AO cannot treat activities of Trust as business without examining the same

ITA No. 93/VIZ/2015 is an appeal filed by the revenue against the order of the ld. CIT(A)-1, Guntur dated 10/11/20 14 for the Assessment Year 2010-11.

ITA No. 241/VIZ/2015 & ITA No. 01/VIZ/2016 are the appeals filed by the revenue against separate orders of the ld. CIT(A), Vijayawada, dated 25/03/2015 & 28/09/2015 for the Assessment Year 2011-12 & 2012-13.

ITA No. 93/VIZ/2015

2. Facts of the case, in brief, are that assessee- Andhra Cricket Association (ACA) was registered under section 12A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) w.e.f. 01/04/1993 vide proceedings of the Commissioner of Income Tax (CIT), Guntur [H .Qrs. No. I (516)/Guntur/94-95, dated 21/02/1995]. The assessee also obtained grant of approval under section 10(23C)(iv) of the Act vide proceedings of Chief Commissioner of Income Tax-III, Hyderabad [CCIT-III/Tech/10(23C)(iv)/18/08-09, dated 27/02/2009]. The assessee has filed its return of income by declaring total loss of ₹ 1,91,29,098/- after claiming exemption under section 11 and 10(23C)(iv) of the Act. The return filed by the assessee was processed under section 143(1) of the Act. Subsequently, the assessee^‘s case was selected for scrutiny and notice under section 143(2) was issued and after following due procedure, assessment is completed under section 143(3) of the Act. In the assessment order, the Assessing Officer has noted that the assessee allegedly receiving grants from the Board of Control for Cricket in India (BCCI) partly, as reimbursement for various tournaments conducted by the assessee. The assessee has already constructed a stadium at Visakhapatnam for conducting ^‘test matches’. During the year under consideration, the assessee has also commenced construction of stadiums at various places like Mangalagiri, Kurnool & Kadapa. During the year, it has also acquired land at Nellore for the purpose of constructing a stadium. The assessee has admitted the income under the major heads, such as BCCI reimbursements of ₹ 20,64,17,339/- and interest of ₹ 1,26,10,435/- on FDR^‟s & SB accounts. Out of these receipts, the assessee incurred expenditure towards conducting various tournaments, grants to district associations for conducting league tournaments and development of game and other heads, such as Administrative & Maintenance. The assessee has shown the values of fixed assets and the infrastructure subsidy from the BCCI.

3. The Assessing Officer further observed that on verification of the copy of booklet of Memorandum and Articles of Association dated 18/07/1994, it is mentioned at page No. 50 that certain amendments were made in three phases by conducting Special General Body Meetings held on 04/08/1994, 23/07/1995 & 10/11/2007 carried out by the Registrar of Societies, Guntur vide C. No. 415/94, 159/99 & 978/07 respectively. However, the assessee has failed to furnish evidence with regard to approvals obtained from the jurisdictional Commissioner of Income Tax for the said amendments.

4. The Assessing Officer after verifying the objects of original memorandum of association and subsequent amendments made by the assessee on 04/08/1994, 23/07/1995 & 10/11/2007, he came to a conclusion that the assessee has not taken approval from the Commissioner of Income Tax and therefore, is not eligible for exemption under section 11 of the Act. For the sake of convenience, original objects of the assessee as per memorandum of association and subsequent amendments are extracted as under:-

5. The Assessing Officer further observed that assessee intentionally passed amendments to the objects and rules conspiring with the BCCI and also at the convenient of the Executive Bodies of the ACA & BCCI to get benefit of alleged funds from BCCI and then to avail the benefits of sections 11 & 12 for both the organizations. The Assessing Officer also noted that the basis of which, granted registration under section 12A by the Commissioner of Income Tax are the original objects. Therefore, once amendments are made without approval of the Commissioner of Income Tax, the registration granted under section 12A would not survive and therefore the registration granted by the Commissioner of Income Tax, ceased to exist as per the judgment of the Allahabad High Court in the case of Allahabad Agricultural Institute & another Vs. Union of India & others (291 ITR 116). The Assessing Officer also noted that the activities carried out by the assessee are totally commercial and there is no element of any charity in the conduct of ACA. Therefore, on this count also, the Assessing Officer denied exemption under section 11 of the Act.

