Womens Golf Association of India Vs CIT (Exemption) (ITAT Delhi)
Golf Is Charity, Sponsorship Is Its Caddie — Delhi ITAT Restores 12AB & 80G Registration; 20% Test u/s 2(15) Cannot Be Applied Mechanically
Summary: The Delhi Bench of the Income Tax Appellate Tribunal has held that substantial sponsorship receipts received by a sports association do not, by themselves, convert its charitable sporting activities into trade, commerce or business. The Tribunal accordingly directed the Commissioner of Income Tax (Exemptions) to grant registration under section 12AB and approval under section 80G to Women’s Golf Association of India.
The assessee is a non-profit sports association established with the principal object of promoting and developing women’s golf in India. It had originally obtained registration under section 12AA with effect from 01.12.2004 and subsequently obtained registration under the new regime for AYs 2022-23 to 2026-27. Its activities included organising professional golf tournaments, promoting participation of women golfers at national and international levels, coaching, training, player development and welfare.
The assessee applied for renewal of registration in Form No. 10AB. The CIT(E), however, rejected the application primarily on the ground that the assessee conducted professional golf tournaments, charged entry and professional entry fees and received substantial sponsorship receipts. According to the CIT(E), sponsorship arrangements were contractual services rendered for consideration and the relevant receipts exceeded the 20% threshold contemplated by the proviso to section 2(15).
The Tribunal disagreed with this approach and held that the nature of the underlying activity must first be determined. The mere quantum of receipts cannot itself establish that an activity is trade, commerce or business. Only after the activity is found to possess such commercial character can the quantitative test under the proviso to section 2(15) be examined.
Golf Tournaments Were Integral to the Charitable Object
The Tribunal found that organising golf tournaments could not realistically be separated from the assessee’s object of promoting and developing golf.
Tournaments provide players with competitive exposure, facilitate rankings, identify talent, create professional opportunities and encourage participation in the sport. The assessee had also undertaken activities for junior and amateur golfers, provided financial assistance for overseas participation, conducted junior golf camps, provided coaching and training facilities and conducted caddy-training programmes without charging trainees.
Thus, the activities had to be examined in their proper factual and functional context, rather than merely by looking at the receipts. Organising tournaments was itself one of the principal means through which the assessee achieved its charitable sporting object.
Professional Golf Tour of India Supported the Assessee
The Tribunal relied upon the Chandigarh Bench decision in Professional Golf Tour of India v. CIT, 155 TTJ 17, where promotion of golf and professional golf was accepted as a charitable purpose.
That decision had held that a charitable organisation does not have to remain financially weak merely to preserve its charitable character. A society may adopt prudent financial measures to become self-sustaining without thereby becoming a commercial organisation.
The Tribunal found the factual similarity with the present case significant because the assessee was likewise a golf association whose tournaments were an integral means of achieving its object of promoting and developing golf.
AUDA Cannot Be Applied Mechanically
The CIT(E) had relied substantially upon the Supreme Court judgment in ACIT(E) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC).
The Tribunal held that the decision in AUDA had been applied mechanically.
The Supreme Court had not laid down an absolute proposition that every receipt pursuant to a contractual arrangement or every sponsorship received by an institution having an object of general public utility automatically constitutes trade, commerce or business.
The relevant consideration is the true nature and character of the activity, having regard to the objects of the institution, the purpose for which the activity is undertaken, the nature of the receipts, the expenditure incurred and the manner in which the activity is actually carried out.
83% to 88% Receipts Did Not Make the Association Commercial
The CIT(E) noted that sponsorship fees, entry fees and professional entry fees constituted approximately 83% to 88% of gross receipts for FYs 2022-23 to 2024-25 and treated this as evidence of commercial activity.
The Tribunal rejected that reasoning.
Sponsorship receipts were approximately:
- ₹8.67 crore in FY 2022-23;
- ₹9.13 crore in FY 2023-24; and
- ₹10.14 crore in FY 2024-25.
Against these receipts, direct expenditure relating to tournament activities was approximately:
- ₹8.89 crore;
- ₹9.22 crore; and
- ₹10.10 crore, respectively.
The Tribunal found that the overwhelming portion of sponsorship receipts was consumed in conducting tournaments and activities directly connected with the sporting object. There was no substantial commercial mark-up which could justify an inference of profit motive.
The Tribunal also rejected the proposition that the existence of a small surplus establishes a profit motive. A charitable organisation requires reasonable financial reserves to maintain sustainability, meet contingencies and deal with timing differences between receipts and expenditure.
Sponsorship Agreement Did Not Change Character of Activity
The CIT(E) had also relied upon the contractual nature of sponsorship arrangements, including the agreement with Hero MotoCorp Ltd.
The Tribunal held that the existence of a contractual sponsorship arrangement does not, by itself, establish that the recipient sports association is carrying on commercial activity.
A sponsorship agreement necessarily defines the rights of the sponsor and obligations of the sporting organisation. The fact that a sponsor obtains visibility, association or exclusivity in return for sponsorship does not alter the essential character of the activity undertaken by the recipient organisation.
First Determine Whether There Is Business — Then Apply the 20% Test
The most important legal principle emerging from the ruling is that the 20% threshold under the proviso to section 2(15) cannot be treated as the starting point of the enquiry.
