE STATE AND TO A RRANGE FOR THE COACHES FOR THE PLAYERS, TO TRAIN AND MAINTAIN PANE L OF EMPIRES AND RESORT TO ALL SUCH MEASURES DO ALL SUCH ACTS AS ARE CONDUC IVE TO THE FURTHERANCE OF CRICKET. THE INCOME AND PROPERTY OF ASSOCIATION SHALL BE APPLIED SOLELY FOR THE PROMOTION OF THE OBJECTS OF THE SOCIETY AND NO PORTION OF SUCH INCOME SHALL BE PAID OR TRANSFERRED DIRECTLY OR IND IRECTLY BY WAY OF DIVIDEND OR OTHERWISE TO ANY OTHER PERSON IN RETURN FOR ANY SERVICES RENDERED TO THE SOCIETY. THIS MAKES AMPLY CLEAR TH AT THE SOCIETY HAS BEEN ESTABLISHED IN ORDER TO POPULARIZE CRICKET IN THE S TATE OF KERALA AND TO PROVIDE AND STRENGTHEN THE PLAYERS WITH COMPETITIVE SKILLS. THE SOURCES OF FUNDS IS THE GRANT RECEIVED FROM BCCI AND, OTHER TH AN THAT, THE ONLY SOURCES OF INCOME IS THE INTEREST, EARNED ON DEPOSI TS OF SURPLUS AMOUNT. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 14 DURING THE YEAR UNDER QUESTION, THE ASSOCIATION HAS NOT CARRIED OUT ANY TEST MATCHES AND HAS GOT NO REVENUE FROM ADVERTISEM ENT ETC. 4.6.6 THE ABOVE FINDING/OBSERVATION OF THE CIT(A) HAS NOT BEEN DISPELLED BY THE REVENUE BY PLACING ANY CONTRA MATERIAL BEFORE U S. THEREFORE IT CANNOT BE STATED THAT THE ASSESSEE WAS DOING ANY ACTIVITY IN THE NATURE OF BUSINESS, TRADE OR COMMERCE. IN OTHER WORDS, THE ASSESSEE IS NOT D RIVEN BY ANY PROFIT MOTIVE, ON THE CONTRARY ITS PRIMARY OBJECTIVE IS ONLY TO PR OMOTE THE GAME OF CRICKET IN THE STATE OF KERALA. NOW, AFTER HAVING FOUND THA T THE ASSESSEE IS NOT ENGAGED IN ANY TRADE, BUSINESS OR COMMERCE, LET US EXAMINE WHETHER THE PROVISO TO SECTION 2(15) OF THE ACT WILL HAVE APPLICATION TO T HE FACTS OF THE INSTANT CASE, BY EXAMINING JUDICIAL PRONOUNCEMENTS ON THE ISSUE. (A) THE HON'BLE DELHI HIGH COURT IN THE CASE OF PHD CHAMBER OF COMMERCE AND INDUSTRY VS. DIT (E) (2013) 357 ITR 29 6 (DELHI). THE HON'BLE COURT AT PARA 17 AT PAGES 308 & 309 RELEVAN T PORTION OF THE OBSERVATION OF THE HON'BLE COURT IS AS UNDER: 'IN ALL THESE CASES, THE COMMON THREAD WHICH WAS NO TICED TO RUN THROUGH WAS THE ABSENCE OF ANY PROFIT MOTIVE OF PRIVATE PROFIT. THESE DECISIONS DO ESTABLISH THAT THE RECEIPTS DERIVED BY A CHAMBER OF COMMERCE AND INDUSTRY FOR PERFORMING SPECIFIC SERVICES TO ITS MEMBERS, THOUGH TREATED AS BUSINESS INCOME UNDER SECTION 28(III) WOULD STILL BE ENTITLE D TO THE EXEMPTION UNDER SECTION 2(15) READ WITH SECTION 11, PROVIDED THERE IS NO PROFIT MOTIVE. (B) THE HON'BLE BANGALORE TRIBUNAL IN THE CASE OF M/S. KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD VS. ACIT IN ITA ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 15 NO.378/BANG/2013 DATED O4/09/2015 BY APPLYING THE PRINCIPLES LAID DOWN IN THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANIZATION HELD THAT THE ASSESSEE DOES NOT DRIVEN PRIMARILY BY DESIRE OR MOTIVE TO