6. On appeal, ld. CIT(A) directed the Assessing Officer to grant exemption under section 11 of the Act by observing as under:-

“5 . I have gone through the facts of the case, assessment order and written submissions filled by the appellant. The Assessing Officer mainly concluded that these amendments to the Rules and Bye-laws to the Original Memorandum and Articles of Association were in the absence of prior approval of the Commissioner of Income Tax for making the amendments thereby not eligible for exemption claimed by the appellant u/s. 11 and proceeded to assess the society as business concern and computed the total income at Rs. 14,91,89,110/-.

Further in the amendment to rules the AO observed that the activities of the appellant have become’ totally commercial and the income is derived from the business of cricket and not from the game of cricket which is wrong. With regard to this, the appellant submitted that the AO has not established as to which activity of the appellant was commercial in nature during the year. The appellant also contends that the AO has failed to bring on record necessary evidence to prove that the appellant has indulged in commercial activity before making such sweeping allegation. From the assessment order I also observed that Assessing Officer actually mention the business activity and hot established the same.”

7. On being aggrieved, revenue carried the matter in appeal before the tribunal.

8. Learned Departmental Representative has submitted that the assessee- association has been granted registration under section 12A of the Act. Subsequently, certain amendments were made without approval of the Commissioner of Income Tax. Therefore, the Assessing Officer has rightly rejected exemption claimed by the assessee under section 11 of the Act.

9. Learned Departmental Representative further submitted that the assessee is not carrying any charitable activities, therefore, Assessing Officer by considering the same, denied exemption under section 11 of the Act.

10. On the other hand, learned counsel for the assessee has submitted that the assessee- association has been granted registration by the Commissioner of Income Tax under section 12A of the Act on 21/02/1995. Since then, the assessee is continuously enjoying registration under section 12A of the Act. Subsequently, the assessee association has made certain amendments which are only clarificatory in nature and without affecting the main objects of the association and for the purpose of more effective and practical execution of the objects.

11. Learned counsel for the assessee has further submitted that learned CCIT has granted approval to the assessee- association under section 10(23C)(iv) of the Act after examining the amended objects, and therefore, the Assessing Officer is not justified in rejecting claim of exemption under section 11 of the Act. It is further submitted that there is a proposal by the learned Commissioner to cancel the registration granted under section 12A to the assessee, and a notice was issued to the assessee on 04/03/2014 calling explanation from the assessee. In response to the notice, assessee has submitted a detailed representation to the Commissioner on 10/03/2014. By considering the same, the Commissioner has dropped the proceedings initiated for cancellation of registration under section 12A of the Act.

12. Learned counsel for the assessee has further submitted that once assessee is enjoying registration under section 12A, the duty of the Assessing Officer is to see whether assessee^‟s income is exempt under section 11 of the Act or not. The Assessing Officer without giving any reasons, simply rejected the exemption under section 11 of the Act on the ground that assessee amended the objects. It is further submitted that the learned CCIT has already granted approval to the assessee under section 10(23C)(iv) of the Act. The Assessing Officer without considering the same, rejected the claim of exemption made by the assessee. Learned counsel for the assessee has further submitted that the objects of the assessee- association, originally framed and filed before the learned Commissioner and subsequently, the some changes by way of amendments were made without effecting the character of the original objects. Therefore, the Assessing Officer is not justified in rejecting exemption under section 11 of the Act. Learned counsel for the assessee mainly relied on the decision of the Hon’ble Madras High Court in the case of the Tamil Nadu Cricket Association Vs. The Director of Income Tax (Exemptions) & others [(360 ITR 663) (Madras)] and submitted that the activities carried out by the assessee- association are similar to the facts of the case in Tamil Nadu Cricket Association (supra) as assessee is also carrying charitable activities, and therefore, assessee is entitled for exemption under section 11 and 10(23C)(iv) of the Act.