The first question is whether the activity generating the receipts is, in substance, an activity in the nature of trade, commerce or business or rendering of service in relation thereto.
If the activity itself constitutes implementation of the charitable object and does not possess the character of an independent commercial activity, the mere quantum of receipts generated in carrying out that activity cannot convert it into business.
Indian Olympic Association Decision Also Supports Factual Examination
The Tribunal also relied upon the Delhi ITAT decision in DCIT v. Indian Olympic Association, 209 ITD 209, which was rendered after the Supreme Court’s decision in AUDA.
The Tribunal noted that sponsorship arrangements entered into by a sports body do not automatically establish a profit motive. AUDA has to be applied by examining the factual model of the sports organisation, including the nature of receipts, expenditure, use of sponsorship funds and existence or absence of profit motive.
No Finding of Non-Genuine Activities or Violation Under Section 12AB(4)
The Tribunal noted that the CIT(E) had not recorded any adverse finding regarding genuineness of the assessee’s activities.
There was no finding that the assessee did not conduct the tournaments, receive sponsorships, incur sporting expenditure or undertake player-development and training programmes. Nor was there any finding of a specified violation under section 12AB(4) or misuse of funds.
The dispute was essentially about the legal characterisation of sponsorship receipts and activities carried out pursuant to sponsorship arrangements.
Renewal Proceedings Cannot Become Cancellation Proceedings
The assessee had been registered under section 12AA since 2005 and subsequently under the new section 12AB regime. The Tribunal noted that there had been no change in the assessee’s objects, activities, tournament structure, sponsorship model or application of funds.
Further, in earlier assessment proceedings, including AY 2017-18, the charitable nature of the assessee’s activities had been accepted and exemption under section 11 had been allowed.
The Tribunal therefore accepted the assessee’s argument concerning consistency.
It held that renewal proceedings under section 12AB principally require examination of the charitable objects and genuineness of activities. In the absence of a change in objects or activities, the CIT(E) could not simply take a different view on pre-existing facts.
The Tribunal specifically observed that permitting such an approach would effectively obliterate the distinction between renewal proceedings under section 12AB(1) and cancellation proceedings under section 12AB(4).
12AB Registration and 80G Approval Directed
The Tribunal concluded that the assessee’s objects fell within the ambit of “charitable purpose” under section 2(15) and that its activities were genuine and carried out in furtherance of those objects.
The organisation of golf tournaments was held to constitute an integral part of its sporting and charitable activities, while sponsorship receipts were merely a means of financing those activities.
Accordingly, the CIT(E)’s order rejecting registration under section 12AB was cancelled and the CIT(E) was directed to grant registration under section 12AB.
Since rejection of approval under section 80G was consequential to rejection of section 12AB registration, the Tribunal also directed the CIT(E) to grant approval under section 80G. Both appeals were consequently allowed.
Takeaway
The decision establishes an important proposition for charitable sports organisations:
The quantum of sponsorship receipts is not, by itself, determinative of commercial character.
Where tournaments, coaching, training, player development and other sporting activities are undertaken as part of the charitable object of promoting sport, sponsorship received to finance those activities does not automatically become business income for purposes of the proviso to section 2(15).
The 20% test is therefore not a shortcut. The Revenue must first examine whether the underlying activity itself possesses the character of trade, commerce or business.
A modest surplus, particularly where the overwhelming portion of sponsorship receipts is consumed in conducting the sporting activities, cannot by itself establish a profit motive.
A golf association need not play without sponsors — after all, even charity needs someone to pay the green fees.
List of Cases Discussed / Relied Upon
- ACIT(E) v. Ahmedabad Urban Development Authority, [2022] 449 ITR 1 (SC).
- DCIT v. Indian Olympic Association, 209 ITD 209 (Delhi ITAT).
- Professional Golf Tour of India v. CIT, 155 TTJ 17 (Chandigarh ITAT).
- ITO v. Indian Golf Union, ITA No. 2653/Del/2015 (Delhi ITAT).
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No. 3977 & 3878/Del/2025 for AY 2027-28, arises out of the order of the ld. Commissioner of Income Tax (Exemptions), New Delhi [hereinafter referred to as ‘ld. CIT(E)’, in short] dated 25.03.2026 for registration of u/s 12AB(1)(b)(ii)(B) and 80G of the Income Tax Act, 1961.
2. This appeal has been preferred by the appellant assessee against the order dated 25.03.2026 passed by the Learned Commissioner of Income Tax (Exemptions), Delhi [hereinafter referred to as Ld. CIT(E)] under section [u/s] 12AB(1)(b)(ii)(B) of the Income-tax Act, 1961 [hereinafter referred to as the Act], whereby the application filed by the assessee in Form No. 10AB seeking registration u/s 12A/12AB of the Act has been rejected primarily on the ground that the assessee was conducting professional golf tournaments, charging entry and professional entry fees and receiving substantial sponsorship receipts.
3. The assessee has raised following grounds of appeal:-
“1.1 That on the facts and in the circumstances of the case, the impugned order passed by the Ld. CIT(E) rejecting the application for registration u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961 is bad in law, arbitrary, and contrary to the facts and circumstances of the case.
