Mere surplus does not mean that assessee exists for profit

By Editor4 Income Tax Judiciary September 27, 2019

TaxGuru Citation: 2019 taxguru.in 1859
Case Name: Director of Income Tax (E) Vs Gujarat Cricket Association (Gujarat High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Gujarat High Court

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Director of Income Tax (E) Vs Gujarat Cricket Association (Gujarat High Court)

Merely because the Association puts up tickets of the international cricket matches for sale and earns some profit out of the same, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit but the object is to promote the game of cricket and nurture the best of the talent.

Carrying on an ‘activity in the nature of trade, commerce, or business’ or rendering of any service in relation to trade etc. is sine qua non for taking away the character of charitable purpose. An activity in the nature of trade, commerce or business is always carried on with the prior object of earning income. What is relevant is the intention of the person before undertaking such activity. A line of distinction needs to be drawn between the activities undertaken by a society, otherwise satisfying the prescription .of section 2(15) ‘prior to the insertion of proviso, which are aimed at earning income divorced from the objects for which it is charitable por una parte and the activities which are aimed at the attainment of the objects for which It was set up por otra parte. Whereas the former fall within the mandate of the proviso to section 2(15), the latter do not. The obvious reason is that the latter activities are in furtherance of the charitable objects of such society and income, if any, resulting from such activities and does not convert the otherwise charitable activity [within the definition of section 2(15)] into carrying on of a business, trade or commerce. It can be understood with the help of a simple illustration. Supposing an association set up for the promotion of a particular trade, has its own premises‘ from which it carries out the activities for the promotion of such trade. If the association lets out its premises from time to time for enhancing its income, which letting out has no relation with the objects for which it was set up as a charitable institution, namely, the promotion of that particular trade, the resultant activity will amount to carrying on trade, commerce or business so as to fall within proviso to section 2(15). 0n the other hand, if it uses its premises for undertaking activities for which it was set up and is a charitable institution, and while doing so, there results some income, such income will not amount to carrying on any trade, commerce or business. The crux of the matter is to understand the object of carrying on the activity which resulted into income. If the object is to simply earn income de hors the promotion of objects for which it was set up, it will fall within the ambit of proviso to section 2(15) and if the object of the activity is to promote the objects for which it was set up, then it will not be caught within the sweep of the proviso notwithstanding the fact that there results some income from carrying out such activity. The core of the matter is to see whether the activity which resulted into some income or loss was carried on with the object of doing some trade, commerce or business, etc., or it was in furtherance of the objects (non-business) etc., for which the assessee was set up. In other words, the predominant object of the activities should be seen as to whether it is aimed at carrying on some business, trade or commerce or the furtherance of the object for which it was set up. If it falls in the first category, then, the case would be covered within the proviso to section 2(15) and, in the otherwise scenario, the assessee will be construed to have carried on its activities of general public utility. (see Society of Indian Automobile Manufactures vs. ITO, Delhi)

The Delhi High Court in the Institute of Chartered Accounts of India v. Director General of Income-tax (Exemptions), 2013 358 lTR 91/217 Taxman 152/35 taxmann.com 140 (Delhi) , observed, while disposing of a writ petition, that holding interviews for fees for the purpose of campus placements of its students does not amount to carrying on a business so as to deny exemption u/s 11 of the Act. It further observed that if the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institution. The Delhi High Court further observed in para 67 that “the purport of the first proviso to section 2(15) of the Act is not to exclude the entities which are essentially for charitable purpose, but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude the organizations which are carrying on regular business from the scope of “charitable purpose'”.

FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT

1. Since the issues raised in all the captioned tax appeals preferred at the instance of the Revenue are the same,those were heard analogously and are being disposed of by this common judgement and order.

2. In the tax appeals captioned above, the respondent assessee are the three Cricket Associations, namely, (I) Gujarat Cricket Association (ii) Baroda Cricket Association and (iii) Saurashtra Cricket Association.

3. In the following tax appeals, the respondent-assessee is the Gujarat Cricket Association;

“(i) Tax Appeal No.268 of 2012;

(ii) Tax Appeal No.317 of 2019;

(iii) Tax Appeal No.318 of 2019;

(iv) Tax Appeal No.319 of 2019;

(v) Tax Appeal No.375 of 2019;

(vi) Tax Appeal No.333 of 2019;

(vii) Tax Appeal No.334 of 2019;

(viii) Tax Appeal No.335 of 2019;

(ix) Tax Appeal No.336 of 2019;

(x) Tax Appeal No.337 of 2019;

(xi) Tax Appeal No.338 of 2019;

(xii) Tax Appeal No.339 of 2019;

(xiii) Tax Appeal No.340 of 2019;”

4. In the following tax appeals, the respondent-assessee is the Baroda Cricket Association.

“(i) Tax Appeal No.320 of 2019

(ii) Tax Appeal No.321 of 2019

(iii) Tax Appeal No.374 of 2019

(iv) Tax Appeal No.675 of 2019

5. In the following tax appeals, the respondent-assessee is the Saurashtra Cricket Association;

“(I) Tax Appeal No.152 of 2019;

(ii) Tax Appeal No.358 of 2019;

(iii) Tax Appeal No.359 of 2019;

(iv) Tax Appeal No.360 of 2019;

(v) Tax Appeal No.123 of 2014;”

Tax Appeal No.268 of 2012

6. We propose to first take up the Tax Appeal No.268 of 2012.

7. This tax appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, ‘A’ Bench, Ahmedabad in the ITA No.93/Ahd/2011 for the A.Y.2004-05. This tax appeal was admitted vide order passed by this Court dated 19^th July, 2012 on the following substantial question of law;

“Whether the Hon’ble ITAT has erred in not taking cognizance of the latest amendment in the nature of the proviso to section 2(15) of the I.T. Act inserted with effect from 01/04/2009?”

8. The facts giving rise to this tax appeal may be summarized as under;

8.1 The assessee, namely, Gujarat Cricket Association (for short “the GCA”) is a society registered under the Societies Registration Act, 1860. The GCA came to be registered with the Registrar of Societies vide the Registration Certificate dated 10^th July, 1984. Later, the GCA was notified under Section 10(23) of the Act, 1961 vide notification dated 30^thMarch, 1999 from A.Y. 1999 – 2000 to 2001-2002 by the Government of India, Ministry of Finance, Department of Revenue.

8.2 In the absence of renewal of the notification under Section 10(23) of the Act, the GCA preferred an application for registration under Section 12AA of the Act, 1961. The registration under Section 12AA of the Act came to be granted by the DIT (Exemption), Ahmedabad vide its order dated 16^th April, 2003, i.e., from A.Y.2004-05 onwards.

8.3 A show-cause notice dated 26^th September, 2010 came to be issued upon the GCA under Section 12AA(3) of the Act, calling upon the GCA to show cause why the registration granted under Section 12AA of the Act should not be cancelled from 2004-05 onwards.

8.4 The Commissioner, after hearing the assessee, cancelled the registration under Section 12AA for the period from A.Ys.2004-05 till the date of his order, i.e. 6^thDecember, 2010 in exercise of his powers under Section 12AA(3) by invoking the Proviso to Section 2(15) of the Act, 1961 inserted by the Finance Act, 2010 with effect from 1^stApril, 2009. The Commissioner, while cancelling the registration of the assessee held that the activities of the trust were commercial in nature. The relevant observations in the order passed by the Director of Income Tax (Exemption), Ahmedabad are quoted herein below;

“The legislature in its wisdom has introduced section 12AA of the I.T. Act, 1961 by the Finance Act No.2, 1996 w.e.f 1.4.1997 i.e. A.Y.1997-98 onwards which requires the Commissioner to be satisfied with the objects of the Trust and the genuineness of its activities. As a logical corollary of the provisions of Section 12AA of the Act, the Commissioner has to examine the objects of the Trust by their reference to the definition of “charitable purpose” along with the newly inserted proviso to charitable purpose in Section 2(15) of the Act w.e.f 1.4.2009. In fact there is a mutual, symbiotic relationship between the two provisions, namely section 2(15) and section 12AA of the I.T. Act, 1961. The definition of “charitable purpose” in section 2(15) of the Act is the engine which drives the machinery of the provisions of Section 12AA of the Act.

Thus it is clear that even as per pre-amended section 2(15) of the I.T. Act, the GCA is not entitled for registration u/s 12A of the I.T. Act as per ratio of judgments of Hon. Courts as discussed above. When this is the position even as per pre-amended section 2(15) of the I.T. Act, there remains no case at all for continuation of registration u/s 12A after the amendment of section 2(15) by Finance Act 2008 as applicable from A.Y.2009- 10 which, inter alia, clearly applicable to sports associations and is not applicable to educational institutions. In view of this, registration allowed to GCA u/s 12A of the I.T. Act stands withdrawn from A.Y.2004- 05 onwards.

The Ld. Counsel has further submitted that GCA has no contract with any party from which the funds are credited by BCCI coupled with the fact that GCA has no enforceable rights to receive any portion of TV rights which have been received by BCCI and the corpus donation received at the sweet will of BCCI may be in furtherance of the objects of that Institution namely BCCI.

I am constrained to state that there is no merit in the argument of the Id. Counsel. It goes without saying that BCCI is a huge money spinning machine in the field of Cricket. It is following practice of giving some portion of its TV rights to certain Cricket Associations in the country including the GCA. BCCI also has commercial transactions like receipts of TV rights, IPL matches etc. This commercial chain further percolates down to the State Associations like GCA which shows the receipts of TV rights as corpus donations. This accounting procedure is incorrect as it is purely commercial receipt which falls within the ambit and scope of newly inserted proviso to section 2(15) of the I.T. Act w.e.f. 1/4/2009. It partakes the character of tax avoidance device clearly attracting the decision of Constitution Bench (5 Judges) of the Apex Court in McDowell and Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC) which fortifies the cancellation of registration of GCA. In this landmark case, their Lordships have held that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning (Per Ranganath Misra at Pg.171 of the order).

A critical analysis of Receipts and Expenditure of GCA shows that there Is huge generation of income of Rs.16,37,747.54, (-) Rs.70,50,486.28 and (-) Rs.5,91,708.94 in F.Ys. 2006-07, 2007-08 and 2008-09 respectively after meeting out only a nominal expenditure on promotion of sports of Rs.67,76,530/-, Rs. 15,16,311/and Rs.24,90,579/ in F. Y.2006-07, 200 7-08 and 2008-09 respectively. There is capital expenditure of Rs. 11,37,64,313/~, Rs.6,63,80,215.80 and Rs.1,99,23,701/ in F.Y. 2006-07, 2007-08 and 2008-09 respectively. It is reiterated that this capital expenditure cannot be considered as charitable expenditure for promotion of sports as It is simply an act of business organization to enhance its Infrastructure and income earning apparatus. Thus the expenditure on promotion of sports as percentage .of total receipts has further declined further in F.Y.2008-09. If GCA was really a charitable organization, it should have acted as such and instead of earning huge income, it should have ensured as under:

(a) There should have been no ticket for watching cricket matches so that more and more youth, students and common man are able to watch these matches. Instead there are costly tickets for general public for watching these important Cricket Matches and true to its character as an out and out commercial organisation.