13. We have heard both the sides, perused the material available on record and orders of the authorities below.

14. The assessee- M/s. The Andhra Cricket Association has been granted registration by the learned Commissioner on 21/02/1995. Subsequently, learned CCIT granted approval under section 10(23C)(iv) of the Act on 27/02/2009. The assessee filed its return of income for the year under consideration by declaring total loss of ₹ 1,92,29,098/- after claiming exemption under section 11 of the Act. In the assessment order, the Assessing Officer has observed that the assessee association, subsequent to the registration granted under section 12A, certain amendments were made in three phases by conducting Special General Body Meetings held on 04/08/1994, 23/07/1995 & 10/11/2007, but he failed to furnish evidence with regard to approvals obtained from the jurisdictional Commissioner for the said amendments. The Assessing Officer further observed that assessee has further amended to the Memorandum of association and Articles of association on 24/06/2001, 25/06/2011 & 17/08/2012. By considering the above the Assessing Officer is of the opinion that the assessee intentionally passed the amendments to the objects and rules conspiring with the BCCI and also at the convenient of the Executive Bodies of the ACA & BCCI to get benefit of alleged funds from BCCI and then to avail benefits of section 11 & 12 for both the organizations. Insofar as amendments for the year under consideration are concerned, the learned Commissioner has observed that the amendments were made on 24/06/2001, 25/06/2011 & 17/08/2012. Subsequently, learned CCIT has granted approval under section 10(23C)(iv) of the Act and the remaining part itself is not pertaining to the assessment year under consideration. The learned Commissioner has observed that even after amendments made by the assessee, learned CCIT granted approval on 27/02/2009. Therefore, assessee is eligible for exemption under section 10(23C)(iv) of the Act which is effective from Assessment Year 2008-09 on wards, thereby exemption under section 11 has to be granted to the assessee association.

15. So far as amendments are concerned, we have considered the original objects and subsequent amendments and found that there are no major changes, which are also not affected to the objects of the assessee. The Assessing Officer is also not able to point out which activity of the assessee is converted from charity to commerciality by virtue of subsequent amendments made by the assessee. We also observe that once the assessee is enjoying registration under section 12A as well as 10(23C)(iv), it is the duty of the Assessing Officer to see whether claim of exemption made by the assessee under section 11 or 10(23C)(iv) is eligible or not, if not, the assessee has to give reasons why the assessee’s case is not considered for exemption under section 11 otherwise section 10(23C)(iv) of the Act. In the present case, the Assessing Officer has not given any reasons why the assessee is not eligible for exemption under section 11 or 10(23C)(iv) of the Act. The only reason given by the Assessing Officer is that assessee has amended Articles of association and there is no approval from the jurisdictional Commissioner, therefore, not eligible. In this context, it is necessary to note that the learned Commissioner has issued a notice to the assessee on 04/03/2011 (page No. 45 of the paper book) calling the explanation from the assessee why registration granted under section 12A cannot be cancelled. In response to that, assessee has filed a detailed reply (page No. 52 of the paper book) wherein he explained that “there were no drastic changes in the objects of the association on account of the amendments. If the amendments listed in the assessment order are perused, it is very obvious that there were no drastic changes in the objects and that the amendments were only clarificatory in nature and for the purpose of more effective and practical execution of the objects.”

16. The learned Commissioner after receiving reply from the assessee, he has dropped the proceedings initiated for cancellation of registration under section 12A of the Act and therefore it has to be presumed that the amendments made by the assessee- association are not affected the original objects of the assessee. In our opinion, on account of amendments, which are subsequently approved by the learned Commissioner, exemption under section 11 cannot be denied. Apart from that, assessee has already been enjoying approval under section 10(23C)(iv) of the Act. In the assessment order, the Assessing Officer has not discussed anything about it. Therefore, the Assessing Officer is not correct in passing the assessment order without considering the approval granted by the learned CCIT under section 10(23C)(iv) of the Act.

17. So far as another observation made by the Assessing Officer in the assessment order (page No. 7) that “in this context of sports, promoting cricket would be a charitable activity, it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly show that these activities are totally commercial and there is no element of any charity in the conduct of the assessee. A perusal of the relevant details of financial transactions clearly shows that the activities and source of income which clearly fall in the definition of business. It is also evident that the major income arises not from the game of cricket but from the business of cricket”.