1.2 That the Ld. CIT(E) has failed to appreciate that the primary object of the Appellant is the promotion of sports, specifically women’s golf in India, which falls within the ambit of “charitable purpose” u/s 2(15) as being an object of general public utility coupled with the upliftment and empowerment of women.
1.3 That the Ld. CIT(E) has fallen into error in concluding that organizing golf tournaments as part of charitable activity amounts to a commercial activity without appreciating that such tournaments are the core means of achieving the charitable objects of the Appellant and cannot be divorced from its stated purpose.
1.4 That the Ld. CIT(E) has failed to appreciate that the receipt of sponsorship fees is incidental and intrinsically linked to the attainment of the charitable objects and same being necessary for meeting the costs of organizing tournaments and promoting women’s participation in professional golf, the allegation of commercial activity is arbitrary and unjustified.
1.5 That the Appellant operates without any profit motive which is evident from the financial particulars of last few years, the allegation of commercial intent and invocation of proviso to section 2(15) is contrary to facts and devoid of merits.
2.1 That the Ld. CIT(E) has disregarded that the activities of the appellant being towards object of general public utility and supported from past history, the presumption of CIT(E) is misconceived and based on change of opinion.
2.2 In any case, the impugned order is arbitrary, inconsistent and contrary to past history in view of continuous registration since 2004 with no change in objects or activities.
2.3 That the Ld. CIT(E) has misapplied and misconstrued the ratio laid down by the Hon’ble Supreme Court in the case of ACIT(E) v. Ahmedabad Urban Development Authority [2022] 449 ITR 1(SC), by failing to appreciate that the said decision does not prohibit genuine charitable institutions from carrying on activities that are incidental to their objects.
3. That the Ld. CIT(E) failed to appreciate that at the stage of grant of registration u/s 12A, the scope of enquiry is limited to examining the objects and genuineness of activities, and not to adjudicate upon the applicability of the proviso to section 2(15), which is relevant only at the stage of assessment.
4. That the learned CIT(E) has failed to consider relevant facts and submissions and has passed the impugned order without proper application of mind, rendering the impugned order unsustainable in law.”
We have heard the rival submissions and perused the materials available on record. The assessee is a society registered under the Societies Registration Act on 01.12.2004. The assessee was originally granted registration u/s 12AA of the Act vide order dated 28.06.2005 with effect from 01.12.2004. Subsequently, registration under the new regime was also granted vide order dated 24.09.2021 for the period from Assessment Years 2022-23 to 2026-27. The assessee is also registered under Foreign Contribution Regulation Act (FCRA). The assessee is a non-profit sports association established with the principal object of promoting and developing women’s golf in India. In furtherance of its objects, the assessee organizes professional golf tournaments, including the Women’s Indian Open and Women’s Professional Golf Tour, provides opportunities to women golfers to participate at national and international levels and undertakes activities relating to training, coaching, player development and welfare.
4. The assessee filed application seeking renewal of registration in Form No. 10AB on 28.09.2025 u/s 12A(1)(ac)(ii) of the Act. The Ld. CIT(E) issued questionnaires dated 08.12.2025 and 11.03.2026 which were duly replied by the assessee by furnishing the requisite documents. The Ld. CIT(E), however, rejected the application primarily on the ground that the assessee was conducting professional golf tournaments, charging entry and professional entry fees and receiving substantial sponsorship receipts. The Ld. CIT(E) held that the sponsorship arrangements were contractual in nature and constituted services rendered for consideration. It was further held that sponsorship fees constituted the predominant component of the receipts and concluded that the commercial receipts exceeded the 20 per cent threshold contemplated u/s 2(15) of the Act.
5. The Ld. AR submitted that the Ld. CIT(E) has fundamentally misunderstood the nature of the assessee’s activities. It was submitted that the assessee is not a commercial organization but a sports body whose very object is the promotion and development of women’s golf. It was submitted that organizing golf tournaments is not an activity independent of the charitable object, rather, it is the principal mechanism through which the charitable object of promotion of golf is achieved in the form of participation, ranking, identification of talent, development of professional opportunities and advancement of the sport. It was further submitted that sponsorship receipts are merely a means of financing the charitable activities. The assessee does not distribute its surplus amongst its members and the receipts are applied towards organizing tournaments, prize money, player participation, coaching, training, development of women’s golf and allied sporting activities. It was submitted that there has been no change in the objects, manner of functioning, organization of tournaments, sponsorship model or application of funds. Further, in the assessee’s own assessment proceedings for various Assessment Years 2011-12, 2014-15 and 2017-18, the appellate authorities have accepted the charitable nature of the activities and allowed exemption u/s 11 and 12 of the Act. The Ld. AR referred to the various appellate orders in this regard.