(b) GCA should have allowed the free use of its Cricket ground for conducting tournaments and also popularizing the game of Cricket in the state of Gujarat for the common man.

viii) It is further seen from the Auditor’s Report for F.Y. 2006-07 dated 20/8/07 (Page 2), 2007-08 dated 11/8/98 (Page 11) and 2008-09 dated 23/7/09 (Page 7) that TV rights received from BCCI are amounting to Rs. 1 7,58,00,000/-,Rs. 6,83,46,038/ and Rs.20, 69,60,338/- respectively have been shown as CORPUS. The accounting practice followed by GCA by treating TV rights received from BCCI as corpus is incorrect. This is purely a commercial receipt which falls within the ambit and scope of aforesaid proviso to section 2(15) of the I.T. Act, 1961.

From the above discussion, it is quite clear that there is huge generation of revenue of Rs.2,52,96,831/-, Rs. 1,80,04,862/- and RS.3,98,07,027/- in F. Ys.2006-07, 2007-08 and 2008-09 respectively after meeting out small expenditure on promotion of Sports of Rs.67,76,530/-, Rs.15,16,311/- and Rs.24,90,796/- in F.Ys.2006-07, 2007-08 and 2008-09 respectively giving a percentage of expenditure on promotion of Sports at 26.78%, 8.42% and 6.25% for the aforesaid three financial years respectively. In other words, GCA is not spending much of the revenue generated for the promotion of Sports. This is a clear violation of the educative object of GCA as is seen from the submission of the Id. Counsel above.

From the reasons mentioned above, it is quite manifestly and palpably evident that the entire character and focus of GCA has become totally commercial with the object of earning revenue and it is no more a charitable organization. As stated above, the facts and ratio of the decision of the Uttarakhand High Court in the case of Queens’ Educational Society (supra) call for withdrawal of registration allowed to GCA u/s 12AA of the I.T. Act, 1961 even with pre-amended section 2(15) of the I.T. Act, 1961. Furthermore, a fortiori, with the amendment u/s 2(15) of the I.T. Act, 1961 by the Finance Act, 2008 w.e.f. A.Y.2009~10, GCA has lost the status of charitable organisation. Its activities, proprio vigore, are being carried on commercial lines. GCA, though, was granted registration in principle by this Office Order dated 16/4/03, did not carry out any activity which has charitable object and also by invoking Doctrine of Just Cause in the light of the observations of Hon Supreme Court in 259 ITR, 1 (SC) (supra), I strongly conclude that the activities of GCA are not genuine charities and are being carried out with Pure commercial considerations bereft of any element of charity. Accordingly, the registration granted earlier vide this Office Order dated 16.4.2003 is cancelled w.e.f 16.4.2003 i.e. A.Y.2004-05 onwards.”

8.5 The assessee, being dissatisfied with the order passed by the Director of Income Tax (Exemption), cancelling the registration, preferred an appeal before the Income Tax Appellate Tribunal, ‘A’ Bench, Ahmedabad. The ITAT allowed the appeal preferred by the GCA. While allowing the appeal, the ITAT observed as under;

“We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal decision cited by the Ld. A.R. In the present case, the registration of the assessee was cancelled by the DIT(E) on this basis that the main source of income of the assessee is derived form sponsorship, bank interest, annual subscription, income from ICC matches, income from trophy/tournament matches, scrap sale, rental income and sale of tickets. It is observed by him that none of these sources of income has any nexus with the education of the cricketers. He also observed that in fact, the assessee has been engaged itself in transaction of commercial nature. He also observed that the assessee has been carrying its activities with a commercial motive. He has decided the issue on this basis that as per the amended provisions of Section 2(15) of the Income Tax Act, 1961. In the case of Vidarbha Cricket Association (supra) also, registration was cancelled u/s.12AA(3) of the Act on the basis of amended provisions of Section 2(15) of the Act and under these facts, the issue has been decided by the tribunal in favour of the assessee. The relevant para is para 7, 8 & 9 of the Tribunal decision which are reproduced below:

“7. In this view of the matter, we may now examine the reasons put forth by the Commissioner in this case to cancel registration already granted to the assessee under section 12A of the Act. In this direction, we have carefully perused the impugned order, wherein the Commissioner has primarily examined the application of revised definition of charitable purpose under section 2(15) as amended by the Finance Act, 2003 with effect from 1.4.2009. The ultimate conclusion of the Commissioner in paragraph 17 of the impugned order is pertinent, which is reproduced as under‑

“17. In view of the amended provisions of sec. 2(15), it Is seen that assessee’s activities can no longer be regarded as charitable activities. Especially the proviso to sec. 2(15) is violated by assessee and hence, it cannot be regarded as a charitable society engaged In charitable purposes. I have duly considered the nature of activities, the sources of income, the activities on which expenditure was made, surplus generated existence of profit motive, commercial exploitation of assets, fees and Charges collected, nature of other income and other activities and case law before coming to a final conclusion, the assessee Vidarbha Cricket Association cannot be held to be an organization meant for charitable purposes in view of the above findings.

18. In the result, the deemed registration benefit under section 12AA as claimed and enjoyed by the assessee is hereby withdrawn/cancelled from assessment year 2009- 10 onwards.

8. On a perusal of the aforesaid, It is clearly established that as per the Commissioner, the activities of the assessee do not qualify to fall within the meaning of charitable purpose as per proviso to section 2(15) inserted with effect from 1.4.2009. Quite clearly, as we have observed earlier, such an objection cannot be the basis of invoke section 12AA(3) so as to cancel the registration already granted to the assessee under section 12A of the Act. In our considered opinion registration already granted to the assessee could not have been re-visited by the Commissioner on the basis of the reasoning aforesaid, since his power to cancel registration under section 12AA(3) was confined to the examination as to whether the activities of the assessee society/association are genuine or that the same are not being carried out in accordance with the stated objects. In the light of the discussion emerging form the order of the Commissioner in our considered opinion, action taken by the Commissioner does not fall within the parameters of section 12AA(3) of the Act and, therefore, the impugned order is bad in law.

9. At this stage, we may hasten to add that we are not commenting on the merits of the issue as to whether the activities of the assessee fall within the meaning of expression charitable purpose as per section 2(15) as amended with effect from 1.4.2009. The only point decided in the appeal is to the effect that it was not within the scope and ambit of section 12AA(3) for the Commissioner to have examined the applicability of the amended section 2(15) of the purposes of invoking his powers of cancellation provided in section 12AA(3) of the Act. At this stage, we may also state that the issues raised by the Commissioner in the impugned order are not beyond the powers of the revenue to examine, so however, the same can only be examined in the appropriate proceedings, such as assessment proceedings in the present case. Our decision is resting only on the foundation that the impugned order passed by the Commissioner is not permissible in view of the limited powers available to him under section 12AA(3) of the Act. However it would be open for the A.O. to consider the issues raised in the impugned order, if so advised, in the course of the relevant assessment proceedings.”

5. Since the present case also, registration has been cancelled by DIT(E) on the basis of amended provisions of Section 2(15) of the Income tax Act,1961, we are of the considered opinion that the action taken by DIT(E) does not fall within the permissible limits of Section 12AA(3) of the Income tax Act, 1961 and therefore, the impugned order is bad in law. We also add that we are not commenting on the merits of the issue as to whether the activities of the assessee falls within the meaning of charitable purpose as per Section 2(15) of the Income tax Act, 1961 as amended and we are only deciding this aspect of matter that the order passed by the DIT(E) u/s 12AA(3) is bad in law. This issue raised by the DIT(E) is not permissible in view of the limited powers available to him U/s. 12AA(3) of the Income tax Act, 1961. However, it would be open for the A.O. to consider all the issues raised in the impugned order, if so advised, in the course of relevant assessment proceedings

6. In view of our discussion in the above para, we set aside the order of DIT(E) u/s. 12AA(3) of the Income Tax Act, 1961 and restore the registration granted to the assessee u/s.12A of the Income tax Act, 1961.”

8.6 The Revenue, being dissatisfied with the order passed by the ITAT has come up with the present appeal.

Submissions on behalf of the Revenue:-

9. Mr. M.R. Bhatt, the learned senior counsel appearing for the Revenue vehemently submitted that the ITAT committed a serious error in disturbing the order passed by the Director of Income Tax (Exemption), cancelling the registration of the GCA under Section 12AA of the Act. According to Mr. Bhatt, in view of the amendment under Section 2(15) of the Act, the DIT (Exemption) was justified in taking the view that the activities of the GCA cannot be termed as charitable and such activities were commercial in nature with the element of earning profit from the income of sale of tickets, income from the ICC, income from hosting the international cricket matches etc. Mr. Bhatt would submit that the DIT (Exemption) was justified in taking the view that though the BCCI confirmed the payment to the assessee as grant of subsidy, the same was not in the nature of grant. Mr. Bhatt would submit that most of the advertisements through TV telecasting are received by the BCCI, it being the apex body,thus the so-called subsidy given by the BCCI is nothing but some sort of sharing of the advertisement income on account of holding of international test matches and one-day international matches, due to which, the BCCI has amassed huge advertisement income. Mr. Bhatt would submit that the nature of receipt, even though called subsidy by the assessee, was necessarily in the nature of income received by the activity of the assessee.

10. Referring to Section 12AA(3) read with Section 2(15) of the Act, 1961, Mr. Bhatt submitted that even if the activities were carried on in accordance with the arrangement with the other party,the activities, being not charitable, it was hit by Section 12AA(3) of the Act, 1961. Reading genuineness into the activities of the trust and considering the objects of the trust, Mr. Bhatt submitted that the term “genuineness” has been used only to find out whether the institution was charitable or not. Once the institution was held as not for charitable purpose, Section 12AA registration came to be rightly cancelled by the DIT (Exemption).

11. In such circumstances, referred to above, Mr. Bhatt prays that there being merit in this appeal, the same be allowed and the substantial question of law be answered in favour of the Revenue and against the assessee.

Submissions on behalf of the respondent-assessee:

12. On the other hand, this appeal has been vehemently opposed by Mr. J.P. Shah, the learned senior counsel appearing for the GCA. Mr. Shah would submit that no error, not to speak of any error of law, could be said to have been committed by the ITAT in quashing and setting aside the order passed by the DIT (Exemption). Mr. Shah would submit that since the inception of the GCA and the date of grant of the registration under the Act, the objects of the Association have remained the same and have not undergone any change to question its genuineness. Mr. Shah would submit that the view of the DIT (Exemption) that the assessee could not be said to be carrying on the charitable activity as per Section 2(15) of the Act is erroneous in law. Mr. Shah would submit that in any event all that the Section 12AA(3) of the Act prescribes for cancellation is the genuineness of the activities of the trust or that the activities are not carried on in accordance with the objects of the trust.

13. Mr. Shah took us through the various objects of the Association and pointed out to the clear distinct words used in Section12AA(1) and 12AA(3) of the Act as well as the first Proviso to Section 2(15) of the Act. Mr. Shah submitted that the grant of registration originally as early as in 2003 clearly indicates the satisfaction of the authorities that the assessee is a public charitable trust under Section 12AA of the Act. Mr. Shah would submit, referring to Section12AA(3) of the Act, that the cancellation of registration granted is permissible in law only under the following circumstances;

(I) On the Commissioner recording his satisfaction that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or institution,; thus unless and until the show cause notice issued contained the grounds and materials as prescribed under Section 12AA(3) of the Act, the question of cancellation of registration, per se, does not arise.