EARN PROFITS BUT TO DO CHARITY THROUGH ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY. THE ASSESSEE OPE RATING ON NO PROFIT BASIS. THE PROVISO TO SECTION 2(15) IS NOT APPLICABLE TO THE C ASE OF THE ASSESSEE. (C) INDIA VS. DGIT (EXEMPTIONS) AND ANOTHER (2014) 3 60 ITR 138 (DELHI). THE HON'BLE COURT OBSERVED AS FOLLOWS: PROFIT MOTIVE IS DETERMINATIVE AND A CRITICA L FACTOR TO DISCERN WHETHER AN ACTIVITY IS BUSINESS, TRADE OR COMMERCE. AN ACTIVITY WOULD BE CONSIDERED AS 'BUSINESS' IF IT IS UNDERTAKEN WITH PROFIT MOTIVE. THERE IS NO STATUTORY MANDATE THAT A CHARITA BLE INSTITUTION FALLING UNDER THE LAST CLAUSE SHOULD BE WHOLLY, SUBSTANTIALLY OR IN PART MUST BE FOUNDED BY VOLUNTARY CONTRIBUTION. THE ANTIQUATED DEFINITION OF CHARITY, WHICH ENTAILS GIVING AND RECEIVING NOTHING IN RETURN IS OUTDATED. A MANDATORY FEATURE WOULD BE; CHARITABLE ACTIVITY SHOULD BE DEVOID OF SELFISHNESS OR ILLIBER AL SPIRIT. ENRICHMENT OF ONESELF OR SELF GAIN SHOULD BE MISSING AND THE PREDOMINANT PURPOSE OF THE ACTIVITY SHOULD BE TO SERVE AND BENEFIT OTHERS. A SMALL CONT RIBUTION BY WAY OF FEE THAT THE BENEFICIARY PAYS WOULD NOT CONVERT CHARITABLE A CTIVITY INTO BUSINESS, COMMERCE OR TRADE IN THE ABSENCE OF CONTRARY EVIDEN CE. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 16 (D) INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND A NOTHER VS. DGIT (EXEMPTIONS) AND OTHERS (2013) 358 ITR 91 (DEL HI). THE GIST OF RELEVANT OBSERVATIONS OF THE HON'BLE COURT ARE A S UNDER: THE EXPRESSION TRADE WAS DISCUSSED BY THE SUP REME COURT IN ITS DECISION IN THE CASE OF KHODAY DISTILLERIES LTD VS. STATE OF KARNATAKA (1995) 1 SCC 574. IN THE SAID CASE, SUPREME COURT HELD AS UNDER: '68. THERE IS NO DOUBT THAT THE WORD 'BUSINESS' IS MORE COMPREHENSIVE THAN THE WORD 'TRADE' SINCE IT WILL INCLUDE MANUFAC TURE WHICH THE WORD 'TRADE' MAY NOT ORDINARILY INCLUDE. THE PRIMARY MEA NING OF THE WORD 'TRADE' IS THE EXCHANGE OF GOODS FOR GOODS OR GOODS FOR MONEY'. THE SUPREME COURT HAS FURTHER CONSIDERED TH E EXPRESSION 'BUSINESS' IN THE CASE OF STATE OF ANDHRA PRADESH VS. H. ABDUL BAKSHI AND BROS (1964) 15 STC 644 (SC), WHEREIN IT WAS HELD THAT TH E EXPRESSION 'BUSINESS' WAS OF INDEFINITE IMPORT AND IN THE TAXI NG STATUTE IT IS USED FOR THE SENSE OF OCCUPATION AND PROFESSION WHICH OCCUPI ES TIME, ATTENTION OR LABOUR OF A PERSON AND IS CLEARLY ASSOCIATED WITH T HE OBJECT OF MAKING PROFIT. IN THE CASE OF ADDL.CIT VS. SURAT ART SILK CLOTH MANUFACTURES ASSOCIATION (1980) 121 ITR 1 (SC), THE SUPREME COUR T HELD AS UNDER: ' THE TEST WHICH HAS, THEREFORE, NOW TO BE APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN CARR YING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUBSERVE THE CHARITABL E PURPOSE OR TO EARN PROFIT. WHERE PROFIT MAKING IS THE PREDOMINANT OBJE CT OF THE