6. The Ld. CIT(E) noted that sponsorship fees constituted the predominant component of the receipts and concluded that the commercial receipts exceeded the 20 per cent threshold contemplated u/s 2(15) of the Act. The Ld. CIT(E) also relied upon the decision of the Hon’ble Supreme Court in the case of ACIT vs Ahmedabad Urban Development Authority (“AUDA”) reported in 449 ITR 1 (SC), particularly the observations concerning sports associations, and ultimately held that the assessee failed the 20 per cent test u/s 2(15) of the Act. It was further submitted that the reliance placed by the Ld. CIT(E) on the judgment of the Hon’ble Supreme Court in the case of AUDA is totally misconceived in as much as the Hon’ble Supreme Court did not lay down an absolute proposition that every receipt arising pursuant to a sponsorship agreement or every activity involving consideration would necessarily constitute an activity in the nature of trade, commerce or business. On the contrary, in the context of sports associations, the Hon’ble Supreme Court specifically directed that the matter be examined on the basis of the factual pattern of receipts and expenditure and the actual nature of the activities undertaken by the concerned association. The Ld. AR specifically made reference to the observation of Hon’ble Supreme Court vide Para 253 (H) which is as under: –
“H. It may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the assessees (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The Assessing Officer must on a yearly basis, scrutinize the record to discern whether the nature of the assessee’s activities amount to ‘trade, commerce or business’ based on its receipts and income (i.e., whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of ‘trade, commerce or business’, then it must be examined whether the quantified limit (as amended from time-to time) in proviso to section 2(15), has been breached, thus, disentitling them to exemption.”
7. The Ld. AR also placed reliance on the following decisions in support of his contentions:
a) Co-ordinate Bench of Delhi Tribunal in the case of DCIT vs Indian Olympic Association reported in 209 ITD 209.
b) Co-ordinate Bench of Chandigarh Tribunal in the case of Professional Golf Tour of India vs CIT reported in 155 TTJ 17 (Chandigarh – Trib.).
c) Co-ordinate Bench of Delhi Tribunal in the case of ITO vs Indian Golf Union in ITA No. 2653/Del/2015.
8. Finally the Ld. AR vehemently submitted that the assessee had only sought renewal of registration u/s 12AB of the Act and in absence of any change of objects or activity, it was not open for Ld. CIT(E) to deviate from a settled and accepted position while considering an application of renewal of registration.
9. Per Contra, the Ld. CIT DR on the other hand supported the order of Ld. CIT(E) and contended that the reasoning adopted by the Ld. CIT(E) for rejecting the grant of registration u/s 12AB of the Act is in accordance with principle laid down by the Hon’ble Supreme Court in the case of AUDA referred supra.
10. The core issue to be decided in this appeal is as to whether the Ld. CIT(E) was justified in rejecting the application filed by the assessee for registration u/s 12AB of the Act merely on the ground that the assessee receives substantial sponsorship fees and that such receipts, together with entry fees and professional entry fees, exceed 20 per cent of the total receipts. The Ld. CIT(E) has further relied upon the judgment of the Hon’ble Supreme Court in the case of AUDA and has proceeded on the premise that once the assessee receives consideration under contractual sponsorship arrangements, the activities necessarily assume the character of trade, commerce or business and, consequently, the proviso to section 2(15) of the Act becomes applicable. In our considered view, the aforesaid approach of the Ld. CIT(E) proceeds on an incomplete appreciation of the ratio laid down by the Hon’ble Supreme Court in AUDA. On perusal of the Income and Expenditure account of the assessee, we find that the assessee has incurred expenditure on various such developmental and welfare activities in consonance with the charitable objects of the Society. Further we find that the dispute regarding the nature of activities in the context of proviso to section 2(15) of the Act arose in AY 2017-18 wherein the Ld. CIT(A) after appreciating the facts of the case, allowed the claim of exemption u/s 11 of the Act vide order dated 09.10.2024. We find that the reasoning adopted by the Ld. CIT(E) also overlooks the fundamental distinction between an activity undertaken in furtherance of a charitable object and an independent commercial activity. In the case of a sports association, organizing tournaments is an intrinsic activity which cannot realistically be separated from promotion of the sport. Tournaments provide the platform for players to compete, enable identification and development of talent, create professional opportunities and increase public participation in the sport. The material on record also establishes that the assessee has undertaken various activities for junior golfers, amateur players and professional golfers. It has provided financial assistance for overseas participation, conducted caddy training programmes without charging fees from trainees, organized junior golf camps and provided coaching and training facilities. Thus, the activities cannot be viewed merely from the standpoint of receipts. The entire activity has to be examined in its proper factual and functional context which would also prove the predominant charitable activity of the Society and its objects. Furthermore, organizing golf tournaments is one of the principal means through which the object of promotion and development of golf is achieved. Without tournaments, players cannot obtain competitive exposure, rankings cannot be developed, talent cannot be identified, professional opportunities cannot be created and the sport cannot be promoted. Therefore, the tournament itself constitutes an implementation of the assessee’s charitable sporting object. This view of ours is further fortified by the Co-ordinate Bench decision of Chandigarh Tribunal in the case of Professional Golf Tour of India vs CIT reported in 155 TTJ 17 (Chandigarh – Trib.). In that case, the Tribunal was considering an association formed for promoting golf and professional golf and held that promotion of sports and games constitutes charitable purpose within the meaning of section 2(15) of the Act and that the assessee was entitled to registration u/s 12AA of the Act. The Tribunal also considered the allegation that the assessee was engaged in money-making activities through professional golf tournaments and sponsorships and held that obtaining sponsors for tournaments and organizing such events was aimed at promoting golf and creating career opportunities for young golfers. The relevant operative portion of the said Tribunal order is reproduced hereunder:-