14. Shah, thereafter, took us through the Circular No.11 of 2008 issued by the Central Board of Direct Taxes dated 19^th December, 2008. The circular was issued in the wake of the insertion of the Proviso to Section 2(15) of the Act, 1961. Mr. Shah would submit that from the reading of the circular, it is evident that the question of rejection of registration under Section 12AA(3) of the Act would arise only in those cases where an entity uses this status of charitable institution with a charitable object of general public utility as a mask or a device to hide the true purpose and that object is nothing other then trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Mr. Shah would submit that in the case on hand, the Revenue has not been able to substantiate with any cogent material to indicate the absence of the genuineness of the activities. Mr. Shah would submit that the erroneous misconception in the mind of the Revenue is that by conduct of matches, the GCA could be said to have exhibited a sense of business or commercial character. In such circumstances, referred to above, Mr. Shah prays that there being no merit in this appeal, the same be dismissed and the substantial question of law, on which, this tax appeal has been admitted, may be answered in favour of the assessee and against the Revenue.

15. Shah in support of his submissions, has placed strong reliance on a decision of the Madras High Court in the case of Tamil Nadu Cricket Association vs. Director of Income Tax (Exemptions) & Ors., (2014) 360 ITR 633 (Mad.).

16. Bhatt, the learned senior counsel appearing for the Revenue, in rejoinder, brought to the notice of this Court that the decision of the Madras High Court in the case of Tamil Nadu Cricket Association (supra), on which strong reliance is sought to be placed on behalf of the assessee, has been challenged by the Revenue before the Supreme Court . The Supreme Court is yet to hear the appeal preferred by the Revenue.

ANALYSIS

17. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the ITAT committed any error in passing the impugned order.

18. Section 12AA of the Act prescribes the procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of the activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied or convinced about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an order in writing refusing to register the trust or institution.

19. Section 12AA(3) of the Act inserted with effect from 01.10.2004 under the Finance (No.2) Act, 2004 and the amendment inserted by Finance Act, 2010, with effect from 06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:-

“Provision inserted under Finance Act, 2004:

Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution.

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.“

20. After the amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows:

“Section 12AA(3):- Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.”

21. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires the satisfaction about the objects of the trust as well as the genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, the grant of registration as well as the cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Sections 12AA(1) and 12AA(3) of the Act, as the case may be.

22. The registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circumstances under which the income of the trust is not to be included in the total income of the previous year of the person. So too, Section 12 of the Act on the income derived from the property held for the charitable or religious purposes.

23. Thus, when the assessee is in receipt of income from the activities, which fits in with Sections 11 and 12 of the Act as well as from the sources which do not fall strictly with the objects of the trust, would not go for cancellation of registration under Section 12AA of the Act on the sole ground that the assessee is in receipt of income which does not qualify for exemption straight away by itself. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of the first proviso to Section 2(15) of the Act was only to curtail the institution, which under the garb of ‘general public utility’, carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act.

24. The sum and substance of the submissions canvassed by Mr. J.P. Shah, the learned senior counsel appearing for the assessee, may be summed up thus;

(I) The Gujarat Cricket Association is an affiliated member of the BCCI which controls and regulates all the cricket activities in India.

(ii) The only source of income for the Gujarat Cricket Association is the receipt of some amount from the BCCI on account of the tournament subsidy.

(iii) The Gujarat Cricket Association is a non-profit organization and applies its surplus for the promotion of the game of cricket, and that its objects prohibit the distribution of any surplus amongst its members.

(iv) All the members of the Executive Committee hold honorary position in the Gujarat Cricket Association.

(v) The Gujarat Cricket Association has produced a number of excellent cricketers of international repute and the same was achieved by nurturing the talent irrespective of the cast, creed, status, religion etc. It also provides support to one another facet of the game of cricket, i.e. umpiring.

(vi) The Gujarat Cricket Association has a self-sustaining model and promotes cricket in the State of Gujarat without any support, aid, grant or subsidy from any Government.

(vii) The Gujarat Cricket Association has constructed a world class infrastructure facility by modernizing the entire Motera Stadium at Ahmedabad.

(viii) The Gujarat Cricket Association provides medical aid to its players, remuneration to Coaches, Physiotherapists, Doctors

(ix) It organizes various programmes to encourage the game of cricket.

(x) On the ground booking charges, it was submitted that only in the special cases, it has charged exclusively for the purpose of playing cricket matches.

(xi) The Ranji Trophy and other matches are open to public viewing and no tickets are sold.

(xii) On the international matches, charge is levied, but the same would be a nominal charge as it would be impossible to manage the affairs if the viewing is free of cost.

25. The aforesaid indicates that there is no profit motive.

26. On income from the advertisement etc., it was submitted that the assessee has to maintain the stadium for the whole year and whereas, the international matches are played only once or twice in a year or may be in two years, the cost of maintenance of the stadium is as high as compared to the charges for transfer of interstate rights.

27. All the funds are used for building up infrastructure for promotion of cricket and for the purpose of development of players and for the promotion of the game and no funds are being utilized for personal purpose of any of the members of the Association.

28. The activities of the Association are not carried out on commercial basis.

29. The Registration could not have been cancelled on an erroneous ground that the activities of the assessee are commercial in nature. For invoking Section 12AA read with Section 2(15) of the Act, the Revenue has to show that the activities are not in accordance with the objects of the

30. For achieving its main charitable object, if an institution carries on some commercial activity and there is profit, it cannot be considered to be a business activity, with profit motive, so long as, the profit earned is utilized for the purpose of achieving the main charitable object.

31. The sum and substance of the submissions canvassed on behalf of the Revenue may be summed up thus;

(i) It is only logical to hold that the activities of the assessee are no longer falling within the definition of charitable purposes after the amendment of Section 2(15) of the Act w.e.f 1st January, 2019.

(ii) The assessee, in the name of general public utility, is engaged in business.

(iii) Once the activities ceases to qualify as charitable, the same cannot be said to be genuine for the purpose of charity.

(iv) Instead of promoting and developing the game of cricket, the assessee could be said to be promoting and developing the game of cricket as an entertainment and the tickets of the international matches are highly priced. The assessee, in such circumstances, could be said to have shifted the activities of the general public utility to commercial activity for generating

32. We have gone through the entire judgment of the Madras High Court in the case of Tamil Nadu Cricket Association (supra). We are convinced with the line of reasoning assigned by the Madras High Court and the view taken on the subject. It is true that the decision of the Madras High Court has been challenged before the Supreme Court. The Supreme Court has yet to look into the issue and consider whether the view taken by the Madras High Court is the correct proposition of law or not?. However, as on date, the view taken by the Madras High Court on the subject holds the field. We may quote the relevant observations made by the High Court of Madras.

“Going by the objects , we find that the trust falls under the head of “any other object of general public utility” and hence falls within the meaning of charitable purpose under Section 2(15) of the Act. Section 2(15) of the Act defines “charitable purpose” as it originally stood at the time of grant of registration as under:-

” ‘charitable purpose’ includes relief of the poor, education, medical relief and the advancement of any other object of general public utility.”

23. Section 2(15) was amended under Finance Act,2008, with effect form 1.4.2009 by substituting the following provision which reads s under:

“2. Definitions. …. (15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including waterheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity;)

24. Section 2(15) as it stood prior to 1983 defined ‘charitable purpose’ to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The phrase “not involving the carrying on of any activity for profit” was omitted from the Section by the Finance Act 1983, with effect from 01.04.1984, consequent on the amendment to Section 11, where under profits and gains of business in the case of charitable or religious trust and institutions would not be entitled to exemption under that Section, except in cases where the business fulfilled the conditions under Section 11 (4). The Section was once again amended by substitution in the year 2008 under the Finance Act, 2008, with effect from 01.04.2009, streamlining the definition of ‘charitable purpose’, considering the fact that taking advantage of the phrase ‘advancement of any other object of general public utility’, number of entities operating on commercial lines claimed exemption on their income either under Section 20(23c) or under Section 11 of the Act. Thus, to limit the scope of this expression, Section was amended in the year 2008 that the advancement of any other object of general public utility shall not be a charitable purpose, if the object involved the carrying on of any activity 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, irrespective of the nature of use or application, or retention, of the income from such activity. Though the section as it stood prior to the substitution in 2008 contained no provision as in the proviso under the 2008 amendment, yet the Supreme Court held that that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in the decision reported in (1980) 121 ITR 1 (Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if the dominant object or the primary object was charitable, the subsidiary object for the purpose of securing the fulfillment of the dominant object would not militate against its charitable character and the purpose would not be any the less charitable. The amendment in the year 2008 made a drastic amendment to deny the status of a charitable purpose to an institution with the object of general public utility, having any activity 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.

25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, the status of the institution will not be one for ‘charitable purpose’.

26. The Central Board of Direct Taxes, in paragraph 3.2 pointed out to the scope of the circular as under:-

” In such a case, the object of ‘general public utility’ will be only a mask or a device to hide the true purpose, which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is ‘charitable purpose’ within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business.”

27. Thus, the anxiety of the Parliament in introducing the proviso to Section 2(15) of the Act is only to check those institution, which attempt to gain exemption under the cloak of a trust.

28. Section 11 of the Act states that income from property held for religious or charitable purposes shall not be included in the total income of the previous year. Section 12 deals with income of trusts or institutions from Section 12A deals with making application for registration of the trust/association so that the said institution will have the benefit of exemption under Section 11 and 12 of the Act.

29. Section 12AA of the Act prescribes procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied himself about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an order in writing refusing to register the trust or

30. Section 12AA(3) of the Act inserted with effect from 01.10.2004 under the Finance (No.2) Act, 2004 and the amendment inserted by Finance Act, 2010, with effect from 01.06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:-

Provision inserted under Finance Act, 2004:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

31. After amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows:

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.”

32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be.

33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circumstances under which income of the trust is not to be included in the total income of the previous year of the person. So too, Section 12 of the Act on the income derived from property held for charitable or religious purposes.

34. Thus, when the assessee is in receipt of income from activities, which fits in with Sections 11 and 12 of the Act as well as from sources which do not fall strictly with the objects of the trust, would not go for cancellation of registration under Section 12AA of the Act on the sole ground that the assessee is in receipt of income which does not qualify for exemption straight away by itself. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of first proviso to Section 2(15) of the Act was only to curtail institution, which under the garb of ‘general public utility’, carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act.

35. In the decision reported in (2012) 343 ITR 23 (Bom) (Sinha gad Technical Education Society V. Commissioner of Income Tax (Central), Pune & Anr), the Bombay High Court held as follows:

“As a result of the amendment, which has been brought about by the Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as it stood prior to its amendment by the Finance (No.2) Act, 1996. Sub-Section (3) was inserted into the provisions of Section 12AA by the Finance (No.2) Act, 2004 with effect from 1 October 2004. As it originally stood, under subsection (3), a power to cancel registration was conferred upon the Commissioner where a trust or an institution had been granted registration under clause (b) of subsection (1) of Section 12AA. The Commissioner, after satisfying himself that the objects of the trust or an institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, was vested with the power to pass an order in writing cancelling the registration of such trust or institution. By the Finance Act of 2010, subsection (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996). As a result of the amendment, a regulatory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996.

………..

power under Section 12AA(3) can be exercised by the Commissioner in respect of a trust registered prior to 1 June 2010. The mere fact that a part of the requisites for the action under Section 12AA (3) is drawn from a time prior to its passing namely registration as a charitable trust under Section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions.”

