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

ACIT (Exemptions) Vs. Andhra Cricket Association (ITAT Vishakhapatnam)

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.

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).

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