“8. We have seen and carefully read the objects specifically referred to by CIT-DR which according to him are beneficial to running of commercial activities and not charitable activities by the Society. In our considered opinion, the bare reading of sub-clause (xii), (xiii) and (xiv) of main clause 3 do not show or reveal that they are not aimed at doing charity to public. In fact, the game of golf is a specialized game which is not generally played by majority of people and that is why the ld. Commissioner has misconceived that this game is not meant for public at large. At the stage of consideration of registration u/s 12AA in which the objects are primarily to be looked into and of course its activities can also be examined with a view to ascertain if it is really pursuing its objects or not. In our considered opinion, there is nothing on record which suggests that the assessee is not pursuing charitable purpose. The expression ‘charitable purpose’ is defined in section 2(15) of the Act to include relief of the poor, education, medical relief and advancement of any other object of public utility. The Board has advised that promotion of sports and games can be considered as ‘charitable purpose’. The Board has also advised that the advancement of any object which is beneficial to the public or a section of the public as distinguished from an individual or group of individuals would amount to an object of general public utility. Therefore, promotion of sports and games has to be considered as ‘charitable purpose’ within the meaning of section 2(15) of the Act. The assessee is a society registered under the Societies Registration Act and it is formed to promote interest in the game of golf in general and professional golf in particular. The averment made by ld. Commissioner that membership of society is restricted to Professional Golfers resident in India and also overseas is misconceived. We do not find any such restrictive clause in the objects of the assessee society. Golf is a game in which not many people are interested. It is clear from the aims and objects of the society that any person who is in any way attached to or interested in the game of golf can join as its member and can contribute towards the promotion of game. We do not find anything on record which suggest that the society is being run on commercial lines. It is not taking any financial aid or grant from any government agency. Therefore, it becomes imperative for it to follow certain rules or commercial expediency in order to keep-going. It is nowhere mentioned that a charitable society has to be poor, ill-managed, financially drenched and always anchoring for financial help. If any society acts in a prudent manner to become self-sustained, it would not amount to becoming of commercial organization. The allegation of ld. Commissioner that the society is engaged in money making activities which ultimately benefit the Professional Golfers in the form of prize money from various professional golf tournaments. The general public gets motivated only if the concerned game is in public domain and its players get compensated financially only. Thus, in our view, getting sponsors for tournaments and organizing such events as have been mentioned by the Commissioner is only aimed to display carrier opportunity for young golfers to take up this game as a profession. In that eventuality, even families of the players would have no objection. Thus, all the activities of the assessee are not commercial but they aim at promoting the game of golf. The society requires genuine motivation and zeal to organize the successful golf tournament to evoke interest in building golfers and motivate upcoming amateur as well as professional golfers.”
(Underlining provided by us)
The factual similarity between the aforesaid decision and the instant case before us is striking, since the present assessee is also a golf association whose principal object is promotion and development of women’s golf and whose tournaments are conducted as an integral means of achieving that object.
11. We further find that the Ld. CIT(E) has not recorded any adverse finding regarding the genuineness of the assessee’s activities or any specified violation u/s 12AB(4) or any benefit or misuse of funds. The Ld. CIT(E) has not disputed that the assessee actually conducts golf tournaments, receives sponsorships, incurs expenditure on sporting activities or undertakes player-development and training programmes. The dispute is essentially regarding the legal characterization of the sponsorship receipts and the activities undertaken pursuant to the sponsorship arrangements. Therefore, the genuineness of the activities is not in question. The material before us demonstrates that the assessee is actually pursuing its stated objects and that its activities are directly connected with the promotion of women’s golf. For a sports promotion body, the activities undertaken for promotion, development and advancement of sports can constitute an object of “advancement of any other object of general public utility” within the meaning of section 2(15) of the Act, provided the activities are undertaken in furtherance of the stated charitable objects and are not in the nature of carrying on a business, trade or commerce for profit. The expression “general public utility” is of wide import and is fully relevant to activities towards promotion of sports for public at large.. Accordingly, conduct of tournaments, coaching and training programmes, selection and development of players, providing sporting facilities, organising competitions, promoting participation in sports and undertaking activities for the development of sporting talent are, in substance, activities directed towards the advancement of the relevant sport and consequently towards an object of general public utility. The mere fact that the sports body receives fees, sponsorship, entry charges, grants or other receipts in the course of such activities would not, by itself, alter the charitable character of its objects. The determinative consideration is whether the dominant and predominant purpose is advancement of the sporting activity and public benefit, or whether the institution is carrying on trade, commerce or business as an end in itself. Thus, in our opinion, where the receipts and activities are incidental to and in aid of the predominant charitable objective of promotion of sports, the same would fall within the ambit of section 2(15) of the Act.