36. As already pointed out earlier, the question as to whether the particular income of trust is eligible for exemption under Section 12 of the Act is a matter of assessment and this Court had pointed out in the decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai, as under:-

” In order to avail the benefit of exemption under Section 11 of the Income Tax Act, 1961, a Trust can make an application to the Commissioner for registration under Section 12A of the Income Tax Act, 1961. On receipt of the said application for registration of a trust or institution, the Commissioner should satisfy himself about the genuineness of the activities of the trust or institution. In order to satisfy himself, the Commissioner may also make such enquiry as he may deem necessary in that behalf. In the event the Commissioner satisfies himself that the trust is entitled to registration keeping in mind the objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1) (b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very same provision of section 12AA(b)(i) of the Income Tax Act, 1961 to go into the genuineness of the activities of the trust. However, the Commissioner is empowered to revoke the certificate in terms of Section 12AA(3) of the Income Tax Act, 1961. As Commissioner is empowered to revoke the certificate in terms of section 12AA(3) of the Income Tax Act, 1961. As per the said provision, in the event the Commissioner is satisfied subsequently i.e., after registration that the activities of such trust or institution are not genuine or not being carried out in accordance with the objects of the trust or the institution as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution.”

37. After the grant of registration, if the Commissioner is satisfied subsequently that the activities of the institution are not genuine or they are not carried on in accordance with the trust/ institution, he could pass an order in writing cancelling the registration of such trust or

38. Referring to Section 11 and 12A of the Act, this Court pointed out that the act of granting registration under Section 12AA(1) itself is a result of a satisfaction recorded by the Commissioner as regards the genuineness of the objects of the trust as well as the activities of the trust and once a satisfaction is arrived at by the Commissioner, the cancellation could only be in terms of Section 12AA(3) of the Income Tax Act, 1961.

39. This Court pointed out that the cancellation made in the case of assessee therein was not on the ground that the activities were not genuine, but the activities of the trust in publication and sale and spread of Sarvodaya Literature and Gandhian Ideologies was not the objects of the trust. This Court pointed out that the cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust; when the trust was registered with definite objects, carrying on such activities would be in terms of the objects for which registration was granted.

40. Referring to Section 12AA of the Income Tax Act, 1961, this Court has held as under:-

” 9. Under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down under Section 12AA(3) of the Income Tax Act, 1961. Whether the income derived from such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the assessing officer to decide as to whether it should be assessed or exempted.”

41. In the light of the law declared by this Court in the above said decision, we do not find that the scope of Section 12AA(3) of the Act is of any doubt for a fresh It is relevant herein to point out that in two other assessee’s case, the Income Tax Appellate Tribunal, Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 and that of the Nagpur Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income-tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, considered the said decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of the Act. On appeal before the respective High Courts, the decision of the Income Tax Appellate Tribunal was confirmed.

42. Leaving that aside, there being no dispute raised by the Revenue as to the genuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3 .2003, the same was made taking into consideration the objects of the institution fitting in with the definition of ‘charitable purpose’ defined under Section 2(150 of the Act and the substitution of the Section itself came only 2008, with effect from 01.04.2009. As rightly pointed out by the learned senior counsel appearing for the assessee, the circular clearly brings out the object of the amendment and the amended provision has no relevance to the case . The power regarding cancellation, hence has to be seen with reference to the registration and the object satisfying the definition on ‘charitable purpose’, as it stood at the time of registration and not by the subsequent amendment to Section 2(15) of the Income Tax Act.

43. Learned Standing counsel appearing for the Revenue placed heavy reliance on the proviso to Section 12AA(3) of the Act and submitted that when the assessee has income received from conduct of the matches, which are commercial in nature, as had been found by the Income Tax Appellate Tribunal, the objects of the trust ceased to be charitable. He submitted that going by the definition of Section 2(15) of the Act, rightly, the Commissioner assumed jurisdiction under Section 12AA(3) of the Act to cancel the registration. He further pointed out that for the finding to be recorded that the activities of the trust are not genuine, one must necessarily look into the objects of the association; if the objects of the association reveal commercial nature in the conduct of matches, the association cannot be one for charitable purpose as defined under Section 2(15) of the Act. Thus, there could be no inhibition for the Commissioner to assume jurisdiction to issue show cause notice calling upon the assessee to state whether the association is genuine or not. He further submitted that on looking at the activities of the association, the Commissioner had rightly come to the conclusion that the assessee’s registration was liable to be withdrawn.

44. We do not accept the submission of learned Standing counsel appearing for the Revenue. As rightly observed by learned Senior counsel appearing for the assessee, the Revenue granted registration under Section 12AA of the Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting the registration, if the registration is to be cancelled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AA is bad and hence, to be cancelled.

45. It may be of relevance to note the language used in the definition “charitable purpose” in Section 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee’s case falls within the phrase of the definition general public utility . In the decision reported in (2000) 246 ITR 188 in the case of Hiralal Bhagwati Vs. Commissioner of Income Tax, the Gujarat High court considered the said phrase in the context of Section 12AA registration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the objects of the trust as well as an empirical study of the past activities of the applicant; the Commissioner of Income-tax has to examine that it is really a charitable trust or institution eligible for registration; the object beneficial to a section of the public is an object of “general public utility”. The Gujarat High Court held that to serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province; it is required to be noted that if a section of the public alone are given the benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public; it is not necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression “object of general public utility”, however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utility; the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature.

46. The above said decision (2000) 246 ITR 188 – Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, the Revenue has not gone on appeal as against this judgment. In the decision reported in (2008) 300 ITR 214(S C) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, reference was made about this decision and the Apex Court pointed out that the Revenue did not challenge this case and it attained finality.

47. It is no doubt true that the decision reported in (2008) 300 ITR 214(S C) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, was in the context of Section 10(23) of the Income Tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression “general public utility” would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as ‘trust’ under Section 12AA of the Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation.

48. As far as the unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, on which heavy reliance was placed by the Revenue, the said decision relates to the rejection of the registration at the threshold of the application filed for registration. So too the decision of the Apex court reported in 315 ITR 428 in the case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society, wherein, rejection was made on the threshold of application for registration made by the assessee. The decisions relied on is thus distinguishable and has no relevance to the facts of the present case.

49. As far as unreported decision of this Court in C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, while rejecting the appeal filed by the assessee on the rejection of the application for registration, this Court observed that it was open for the assessee Society to renew its application as and when it expanded the objects of the Society and were approved by the competent Court. The rejection order passed by the Revenue was on the ground that the objects of the trust were not charitable in character. This decision also has no relevance to the case on hand.

50. As already noted in the preceding paragraphs, considering the provision under Section 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances under Section 12AA(3) of the Act and in the background of the definition relevant to the particular year of registration. As rightly pointed out by the assessee, Revenue does not allege anything against the genuineness of the objects of the assessee or its activities. It rests its order only on the ground of the assessee receiving income from holding of matches which according to the assessee were not held by it. Thus, as regards the question as to whether the particular income qualified under Section 11 of the Act or not is not the same as activity being genuine or not. In the circumstances, we do not agree with the view of the Income Tax Appellate Tribunal that the order passed by the Director of Income Tax (Exemptions) was in accordance with the provisions of the Income Tax Act, He viewed that the conduct of test matches and ODI are in the nature of commerce or business. Though the assessee claimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV Advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009.

51. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of ‘charitable purpose’ under Section 2(15) of the Act.

52. On going through the materials, the Income Tax Appellate Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of Section 12AA(3) were satisfied. The Income Tax Appellate Tribunal agreed with the Director of Income Tax (Exemptions) that the expression ‘subsidy from BCCI’ was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast rights. The surplus from IPL Season-I worked out to 8.5% of the total receipts. It further held that 78% of the total receipt came out of advertisement revenue.

53. The Income Tax Appellate Tribunal pointed out that the physical aspect of the game was one in accordance with the objects of the assessee and the activities are However, the matches held were not in advancement of any specific object of general public utility. The pattern of receipt is commercial in character and the matches conducted are not in accordance with the objects of the Association. Thus, it rejected the assessee’s case and held that both the conditions under Section 12AA(3) of the Act stood attracted.

54. As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Income Tax Appellate Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the Commissioner had satisfied himself about the objects of the trust and the genuineness of the activities as falling within the meaning of ‘charitable purpose’, as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee’s object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility.

55.The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal’s view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act.

56. As regards the observation of the Income Tax Appellate Tribunal that IPL Matches and Celebrity Cricket Matches are also being held by the Association and hence it is an entertainment industry, we need not go into these aspects, for, the order of the Director of Income Tax (Exemptions) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the Assessing Officer to take note of all facts, while considering the same under Section 11 of the Income Tax Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above said circumstances, we set aside the order of the Income Tax Appellate Tribunal. “

33. The Delhi High Court, in the case of M/s. GST India vs. DIT, Delhi, reported in 360 ITR 138, held that:

“Section 2(15) of the Income-tax Act, 1961, was amended by the Finance Act, 2008, with effect from April 1, 2009, and a proviso was added to it. A second proviso was inserted to section 2(15) by the Finance Act, 2010, with retrospective effect from April 1, 2009. There are four main factors that need to be taken into consideration before classifying the activity of the assesseee as “charitable” under the residuary category, i.e.,” advancement of any other object of general public utility” under section 2(15) of the Act. The four factors are (i) the activity should be for advancement of general public utility; (ii) the activity should not involve any activity in the nature of trade, commerce and business; (iii) the activity should not involve rendering any service in relation to any trade, commerce, or business; and (iv) the activities in clauses (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration the aggregate value of the receipts from the activities under (ii) and (iii) should not exceed the amount specified in the second proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of2008 that a new proviso to section 2(15) of the Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of “public utility” to avoid tax liability. The legal terms “trade, commerce, or business” in section 2(15) mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is the antithesis of activity undertaken with profit motive or activity undertaken on sound or recognised business principles. The quantum of fee charged, the economic status of the beneficiaries who pay commercial value of benefits, in comparison to the fee, the purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business? Charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in the long run. There is no statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. A practical and pragmatic view is required to examine the data, which should be analysed objectively and a narrow and coloured view will be counter-productive and contrary to the language of section 2(15). The second proviso applies when business was/is conducted and the quantum of receipts exceeds the specified sum. The proviso does not seek to disqualify a charitable organization covered by the last limb, when a token fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which it is established and it undertakes.”

34. The principles of law discernible from the aforesaid two decisions may be summed up thus:-

(a) For the purpose of cancellation of the registration u/s 12AA(3), the Commissioner should record a satisfaction that the activities of the Trust or Institution are not genuine or that the activities are not being carried on in accordance with the objects of the Trust. In the absence of such a finding, the registration granted u/s 12A or u/s 12AA cannot be cancelled. Cancellation of registration of a charitable Trust, in a given case, is permissible, only under the circumstances stated u/s 12AA(3) of the Act.

(b) For an assessee to be classified as charitable under the residuary category i.e. “advancement of any other object of general public utility” u/s 2(15) of the Act, the following four factors need to be satisfied.

i) Activity should be for the advancement of the ‘general public utility’.

ii) Activity should not be in the nature of trade, commerce or business.

iii) Activity should not involve rendering of services in relation to any trade, commerce or business.

iv) Activities in Clauses b and c above, should not be for fees, cess or other consideration, the aggregate value of which should not exceed the amount specified in the Second Proviso to S.2(15).

(c) The earlier test that if the income so collected, is applied towards the charitable activity, then the trust cannot be held as non-charitable, is no longer relevant after the statutory amendment.

(d) The scope of the term “activity in the nature of trade, commerce or business” would mean that:

i) It is undertaken with a profit motive;

ii) The activity is continued on sound and recognized business principles and is pursued with reasonable continuity;

iii) There should be facts and other circumstances which justify and indicate that the activity undertaken is in fact, in the nature of business;

iv) The five tests propounded in the case of Customs and Excise Commissioner vs. Lord Fisher (1981) STC 238 and the propositions in the case of CST vs. Sai Publication Fund 258 ITR 70 (SC) apply.

v) Business activity is an important prevailing element of self

(e) From a perusal of the Circular no.11 of 2008 issued by the CBDT, it is clear that the new Proviso of S.2(15) of the Act, is applicable to the assesses who are engaged in commercial activities i.e. carrying of trade, commerce or business in the garb of “public utility” to avoid tax liability, and where the object of the “general public utility” is only a mask or device to hide the true purpose, which was “trade, commerce or business.”