18. In this context, it is necessary to examine what are the receipts of the assessee and how assessee has been incurred towards the objects. The assessee is receiving grants from BCCI partly as reimbursements for various tournaments conducted by the assessee. The assessee has already constructed a stadium at Visakhapatnam suitable for conducting ^‘test matches^‘. During the year under consideration, the assessee has also commenced construction of stadiums at various places like Mangalagiri, Kurnool & Kadapa. During the year, it has also acquired land at Nellore for the purpose of constructing a stadium. The assessee has admitted the incomes under the major heads such as BCCI reimbursements of ₹ 20,64,17,339/- and interest of ₹ 1,26,10,435/- on FDR^‟s & SB accounts. Out of these receipts, the assessee incurred expenditure towards conducting various tournaments, grants to District associations for conducting league tournaments and development of game and other heads such as Administrative & Maintenance. From the above, it is very clear that the receipts received by the assessee in relation to sports of cricket and also incurring expenses towards development of the stadiums, which is also related to sports of cricket and also clearing the land for the purpose of construction of stadium which is also related to the sports of a cricket. Certain funds are granted to the District Associations for the purpose of development of cricket sports. Therefore, all the receipts received by the assessee are incurred in connection with sports of the cricket. Therefore, the Assessing Officer is not justified in observing that the activities of the assessee are business activities.

19. We find that the Assessing Officer simply observed that the activities of the assessee are converted into business activities without making any inquiry, which object is converted into business. Simply making observations without recording the reasons, is not a sufficient to constitute that the assessee is converted from charitable to business Therefore, the observations of the Assessing Officer are not correct and it has to be rejected. Keeping in view of the facts and circumstances of the case and also in view of the above, the Assessing Officer is not correct in rejecting exemption claimed by the assessee under section 11 of the Act also not correct in rejecting the claim of the assessee under section 10(23C)(iv) of the Act. Thus, ld. CIT(A) has considered the entire facts and circumstances of the case and also details submitted by the assessee, directed the Assessing Officer to allow claim under section 11 of the Act to the assessee. We find no reason to interfere with the order passed by the ld. CIT(A).

20. So far as case-law relied on by the assessee in the case of Tamil Nadu Cricket Association (supra), the Hon’ble Madras High Court has only dealt with the issue of cancellation of registration under section 12AA (3) of the Act. In the present case, the Assessing Officer has denied exemption under section 11 of the Act. In our opinion, the case law relied on by the assessee has no application to the facts of the case. As the Assessing Officer failed to establish that the assessee has violated sections 11, 12 & 13 of the Act, the case-law relied on by him in the case of Allahabad Agricultural Institute & another (supra) has no application to the facts of the present case. In view of the above, the appeal filed by the revenue is dismissed.

ITA Nos. 241/VIZ/2015 & 01/VIZ/2016

21. So far as Assessment Years 2011-12 & 2012-13 are concerned, both the parties have submitted that the facts involved in Assessment Year 2010-11 are similar to the facts of the Assessment Years 2011-12 & 2012-13.

22. The Assessing Officer, in the Assessment Years 2011-12 & 2012-13, has expressed a view that the activities carried out by the assessee are commercial in nature, though assessee having a registration under section 12A as well as 10(23C)(iv) of the Act, therefore, he denied exemption for both the years. But, the Assessing Officer is not able to establish that the activities carried out are contrary to the objectives of the assessee- association. We find that the activities carried out by the assessee for these two assessment years are same to the Assessment Year 2010-11. We also find that all the activities carried out by the assessee in connection with the sports of the cricket. The assessee has got registration under section 12A as well as 10(23C)(iv) in connection with the sport of the cricket. The activities carried out by the assessee are only relate to the sports of the cricket and therefore, denial of exemption by the Assessing Officer is not correct when the activities carried out by the assessee have been considered by the learned Commissioner, who granted approval and also considered by the learned CCIT, who granted approval under section 10(23C)(iv) of the Act for both the years. The ld. CIT(A) has considered all the activities carried out by the assessee and directed the Assessing Officer to allow exemption claimed. For the sake of convenience, the operative part of the ld. CIT(A)^‟s order for both the assessment years are reproduced as under:-

Assessment Year 2011-12:

“6. I have carefully considered the facts of the case, various return submissions and assessment order. The ACA is a registered society and registered under registration of society Act 1950 on 12-07-1996, mainly with the object to maintain a general control of the game of cricket in the State. This ACA shall be affiliated to the Board of Control for Cricket in India (BCCI).