12. In the above background, we find it appropriate to examine the scope and ratio of the judgment of the Hon’ble Supreme Court in the case of AUDA which has been heavily relied upon by the Ld. CIT(E). The said judgment was rendered in a batch of appeals concerning different categories of institutions claiming to be engaged in the advancement of an object of general public utility. The Hon’ble Supreme Court examined the scope of the expression “charitable purpose” u/s 2(15) of the Act, particularly the proviso relating to activities in the nature of trade, commerce or business. The Court held that an institution having an object of general public utility cannot ordinarily engage itself in trade, commerce or business or render services in relation thereto for consideration merely under the guise of pursuing an object of general public utility. However, the judgment does not lay down an absolute proposition that every receipt generated by an institution having an object of general public utility, or every activity undertaken pursuant to a contractual arrangement, automatically assumes the character of trade, commerce or business. The true nature and character of the activity has to be determined having regard to the objects of the institution, the purpose for which the activity is undertaken, the nature of the receipts, the expenditure incurred and the manner in which the activity is actually carried out. This aspect assumes particular significance in the context of sports associations. The Hon’ble Supreme Court dealt with sports associations separately in the judgment in AUDA. In relation to the State Cricket Associations, the Hon’ble Supreme Court did not lay down an absolute proposition that receipt of sponsorship or other commercial receipts by a sports association necessarily destroys its charitable On the contrary, the Court directed further scrutiny of the relevant factual circumstances and required the authorities to examine the nature and pattern of receipts and expenditure. The discussion in paragraphs 228 to 238 of the judgment was in the context of the particular factual circumstances of the cricket associations before the Court. The Court noticed substantial receipts from sponsorship, media rights, ticket sales and other commercial rights, the existence of substantial physical infrastructure, permanent manpower and an organized commercial ecosystem surrounding the conduct of cricket. The Court further noted that the expenditure incurred by the concerned associations did not disclose significant expenditure towards sustained or organized coaching camps or academies. In that factual context, the Hon’ble Supreme Court emphasized that the pattern of receipts and expenditure had to be carefully examined to determine the true character of the activities. The aforesaid factual background demonstrates that the judgment in AUDA cannot be read as laying down a blanket rule that every sports association receiving sponsorship is engaged in commercial activity. The Hon’ble Supreme Court itself required examination of the particular factual circumstances of the concerned sports associations. Therefore, what is required to be seen in the present case is whether the assessee’s sponsorship arrangements represent an independent commercial activity or whether they constitute a means of financing and facilitating the assessee’s principal charitable object of promoting and developing women’s golf. In the instant case before us, the facts are materially different from those considered by the Hon’ble Supreme Court in relation to the State Cricket Associations. The assessee herein before us is a specialized non-profit organization established for promotion and development of women’s golf in India. Its activities include organizing golf tournaments, promoting participation of women golfers, developing amateur and junior golfers, providing coaching and training facilities, assisting players in participation in overseas tournaments and conducting caddy and junior development programmes. The record demonstrates that the assessee has undertaken caddy training programmes without charging fees from trainees, conducted junior golf training camps and provided financial assistance to players for participation in overseas events. The assessee has also incurred expenditure towards coaching facilities and junior development camps and has provided facilities to professional women golfers. Therefore, the very factual consideration which led the Hon’ble Supreme Court to require closer scrutiny in AUDA, namely the relationship between substantial commercial receipts and expenditure towards promotion and development of the sport, has to be examined in the factual context of the present assessee and cannot simply be presumed against it. We further find that the Ld. CIT(E) has proceeded primarily on the quantum of sponsorship receipts. For Financial Years 2022-23 to 2024-25, the Ld. CIT(E) noticed that sponsorship fees, entry fees and professional entry fees constituted approximately 83 per cent to 88 per cent of the gross receipts and, on that basis, concluded that the assessee was predominantly engaged in commercial activities. In our considered opinion, however, the percentage of receipts cannot by itself determine the character of the activity. The anterior question is whether the activity from which the receipts arise is, in substance, an activity in the nature of trade, commerce or business or whether it is an integral part of the implementation of the charitable objects of the institution. Only after determining the true character of the activity can the consequences of the proviso to section 2(15) of the Act be examined.
13. We further find that the issue has been considered by the Co-ordinate Bench of Delhi Tribunal in the case of DCIT vs Indian Olympic Association reported in 209 ITD 209, which is a decision rendered after the judgment of the Hon’ble Supreme Court in AUDA. The relevance of this decision cannot be overstated. In that case also, the revenue relied upon the judgment of the Hon’ble Supreme Court in AUDA and contended that sponsorship arrangements entered into by the sports body constituted business or commercial activity. The Tribunal, after considering AUDA, examined the factual circumstances of the Indian Olympic Association and distinguished the model of the State Cricket Associations considered by the Hon’ble Supreme Court from the activities of the Olympic Association. The Tribunal observed that the sponsorship arrangements were intended to support participation in sporting events and that the circumstances did not demonstrate any profit motive. It accordingly held that there was no justification for denying the benefit merely because sponsorship contracts had been arranged. The Tribunal held that arranging sponsorship contracts, by itself, did not establish a profit motive and that the decision in AUDA was not applicable on the facts of the Indian Olympic Association. This decision is significant because it demonstrates the correct manner in which AUDA is required to be applied to a sports association. The Tribunal did not disregard AUDA; rather, it examined the factual model of the sports organization and determined whether the receipts and expenditure demonstrated a commercial activity or whether the sponsorship arrangements were merely a means of facilitating the charitable sporting objects. Therefore, the ratio which emerges is not that AUDA has no application to sports associations, but that AUDA cannot be mechanically applied merely because a sports association receives sponsorship consideration. The nature of the institution, the purpose of the sponsorship, the manner in which the funds are utilized, the existence or absence of profit motive and the overall pattern of receipts and expenditure have to be examined.