(f) Charitable activity is the anti-thesis of activity having an element of self interest. Charity is driven by altruism and desire to serve others, though the element of self preservation may be present. For charity, benevolence should be omnipresent and demonstratable but it is not equivalent to self sacrifice and abnegation.

(g) The antiquated definition of the term charity, which entails giving and receiving nothing in return is outdated.

(h) Enrichment of oneself or self-gain should be missing and the predominant purpose of the activity should be to serve and benefit others, the mandatory features being, selflessness or illiberal spirit.

(i) The quantum of fee charged, the economic status of the beneficiaries who pay, commercial values in comparison to the fee, purpose and object behind the fee etc. are several factors which decide the seminal question, is it business?

(j) The Revenue cannot take a contradictory stand that, the assessee carries on charitable activity under the residuary head “general public utility”, but, simultaneously record the said activity as business.

(k) There is no statutory mandate that a charitable Institution falling under the residuary Clauses, should be wholly, substantially or in part be funded by voluntary contributions.

(l) A pragmatic view is required to be taken while examining the data and the same should be analysed objectively. A narrow and coloured view may prove to be counter productive and contrary to S.2(15) of the Act.

(m) Accumulation of money/funds over a period of two to three years may not be relevant in determining the nature and character of the activity and whether the same should be treated indicative of profit motive i.e. the desire or intention to carry on business or commerce.

(n) The so called business activities, when intrinsically woven into and is part of the charitable activity undertaken, the business activity is not feeding charitable activities, as they are integral to the charity/charitable activity.

(o) What has to be seen is, as to what is the core/main activity of the assessee. The predominant activity shall be the basis of the decision making.

ANALYSIS

35. It appears from the line of reasoning adopted by the Assessing Officer and the CIT(A) that both are absolutely mesmerized or rather hypnotized by the word “BCCI” The corpus with the BCCI may be huge and the BCCI may be indulging in commercial transactions like TV rights, IPL matches etc. However, we fail to understand what has the BCCI to do directly with the assessee. The assessee is a registered charitable trust. It has its own objects. It has its own activities for the purpose of promoting the game of cricket, or in other words, imparting education in the game of cricket. The BCCI may ask the Association to host a cricket match at the international level once in a year or two. However, that by itself, is not sufficient to draw an inference that the assessee-Association is indulging in commercial activity with an element of profit motive.

36. We are quite amazed with some of the findings recorded by the Assessing Officer as well as the CIT(A). One of the findings recorded is that the Association should not sell tickets for watching the cricket matches. Are the authorities trying to convey that the Association should not sell tickets even when it comes to international matches. How does the Revenue expect the Association to distribute the tickets in such circumstances.

37. Having regard to the materials on record, we are convinced that the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in the State of Gujarat. The undisputed fact is that over a period of years, this activity has been recognized by the Income Tax Department as a charitable activity and the registration under Section 12A of the Act was granted to the assessee. A number of assessment orders under Section 143(3) were passed, wherein the assessee was held eligible for the exemption under Sections 11 and 12 of the Act. It appears that it is only after the Proviso came to be inserted that, all of a sudden, the department now believes that the activity of the assessee is commercial in nature and no longer charitable. It is difficult for us to take the view that the assessee could be said to be carrying on “trade, commerce or business” under the garb of the activity being “general public utility”. Merely because an activity is performed in an organized manner, that alone, will not make such activities as business/commercial activity. The profit motive is one essential ingredient which is apparently missing in the case on hand. In carrying out an activity, one may earn profit or one may incur loss. But for making it as a business activity, the presence of the profit motive is sine qua non.

38. In the case on hand, the ultimate beneficiary is either the cricketer or the game of cricket. The assessee is not charging any fees or revenue from the cricketer who is the ultimate beneficiary. Thus there is no quid pro quo relationship with the cricketer. The assessee is promoting cricket on the charitable basis as far as real beneficiary is concerned. Whenever the revenue is earned, the same is not on commercial lines and the same could be said to be earned without any commercial attributes. The revenue is generated for recovering the cost, at least partly if not in full.

39. Shah also invited our attention to the observations made by this High Court in the case of Commissioner of Income Tax vs. Sarabhai Sons Ltd., (1983) 143 ITR 473 (Guj.). Mr. Shah seeks to rely upon this decision, more particularly, the observations we shall quote hereinafter to make good his submission that the view taken by the Madras High Court should be accepted in conformity with the uniform policy as laid down in the Income Tax matters. We quote the observations upon which Mr. Shah would like to rely upon;

“Under the circumstances, as observed by Chagla, CJ, in Maneklal Chunilal & Sons Ltd. vs. CIT (1953) 24 ITR 375 (Bom.) in conformity with the uniform policy, which has been laid down in income tax matters, whatever our view may be, we must accept the view taken by the another High Court on the interpretation of the section of a statute which is in all India statute. Similar view has expressed by the Bombay High Court in Ramanlal Amarnath (Agency) Ltd. vs. CIT (1973) 91 ITR 250, while following a decision of this Court in Baroda Traders Ltd. vs. CIT (1965) 57 ITR 490. Even though, we may be persuaded to take a different view, we are not inclined to do so in view of the settled practice referred to in the decision of the Madras High Court and the decision of Bombay High Court and the Madhya Pradesh High Court adverted to above. Therefore, respectfully following the decisions of the Madras High Court and the Madhya Pradesh High Court, we must answer the third question referred to us also in the affirmative and against the revenue.”

40. However, Mr. Bhatt would submit, by placing reliance on the decision of this Court in the case of R. Paper & Board Limited vs. Deputy Commissioner of Income Tax, 1998 (234) ITR 733 that while the decision of any other High Court is entitled to highest esteem and respect by this Court, the system of law should not be evolved by such mechanical process of following the dictum as laid. According to Mr. Bhatt, if it becomes impossible to agree with the decisions of the other High Courts, this Court should be free to give its reasons which may not coincide with the conclusions reached in the persuasive precedent relied upon. Mr. Bhatt seeks to rely upon the following observations of this Court, as contained in para-27;

“27. While the decision of any other High Court is entitled to our highest esteem and respect, the constitutional powers of the High Court in its writ jurisdiction cannot be reduced to simply matching the colours of the case at hand against the colours of many sample cases spread out upon its desk and accept the sample nearest in shade as the applicable rule. The system of law cannot be evolved by such mechanical process and no judge of a High Court worthy of his office, views the function of his place so narrowly. If that were all there was to our calling there will be little of intellectual interest about it.

The choice of a path for us cannot be made so blind and unintelligent, to be followed without a survey of the route which has been travelled and of the place where it would lead. Necessarily therefore, reasons that are given in the decisions of other High Courts relied upon for the petitioners, which have great persuasive value as precedent are required to be considered and the consequences are to be noted and if it becomes impossible to agree with them, or if there are no reasons at all and only announcements of legal precepts, the court would be free to give its reasons, which may not coincide with the conclusions reached in the persuasive precedent relied upon. The decisions of any High Court are after all not intended to be “gag orders” for other High Courts and do not have the effect of freezing judicial thinking on the points covered by them. This is why in Arvind Boards and Paper Products Ltd. [1982] 137 ITR 635 (Guj), the court after reviewing the authorities on the subject, clearly spelt out exceptions, such as where the decision is sub-silentio, per incuriam, obiter dicta or based on a concession or takes a view which it is impossible to arrive at, etc., which would justify the High Court from taking its own view and not just follow the precedent which may otherwise have a persuasive value, though not binding.”

41. Mr. Bhatt, the learned senior counsel appearing for the Revenue may be right in his submission that if this Court is not persuaded to follow the view taken by the High Court of Madras in the case of Tamil Nadu Cricket Association (supra), then by only following the principle as laid down in the case of Maneklal (supra), this Court may not adopt or follow the view of the High Court of Madras for the purpose of consistency. We may only say that having regard to the materials on record, we are not persuaded to take a different view than the one taken by the High Court of Madras. Therefore, we are not going much into the issue as regards the dictum as laid down in Maneklal (supra). We find the view taken by the ITAT in its impugned order quite reasonable and in accordance with law. The Tribunal, in its impugned order, has made itself very clear that it was not expressing any opinion on the merits of the issue as to whether the activities of the GCA would fall within the meaning of charitable purpose in accordance with Section 2(15) of the Act as amended. The ITAT has also clarified that the issue with regard to registration under Section 12AA of the Act can be examined in the assessment proceedings.

42. In the aforesaid view of the matter, we are not convinced with the case put up by the Revenue. It is not the case of the Revenue that the objects of the Trust are not charitable, but the case of the Revenue is that the activities undertaken by the Association are not charitable in nature.

43. In the result, this appeal fails and is hereby dismissed. The substantial question of law, as formulated by this Court, is answered in favour of the assessee and against the Revenue.

Tax Appeal No.317 of 2019

44. We shall now take up the Tax Appeal No.317 of 2019. This tax appeal under Section 260A of the Income Tax Act, 1961 is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench ‘D’, Ahmedabad in the ITA No.1257/Ahd/2013 for the A.Y.2009-10. This tax appeal came to be admitted by this Court vide order dated 15^th July, 2019 on the following substantial questions of law;

“[A]. Whether, on the facts and in the circumstances of the case the Appellate Tribunal was justified in allowing the benefit of Sections 11 and 12 when the Assessing Officer has clearly brought on record that assessee is covered under the proviso to Section 2(15) r.w.s 13(8) of the Act?

[B]. Whether, on the facts and in the circumstances of the case the Appellate Tribunal has erred in holding that the assessee is not covered under the proviso to section 2(15) when the Officer has clearly brought on record that assessee is engaged in the activity of “advancement of objects of general public utility?”

[C]. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made in respect of corpus donations u/s.11(l)(d) of the Act without appreciating that the assessee failed to discharge its onus by not bringing anything on record in support of its claim of corpus donation?”

[D]. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made on account of infrastructure subsidy of Rs.2,13,34,033/-, treating it as capital receipts without appreciating the findings of the Assessing Officer?”

45. We may borrow the facts giving rise to this appeal from the memorandum of the appeal. The pleadings in the memo of the appeal are as under;

“(A) In the present case, the assessee filed its return of income on 14/09/2009 declaring total loss of Rs.3,45,54,247/-. The summary assessment u/s.143(1) of the Act was resulted in Refund of Rs.46,14,500/-. The assessment u/s.143(3) of the Act was completed on 30/12/2011 determining total income at Rs.22,77,02,663/-.

(B) Disallowance of benefit of section 11 of the Act.