6.1 On verification of Income and expenditure account for this year ended 31st march 2011 the main sources of income was of BCCI reimbursements of Rs. 23.01cr, interest on FDRs & SB accounts of Rs. l.57cr and contribution from celebrity cricket league of RS. 8.92lakhs. The ACA was granted registration u/s.12A on 21- 02-1995 by the Commissioner of income tax, Guntur. The approval u/s.l0(23C) (iv) granted by CCIT, Hyderabad-III on 27-02-2009.

6.2 In the Assessment order page 7 para 3, the assessing officer observed that “In the context of sports, promoting cricket would be a charitable activity, if it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of any charity in the conduct of the ACA. Perusal of the relevant details of financial transactions clearly shows that the activities and source of income which clearly fall in the definition of ‘Business’. It is also evident that the major income arises not from the game of cricket but from the ‘Business’ of cricket.”

6.2.1 “This observation of the AO was not correct because of the reason that major income of the ACA for this assessment is from BCCI and not from the ^„Business of cricket’ as observed from the income and expenditure.

6.3 Page 8 para 2 “It is seen that through the object of the trust of promotion of sports’ is charitable, however, its activities- The ACA element of profiteering. Therefore, it cannot be held eligible for the benefits of section 11 of the I. T. Act, 1961 even otherwise as its activities are not in conformity with the objects of the trust.”

6.4 Page 9 para 2 “From the discussion, it is clear that the ACA is not acting as a charitable organization. The entire character and focus of ACA has become totally commercial. There is generation of huge profits year after year, a part of which is used, to enhance the investment and income earning infrastructure and apparatus, of ACA.”

6.5 As per para 3 “Further, it is clear that entire character and focus of The ACA has become totally commercial with eye on huge profits and it is no more charitable organization as discussed supra. Therefore, even with Registration allowed to the ACA u/s. 12A of the I. T Act, since its activities are being carried on commercial lines and not in conformity with the objects of the assessee, it is not eligible for Exemption u/s. 11(1) and 11(2) of the I.T. Act.”

6.5.1 These observations of the AO is not correct as there is no profit motive as the funds received from the BCCI were utilized for maintenance of the cricket academy and promotion of the cricket. The excess income deposited in the banks and disclosing interest income as per the provisions of the secl. 1 of the I. T. Act, 1961.

6.6 As per para 4 “The amended objects have the effect of not only altering the purpose and intention of the original objects stipulated but also changed its democratic functioning by usurping the powers of nominated executives. The dispute raised by the interested members of association on these amended rules and its admission by the Hon’ble Court gives credence to the fact that they are not accepted by the General body. The changed provisions were camouflaged from the approving authority Le, Commissioner of Income-Tax by not even informing as stipulated in the terms and conditions while granting the Registration u/s. l2AA of the Income-tax Act, 1961.

6.6.1 In view of the above discussion and in the absence of prior approval of the Commissioner of Income Tax concerned for making the amendments to the rules and Bye-laws mentioned in the original memorandum and articles of association based on which the registration u/s. 12A was granted or in the absence of fresh registration u/s. 12AA for the amendments made to the rules and Bye-Laws mentioned in the Original Memorandum and Articles of Association, Exemption u/s. 11 of the I.T. Act claimed by the assessee cannot be allowed. According to section 12A, the provisions of sec. 11 and 12 shall not apply in relation to the income of any trust or institution unless the trust or institution is registered u/s. 12AA of the I. T. Act. Hence, the assessee has lost its entitlement for grant of Exemption u/s, 11, by violating the conditions stipulated for claiming Exemption u/s. 11. For this the appellant submitted that “The learned AO failed to note that all the amendments listed in the assessment order, namely, date 4-8-1994, date 23-7-1995 and date 10-11-2007 were old amendments which were done prior to the year 2009, and that these amendments do not change the basic character of the objects of the Association and that these were done for practical needs and for more effective administration of the Association. Moreover these amendments were within the knowledge of the department, as the Chief Commissioner has granted the approval for exemption u/s 10(23C)(iv) subsequently on 27-2-2009. The amendments alleged to have been done on 24-6-2001, 25-6-2011 and 17-8-2012 as stated in the assessment order were not actually passed by the appellant Association and therefore it is surprising how this observation was made.

