ITO (Exemption) Vs Wrestling Federation of India (ITAT Delhi)
The appeal before the Tribunal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) dated 08.07.2025 for Assessment Year 2017–18. The assessee also filed a cross objection. Both were heard together and disposed of by a common order.
The assessee, a society registered under section 12A and holding approval under section 80G, filed its return declaring nil income and claiming exemption under sections 11 and 12 of the Income Tax Act, 1961. The case was selected for scrutiny, and during assessment proceedings, the Assessing Officer observed that the assessee had received royalty income of ₹4.03 crore and sponsorship fee of ₹92.61 lakh.
The Assessing Officer issued a show cause notice asking why these receipts should not be treated as business income under the proviso to section 2(15), thereby denying exemption. The assessee responded that its activities were charitable in nature, specifically relating to promotion of sports, which falls within the definition of “charitable purpose.” It argued that its activities were not commercial and that the receipts were incidental to its objectives.
The Assessing Officer rejected the explanation, holding that the receipts from royalty and sponsorship exceeded 20% of total receipts, thereby attracting the proviso to section 2(15). Consequently, exemption under sections 11 and 12 was denied, and an amount of ₹4.73 crore, being excess of income over expenditure, was treated as taxable income.