1) During the assessment proceedings, the Assessing Officer observed that the activity of the assessee was held as in the nature of trade, business or commerce for a cess or fees in the form of tickets with profit motive and the receipt from the BCCI in the form of TV rights was not voluntary contribution but price paid for hosting cricket tournament on assessee’s stadium and therefore, it was not educational activity of the assessee. The activity of the assessee was running of its business of entertainment of the people at large for a fee of cess by arranging cricket tournament at various levels. Further, the DlT(E), Ahmedabad had passed speaking order considering all the relevant legal and actual position cancelling the registration u/s. 12AA(3) of the Act on 06/12/2010 w.e.f. A.Y. 2004-05 onwards. The Assessing Officer relied upon the decision of Hon. Supreme Court in the case of Sole Trustee Loka Shikshana Trust Vs CIT (1975) 101 ITR 234 (SC). The Assessing Officer held that the BCCI is the richest Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like the assessee and preparation for conduct of such cricket matches, selection of players, coaches, venue, TV Broadcasting rights, Audio & Video Publicity, sale of tickets, issue of license for parking lots, sale of edibles and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary squarely fit in the definition of trade or services for profit as defined by the Apex Courts. Therefore, the Assessing Officer held that the activities carried out by the assessee were in the nature of advancement of any other object of general public utility. Accordingly, the Assessing Officer had invoked provisions of section 2(15) of the Act and thereby denying benefit of section 11(1)(a) or 11(1)(b) of the Act.

2) Being aggrieved, the assessee filed appeal before CIT(A). The CIT(A) had held that the assessee was not doing any charitable/educational activity by promoting game of cricket but it was in the business of entertainment of people at large by arranging/hosting national and international levels cricket tournaments and thereby received approximately 3 crores which indicate that the activities of the assessee was carrying out activities in the nature of trade, commerce or business. The C1T(A) relied on the decision of Hon. Supreme Court in the case of Sole Trustee Loka Shikshana Trust Vs CIT 101 ITR 234 (SC) and Hon. High Court of Calcutta in the case of Cricket Association of Bengal Vs CIT 37 ITR 277 (Calcutta). The C1T(A) held that with the introduction of Section 13(8) of the Act w.e.f. 01/04/2009 (Finance Act, 2012) it was clear that the assessee was covered by the proviso to section 2(15) of the Act. Accordingly, the C1T(A) had dismissed the appeal of the assessee.

3) Being aggrieved, the assessee preferred appeal before the Appellate Tribunal. The Appellate Tribunal relied on co-ordinate bench’s decision in the case of Hoshiarpur Improvement Trust Vs ACIT (2015) 155 ITD 570 (Asr) which were approved by the Hon. Punjab & Haryana high Court in the case of C1T(E) Vs Improvement Trust Monga in TA No. 147 of 2016 reported as Tribune Trust Vs C1T(2017) 390 ITR 547 (P&H). Further, Appellate Tribunal has relied on the decision of this Hon’ble Court in the case of Sabarmati Gaushala Trust and held that accrual of profit cannot be held that the assessee is not covered by the section 2(15) of the Act. The receipts in the hands of the cricket associations are nothing but appropriation of profits and that are not taxable. Further, the Department has not been able to point out a single object of the assessee which is in the nature of trade, commerce or business. On perusal of the annual reports and annual financial statements of the assessee, the objects of the assessee exist and operate purely for the purpose of promoting cricket. The Appellate Tribunal held that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business. Accordingly, the Appellate Tribunal held that the assessee has covered by the section 2(15) of the Act and thus the assessee is entitled to relief u/s.11l of the Act.

4) The decision of the Appellate Tribunal is erroneous. It is seen that control of cricket is in a few powerful hands and that cricket is completely monopolized by the Board of Cricket Control in India. The BCCI is not a rank outsider for these cricket associations but the apex bodies of these cricket associations. These cricket associations act in tandem with the BCCI and the cricket is pursued in as commercial a manner as it can be pursued auction of players for playing matches and the format of the matches being improvised as per the requirements of commercial interests. It is submitted that cricket as it is pursued by the BCCI and its affiliates is pure entertainment, and these are the dictates of its entertainment value that decides the form and presentation of cricket. If it is a noble activity of education in a gentleman’s sport, where is the need of auctioning of the players. The commerce is glaring in each facet of cricket today. It is also submitted that even imparting cricket coaching is a big business rather than a selfless education. What is being pursued by these associations is pure commercial exploitation of cricket and that is the reason that the profits of these associations needs to be brought to tax. The financial relationship between the assessees and the BCCI cannot be without quid pro quo between the BCCI and these cricket associations, or else why would anyone share such huge amounts with cricket associations. BCCI organizes the events on pure commercial lines, makes huge monies on organizing these events, and share the monies with the local cricket associations. What the associations get is on account of fruits of the commercial operations, and that precisely is the reason these monies should be brought to tax. Learned Commissioner then takes us through the legislative amendments to Section 2(15) and links the same to how the sports have been exploited commercially in the last few decades. It is an admitted position that the cricket associations were all along treated as involved in “advancement of an object of general public utility” and, effective 1st April 2009, the proviso to Section 2(15) came in force which made it clear that if the activities of such institutions is in the nature of trade, commerce or business or rendition of services, for a cess, fee or any other consideration, to the business entities. The principle is clear. When you are here to make money from such activities on commercial lines, in the garb pursuing advancement of an object of general public utility, you may as well pay tax on the earnings from such activities. There is no dispute that the cricket is now biggest source of making money and, therefore, the income of the entities organizing cricket events should also be taxed. It is pertinent to mention that as per the CBDT Circular No.395 dated 24/09/1984, it was held that promotion of sports and games is “advancement of objects of general public utility’. Thus, in the instant case, the Assessee is clearly engaged in an activity that is of “advancement of objects of general public utility”. Since the Assessee is covered by the last limb of the definition of Section 2(15), now it is to be seen whether the conditions in the proviso 1 of the Section 2(15) are applicable to the facts of the case. It is very clear from the audited accounts of the assessee that it earns income out of sale of tickets, sale of space, A/C Cabin Ticket sale etc. out of the cricket matches conducted at the grounds of cricket association which is nothing but a business activity carried out by the Assessee. Thus, it is clearly evident that the Assessee is engaged in business activity, thereby satisfying the conditions prescribed in the proviso 1 to Section 2(15) of the I.T Act. Since the gross receipts of the Assessee exceed the amount decided in the provisos, the provisions of the second proviso to Section 2(15) of the I.T Act are also satisfied. Thus, the Assessee is clearly covered by the provisions of Section 2(15) read with the proviso 1 & 2 to the said section.

[C] Disallowance of corpus donation.

(1) During the assessment proceedings, the Assessing Officer observed that the assessee claimed to have been received amount of Rs.20,69,60,338/being corpus from BCCI and sponsorship money of Rs.20,00,000/ from Reliance Industries Ltd. The assessee was asked to submit documentary evidences to support its claim for corpus donation. The assessee failed to discharge its onus either by bringing anything on records or producing representative of BCCI as its witness in support of its claim of corpus donation that can be considered as corpus donation on instruction of BCCI. The auditor was also of the opinion that the amount of Rs.20,69,60,338/ considered as corpus was not in consonance with provisions of law and facts of the case. The Assessing Officer held that the assessee had not complied with the requirements of section 11(1)(d) of the Act. Accordingly, the claim of corpus donation of Rs.20,69,60,338/- of the assessee was rejected by the Assessing Officer.

2) Being aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) held that no written specific direction was available with the respective amounts for the respective A.Ys. Accordingly, the CIT(A) held that the Assessing Officer has rightly treated the donation received from the BCCI as income of the assessee and thereby had confirmed the addition of Rs.20.69,60,338/-.

3) Being aggrieved. the assessee preferred appeal before the Appellate Tribunal. The Appellate Tribunal held that there was specific confirmation to the effect that amounts were corpus donations. Further, on perusal of the BCCI resolution No. 5 which specifically stated that the TV subsidies should henceforth be sent to the member association towards corpus funds. Therefore, any payments made by the BCCI, without a legal obligation and with a specific direction that shall be form corpus fund. Thus, the condition u/s.l 11(1)(d) of the Act are satisfied. The Appellate Tribunal has relied on the decisions in assessee’s own case in orders for A.Ys. 200405 to 2007-08 and thus directed the Assessing Officer to treat the TV subsidy of Rs.20,69,60,338/received from BCCI as a corpus donation.

4) The decision of the Appellate Tribunal is erroneous. As per provisions of section 11(1)(d) of the Act voluntary contributions with a specific direction that can be used as a corpus donation. However, in the instant case there is no specific direction from the BCCI to treat the said amounts as towards the ‘corpus fund’. If the intention of the donor was to donate this amount towards the ‘corpus fund’ of the assesee, then it has to be specifically mentioned. In the absence of written direction, a particular donation cannot be considered as ‘corpus donation’. In this case, as the specific direction was clearly missing, said receipt of subsidy had to be considered as the income of the assessee trust and it cannot be exempt u/s.11(1)(d) of the Act.

[D] Disallowance of infrastructure subsidy

1) During the assessment proceedings, the Assessing Officer observed that the activity of the assessee was held as in the nature of trade, business or commerce for a cess or fees in the form of tickets with profit motive and the receipt from the BCCI in the form of TV rights was not voluntary contribution but price paid for hosting cricket tournament on assessee’s stadium and therefore, it was not educational activity of the assessee. The activity of the assessee was running of its business of entertainment of the people at large for a fee of cess by arranging cricket tournament at various levels. Further, the DIT(E), Ahmedabad had passed speaking order considering all the relevant legal and actual position cancelling the registration u/s.12AA(3) of the Act on 06/12/2010 w.e.f. A.Y. 2004-05 onwards. On perusal of Income & Expenditure A/c., the assessee had received amount of Rs.3,98,07,028/-. The Assessing Officer relied upon the decision of Hon. Supreme Court in the case of Sole Trustee Loka Shikshana Trust Vs CIT (1975) 101 ITR 234 (SC). The Assessing Officer held that the BCCI is the richest Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like the assessee and preparation for conduct of such cricket matches, selection of players, coaches, venue, TV Broadcasting rights, Audio & Video Publicity, sale of tickets, issue of license for parking lots, sale of edibles and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary squarely flt in the definition of trade or services for profit as defined by the Apex courts. Therefore, the Assessing Officer held that the activities carried out by the assessee were in the nature of advancement of any other object of general public utility. Accordingly, Assessing Officer had invoked provisions of section 2(15) of the Act and thereby denying benefit of section 11(1)(a) or 11(1) (b) of the Act. The assessee, during the year under consideration, had received infrastructure subsidy from BCCI of Rs.3,52,86,521/- and had utilized of Rs.1,39,52,488/- by way of payment of District Cricket Association. Therefore, differential amount of Rs.2,13,34,033lwas added to the total income of the assessee.

2) Being aggrieved, the assessee preferred appeal before CIT(A). The CIT(A) held that the assessee was not an educational institution within the meaning of section 2(15) of the Act. The CIT(A) partly allowed the appeal of the assessee.

3) Being aggrieved, the assessee preferred appeal before Appellate Tribunal. The Appellate Tribunal held that the Assessing Officer has not justified in holding that infrastructure subsidy as revenue in nature. The assessee was made claim for subsidy only after the expenditure having been incurred which is relatable to capital assets. The infrastructure subsidy was given to the assessee for the reimbursement of 50% of expenditure which was incurred on infrastructure related to the capital assets and therefore it was not revenue receipt. Accordingly, the Appellate Tribunal has deleted the addition of Rs.2,13,34,033/-.

4) The decision of the Appellate Tribunal erroneous. In the cases of trusts, the trust is eligible to claim both revenue as well as capital expenses as application of income, so all expenses claimed as application of income should be first treated as income and be routed through the profit and loss accounts.

The tax effect involved is Rs.7,72,84,442/- which is above the prescribed monetary limit under the Board’s Circular No.03/2018 dated 11/07/2018.”