6.7 it Is submitted that there is no statutory requirement of intimating the amendments/changes to the bye-laws to the Income Tax’ Department. The requirement of intimation is mentioned only in the form No. 10A and even in the form No. 10 A there is no time limit prescribed. The appellant has already intimated the amendments to the Commissioner of Income-tax, Guntur on 26-04-2013 (copy of letter date 26-04-2013 with ackmnt. enclosed) and therefore there is no violation on the part of the appellant. Therefore the appellant cannot be declared ineligible for exemption on the ground that the very foundation on the basis of which the appellant was registered stands removed and ceased to be operative. The important point that was missed by the A.O was that the learned CCIT granted registration u/s 10(23C) (iv) after examining these amendments, so the department is aware of the amendments” Therefore I am in agreement with the submissions of the appellant.

6.8 Further the AO relayed on the case of page 8 para last “It had been found by the Tribunal that the activities which produced the income in question consisted solely in arranging certain cricket matches and charging the public with a fee for admissions to them as spectators. The majority of the players who took part in those games were not members of either the assessee association or of the bodies affiliated to it, though on occasions one or two players who were members of those bodies played. The receipts which constituted the income in question came entirely from the members of the public who came to witness the game. If the income in question was derived from the fees charged for admission to the games held under the auspices of the association it was difficult to see how it was derived from any property.

6.8.1 This observation and case law relayed on AO is not relevant and the facts of the case cricket association of Bengal vs CIT not relevant for this appellant for this assessment year since there is no matches conducted and no income earned.

6.9 Further, the appellant submitted the recent decision of the Hon’ble HC of Delhi in the case of India Trade Promotion Organization (ITPO) vs Director General of Income Tax & Others dated 22-01-2015, wherein the Hon’ble HC held that:

“In conclusion, we may say that the expression “charitable purpose”, as defined in section 2(15) cannot be constructed literally and in absolute terms. It has to take color and be considered in the context of section 10 (23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a ‘charitable purpose’. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purpose.

Thus, while we uphold the Constitutional validity of the proviso to section 2(15) of the said Act, it has to be read down in the manner indicated by us. As a consequence, the impugned order dated 23/01/2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C)(iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs.”

6.10 Keeping in view of the above, the appellant is eligible for exemptions the provisions of section 11, 12,and 13 of IT Act, 1961 and also section 10(23C)(iv) which was already granted to the appellant for the assessment year 2008-09 on wards vide CCIT Hyd- III letter date 27-02-2009. Therefore, the AO directed to allow the exemptions to the appellant.

 Assessment Year 2012-13

“6. I have gone through the assessment order and the submissions of the appellant carefully. In this case, on the same issue, my predecessor has dealt with in detail in her order vide ITA No. 108//2014-15/ACIT/Cir-1(1)/CIT(A)/VJA/2014-15 dated 25/03/2015 for the Assessment Year 2011-12. The relevant portion of the above is reproduced as under:-

6.5.1 These observations of the AO is not correct as there is no profit motive as the funds received from the BCCI were utilized for maintenance of the cricket academy and promotion of the cricket. The excess income deposited in the banks and disclosing interest income as per the provisions of the secl. 1 of the I.T. Act, 1961.

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6.9 Further, the appellant submitted the recent decision of the Hon’ble HC of Delhi in the case of India Trade Promotion Organization (ITPO) vs Director General of Income Tax & Others dated 22-01-2015, wherein the Honorable HC held that:

“In conclusion, we may say that the expression “charitable purpose”, as defined in section 2(15) cannot be constructed literally and in absolute terms. It has to take color and be considered in the context of section 10 (23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 10(23C)(iv) because, in our view, the context requires such an interpretation. The correct interpretation of the proviso to section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a ‘charitable purpose’. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purpose.

Thus, while we uphold the Constitutional validity of the proviso to section 2(15) of the said Act, it has to be read down in the manner indicated by us. As a consequence, the impugned order dated 23/01/2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C)(iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs.”

6.10 Keeping in view of the above, the appellant is eligible for exemptions the provisions of section 1 1,12,and 13 of IT Act, 1961 and also section 10(23C)(iv) which was already granted to the appellant for the assessment year 2008-09 on-wards vide CCIT Hyd- III letter date 27-02-2009. Therefore, the AO directed to allow the exemptions to the appellant.”