ACTIVITY, THE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 17 PURPOSE, THOUGH AN OBJECT OF GENERAL PUBLIC UTILITY WOULD CEASE TO BE A CHARITABLE PURPOSE. BUT WHERE THE PREDOMINANT OBJEC T OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PR OFIT, IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUS E SOME PROFIT ARISES FROM THE ACTIVITY'. (E) BUREAU OF INDIAN STANDARDS VS. DGIT (EXEMPTIONS) (DELHI) (2013) 358 ITR 78 (DELHI). THE HONBLE COURT AT PARA 13 AT PAGE 87 OF THE REPORTED DECISION HAS OBSERVED AS FOLLOWS: 'IN VIEW OF THE ABOVE DISCUSSION, IT CANNOT BE SAID THAT BIS IS INVOLVED IN ANY CARRYING ON TRADE, COMMERCE OR BUSINESS. BIS IS A STATUTORY BODY ESTABLISHED UNDER THE BIS ACT AND WAS BROUGHT INTO EXISTENCE 'FOR THE HARMONIOUS DEVELOPMENT OF THE ACTIVITIES OF STANDAR DIZATION, MARKING AND QUALITY CERTIFICATION OF GOODS'. THIS WAS, AND HAS BEEN, ITS PRIMARY AND PREDOMINANT OBJECT. EVEN THOUGH IT DOES NOT TAK E LICENCE FEE FOR GRANTING MARKS/ CERTIFICATION, THE SAME CANNOT BE S AID TO BE DONE FOR THE PURPOSE OF PROFIT. IF ANY PROFIT/ REVENUE IS EARNED , IT IS PURELY INCIDENTAL. THE BIS PERFORMS SOVEREIGN AND REGULATORY FUNCTION, IN ITS CAPACITY OF AN INSTRUMENTALITY OF THE STATE. THEREFORE, THIS COURT HAS NO DOUBT IN HOLDING THAT IT IS NOT INVOLVED IN CARRYING ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS'. (F) IN THE CASE OF JAIPUR DEVELOPMENT AUTHORITY VS. CIT (2014) 52 TAXMANN.COM 25 (JAIPUR-TRIBU). THE HON'BLE TRIBUNAL OBSERVED AS FOLLOWS: THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF LUCKNOW DEVELOPMENT AUTHORITY, HELD THAT MERE SELLING SOME PRODUCT AT PROFIT WILL NOT IPSO FACTO HIT ASSESSEE BY APPLYING THE PROVISO TO SECTION 2(15) AND DENY EXEMPTION AVAILABLE UNDER SECTION 11. THE INTE NTION OF THE TRUSTEES AND THE MANNER IN WHICH THE ACTIVITIES OF THE CHARI TABLE TRUST INSTITUTION ARE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 18 UNDERTAKEN ARE HIGHLY RELEVANT TO DECIDE THE ISSUE OF APPLICABILITY OF THE PROVISION TO SECTION 2(15). THE ACTIVITIES OF THE T RUST SHOULD BE CARRIED OUT ON COMMERCIAL LINES WITH INTENTION TO MAKE PROFIT. WHERE THE TRUST IS CARRYING OUT ITS ACTIVITIES ON COMMERCIAL LINES WIT H NO PROFIT MOTIVE TO EARN PROFITS FOR FULFILLMENT OF ITS AIMS AND OBJECTIVES WHICH ARE CHARITABLE IN NATURE AND IN THE PROCESS EARN SOME PROFITS, THE SA ME WOULD NOT BE HIT BY PROVISO TO SECTION 2(15) OF THE ACT. AS PER SECTION 2(15), THE CHARITABLE ACTIV ITY TEST MEANS ACTIVITY WITH A VIEW TO MAKE OR EARN PROFIT. THE FOUR INTEGRATES LAID DOWN ARE (A) PROFIT MOTIVE IS AN CRITICAL FACTOR TO DISCERN WHETHER THE ACTIVITY IS BUSINESS, TRADE OR COMMERCE, (B) CHARITABLE ACTIVITY SHOULD BE DEVO ID OF SELFISHNESS OR ILLIBERAL SPIRIT, (C) THE UNDERLINE PROPELLING MOTI VE IS NOT FOR COMMERCIAL EXPLOITATION BUT GENERAL PUBLIC GOOD AND (D) FEES C HARGED IF ANY SHOULD BE NOMINAL AND BASED ON COMMERCIAL PRINCIPLE. THE APPELLANT IS A GOVERNMENT AGENCY AND ENG AGED IN THE COORDINATE AND PLANNED DEVELOPMENT OF JAIPUR REGION AND WHICH IS PREDOMINANT OBJECT OF IT. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 19 (G) IN THE CASE OF INDIAN TRADE PROMOTION ORGANIZATIO N VS. DGIT (EXEMPTIONS) (2015) 53 TAXMANN.COM 404 (DELHI). THE HONBLE COURT OBSERVED AS FOLLOWS: IT IS ALSO IMPORTANT TO NOTE THAT WE MUST EXAMINE AS TO WHAT IS DOMINANT ACTIVITY OF THE INSTITUTION IN QUESTION. IF THE DO MINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE, TH EN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL WITHIN THE C ATEGORIES OF TRADE, COMMERCE OR BUSINESS. IT IS CLEAR FROM THE FACTS OF THE PRESENT CASE THAT THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT , THE OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSELF, BUT FOR THE NATI ON BOTH WITHIN INDIA AND OUTSIDE INDIA. CLEARLY THIS IS A CHARITABLE PURPOSE , WHICH HAS AS ITS MOTIVE THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTIL ITY TO WHICH THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTIO N 2(15) OF THE SAID ACT WOULD NOT APPLY. (H) IN THE CASE OF . BANGALORE GOLF CLUB V. ASSISTANT COMMISSIONER OF LUXURY TAXES [1999] 115 STC 338 WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT- 'THE EXPRESSION 'BUSINESS' THOUGH EXTENSIVELY USED IS A WORD OF INDEFINITE IMPORT. IN TAXING STATUTES IT IS USED IN THE SENSE OF AN OCCUPATION, OR PROFESSION WHICH OCCUPIES THE TIME, ATTENTION AND L ABOUR OF A PERSON, NORMALLY WITH THE OBJECT OF MAKING PROFIT. TO REGAR D AN ACTIVITY AS BUSINESS THERE MUST BE A COURSE OF DEALING, EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO BE CONTINUED WITH A PROFIT MOTIVE, AND NOT FOR SPORT OR PLEASURE.' 4.6.7 IN VIEW OF THE AFORESAID REASONING AND TH E JUDICIAL PRONOUNCEMENTS, WE HOLD THAT THE ACTIVITY OF THE ASSESSEE IS NOT HIT B Y THE PROVISO TO SUB-SECTION (15) OF SECTION 2 OF THE ACT. THEREFORE, AS REGARDS EXEMPTION U/S. 11, WE SUMMARIZE OUR REASONING AS FOLLOWS: ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 20 (I ) THE RECEIPTS FROM BCCI ARE NOT IN THE NATURE OF TRADE, BUSINESS OR COMMERCE AND CONSEQUENTLY THE PROVISO TO SECTION 2(15) OF THE ACT WAS NOT APPLICABLE. (II) THE ASSESSEE IS AN AFFILIATE OF THE BOARD FOR CONTR OL OF CRICKET IN INDIA (BCCI IN SHORT) AND IS THE BODY REPRESENTING CRICKE TING ACTIVITIES IN KERALA. THE ASSESSEE CARRIES OUT VARIOUS ACTIVITIES FOR THE SOL E PURPOSE OF DEVELOPMENT OF THE GAME OF CRICKET IN KERALA. (III) THE ASSESSEE IS ALSO NOT PROVIDING ANY SERVIC E TO ANY TRADE, COMMERCE OR INDUSTRY. (IV) THE ASSESSEE IS NOT CREATED FOR EARNING PROFIT AS I TS MOTIVE AND OBJECT OF THE ASSESSEE IS