46. The assessee is a Society registered under the Societies Registration Act, 1860. It came to be registered with the Registrar of Societies vide the Registration Certificate dated 10^th July, 1984. The assessee was granted registration under Section 12AA of the Act, 1961 vide order dated 16^th April, 2003 by the then DIT (Exemption), Ahmedabad. The registration under Section 12AA of the Act was granted on the premise that the assessee-Association is carrying on the charitable activities like promotion of sports.

47. The objects of the assessee-Association are as follows;

“1. To control, supervise, regulate or encourage, promote and develop the game of cricket in the area under the jurisdiction of the Association. The Association can also undertake any other and all activities which may be beneficial to the Association.

2. To create, foster and maintain friendly and cordial relationship through sports tournaments and competitions connected therewith and to create a healthy spirit through the medium of sports in general and cricket in particular.

3. To instill the spirit of sportsmanship in students attending schools, colleges and members of other institutions and other citizens and to foster the spirit of sportsmanship and instill the ideal of cricket and educate them in the same.

4. To maintain a panel of approved Umpires who qualify themselves by passing the prescribed tests for purpose of officiating as such in the matches conducted by the Association.

5. To select teams to represent the Association in any tournaments, championship or fixture local or otherwise.

6. To arrange, supervise, hold, encourage and finance visits of teams.

7. To arrange, and/or manage among other things league and/or any other tournaments.

8. To promote and hold either alone or jointly with any other Association. Club or persons, sports, meetings, competitions and matches and to offer, give or distribute towards prizes, medals and awards.

9. To make provision for coaching deserving persons in the various departments of the game in general and cricket in particular.

10. To impart physical education through the medium of Cricket and take all steps to assist to the citizens to develop their physique.

11. To organize matches in aid of public charities and Relief Funds.

12. To lay out such ground or grounds for playing the game and for other purposes and to provide pavilion, stadiums, other conveniences and amenities in connection therewith.

13. To introduce a Scheme of professionalism and to implement the same.

14. To start and maintain a journal devoted to sports in general and cricket in particular.

15. To maintain a library of books, periodicals and other literature on sports i.e. general and cricket in particular and to start journal or journals on sports in general and/or cricket in particular.

16. To engage person or persons and professional cricketers, coaches, umpires, groundsmen and to pay remuneration or honorarium to them.

17. To start, sponsor and/or to subscribe to any fund for the benefit of players, umpires, coaches, groundsmen, employees or their families.

18. To collect funds for the purpose of the Association and to utilize such in such a manner as the Managing Committee of the Association consider desirable for the fulfillment of the objects of the Association.

19. To hold and maintain the Laws of Cricket and The Rules and Regulations of the Board of Control for Cricket in India.

20. To take such action as may be necessary to coordinate the activities of affiliated district Cricket Association institutions and their members in to the Association and amongst themselves.

21. To stage or sponsor and/or to subscribe funds to stage a match for benefit of the Cricketers or persons who may have rendered service game of cricket or for their families or to denote towards the develop promotion of the game.

22. To appoint representative or representatives on the Cricket conference and other conferences, seminars, talent events, symposiums connected with the game of cricket.

23. To invest moneys and funds of the Association in such a manner as may be decided upon by the Managing Committee of the Association capable of being conveniently carried on in connection with objects of the Association.

24. To carry on any other activity which may seem to the Association capable of being conveniently carried on in connection with objects of the Association.

25. To carry on any other activity for promoting the objects of the Association which are calculated directly or indirectly, to protect and/or to enhance the value of its properties or its rights and is conductive to the objects of the Association.

26. To acquire movable and immovable property and to apply both the capital and income thereof and the proceeds of the sale or mortgage thereof, for or towards, ail or any of the objects of the Board.

27. To start, assist, encourage or promote for training Cricketers and to provide for such amenities and facilities, usually provided in boarding schools.

28. To appoint Committee or Committees from time to time to organize matches for the achievement of the objects of the association and to utilize the net proceeds thereof towards the implementation of these objects.

29. To purchase, repair, make, supply, take on lease, hire or otherwise acquire any movable and/or immovable property, rights or privileges necessary or convenient for the purpose of carrying out the objects of the Association on such terms and conditions as the Managing Committee may at its discretion deem fit.

30. To sell, mortgage, exchange, lease, dispose of or otherwise deal with, all or any part of the property or funds of the Association it may at its discretion deem fit.

31. To borrow, whenever necessary by and mode with or without security, with or without interest and to purchase, redeem or pay off any such securities.

32. To employ, appoint executive secretaries and assistant secretaries, clerks, managers, coaches, professional cricketers, umpires, scorers, statisticians, groundsmen, peons, servants and other service personnel and staff and to pay to them and other persons in return for their services to the Association salaries, wages, gratuities, pensions, honorariums, compensations, any ex-gratia payments and/or provident funds, other funds and to remove or dismiss such employees.

33. To promote such benevolent or other funds and to donate such sum or sums for

1. such causes as would be deem ed fit by the Association conducive to the promotion of the game of cricket;

2. the benefit of a Cricketer or his widow or children as the Association may deem fit;

3. any other person who has served cricket or his widow or his children as the Association considers fit.

4. Generally to do all such other acts and things as may seem to the Association to be convenient and/or conductive to the carrying out of the objects of the Association.

48. The Assessing Officer took the view that the activities of the Association cannot be termed as “charitable activities”. The Assessing Officer took the view that the objects of the trust may be to promote the game of cricket, but the activities are covered by the Proviso to the fourth limb of Section 2(15) of the Act. The Assessing Officer also took the view that the activities of the Association cannot even be termed as the educational activities. In short, the Assessing Officer took the view that the Association is engaged in business. It derives profit from its so-called charitable activities. In such circumstances, according to the Assessing Officer, the Association is not entitled to seek exemption under Section 11 of the Act. The Assessing Officer, in its order, has observed as under;

“iv) The legal position as contained in the amended definition of ‘Charitable Purpose’ u/s 2(15) of the Act and explained vide Clause 4.3 of CBDT Circular No. 1 of 2009 dt. 27-05-2009 on I.T. Act 2008, Finance Minister’s Speech, the Notes on Clauses, Memorandum Explaining the provisions of Finance Bill, CBDT circular No. 11 of 2008 dt. 19/12/2008, as well as the alternative submission of the assessee is considered but not found acceptable for the reasons stated below.

(a) The assessee has claimed that it is an Educational Institute. The claim of the assessee is not acceptable in view ‘Education’ defined by H’ble Apex Court has in the case of Sole Trustee Loka Shikshana Trust Vs. Commissioner of Income Tax [1975] 101 ITR 234(SC) has defined ‘Education’ as under:

”Per Khanna J. The sense in which the word ‘education has been used in section 2(15) is the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received The word ’education’ has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. What education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling.”

The so called “Educational Activity” of the assessee is not the education activity but an activity directed at to keep the flow of future cricketers uninterrupted for smooth running of its business of entertainment of the people at large for a fee or cess by arranging cricket tournament at various levels by it as well as hosting them arranged by BCCI, irrespective of the use of money. It is pertinent to note that the assessee is imparting only cricket related training. Hence the claim of the assesse that it is an ‘Educational Institution’ is not acceptable and hence rejected.

(b) the receipt of the previous year of the assessee as reported in the Income & Expenditure Account is Rs.3,98,07,028/- which is not less than Rs. 10 lakh,

(c) The assessee is in the business of entertainment of public at large by arranging/hosting/ managing/executing cricket matches at national and international level for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. This issue is discussed below at length.

(d) The analysis of its activities and justification of applicability of amended definition of “Charitable Purpose’ i.e. Carrying on activity, engaged in carrying on Trade, Commerce or Business etc. and the activities should be carried out for any fee, cess etc. as analyzed in the tabular form is misleading and contrary to the interpretation of any activity, document, agreement or law as settled by various judicial pronouncements. The activities and object of the trust should be seen as a whole. The above referred activities are ancillary to the main activities of the business of entertainment of people at large for a fee or cess by arranging/hosting cricket tournaments on commercial basis with profit motive. The assessee during year under assessment has earned fee income of Rs.1,51,97,741/- for India Vs. South Africa Test Match in Income & Expenditure Account and hence, assessee’s claim of non collecting of fees is incorrect.

(e) As discussed above, the assessee was given ample opportunities right from the issue and service of first notice issued u/s 143(2) of the Act dated 24/09/2010, which provides an opportunities to the assessee to submit any account, document, statement or evidences relying upon which it has made its return of income till last opportunity offered to it vide letter dated 8/12/2011. The assessee has avoided defining its relation with BCCI, revenue sharing with BCCI in respect of TV broadcasting rights of cricket matches played on its ground, nature of agreements made with RIL for sponsorship, nature of receipt of income from sale of tickets. The assessee has failed to discharge its onus to establish the nature of the income earned in the form of ‘Sponsorship Money’ ‘Sharing of TV Broadcasting Income with BCCI. It has tried ‘to conceal the revenue income in the garb of ‘Corpus Donation’. It has failed to establish why and how BCCI is giving “Corpus Donation” It is to bring on record that as against the receipt of ‘Sponsorship Money’ of RS. 20,00,000/- from Reliance Industries Ltd., the assessee has claimed expenses of Rs: 25,84,636/- for Reliance Inter District Tournaments. Shri Parimal Nathwani holding a very senior position in Reliance Industries Ltd. is also Vice

President of the assessee.

It is very well known fact that BCCI is the richest ‘Sport Authority‘ in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like the assessee, and preparation for conduct of such cricket matches, selection of Players, Coaches, venue, TV Broadcasting rights, Audio & Video Publicity, sale of tickets, issue of license for parking lots, sale of edibles and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium a lot of other ancillary activities squarely flt in the definition of trade or service for profit as defined by the Apex court. Even by stretch of imagination it cannot be considered that the BCCI had its affiliated bodies who are represented on its board through elected representative is doing any sort of chaele or educational activity. The expenses claimed by the assessee in the Income & Expenditure Account for arranging various cricket tournaments in various levels round the year proves that it is a business activity as defined by Ho’ble Apex Court by the above referred judgement. “

49. The assessee, being dissatisfied with the order passed by the Assessing Officer preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax partly allowed the appeal. However, the Commissioner of Income Tax (Appeals) also took the view that the activities of the Association are not charitable in nature and the Association is not entitled to claim any exemption under Sections 11 and 12 of the Act. The CIT (A), while partly allowing the appeal, held as under;

“26. It is clear from the above that to claim exemption u/s 11 & 12 of the Income tax Act there must exist educational institution. Secondly the educational institute must exist solely for the purpose of education and not for the purpose of profit.

27. Considering the elaboration on education above including that of the judgment by the hons court in the case of Sole Trustee Loka Shikshana Trust Vs. CIT 101 ITR 234 (SC), it is clear that education in clause 2(15) refers to the process of training and development of knowledge, skill, mind and character of student by normal schooling. It is also clear that the term ‘education’ has a very specific meaning and is not used in a wide and extended sense and to be within the definition of education u/s. 2(15), the trust should be an educational institution which primarily engaged in education activity and if such trust does not have education activity as primary activity, it cannot avail examination on the basis of incidental training activity

28. In the instant case, the appellant trust is admittedly in promotion of cricket as a game in the state of Gujarat. Even the plain reading of objects of appellant does not support the view that the appellant trust is an education institution. The argument that cricket is a subject in school under the broad subject of ‘Health and Physical Education’ cannot make such physical training as education as it is not scholastic instruction as was held by the Hon’ble apex court. To add this chapter is only for class from Standard VI to Standard IX. Further, this subject is an optional subject in higher classes as is evident from both of the certificates from school submitted by the appellant. I am inclined to state that merely having a chapter on cricket and that too under a broad subject ‘Health and Physical education’ will not be suffice to make appellant as ‘education institute’. The A.O on the other hand amply elaborate the fact that how appellant is in the promotion of game cricket and has also highlighted that gross receipt of about 3 crores from the sale of tickets to general public. Considering the above facts. I am not inclined to support this argument with the appellant trust as an educational institution within the meaning of Section 2(15) of the Incometax Act.