14. We have also examined the financial statements of the assessee for Financial Years 2022-23, 2023-24 and 2024-25 in the light of the specific test laid down by the Hon’ble Supreme Court in the case of AUDA. The financial statements reveal that the assessee received sponsorship receipts of Rs 8.67 crores, Rs 9.13 crores and Rs 10.14 crores respectively during the aforesaid three years, whereas the total receipts were Rs 10.07 crores, Rs 11.18 crores and Rs 12.16 crores respectively which includes donation, membership fee and interest. However, against the aforesaid receipts, the assessee incurred direct expenses, which included expenses directly relatable to the tournament activities, of Rs 8.89 crores, Rs 9.22 crores and Rs 10.10 crores respectively. The total expenditure, including other expenses, stood at Rs 9.24 crores, Rs 9.62 crores and Rs 10.60 crores respectively. Thus, the financial data itself demonstrates that the overwhelming and almost entire amount of sponsorship receipts was consumed in conducting and organizing the golf tournaments and the activitiesdirectly connected therewith, leaving only a gross surplus of Rs 2.51 lakhs, Rs 15.60 lakhs and Rs 29.57 lakhs respectively. In other words, when the sponsorship receipts are examined in the manner contemplated by the Hon’ble Supreme Court in AUDA, there is no substantial margin or mark-up embedded in the receipts which could indicate that the assessee was conducting the tournaments with a commercial profit motive. The Ld. CIT(E) has characterized the assessee’s surplus as “substantive” merely by looking at the absolute figure of net surplus, without appreciating its proportion to the receipts and, more importantly, without appreciating that the sponsorship receipts were substantially absorbed in the very sporting activities for which they were raised. The figures demonstrate that the assessee incurred direct expenses of approximately 97 per cent, 95 per cent and 97 per cent of the sponsorship/commercial receipts in the three years respectively, leaving only a marginal gross surplus. The Hon’ble Supreme Court specifically emphasized that the nature of the receipts and the manner in which they are utilized have to be examined in determining their true character. The present financial analysis therefore satisfies, rather than violates, the mandate of AUDA; the sponsorship consideration is substantially consumed in carrying out the sporting activity itself and does not yield a substantial commercial margin.
15. Next coming to the existence of a small surplus, the same cannot be treated as evidence of a profit motive. A charitable institution cannot realistically be expected to operate on a year-to-year basis without maintaining any surplus or financial reserve whatsoever. Retention of a reasonable and nominal surplus is necessary for the financial sustainability, continuity and survival of the institution, particularly in the case of an organization such as the assessee which is required to incur substantial expenditure for organizing tournaments, prize money, player participation, coaching, training and other sporting activities before and irrespective of the receipt of sponsorship funds. A prudent charitable institution must necessarily retain sufficient funds to meet contingencies, bridge timing differences between receipt of sponsorship and incurrence of expenditure, absorb years in which expenditure exceeds receipts and ensure that its charitable activities do not come to a standstill merely because sponsorship receipts fluctuate. Thus, the retention of a modest surplus is not inconsistent with charitable activity; rather, it is an essential incident of prudent financial management of a non-profit institution. Therefore, when the financials are examined not merely from the perspective of the gross quantum of sponsorship receipts but from the perspective mandated by AUDA—namely, the relationship between the consideration received, the cost incurred, the manner of utilization and the resultant surplus, it is evident that there is no substantial commercial mark-up and no material basis to infer a profit motive. The financial analysis thus supports the assessee’s contention that the sponsorship receipts are incidental and intrinsically connected with the charitable object of promotion of women’s golf and that the activities of the assessee satisfy the test laid down by the Hon’ble Supreme Court in AUDA.
16. The Ld. CIT(E) has also relied upon the contractual nature of the sponsorship arrangements, particularly the agreement with Hero MotoCorp Ltd., under which the sponsor received certain rights and benefits and brand exclusivity. In our opinion, the existence of any contractual arrangement does not, by itself, establish that the assessee is carrying on any commercial activity. A Sponsorship agreement necessarily define the rights of the sponsor and the obligations of the sporting organization, however, the fact that the sponsor obtains visibility, association or exclusivity in return for its sponsorship does not alter the essential character of the activity undertaken by the recipient organization. What is relevant is the purpose for which the assessee accepts sponsorship and its utilization towards the defined objective.
17. The Ld. CIT(E) has also proceeded on the basis that because the sponsorship receipts exceed 20 per cent of the total receipts, the assessee necessarily fails the test contained in the proviso to section 2(15) of the Act. Such an approach, in our considered view, is not correct. The 20 per cent threshold cannot be applied in isolation without first determining whether the activity from which the relevant receipts arise is in the nature of trade, commerce or businessor a service in relation thereto. If the activity itself constitutes implementation of the charitable object and does not possess the character of an independent commercial activity, the mere quantum of receipts generated in the course thereof cannot convert the activity into business. This distinction assumes even greater significance in the present case because the assessee does not exist for the purpose of conducting events for sponsors and instead it exists only for promotion and development of women’s golf and as noted above, the sponsorship is merely a means of obtaining financial resources necessary for carrying out that object. The assessee’s own history demonstrates that it has been consistently engaged in the promotion of golf and has undertaken various developmental activities for players. The material on record shows expenditure towards overseas participation of players, coaching facilities, junior development camps and caddy training programmes. Accordingly, we are unable to comprehend ourselves to accept to the observations of the Ld. CIT(E) regarding 20 per cent threshold which is not applicable to the facts of the case.