TOWARDS THE UPLIFMENT OF GAME OF CR ICKET IN THE STATE OF KERALA. THE ASSESSEE IS NOT DRIVEN WITH ANY PROFIT MOTIVE. (V) ANY EXCESS OF INCOME OVER EXPENDITURE IS NOT DISTRIBUTED TO THE MEMBERS, AS THE SAME IS ABSENT I.E. DISTRIBUTION OF SURPLUS AMONG THE MEMBERS THE OBJECT OF THE ASSESSEE IS ONE OF CHARITABLE IN NATU RE AND THE PROVISO TO SECTION 2(15) OF THE ACT IS NOT ATTRACTED. (VI) THE ONE DAY INTERNATIONAL MATCHES T-20 MATCHE S AND IPL MATCHES ARE ALL CONDUCTED BY THE BCCI AND THE ASSESSEE IS ONLY PROV IDING THE INFRASTRUCTURAL ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 21 FACILITIES AVAILABLE IN THE STADIUM. THE ASSESSEE RECEIVES FUNDS FROM BCCI FOR MEETING THE EXPENDITURE BEING THE HOST. (VII) THE AMENDMENT TO SECTION 2(15) OF THE ACT W AS CARRIED OUT TO TAX ENTITIES WEARING THE MASK OF CHARITY BUT IN FACT CA RRYING ON COMMERCIAL ACTIVITIES. A. IN THE COURSE OF BUDGET SPEECH FOR 2008-20 09, HONBLE FINANCE MINISTER OBSERVED THAT CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF G ENERAL 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 EAR NING INCOMES HAVE SOUGHT TO CLAIM THAT 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 C ASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFF ECTED . B. THE MEMORANDUM EXPLAINING THE PROVISIONS OF FIN ANCE BILL IS TO A SIMILAR EFFECT. WHILE REPLYING IN TO A DEBATE ON THE FINAN CE BILL, THE FINANCE MINISTER ASSURED THAT GENUINE CHARITABLE INSTITUTIO NS WOULD NOT BE BROUGHT WITHIN THE AMBIT OF SECTION 2(15). ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 22 (VIII) IT IS RELEVANT TO POINT OUT THAT THE STATEMENT MADE BY THE MOVER OF THE FINANCE BILL CAN BE USED FOR DEMONSTRATING THE OBJECTS OF THE AMENDMENT. RELIANCE IS PLACED ON THE DECISION OF THE APEX COUR T IN THE CASE OF K.P. VARGHESE 131 ITR PAGE 597. IT IS ALSO WELL SETTLED LAW THAT CIRCULARS ISSUED BY THE BOARD ARE BINDING ON THE REVENUE. (IX) THE ASSESSEE HAS A HISTORY OF DISTINGUISHED RECORD IN SERVING THE CAUSE OF THE SPORT OF CRICKET. IT HAS BEEN IN PUBLIC FOCU S AS A PREMIER BODY SERVING, PROMOTING AND DEVELOPING THE SPORT OF CRICKET. AS A PART OF ITS COMMITMENT, THE ASSOCIATION IS ACTIVELY INVOLVED FOR PROMOTING INFRASTRUCTURE, CONDUCTING AND ALSO PARTICIPATION IN TOURNAMENTS. (X) AS PER BOARD CIRCULAR NO. 39 5 DATED 24/09/1 984 THE PROMOTION OF SPORTS AND GAMES CAN BE CONSIDERED TO BE CHARITABLE PURPOSE. THE BOARD CIRCULAR ARE BINDING IN NATURE ON THE DEPARTMENT. (XI) THE CHENNAI TRIBUNAL IN THE CASE OF TAMIL NADU CRICKET ASSOCIATION VS. DDIT (EXEMPTIONS) (2015) 60 TAXMANN.COM 287 (CHENNA I-TRIB). WAS CONSIDERING THE CASE OF T.N. CRICKET ASSOCIATION WH ICH WAS IN RECEIPT OF (I) SUBSCRIPTION FROM MEMBERS (II) SALE OF TICKETS (III ) REVENUE FROM ADVERTISEMENTS (IV) RECEIPTS FROM BCCI (V) INTEREST FROM BANK