29. Further, findings made by the A.0. indicates that the appellant indeed is carrying out charitable activities which are of the nature of ‘advancement of any other objective of the general public utility’. During the course of scrutiny by the A.O it was established that the assessee was not doing any ‘charitable/educational activity’ but it was in the business of entertainment of people at large by arranging/hosting national and international levels cricket tournaments for a fee/cess. The A.O has rightly pointed out that the receipts by the appellant predominantly from the sale of India Vs. Sri Lanka match amounting to approximately Rs.3 crores and also other activities indicate that the appellant is carrying out activities in the nature of trade, commerce or business.

30. At this point, it may be pointed out that CBDT has clarified that promotion of sports and games is considered to be general public utility vide Circular No.395 dated 24.09.1984. The text of circular is reproduced below:

SECTION 2(15) CHARITABLE PURPOSE

11. Whether promotion of sports and games can be considered to be charitable purpose

1. The expression “charitable purpose” is defined in section 2(15) to include relief of the poor, education, medical relief and the advancement of any other object of general public utility.

2. The question whether promotion of sports and games can be considered as being a charitable purpose has been examined. The Board are advised that the advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individuals would be an object of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games.

Circular No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24.9. 1984.

31. I may hasten to add that in Cricket Association of Bengal Vs. CIT 37 ITR 277 (Calcutta) wherein it was held that a club formed for the development of promotion of sports or games or entertainment are held to be not charitable institution. The head note of the decision is reproduced as under:

Section 11 of the Income-tax Act 1961 (Corresponding to section 4(3)(i) of the Indian Income-tax Act 1922)-Charitable or religious trust Exemption of income from property held under-Assessment years 1950-51 to 195253 Whether while promotion of games as a part of education of those who participate in them may be a charitable purpose, promotion of practice of game in general either for entertainment of public or for advancement of game itself could not be held to be charitable- Held, yes Assessee was an association whose main object was to promote game of cricket- Another object authorized assessee to carry out any other business or activity which might seem to assessee capable of being carried on in connection with above Assessee merely held some demonstration or exhibition matches and did not provide any training in game of cricket to novices or any advanced training for persons who were already practiced players its activities outside holding matches was limited entirely to its own members and only contact it had with public was by way of having them as spectators, on payment of fee, of matches arranged by it- Whether income that was derived from fees charged for admission to games held under auspices of association could not be said to be income derived from any property- Held, yes Whether further, there was no general public utility, so as to amount to charity, in arranging cricket matches which public could see on payment and hence, assessee was not entitled to exemption conferred by sections 4(3)(i) and 4(3)(ia) of 1922 Act- Held, yes

32. Section 2(15) of the Act defines ‘charitable purposes’. First proviso, thereto with effect from assessment year 2009-10 laid down that, if any trust etc. (a) is engaged in pursuing objects of general public utility (‘other objects’) and (b) carries on any activity in the nature of trade, business or commerce or provides any services in relation to the trade, commerce services or business and (c) aggregate receipts there from exceed Rs.25 lacs, it shall be considered that other objects is not a charitable purpose. If so, such a trust is not eligible for the exemption inasmuch as the primary condition of being existing for charitable purpose is not satisfied.

33. With the introduction of Sec. 13(8) of the Act, w.e.f 1/04/2009 (Finance Act 2012), it is clearly evident that the appellant whose case is squarely covered by the proviso to Sec 2(15) sha11 forfeit all the exemptions that are otherwise available u/s 11 and 12 of the Act. The relevant provisions are as under:

”(8) Nothing contained in section 11 or section 12 Shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.”

The new sub-section (8) provides that the exemption under section 11 & 12 will not be available to a Trust, in a previous year, in which the First proviso to section 2(15) becomes applicable, for that previous year.

34. Therefore, in the light of the provisions of Sec 13(8) of the Act, the appellant loses all the exemptions claimed u/s 11 & 12 of the Act. It is clear from the plain reading of the said provision that once proviso to Sec 2(15) becomes applicable to the facts of the case, all the exemptions otherwise allowable u/s 11 and 12 are not available to the appellant in that previous year.

35. Considering all the above, I am of the view that the AO has rightly invoked proviso to Section 2(15) of the Income-tax Act and denied exemptions u/s 11 & 12 of the Income tax Act as the appellant trust was engaged in pursuing objects of general public utility and it carried on activities in the nature of trade, business or commerce where the aggregate receipts exceeded Rs.25 lacs. Accordingly, ground Nos. 1(a) & 1(b) and ground Nos. 2 & 3 are dismissed. “

50. The assessee carried the matter further in appeal before the Income Tax Appellate Tribunal, Ahmedabad, Bench ‘D’, Ahmedabad. The Tribunal, while allowing the appeal preferred by the assessee-Association, has observed as under;

“34. What essentially follows from the above discussions is that, even after the 2008 amendment and insertion of proviso to Section 2(15), so far as ‘any other object of general public utility’ is concerned, as long as profit earning is not the predominant purpose of the activity of the assessee, the benefit of Section 2(15) cannot be declined. In other words, the accrual of profits to the assessee, by itself, cannot, therefore, be reason enough to hold that the assessee is not covered by the definition of ‘charitable institution’ under section 2(15). Of course, all these discussions are relevant only for the residuary clause i.e. “any other object of general public utility”. In case, therefore, where the objects being pursued by the assessee is “relief of the poor”, “education” or “medical relief”, it is not even material whether or not the assessee is carrying on an activity in the nature of trade, commerce or business in the course of such activities.

The key factor is as to what are the activities of the assessee institution and as to what these activities seek to achieve.

35. Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends has to an activity of the assessee which is in the nature of trade, commerce or business. However, the case of the revenue authorities hinges on the allegation that the way and manner in which cricket matches are being organized, particularly the IPL matches, the activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from the time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and the impact of this commercialization has not left Indian cricket intact. The Indian Premier League and the rules of the game being governed by the dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. The difficulty for the case of the revenue before us, however, is that these matches are not being organized by the local cricket associations. We are told that the matches are being organized by the Board of Cricket Control of India, but then, if we are to accept this claim and invoke the proviso to Section 2(15) for this reason, it will amount to a situation in which proviso to Section 2(15) is being invoked on account of activities of an entity other than the assessees-something which law does not permit. We are not really concerned, at this stage, whether the allegations about commercialization of cricket by the BCCI are correct or not, because that aspect of the matter would be relevant only for the purpose of proviso to Section 2(15) being invoked in the hands of the BCCI. We do not wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the BCCI. Suffice to say that the very foundation of revenue’s case is devoid of legally sustainable basis for the short reason that the commercialization of cricket by the BCCI, even if that be so, cannot be reason enough to invoke the proviso to Section 2(15). We are alive of the learned Commissioner (DR)’s suggestion that the cricket associations cannot be seen on standalone basis as the BCCI is nothing but an apex body of these cricket associations at a collective level and whatever BCCI does is at the behest of or with the connivance of the local cricket associations, and that it is not the case that anyone can become a Member of the BCCI because only a recognized cricket association can become a Member of the BCCI. We are also alive to learned Commissioner’s argument that what is being sought to be protected by the Charitable status of these associations is the share of these cricket associations from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body; as we have explained earlier, cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitute BCCI or not, in the event of BCCI being involved in commercial activities, the taxability of such commercial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner’s arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial considerations said to be inherent in planning the matches. As we make these observations, and as we do not have the benefit of hearing the perspective of the BCCI, we make it clear that these observations will have no bearing on any adjudication in the hands of the BCCI. Suffice to say that so far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of ‘charitable activities’ in the hands of the cricket associations before us- particularly as learned Commissioner has not been able to point out a single object of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are “objects of general public utility”under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility.

36. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. We have carefully analyzed the annual reports and the annual financial statements of the assessee, and we do not find any objects, other than objects of the cricket associations, being pursed by these cricket associations. The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. We are, therefore, of the considered view that the proviso to Section 2(15) has been wrongly invoked in these cases.

41. We have noted that all the learned representatives have advanced detailed arguments on the proposition that since the assessee cricket associations are engaged in educational activities, it is not really material whether or not the assessee has engaged itself in the activities in the nature of trade, commerce or business. However, in the light of our categorical finding that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave the question open for adjudication in a flt case.

Conclusions on this issue:

42. For the detailed reasons set out above, we are of the considered view that the authorities below were in error in invoking the proviso to Section 2(15) and thus in declining the benefit of Section 11 and 12 to the appellant cricket associations. To this extent, plea of the appellants must be upheld. We uphold the plea. “

51. Being dissatisfied with the order passed by the ITAT, Ahmedabad, ‘D’ Bench, Ahmedabad, the Revenue is here before this Court with the present tax appeal.

Submissions on behalf of the Revenue:-

52. Mr. M.R. Bhatt, the learned senior counsel appearing for the Revenue vehemently submitted that the ITAT committed a serious error in passing the impugned order. Mr. Bhatt would submit that by any stretch of imagination, the activities of the assessee do not fall within the definition of the term “charitable purpose” as defined under Section 2(15) of the Act. Mr. Bhatt submitted that the activities, in no manner, could be said to be for the purpose of promotion of sports (game of cricket). Mr. Bhatt would submit that the activities of the Association are in the nature of business. The Association derives huge profit by hosting international cricket matches in the stadium. Mr. Bhatt would submit that the Association receives a huge amount from the BCCI for the purpose of organizing the international matches. Mr. Bhatt would submit that the registration of the Association under Section 12A of the Act will not make the assessee automatically eligible to seek exemption under Section 11 of the Act. Mr. Bhatt submitted that howsoever laudable the objects of the trust may be, but the activities undertaken by such trust are to be looked into for the purpose of deciding whether such trust is entitled to be called a charitable trust within the meaning of Section 2(15) of the Act and is liable to claim exemption under Sections 11 and 12 of the Act or not.

53. According to Mr. Bhatt, the Tribunal has not discussed the relevant issues in their true perspective and, therefore, the matters should be remitted to the Tribunal for fresh consideration of all the relevant aspects. According to Mr. Bhatt, although the Income Tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it, this Court may not interfere, yet it is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal is obliged to give its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings recorded on the evidence on record before it. According to Mr. Bhatt, when the Assessing Officer and the CIT (A) have assigned cogent reasons for the purpose of coming to the conclusion that the activities of the assessee cannot be termed as charitable and the case of the assessee is covered within the Proviso to the fourth limb of Section 2(15) of the Act, then to upset such findings, the Tribunal was expected to assign cogent reasons. Mr. Bhatt, in support of this submission, has placed reliance on a decision of the Supreme Court in the case of Omar Salay Mohamed Sait vs. CIT, reported in (1959) 371 ITR 151 (SC), in which the Supreme Court succinctly expressed the expectation from a Tribunal while deciding such appeals. The following observations of the Supreme Court have been relied upon by Mr. Bhatt;

“We are aware that the Income Tax Appellate-Tribunal is a fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court.”

54. Mr. Bhatt, in support of his submissions, has placed reliance on the following decisions;

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Mere surplus does not mean that assessee exists for profit

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Director of Income Tax (E) Vs Gujarat Cricket Association (Gujarat High Court)

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