18. In any event, we find considerable force in the assessee’s contention of rule of consistency. The assessee was granted registration u/s 12AA of the Act on 28.6.2005 and subsequently registration under the new regime for Assessment Years 2022-23 to 2026-27. Further, in the assessee’s own assessment proceedings for earlier years, substantially similar objections concerning sponsorship receipts and the proviso to section 2(15) of the Act were raised and considered and the Ld. CIT(A) after detailed analysis, accepted the assessee’s contention that promotion of golf is a charitable activity thereby upheld the claim of exemption u/s 11 of the Act. On perusal of the Ld. CIT(A) order for AY 2017-18, it is noted that the issue of claim of exemption u/s 11 of the Act was decided in favour of the assessee based on order passed by Ld. CIT(A) in AYs 2011-12 to 2014-15 and following the decision of the Tribunal in the case of Indian Golf Union.
19. In the impugned order, there is neither any finding that the objects of the assessee have undergone any change nor any finding that the assessee has changed the manner in which it conducts tournaments, promotes golf or applies its funds. In fact, the assessee has asserted that there has been no change in its objects, manner of functioning, nature of tournaments, sponsorship model or application of funds since its inception. In the absence of any material change in facts or law, the departure from the settled position accepted in the assessee’s own case requires cogent reasons, which are absent in the present case.
20. At this stage, it is also necessary to bear in mind the scope of proceedings relating to registration u/s 12AB of the Act. The registration authority is required to examine whether the objects of the applicant are charitable and whether its activities are genuine and are being carried out in accordance with those objects. The proceedings for registration cannot be converted into a complete assessment of the taxability of every receipt of the assessee for every assessment year. We agree with the contention of the Ld. AR regarding distinction between proceedings for renewal of registration u/s 12AB of the Act and cancellation of pre-existing registration. It is noted that the renewal proceedings are essentially for continuance of already granted registration and the scope of such proceedings is confined to verification of the objects and activities of the trust under the umbrella of facts existed as on the date of earlier registration. It essentially means that while deciding the application of renewal of registration, the Ld. CIT(E) cannot take different view on pre-existing facts in the absence of any change of objects or activities of the Society otherwise it will obliterate the difference between the renewal proceedings u/s 12AB(1) of the Act and cancellation proceedings as envisaged u/s 12AB(4) of the Act. Thus, considering the consistency of facts of the present case and past history, we find that the Ld. CIT(E) has clearly exceeded his jurisdiction in rejecting the renewal of registration u/s 12AB of the Act on unfounded grounds.
21. It is trite law that at the stage of registration, the objects are primarily to be examined and the activities may be examined to ascertain whether the institution is genuinely pursuing its objects. In the present case, the Ld. CIT(E) has not found that the assessee is not genuinely pursuing its objects or there is anyspecified violation within the meaning of Explanation to Section 12AB(4) of the Act. The rejection is essentially founded upon the conclusion that the sponsorship receipts are of commercial nature which is clearly untenable and based on change of opinion.
22. Considering the totality of the facts and circumstances, we are of the considered view that the assessee’s objects fall within the ambit of “charitable purpose” u/s 2(15) of the Act and that its activities are genuine and are being carried out in furtherance of those objects. The organization of golf tournaments constitutes an integral part of the assessee’s sporting and charitable activities, while the sponsorship receipts are a means of financing such activities. The mere fact that the sponsorship receipts constitute a substantial percentage of the total receipts cannot, in the absence of any independent commercial activity or profit motive, be treated as conclusive of the assessee’s commercial character. The Ld. CIT(E), therefore, was not justified in rejecting the application for registration u/s 12AB of the Act. Accordingly, the impugned order passed by the Ld. CIT(E) rejecting the assessee’s application u/s 12AB of the Act is hereby cancelled. The Ld. CIT(E) is directed to grant registration to the assessee u/s 12AB of the Act.
23. The other appeal preferred by the assessee is denial of exemption u/s 80G of the Act which is consequential to denial of registration u/s 12AB of the Act. Since we have already directed the Ld. CIT(E ) to grant registration u/s 12AB of the Act hereinabove, the assessee would be entitled for exemption u/s 80G of the Act also.
24. In the result, both the appeals of the assessee are allowed.
25. With regard to ITA No. 3978/Del/26 which is directed against rejection of registration u/s 80G of the Act. Since the ground and basis for rejection of approval u/s 80G is directly consequential to issue of renewal of registration u/s 12AB, in view of aforesaid finding in ITA No. 3977/Del/26, we direct the Ld. CIT(E) to grant registration u/s 80G of the Act. Accordingly, the appeal is allowed.
Order pronounced in the open court on 3rd -September, 2026.