7. Since the issue involved is identical, the decision outlined in the above order applies to the present Asst Year 2012-13 also.

There was no cancellation of registration (granted earlier) till date by competent authority. The Assessing Officer has not pointed out any specific violation of conditions mentioned in order u/s 10(23C)(iv). The sole object of the appellant society is to promote sport of cricket in the state of Andhra Pradesh. Hence, I hold that the appellant is eligible for exemptions under provisions of section 11, 12 and 13 of the Act and also section 10(23C)(iv) which was already granted to the appellant for the assessment year 2008-09 on wards vide CCIT Hyderabad-Ill letter dated 27.02.2009. Therefore, the Assessing Officer is directed to allow the exemptions to the appellant.

7.1 Honorable ITAT ‘A’ Bench, Chennai in its order dated 14.08.2015 in the case of M/s Tamil Nadu Cricket Association Vs DDIT(Exemptions) on similar issue of non-grant of exemption and taxing of income of Tamil Nadu Cricket Association income as business income held as follows:

“15 The assessee- society, being a member of BCCI, hosts the matches which are conducted by BCCI. For the purpose of meeting its expenditure, the BCCI allocates 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 of BCCI? In fact, BCCI conducts the public auction for selling premier players at a huge premium rate. In fact, the BCCI collects money. The role of the assessee- society is only to provide stadium for conducting matches. Other than that, the assessee – society has no role in conducting the international matches and Indian Premier League matches.

16. The other activity of the assessee- society is to conduct training programmes, coaching classes for college students at district level in the State of Tamil Nadu and in the Union Territory of Puducherry. The assessee is also conducting inter-university, inter-school and Inter-association matches. Expenditures involved in such activities were met out 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 host In the State of Tamil 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 imagination, it cannot be said that the assessee is conducting any business activity. The assessee is also not providing any service to any trade, commerce or Industry. In those circumstances, this Tribunal is of the considered opinion that proviso to Section 2(15) of the Act is not applicable to the assessee. 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 exemption 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.”

7.2 It was further held that – “In view of Section 32 of the Act, depreciation has to be allowed only in respect of an asset owned by the assessee and used for the purpose of business or profession. In this case, it is not a case of the assessee that they are not doing any business or profession. The assessee is categorically making a statement that they are charitable organization engaged itself in public utility service. Once the assessee claims that it is a charitable organization and not engaged in business or profession, this Tribunal is of the considered opinion that the provisions of Section 32 have no application at all …….. In fact, this Tribunal examined the issue elaborately in The Anjuman-E-Himayath-E-Islam Vs ADIT in ITA No. 2271/Mds/2014 by order dated 2nd July, 2015 and found that when the assesses is eligible for exemption under section 11 of the Act, it is not eligible claims the cost of the capita! expenditure as exemption under section 11 of the Act, then the cost of the capita! asset becomes NIL. Admittedly, depreciation under section 32 of the Act has to be allowed only on written down value of the asset When the written down value of the asset becomes NIL since the entire cost was allowed as application of income under section 11 of the Act, this Tribunal is of the considered opinion that there cannot be any further claim for deduction under section 32 of the Act In view of the above, this Tribunal is of the considered opinion that the assesses is not eligible for deduction under section 32 of the Act towards depreciation. However, it is made dear that the assessee is eligible for exemption under section 11 of the Act for all the assessment years under consideration.”

7.3 Duly following the above decision of Hon’ble HAT, Chennai, I direct the Assessing Officer to allow exemption in appellant’s case and re-compute the income after disallowing correct quantum of depreciation.”

23. We have carefully considered the orders passed by the ld. CIT(A) for the Assessment Years 2011-12 & 2012-13. We find no reason to interfere with the orders passed by the ld. CIT(A) and therefore, the decision passed in ITA No. 93/VIZ/2015 shall apply mutatis mutandis to these appeals also. Thus, the appeals filed by the revenue for the Assessment Years 2011-12 & 2012-13 are dismissed.

24. In the result, all the appeals filed by the revenue are dismissed.

Order Pronounced in the open Court on this 10th day of Nov., 2017.

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