DEPOSITS. THE ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 23 TRIBUNAL ALSO NOTICED THAT THE ASSESSEE IS IN RECEI PT OF FUNDS FROM BCCI. THE TRIBUNAL, AFTER CONSIDERING THE SUBMISSIONS, HELD THAT IT CANNOT BE SAID THAT THE TAMIL NADU CRICKET ASSOCIATION IS CONDUCTING AN Y BUSINESS ACTIVITY, NOR WAS IT RENDERING ANY SERVICE IN RELATION TO ANY TRA DE, COMMERCE OR INDUSTRY. IN THOSE CIRCUMSTANCES, THE TRIBUNAL CONCLUDED THAT PR OVISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE. FURTHER THE TRIBUNAL HAD OBSERVED AS UNDER: 15. NOW, LETS EXAMINE WHETHER THE ACTIVITY OF CON DUCTING ONE-DAY MATCHES, T-20 MATCHES AND INDIAN PREMIER LEAGUE MATCHES WOUL D AMOUNT TO DOING BUSINESS OR TRADE. IT IS THE CASE OF THE REVENUE T HAT THE ASSESSEE-SOCIETY IS CONDUCTING OR ORGANIZING T-20, ONE-DAY MATCHES OR I NDIA PREMIER LEAGUE MATCHES. IN FACT, BCCI, THE PARENT ORGANIZATION WH ICH IS A NATIONAL BODY IN INDIA, IS ORGANIZING AND CONDUCTING THE MATCHES. T HE ASSESSEE-SOCIETY, BEING A MEMBER OF BCCI, HOSTS THE MATCHES WHICH ARE CONDU CTED BY BCCI. FOR THE PURPOSE OF MEETING ITS EXPENDITURE, THE BCCI ALLOCA TES FUNDS FROM THE REVENUE IT COLLECTED FROM ADVERTISEMENT AND OTHER SOURCES. THE ASSESSEE-SOCIETY IS ALLOWED TO SELL TICKETS TO THE CRICKET VIEWERS. NO DOUBT, THE PLAYERS OF INDIAN PREMIER LEAGUE ARE SOLD IN PUBLIC AUCTION FOR VERY HUGE AMOUNT. BUT THE QUESTION IS WHO IS CONDUCTING AND WHO IS AUCTIONING , WHETHER THE ASSESSEE- SOCIETY OR BCCI? IN FACT, BCCI CONDUCTS THE PUBLIC AUCTION FOR SELLING PREMIER PLAYERS AT A HUGE PREMIUM RATE. IN FACT, THE BCCI C OLLECTS THE MONEY. THE ROLE OF THE ASSESSEE-SOCIETY IS ONLY TO PROVIDE STADIUM FOR CONDUCTING MATCHES. OTHER THAN THAT, THE ASSESSEE-SOCIETY HAS NO ROLE I N CONDUCTING THE INTERNATIONAL MATCHES AND INDIAN PREMIER LEAGUE MAT CHES. 16. THE OTHER ACTIVITY OF THE ASSESSEE-SOCIETY IS T O CONDUCT TRAINING PROGRAMMES, COACHING CLASSES FOR COLLEGE STUDENTS A T DISTRICT LEVEL IN THE STATE OF TAMIL NADU AND IN THE UNION TERRITORY OF PUDUCHE RRY. THE ASSESSEE IS ALSO CONDUCTING INTER-UNIVERSITY, INTER-SCHOOL AND INTER -ASSOCIATION MATCHES. EXPENDITURES INVOLVED IN SUCH ACTIVITIES WERE MET OU T OF SURPLUS FUNDS REMAINING WITH THE ASSESSEE-SOCIETY. THE ASSESSING OFFICER GOT CONFUSED HIMSELF WITH THE ACTIVITY CARRIED ON BY THE BCCI AS THAT OF THE ACTIVITY CARRIED ON BY THE ASSESSEE-SOCIETY. THE MATERIAL AVAILABLE ON RECORD SHOWS THAT ONE- DAY MATCHES, T-20 MATCHES AND INDIAN PREMIER LEAGUE MATCHES ARE ALL CONDUCTED BY THE BCCI AND THE ASSESSEE, BEING THE H OST IN THE STATE OF TAMIL ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 24 NADU, IS ONLY PROVIDING ITS STADIUM. THE ASSESSEE HAS ALSO RECEIVED FUNDS FROM BCCI FOR MEETING THE EXPENDITURE, BEING THE HOST. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AT ANY STRETCH OF IM AGINATION, IT CANNOT BE SAID THAT THE ASSESSEE IS CONDUCTING ANY BUSINESS ACTIVI TY. THE ASSESSEE IS ALSO NOT PROVIDING ANY SERVICE TO ANY TRADE, COMMERCE OR IND USTRY. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT PROVISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE TO THE A SSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES FOR ASSESSMENT YEARS 2009-10 AND 2010-11 ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO GRANT EXEM PTION UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER IS ALSO DIRECTED TO GRANT EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE ASSESSMENT YEAR 2008- 09 ALSO. (XII) THE DELHI TRIBUNAL IN THE CASE OF DELHI & DISTRICT CRICKET ASSOCIATION VS. DIT (E) IN ITA NO.3095/DEL/2012 DATED 13/01/201 5 HELD THAT PROVISO TO SECTION 2(15) DOES NOT HAVE APPLICATION TO DELHI CRICKET ASSOCIATION. THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLO WS: ON CONSIDERATION OF ALL THE FACTS AND CIRCUMSTANCE S 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 O R WITH ANY SELF INTEREST. THE CONTRIBUTION RECEIVED BY WAY OF SPONSORSHIP, AD VERTISEMENT, SALE OF TICKETS ETC AND USER CHARGES ON THE FACTS O F THE CASE, DO NOT CONVERT THE CHARITABLE ACTIVITY INTO 'TRADE, COMMER CE OR BUSINESS' ACTIVITY. (XIII) FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14, THE ASSESSING OFFICER HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT TH E PROVISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE AND GRANTED EXEMPTION UNDER SECTION 11 OF THE ACT. (ASSESSMENT ORDERS ARE PLACED AT PAGE NO. 56-5 7 AND 58-59 OF THE PAPER BOOK FILED BY THE ASSESSEE). ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 25 (XIV)) IN VIEW OF ABOVE REASONING, WE CONCLUDE T HAT THE ASSESSEES ACTIVITIES ARE CHARITABLE AND IS NOT HIT BY THE PROVISO TO SEC TION 2(15) OF THE ACT AND CONSEQUENTLY THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. 4.6.8 NO OTHER ARGUMENTS WERE RAISED BY THE LD. DR OR BY THE LD. AR CONCERNING THE APPEAL FILED BY THE ASSESSEE, HENCE THE GROUNDS RAISED IN THE REVENUES APPEAL ARE REJECTED. C.O. NO. 08/COCH/201 : (ASSESSEES CROSS OBJECTION ) 5. TWO ISSUES ARE INVOLVED IN THE ASSESSEES CR OSS OBJECTION. FIRSTLY, THE DISALLOWANCE OF PRE-PAID EXPENSES AMOUNTING TO RS.1 8.55,697/- AND SECONDLY, THE DISALLOWANCE OF AMOUNT OF RS.16,65,453/- U/S. 4 0(A)(I) OF THE ACT. DISALLOWANCE OF PRE-PAID EXPENSES OF RS.18,55,697/- 5.1 THE ASSESSING OFFICER IN PARA 11 OF THE O RDER HAD OBSERVED THAT THE ASSESSEE HAD SHOWN THE PRE-PAID EXPENSES TO THE TUN E OF RS.18,55,697/- BUT NO DETAILS WERE FILED. IT WAS CONCLUDED BY THE AO THA T THE SAME IS TO BE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5.2 THE CIT(A) CONFIRMED THE ASSESSMENT ORDE R. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 26 PREPAID EXPENSES OF RS.18,55,697/- DISALLOWED, EVE N IF, IT WAS NOT DEBITED TO PROFIT AND ACCOUNT - AS A MATTER OF FACT, WERE DIS ALLOWED BY THE ASSESSING OFFICER BY OBSERVING THAT DETAILS WERE NOT FILED. HENCE THE DISALLOWANCE MADE IS UPHELD. 5.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. NO DETAILS WERE PLACED BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) AS REGARDS THE CLAIM OF PRE-PAID EXPENSES OF RS.18,55, 697/-. EVEN BEFORE US, NO DETAILS ARE PROVIDED AND, HENCE, THE DISALLOWANCE M ADE BY THE INCOME TAX AUTHORITIES IS CONFIRMED. DISALLOWANCE U/S. 40(A)(IA) AMOUNTING TO RS. 16,65, 453/- 5.4 THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN PARA 10 OBSERVED THAT IN THE P&L A/C, THE ASSESSEE CLAIMED RS. 16,65,453/- A S FEE GIVEN TO COACHES. BUT, IT IS FOUND THAT NO TDS HAS BEEN MADE ON THIS PAYME NT. HENCE, THE AO DISALLOWED THE ABOVE PAYMENT BY INVOKING THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME. 5.5 THE CIT(A) CONFIRMED THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE AC T. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: DISALLOWANCE U/S. 40A(IA) THE ASSESSING OFFICER HAS OBSERVED THAT ALTHOUGH THERE HAVE BEEN DEBIT OF RS.16,65,453/- ON ACCOUNT OF FEE PAID TO THE COACHES, NO DETAILS FOR DEDUCTION OF TDS WERE M ADE AVAILABLE. THE ASSESSEE HAS ONLY ARGUED FOR CALLING FOR THE REMAND REPORT. HOWEVER, CALLING FOR REMAND REPORT IS NOT THE PART OF REGULAR ASSESS MENT PROCEEDINGS. THE FAILURE IS QUITE ON PART OF THE ASSESSEE AND FOR CO MPENSATING THE NON ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 27 SUBMISSION AND NON-COMPLIANCE ON THEIR PART AT THE TIME OF ASSESSMENT PROCEEDINGS, CANNOT BE SUBSTANTIATED BY RESORTING T O THE MECHANISM OF REMAND REPORT. IN VIEW OF THIS, THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER IS CONFIRMED. 5.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. ADMITTEDLY, THE ABOVE PAYMENTS WERE MADE TO THE COA CHES WITHOUT MAKING ANY TDS, THEREBY VIOLATING THE PROVISIONS OF SECTION 40 (A) (IA) OF THE ACT AND, HENCE, WE SEE NO REASON TO INTERFERE WITH THE ORDERS OF TH E INCOME TAX AUTHORITIES AND WE CONFIRM THE SAME. THUS THE CROSS OBJECTION FILE D BY THE ASSESSEE IS DISMISSED. 6. IN THE RESULT, BOTH THE APPEAL FILED BY THE RE VENUE AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18 TH /12/2017. SD/- SD/- (ABRAHAM P. GEORGE) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: KOCHI DATED: 18 TH DECEMBER, 2017 GJ COPY TO: 1. M/S. KERALA CRICKET ASSOCIATION, TC 24/131(1), K CA COMPLEX, SASTHANKOVIL ROAD, THYCAUD P.O., TRIVANDRUM. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, EXEMPTION CIRCLE, TRIVANDRUM. ITA NO.78/COCH/2015 & C.O. 08/COCH/2015 28 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN