Director of Income-tax (Exemption) v. Gujarat Cricket Association
[Citation -2019-LL-0927-128]

Citation 2019-LL-0927-128
Appellant Name Director of Income-tax (Exemption)
Respondent Name Gujarat Cricket Association
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 27/09/2019
Assessment Year 2004-05
Judgment View Judgment
Keyword Tags nature of trade commerce or business • cancellation of registration • genuineness of activities • general public utility • charitable activity • commercial activity • charitable purpose • charitable objects • commercial nature • charitable nature • grant of subsidy • corpus donation • profit motive • corpus fund


C/TAXAP/268/2012 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 268 of 2012 With R/TAX APPEAL NO. 152 of 2019 With R/TAX APPEAL NO. 317 of 2019 With R/TAX APPEAL NO. 318 of 2019 With R/TAX APPEAL NO. 319 of 2019 With R/TAX APPEAL NO. 375 of 2019 With R/TAX APPEAL NO. 358 of 2019 With R/TAX APPEAL NO. 359 of 2019 With R/TAX APPEAL NO. 360 of 2019 With R/TAX APPEAL NO. 333 of 2019 With R/TAX APPEAL NO. 334 of 2019 With R/TAX APPEAL NO. 335 of 2019 With R/TAX APPEAL NO. 336 of 2019 With R/TAX APPEAL NO. 337 of 2019 With R/TAX APPEAL NO. 338 of 2019 With R/TAX APPEAL NO. 339 of 2019 With R/TAX APPEAL NO. 340 of 2019 With R/TAX APPEAL NO. 320 of 2019 With R/TAX APPEAL NO. 321 of 2019 With R/TAX APPEAL NO. 374 of 2019 With R/TAX APPEAL NO. 675 of 2019 With Page 1 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT R/TAX APPEAL NO. 123 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- 1 Whether Reporters of Local Papers may be allowed to Yes see judgment ? 2 To be referred to Reporter or not ? Yes 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law No as to interpretation of Constitution of India or any order made thereunder ? DIRECTOR OF INCOME TAX (EXEMPTION) Versus GUJARAT CRICKET ASSOCIATION Appearance: MR. M.R. BHATT, LD. SR. COUNSEL WITH MS MAUNA M BHATT, LD. COUNSEL for Appellants in all Tax Appeals. MR. J. P. SHAH, LD. SR. COUNSEL WITH MR.MANISH J SHAH, LD. COUNSEL for Gujarat Cricket Association MR. S.N. SOPARKAR, LD. SR. COUNSEL WITH MR. B.S. SOPARKAR, LD. COUNSEL for Baroda Cricket Association MR. TUSHAR HEMANI, LD. SR. COUNSEL WITH MS. VAIBHAVI PARIKH, LD. COUNSEL for Saurashtra Cricket Association. CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 27/09/2019 Page 2 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. Since issues raised in all captioned tax appeals preferred at instance of Revenue are same,those were heard analogously and are being disposed of by this common judgment and order. 2. In tax appeals captioned above, respondent- assessee are three Cricket Associations, namely, (I) Gujarat Cricket Association (ii) Baroda Cricket Association and (iii) Saurashtra Cricket Association. 3. In following tax appeals, respondent-assessee is 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 following tax appeals, respondent-assessee is Page 3 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 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 following tax appeals, respondent-assessee is Saurashtra Cricket Association; (I) Tax Appeal No.152 of 2019; (I) Tax Appeal No.358 of 2019; (II) Tax Appeal No.359 of 2019; (III) Tax Appeal No.360 of 2019; (IV) Tax Appeal No.123 of 2014; Tax Appeal No.268 of 2012 6. We propose to first take up Tax Appeal No.268 of 2012. 7. This tax appeal under Section 260A of Income Tax Act, 1961 (for short Act, 1961 ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, 'A' Bench, Ahmedabad in ITA No.93/Ahd/2011 for A.Y.2004-05. This tax appeal was admitted vide order passed by this Court dated 19th July, 2012 on following substantial question of law; Whether Hon'ble ITAT has erred in not taking cognizance of latest amendment in nature of proviso to section 2(15) of I.T. Act inserted with effect from 01/04/2009? Page 4 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 8. facts giving rise to this tax appeal may be summarized as under; 8.1 assessee, namely, Gujarat Cricket Association (for short GCA ) is society registered under Societies Registration Act, 1860. GCA came to be registered with Registrar of Societies vide Registration Certificate dated 10th July, 1984. Later, GCA was notified under Section 10(23) of Act, 1961 vide notification dated 30 th March, 1999 from A.Y. 1999-2000 to 2001-2002 by Government of India, Ministry of Finance, Department of Revenue. 8.2 In absence of renewal of notification under Section 10(23) of Act, GCA preferred application for registration under Section 12AA of Act, 1961. registration under Section 12AA of Act came to be granted by DIT (Exemption), Ahmedabad vide its order dated 16th April, 2003, i.e., from A.Y.2004-05 onwards. 8.3 show-cause notice dated 26th September, 2010 came to be issued upon GCA under Section 12AA(3) of Act, calling upon GCA to show cause why registration granted under Section 12AA of Act should not be cancelled from 2004-05 onwards. 8.4 Commissioner, after hearing assessee, cancelled registration under Section 12AA for period from A.Ys.2004-05 till date of his order, i.e. 6th December, 2010 in exercise of his powers under Section 12AA(3) by invoking Proviso to Section 2(15) of Act, 1961 inserted by Finance Act, 2010 with effect from 1st April, 2009. Page 5 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Commissioner, while cancelling registration of assessee held that activities of trust were commercial in nature. relevant observations in order passed by Director of Income Tax (Exemption), Ahmedabad are quoted herein below; legislature in its wisdom has introduced section 12AA of I.T. Act, 1961 by Finance Act No.2, 1996 w.e.f 1.4.1997 i.e. A.Y.1997-98 onwards which requires Commissioner to be satisfied with objects of Trust and genuineness of its activities. As logical corollary of provisions of Section 12AA of Act, Commissioner has to examine objects of Trust by their reference to definition of charitable purpose along with newly inserted proviso to charitable purpose in Section 2(15) of Act w.e.f 1.4.2009. In fact there is mutual, symbiotic relationship between two provisions, namely section 2(15) and section 12AA of I.T. Act, 1961. definition of charitable purpose in section 2(15) of Act is engine which drives machinery of provisions of Section 12AA of Act. Thus it is clear that even as per pre-amended section 2(15) of I.T. Act, GCA is not entitled for registration u/s 12A of I.T. Act as per ratio of judgments of Hon. Courts as discussed above. When this is position even as per pre-amended section 2(15) of I.T. Act, there remains no case at all for continuation of registration u/s 12A after 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 I.T. Act stands withdrawn from A.Y.2004- 05 onwards. Ld. Counsel has further submitted that GCA has no contract with any party from which funds are credited by BCCI coupled with fact that GCA has no enforceable rights to receive any portion of TV rights which have been received by BCCI and corpus donation received at sweet will of BCCI may be in furtherance of objects of that Institution namely BCCI. Page 6 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT I am constrained to state that there is no merit in argument of Id. Counsel. It goes without saying that BCCI is huge money spinning machine in field of Cricket. It is following practice of giving some portion of its TV rights to certain Cricket Associations in country including GCA. BCCI also has commercial transactions like receipts of TV rights, IPL matches etc. This commercial chain further percolates down to State Associations like GCA which shows receipts of TV rights as corpus donations. This accounting procedure is incorrect as it is purely commercial receipt which falls within ambit and scope of newly inserted proviso to section 2(15) of I.T. Act w.e.f. 1/4/2009. It partakes character of tax avoidance device clearly attracting decision of Constitution Bench (5 Judges) of Apex Court in McDowell and Co. Ltd. Vs. CTO (1985) 154 ITR 148 (SC) which fortifies cancellation of registration of GCA. In this landmark case, their Lordships have held that tax planning may be legitimate provided it is within framework of law. Colourable devices cannot be part of tax planning (Per Ranganath Misra at Pg.171 of order). 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 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, 2007-08 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 act of business organization to enhance its Infrastructure and income earning apparatus. Thus expenditure on promotion of sports as percentage .of total receipts has further declined further in F.Y.2008-09. If GCA was really 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 Page 7 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 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 out and out commercial organisation. (b) GCA should have allowed free use of its Cricket ground for conducting tournaments and also popularizing game of Cricket in state of Gujarat for common man. viii) It is further seen from 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.17,58,00,000/-,Rs.6,83,46,038/ and Rs.20,69,60,338/- respectively have been shown as CORPUS. accounting practice followed by GCA by treating TV rights received from BCCI as corpus is incorrect. This is purely commercial receipt which falls within ambit and scope of aforesaid proviso to section 2(15) of I.T. Act, 1961. From 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 percentage of expenditure on promotion of Sports at 26.78%, 8.42% and 6.25% for aforesaid three financial years respectively. In other words, GCA is not spending much of revenue generated for promotion of Sports. This is clear violation of educative object of GCA as is seen from submission of Id. Counsel above. From reasons mentioned above, it is quite manifestly and palpably evident that entire character and focus of GCA has become totally commercial with object of earning revenue and it is no more charitable organization. As stated above, facts and ratio of decision of Uttarakhand High Court in case of Queens Educational Society (supra) call for withdrawal of registration allowed to GCA u/s 12AA of I.T. Act, 1961 Page 8 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT even with pre-amended section 2(15) of I.T. Act, 1961. Furthermore, fortiori, with amendment u/s 2(15) of I.T. Act, 1961 by Finance Act, 2008 w.e.f. A.Y.2009 10, GCA has lost 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 light of observations of Hon Supreme Court in 259 ITR, 1 (SC) (supra), I strongly conclude that activities of GCA are not genuine charities and are being carried out with Pure commercial considerations bereft of any element of charity. Accordingly, 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 assessee, being dissatisfied with order passed by Director of Income Tax (Exemption), cancelling registration, preferred appeal before Income Tax Appellate Tribunal, 'A' Bench, Ahmedabad. ITAT allowed appeal preferred by GCA. While allowing appeal, ITAT observed as under; We have considered rival submissions, perused material on record and have gone through orders of authorities below and tribunal decision cited by Ld. A.R. In present case, registration of assessee was cancelled by DIT(E) on this basis that main source of income of 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 education of cricketers. He also observed that in fact, assessee has been engaged itself in transaction of commercial nature. He also observed that assessee has been carrying its activities with commercial motive. He has decided issue on this basis that as per amended provisions of Section 2(15) of Income Tax Page 9 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Act, 1961. In case of Vidarbha Cricket Association (supra) also, registration was cancelled u/s.12AA(3) of Act on basis of amended provisions of Section 2(15) of Act and under these facts, issue has been decided by tribunal in favour of assessee. relevant para is para 7, 8 & 9 of Tribunal decision which are reproduced below: 7. In this view of matter, we may now examine reasons put forth by Commissioner in this case to cancel registration already granted to assessee under section 12A of Act. In this direction, we have carefully perused impugned order, wherein Commissioner has primarily examined application of revised definition of charitable purpose under section 2(15) as amended by Finance Act, 2003 with effect from 1.4.2009. ultimate conclusion of Commissioner in paragraph 17 of impugned order is pertinent, which is reproduced as under- "17. In view of amended provisions of sec. 2(15), it Is seen that assessee s activities can no longer be regarded as charitable activities. Especially proviso to sec. 2(15) is violated by assessee and hence, it cannot be regarded as charitable society engaged In charitable purposes. I have duly considered nature of activities, sources of income, 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 final conclusion, assessee Vidarbha Cricket Association cannot be held to be organization meant for charitable purposes in view of above findings. 18. In result, deemed registration benefit under section 12AA as claimed and enjoyed by assessee is hereby withdrawn/cancelled from assessment year 2009- 10 onwards. 8. On perusal of aforesaid, It is clearly established that as per Commissioner, activities of assessee do not qualify to fall within 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 objection cannot be Page 10 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT basis of invoke section 12AA(3) so as to cancel registration already granted to assessee under section 12A of Act. In our considered opinion registration already granted to assessee could not have been re-visited by Commissioner on basis of reasoning aforesaid, since his power to cancel registration under section 12AA(3) was confined to examination as to whether activities of assessee society/association are genuine or that same are not being carried out in accordance with stated objects. In light of discussion emerging form order of Commissioner in our considered opinion, action taken by Commissioner does not fall within parameters of section 12AA(3) of Act and, therefore, impugned order is bad in law. 9. At this stage, we may hasten to add that we are not commenting on merits of issue as to whether activities of assessee fall within meaning of expression charitable purpose as per section 2(15) as amended with effect from 1.4.2009. only point decided in appeal is to effect that it was not within scope and ambit of section 12AA(3) for Commissioner to have examined applicability of amended section 2(15) of purposes of invoking his powers of cancellation provided in section 12AA(3) of Act. At this stage, we may also state that issues raised by Commissioner in impugned order are not beyond powers of revenue to examine, so however, same can only be examined in appropriate proceedings, such as assessment proceedings in present case. Our decision is resting only on foundation that impugned order passed by Commissioner is not permissible in view of limited powers available to him under section 12AA(3) of Act. However it would be open for A.O. to consider issues raised in impugned order, if so advised, in course of relevant assessment proceedings." 5. Since present case also, registration has been cancelled by DIT(E) on basis of amended provisions of Section 2(15) of Income tax Act,1961, we are of considered opinion that action taken by DIT(E) does not fall within permissible limits of Section 12AA(3) of Income tax Act, 1961 and therefore, Page 11 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT impugned order is bad in law. We also add that we are not commenting on merits of issue as to whether activities of assessee falls within meaning of charitable purpose as per Section 2(15) of Income tax Act, 1961 as amended and we are only deciding this aspect of matter that order passed by DIT(E) u/s 12AA(3) is bad in law. This issue raised by DIT(E) is not permissible in view of limited powers available to him U/s. 12AA(3) of Income tax Act, 1961. However, it would be open for A.O. to consider all issues raised in impugned order, if so advised, in course of relevant assessment proceedings 6. In view of our discussion in above para, we set aside order of DIT(E) u/s. 12AA(3) of Income Tax Act, 1961 and restore registration granted to assessee u/s.12A of Income tax Act, 1961. 8.6 Revenue, being dissatisfied with order passed by ITAT has come up with present appeal. Submissions on behalf of Revenue:- 9. Mr. M.R. Bhatt, learned senior counsel appearing for Revenue vehemently submitted that ITAT committed serious error in disturbing order passed by Director of Income Tax (Exemption), cancelling registration of GCA under Section 12AA of Act. According to Mr. Bhatt, in view of amendment under Section 2(15) of Act, DIT (Exemption) was justified in taking view that activities of GCA cannot be termed as charitable and such activities were commercial in nature with element of earning profit from income of sale of tickets, income from ICC, income from hosting international cricket matches etc. Mr. Bhatt would submit that DIT (Exemption) was justified in taking view that though BCCI confirmed payment to assessee as grant of subsidy, same was not in Page 12 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT nature of grant. Mr. Bhatt would submit that most of advertisements through TV telecasting are received by BCCI, it being apex body,thus so-called subsidy given by BCCI is nothing but some sort of sharing of advertisement income on account of holding of international test matches and one-day international matches, due to which, BCCI has amassed huge advertisement income. Mr. Bhatt would submit that nature of receipt, even though called subsidy by assessee, was necessarily in nature of income received by activity of assessee. 10. Referring to Section 12AA(3) read with Section 2(15) of Act, 1961, Mr. Bhatt submitted that even if activities were carried on in accordance with arrangement with other party,the activities, being not charitable, it was hit by Section 12AA(3) of Act, 1961. Reading genuineness into activities of trust and considering objects of trust, Mr. Bhatt submitted that term genuineness has been used only to find out whether institution was charitable or not. Once institution was held as not for charitable purpose, Section 12AA registration came to be rightly cancelled by DIT (Exemption). 11. In such circumstances, referred to above, Mr. Bhatt prays that there being merit in this appeal, same be allowed and substantial question of law be answered in favour of Revenue and against assessee. Submissions on behalf of respondent-assessee: 12. On other hand, this appeal has been vehemently opposed by Mr. J.P. Shah, learned senior counsel appearing Page 13 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT for GCA. Mr. Shah would submit that no error, not to speak of any error of law, could be said to have been committed by ITAT in quashing and setting aside order passed by DIT (Exemption). Mr. Shah would submit that since inception of GCA and date of grant of registration under Act, objects of Association have remained same and have not undergone any change to question its genuineness. Mr. Shah would submit that view of DIT (Exemption) that assessee could not be said to be carrying on charitable activity as per Section 2(15) of Act is erroneous in law. Mr. Shah would submit that in any event all that Section 12AA(3) of Act prescribes for cancellation is genuineness of activities of trust or that activities are not carried on in accordance with objects of trust. 13. Mr. Shah took us through various objects of Association and pointed out to clear distinct words used in Section12AA(1) and 12AA(3) of Act as well as first Proviso to Section 2(15) of Act. Mr. Shah submitted that grant of registration originally as early as in 2003 clearly indicates satisfaction of authorities that assessee is public charitable trust under Section 12AA of Act. Mr. Shah would submit, referring to Section12AA(3) of Act, that cancellation of registration granted is permissible in law only under following circumstances; (I) On Commissioner recording his satisfaction that activities of trust are not genuine or are not being carried out in accordance with objects of trust or institution,; thus unless and until show cause notice issued contained Page 14 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT grounds and materials as prescribed under Section 12AA(3) of Act, question of cancellation of registration, per se, does not arise. 14. Mr. Shah, thereafter, took us through Circular No.11 of 2008 issued by Central Board of Direct Taxes dated 19 th December, 2008. circular was issued in wake of insertion of Proviso to Section 2(15) of Act, 1961. Mr. Shah would submit that from reading of circular, it is evident that question of rejection of registration under Section 12AA(3) of Act would arise only in those cases where entity uses this status of charitable institution with charitable object of general public utility as mask or device to hide true purpose and that object is nothing other then trade, commerce or business or rendering of any service in relation to trade, commerce or business. Mr. Shah would submit that in case on hand, Revenue has not been able to substantiate with any cogent material to indicate absence of genuineness of activities. Mr. Shah would submit that erroneous misconception in mind of Revenue is that by conduct of matches, GCA could be said to have exhibited sense of business or commercial character. In such circumstances, referred to above, Mr. Shah prays that there being no merit in this appeal, same be dismissed and substantial question of law, on which, this tax appeal has been admitted, may be answered in favour of assessee and against Revenue. 15. Mr. Shah in support of his submissions, has placed strong reliance on decision of Madras High Court in case of Tamil Nadu Cricket Association vs. Director of Page 15 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Income Tax (Exemptions) & Ors., (2014) 360 ITR 633 (Mad.). 16. Mr. Bhatt, learned senior counsel appearing for Revenue, in rejoinder, brought to notice of this Court that decision of Madras High Court in case of Tamil Nadu Cricket Association (supra), on which strong reliance is sought to be placed on behalf of assessee, has been challenged by Revenue before Supreme Court . Supreme Court is yet to hear appeal preferred by Revenue. ANALYSIS 17. Having heard learned counsel appearing for parties and having gone through materials on record, only question that falls for our consideration is whether ITAT committed any error in passing impugned order. 18. Section 12AA of Act prescribes procedure for registration. As per this, on receipt of application for registration, Commissioner is to call for such documents or information from trust or institution in order to satisfy himself about genuineness of activities of trust or institution. Section further empowers Commissioner to make such enquiry as he deems necessary in this regard. Once Commissioner is satisfied or convinced about objects of trust or institution and genuineness of activities of trust, he has to pass order in writing registering trust or institution; if he is not so satisfied, he has to pass order in writing refusing to register trust or institution. Page 16 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 19. Section 12AA(3) of Act inserted with effect from 01.10.2004 under Finance (No.2) Act, 2004 and amendment inserted by Finance Act, 2010, with effect from 01.06.2010 therein empowering Commissioner to cancel registration granted under stated circumstances, reads as under:- Provision inserted under Finance Act, 2004: Section 12AA(3):- Where trust or institution has been granted registration under clause (b) of sub-section (1) and subsequently Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard. 20. After amendment in year 2010, Section 12AA(3) of Income Tax Act reads as follows: "Section 12AA(3):- Where trust or 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 Finance (No.2) Act, 1996 (33 of 1996) and subsequently Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard." 21. Thus in contrast to Section 12AA(1)(b) of Income Tax Act, 1961, where grant of registration requires Page 17 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT satisfaction about objects of trust as well as genuineness of activities, for cancellation of registration under Section 12AA(3), all that it is insisted upon is satisfaction as to whether activities of trust or institution are genuine or not and whether activities are being carried on in accordance with objects of trust. Thus, even if trust is genuine one i.e., objects are genuine, if activities are not genuine and same not being carried on in accordance with objects of trust, this will offer good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on satisfaction of Commissioner on findings given on parameters given in Sections 12AA(1) and 12AA(3) of Act, as case may be. 22. registration of trust under Act, confers certain benefits from taxation under provisions of Act. conditions under which income of trust would be exempted under provisions of Act are clearly laid down under Section 11 as well as in Section 12 of Act. Section 11 of Act specifically points out circumstances under which income of trust is not to be included in total income of previous year of person. So too, Section 12 of Act on income derived from property held for charitable or religious purposes. 23. Thus, when assessee is in receipt of income from activities, which fits in with Sections 11 and 12 of Act as well as from sources which do not fall strictly with objects of trust, would not go for cancellation of Page 18 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT registration under Section 12AA of Act on sole ground that 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 question of considering whether Section 11 of Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with genuineness of activity or activities not in conformity with objects of trust. As rightly pointed out by learned Senior counsel appearing for assessee, as is evident from reading of Circular No.11 of 2008 dated 19.12.2008, object of insertion of first proviso to Section 2(15) of Act was only to curtail institution, which under garb of 'general public utility', carry on business or commercial activity only to escape liability under Act thereby gain unmerited exemption under Section 11 of Act. 24. sum and substance of submissions canvassed by Mr. J.P. Shah, learned senior counsel appearing for assessee, may be summed up thus; (I) Gujarat Cricket Association is affiliated member of BCCI which controls and regulates all cricket activities in India. (ii) only source of income for Gujarat Cricket Association is receipt of some amount from BCCI on account of tournament subsidy. (iii) Gujarat Cricket Association is non-profit organization and applies its surplus for promotion of game of cricket, and that its objects prohibit distribution of any surplus amongst its members. Page 19 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT (iv) All members of Executive Committee hold honorary position in Gujarat Cricket Association. (v) Gujarat Cricket Association has produced number of excellent cricketers of international repute and same was achieved by nurturing talent irrespective of cast, creed, status, religion etc. It also provides support to one another facet of game of cricket, i.e. umpiring. (vi) Gujarat Cricket Association has self-sustaining model and promotes cricket in State of Gujarat without any support, aid, grant or subsidy from any Government. (vii) Gujarat Cricket Association has constructed world class infrastructure facility by modernizing entire Motera Stadium at Ahmedabad. (viii) Gujarat Cricket Association provides medical aid to its players, remuneration to Coaches, Physiotherapists, Doctors etc. (ix) It organizes various programmes to encourage game of cricket. (x) On ground booking charges, it was submitted that only in special cases, it has charged exclusively for purpose of playing cricket matches. (xi) Ranji Trophy and other matches are open to public viewing and no tickets are sold. (xii) On international matches, charge is levied, but same would be nominal charge as it would be impossible to manage affairs if viewing is free of cost. 25. aforesaid indicates that there is no profit motive. Page 20 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 26. On income from advertisement etc., it was submitted that assessee has to maintain stadium for whole year and whereas, international matches are played only once or twice in year or may be in two years, cost of maintenance of stadium is as high as compared to charges for transfer of interstate rights. 27. All funds are used for building up infrastructure for promotion of cricket and for purpose of development of players and for promotion of game and no funds are being utilized for personal purpose of any of members of Association. 28. activities of Association are not carried out on commercial basis. 29. Registration could not have been cancelled on erroneous ground that activities of assessee are commercial in nature. For invoking Section 12AA read with Section 2(15) of Act, Revenue has to show that activities are not in accordance with objects of Association. 30. For achieving its main charitable object, if institution carries on some commercial activity and there is profit, it cannot be considered to be business activity, with profit motive, so long as, profit earned is utilized for purpose of achieving main charitable object. Page 21 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 31. sum and substance of submissions canvassed on behalf of Revenue may be summed up thus; (i) It is only logical to hold that activities of assessee are no longer falling within definition of charitable purposes after amendment of Section 2(15) of Act w.e.f 1st January, 2019. (ii) assessee, in name of general public utility, is engaged in business. (iii) Once activities ceases to qualify as charitable, same cannot be said to be genuine for purpose of charity. (iv) Instead of promoting and developing game of cricket, assessee could be said to be promoting and developing game of cricket as entertainment and tickets of international matches are highly priced. assessee, in such circumstances, could be said to have shifted activities of general public utility to commercial activity for generating revenue. 32. We have gone through entire judgment of Madras High Court in case of Tamil Nadu Cricket Association (supra). We are convinced with line of reasoning assigned by Madras High Court and view taken on subject. It is true that decision of Madras High Court has been challenged before Supreme Court. Supreme Court has yet to look into issue and consider whether view taken by Madras High Court is correct proposition of law or not?. However, as on date, view taken by Madras High Court on subject holds field. We may quote Page 22 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT relevant observations made by High Court of Madras. Going by objects , we find that trust falls under head of "any other object of general public utility" and hence falls within meaning of charitable purpose under Section 2(15) of Act. Section 2(15) of Act defines "charitable purpose" as it originally stood at time of grant of registration as under:- " 'charitable purpose' includes relief of poor, education, medical relief and 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 following provision which reads s under: "2. Definitions. .... (15) "charitable purpose" includes relief of 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 advancement of any other object of general public utility. Provided that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity;) 24. Section 2(15) as it stood prior to 1983 defined 'charitable purpose' to include relief of poor, education, medical relief, and advancement of any other object of general public utility not involving carrying on of any activity for profit. phrase "not involving carrying on of any activity for profit" was omitted from Section by Finance Act 1983, with effect from 01.04.1984, consequent on amendment to Section 11, where under profits and gains of business in case of charitable or religious trust and institutions would not be entitled to exemption under that Section, except in cases where business fulfilled conditions under Section 11 (4). Section was once again amended by substitution in year 2008 under Page 23 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Finance Act, 2008, with effect from 01.04.2009, streamlining definition of 'charitable purpose', considering fact that taking advantage of 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 Act. Thus, to limit scope of this expression, Section was amended in year 2008 that advancement of any other object of general public utility shall not be charitable purpose, if object involved carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. Though section as it stood prior to substitution in 2008 contained no provision as in proviso under 2008 amendment, yet Supreme Court held that that if primary or dominant purpose of trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to primary or dominant purpose would not prevent trust or institution from being valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in decision reported in (1980) 121 ITR 1(Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if dominant object or primary object was charitable, subsidiary object for purpose of securing fulfillment of dominant object would not militate against its charitable character and purpose would not be any less charitable. amendment in year 2008 made drastic amendment to deny status of charitable purpose to institution with object of general public utility, having any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration. 25. Proviso to Section 2(15) of Income Tax Act states that if objects involve carrying on any activity in nature of trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity, status of institution will not be one Page 24 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT for 'charitable purpose'. 26. Central Board of Direct Taxes, in paragraph 3.2 pointed out to scope of circular as under:- " In such case, object of 'general public utility' will be only mask or device to hide true purpose, which is trade, commerce or business or 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 meaning of Section 2(15), would be well advised to eschew any activity which is in nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business." 27. Thus, anxiety of Parliament in introducing proviso to Section 2(15) of Act is only to check those institution, which attempt to gain exemption under cloak of trust. 28. Section 11 of Act states that income from property held for religious or charitable purposes shall not be included in total income of previous year. Section 12 deals with income of trusts or institutions from contributions. Section 12A deals with making application for registration of trust/association so that said institution will have benefit of exemption under Section 11 and 12 of Act. 29. Section 12AA of Act prescribes procedure for registration. As per this, on receipt of application for registration, Commissioner is to call for such documents or information from trust or institution in order to satisfy himself about genuineness of activities of trust or institution. Section further empowers Commissioner to make such enquiry as he deems necessary in this regard. Once Commissioner is satisfied himself about objects of trust or institution and genuineness of activities of trust, he has to pass order in writing registering trust or institution; if he is not so satisfied, he has to pass order in writing refusing to register trust or institution. 30. Section 12AA(3) of Act inserted with effect from 01.10.2004 under Finance (No.2) Act, 2004 and amendment inserted by Finance Act, 2010, with effect Page 25 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT from 01.06.2010 therein empowering Commissioner to cancel registration granted under stated circumstances, reads as under:- Provision inserted under Finance Act, 2004: Section 12AA(3):- Where trust or institution has been granted registration under clause (b) of sub-section (1) and subsequently Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard. 31. After amendment in year 2010, Section 12AA(3) of Income Tax Act reads as follows: "Section 12AA(3):- Where trust or 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 Finance (No.2) Act, 1996 (33 of 1996) and subsequently Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard." 32. Thus in contrast to Section 12AA(1)(b) of Income Tax Act, 1961, where grant of registration requires satisfaction about objects of trust as well as genuineness of activities, for cancellation of registration under Section 12AA(3), all that it is insisted upon is satisfaction as to whether activities of trust or institution are genuine or not and whether activities are being carried on in accordance with objects of trust. Thus, even if trust is genuine one i.e., objects are genuine, if activities are not genuine and same not being carried on in accordance with objects of trust, this will offer good ground for cancellation. Thus, in every case, grant of registration Page 26 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT as well as cancellation of registration rests on satisfaction of Commissioner on findings given on parameters given in Section 12AA(1) and 12AA(3) of Act, as case may be. 33. Registration of trust under Act, confers certain benefits from taxation under provisions of Act. conditions under which income of trust would be exempted under provisions of Act are clearly laid down under Section 11 as well as in Section 12 of Act. Section 11 of Act specifically points out circumstances under which income of trust is not to be included in total income of previous year of person. So too, Section 12 of Act on income derived from property held for charitable or religious purposes. 34. Thus, when assessee is in receipt of income from activities, which fits in with Sections 11 and 12 of Act as well as from sources which do not fall strictly with objects of trust, would not go for cancellation of registration under Section 12AA of Act on sole ground that 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 question of considering whether Section 11 of Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with genuineness of activity or activities not in conformity with objects of trust. As rightly pointed out by learned Senior counsel appearing for assessee, as is evident from reading of Circular No.11 of 2008 dated 19.12.2008, object of insertion of first proviso to Section 2(15) of Act was only to curtail institution, which under garb of 'general public utility', carry on business or commercial activity only to escape liability under Act thereby gain unmerited exemption under Section 11 of Act. 35. In decision reported in (2012) 343 ITR 23 (Bom) (Sinhagad Technical Education Society V. Commissioner of Income Tax (Central), Pune & Anr), Bombay High Court held as follows: "As result of amendment, which has been brought about by Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower Commissioner to cancel registration obtained under Page 27 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Section 12A as it stood prior to its amendment by Finance (No.2) Act, 1996. SubSection (3) was inserted into provisions of Section 12AA by Finance (No.2) Act, 2004 with effect from 1 October 2004. As it originally stood, under subsection (3), power to cancel registration was conferred upon Commissioner where trust or institution had been granted registration under clause (b) of subsection (1) of Section 12AA. Commissioner, after satisfying himself that objects of trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, was vested with power to pass order in writing cancelling registration of such trust or institution. By Finance Act of 2010, subsection (3) was amended so as to empower Commissioner to cancel registration of trust or institution which has obtained registration at any time under Section 12A (as it stood before its amendment by Finance (No.2) Act, 1996). As result of amendment, regulatory framework is now sought to be put in place so as to cover also trust or 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 Commissioner in respect of trust registered prior to 1 June 2010. mere fact that part of requisites for action under Section 12AA (3) is drawn from time prior to its passing namely registration as charitable trust under Section 12A prior to 2010 would not make amendment retrospective in operation. 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, question as to whether particular income of trust is eligible for exemption under Section 12 of Act is matter of assessment and this Court had pointed out in decision reported in 343 ITR 300 in case of CIT Vs. Sarvodaya Ilakkiya Pannai, as under:- " In order to avail benefit of exemption under Section 11 of Income Tax Act, 1961, Trust can make application to Commissioner for registration under Section 12A of Income Tax Act, 1961. On receipt of said application for registration of trust or Page 28 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT institution, Commissioner should satisfy himself about genuineness of activities of trust or institution. In order to satisfy himself, Commissioner may also make such enquiry as he may deem necessary in that behalf. In event Commissioner satisfies himself that trust is entitled to registration keeping in mind objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of Income Tax Act, 1961. In event Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1) (b)(ii) of Income Tax Act, 1961. Once such satisfaction is arrived at by Commissioner to grant, such registration cannot be cancelled by following very same provision of section 12AA(b)(i) of Income Tax Act, 1961 to go into genuineness of activities of trust. However, Commissioner is empowered to revoke certificate in terms of Section 12AA(3) of Income Tax Act, 1961. As Commissioner is empowered to revoke certificate in terms of section 12AA(3) of Income Tax Act, 1961. As per said provision, in event Commissioner is satisfied subsequently i.e., after registration that activities of such trust or institution are not genuine or not being carried out in accordance with objects of trust or institution as case may be, he shall pass order in writing cancelling registration of such trust or institution." 37. After grant of registration, if Commissioner is satisfied subsequently that activities of institution are not genuine or they are not carried on in accordance with trust/ institution, he could pass order in writing cancelling registration of such trust or institution. 38. Referring to Section 11 and 12A of Act, this Court pointed out that act of granting registration under Section 12AA(1) itself is result of satisfaction recorded by Commissioner as regards genuineness of objects of trust as well as activities of trust and once satisfaction is arrived at by Commissioner, cancellation could only be in terms of Section 12AA(3) of Income Tax Act, 1961. 39. This Court pointed out that cancellation made in case of assessee therein was not on ground that activities were not genuine, but activities of trust in publication and sale and spread of Sarvodaya Page 29 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Literature and Gandhian Ideologies was not objects of trust. This Court pointed out that cancellation was made not on ground that activities of trust were not genuine but activities of trust were not in accordance with objects of trust; when trust was registered with definite objects, carrying on such activities would be in terms of objects for which registration was granted. 40. Referring to Section 12AA of Income Tax Act, 1961, this Court has held as under:- " 9. Under section 12AA, Commissioner is empowered to grant or refuse registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down under Section 12AA(3) of Income Tax Act, 1961. Whether income derived from such transaction would be assessed for tax and also whether trust would be entitled to exemption under section 11 are entirely matters left to assessing officer to decide as to whether it should be assessed or exempted." 41. In light of law declared by this Court in above said decision, we do not find that scope of Section 12AA(3) of Act is of any doubt for fresh look. It is relevant herein to point out that in two other assessee's case, Income Tax Appellate Tribunal, Ahmedabad Bench-A rendered in case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 and that of Nagpur Bench rendered in 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 said decision reported in 343 ITR 300 in case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of Act. On appeal before respective High Courts, decision of Income Tax Appellate Tribunal was confirmed. 42. Leaving that aside, there being no dispute raised by Revenue as to genuineness of trust, or as to activities of trust not being in accordance with objects of trust, question of cancellation under Section 12AA of Act does not arise. We further hold that at time of grant of registration on 28.3.2003, same was made taking into consideration objects of institution fitting in with definition Page 30 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT of 'charitable purpose' defined under Section 2(150 of Act and substitution of Section itself came only 2008, with effect from 01.04.2009. As rightly pointed out by learned senior counsel appearing for assessee, circular clearly brings out object of amendment and amended provision has no relevance to case . power regarding cancellation, hence has to be seen with reference to registration and object satisfying definition on 'charitable purpose', as it stood at time of registration and not by subsequent amendment to Section 2(15) of Income Tax Act. 43. Learned Standing counsel appearing for Revenue placed heavy reliance on proviso to Section 12AA(3) of Act and submitted that when assessee has income received from conduct of matches, which are commercial in nature, as had been found by Income Tax Appellate Tribunal, objects of trust ceased to be charitable. He submitted that going by definition of Section 2(15) of Act, rightly, Commissioner assumed jurisdiction under Section 12AA(3) of Act to cancel registration. He further pointed out that for finding to be recorded that activities of trust are not genuine, one must necessarily look into objects of association; if objects of association reveal commercial nature in conduct of matches, association cannot be one for charitable purpose as defined under Section 2(15) of Act. Thus, there could be no inhibition for Commissioner to assume jurisdiction to issue show cause notice calling upon assessee to state whether association is genuine or not. He further submitted that on looking at activities of association, Commissioner had rightly come to conclusion that assessee's registration was liable to be withdrawn. 44. We do not accept submission of learned Standing counsel appearing for Revenue. As rightly observed by learned Senior counsel appearing for assessee, Revenue granted registration under Section 12AA of Act satisfying itself as to objects of association befitting status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting registration, if registration is to be cancelled, it must be only on grounds stated under Section 12AA(3) of Act with reference to objects Page 31 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT accepted and registered under Section 12AA, as per law then stood under definition of Section 2(15) of Income Tax Act. Even therein, Courts have defined as to when institution could be held as one for advancement of any other object of general public utility. Thus, if particular activity of institution appeared to be commercial in character, and it is not dominant, then it is for Assessing Officer to consider effect of Section 11 of Act in matter of granting exemption on particular head of receipt. mere fact that said income does not fit in with Section 11 of Act would not, by itself, herein lead to conclusion that registration granted under Section 12AA is bad and hence, to be cancelled. 45. It may be of relevance to note language used in definition "charitable purpose" in Section 2(15) of Act, which states that charitable purpose includes relief of poor, education, medical relief and advancement of any other object of general public utility. assessee's case falls within phrase of definition general public utility . In decision reported in (2000) 246 ITR 188 in case of Hiralal Bhagwati Vs. Commissioner of Income Tax, Gujarat High court considered said phrase in context of Section 12AA registration and held that registration of charitable trust under Section 12AA of Act is not idle or empty formality; Commissioner of Income-tax has to examine objects of trust as well as empirical study of past activities of applicant; Commissioner of Income-tax has to examine that it is really charitable trust or institution eligible for registration; object beneficial to section of public is object of "general public utility". Gujarat High Court held that to serve as charitable purpose, it is not necessary that object must be to serve whole of mankind or all persons living in country or province; it is required to be noted that if section of public alone are given benefit, it cannot be said that it is not trust for charitable purpose in interest of public; it is not necessary that public at large must get benefit; criteria here is objects of general public utility. Thus, Gujarat High Court held that in order to be charitable, purpose must be directed to benefit of community or section of community; expression "object of general public utility", however, Page 32 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT is not restricted to objects beneficial to whole of mankind; object beneficial to section of public is object of general public utility; section of community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of public or impersonal nature. 46. above said decision (2000) 246 ITR 188 - Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, Revenue has not gone on appeal as against this judgment. In decision reported in (2008) 300 ITR 214(SC) in case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, reference was made about this decision and Apex Court pointed out that Revenue did not challenge this case and it attained finality. 47. It is no doubt true that decision reported in (2008) 300 ITR 214(SC) in case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, was in context of Section 10(23) of Income Tax Act, 1961, nevertheless, fact remains that understanding of scope of expression "general public utility" would nevertheless is of relevance herein. Admittedly when assessee was granted registration, Revenue recorded its satisfaction that objects are of charitable purpose. Thus only possible enquiry under Section 12AA of Act for cancellation is to find out whether activities of trust are genuine or in accordance with objects of trust. If any of income arising on activities are not in accordance with objects of trust, assessees income, at best, may not get exemption under Section 11 of Act. But this, by itself, does not result in straight rejection of registration as 'trust' under Section 12AA of Act. Consequently, we reject prayer of Revenue that Section 12AA(1) of Income Tax Act, 1961 must be read along with Section 12AA(3) of Income Tax Act, 1961 before considering cancellation. 48. As far as 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 Revenue, said decision relates to rejection of registration at threshold of application filed for registration. So too decision of Apex court reported in 315 ITR Page 33 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 428 in case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society, wherein, rejection was made on threshold of application for registration made by assessee. decisions relied on is thus distinguishable and has no relevance to facts of present case. 49. As far as 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, while rejecting appeal filed by assessee on rejection of application for registration, this Court observed that it was open for assessee Society to renew its application as and when it expanded objects of Society and were approved by competent Court. rejection order passed by Revenue was on ground that objects of trust were not charitable in character. This decision also has no relevance to case on hand. 50. As already noted in preceding paragraphs, considering provision under Section 12AA(3) of Act, cancellation or registration in given case could be done only under stated circumstances under Section 12AA(3) of Act and in background of definition relevant to particular year of registration. As rightly pointed out by assessee, Revenue does not allege anything against genuineness of objects of assessee or its activities. It rests its order only on ground of assessee receiving income from holding of matches which according to assessee were not held by it. Thus, as regards question as to whether particular income qualified under Section 11 of Act or not is not same as activity being genuine or not. In circumstances, we do not agree with view of Income Tax Appellate Tribunal that order passed by Director of Income Tax (Exemptions) was in accordance with provisions of Income Tax Act, 1961. He viewed that conduct of test matches and ODI are in nature of commerce or business. Though assessee claimed their activities for promotion of sports, he held that dominant feature is evident from huge profits received and hence amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by assessee for conducting matches, ground where matches are played are Page 34 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT given for rent which is commercial venture. subsidy received from BCCI included mainly TV Advertisements sold by BCCI for conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, nature of receipt was important than name of account under which it was accounted. Thus he viewed that objects and activities would no longer come within definition of Section 2(15) of Act after amendment come in effect from 01.04.2009. 51. As rightly pointed out by assessee, Revenue does not question objects of Association as not genuine or are in accordance with objects. All that Revenue stated was that nature of receipt could not be called subsidy. Thus Revenue came to conclusion that objects and activities could not come within meaning of 'charitable purpose' under Section 2(15) of Act. 52. On going through materials, Income Tax Appellate Tribunal pointed out that instead of promoting and developing game of cricket, assessee was promoting and developing cricket as entertainment and tickets are highly priced; here, assessee has shifted activities of general public utility to commercial activity for generating revenue; public merely participate to view costly matches; hence conditions of Section 12AA(3) were satisfied. Income Tax Appellate Tribunal agreed with Director of Income Tax (Exemptions) that expression 'subsidy from BCCI' was misleading nomenclature and it was share from revenue collected by BCCI from sale of telecast rights. surplus from IPL Season-I worked out to 8.5% of total receipts. It further held that 78% of total receipt came out of advertisement revenue. 53. Income Tax Appellate Tribunal pointed out that physical aspect of game was one in accordance with objects of assessee and activities are genuine. However, matches held were not in advancement of any specific object of general public utility. pattern of receipt is commercial in character and matches conducted are not in accordance with objects of Association. Thus, it rejected assessee's case and held that both conditions under Section 12AA(3) of Act stood attracted. 54. As seen from observation of Income Tax Page 35 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Appellate Tribunal, although generally it accepted case of assessee that physical aspect of game was one in accordance with objects, quantum of receipt apparently led Income Tax Appellate Tribunal and Revenue to come to conclusion that activities are commercial and hence by Section 2(15) proviso to Act, receipt from BCCI could not be called as subsidy. As for observation of Income Tax Appellate Tribunal that twin conditions stood satisfied is concerned, it is not denied by Revenue that at time of granting registration, Commissioner had satisfied himself about objects of trust and genuineness of activities as falling within meaning of 'charitable purpose', as it stood in 2003. Revenue does not deny as matter of fact that objects remain as it was in 2003 and there is no change in its content to call assessee's object as not genuine. There are no materials to indicate that grant of registration was not based on materials indicating objects of general public utility. 55.The assessee is member of Board of Control for Cricket in India (BCCI), which in turn is 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 matches in their stadia. franchisees conduct matches in Stadia belonging to State Cricket Association. State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for conduct of matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of revenue to member cricket association. Thus assessee is also recipient of revenue. Thus, for invoking Section 12AA read with Section 2(15) of Act, Revenue has to show that activities are not fitting with objects of Association and that dominant activities are in nature of trade, commerce and business. We do not think that by volume of receipt one can draw inference that activity is commercial. Income Tax Appellate Tribunal's view that it is entertainment and hence offended Section 2(15) of Act does not appear to be correct and same is based on its own impression on free ticket, Page 36 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT payment of entertainment tax and presence of cheer group and given irrelevant consideration. These considerations are not germane in considering question as to whether activities are genuine or carried on in accordance with objects of Association. We can only say that Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering test specified under Section 12AA(3) to impose commercial character to activity of Association. In circumstances, we agree with assessee that Revenue has not made out any ground to cancel registration under Section 12AA(3) of Act. 56. As regards observation of Income Tax Appellate Tribunal that IPL Matches and Celebrity Cricket Matches are also being held by Association and hence it is entertainment industry, we need not go into these aspects, for, order of Director of Income Tax (Exemptions) casts no doubt on genuineness of objects of trust. Hence, it is for Assessing Officer to take note of all facts, while considering same under Section 11 of Income Tax Act, 1961. We disapprove approach of Tribunal in this regard. In above said circumstances, we set aside order of Income Tax Appellate Tribunal. 33. Delhi High Court, in case of M/s. GST India vs. DIT, Delhi, reported in 360 ITR 138, held that: "Section 2(15) of Income-tax Act, 1961, was amended by Finance Act, 2008, with effect from April 1, 2009, and proviso was added to it. second proviso was inserted to section 2(15) by Finance Act, 2010, with retrospective effect from April 1, 2009. There are four main factors that need to be taken into consideration before classifying activity of assesseee as "charitable" under residuary category, i.e.," advancement of any other object of general public utility" under section 2(15) of Act. four factors are (i) activity should be for advancement of general public utility; (ii) activity should not involve any activity in nature of trade, commerce and business; (iii) activity should not involve rendering any service in relation to any trade, commerce, or business; and (iv) Page 37 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT activities in clauses (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration aggregate value of receipts from activities under (ii) and (iii) should not exceed amount specified in second proviso. earlier test of business feeding or application of income earned towards charity because of statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of2008 that new proviso to section 2(15) of Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in garb of "public utility" to avoid tax liability. legal terms "trade, commerce, or business" in section 2(15) mean activity undertaken with view to make or earn profit. Profit motive is determinative and critical factor to discern whether activity is business, trade or commerce. Business activity has important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is anti- thesis of activity undertaken with profit motive or activity undertaken on sound or recognised business principles. quantum of fee charged, economic status of beneficiaries who pay commercial value of benefits, in comparison to fee, purpose and object behind fee, etc., are several factors which will decide seminal question, is it business? Charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. There is no statutory mandate that charitable institution falling under last clause should be wholly, substantially or in part must be funded by voluntary contributions. practical and pragmatic view is required to examine data, which should be analysed objectively and narrow and coloured view will be counter-productive and contrary to language of section 2(15). second proviso applies when business was/is conducted and quantum of receipts exceeds specified sum. proviso does not seek to disqualify charitable organization covered by last limb, when token fee is collected from beneficiaries in course of activity which is not business but clearly charity for which it is established and it undertakes. Page 38 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 34. principles of law discernible from aforesaid two decisions may be summed up thus:- (a) For purpose of cancellation of registration u/s 12AA(3), Commissioner should record satisfaction that activities of Trust or Institution are not genuine or that activities are not being carried on in accordance with objects of Trust. In absence of such finding, registration granted u/s 12A or u/s 12AA cannot be cancelled. Cancellation of registration of charitable Trust, in given case, is permissible, only under circumstances stated u/s 12AA(3) of Act. (b) For assessee to be classified as charitable under residuary category i.e. "advancement of any other object of general public utility" u/s 2(15) of Act, following four factors need to be satisfied. i) Activity should be for advancement of 'general public utility'. ii) Activity should not be in 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, aggregate value of which should not exceed amount specified in Second Proviso to S.2(15). (c) earlier test that if income so collected, is applied towards charitable activity, then trust cannot be held as non-charitable, is no longer relevant after statutory Page 39 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT amendment. (d) scope of term "activity in nature of trade, commerce or business" would mean that: i) It is undertaken with profit motive; ii) 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 activity undertaken is in fact, in nature of business; iv). five tests propounded in case of Customs and Excise Commissioner vs. Lord Fisher (1981) STC 238 and propositions in case of CST vs. Sai Publication Fund 258 ITR 70 (SC) apply. v). Business activity is important prevailing element of self interest. (e) From perusal of Circular no.11 of 2008 issued by CBDT, it is clear that new Proviso of S.2(15) of Act, is applicable to assesses who are engaged in commercial activities i.e. carrying of trade, commerce or business in garb of "public utility" to avoid tax liability, and where object of "general public utility" is only mask or device to hide true purpose, which was "trade, commerce or business." (f) Charitable activity is anti-thesis of activity having element of self interest. Charity is driven by altruism and desire to serve others, though 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. Page 40 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT (g) antiquated definition of term charity, which entails giving and receiving nothing in return is outdated. (h) Enrichment of oneself or self-gain should be missing and predominant purpose of activity should be to serve and benefit others, mandatory features being, selflessness or illiberal spirit. (i) quantum of fee charged, economic status of beneficiaries who pay, commercial values in comparison to fee, purpose and object behind fee etc. are several factors which decide seminal question, is it business? (j) Revenue cannot take contradictory stand that, assessee carries on charitable activity under residuary head "general public utility", but, simultaneously record said activity as business. (k) There is no statutory mandate that charitable Institution falling under residuary Clauses, should be wholly, substantially or in part be funded by voluntary contributions. (l) pragmatic view is required to be taken while examining data and same should be analysed objectively. narrow and coloured view may prove to be counter productive and contrary to S.2(15) of Act. (m) Accumulation of money/funds over period of two to three years may not be relevant in determining nature and character of activity and whether same should be treated indicative of profit motive i.e. desire or intention to carry on business or commerce. (n) so called business activities, when intrinsically woven into and is part of charitable activity undertaken, business activity is not feeding charitable activities, as they Page 41 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT are integral to charity/charitable activity. (o) What has to be seen is, as to what is core/main activity of assessee. predominant activity shall be basis of decision making. ANALYSIS 35. It appears from line of reasoning adopted by Assessing Officer and CIT(A) that both are absolutely mesmerized or rather hypnotized by word BCCI corpus with BCCI may be huge and BCCI may be indulging in commercial transactions like TV rights, IPL matches etc. However, we fail to understand what has BCCI to do directly with assessee. assessee is registered charitable trust. It has its own objects. It has its own activities for purpose of promoting game of cricket, or in other words, imparting education in game of cricket. BCCI may ask Association to host cricket match at international level once in year or two. However, that by itself, is not sufficient to draw inference that assessee-Association is indulging in commercial activity with element of profit motive. 36. We are quite amazed with some of findings recorded by Assessing Officer as well as CIT(A). One of findings recorded is that Association should not sell tickets for watching cricket matches. Are authorities trying to convey that Association should not sell tickets even when it comes to international matches. How does Revenue expect Association to distribute tickets in such circumstances. Page 42 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 37. Having regard to materials on record, we are convinced that main and predominant object and activity of assessee is to promote, regulate and control game of cricket in State of Gujarat. undisputed fact is that over period of years, this activity has been recognized by Income Tax Department as charitable activity and registration under Section 12A of Act was granted to assessee. number of assessment orders under Section 143(3) were passed, wherein assessee was held eligible for exemption under Sections 11 and 12 of Act. It appears that it is only after Proviso came to be inserted that, all of sudden, department now believes that activity of assessee is commercial in nature and no longer charitable. It is difficult for us to take view that assessee could be said to be carrying on trade, commerce or business under garb of activity being general public utility . Merely because activity is performed in organized manner, that alone, will not make such activities as business/commercial activity. profit motive is one essential ingredient which is apparently missing in case on hand. In carrying out activity, one may earn profit or one may incur loss. But for making it as business activity, presence of profit motive is sine qua non. 38. In case on hand, ultimate beneficiary is either cricketer or game of cricket. assessee is not charging any fees or revenue from cricketer who is ultimate beneficiary. Thus there is no quid pro quo relationship with cricketer. assessee is promoting cricket on charitable basis as far as real beneficiary is concerned. Whenever Page 43 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT revenue is earned, same is not on commercial lines and same could be said to be earned without any commercial attributes. revenue is generated for recovering cost, at least partly if not in full. 39. Mr. Shah also invited our attention to observations made by this High Court in 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, observations we shall quote hereinafter to make good his submission that view taken by Madras High Court should be accepted in conformity with uniform policy as laid down in Income Tax matters. We quote observations upon which Mr. Shah would like to rely upon; Under circumstances, as observed by Chagla, CJ, in Maneklal Chunilal & Sons Ltd. vs. CIT (1953) 24 ITR 375 (Bom.) in conformity with uniform policy, which has been laid down in income tax matters, whatever our view may be, we must accept view taken by another High Court on interpretation of section of statute which is in all India statute. Similar view has expressed by Bombay High Court in Ramanlal Amarnath (Agency) Ltd. vs. CIT (1973) 91 ITR 250, while following decision of this Court in Baroda Traders Ltd. vs. CIT (1965) 57 ITR 490. Even though, we may be persuaded to take different view, we are not inclined to do so in view of settled practice referred to in decision of Madras High Court and decision of Bombay High Court and Madhya Pradesh High Court adverted to above. Therefore, respectfully following decisions of Madras High Court and Madhya Pradesh High Court, we must answer third question referred to us also in affirmative and against revenue. 40. However, Mr. Bhatt would submit, by placing reliance on decision of this Court in case of N.R. Paper & Board Page 44 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Limited vs. Deputy Commissioner of Income Tax, 1998 (234) ITR 733 that while decision of any other High Court is entitled to highest esteem and respect by this Court, system of law should not be evolved by such mechanical process of following dictum as laid. According to Mr. Bhatt, if it becomes impossible to agree with decisions of other High Courts, this Court should be free to give its reasons which may not coincide with conclusions reached in persuasive precedent relied upon. Mr. Bhatt seeks to rely upon following observations of this Court, as contained in para- 27; 27. While decision of any other High Court is entitled to our highest esteem and respect, constitutional powers of High Court in its writ jurisdiction cannot be reduced to simply matching colours of case at hand against colours of many sample cases spread out upon its desk and accept sample nearest in shade as applicable rule. system of law cannot be evolved by such mechanical process and no judge of High Court worthy of his office, views function of his place so narrowly. If that were all there was to our calling there will be little of intellectual interest about it. choice of path for us cannot be made so blind and unintelligent, to be followed without survey of route which has been travelled and of place where it would lead. Necessarily therefore, reasons that are given in decisions of other High Courts relied upon for petitioners, which have great persuasive value as precedent are required to be considered and 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, court would be free to give its reasons, which may not coincide with conclusions reached in persuasive precedent relied upon. decisions of any High Court are after all not intended to be "gag orders" for other High Courts and do not have effect of freezing judicial thinking on points covered by them. This is why in Page 45 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Arvind Boards and Paper Products Ltd. [1982] 137 ITR 635 (Guj), court after reviewing authorities on subject, clearly spelt out exceptions, such as where decision is sub-silentio, per incuriam, obiter dicta or based on concession or takes view which it is impossible to arrive at, etc., which would justify High Court from taking its own view and not just follow precedent which may otherwise have persuasive value, though not binding. 41. Mr. Bhatt, learned senior counsel appearing for Revenue may be right in his submission that if this Court is not persuaded to follow view taken by High Court of Madras in case of Tamil Nadu Cricket Association (supra), then by only following principle as laid down in case of Maneklal (supra), this Court may not adopt or follow view of High Court of Madras for purpose of consistency. We may only say that having regard to materials on record, we are not persuaded to take different view than one taken by High Court of Madras. Therefore, we are not going much into issue as regards dictum as laid down in Maneklal (supra). We find view taken by ITAT in its impugned order quite reasonable and in accordance with law. Tribunal, in its impugned order, has made itself very clear that it was not expressing any opinion on merits of issue as to whether activities of GCA would fall within meaning of charitable purpose in accordance with Section 2(15) of Act as amended. ITAT has also clarified that issue with regard to registration under Section 12AA of Act can be examined in assessment proceedings. 42. In aforesaid view of matter, we are not convinced with case put up by Revenue. It is not case of Page 46 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Revenue that objects of Trust are not charitable, but case of Revenue is that activities undertaken by Association are not charitable in nature. 43. In result, this appeal fails and is hereby dismissed. substantial question of law, as formulated by this Court, is answered in favour of assessee and against Revenue. Tax Appeal No.317 of 2019 44. We shall now take up Tax Appeal No.317 of 2019. This tax appeal under Section 260A of Income Tax Act, 1961 is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad, Bench 'D', Ahmedabad in ITA No.1257/Ahd/2013 for A.Y.2009-10. This tax appeal came to be admitted by this Court vide order dated 15 th July, 2019 on following substantial questions of law; [A]. Whether, on facts and in circumstances of case Appellate Tribunal was justified in allowing benefit of Sections 11 and 12 when Assessing Officer has clearly brought on record that assessee is covered under proviso to Section 2(15) r.w.s 13(8) of Act? [B]. Whether, on facts and in circumstances of case Appellate Tribunal has erred in holding that assessee is not covered under proviso to section 2(15) when Officer has clearly brought on record that assessee is engaged in activity of advancement of objects of general public utility? [C]. Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in deleting addition made in respect of corpus donations u/s.11(l)(d) of Act without appreciating that assessee failed to discharge its onus by not bringing anything on record in support of its claim of corpus donation? Page 47 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT [D]. Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in deleting addition made on account of infrastructure subsidy of Rs.2,13,34,033/-, treating it as capital receipts without appreciating findings of Assessing Officer? 45. We may borrow facts giving rise to this appeal from memorandum of appeal. pleadings in memo of appeal are as under; (A) In present case, assessee filed its return of income on 14/09/2009 declaring total loss of Rs.3,45,54,247/-. summary assessment u/s.143(1) of Act was resulted in Refund of Rs.46,14,500/-. assessment u/s.143(3) of Act was completed on 30/12/2011 determining total income at Rs.22,77,02,663/-. (B) Disallowance of benefit of section 11 of Act. 1) During assessment proceedings, Assessing Officer observed that activity of assessee was held as in nature of trade, business or commerce for cess or fees in form of tickets with profit motive and receipt from BCCI in 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 assessee. activity of assessee was running of its business of entertainment of people at large for fee of cess by arranging cricket tournament at various levels. Further, DlT(E), Ahmedabad had passed speaking order considering all relevant legal and actual position cancelling registration u/s.12AA(3) of Act on 06/12/2010 w.e.f. A.Y. 2004-05 onwards. Assessing Officer relied upon decision of Hon. Supreme Court in case of Sole Trustee Loka Shikshana Trust Vs CIT (1975) 101 ITR 234 (SC). Assessing Officer held that BCCI is richest Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like 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 Page 48 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT and drinking water in stadium during tournament, five star arrangement of lodging and boarding for players, arrangement of security for players and in stadium lot of other ancillary squarely fit in definition of trade or services for profit as defined by Apex Courts. Therefore, Assessing Officer held that activities carried out by assessee were in nature of advancement of any other object of general public utility. Accordingly, Assessing Officer had invoked provisions of section 2(15) of Act and thereby denying benefit of section 11(1)(a) or 11(1)(b) of Act. 2) Being aggrieved, assessee filed appeal before CIT(A). CIT(A) had held that assessee was not doing any charitable/educational activity by promoting game of cricket but it was in 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 activities of assessee was carrying out activities in nature of trade, commerce or business. C1T(A) relied on decision of Hon. Supreme Court in case of Sole Trustee Loka Shikshana Trust Vs CIT 101 ITR 234 (SC) and Hon. High Court of Calcutta in case of Cricket Association of Bengal Vs CIT 37 ITR 277 (Calcutta). C1T(A) held that with introduction of Section 13(8) of Act w.e.f. 01/04/2009 (Finance Act, 2012) it was clear that assessee was covered by proviso to section 2(15) of Act. Accordingly, C1T(A) had dismissed appeal of assessee. 3) Being aggrieved, assessee preferred appeal before Appellate Tribunal. Appellate Tribunal relied on co-ordinate bench s decision in case of Hoshiarpur Improvement Trust Vs ACIT (2015) 155 ITD 570 (Asr) which were approved by Hon. Punjab & Haryana high Court in 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 decision of this Hon ble Court in case of Sabarmati Gaushala Trust and held that accrual of profit cannot be held that assessee is not covered by section 2(15) of Act. receipts in hands of cricket associations are nothing but appropriation of profits and that are not taxable. Further, Department has not Page 49 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT been able to point out single object of assessee which is in nature of trade, commerce or business. On perusal of annual reports and annual financial statements of assessee, objects of assessee exist and operate purely for purpose of promoting cricket. Appellate Tribunal held that assessee cricket associations were not really engaged in activities in nature of trade, commerce or business. Accordingly, Appellate Tribunal held that assessee has covered by section 2(15) of Act and thus assessee is entitled to relief u/s.11l of Act. 4) decision of Appellate Tribunal is erroneous. It is seen that control of cricket is in few powerful hands and that cricket is completely monopolized by Board of Cricket Control in India. BCCI is not rank outsider for these cricket associations but apex bodies of these cricket associations. These cricket associations act in tandem with BCCI and cricket is pursued in as commercial manner as it can be pursued auction of players for playing matches and format of matches being improvised as per requirements of commercial interests. It is submitted that cricket as it is pursued by BCCI and its affiliates is pure entertainment, and these are dictates of its entertainment value that decides form and presentation of cricket. If it is noble activity of education in gentleman s sport, where is need of auctioning of players. commerce is glaring in each facet of cricket today. It is also submitted that even imparting cricket coaching is big business rather than selfless education. What is being pursued by these associations is pure commercial exploitation of cricket and that is reason that profits of these associations needs to be brought to tax. financial relationship between assessees and BCCI cannot be without quid pro quo between BCCI and these cricket associations, or else why would anyone share such huge amounts with cricket associations. BCCI organizes events on pure commercial lines, makes huge monies on organizing these events, and share monies with local cricket associations. What associations get is on account of fruits of commercial operations, and that precisely is reason these monies should be brought to tax. Learned Commissioner then takes us through legislative amendments to Section Page 50 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 2(15) and links same to how sports have been exploited commercially in last few decades. It is admitted position that cricket associations were all along treated as involved in advancement of object of general public utility and, effective 1st April 2009, proviso to Section 2(15) came in force which made it clear that if activities of such institutions is in nature of trade, commerce or business or rendition of services, for cess, fee or any other consideration, to business entities. principle is clear. When you are here to make money from such activities on commercial lines, in garb pursuing advancement of object of general public utility, you may as well pay tax on earnings from such activities. There is no dispute that cricket is now biggest source of making money and, therefore, income of entities organizing cricket events should also be taxed. It is pertinent to mention that as per 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 instant case, Assessee is clearly engaged in activity that is of advancement of objects of general public utility . Since Assessee is covered by last limb of definition of Section 2(15), now it is to be seen whether conditions in proviso 1 of Section 2(15) are applicable to facts of case. It is very clear from audited accounts of assessee that it earns income out of sale of tickets, sale of space, A/C Cabin Ticket sale etc. out of cricket matches conducted at grounds of cricket association which is nothing but business activity carried out by Assessee. Thus, it is clearly evident that Assessee is engaged in business activity, thereby satisfying conditions prescribed in proviso 1 to Section 2(15) of I.T Act. Since gross receipts of Assessee exceed amount decided in provisos, provisions of second proviso to Section 2(15) of I.T Act are also satisfied. Thus, Assessee is clearly covered by provisions of Section 2(15) read with proviso 1 & 2 to said section. [C] Disallowance of corpus donation. (1) During assessment proceedings, Assessing Officer observed that assessee claimed to have been received amount of Rs.20,69,60,338/being corpus from Page 51 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT BCCI and sponsorship money of Rs.20,00,000/ from Reliance Industries Ltd. assessee was asked to submit documentary evidences to support its claim for corpus donation. 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. auditor was also of opinion that amount of Rs.20,69,60,338/ considered as corpus was not in consonance with provisions of law and facts of case. Assessing Officer held that assessee had not complied with requirements of section 11(1)(d) of Act. Accordingly, claim of corpus donation of Rs.20,69,60,338/- of assessee was rejected by Assessing Officer. 2) Being aggrieved, assessee filed appeal before CIT(A). CIT(A) held that no written specific direction was available with respective amounts for respective A.Ys. Accordingly, CIT(A) held that Assessing Officer has rightly treated donation received from BCCI as income of assessee and thereby had confirmed addition of Rs.20.69,60,338/-. 3) Being aggrieved. assessee preferred appeal before Appellate Tribunal. Appellate Tribunal held that there was specific confirmation to effect that amounts were corpus donations. Further, on perusal of BCCI resolution No. 5 which specifically stated that TV subsidies should henceforth be sent to member association towards corpus funds. Therefore, any payments made by BCCI, without legal obligation and with specific direction that shall be form corpus fund. Thus, condition u/s.l 11(1)(d) of Act are satisfied. Appellate Tribunal has relied on decisions in assessee s own case in orders for A.Ys. 2004- 05 to 2007-08 and thus directed Assessing Officer to treat TV subsidy of Rs.20,69,60,338/received from BCCI as corpus donation. 4) decision of Appellate Tribunal is erroneous. As per provisions of section 11(1)(d) of Act voluntary contributions with specific direction that can be used as corpus donation. However, in instant case there is no specific direction from BCCI to treat said amounts as towards corpus fund . If intention of Page 52 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT donor was to donate this amount towards corpus fund of assesee, then it has to be specifically mentioned. In absence of written direction, particular donation cannot be considered as corpus donation . In this case, as specific direction was clearly missing, said receipt of subsidy had to be considered as income of assessee trust and it cannot be exempt u/s.11(1)(d) of Act. [D] Disallowance of infrastructure subsidy 1) During assessment proceedings, Assessing Officer observed that activity of assessee was held as in nature of trade, business or commerce for cess or fees in form of tickets with profit motive and receipt from BCCI in 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 assessee. activity of assessee was running of its business of entertainment of people at large for fee of cess by arranging cricket tournament at various levels. Further, DIT(E), Ahmedabad had passed speaking order considering all relevant legal and actual position cancelling registration u/s.12AA(3) of Act on 06/12/2010 w.e.f. A.Y. 2004-05 onwards. On perusal of Income & Expenditure A/c., assessee had received amount of Rs.3,98,07,028/-. Assessing Officer relied upon decision of Hon. Supreme Court in case of Sole Trustee Loka Shikshana Trust Vs CIT (1975) 101 ITR 234 (SC). Assessing Officer held that BCCI is richest Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like 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 lot of other ancillary squarely flt in definition of trade or services for profit as defined by Apex courts. Therefore, Assessing Officer held that activities carried out by assessee were in nature of advancement of any other object of general public utility. Accordingly, Assessing Page 53 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Offlcer had invoked provisions of section 2(15) of Act and thereby denying benefit of section 11(1)(a) or 11(1) (b) of Act. assessee, during 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 total income of assessee. 2) Being aggrieved, assessee preferred appeal before CIT(A). CIT(A) held that assessee was not educational institution within meaning of section 2(15) of Act. CIT(A) partly allowed appeal of assessee. 3) Being aggrieved, assessee preferred appeal before Appellate Tribunal. Appellate Tribunal held that Assessing Officer has not justified in holding that infrastructure subsidy as revenue in nature. assessee was made claim for subsidy only after expenditure having been incurred which is relatable to capital assets. infrastructure subsidy was given to assessee for reimbursement of 50% of expenditure which was incurred on infrastructure related to capital assets and therefore it was not revenue receipt. Accordingly, Appellate Tribunal has deleted addition of Rs.2,13,34,033/-. 4) decision of Appellate Tribunal erroneous. In cases of trusts, 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 profit and loss accounts. tax effect involved is Rs.7,72,84,442/- which is above prescribed monetary limit under Board s Circular No.03/2018 dated 11/07/2018. 46. assessee is Society registered under Societies Registration Act, 1860. It came to be registered with Registrar of Societies vide Registration Certificate dated Page 54 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 10th July, 1984. assessee was granted registration under Section 12AA of Act, 1961 vide order dated 16th April, 2003 by then DIT (Exemption), Ahmedabad. registration under Section 12AA of Act was granted on premise that assessee-Association is carrying on charitable activities like promotion of sports. 47. objects of assessee-Association are as follows; 1. To control, supervise, regulate or encourage, promote and develop game of cricket in area under jurisdiction of Association. Association can also undertake any other and all activities which may be beneficial to Association. 2. To create, foster and maintain friendly and cordial relationship through sports tournaments and competitions connected therewith and to create healthy spirit through medium of sports in general and cricket in particular. 3. To instill spirit of sportsmanship in students attending schools, colleges and members of other institutions and other citizens and to foster spirit of sportsmanship and instill ideal of cricket and educate them in same. 4. To maintain panel of approved Umpires who qualify themselves by passing prescribed tests for purpose of officiating as such in matches conducted by Association. 5. To select teams to represent 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 Page 55 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 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 various departments of game in general and cricket in particular. 10. To impart physical education through medium of Cricket and take all steps to assist to 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 game and for other purposes and to provide pavilion, stadiums, other conveniences and amenities in connection therewith. 13. To introduce Scheme of professionalism and to implement same. 14. To start and maintain journal devoted to sports in general and cricket in particular. 15. To maintain 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 benefit of players, umpires, coaches, groundsmen, employees or their families. 18. To collect funds for purpose of Association and to utilize such in such manner as Managing Committee of Association consider desirable for fulfillment of objects of Association. 19. To hold and maintain Laws of Cricket and Rules and Regulations of Board of Control for Cricket Page 56 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT in India. 20. To take such action as may be necessary to coordinate activities of affiliated district Cricket Association institutions and their members in to Association and amongst themselves. 21. To stage or sponsor and/or to subscribe funds to stage match for benefit of Cricketers or persons who may have rendered service game of cricket or for their families or to denote towards develop promotion of game. 22. To appoint representative or representatives on Cricket conference and other conferences, seminars, talent events, symposiums connected with game of cricket. 23. To invest moneys and funds of Association in such manner as may be decided upon by Managing Committee of Association capable of being conveniently carried on in connection with objects of Association. 24. To carry on any other activity which may seem to Association capable of being conveniently carried on in connection with objects of Association. 25. To carry on any other activity for promoting objects of Association which are calculated directly or indirectly, to protect and/or to enhance value of its properties or its rights and is conductive to objects of Association. 26. To acquire movable and immovable property and to apply both capital and income thereof and proceeds of sale or mortgage thereof, for or towards, ail or any of objects of 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 achievement of objects of association and to utilize net proceeds Page 57 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT thereof towards 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 purpose of carrying out objects of Association on such terms and conditions as 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 property or funds of 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 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 Association conducive to promotion of game of cricket; 2. benefit of Cricketer or his widow or children as Association may deem fit; 3. any other person who has served cricket or his widow or his children as Association considers fit. 34. Generally to do all such other acts and things as may seem to Association to be convenient and/or conductive to carrying out of objects of Association. Page 58 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 48. Assessing Officer took view that activities of Association cannot be termed as charitable activities . Assessing Officer took view that objects of trust may be to promote game of cricket, but activities are covered by Proviso to fourth limb of Section 2(15) of Act. Assessing Officer also took view that activities of Association cannot even be termed as educational activities. In short, Assessing Officer took view that Association is engaged in business. It derives profit from its so-called charitable activities. In such circumstances, according to Assessing Officer, Association is not entitled to seek exemption under Section 11 of Act. Assessing Officer, in its order, has observed as under; iv) legal position as contained in amended definition of 'Charitable Purpose' u/s 2(15) of 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, Notes on Clauses, Memorandum Explaining provisions of Finance Bill, CBDT circular No. 11 of 2008 dt. 19/12/2008, as well as alternative submission of assessee is considered but not found acceptable for reasons stated below. (a) assessee has claimed that it is Educational Institute. claim of assessee is not acceptable in view 'Education' defined by H'ble Apex Court has in 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. sense in which word 'education has been used in section 2(15) is systematic instruction, schooling or training given to young is preparation for work of life. It also connotes whole course of scholastic instruction which person has received word education has not been used in that wide and extended sense, according to which every Page 59 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT acquisition of further knowledge constitutes education. What education connotes in that clause is process of training and developing knowledge, skill, mind and character of students by normal schooling." so called "Educational Activity" of assessee is not education activity but activity directed at to keep flow of future cricketers uninterrupted for smooth running of its business of entertainment of people at large for fee or cess by arranging cricket tournament at various levels by it as well as hosting them arranged by BCCI, irrespective of use of money. It is pertinent to note that assessee is imparting only cricket related training. Hence claim of assesse that it is 'Educational Institution' is not acceptable and hence rejected. (b) receipt of previous year of assessee as reported in Income & Expenditure Account is Rs.3,98,07,028/- which is not less than Rs. 10 lakh, (c) assessee is in business of entertainment of public at large by arranging/hosting/managing/executing cricket matches at national and international level for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. This issue is discussed below at length. (d) 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 activities should be carried out for any fee, cess etc. as analyzed in tabular form is misleading and contrary to interpretation of any activity, document, agreement or law as settled by various judicial pronouncements. activities and object of trust should be seen as whole. above referred activities are ancillary to main activities of business of entertainment of people at large for fee or cess by arranging/hosting cricket tournaments on commercial basis with profit motive. 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. Page 60 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT (e) As discussed above, assessee was given ample opportunities right from issue and service of first notice issued u/s 143(2) of Act dated 24/09/2010, which provides opportunities to 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. 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. assessee has failed to discharge its onus to establish nature of income earned in form of 'Sponsorship Money' Sharing of TV Broadcasting Income with BCCI. It has tried 'to conceal revenue income in 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 receipt of 'Sponsorship Money' of RS. 20,00,000/- from Reliance Industries Ltd., assessee has claimed expenses of Rs: 25,84,636/- for Reliance Inter District Tournaments. Shri Parimal Nathwani holding very senior position in Reliance Industries Ltd. is also Vice President of assessee. It is very well known fact that BCCI is richest 'Sport Authority in India. Arranging national and international level cricket tournament and its allocation to various affiliated Associations like 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 lot of other ancillary activities squarely flt in definition of trade or service for profit as defined by Apex court. Even by stretch of imagination it cannot be considered that BCCI had its affiliated bodies who are represented on its board through elected representative is doing any sort of chaele or educational activity. expenses claimed by assessee in Income & Expenditure Account for arranging various Page 61 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT cricket tournaments in various levels round year proves that it is business activity as defined by Ho'ble Apex Court by above referred judgement. 49. assessee, being dissatisfied with order passed by Assessing Officer preferred appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax partly allowed appeal. However, Commissioner of Income Tax (Appeals) also took view that activities of Association are not charitable in nature and Association is not entitled to claim any exemption under Sections 11 and 12 of Act. CIT (A), while partly allowing appeal, held as under; 26. It is clear from above that to claim exemption u/s 11 & 12 of Income tax Act there must exist educational institution. Secondly educational institute must exist solely for purpose of education and not for purpose of profit. 27. Considering elaboration on education above including that of judgment by hons court in case of Sole Trustee Loka Shikshana Trust Vs. CIT 101 ITR 234 (SC), it is clear that education in clause 2(15) refers to process of training and development of knowledge, skill, mind and character of student by normal schooling. It is also clear that term 'education' has very specific meaning and is not used in wide and extended sense and to be within definition of education u/s. 2(15), trust should be 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 basis of incidental training activity 28. In instant case, appellant trust is admittedly in promotion of cricket as game in state of Gujarat. Even plain reading of objects of appellant does not support view that appellant trust is education institution. argument that cricket is subject in school under broad subject of 'Health and Physical Page 62 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Education' cannot make such physical training as education as it is not scholastic instruction as was held by Hon'ble apex court. To add this chapter is only for class from Standard VI to Standard IX. Further, this subject is optional subject in higher classes as is evident from both of certificates from school submitted by appellant. I am inclined to state that merely having chapter on cricket and that too under broad subject 'Health and Physical education' will not be suffice to make appellant as 'education institute'. A.O on other hand amply elaborate fact that how appellant is in promotion of game cricket and has also highlighted that gross receipt of about 3 crores from sale of tickets to general public. Considering above facts. I am not inclined to support this argument with appellant trust as educational institution within meaning of Section 2(15) of Incometax Act. 29. Further, findings made by A.0. indicates that appellant indeed is carrying out charitable activities which are of nature of advancement of any other objective of general public utility'. During course of scrutiny by A.O it was established that assessee was not doing any 'charitable/educational activity but it was in business of entertainment of people at large by arranging/hosting national and international levels cricket tournaments for fee/cess. A.O has rightly pointed out that receipts by appellant predominantly from sale of India Vs. Sri Lanka match amounting to approximately Rs.3 crores and also other activities indicate that appellant is carrying out activities in 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. 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 Page 63 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 1. expression "charitable purpose" is defined in section 2(15) to include relief of poor, education, medical relief and advancement of any other object of general public utility. 2. question whether promotion of sports and games can be considered as being charitable purpose has been examined. Board are advised that advancement of any object beneficial to public or section of public as distinguished from individual or group of individuals would be object of general public utility. In view thereof, promotion of sports and games is considered to be charitable purpose within meaning of section 2(15). Therefore, association or institution engaged in promotion of sports and games can claim exemption under section 11 of 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 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 club formed for development of promotion of sports or games or entertainment are held to be not charitable institution. head note of decision is reproduced as under: Section 11 of Income-tax Act 1961 (Corresponding to section 4(3)(i) of Indian Income-tax Act 1922)- Charitable or religious trust Exemption of income from property held under-Assessment years 1950-51 to 1952- 53 Whether while promotion of games as part of education of those who participate in them may be 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 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 Page 64 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 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 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 nature of trade, business or commerce or provides any services in relation to trade, commerce services or business and (c) aggregate receipts there from exceed Rs.25 lacs, it shall be considered that other objects is not charitable purpose. If so, such trust is not eligible for exemption inasmuch as primary condition of being existing for charitable purpose is not satisfied. 33. With introduction of Sec. 13(8) of Act, w.e.f 1/04/2009 (Finance Act 2012), it is clearly evident that appellant whose case is squarely covered by proviso to Sec 2(15) sha11 forfeit all exemptions that are otherwise available u/s 11 and 12 of Act. relevant provisions are as under: (8) Nothing contained in section 11 or section 12 Shall operate so as to exclude any income from total income of previous year of person in receipt thereof if provisions of first proviso to clause (15) of section 2 become applicable in case of such person in said previous year. new sub-section (8) provides that exemption under section 11 & 12 will not be available to Trust, in Page 65 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT previous year, in which First proviso to section 2(15) becomes applicable, for that previous year. 34. Therefore, in light of provisions of Sec 13(8) of Act, appellant loses all exemptions claimed u/s 11 & 12 of Act. It is clear from plain reading of said provision that once proviso to Sec 2(15) becomes applicable to facts of case, all exemptions otherwise allowable u/s 11 and 12 are not available to appellant in that previous year. 35. Considering all above, I am of view that AO has rightly invoked proviso to Section 2(15) of Income-tax Act and denied exemptions u/s 11 & 12 of Income tax Act as appellant trust was engaged in pursuing objects of general public utility and it carried on activities in nature of trade, business or commerce where aggregate receipts exceeded Rs.25 lacs. Accordingly, ground Nos. 1(a) & 1(b) and ground Nos. 2 & 3 are dismissed. 50. assessee carried matter further in appeal before Income Tax Appellate Tribunal, Ahmedabad, Bench 'D', Ahmedabad. Tribunal, while allowing appeal preferred by assessee-Association, has observed as under; 34. What essentially follows from above discussions is that, even after 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 predominant purpose of activity of assessee, benefit of Section 2(15) cannot be declined. In other words, accrual of profits to assessee, by itself, cannot, therefore, be reason enough to hold that assessee is not covered by definition of charitable institution under section 2(15). Of course, all these discussions are relevant only for residuary clause i.e. any other object of general public utility . In case, therefore, where objects being pursued by assessee is relief of poor , education or medical relief", it is not even material whether or not assessee is carrying on activity in nature of trade, commerce or business in course of such activities. Page 66 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT key factor is as to what are activities of assessee institution and as to what these activities seek to achieve. 35. Let us take pause here and examine as to what are activities of assessee cricket associations so as to be brought within ambit of trade, commerce or business. We have seen objects of association, which are reproduced earlier in our order, and it is not even case of revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends has to activity of assessee which is in nature of trade, commerce or business. However, case of revenue authorities hinges on allegation that way and manner in which cricket matches are being organized, particularly IPL matches, activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and impact of this commercialization has not left Indian cricket intact. Indian Premier League and rules of game being governed by dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. difficulty for case of revenue before us, however, is that these matches are not being organized by local cricket associations. We are told that matches are being organized by Board of Cricket Control of India, but then, if we are to accept this claim and invoke proviso to Section 2(15) for this reason, it will amount to situation in which proviso to Section 2(15) is being invoked on account of activities of entity other than assessees- something which law does not permit. We are not really concerned, at this stage, whether allegations about commercialization of cricket by BCCI are correct or not, because that aspect of matter would be relevant only for purpose of proviso to Section 2(15) being invoked in hands of BCCI. We do not wish to deal with that aspect of matter or to make any observations which would prejudge case of BCCI. Suffice to say that very foundation of revenue s case is devoid of legally sustainable basis for short reason Page 67 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT that commercialization of cricket by BCCI, even if that be so, cannot be reason enough to invoke proviso to Section 2(15). We are alive of learned Commissioner (DR) s suggestion that cricket associations cannot be seen on standalone basis as BCCI is nothing but apex body of these cricket associations at collective level and whatever BCCI does is at behest of or with connivance of local cricket associations, and that it is not case that anyone can become Member of BCCI because only recognized cricket association can become Member of BCCI. We are also alive to learned Commissioner s argument that what is being sought to be protected by Charitable status of these associations is share of these cricket associations from commercial profits earned by BCCI by organizing cricket matches. problem, however, is that activities of 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 event of BCCI being involved in commercial activities, taxability of such commercial profits will arise in hands of BCCI and not end beneficiaries. Even in such case point of taxability of these profits is BCCI and not cricket associations, because, even going by learned Commissioner s arguments, these receipts in hands of 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 cricket associations and BCCI cannot be ignored for purposes of tax treatment. There is no dispute that matches were organized by BCCI, and assessee cannot thus be faulted for commercial considerations said to be inherent in planning matches. As we make these observations, and as we do not have benefit of hearing perspective of BCCI, we make it clear that these observations will have no bearing on any adjudication in hands of BCCI. Suffice to say that so far as cricket associations are concerned, allegations of revenue authorities have no bearing on denial of status of charitable activities in hands of cricket associations before us- particularly as learned Commissioner has not been able to point out single object of assessee cricket associations which is in nature of trade, commerce or Page 68 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT business, and, as it is not even in dispute that objects being pursued by assessee cricket associations are objects of general public utility under section 2(15). All objects of assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote cricket, and this object, as has been all along accepted by CBDT itself, object of general public utility. 36. Cricket is indeed immensely popular game in this part of world, and anything to do with cricket results in mass involvement of public at large. sheer strength of these numbers results in higher visibility of cricketing activities and scale of operations on which work for development of cricket is to be carried out. These facts, by itself, and without assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require activities to be treated as commercial activities. When cricket stadium is to be built, it has to accommodate very large number of persons but size of stadium would not mean that activity is for anything other than promotion of cricket.. When numbers are large, scale of operations is large, and when scale of operations are larger, even surplus or deficit could be large, but then scale of operations may be scale on which commercial activities could be carried out but that fact cannot convert object of general public utility into commercial activity. We have carefully analyzed annual reports and annual financial statements of assessee, and we do not find any objects, other than objects of cricket associations, being pursed by these cricket associations. objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for purpose of promoting cricket. We are, therefore, of considered view that proviso to Section 2(15) has been wrongly invoked in these cases. 41. We have noted that all learned representatives have advanced detailed arguments on proposition that since assessee cricket associations are engaged in educational activities, it is not really material whether or not assessee has engaged itself in activities in nature of trade, commerce or business. However, in light of our categorical finding that assessee Page 69 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT cricket associations were not really engaged in activities in nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave question open for adjudication in flt case. Conclusions on this issue: 42. For detailed reasons set out above, we are of considered view that authorities below were in error in invoking proviso to Section 2(15) and thus in declining benefit of Section 11 and 12 to appellant cricket associations. To this extent, plea of appellants must be upheld. We uphold plea. 51. Being dissatisfied with order passed by ITAT, Ahmedabad, 'D' Bench, Ahmedabad, Revenue is here before this Court with present tax appeal. Submissions on behalf of Revenue:- 52. Mr. M.R. Bhatt, learned senior counsel appearing for Revenue vehemently submitted that ITAT committed serious error in passing impugned order. Mr. Bhatt would submit that by any stretch of imagination, activities of assessee do not fall within definition of term charitable purpose as defined under Section 2(15) of Act. Mr. Bhatt submitted that activities, in no manner, could be said to be for purpose of promotion of sports (game of cricket). Mr. Bhatt would submit that activities of Association are in nature of business. Association derives huge profit by hosting international cricket matches in stadium. Mr. Bhatt would submit that Association receives huge amount from BCCI for purpose of organizing international matches. Mr. Bhatt would submit that registration of Association under Page 70 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Section 12A of Act will not make assessee automatically eligible to seek exemption under Section 11 of Act. Mr. Bhatt submitted that howsoever laudable objects of trust may be, but activities undertaken by such trust are to be looked into for purpose of deciding whether such trust is entitled to be called charitable trust within meaning of Section 2(15) of Act and is liable to claim exemption under Sections 11 and 12 of Act or not. 53. According to Mr. Bhatt, Tribunal has not discussed relevant issues in their true perspective and, therefore, matters should be remitted to Tribunal for fresh consideration of all relevant aspects. According to Mr. Bhatt, although Income Tax Appellate Tribunal is fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of evidence before it, this Court may not interfere, yet it is necessary, however, that every fact for and against assessee must have been considered with due care and Tribunal is obliged to give its finding in manner which would clearly indicate what were questions which arose for determination, what was evidence pro and contra in regard to each one of them and what were findings recorded on evidence on record before it. According to Mr. Bhatt, when Assessing Officer and CIT (A) have assigned cogent reasons for purpose of coming to conclusion that activities of assessee cannot be termed as charitable and case of assessee is covered within Proviso to fourth limb of Section 2(15) of Act, then to upset such findings, Tribunal was expected to assign cogent reasons. Mr. Bhatt, in support of this submission, has placed reliance on decision of Supreme Court in Page 71 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT case of Omar Salay Mohamed Sait vs. CIT, reported in (1959) 371 ITR 151 (SC), in which Supreme Court succinctly expressed expectation from Tribunal while deciding such appeals. following observations of Supreme Court have been relied upon by Mr. Bhatt; "We are aware that Income Tax Appellate-Tribunal is fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of evidence before it this court will not interfere. It is necessary, however, that every fact for and against assessee must have been considered with due care and Tribunal must have given its finding in manner which would clearly indicate what were questions which arose for determination, what was evidence pro and contra in regard to each one of them and what were findings reached on evidence on record before it. conclusions reached by 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 assessee, assessee should be given opportunity of doing so. On no account whatever should 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 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 following decisions; Sr. No. Issue Particulars Page Nos. 1 Section 2(15) Director of Income Tax 1 (Exemption) vs. Tamil Nadu Cricket Association, 57 taxmann.com 136 (SC) 2 Commissioner of Income Tax vs. 02/05/19 Truck Operators Association, 328 Page 72 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT ITR 636 (Punjab & Haryana) 3 Commissioner of Income Tax, 06/09/19 Dehradun vs. National Institute of Aeronautical Engg. Educational Society, 315 ITR 428 (Uttranchal) 4 Hyderabad Race Club vs. 10/19/19 Commissioner of Income Tax, 153 ITR 521 (Andhra Pradesh) 5 Dharmaposhanam Co. vs. 20-25 Commissioner of Income Tax, 114 ITR 463 (SC) 6 Sole Trustee Loka Shikshana 26-43 Trust vs. Commissioner of Income Tax, 101 ITR 234 (SC) 7 Cricket Association of Bengal vs. 44-53 Commissioner of Income Tax, 37 ITR 277 (Cal.) 8 Education Travancore Education Society vs. 54-55 Commissioner of Income Tax, 369 ITR 534 (Kerala) 9 Dawn Educational Charitable 56-57 Trust vs. Commissioner of Income Tax, 370 ITR 724 (Kerala) 10 Dawn Educational Charitable 58 Trust vs. Commissioner of Income Tax, 73 taxmann.com 61 (SC) 11 Saurashtra Education Foundation 59-67 vs. Commissioner of Income Tax, 273 ITR 139 (Gujarat) 12 Actual activities to N.N. Desai Charitable Trust vs. 68-74 be seen Commissioner of Income Tax, 246 ITR 452 (Gujarat) 13 Reasons to be Ramesh Chandra M. Lutra vs. 75-77 given by ITAT on Assistant Commissioner of each fact Income Tax, 257 ITR 460 (Gujarat) 14 Decision of another N.R. Paper & Board Ltd. vs. 78-92 High Court, Deputy Commissioner of Income persuasive and not Tax, 234 ITR 733 (Gujarat) Page 73 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT binding Submissions on behalf of assessee: 55. On other hand, Mr. J.P. Shah, learned senior counsel appearing on behalf of assessee has vehemently opposed this tax appeal. Mr. Shah submitted that no error, not to speak of any error of law, could be said to have been committed by ITAT in passing impugned order. Mr. Shah submitted that assessee is engaged in activities of promoting game of cricket. In other words, according to Mr. Shah, assessee is engaged in promotion of sports. Mr. Shah brought to our notice following relevant facts; 1, GCA has given following renowned players to Indian Cricket: Mr. Jashubhai Patel, Mr. Parthiv Patel, Mr.Jasprit Bumrah, Mr. Axar Patel above named cricketers have been rendered coaching and training by GCA. Mr. Jashubhai Patel, Mr. Parthiv Patel and Mr. Axar Patel have played as members of Indian Cricket Team in Cricket matches against Foreign Teams in past. Mr. Jasprit Bumrah is currently star Cricketer in Indian Cricket Team in International Cricket and is ranked as World No.1 bowler. Apart from above players, Mr. Priyank Panchal is renowned Ranji Trophy player playing for GCA at present and is knocking on doors of International cricket. All above players have been coached by GCA. Page 74 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 2. GCA has following Cricket teams for Men. (a) Under 14 years (b) Under 16 years (c) Under 19 years (d) Under 23 years (e) Seniors Ranji Trophy Team, Duleep Trophy, etc. There are cricket teams for women also. 4. GCA has employed former national level cricketers as coaches for each of all above stated segments of cricket teams, i.e. coach appointed for under 14 team would look after coaching of that team only. 5. GCA looks after cricketing activities in following eleven districts/provinces of Gujarat State. (I) Ahmedabad (ii) Ghandhinagar (iii) Kheda (iv) Surat (v) Bulsar(Balsad) (vi) Bharuch I (vii) Anand (viii) Banaskantha (ix) Daman (x) Dadar Nagar Haveli (xi) Panchmahal. 6. Currently GCA has employed former Indian Team Cricketer, Mr. Sairaj Bhautule, as coach for Seniors i.e. GCA Ranji Trophy Team Players etc. He is also responsible for co-ordinating with coaches of other age group segment teams of GCA. 7. Coaching of Cricketers encompasses following aspects : (a) Skill development in nuances of Cricketing. (b) Physical development, (c) Mental development, (d) Building Personality of Cricketer. 8. It is known fact that each large size school has its Page 75 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT own cricket team where players are mostly under 14 years in age. These schools play inter-school cricket and compete with each other for cricket shield for best school team. From these championships, talent is spotted by GCA and invited for coaching and training. budding cricketers are coached by renowned past cricketers and their talent is nurtured. 9. coach monitors progress of players and trains them for overcoming their deficiencies so that each one of them progresses and is able to shine at national level. In Physical development, generally following tests are done as ongoing process. (a) Fitness Test under which MSK is done, i.e., Muscular, Skeleton Test. (b) Endurance Test, (c ) Agility Test. Players are informed of their deficiencies and during training sessions, coaches concentrate for removal of such deficiencies e.g. If one of shoulders is not strong enough, coach would suggest to and supervise player for undertaking specific exercises to strengthen shoulder. In Skill development player is shown videos of his actions. Coach points out deficiency and would suggest corrective actions. e.g. if batsman needs improvement in his batting stance, same will be captured in video first and thereafter it would be shown to him for corrective action. There is one to one discussion with each player for improvement in his game and this is on going process. In Mental development, coach has one to one discussion with all players to know about their deficiencies like getting nervous while facing opening bowling spell etc. Curative actions are taken by coach. Page 76 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Players are also trained to face media, e.g., if cricketer is awarded 'Man of match trophy' then how to face interview etc. Coaching and Support Staff at present. GCA has employed at present following personnel; (a) Coaches 14 (b) Physios 6 (c ) Trainers 5 (d) Video Analyst 2 (e) Pitch Curator 1 ______ Total 28 56. Mr. Shah submitted that Association received corpus donation of Rs.20,69,60,338/- from BCCI. Assessing Officer held that it is not corpus donation and added same to income. Before C.I.T (Appeals), Association drew attention to letter addressed to Officer dated 28th December, 2011 where two specific letters from BCCI dated 12th October, .2001 and 13th October, 2001 respectively addressed to Secretary of Gujarat Cricket Association were produced. letter dated 12th October, 2001 from BCCI draws attention to decision in Annual General Meeting, and resolution incorporating said decision as follows [reproduced at page 59 of order of CIT (A)] 5. Chairman suggested that as already decided in working Committee henceforth TV subsidies should be sent towards 'Corpus Fund' and this decision can also be approved by members of this meeting. Thereafter members unanimously approved that henceforth TV subsidies should be sent by Board to Member Associations towards Corpus Fund instead of subsidy fund. Page 77 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 57. Mr. Shah submitted that C.I.T.(Appeals), in his order, in para-18 on page 65 noted that above donation of Rs.1,38,36,800/- was treated as Corpus donation in A.Y. 2002-03. . above resolution mentioned in letter of BCCI dated 12th October, 2001, which used word henceforth , which means in future also, was not considered good enough by him as specific direction as required by section 11(1)(d) and only on that reasoning, he held that It Is not corpus donation. Department did not file appeal against said decision but Association did file appeal to Tribunal against finding of absence of specific direction in every year. Tribunal, on page 242, para-49 reproduced from their order in A.Ys. 2004-05 to 2007-08 pointing out that similar amounts received in earlier years have been treated all along as corpus donation . Earlier Year means A.Ys. 2002-03 and 2003-04. On page 245, Tribunal reproduced para-15 of their order for A.Ys. 2004-05 to 2007-08 as follows: "15. We find that, at pages 46 and 47 of paperbook, assessee has filed specific confirmations to effect that these amounts were corpus donations. We have also perused BCCI resolution no 5 dated 29th September 2001 which specifically states that TV subsidies should henceforth be sent to Member Associations towards corpus funds". There is no dispute that TV subsidy in question is sent under this resolution. On these facts, and In light of provisions of Section 11(1)(d) which only require income to be by way of voluntary contributions made with specific direction that they shall form part of corpus of trust or institution , we are of considered view that any payments made by BCCI, without legal obligation and with specific direction that it shall be for corpus fund as admittedly present receipt is, is required to be treated as corpus donation not includible in total Page 78 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by separate written document. contribution has to be voluntary and it has to be with specific direction that it will form corpus of trust . These conditions are clearly satisfied. Any payment which assessee is not under obligation to make, whatever be mode of its computation, is voluntary payment, and, any payment which is with specific direction that it for corpus fund is corpus donation. In our considered view, even without two specific confirmations filed by assessee, in light of BCCI resolution under which payment is made and in light of payment not being under any legal obligation, conditions under section 11(1)(d) are satisfied. We, therefore, uphold plea of assessee. Assessing Officer is accordingly directed to delete this addition of Rs.1,58,00,000. 58. Mr. Shah submitted that in view of fact that in A.Ys. 2002-03 and 2003-04, Assessing Officer accepted on same facts and evidence of above two letters and resolution, identical donations to be corpus donations, It was not open for revenue to take contrary view and hold to contrary in succeeding assessment years i.e. A.Ys. 2004-05 to 2012-13 in view of Supreme Court decision of CIT vs. Excel Industries Ltd. (2013) 358 ITR 295, which applied rule of consistency of approach to same issue arising in all other Assessment Years. Supreme Court in aforesaid decision has observed Revenue cannot be allowed to flip-flop on issue . 59. Mr. Shah further submitted that Tribunal has rightly construed word henceforth" used in resolution as covering up all payments in future years by citing decision of CIT (Exemption) vs. Mata Amrithanandamayi Math- (2017) 85 taxmann.com 261 (Ker), holding that once Page 79 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT assessee donated principal and future interest to corpus account, every year, specific direction regarding interest is not necessary. 60. Mr. Shah submitted that following Question (D) is only for A.Y.2009-10: Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in deleting addition made on account of infrastructure subsidy of Rs.2,13,34,033/-, treating it as capital receipts without appreciating findings of Assessing Officer 61. Mr. Shah further submitted that in respect of aforesaid disallowance, Assessing Officer in his order has observed as follows: Corpus Donation under heading Infrastructure Subsidy received from BCCI: assessee during year under assessment, has received infrastructure subsidy from BCCI for Rs.3,52,86,521/- and has utilized Rs.1,39,52,488/- by way of payment to District Cricket Association and hence balance amount of Rs.2,13,34,033/- is added to assessee s total income in view of detailed discussion made in para 5, 6 & 7 above. 62. Mr. Shah also submitted that C.I.T. (Appeals) agreed with Assessing Officer and Tribunal on appeal being disposed off on issue in favour of Respondent in para- 55 at page 249 as follows: 55. On perusal of BCCI Infrastructure Subsidy rules, we find that what is given to assessee as infrastructure subsidy is reimbursement of 50% of costs in respect of certain expenditure on infrastructure which is inherently in capital field. mere fact that it is not reimbursement to outside party, such as district cricket association, does not really matter. As Page 80 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT long as subsidy is relatable to capital asset created by assessee on his own or by eligible district cricket association, as present subsidy undisputedly is, it is outside ambit of revenue receipt and taxable income. very foundation of stand of Assessing Officer is thus devoid of legally sustainable merits. As such, there can hardly be occasion, in principle, to hold such subsidy as revenue receipt or taxable income. There is not even whisper of discussion by Assessing officer to effect that infrastructure subsidy is revenue in nature. As matter of fact, claim is made for subsidy only after expenditure having been incurred. authorities below have simply brushed aside case and submissions of assessee and proceeded to hold it as income. Looking to nature of subsidy, which is clearly relatable to capital assets generated, we are unable to hold this receipt in revenue field. We, therefore, uphold plea of assessee on this point as well and delete addition of Rs 2,13,34,033/-. 63. Mr. Shah, in regard to common question In A.Ys. 2004-05 to 2008-09 pertaining to allowing of benefit of exemption u/s.11, submitted that if Respondent succeeds in Tax Appeal No.268 of 2012, aforesaid question in above appeals for A.Ys 2004-05 to 2008-09 will have to be answered in favour of assessee 64. Mr. Shah further submitted that activity other than International match for A.Ys. 2009-10 to 2012-13 entrusted by BCCI Invariably have resulted into deficit and this activity goes on round year without break. It is only if activity is one day International match or twenty-twenty or five days test match that there may be surplus but one or two matches cannot convert altruistic activity of Association into trade or business. activities carried on by Gujarat Cricket Association are enumerated at para-19 of Tribunal s order. Page 81 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 65. Mr. Shah submitted that findings of Tribunal are very clear on controversy. Tribunal, after due consideration of all relevant aspects, concludes; We are, therefore, of considered view that Proviso to section 2(15) had been wrongly Invoked In these cases. 66. Mr. Shah submitted that even prior to amendment of section 2(15) w.e.f. 01.04.2019 i.e. A.Y. 2009-10, following provision, sub-section (4A) in section 11, inserted w.e.f. 01.04.1992 was in statute book: 11(4A) Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) shall not apply in relation to any income of trust or institution, being profits and gains of business, unless business is incidental to attainment of objectives of trust or, as case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. 67. Mr. Shah submitted that inspite of facts being identical in years, A.Y. 2009-10 and preceding to A.Y. 2009- 10 and in A.Ys. 2008-09, 2007-08 backward upto 2002-03, there is total absence of finding of application of sec.11(4A) or finding of business in all these years prior to A.Y. 2009-10. This very aspect goes to show that Assessing Officer is not consistent and rule of consistency laid down by Supreme Court in CIT vs. Excel Industries Ltd. (2013) 358 ITR 295 very much applies in A.Ys. 2009-10 and onward. 68. Mr. Shah placed strong reliance on following documentary evidences also looked into by ITAT. Page 82 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT (i) Note in form of summary of activities other than international match entrusted by BCCI; (ii) List of matches played in A.Y.2009-10 (iii) Income & Expenditure for A.Y. 2009-10 including income of Rs.1,51,97,741/- from India vs. South Africa Test Match, yet resulting into loss of Rs.5,91,708/- accepted by Assessing Officer in his assessment order u/s. 143(3). (iv) Break-up of remuneration of support staff in current years' cricket season 2019-20 of Rs.49,20,000/-. (v) Break-up of remuneration of coaches in current years' cricket season 2019-20 of Rs.95,00,000/- 69. Mr. Shah has placed strong reliance on following two decisions; (i) In case of Commissioner of Income Tax vs. Excel Industries Ltd., (2013) 358 ITR 295 (SC); (ii) In case of Commissioner of Income Tax, (Exemption) vs. Mata Amrithanandamayi Math, (2017) 85 taxmann.com 261 (Kerala); 70. Mr. Shah also brought to our notice following; 1(a) learned Assessing Officer has not found any defect in books of account. In his Assessment Order, he starts with figure of (-) Rs.5,91,708/against which he has stated thus: Excess of income over expenditure . (b) Analysis of Income and Expenditure account which is accepted by AO is as follows. 2. GCA has incurred total expenditure of Rs.4,03,98,737/- as per audited Income and Expenditure A/c. GCA has receipts of Rs.3,98,07,028/-. net result is loss i.e. Excess of Expenditure over Income of Rs.5,91,709/-, i.e. there is deficit. Page 83 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 3. Receipt side comprises of following heads of receipts as summarized from Income and Expenditure A/c. Rs. (I) International Cricket Match Surplus 1,51,97,741/- (ii) Bank FDR Interest 2,21,88,527/- (iii) Other Income 24,20,760/ 3,98,07,028/ 4. Expenditure side comprises of following heads of Expenses as summarized: (i) Match Expenses [Local Matches] 1,70,84,594/- (ii)Cricketing Expenses as per Chart attached 1,53,90,325/- (iii) Administration and Other Expenses 79,23,818/- 4,03,98,737/- 5. From above summary, it is quite clear that; Surplus income from International matches is less than expense incurred for Local Matches. (a) Cricketing expenses incurred by Rs. GCA for domestic matches other than International Matches where no fees are charged. [1,70,84,594 + 1,53,90,325/-] 3,24,74,919/- (b) Surplus Income from International Matches over all Deficit from Cricketing activities. 1,51,97,741/- Deficit (-)1,72,77,178/- 71. Mr. Shah also brought to our notice income and expenditure account for year ended on 31st March, 2009. same is as under; Sr. No. EXPENDITURE AMOUNT (RS.) 1 Price Money to all Teams 27,86,796 Page 84 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 2 Ground Expense 20,06,228 3 Salary Expense 26,60,008 4 Security charges 11,67,279 5 Coaches Fee 10,06,040 6 Cricket Academy Expenses 9,51,067 7 Leaveling Expenses 9,26,080 8 Repairing & Maintenance Expenses 8,53,084 9 Municipal Tax 7,11,945 10 Senior & Junior Tournament Subsidy to 7,00,000 District Cr. 11 Coaches Seminar Expense 4,87,360 12 Labour Charges 2,08,930 13 Physio Fee Expense 1,75,500 14 Curator Fee Expense 1,39,333 15 Prize Distribution Function Expense 1,29,145 16 Gardening Expense 1,01,765 17 Level B Coaches course Expense 94560 18 Supervision Fee 91000 19 Level Trainer Exam Expense 82281 20 NCA Camp Expense 53435 21 Suspect Action Expense 18266 22 Balling Action Workshop Expense 17953 23 MRF Camp Expense 9087 24 Trainer fee Expense 6000 25 Umpire Medical Exam Expense 3780 26 Cricket Equipment Purchase 3403 Total 1,53,90,325 BARODA CRICKET ASSOCIATION:- 72. We shall now proceed to Tax Appeals Nos.320 of 2019, 321 of 2019, 374 of 2019 and 675 of 2019 respectively. 73. In these tax appeals, assessee is Baroda Cricket Association. In these appeals also Mr. Bhatt, learned Page 85 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT senior counsel has reiterated very same submissions as canvassed in Tax Appeal No.317 of 2019. 74. Tax Appeal No.320 of 2019 is treated as lead matter. This appeal was ordered to be admitted on following substantial questions of law; [A] Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in allowing benefit of exemptions u/s.11 & 12 of Act without considering fact that assessee is involved in widespread commercial activities in nature of business and activities of assessee is covered under first and second proviso to section 2(15) of Act? [B]. Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in deleting addition made in respect of corpus donation u/s.11(1)(d) of Act without appreciating that assessee failed to discharge its onus by not bringing anything on record in support of its claim of corpus donation? 75. Mr. Soparkar, learned senior counsel appearing for Baroda Cricket Association, by large, adopted all submissions of Mr. Shah, learned senior counsel who has argued on behalf of Gujarat Cricket Association. However, Mr. Soparkar has something to add over and above what has been submitted by Mr.J.P. Shah, learned senior counsel appearing for Gujarat Cricket Association. 76. Mr. Soparkar submitted that objects as well as actual activities carried out by Baroda Cricket Association are for education in field of cricket as well as promotion and development of sport of cricket (object of general public utility) not being in nature of trade, commerce or business. Mr. Soparkar invited our attention to objects of Page 86 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Baroda Cricket Association set out as per clause (4) of its Memorandum of Association. objects are as under; (a) To promote develop & encourage cricket within its jurisdiction. (b) To arrange and promote establishment of Cricket clubs within its jurisdiction. (c) To directly control and manage all cricket activities within its jurisdiction. (d) To pay special attention and care to development of cricket at all levels within its jurisdiction. (e) To arrange for good cricket ground and maintain pitch for practice and matches arranged by Association. (f) To popularize game of cricket within its jurisdiction by organizing and/or conducting and/or controlling tournaments and matches. (g) To select teams to represent Association in any tournament Championship or fixture local or otherwise. (h) To start or sponsor and/or to subscribe to funds or to stage match for benefit of cricketers or persons who have rendered services to game of cricket or for their families or to sporting cause or institution. (i) To borrow or raise money which may be required for purpose of Association. (j) To collect funds and to utilize same in such manner as may be considered fit for fulfillment of objects of Association. (k) To invest moneys and funds of Association in such manner as may be decided upon from time to time. (l) To train umpire and to form panel of umpires. (m) To collect all cricket statistics of different players and clubs so as to give guidance in selection of Page 87 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT players for important matches. (n) To do any other acts in furtherance of above objects not inconsistent there with. 77. Mr. Soparkar, thereafter, invited our attention to fact that to meet with aforesaid objects, Baroda Cricket Association incurs following types of expenditure. (i) Local tournament expense- cricketing tournament (ii) District cricket expense- to promote game of cricket in our jurisdictional districts. (iii) Seminar, training, meetings, exhibition, etc. for coaches, umpires, trainers, physics, scorers, and other cricketing support staff. (iv) Junior cricketing expense wherein kids from young age of below 12 years, below 14 years (v) sports material like balls, clothes, shoes, drinks. etc are bought for cricketers during year which are used in various tournaments played over year. (vi) Medical, physical training, gym, fitness, etc expenses are incurred for players during year. (vii) Women cricketing expense are also incurred. (viii) Prize distribution expenses are also incurred for various tournaments organized by association during year. (ix) Cricketing ground maintenance expenses are incurred for upkeep of all cricket ground in Baroda and in jurisdictional districts. (x) Fees are paid to professionals like coaches, trainers, physics, curators and so on whose services are used by association during year. (xi) All other establishment and other related expenditure are incurred to run association. Page 88 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 78. Mr. Soparkar, thereafter, invited our attention to details of income and expenditure of assessee from paper-book furnished by him to this Court. Assessment Year 2009-10 2010-11 2011-12 Income and Expenditure At Pg 57 At Pg.38 At Pg.60 Account Income and Expenditure from At Pg 58 At Pg 39 One Day International Schedule lX Schedule E: Cricketing and At Pg 61 At Pg 42 At Pg 63 Tournament expenses Schedule F: Property and Ground Maintenance Expenses Schedule G tournaments and other receipts 79. Mr. Soparkar submitted that Association is engaged into activities of seminar, training, meetings, exhibition, etc. for coaches, umpires, trainers, physics, scorers, and other cricketing support staff for purpose of promoting game of cricket. Mr. Soparkar also invited our attention to annual report of Association. Mr. Soparkar, in support of his submissions, has placed reliance on three decisions;. (i) Ahmedabad Urban Development Authority, 2017 396 ITR 323 (Gujarat); (ii) Gujarat Industrial Development Corporation, 2017 83 taxmann.com 366 (Gujarat) (iii) Naroda Enviro Projects Limited (Gujarat), Tax Appeal No. 189 of 2019; Page 89 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 80. Mr. Soparkar submitted that in carrying on activities, certain surplus may ensue. earning of surplus itself would not mean that appellant existed for profit. Profits means that surplus over which owners of entity have right to withdraw for any purpose including personal purpose. Profit making would therefore means private profit. Profit making would not mean surplus that results from certain activities for which organization is devoted is ploughed back for promotion of very same activities. 81. Mr. Soparkar submitted that Assessee Association has not distributed any profits outside organization. All profits are ploughed back into very activities of education and promotion and development of sport of cricket and therefore Assessee cannot be termed to be carrying out commercial activities in nature of trade, commerce or business: 82. Mr. Soparkar submitted that case of Revenue is that appellant is alter ego of BCCI. Assessee receives share of income from BCCI and therefore activities of BCCI are activities of assessee. Further activities of BCCI are commercial in nature. activities of BCCI is exhibition of sports and to earn profit out of it. It is only when such exhibition of substantial part of income of assessee is coming from BCCI and therefore necessarily receipts of assessee partake character of commercial nature. 83. Mr. Soparkar submitted that state cricket associations and BCCI are distinct taxable units and must be treated as Page 90 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT such, as there is no provision in law that member body can be held liable for taxation on account of activities of apex body. 84. Mr. Soparkar submitted that irrespective of nature of activities of BCCI (Commercial or Charitable) what is pertinent for determining nature of activates of assessee is object and activates of assessee and not that of BCCI. nature of activities of assessee cannot take its colour from nature of activities of donor. Examples are plenty where corporate house supports activities of Hospital or School. Simply because corporate house is not charitable organization, Hospital or school doesn t cease to remain charitable. 85. Mr. Soparkar submitted that even if BCCI is held to be involved in carrying out commercial activities, disbursements from BCCl to cricket associations cannot become commercial profits of assessee cricket associations liable to be taxed. It is again urged that trigger for denial of Section 2(15) benefit, or for proviso to Section 2 (15) being invoked, is activity of assessee and not outsider. 86. With respect to question relating to corpus donation received by Association from BCCI and claimed as exempt by assessee under Section 11(1)(d) of Act, Mr. Soparkar submitted that according to Revenue, there is no specific direction from BCCI to treat said amount towards corpus donation and, in such circumstances, same cannot be considered as corpus donation and same should be treated as income of Page 91 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT assessee not exempt under Section 11(1)(d) of Act. According to Mr. Soparkar, such stance of Revenue is not sustainable in law. 87. Mr. Soparkar submitted that ITAT has followed its earlier decision in case of Gujarat Cricket Association for A.Ys.2004-05 to 2007-08 (ITA 1253/Ahd/2013), wherein ITAT held as under; 1. assessee has filed specific confirmations to effect that these amounts were corpus donations. 2. BCCI resolution no 5 dated 29th September 2001 specifically states that TV subsidies should henceforth be sent to Member Associations towards corpus funds . There is no dispute that TV subsidy in question is sent under this resolution. This resolution includes present assessee-Baroda Cricket Association as well. 3. On these facts, and in light of provisions of Section 11(1)(d) which only require income to be by way of voluntary contributions made with specific direction that they shall form part of corpus of trust or institution , Tribunal was of considered view that any payments made by BCCI, without legal obligation and with specific direction that it shall be for corpus fund as admittedly present receipt is, is required to be treated as corpus donation not includible in total income. 4. There is no legal support for leamed CIT(A) s stand that each donation must be accompanied by separate written document. 5. contribution has to be voluntary and it has to be with specific direction that it will form corpus of trust . These conditions are clearly satisfied. Any payment which assessee is not under obligation to make, whatever be mode of its computation, is voluntary payment, and, any payment which is with specific direction that it for corpus fund is corpus donation. Page 92 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 6. Therefore, even without two specific confirmations filed by assessee, in light of BCCI resolution under which payment is made and in light of payment not being under any legal obligation, conditions under section 11(1)(d) are satisfied. 88. In such circumstances, referred to above, Mr. Soparkar submits that Tribunal has correctly found on facts and in law that said amount is towards corpus fund and, therefore, same will be exempted under Section 11(1)(d) of Act, 1961. SAURASHTRA CRICKET ASSOCIATION:- 89. We shall now take up Tax Appeals Nos.358-360 of 2019. In these two tax appeals, respondent-assessee is Saurashtra Cricket Association. 90. Tax Appeal No.358 of 2019 is treated as lead matter. This tax appeal was ordered to be admitted on following substantial questions of law; [A]. Whether, on facts and in circumstances of case Appellate Tribunal was justified in allowing benefit of Sections 11 and 12 when Assessing Officer has clearly brought on record that assessee is covered under proviso to Section 2(15) r.w.s 13(8) of Act? [B]. Whether on facts and circumstances of case and in law, Appellate Tribunal was justified in directing Assessing Officer to allow claim of accumulation of Rs.5,37,04,677/- under section 11(1)(a) and Rs.23,44,45,000/- under section 11(2) of Act without appreciating findings of Assessing Officer with regard to applicability of section 2(15) of Act? [C]. Whether on facts and circumstances of case Page 93 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT and in law, Appellate Tribunal was justified in remitting issue of infrastructure subsidy of Rs.4,57,95,448/- back to file of Assessing Officer, without appreciating findings of Assessing Officer? 91. Mr. Tushar Hemani, learned senior counsel appearing for respondent-assessee has, by and large, adopted all submissions canvassed by Mr. J.P. Shah, learned senior counsel appearing for Gujarat Cricket Association and Mr. Soparkar, learned senior counsel appearing for Baroda Cricket Association. However, Mr. Hemani added something important of his own to what has been submitted on behalf of other two Associations. His submissions are broadly as under; I) Imparting training in sports is educational activity and hence not object of general public utility. Hence, proviso to Section 2(15) of Act is not applicable at all. II) Alternatively and without prejudice: a. activities carried out by Respondent are in nature of general public utility. b. Mere generation of surplus does not add element of trade, commerce or business to otherwise charitable activity. III) Where two views are possible, view in favour of assessee should be adopted. aforesaid is elaborated as follows: I) Imparting training in sports is nothing but education activity and therefore Respondent would fall in first limb of definition of charitable purpose as defined u/s.2(15) of Act and not under residual clause of advancement of any other object of general public Page 94 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT utility . If that be situation, proviso to Section 2(15) would not apply at all. Section 2(15): charitable purpose includes relief of poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and advancement of any other object of general public utility: Provided that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity: Provided further that first proviso shall not apply if aggregate value of receipts from activities referred to therein is twenty-five lakh rupees or less in previous year; It is submitted that it is settled position that education is term with very wide meaning, going beyond traditional classroom teaching and taking within its ambit training in sports: [CIT vs. Secretary, Regional Committee, National Sports Club of Assam [1989] 180 ITR 648 (Gauhati) is squarely applicable: To satisfy us in this regard, we have been taken through order of Tribunal passed in ITA Nos. 684 (Gauhati) to 689 (Gauhati) of 1973-74 which related to same assessee. perusal of that judgment shows that after going through aims and objects of assessee, it was held that main object of assessee is to provide means for improving health and physique of youth of Assam through medium of sports and games of all kinds. learned Tribunal, therefore, concluded that, in its considered opinion, main object of institution falls Page 95 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT within head "Education". In this context, our attention has been invited by Shri Bhattacharjee to Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) in which it has been held that if primary or dominant purpose of trust or institution is charitable, subsidiary object would not militate against its charitable character and purpose of assessee would not be any less charitable. It thus seems that, to decide whether purpose of assessee is charitable or not within meaning of section 2(15) of Act, attention has to be paid to dominant or primary purpose of assessee. As, in this case, it has been held by learned Tribunal in its earlier judgment which was followed in present case that main object of assessee falls within head "Education", it has to be accepted that purpose of assessee is charitable. Shri Choudhury, however, contends that assessee is also carrying on activity for profit by running guest- house. As to this, it has been brought to our notice by Shri Bhattacharjee that words "not involving carrying on of any activity for profit" which found place in section 2(15) of Act at relevant time are relatable to last head of charitable purpose of which mention has been made in section. We may note section 2(15) which at relevant time read as below: " 'Charitable purpose' includes relief of poor, education, medical relief and advancement of any other object of general public utility not involving carrying on of any activity for profit." It has been held in Surat Art Silk's case [1980] 121 ITR 1 (SC) that words "not involving carrying on of any activity for profit" qualify or govern only last head of charitable purpose and not earlier three ones. It was, therefore, held that if purpose of trust or institution be relief of poor, education or medical relief, requirement of definition of "charitable purpose" would be fully satisfied, even if activity for profit is carried on in course of actual carrying out of primary purpose of trust or institution. Page 96 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT This being settled law by now and finding of learned Tribunal being that main object of institution falls within head "Education", and primary purpose being criterion for deciding whether income has been earned for charitable purpose, it has to be held that questions of law involved in present case are concluded by judgment of highest court of land. In such situation, any direction to make reference would be academic and High Court would be right in refusing same as stated in Mathura Prasad v. CIT [1966] 60 ITR 428 (SC). (Emphasis supplied)] [It has been held in Gujarat State Co-Operative Union vs. CIT [1992] 195 ITR 279 (Gujarat) with reference to decision of Hon ble Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 that meaning of education is not to be narrowly construed: observations of Supreme Court only indicate proper confines of word "education" in context of provisions of section 2(15) of Act. It will not be proper to construe these observations in manner in which they are construed by Tribunal when it infers from these observations, in para 17 of its judgment, that word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. observations of Supreme Court do not confine word "education" only to scholastic instructions but other forms of education also are included in word "education". As noticed above, word "schooling" also means instructing or educating. It, therefore, cannot be said that word "education" has been given unduly restricted meaning by Supreme Court in said decision. Though, in context of provision of section 10(22), concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by assessee. changing times and ever widening horizons of knowledge may bring in changes in methodology of teaching and shift for better in institutional setup. Advancement of knowledge brings within its fold Page 97 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT suitable methods of its dissemination and though primary method of sitting in classroom may remain ideal for most of initial education, it may become necessary to have different outlook for further education. It is not necessary to nail down concept of education to particular formula or to flow it only through defined channel. Its progress lies in acceptance of new ideas and development of appropriate means to reach them to recipients. (Emphasis supplied)] [Director of Income-tax (Exemption) v. Ahmedabad Management Association [2014] 366 ITR 85 (Gujarat) 5.6 Now applying ratio of decision of Division Bench of this Court in case of Gujarat State Co- operative Union (Supra) reproduced hereinabove and activities of assessee such as Continuing Education Diploma and Certificate Programme; Management Development Programme; Public Talks and Seminars and Workshops and Conferences etc., we are in complete agreement with view taken by tribunal that activities of assessee is educational activities and/or is in field of education. (Emphasis supplied)] [Delhi Music Society vs. DGIT [2013] 357 ITR 265 (Delhi) In context of Section 10(23C)(vi) of Act, it was held that assessee society whose object clause says that objects of school are to teach western, classical music, to promote musical knowledge and appreciation among students as well as among interested public by means of workshops, lectures/demonstrations, recitals etc., to acquire and maintain instruments for teaching purposes, to create and update world class library of music literature both audio and video to add more class rooms and other required facilities for purpose of musical education and to construct and maintain concert hall/auditorium for school was held to be educational institute under Section 10(23C)(vi) of Act.] Page 98 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT In light of these decisions, it is submitted that since objects of Respondent include promoting game of cricket, imparting physical education through medium of cricket and maintaining library and periodicals on sports and cricket, Respondent s activities pertain to education and hence fall under charitable purpose under Section 2(15) of Act. relevant objects are as follows (pgs.57-58 of Paper book for AY 2012-13): 3.(e) To promote game throughout Saurashtra and Kutch by organising coaching schemes, Tournaments, Exhibition Matches and by any other manner. 3. (f) To foster spirit of sportsmanship and ideals of cricket amongst School, College and University students and others and educate them for same. 3. (l) To impart physical education through medium of cricket and take all steps to assist citizens to develop their physique. 3. (p) To start and maintain library of books, periodicals and museum on Sports in general and cricket in particular and to start journal or journals in cricket. Respondent has incurred expenses to hold various tournaments including Inter District tournaments for various age groups, Women s matches and various Trophy tournaments which squarely fall under educational activity. Details of Tournament Expenses are on pg.12 of Paperbook for Assessment Year 2012-13. Further details of such Tournament Expenses were submitted to Assessing Officer vide letter dated 07.03.2015. Copy of same is at pgs.72-76 and details are on pgs. 77-144 of Paperbook for Assessment Year 2012-13. II Alternatively and without prejudice, activities carried out by Respondent-Trust are charitable in nature, being general public utility and not in nature of trade, commerce or business in view of amended provisions of Section 2(15) of Act : Page 99 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT It has been observed by lower authorities that Respondent Trust has arranged one day international matches of cricket and in turn has received TV subsidy / subvention income i.e sharing of TV broadcasting right income from BCCI and Advertisement sales income, and therefore, such activities are in nature of trade, commerce or business in view of first proviso to S.2(15). These observations by lower authorities, as discussed by ITAT on pages 453-454, are factually incorrect in as much as arranging of one day international matches of cricket, sale and auction of TV broadcasting rights and Advertisement sales income from holding one day internationals are all carried out by BCCI and not by Respondent Cricket Association. question then for kind consideration of this Court would be whether activities of Respondent Cricket Association can be held to be charitable within meaning of S.2(15) so as to entitle it to claim exemption u/s 11 of Act. entire issue has to be seen from two limbs of provisions of Section 2(15) of Act viz.: (a) whether promotion of sports and games, cricket in present case is charitable or not within definition as provided u/s 2(15) of Act and (b) whether such promotion of sports and games of cricket are carried out with profit motive or not so to be treated as in nature of trade, commerce or business or charitable purpose. Promotion of cricket is advancement of general public utility and is hence charitable purpose : Insofar as first limb as mentioned in (a) above is concerned, attention is invited to Circular : No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24-9-1984, wherein Board has advised that promotion of sports and games is considered to be charitable purpose within meaning of section 2(15). Page 100 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT It is not in dispute that Respondent is involved only in activity of promoting game of cricket. Assessing Officer himself has noted so in para 3.3 of order on page 61 of Tax Appeal that assessee is admittedly involved in promotion of cricket as game. Further, all of objects of assessee are related to promotion of cricket. Moreover, Circular has also been held to be applicable by lower authorities (Assessment Order on pg.3 and CIT(A) on pg.210-211 of Tax Appeal) It is submitted that all expenses of Respondent have been incurred towards object clause i.e., promotion of cricket: Expenses are as follows (pg.3 of Paperbook for Assessment Year 2012-13): Establishment Expenses : pg.11 Stadium Expenses : pg.12 Tournament Expenses : pg.12 Depreciation : pg.9 Cricket Infrastructure Fund* : pg.4, Resolution is on pg.21 * Accumulation (pgs.20-21 of Paperbook for AY 2012- 13) Even from Computation of Income on pg.15 of Paperbook for AY 2012-13, it can be seen that none of expenses have been incurred for non-trust purposes. Moreover, details and evidences of all various incomes and expenses related to objects of Respondent have been submitted to Assessing Officer vide letter dated 07.03.2015, reproduced on pgs. 72 to160 of Paperbook for AY 2012-13. Even after perusal of same, it is not case of lower authorities that Respondent has conducted activities or incurred expenses outside of objects of Respondent. Page 101 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Even Income Tax Appellate Tribunal has held that Commissioner has not been able to point out single object of Respondent which is in nature of trade, commerce or business and that it is not even in dispute that objects are objects of general public utility. All objects unambiguously promote cricket. (ITAT Order para 35., pg.456 of Tax Appeal) Hence, activity of Respondent is charitable activity. Once it is established that objects of trust are of general public utility and that no activities deviating from objects have been carried out, mere generation of surplus cannot turn it into activity in nature of trade, commerce or business. Now so far as second limb i.e first proviso to S.2(15) of Act as inserted by Finance Act, 2008 w.e.f 01/04/2009 is concerned, it is submitted that law is settled by larger bench of Supreme Court in case of ACIT vs. Surat Art Silk Cloth Manufacturers Association reported in 121 ITR 1 (SC) that (a) primary or dominant purpose of trust or institution has to be examined to determine whether said trust / institution is involved in carrying out any activity for profit and (b) if object of trust or institution is to carry out object of general public utility and this is primary or dominant purpose and not carrying on any activity for profit, same would satisfy requirements of S.2(15) of Act. Since terms trade, commerce or business is not defined under scheme of Act, general or dictionary meaning has to be resorted to. In order to determine whether activity is in nature of trade, commerce or business OR charitable, determining factor is profit motive. nature of activities may remain same. However, if they are carried out for profit motive, same are to be characterized as trade, commerce or business. Conversely, if profit motive is absent, these very activities become charitable. Page 102 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT It is further submitted that (a) first proviso to S.2(15) of act should not be generalized to each and every facts of case where there is surplus over expenditure in respect of activities or objects carried out by Trust which are in any case of charitable purpose, (b) cardinal principle is predominant object of Trust. If predominant object of Trust is of charitable nature and with no-profit motive, said activities cannot be treated as trade, commerce or business merely because some surplus has remained left over expenditure to carry out such activities. essence of trade, commerce or business is profit motive and absence thereof makes such activities charitable. It is further submitted that even after insertion of proviso to S.2(15) of Act wef 01/04/2009, following authorities, after following law laid down by Apex Court in Surat Art Silk (supra), have taken view that if predominant object of Trust is of charitable nature and with no-profit motive, said activities cannot be treated as trade, commerce or business merely because some surplus has remained left over expenditure to carry out such activities : (a) CIT v. Gujarat industrial Development Corporation [2017] 83 taxmann.com 366 (Gujarat) Where collection of fees and cess was incidental to main charitable object of trust, it would not fall under second part of proviso to Section 2(15) of Act. (b) Sabarmati Ashram Gaushala Trust vs. ADIT (Exemption) [2014] 362 ITR 539 (Gujarat) 12. All these were objects of general public utility and would squarely fall under section 2 (15) of Act. Profit making was neither aim nor object of Trust. It was not principal activity. Merely because while carrying out activities for purpose of achieving objects of Trust, certain incidental surpluses were generated, would not render activity in nature of trade, commerce or business. As clarified by CBDT in its Circular No. 11/2008 dated 19th December 2008 proviso aims to Page 103 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT attract those activities which are truly in nature of trade, commerce or business but are carried out under guise of activities in nature of ' public utility'. (Emphasis supplied) (c) Ahmedabad Urban Development Authority vs. ACIT (Exemption) [2017] 396 ITR 323 (Gujarat) 13. xxx Merely because under statutory provisions and to meet with expenditure of Town Planning Scheme and/or providing various services under Town Planning Scheme, such as road, drainage, electricity, water supply etc. if assessee is permitted to sale plots (land) to extent of 15% of total area under Town Planning Scheme and while selling said plots they are sold by holding public auction, it cannot be said that activities of assessee is profiteering, to be in nature of trade, commerce and business. xxx 15. Now, so far as another question which is posed for consideration of this Court i.e. whether while collecting cess or fees, activities of assessee can be said to be rendering any services in relation to any trade, commerce or business is concerned, for reasons stated above, merely because assessee is collecting cess or fees which is regulatory in nature, proviso to Section 2(15)of Act shall not be applicable. As observed herein above neither there is element of profiteering nor same can be said to be in nature of trade, commerce or business. XXX (d) Institute of Chartered Accountants of India vs. DGIT reported in 347 ITR 99 (Delhi) Hon ble High Court held that fundamental or dominant function of Institute was to exercise overall control and regulate activities of members/enrolled chartered accountants and merely because Institute Page 104 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT was holding coaching classes which also generate income, Court held that proviso to Section 2 (15) of Act would not be applicable In present case, main object of Trust is to promote and encourage game of cricket in Saurashtra and Kutch by organizing coaching schemes, tournaments, exhibition matches and other matches etc. attention is further invited to clause 3(j) of MOA which provides to organize matches for achievements of objects of Association and utilize net proceeds thereof towards implementation of object set therein . It is submitted that all receipts arising or accruing to Respondent-Trust are on account of activities carried out to meet object of Respondent i.e to promote and encourage game of cricket in Saurashtra and Kutch by organizing coaching schemes, tournaments, exhibition matches and other matches etc, and they are not with intention to carry out any trade, commerce or business with profit motive. Such receipts should be strictly confined to attainment of objects of Respondent-Trust and with intention to carry out any trade, commerce or business. Details of all receipts were submitted to Assessing Officer, as reproduced in Assessment Order on pgs. 4 to 9 of Tax Appeal. As can be seen from nature of receipts, none of incomes pertain to any activity other than promoting game of cricket. It is submitted that promotion of sports is itself not activity in nature of trade, commerce or business and on that count also proviso is not applicable. Hon ble High Court of Bombay in CIT (Exemptions) vs. Bombay Presidency Golf Club Ltd. [2019] 106 taxmann.com 58 (Bombay) has held that: In present case, main object of assessee club as noted above is to provide golf facilities to members for promotion of sport. Tribunal correctly held that there was no element of assessee's activity being in nature of trade, commerce or business. Once applicability of Page 105 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT proviso to Section 2(15) of Act is ruled out, question of exemption under Section 11 of Act would arise. (Emphasis supplied) Further reliance is also placed on Supreme Court decision in case of CIT vs. Gujarat Maritime Board reported in [2007] 295 ITR 561(SC), wherein question before Apex Court was that whether Maritime Board was entitled to status of charitable institution u/s 11 of Act and in that context also, Apex Court observed that Gujarat Maritime Board was established for predominant purpose of development of minor ports within State of Gujarat, management and control of Board was essentially with State Government and there was no profit motive and income including reserves and surplus earned by Board was deployed for development of minor ports in State of Gujarat and accordingly Apex Court held that Board was entitled to be registered as Charitable Trust within scheme of Act It is submitted that insertion of proviso to s. 2(15) does not mean that in case assessee is to receive any payment for anything done for trade, commerce or business, assessee will be hit by said proviso. Elaborating scope of this amendment, CBDT, vide Circular No. 11, dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows: "3. newly amended s. 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' i.e., fourth limb of definition of 'charitable purpose' contained in s. 2(15). Hence, such entities will not be eligible for exemption under s. 11 or under s. 10(23C) of Act, if they carry on commercial activities. Whether such entity is carrying on activity in nature of trade, commerce or business is question of fact which will be decided based on nature, scope, extent and frequency of activity. As long as object of general public utility is not merely mask to hide true purpose or rendering of any service in relation thereto, and where such services are being rendered as purely incidental to or as subservient to Page 106 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT main objective of 'general public utility', carrying on of bonafide activities in furtherance of such objectives of 'general public utility' cannot be hit by proviso to Section 2(15). Respondent also draws support from Circular no.194/16- 17 II(AI) in which question referred to board is; whether educational institution existing solely for educational purpose but which shows some surplus at end of year is eligible for exemption? board had replied this question in following manner: If profit of educational institution can be diverted for personal use of proprietor thereof, then income of educational institution will be subject to tax. However, there may be cases where educational institutions may be owned by trusts or societies to whom provisions of section 11 may be applicable. Where all objects of these trusts are educational, and surplus, if any, from running educational institution is used for educational purposes only, it can be held that institution is existing for educational purposes and not for purposes of profit. However, if surplus can be used for non-educational purposes, it cannot be said that institution is existing solely for educational purposes and such institutions will not be liable for exemption u/s 10(22). But, in such cases, applicability of section 11 can be examined and if conditions laid down therein are satisfied, income will be exempt u/s 11. principle would also apply to case of Respondent. It is submitted that there are decisions of other Hon ble High Courts that are in favour of Respondent: Tamil Nadu Cricket Association v. DIT (Exemptions) [2014] 360 ITR 633 (Mad) CIT (Exemptions) v. Rajasthan Cricket Association [2018] 98 taxmann.com 425 (Raj) III Legally it is well settled that while adjudicating upon appeal, where two views are Page 107 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT possible, view in favour of assessee should be adopted. In facts of present case, there are large numbers of decisions which are in favour of assessee and therefore, even if view against assessee is plausible and probable, view in favour may kindly be adopted: (a) Mysore Minerals Ltd. V CIT 239 ITR 775 (SC) (b) Orissa State Warehousing Corporation v CIT 237 ITR 589 (SC) (c) CIT v. Podar Cement Pvt. Ltd. and Others. 226 ITR 625 (SC) (d) CIT v Gwalier Rayon Silk Mfg. Co. Ltd. 196 ITR 149 (SC) (e) CIT v Sahazada Nand 60 ITR 392 (SC) (f) CIT v Kulu Valley Transport Co. Ltd. 77 ITR 518, 530 (SC) (g) CIT v Vegetable Products Ltd. 88 ITR 192 (SC (h) CIT v Naga Hills Tea Co. Ltd. 89 ITR 236, 240 (SC) (i) Contr. ED v Kanakasabai 89 ITR 251, 257 (SC) (j) CIT v Madho Jatia 105 ITR 179, 184 (SC) In addition to above, it is submitted with respect to Question [C] that Tribunal has remitted issue of infrastructure subsidy to file of Assessing Officer. It is submitted that for this reason, no substantial question of law arises. 92. We propose to first deal with submission of Mr. Bhatt, learned senior counsel appearing for Revenue that matters deserve to be remitted to ITAT for fresh consideration of issues in question. This submission of Mr. Bhatt is canvassed in wake of fact that, according to Mr. Bhatt, ITAT ought to have assigned cogent reasons in its impugned order for purpose of disagreeing with concurrent findings recorded by lower revenue authorities, namely, Assessing Officer and CIT(A). We are not impressed by such submission of Mr. Bhatt. We are of view that there is no good reason to remit matters for fresh consideration. As discussed above, only circumstance that Page 108 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT weighed with CIT(A) is revenue earned by Associations through subsidy paid by BCCI. We have dealt with this issue at length while deciding Tax Appeal No.268 of 2012. We take notice of fact that issue with regard to Proviso to Section 2(15) of Act has been elaborately dealt with by ITAT in its own way. ITAT has conveyed, in so many words, that for purpose of invoking Proviso to Section 2(15) of Act, many other aspects need to be looked into and subsidy paid by BCCI cannot be sole factor for brining case within Proviso to Section 2(15) of Act. 93. At cost of repetition, we, once again, reproduce findings recorded by ITAT in this regard. We are highlighting findings to demonstrate why ITAT disagreed with CIT(A) . findings are as under; 34. What essentially follows from above discussions is that, even after 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 predominant purpose of activity of assessee, benefit of Section 2(15) cannot be declined. In other words, accrual of profits to assessee, by itself, cannot, therefore, be reason enough to hold that assessee is not covered by definition of charitable institution under section 2(15). Of course, all these discussions are relevant only for residuary clause i.e. any other object of general public utility . In case, therefore, where objects being pursued by assessee is relief of poor , education or medical relief", it is not even material whether or not assessee is carrying on activity in nature of trade, commerce or business in course of such activities. key factor is as to what are activities of assessee institution and as to what these activities seek to achieve. Page 109 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 35. Let us take pause here and examine as to what are activities of assessee cricket associations so as to be brought within ambit of trade, commerce or business. We have seen objects of association, which are reproduced earlier in our order, and it is not even case of revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends has to activity of assessee which is in nature of trade, commerce or business. However, case of revenue authorities hinges on allegation that way and manner in which cricket matches are being organized, particularly IPL matches, activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and impact of this commercialization has not left Indian cricket intact. Indian Premier League and rules of game being governed by dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. difficulty for case of revenue before us, however, is that these matches are not being organized by local cricket associations. We are told that matches are being organized by Board of Cricket Control of India, but then, if we are to accept this claim and invoke proviso to Section 2(15) for this reason, it will amount to situation in which proviso to Section 2(15) is being invoked on account of activities of entity other than assessees- something which law does not permit. We are not really concerned, at this stage, whether allegations about commercialization of cricket by BCCI are correct or not, because that aspect of matter would be relevant only for purpose of proviso to Section 2(15) being invoked in hands of BCCI. We do not wish to deal with that aspect of matter or to make any observations which would prejudge case of BCCI. Suffice to say that very foundation of revenue s case is devoid of legally sustainable basis for short reason that commercialization of cricket by BCCI, even if that be so, cannot be reason enough to invoke proviso to Section 2(15). We are alive of learned Commissioner (DR) s suggestion that cricket Page 110 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT associations cannot be seen on standalone basis as BCCI is nothing but apex body of these cricket associations at collective level and whatever BCCI does is at behest of or with connivance of local cricket associations, and that it is not case that anyone can become Member of BCCI because only recognized cricket association can become Member of BCCI. We are also alive to learned Commissioner s argument that what is being sought to be protected by Charitable status of these associations is share of these cricket associations from commercial profits earned by BCCI by organizing cricket matches. problem, however, is that activities of 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 event of BCCI being involved in commercial activities, taxability of such commercial profits will arise in hands of BCCI and not end beneficiaries. Even in such case point of taxability of these profits is BCCI and not cricket associations, because, even going by learned Commissioner s arguments, these receipts in hands of 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 cricket associations and BCCI cannot be ignored for purposes of tax treatment. There is no dispute that matches were organized by BCCI, and assessee cannot thus be faulted for commercial considerations said to be inherent in planning matches. As we make these observations, and as we do not have benefit of hearing perspective of BCCI, we make it clear that these observations will have no bearing on any adjudication in hands of BCCI. Suffice to say that so far as cricket associations are concerned, allegations of revenue authorities have no bearing on denial of status of charitable activities in hands of cricket associations before us- particularly as learned Commissioner has not been able to point out single object of assessee cricket associations which is in nature of trade, commerce or business, and, as it is not even in dispute that objects being pursued by assessee cricket associations are objects of general public utility under section 2(15). All objects of assessee cricket associations, as Page 111 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT reproduced earlier in this order, unambiguously seek to promote cricket, and this object, as has been all along accepted by CBDT itself, object of general public utility. 36. Cricket is indeed immensely popular game in this part of world, and anything to do with cricket results in mass involvement of public at large. sheer strength of these numbers results in higher visibility of cricketing activities and scale of operations on which work for development of cricket is to be carried out. These facts, by itself, and without assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require activities to be treated as commercial activities. When cricket stadium is to be built, it has to accommodate very large number of persons but size of stadium would not mean that activity is for anything other than promotion of cricket.. When numbers are large, scale of operations is large, and when scale of operations are larger, even surplus or deficit could be large, but then scale of operations may be scale on which commercial activities could be carried out but that fact cannot convert object of general public utility into commercial activity. We have carefully analyzed annual reports and annual financial statements of assessee, and we do not find any objects, other than objects of cricket associations, being pursed by these cricket associations. objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for purpose of promoting cricket. We are, therefore, of considered view that proviso to Section 2(15) has been wrongly invoked in these cases. 94. From above, it is evident that ITAT considered issue bearing in mind activities of assessee and what such activities seek to achieve. ITAT has observed that it carefully analyzed annual reports and annual financial statements of assessee, and upon perusal of same, ITAT reached to conclusion that activities undertaken by Associations were not contrary to objects. This is Page 112 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT pure finding on question of fact. In such circumstance, referred to above, it cannot be said or argued that ITAT passed impugned order in very slipshod manner or without assigning any cogent reasons. 95. We shall now proceed to examine main issue on our own. 96. Section 2(15) of Act defines term Charitable Purpose . definition reads as under: 'Section 2(15):-"charitable purpose" includes relief of poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and advancement of any other object of general public utility: Provided that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity, unless (i) such activity is undertaken in course of actual carrying out of such advancement of any other object of general public utility; and (ii) aggregate receipts from such activity or activities during previous year, do not exceed twenty per cent of total receipts, of trust or institution undertaking such activity or activities, of that previous year; 97. S.2(15) of 1961 Act::- Charitable purpose, defined (upto 31-3-2009).- According to section 2(15), expression charitable purpose has been defined by way of inclusive definition so Page 113 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT as to include- -relief to poor, -education, -medical relief, and -the advancement of any other object of general public utility [(upto 31-3-1984) not involving carrying on of any activity for profit]. 98. subject-matter of this definition has been dealt with under section 11, post. 99. Charitable purpose, defined (operative from 1-4- 2009).-As per section 2(15), newly substituted (w.e.f. 1-4- 2009) by Finance Act, 2008, expression charitable purpose has been defined by way of inclusive definition so as to include; -relief to poor, -education, medical relief, -(w.e.f. 1-4-2009) preservation of environment (including watersheds, forests and Wildlife) and Preservation of monuments or places or objects of artistic of historic interest and, -the advancement of any other object of general public utility. 100. first proviso to section 2(15) provides that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity: - in nature of trade, commerce or business, or Page 114 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT -of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. 101. second proviso to section 2(15) as newly inserted (w..e.f. 1-4-2009) by Finance Act, 2010, further provides that first proviso shall not apply if aggregate value of receipts from activities referred to therein is -(between 1-4-2009 and 31-3-2012) Rs. 10 lakhs -(w.e.f. 1-4-2012) Rs. 25 lakhs or less in previous year. 102. Legislative amendments.- I. Finance Act, 1983-By section 3(a) of Act 11 of 1983, section 2(15) has been amended (w.e.f. 1-4-1984). II Finance Act, 2008.-The scope and effect of substitution (w.e.f. 1-4-2009) of section 2(15) by Act 18 of 2008, have been elaborated in following portion of departmental circular No. 1/2009, dated 27-3-2009, as under:- 'Streamlining definition of charitable purpose .- 5.1 Sub-section (15) of section 2 of Act defines charitable purpose to include relief of poor, education, medical relief, and advancement of any other object of general public utility. It has been noticed that number of entities operating on commercial lines are claiming exemption on their income either under sub- section (23C) of section 10 or section 11 of Act on ground that they are charitable institutions. This is based on argument that they are engaged in advancement of object of general public utility as is included in fourth limb of current definition of charitable purpose Such as claim, when made in Page 115 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT respect of activity carried out on commercial lines, is is contrary to intention of provision. 5.2 With view to limiting scope of phrase advancement of any other object of general public utility , sub-section (15) of section 2 has been amended to provide that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. Scope of this amendment has further been explained by CBDT vide its Circular 11/2008 dated December 19, 2008. 5.3 Applicability: This amendment has been made applicable with effect from 1st April, 2009, and shall accordingly apply for assessment year 2009-10 and subsequent assessment years. . III Finance (No.2) Act, 2009-The scope and effect of substitution (w..e.f. 1-4-2009) of section 2(15) by Act 33 of 2009 have been elaborated in following portion of departmental circular No.5/2010, dated 3-6-2010, as under:- Amendment to include certain activities within ambit of provisions relating to charitable purpose in Income-tax Act. 4.1 For purposes of Income-tax Act, charitable purpose has been defined in section 2(15) of Income-tax Act and it includes (a) relief to poor, (b) education, (c) medical relief and, (d) advancement of any other object of general public utility. However, as per proviso to section, advancement of any other object of general public utility shall not be charitable purpose, if it involves Page 116 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. 4.2 Clause (15) of section 2 has been amended so as to provide that preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest would be excluded from applicability of aforesaid proviso which is applicable to advancement of any other object of general public utility . 4.3 Applicability:-These amendments have been made applicable with effect from 1st April, 2009 and will accordingly apply for assessment year 2009-10 and subsequent assessment years.. IV Finance Act, 2010:--The scope and effect of insertion (w.e.f. 1-4-2009) of new second proviso in section 2(15) have been elaborated in following portion of departmental circular No.1/2011, dated 6-4 2011, as under: Change in definition of charitable purpose .- 4.1 For purposes of Income-tax Act, charitable purpose has been defined in section 2(15) which, among others, includes advancement of any other object of general public utility . 4.2 However, advancement of any other object of general public utility is not charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. 4.3 absolute restriction on any receipt of commercial nature may create hardship to Page 117 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT organizations which receive sundry considerations from such activities. Therefore, section 2(15) has been amended to provide that advancement of any other object of general public utility shall continue to be charitable purpose if total receipts from any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business do not exceed Rs.10 lakhs in previous year. 4.4 Applicability: This amendment has been made effective retrospectively from 1st April, 2009 and will, accordingly, apply in relation to assessment year 2009-10 and subsequent years. . V. Finance Act, 2011.-The second proviso to section 2(15) has been amended (w.e.f. 1-4-2012) by section 3 of Act 8 of 2011. scope and effect of amendment made in section 2(15) by Finance Act, 2011 have been elaborated in following portion of departmental circular No.2 of of 2012 dated 22-05-012. as follows: Definition of charitable purpose":- 4.1 For purpose of 1961 Act, charitable purpose has been determined in section 2(15) which, among others, include "the advancement of any other object of general public utility . 4.2 However. advancement of any other object of general public utility is not considered as charitable purpose. if it involves carrying on of any activity in nature of trade. commerce or business. or any activity of rendering any service in relation to any trade. commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity. if receipts from such activities is above specified limit in previous year. Page 118 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 4.3 Second proviso to section 2(15) of 1961 Act has been amended to provide that specified monetary limit in respect of receipts from such activities shall be 25 lakh rupees instead of 10 lakh rupees. 4.4 Applicability.--This amendment has been made effective from [1st April. 20l2, and will, accordingly, apply in relation to assessment year 2012-13 and subsequent years. Departmental circular.-1. Definition of Charitable purpose under section 2(15) of Income-tax Act, 1961-reg- Section 2(15) of Income-tax Act, 1961 ( Act ), defines charitable purpose to include following: (i) relief to poor (ii) education (iii) medical relief, and (iv) advancement of any other object of general public utility. entity with charitable object of above nature was eligible for exemption from tax under section Section 11 or alternatively under section 10(23C) of Act. However. it was seen that number of entities who were engaged in commercial activities were also claiming exemption on ground that such activities were for advancement of objects of general public utility in terms of fourth limb of definition of charitable purpose". Therefore. section 2(15) was amended, vide Finance Act. 2008, by adding proviso which states that advancement of any other object of general public utility shall not be charitable purpose if it involves carrying on of - (a) any activity in nature of trade, commerce or business: or (b) any activity of rendering any service in relation to any Page 119 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT trade. commerce or business; for cess or fee or any other consideration, irrespective of nature of use or application, or retention of income from such activity. 2. following implications arise from this amendment 2.1 newly inserted proviso to section 2(15) will not apply in respect of first three limbs of section 2(15), i.e., relief of poor, education or medical relief. Consequently, where purpose of trust or institution is relief of poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves carrying on of commercial activities. 2.2. Relief of poor encompasses wide range of objects for welfare of economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on commercial activity, subject, however, to conditions stipulated under section 11(4A) or seventh proviso to section 10(23C) which are that (i) business should be incidental to attainment of objectives of entity,and (ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is education or medical relief would also continue to be eligible for exemption as charitable Page 120 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT institutions even if they incidentally carry on commercial activity subject to conditions mentioned above. 3. newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. fourth limb of definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of Act if they carry on commercial activities. Whether such entity is carrying on activity in nature of trade, commerce or business is question of fact which will be decided based on nature, scope, extent and frequency of activity. 3.1. There are industry and trade associations who claim exemption from tax u/s 11 on ground that their objects are for charitable purpose as these are covered under any other object of general public utility . Under principle of mutuality, if trading takes place between persons who are associated together and contribute to common fund for financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to persons forming such association is not chargeable to tax. In such cases, there must be complete identity between contributors and participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under purview of proviso to section 2(15) owing to principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable Page 121 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT organizations would now be governed by additional conditions stipulated in proviso to section 2 (15). 3.2. In final analysis, however, whether assessee has for its object advancement of any other object of general public utility is question of fact. If such assessee is engaged in any activity in nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such case, object of general public utility will be only mask or device to hide true purpose which is trade, commerce or business or 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 meaning of Section 2(15), would be well advised to eschew any activity which is in nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business. 103. In course of hearing of these appeals, our attention was drawn to following extract from speech of Minister of Finance on 29th February, 2008. 180. Charitable purpose' includes relief of poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade commerce or business and earning income have sought to claim that their purpose would also fall under 'charitable purpose'. Obviously, this way not intention of Parliament and, hence, I propose to amend law to exclude aforesaid cases. Genuine charitable organizations will not in any way be affected. Page 122 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 104. Our attention was also drawn to following extract from reply of Finance Minister to Debate in Lok Sabha on Finance Bill, 2008:- 6. Clause 3 of Finance Bill, 2008 seeks to amend definition of charitable purpose' so as to exclude any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature or use of application, or retention, of income from such activity. intention is to limit benefit to entities which are engaged in activities such as relief of poor, education, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear mask of charity. number of Honourable Members have written to me expressing their concern on possible impact of proposal on Agricultural Produce Market Committees (APMC) or State Agricultural Marketing Boards (SAMB). Since there is no intention to tax such committees or boards, and in order to remove any doubts, I propose to insert new clause (26AAB) in section 10 of Income tax Act to provide exemption to any income of APMC or SAMB constituted under any law for time being in force for purpose of regulating marketing of agricultural produce. I once again assure House that genuine charitable organisations will not in any way be affected. CBDT will, following usual practice, issue explanatory circular containing guidelines for determining whether entity is carrying on any activity in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether purpose is charitable purpose will depend on totality of facts of case. Ordinarily, Chambers of Commerce and similar organisations rendering services to their members would not be affected by amendment and their activities would continue to be regarded as advancement of any other object of general public utility. (underlining added) 105. Thus, prima facie, it appears from above that object of introduction of Proviso to clause (15) of Section 2 of said Act was to deny benefit of Income Page 123 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Tax Act exemption to purely commercial and business entities which wear mask of charity. genuine charitable organizations were not affected in any way. 106. first and foremost thing we want to clarify is that registration of assessee as Charitable Institution would, prima facie, clothe assesseee with character of charitable institution. However, game, by itself, is not conclusive and question whether assessee is established for charitable purpose or not must be examined independently with reference to provisions of Act. registration of assessee as charitable institution under Section 12A of Act, 1961 is relevant factor in reaching appropriate conclusion. Unless positive requirements of law are satisfied, assessee, only by virtue of aforesaid event, cannot be regarded as Charitable Institution. objects, for which, assessee is established either as Society or as Association should spell out any charitable purpose. 107. In aforesaid context, it may be pertinent to refer to decision of this High Court in case of Hiralal Bhagwati v. Commissioner of Income Tax, [2000] 161 CTR (Guj) 401, wherein Court has held as under: registration of charitable trust under section 12A is not empty formality. This is apparent from tenor of provisions of section 12A. It requires that not only application should be filed in prescribed form, setting details of origin of trust, but also names and addresses of trustees and/or managers should be furnished. CIT has to examine objects of creation as well as empirical study of past activities of applicant. CIT has to examine that it Page 124 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT is really charitable trust or institution eligible for registration. Court further held that once registration under section 12A(a) of Act is granted, Income Tax Officer is not justified in refusing benefit which would, otherwise, accrue under registration. 108. In case of Assistant Commissioner of Income Tax v. Surat City Gymkhana, (2008) 300 ITR 214 (SC), Supreme Court was called upon to deal with question as to whether on facts and circumstances of said case, Income Tax Appellate Tribunal was justified in law in holding that registration under section 12A was fiat accompli to hold Assessing Officer back from further probe into objects of trust. On perusal of judgment of Gujarat High Court in case of Hiralal Bhagwati, Supreme Court held that question stood concluded by said judgment, which had attained finality since revenue did not challenge decision in said case. relevant observations made by Supreme Court are as follows; respondent assessee claimed exemption under Section 10(23) of Income Tax Act, 1961 for Assessment Years 1991-1992 and 1992-1993. said exemption was claimed on basis that objects of respondent assessee are exclusively charitable. assessing officer rejected claim. appeals filed before Commissioner of Income Tax (Appeals) were also dismissed. Aggrieved thereby, assessee filed further appeals before Income Tax Appellate Tribunal (the Tribunal). Tribunal, by order dated 20-1-2000, allowed appeals filed by respondent assessee. appellant filed appeals before High Court of Gujarat. Revenue claimed that following two substantial questions of law arise from order of Tribunal: (A) Whether, on facts and circumstances of case, Income Tax Appellate Tribunal was justified in law in holding that objects of trust restricting Page 125 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT benefit to members of club would fall within purview of act of general public utility under Section 2(15) of Income Tax Act constituting as section of public and not body of individuals? (B) Whether, on facts and circumstances of case, Income Tax Appellate Tribunal was justified in law in holding that registration under Section 12-A was fait accompli to hold assessing officer back from further probe into objects of trust? 2. By impugned order, High Court dismissed appeals, in limine, relying on decision of same Court in Hiralal Bhagwati v. CIT 2000 246 ITR 188, holding that questions raised in appeals are covered by aforesaid decision. 3. Being dissatisfied by order of High Court, Revenue has filed these appeals. 4. This Court, on 22-7-2002, granted leave in respect of Question B only. appeals were not entertained in respect of Question and it was noted that appeals were rightly dismissed by High Court insofar as Question is concerned as appellant did not challenge correctness of judgment in Hiralal Bhagwati. 5. On perusal of judgment of Gujarat High Court in Hiralal Bhagwati we now find that Question B is also concluded by said judgment (refer to 1st paragraph of ITR p. 196). Since Revenue did not challenge decision in said case, same has attained finality. Question B , therefore, is to meet same fate as Question as this Court had declined to grant leave in respect of Question on ground that Revenue did not challenge correctness of decision in Hiralal Bhagwati. It appears that fact, that Question B was also covered by aforementioned judgment, was not brought to notice of Their Lordships and, therefore, leave granted was restricted to Question B . 109. This High Court in case of Ahmedabad Urban Development Authority v. Deputy Director of Income Tax (Exemption), (supra), has held thus: Page 126 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 9. Section 12AA of Act lays down procedure for registration in relation to conditions for applicability of sections 11 & 12 as provided in section 12A of Act. Therefore, once procedure is complete as provided in sub-section (1) of section 12AA of Act and Certificate is issued granting registration to Trust or Institution it is apparent that same is document evidencing satisfaction about : (1) genuineness of activities of Trust or institution, (2) about objects of Trust or Institution. Section 12A of Act stipulates that provisions of sections 11 & 12 shall not apply in relation to income of Trust or Institution unless conditions stipulated therein are fulfilled. Thus granting of registration under section 12AA of Act denotes, as per legislative scheme, that conditions laid down in section 12A of Act stand fulfilled. 110. This High Court, in case of Agricultural Produce Market Committee vs. Income Tax Officer, reported in (2013) 355 ITR 384, held as under; perusal of reasons recorded shows that assessment is sought to be reopened on ground that even if petitioner has obtained registration under section 12AA of Act as institution carrying on charitable activities, petitioner is not entitled to status of trust carrying out charitable activities since petitioner is conducting business as Association of Persons and not as Trust . Thus, though petitioner has been granted registration under section 12AA of Act by Commissioner of Income-tax, assessment is sought to be reopened on basis of revenue audit objection that petitioner is not eligible for exemption for aforesaid reasons. grounds for reopening assessment are clearly contrary to settled legal position as laid down by this Court in case of Hiralal Bhagwati v. Commissioner of Income Tax, (supra) as well as in case of Ahmedabad Urban Development Authority v. Deputy Director of Income Tax (Exemption), wherein Court has held that section 12AA of Act lays down procedure for registration in relation to conditions for applicability of sections 11 and 12 as provided in section 12A of Act. Page 127 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Therefore, once procedure is complete as provided under sub-section (1) of section 12AA of Act and certificate is issued granting registration to Trust or Institution, it is apparent that same is document evidencing satisfaction about: (1) genuineness of activities of trust or Institution, and (2) about objects of Trust or Institution. While framing assessment order, it is not open to Assessing Officer to ignore certificate of registration granted under section 12AA of Act by Director of Income Tax (Exemption). In facts of present case, Assessing Officer while framing original assessment under section 143(3) of Act, has, taken into consideration certificate granted by Commissioner of Income Tax under section 12AA of Act, and has found that petitioner carries on charitable activities. In return of income filed by it, petitioner had specifically claimed deduction of Rs.32,40,212/- and Rs.45,00,000/- totalling to Rs.77,40,212/- as Charitable Trust registered under section 12AA of Act by Commissioner of Income Tax. During course of assessment proceedings Assessing Officer had issued notice pursuant to which petitioner had given its reply explaining as to why it was entitled to said deductions. Assessing Officer after considering explanation given by petitioner had passed scrutiny assessment order under section 143(3) of Act specifically allowing above deductions. From reasons recorded, it is evident that Assessing Officer has not recorded any independent opinion regarding income having escaped assessment for reasons stated therein. sole ground for reopening assessment appears to be observations of Revenue Audit Party that assessee is not eligible for exemption to tune of Rs.77,40,212/- for year under reference since, Assessing Officer has not disallowed exemption while finalizing assessment under section 143(3) of Act. Thus, it appears that belief that income chargeable to tax escaped assessment is that of Revenue Audit Party and not of Assessing Officer. In circumstances, condition precedent for exercise of powers under section 147 of Act, namely, that Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment, does not appear to be fulfilled in Page 128 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT present case. Besides, in light of above referred decisions of this Court, it is not permissible for Assessing Officer to go behind registration obtained by assessee under section 12AA of Act. Assessing Officer while framing original assessment having taking into consideration registration under section 12AA of Act as well as having examined admissibility of claims made by petitioner, has allowed deduction under section 11 of Act. Under circumstances, reopening of assessment appears to be based on mere change of opinion, that too, opinion of Revenue Audit Party and not that of Assessing Officer. 111. ratio discernible from aforesaid decision is that once procedure is completed as provided under sub- section (1) of Section 12AA of Act and certificate is issued granting registration to trust or institution, it is apparent that same is document evidencing satisfaction about (i) genuineness of activities of trust or institution and (ii) about objects of trust or institution. While framing assessment order, it is not open to Assessing Officer to ignore certificate of registration granted under Section 12AA of Act by Director of Income Tax (Exemption). It is not permissible for Assessing Officer to go behind registration obtained by assessee under Section 12AA of Act. 112. It is apposite to state that definition of term charitable purpose remains inclusive one and is not exhaustive or exclusive one. In other words, purposes similar to those mentioned in aforesaid definition could also constitute charitable purpose' under Act. expression charitable purpose is sufficiently wide in scope to include variety of activities. For instance, promotion of sports Page 129 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT and games is charitable purpose, as is promotion of trade and commerce, even when beneficiaries are confined only to particular line of trade or commodity. However, at same time, fact that remote and indirect benefits are derived by members of public will not be sufficient to make purpose charitable purpose under Act. 113. word Charity connotes altruism in thought and action. It involves idea of benefiting others rather than oneself. 114. For trust to be accepted as charitable trust for purposes of exemption, it is necessary that objects should be specific so as to confirm to requirement of income tax law in this regard. Where they are too wide, trust may not qualify for exemption. However, pragmatic view is required to be taken while examining data. material on record should be analysed objectively. 115. onus to prove that objects are of charitable nature is on assessee. 116. In our considered opinion, principle of purposive interpretation of provision has to be adopted and when such construction is placed, it serves legislative intent. 117. In this context we may refer to decision in State of T.N. v. Kodaikanal Motor Union (P) Ltd., (1986) 62 STC 272 (SC): (1989) 3 SCC 91, wherein Supreme Court, after referring to K.P. Varghese vs. Income Tax Officer and and Luke v. Inland Revenue Commissioner, (1964) 54 ITR 692 (HL); (1963) AC 557 (HL), observed thus:- courts must always seek to find out intention of legislature. Though courts must find out intention of statute from language used, but Page 130 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT language more often than not is imperfect instrument of expression of human thought. As Lord Denning said it would be idle to expect every statutory provision to be drafted with divine prescience and perfect clarity. As Judge Learned Hand said, we must not make fortress out of dictionary but remember that statutes must have some purpose or object, whose imaginative discovery is judicial craftsmanship. We need not always cling to literalness and should seek to endeavour to avoid unjust or absurd result. We should not make mockery of legislation. To make sense out of unhappily worded provision, where purpose is apparent to judicial eye some violence to language is permissible. 118. In Keshavji Ravji and Co. v. CIT, (1990) 183 ITR 1 (SC); (1990) 2 SCC 231, it has been held by Supreme Court that when in taxation statute where literal interpretation leads to result that does not sub-serve object of legislation another construction in consonance with object can be adopted. 119. We now propose to examine matter, keeping in mind fourth limb of Section 2(15) of Act, i.e., advancement of any other object of general public utility . 120. provision as it existed under Act of 1922 was that once purpose of trust was relief of poor, education, medical relief or advancement of any other object of general public utility, trust was considered to be for charitable purpose. As result of addition of words "not involving carrying on of any activity for profit" at end of definition in section 2(15) of Act even if purpose of trust is "advancement of any other object of general public utility", it would not be considered to be "charitable purpose" unless it is shown that above purpose does not involve Page 131 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT carrying of any activity for profit. result, thus, of change in definition is that in order to bring case within fourth category of charitable purpose, it would be necessary to show that : (i) purpose of trust is advancement of any other object of general public utility, and (ii) above purpose does not involve carrying on of any activity for profit. 121. Both above conditions must be satisfied before purpose of trust can be held to be charitable purpose. 122. brief analysis of all provisions would show that (i) providing relief of poor; (ii) establishing institution for education; (ii) providing medical relief; and (iv) to advance any other object of general public utility are included within definition of charitable purposes . With effect from 01.04.2009, new definition has been substituted, in that, if advancement of object of general public utility involves carrying on any activity in nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, such activity shall not be charitable purpose. Except addition of proviso, restricting purport of advancement of any other object of general public utility , there is not much difference in section 2(15) as it existed prior to 01.04.2009, and thereafter. After amendment preservation of environment including watersheds, forest and wild life, and preservation of monuments or places/objects of artistic or historic interest are also included in definition charitable purpose . Be that as it is, what is important is any Page 132 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT institution or organization or entity for advancement of object of general public utility is also considered as institution or trust for charitable purpose. Section 11 exempts various categories of incomes as enumerated under section 11(1)(a) to (d) from total income of previous year. Section 12 exempts voluntary contributions received by trust created for charitable purposes from total income. benefit of Section 11 and/or 12 can be claimed only when conditions as stipulated under Section 12A are satisfied. One such condition is that person in receipt of income has to apply for registration of trust or institution in prescribed form on or before expiry of period of one year from date of creation of trust or establishment of institution. proviso to Section 12A(1) confers power on Commissioner to entertain application under Section 12A (1) even after expiry of period of one year if he is satisfied that person was prevented from making application before expiry of period of one year for sufficient reasons. 123. Section 11(5) requires every trust or institution for charitable purpose to invest or deposit money only in manner provided therein inter alia investment in Savings Certificates as defined in Government Savings Certificates Act, 1959, deposit with Post Office Savings Bank, deposit in any account with scheduled bank i.e., Reserve Bank of India or its subsidiary bank or any scheduled bank under Section 3 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 or any other bank being bank included in Second Schedule to Reserve Bank of India Act, Page 133 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 1934 and like. breach of Section 11(5) would attract Section 13(1)(d) of IT Act and benefit under Sections 11 and 12 would not be available if funds are deposited or invested contrary to Section 11(5) or in breach of Section 13(1) generally and Section 13(1)(d) specifically. 124. In CIT vs. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC), Supreme Court considered question as to whether income of Andhra Chamber of Commerce is exempt under Section 4(3)(i) of Income tax Act, 1922. While observing that legislature had used language of great amplitude in defining charitable purpose and referring to Trustees of Tribune, Court held that Chamber of Commerce is charitable institution although it was promoting interest of trade and commerce, which were only ancillary and subsidiary objects. While observing that primary object being, to promote and protect trade, commerce and industries, to aid, stimulate and promote development of trade, commerce and industries, and to watch over and protect general commercial interests of India , Court held as under. expression object of general public utility in Section 4(3) would prima facie include all objects which promote welfare of general public. It cannot be said that purpose would cease to be charitable even if public welfare is intended to be served thereby if it includes taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If primary purpose be advancement of objects of general public utility, it would remain charitable even if incidental entry into political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, is contemplated. Page 134 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 125. In Addl. Commissioner of Income Tax vs. Surat Art Silk, (1980) 121 ITR 1 (SC), Constitution Bench of Supreme Court interpreting words not involving carrying on of any activity for profit occurring in section 2(15) (as it existed), held that test of predominant object has to be applied while deciding whether entity is charitable trust/institution and that profit making by such institution is not excluded. relevant observations are as follows. Therefore, for purpose to fall under fourth head of charitable purpose , it must constitute advancement of object of general public utility in which activity of advancement must not involve profit making activity. word involving in restrictive clause is not without significance. activity is involved in advancement of object when it is enwrapped or enveloped in activity of advancement. In another case, it may be interwoven into activity of advancement, so that resulting activity has dual nature or is twin faceted. Since we are concerned with definition of charitable purpose , and definition defines in its entirety purpose only, it will be more appropriate to speak of purpose of profit making being enwrapped or enveloped in purpose of advancement of object of general public utility or, in other kind of case, purpose of profit making being interwoven into purpose of advancement of that object giving rise to purpose possessing dual nature or twin facets. Now, section 2(15) clearly says that to constitute charitable purpose purpose of profit making must be excluded. In my opinion, requirement is satisfied where there is either total absence of purpose of profit making or it is so insignificant compared to purpose of advancement of object of general public utility that dominating role of latter rendersthe former unworthy of account. If profit making purpose holds dominating role or even constitutes equal component with purpose of advancement of object of general public utility, then clearly definition in section 2(15) is not satisfied. When applying Section 11, it is open to tax authority in appropriate case to pierce veil of what is Page 135 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT proclaimed on surface by document constituting trust or establishing institution, and enter into ascertainment of true purpose of trust or institution. true purpose must be genuinely and essentially charitable. 126. In CIT vs. Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR 1 (SC), question was whether income of APSRTC was exempt from income tax under section 4(3)(i). On reference by Income Tax Appellate Tribunal, High Court answered question in affirmative in favour of assessee. Following Trustees of Tribune, Supreme Court affirmed High Court s view observing as under. It is admitted position, as pointed out by High Court in its judgment under appeal, that no share capital has been raised under Section 23(2) and entire capital has been provided by government under Section 23(1) and Government is only paid interest thereon under Section 28(1) just as interest would be paid on any money due as debt. That activity of respondent Corporation is not carried on with object of making profit is made abundantly clear by provisions of section 30 under which, prior to amendment of that section by Amendment Act of 1959, balance of income left, after utilization of net profits for purpose set out in section 30, was to be made over to State Government for purpose of road development and after Amendment Act of 1959 is to be utilized for financing expansion programmes of respondent corporation and remainder, if any, is to be made over to State Government for purpose of road development. As pointed out by this Court in Andhra Pradesh Road Transport Corporation v ITO (1964) 52 ITR 524 (SC), amount handed over to State Government does not become part of general revenues of State but is impressed with obligation that it should be utilized only for purpose for which it is entrusted, namely, road development. It is not, and cannot be, disputed that road development is object of general public utility. Page 136 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 127. CIT vs. Agricultural Produce and Market Committee, (2007) 291 ITR 419 (Bom) is case wherein Bombay High Court considered question whether market committees constituted under Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 are established for charitable purposes and whether they can be registered under section 12A/12AA of Act. After referring to various provisions of Maharashtra Act preamble, powers and duties of market committees, power to levy and collect fees and regulate markets, Court relied on Surat Art Silk (supra) and held as under. (paras 22 and 24) Applying tests laid down by apex court in aforesaid cases to facts of present case, there can be no doubt that object of market committees (assessees) established under 1963 Act is to regulate entire marketing of agricultural and some other produce from stage of procuring till it reaches ultimate consumer, which is squarely covered within meaning of expression "advancement of any object of general public utility" contained in section 2(15) of Act. It is pertinent to note that prior to April 1,1984, words used in section 2(15) of Act were "advancement of any other object of general public utility not involving carrying on of any activity for profit". By Finance Act, 1983 with effect from April 1, 1984, Legislature has omitted words "not involving carrying on of any activity for profit" from section 2(15) of Act. Thus, after April 1, 1984, even if there is some profit in activity carried on by trust/institution, so long as dominant object is of general public utility, it cannot be said that said trust/institution is not established for charitable purposes. 128. In CIT vs. Market Committee, (2007) 294 ITR 563 Page 137 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT (P&H), Punjab and Haryana High Court, after considering provisions of Punjab Agricultural Produce Markets Act, 1961 held that market committee incorporated in terms of Section 18 of Punjab Act is body corporate and that its activities can be included within definition of term charitable purposes. It was also held that exemptions under sections 10, 11 and 12 of Act are independent of one another and merely because assessee is not entitled to claim exemption under one of aforesaid provisions that cannot ipso facto lead to conclusion that claim of assessee cannot be considered for grant of tax exemption in some other provisions of IT Act. relevant observations are as follows. It is apparent from duties and responsibilities of market committees, delineated in foregoing two paragraphs, that market committee, in background of provisions of Markets Act, should be treated as body, discharging "legal obligation"(s) within meaning of Section 13(7) of Income Tax Act. duties and responsibilities discharged by market committee, envisaged under provisions of Markets Act, referred to above, also lead us to conclude, that activities of market committee can be included within definition of term "charitable purpose", defined by Section 2(15) of Income Tax Act. instant conclusion is inevitable from cumulative reading and interpretation of Sections 13, 26 and 28 of Markets Act (analysed in paragraphs 3, 4 and 5 hereinabove). Briefly stated, it may be noticed, that obligations discharged by market committee include regulation of purchase, sale, storage and processing of agricultural produce with intention of benefiting producers, as well as, consumers of agricultural products. market committee is also obliged to provide for conveniences for activities of market area like construction of buildings, sheds, plinths, etc. market committee is also obliged to provide conveniences for persons visiting market area, like providing for shelter, shade and parking facilities. market committee is also Page 138 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT obliged to look after safety, health and convenience of persons visiting market area. market committee is also obliged to construct and repair link roads, approach roads, culverts, and bridges, etc. One of many specified activities of market committee is to extend loans to financially weak communities as well as in repayment of such loans and interest thereon. market committee under reference, in discharge of its obligations, besides carrying out all aforesaid activities, is stated to have spent huge sum of money for construction, development and repair of link roads, culverts, bridges, etc 129. In CIT vs. Gujarat Maritime Board, (2007) 295 ITR 561 (SC), question before Supreme Court was whether Maritime Board is entitled to status of charitable institution under Section 11 of Act. Maritime Board was constituted under Gujarat Maritime Board Act for purpose of development of minor ports in Gujarat. Under statute, Board also renders stevedoring, transport and shipping services besides maintaining jetties, wharfs, roads, lights etc. management and control of Board was with State Government. There was no profit motive and income earned by Board has to be deployed for development of minor ports in Gujarat. It was registered as local authority under Section 3(31) of General Clauses Act, 1897. Prior to 2002, it was availing exemption as local authority under Section 10(20) of IT Act and, therefore, was not exigible to income tax. After insertion of explanation in Section 10(20), expression local authority was confined to Panchayats, Municipality, Municipal Committee, District Board and Cantonment Board. Maritime Board did not come within definition of local authority. They, therefore, made application to Commissioner for being registered as Page 139 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT charitable institution as defined under section 2(15). Commissioner rejected application. Tribunal as well as High Court of Gujarat held that Maritime Board is charitable institution. Supreme Court, while construing Section 2(15) and Section 11(1), relied on Andhra Chamber of Commerce (supra), Surat Art Silk (supra) and APSRTC (supra) and held that Maritime Board is entitled to be registered as charitable trust under Section 12A of Act. relevant observations are as follows. ; For purposes of this section property held under trust includes business undertaking so held, and where claim is made that income of any such undertaking shall not be included in total income of persons in receipt thereof, assessing officer shall have power to determine income of such undertaking in accordance with provisions of this Act relating to assessment; and where any income so determined is in excess of income as shown in accounts of undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. According to section 2(15), expression charitable purpose has been defined by way of inclusive definition so as to include relief to poor, education, medical relief and advancement of any other object of general public utility. In this case we are concerned with interpretation of expression advancement of any other object of general public utility. Under Section 11(1), income from property held for charitable purposes is not includible and does not form part of total income. Section 11(1) has three sub-sections, (a), (b) and (c). In all three sub-sections words used are income derived from property held under trust wholly for charitable purposes . Under Section 11(4) expression property held under trust includes business undertaking so held. In other words, income from business undertaking held for charitable purposes can fall under Section 11 subject to such income fulfilling requisite conditions of that section ... Page 140 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT .. At outset, we may point out that Section 10(20) and Section 11 of 1961 Act operate in totally different spheres. Even if Board has ceased to be local authority , it is not precluded from claiming exemption under Section 11(1) of 1961 Act. Therefore we have to read Section 11(1) in light of definition of words charitable purposes as defined under Section 2(15) of 1961 Act. We have perused number of decisions of this Court which have interpreted words in section 2(15), namely, any other object of general public utility . From said decisions it emerges that said expression is of widest connotation. word general in said expression means pertaining to whole class. Therefore, advancement of any object of benefit to public or section of public as distinguished from benefit to individual or group of individuals would be charitable purpose (CIT v. Ahmedabad Rana Caste Assn (1983) 140 ITR 1 (SC)). said expression would prima facie include all objects which promote welfare of general public. It cannot be said that purpose would cease to be charitable even if public welfare is intended to be served. If primary purpose and predominant object are to promote welfare of general public purpose would be charitable purpose. When object is to promote or protect interest of particular trade or industry that object becomes object of public utility, but not so if it seeks to promote interest of those who conduct said trade or industry (CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC). If primary or predominant object of institution is charitable, any other object which might not be charitable but which is ancillary or incidental to dominant purpose, would not prevent institution from being valid charity (CIT v. Surat Art Silk Cloth Manufacturers Assn (1980) 121 ITR 1 (SC). 130. apex Court in case of Surat Art Silk Cloth Manufacturers Association (supra) has pointed out that restriction must be read with "the advancement of any other object of general public utility" and not "object of general public utility". Supreme Court, considering English Page 141 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT decisions and Indian law, has pointed out in aforesaid decision that : "......... There is no such limitation so far as Indian law is concerned even if purpose is not within spirit and intendment of preamble to statute of Elizabeth, it would be charitable if it falls within definition of "charitable purpose" given in statute Every object of general public utility would, therefore, be charitable under Indian law, subject only to condition imposed by carrying on of any activity for profit" added in present Act. ......" 131. apex Court in case of CIT vs. Federation of Indian Chambers of Commerce & Industry (1981) 130 ITR 186 (SC), after applying principle laid down in case of Surat Art Silk Cloth Manufacturers Association (supra), held as under : ".......... income derived by respondent from activities, such as holding Indian Trade Fair and sponsoring conference of Afro-Asian Organisation, were for advancement of dominant object and purpose of Federation, viz. promotion, protection and development of trade, commerce and industry in India, and were exempt from tax under s. 11(1)(a) r/w s. 2(15) ......" 132. Apex Court in Ahmedabad Rana Caste Association vs. CIT, (1971) 82 ITR 704 (SC) and CIT vs. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC) pointed out that law recognises no purpose as charitable unless it is for public charity. That is to say, purpose must, in order to be charitable, be directed to benefit of community or section of community. expression "object of general public utility", however, is not restricted to objects beneficial to whole mankind. object beneficial to section of public is object of general public utility. Page 142 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT section of community sought to be benefited must undoubtedly be sufficiently defined and identifiable ........ quality of public or impersonal nature. 133. apex Court in case of Kamla Town Trust (supra), after considering facts of that case, viz., trust deed and rectification agreement, expressed opinion as under : "............. On contrary it becomes clear on close reading of relevant provisions of this clause that objects are specific and charitable in nature. beneficiaries are also clearly indicated. There is also no ambiguity about trustees or trust properties. Thus all basic requirements for creation of public charitable trust do exist on express language of relevant clauses of rectified deed. ....." 134. We may also refer to and rely upon decision of this Court in case of Additional Commissioner of Income Tax, Gujarat vs. Ahmedabad, Millowners Association, reported in 1977 (106) ITR 725, wherein this Court held as under; 22. We now proceed to consider whether object which serves personal interest would fall within scope of section 2(15) of Act. There is no dispute that charitable purposes of relief to poor and educational and medical relief have no relevance to facts of present case. It is, therefore, fourth category of charitable purpose, namely, object of general public utility, with which we are concerned in this case. expression "object of general public utility " appearing in section 2(15) would include only those objects which promote welfare of general public and not personal and individual interests of some persons. It is not uncommon to find objects of general public utility being in conflict with object of personal welfare of some specified individuals. It is true, as held by Supreme Court in case of Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), that personal welfare Page 143 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT of specified individuals would be incidental or consequential to main purpose of general public utility, but converse of this proposition is not always true. Now, if we examine objects contained in clauses (a), (b) and (c) from this point of view, it will be at once noticed that these objects seek to protect interest of "millowners and users of motive power" and also of those concerned with them. Clause (b) contemplates promotion of good relations between persons and bodies using such powers and clause (c), which is consequential to clause (a) and (b), contemplates doing of those acts and things by which objects covered by clause (a) and (b) may be attained. Thus, all these three clause aim at protecting personal interest and not public interests. If this is so, respondent-association is bound to carry on its activity keeping in mind narrower concept of promoting personal and self- serving interests of individuals who are consider "millowners and users of motive power" even when their interest are in conflict with interests of their own trade or industry. If and when this happens, how can it be said that respondent-association has carried out object of general public utility ? General public is undoubtedly interested in trade, commerce or industry conducted by individuals, but it is surely not interested in protecting personal interests of these individuals if they are in conflict with interests of trade, commerce and industry. Therefore, when object seeks to promote or protect interests of particular trade or industry, that object becomes object of public utility, but not so, if it seeks to promote interests of those who conduct said trade or industry. 23. This distinction between protection of interests of individuals and protection of interests of activity, which is of general public utility, goes to root of whole problem, and, hence, Supreme Court has pointedly referred to this problem in Commissioner of Income-tax v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) at page 727 of report by observing as under : "It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and Page 144 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT industry." 24. In this case, Supreme Court has pointed out that even object beneficial to section of public is object of public utility and that to serve charitable purpose, it is not necessary that object should be to benefit whole mankind or person living in particular country or province. But, while making these observations, Supreme Court has been careful in pointing out distinction between " section of public " and specified individuals. Even so far as "a section of public" is concerned, Supreme Court has been particular in identifying it in following terms (page 729) : "The section of community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of public or impersonal nature : where there was no common quality uniting potential beneficiaries into class, it might not be regarded as valid." 25. These observations are repeated by Supreme Court in subsequent decision in Ahmedabad Rana Caste Association v. Commissioner of Income-tax [1971] 82 ITR 704 (SC). 26. These observations supply complete answer to contention of learned Advocate-General that category of persons covered by expression "millowners and users of motive power" constitutes section of public, which can legitimately form object of charitable purpose. observations make it clear that section of public which is to be benefited to make purpose charitable one should have common quality of either "public" nature or "impersonal" nature. Can it be said that "millowners and users of motive power" have common quality of "public nature" ? If they have any common quality same is obviously of "private" nature, as each one of them is concerned with his own interest and shares nothing in common with public. It was contended that their common quality is fact that each one of them is either millowner or user of motive power. Granting that this is their common quality, it cannot be said that said common quality possesses attributes of public or impersonal nature. If individuals, whose only common quality is their profession or vocation, can Page 145 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT legitimately be invested with attributes of public nature, then every partnership, company or association of persons can be object of charity, and trusts created for benefit of such partnerships, companies and associations would be charitable trusts earning exemption under section 11. Absurdity of such situation cannot be over-emphasised. 27. What is exact nature of "section of public" which can legitimately become object of charity, is considered by Lord Greene M.R. in Powell v. Compton [1945] 1 Ch 123, 129 (CA). In that case bequest was made for education of small number of individual relatives of testatrix. question which arose was whether these individuals formed "section of public" so as to make trust charitable trust. Lord Greene M. R. held that trust was not valid trust, making following observations : "No definition of what is meant by section of public has, so far as I am aware, been laid down, and I certainly do not propose to be first to make attempt to define it. In case of many charitable gifts it is possible to identify individuals who are to benefit, or who at any given moment constitute class from which beneficiaries are to be selected. This circumstance does not, however, deprive gift of its public character. Thus, if there is gift to relieve poor inhabitants of parish class to benefit is readily ascertainable. But they do not enjoy benefit, when they receive it, by virtue of their character as individuals but by virtue of their membership of specified class. In such case common quality which unites potential beneficiaries into class is essentially impersonal one. It is definable by reference to what each has in common with others, and that is something into which their status as individuals does not enter." 28. Our Supreme Court has approved of this principle in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704 (SC) and has held that members of Rana caste has relationship which was impersonal one dependent upon their status members of that caste. No such relationship of impersonal nature can be found amongst millowners and users of motive power, and, hence, none of objects mentioned in clause (a), (b) and (c) can be treated as objects of public utility. Page 146 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 29. We have already dealt with object found in clause (d). So far as object contained in clause (e) is concerned it consists of two parts. This first part contemplates establishment or creation of funds to benefit employees of association or dependents of such persons while second part contemplates subscriptions, donations or guarantees or "charitable or benevolent" purposes at discretion of association. Now, so far as first part is concerned, it is covered by decision in Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (HL), to which reference is made by Supreme Court in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704 (SC) at page 710 of report. facts of that English decision were that trustees were directed to apply certain income in providing for education of children of employees or "former employees" of British limited company or any of its subsidiary or allied companies. House of Lords held in this case by majority that though group of persons indicated was numerous, nexus between them was employment by particular employers and, accordingly, trust did not satisfy test of public benefit requisite to establish it as charitable. This principle has been approved by our Supreme Court and, therefore, first part of object clause (e) is also not found to be for general public utility within meaning of section of section 2(15) of Act. So far as second part is concerned, Shri Kaji's contention was that benevolent purpose is not necessarily charitable purpose but if this clause is constructed liberally, it may be said that it embodies within it object of public utility. Now, proceeding to clause (f) it contemplates promotion of good relation between employers and employees. So far as this object is concerned, matter is concluded by decision of Supreme Court in above referred case of Commissioner of Income- tax v. Indian Sugar Mills Association [1974] 97 ITR 486 (SC), wherein relevant clause which court considered was "to promote good relations between employers and employees". This clause was exactly similar to clause (f) with which we are concerned in this reference. With regard to such clause, Supreme Court has observed that even assuming that in some remote and indirect manner such object might be some public utility, it cannot be called charitable purpose within meaning of section 4(3)(i) of Page 147 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Indian Income-tax Act, 1922. In view of this decision, even object mentioned in clause (f) cannot be considered as object serving any public utility. 30. If we closely scrutinise objects contained in rule 3, we find that substantial part of these objects benefit association's own members, those connected with them, and their employees. It is no doubt true that beneficiaries of these objects are also who are non- members but who happen to be millowners or users of motive power. But that aspect of matter does not detract from fact all members, and their employees, and "those who are connected" with members, from substantial part of recipients of benefits contemplated by objects. In Commissioner of Inland Revenue v. City of Glasgow Police Athletic Association [1953] 34 TC 76 (HL) Lord Cohen has summarised legal position in such cases as under at page 105 of report : "(1) If main purpose of body of persons is charitable and only elements in its constitution and operations which are non-charitable are merely incidental to that main purpose, that body of persons is charity notwithstanding presence of those elements - Royal College of Surgeons of England v. National Provincial Bank [1952] AC 631 (HL). (2) If, however, non-charitable object is itself one of purposes of body of persons and is not merely incidental to charitable purposes, body of persons is not body of persons formed for charitable purposes only, within meaning of Income Tax Acts - Oxford Group v. Inland Revenue Commissioner [1949] 2 All ER 537; 31 TC 221 (CA). (3) If substantial part of objects of body of person is to benefit its own members, body of persons is not established for charitable purposes only - Inland Revenue Commissioner v. Yorkshire Agricultural Society [1928] 1 KB 611 (CA)." 135. In our opinion, case on hand falls within first category mentioned by Lord Cohent. Page 148 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 136. It is important to note that prior to introduction of Proviso to Section 2(15) of Act, assessee-Association was granted registration under Section 12A of Act. From this, it is clear that prior to introduction of Proviso to Section 2(15) of Act, authority, upon due consideration of all relevant aspects, arrived at satisfaction that assessee-Association was established for charitable purposes.. Association continues to be recognised as charitable institution. certificate issued under Section 12A, after due inquiry, is still in force. If Proviso had not been introduced by virtue of Finance Act, 2008 w.e.f 1st April, 2009, assessee Association would have been recognized as charity and would have been recognized as institution established for purpose of advancement of object of general public utility. argument of learned senior counsel on behalf of Revenue is that in view of introduction of Proviso to Section 2(15), assessee-Association is not entitled to seek exemption. said proviso has two parts. first part has reference to carrying on of any activity in nature of trade, commerce or business. second part has reference to any activity of rendering any service in relation to any trade, commerce or business. Both these parts are further subject to condition that activities so carried out are for cess or fee or any other consideration, irrespective of nature or use or application or retention of income from such activities. In other words, if, by virtue of cess' or fee' or any other consideration, income is generated by any of two sets of activities referred to above, nature of use of such income or application or retention of such income is irrelevant for purposes of construing activities as charitable or not. Page 149 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 137. To be clear, if activity in nature of trade, commerce or business is carried on and it generates income, fact that such income is applied for charitable purposes, would not make any difference and activity would nonetheless not be regarded as being carried on for charitable purpose. We have seen that by virtue of Section 25 of Companies Act, petitioner is enjoined to plough back its income in furtherance of its object and declaration of dividends is prohibited. If literal interpretation is to be given to proviso, then it may be concluded that this fact would have no bearing on determining nature of activity carried on by petitioner. But, we feel that in deciding whether any activity is in nature of trade, commerce or business, it has to be examined whether there is element of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, element of profit making is also very important. 138. Delhi High Court in case of Addl. Commissioner of Income Tax, Delhi vs. Delhi Brick Kiln Owners Association, reported in 1981 (130) ITR 55. In said case, M/s. Delhi Brick Kiln Owners Association was respondent assessee. association had obtained license from Central Government for its registration under Section 26 of Indian Companies Act, 1913. following were objects of company; (a) To promote, develop and protect brick kiln trade, commerce and industries. (b) To watch and protect interest of brick kiln owners, Page 150 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT contractors, customers and brick dealers, members of association and interest of persons engaged in brick trade, commerce or industries legally, morally and socially. (c) To consider all questions connected with brick trade, commerce and industries and to initiate or support necessary action in connection therewith. (d) To protect trade, with co-operation of Government through legislative representation to get grievances and difficulties of Brick Kiln Association redressed. 139. High Court took notice of fact that other objects appeared to be incidental to paramount objects and were in nature of powers to carry out primary purpose. association derived its income from admission fee, membership subscription and rent realized by it from building belonging to it. association asserted that its income was entitled to exemption from tax under Section 11(1)(a) of I.T. Act, 1961 as it was formed for charitable purpose, it objects being advancement of general public utility. ITO, however, disallowed claim. ITO took view that as assessment was confined to brick kiln owners, it could not be said to have been formed for benefit of general public and, therefore, was not entitled to exemption. On appeal, AAC, relying on main objects of association, as laid down in Memorandum of Association, held that association was entitled to exemption. AAC, relied on decision of Supreme Court in CIT vs. Andhra Chamber of Commerce (supra) and decision of Kerala High Court in CIT vs. Indian Chamber of Commerce, 1971 80 ITR 645. AAC came to conclusion that association fulfilled conditions as required under Section 11(1)(a) of Act. department Page 151 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT went up in appeal to Income Tax Appellate Tribunal. It contended, on basis of decision of Mysore High Court in CIT vs. Sole Trustee Loka Shikshana Trust, 1970 77 ITR 61 and decision of Calcutta High Court in CIT vs. Indian Chamber of Commerce, 1971 81 ITR 147 that conclusions of AAC were erroneous. On other hand, respondent association relied on decision of Keral High Court in CIT vs. Cochin Chamber of Commerce & Industry, 1973 87 ITR 83. It also contended that decision of Supreme Court in Andhra Chamber of Commerce, 1965 55 ITR 722, despite fact that it pertained to provisions of Indian I.T. Act, 1922, was still good law as there was no change in substantive provisions relating to exemption of income from trust in I.T. Act, 1961. Tribunal dismissed appeal of department. department, being dissatisfied, preferred appeal before High Court. High Court took notice of fact that Tribunal did not consider matter relating to dominant intention but construed words not involving carrying on of any activity for profit which had been added by 1961, Act to definition of term charitable purpose . High Court also took notice of fact that Tribunal held that activity for profit would imply that there should be profit motive in activities of assessed. In other words, activities should be commercial in nature. Further, motive to make profit should be in integrated activity of buying and disposal. High Court of Delhi, while dismissing appeal of department, held as under; 12. question referred for our opinion is dependent on construction and interpretation of "charitable purpose" as defined in s. 2(15) of I. T. Act, 1961. Page 152 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Section 2(15) reads : "'Charitable purpose' includes relief of poor, education, medical relief, and advancement of any other object of general public utility not involving carrying on of any activity for profit." 13. It is well settled that words "not involving carrying on of any activity for profit" pertain only to fourth limb of charitable purpose, i.e., advancement of any other object of general public utility. 14. However, there has been conflict of opinion with regard to meaning of these words. This conflict appears to have been set at rest in view of recent decision of Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturing Association [1980] 121 ITR 1. assessed therein was company incorporated under Indian Companies Act, 1913, and registered under s. 25 of Companies Act, 1956; its objects were, inter alia, to promote commerce and trade, in art silk, raw silk, cotton yarn, art silk cloth, silk cloth and cotton and to carry on all and any business of art silk, etc., belonging to and on behalf of its members. court held, inter alia, that where main or primary objects are distributive, each and every one of objects must be charitable in order that trust or institution be upheld as valid charity. But if primary or dominant purpose of trust or institution is charitable, another object, which by itself may not be charitable, but is merely ancillary or incidental to primary or dominant purpose, would not prevent trust or institution from being or valid charity. 15. fact that members of assessed benefited was merely incidental to carrying out of main or primary purpose and if primary purpose was charitable, subsidiary objects would not militate against its charitable character not would it make purpose any less charitable. 16. Supreme Court referring to its earlier decision in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722, observed that court had held that dominant or primary object of Andhra Chamber of Commerce, which was to promote and protect trade, commerce and industry and to aid, stimulate and promote development of trade, commerce and industry and to watch over and protect general commercial interests of India or any part thereof was clearly object of Page 153 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT general public utility. This was despite fact that one of objects included in memorandum was taking of steps to urge or oppose legislation affecting trade, commerce or manufacture, which by itself, might be considered non-charitable. However, as it was merely incidental to dominant or primary object, it did not prevent Andhra Chamber of Commerce from being valid charity. Therefore, if primary purpose was advancement of object of general public utility, it would remain charitable, even if incidental entry into political domain for achieving that purpose, such as promotion of or opposition to legislation concerning that purpose, was contemplated. Applying that very test, Supreme Court held that Surat Art Silk Cloth Manufacturers Association was also valid charity. 17. true meaning of ten words "not involving carrying on of any activity for profit" was held to be, that when purpose of trust or institution is advancement of object of general public utility, it is that object of general public utility, and not its accomplishment or carrying out, which must not involve carrying on of any activity for profit. So long as purpose does not involve carrying on of any activity for profit, requirement of definition would be met and it is immaterial how monies for achieving or implementing such purpose are found, whether by carrying on activity for profit or not. decision of Supreme Court in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 was overruled. It was observed that decisions of Kerala High Court in CIT v. Cochin Chamber of Commerce and Industry [1973] 87 ITR 83 and Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corporation v. CIT [1975] 100 ITR 392 laid down correct interpretation. 18. Applying these principles, it is clear that dominant intention of assessed was to promote brick kiln trade. This purpose did not involve carrying on of any activity for profit, though its advancement might have. It is thus valid charity. For relevant years, however, it appears that even advancement of purpose did not involve carrying on of any activity for profit. assessed is clearly entitled to exemption under s. 11(1)(a) of Act. Page 154 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 140. Delhi High Court, in case of India Trade Promotion Organization vs. Director General of Income Tax (Exemptions) & Ors., Writ Petition (C) No.1872 of 2013,, decided on 22nd January, 2015, in context with Section 10(23C)(iv) of Act vis-a-vis Section 2(15) of Act, had observed as under; At this juncture, we may point out that we are in agreement with argument advanced by Mr Syali that proviso to Section 2(15) does not make any distinction between entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business on one hand and genuine charitable organizations on other. It must be remembered that we are construing expression "charitable purpose" not in vacuum, but in specific context of Section 10(23C)(iv) of said Act. As pointed out above, Section 10 deals with incomes not included in total income. And, Section 10(23C)(iv) specifically deals with income received by any person on behalf of, inter alia, institution established for charitable purposes. We have to, therefore, examine meaning of expression "charitable purposes" in context of Section 10(23C)(iv). Looking at said expression from this stand point, it becomes clear that it has reference to income. Because, it is only when such institution has income that question of not including that income in its total income would arise. Therefore, merely because institution, which otherwise is established for charitable purpose, receives income would not make it any less charitable institution. Whether that institution, which is established for charitable purposes, will get exemption under Section 10(23C)(iv) would have to be determined by prescribed authority having regard to objects of institution and its importance throughout India or throughout any State or States. There is no denying that having regard to objects of petitioner and its importance throughout India in field of advancement of promotion of trade and commerce, petitioner would be entitled to be regarded as institution which would qualify for that exemption. only thing that we have to examine is - whether petitioner had been Page 155 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT established for charitable purposes? fact that it derives income does not, in any way, detract from position that it is institution established for charitable purposes. Therefore, in our view, merely because petitioner derives rental income, income out of sale of tickets and sale of publications or income out of leasing out food and beverages outlets in exhibition grounds, does not, in any way, affect nature of petitioner as charitable institution if it otherwise qualifies for such character. We have already noted that prior to amendment being introduced with effect from 01.04.2009, petitioner had been recognized as institution established for charitable purpose and this had been done having regard to objects of institution and its importance throughout India. It is only because of this that petitioner had been granted exemption by respondent for period prior to assessment year 2009-10. Therefore, insofar as receiving of income is concerned, that cannot be taken as instance to deny petitioner its status as institution established for charitable purposes. Because, if that were to be so, then there would be no necessity to take recourse to Section 10(23C)(iv) for benefit of exemption. To put it plainly, if institution established for charitable purposes did not receive income at all, then what would be need for taking any benefit under Section 10(23C)(iv) of said Act. Therefore, if meaning is given to expression charitable purpose so as to suggest that in case institution, having objective of advancement of general public utility, derives income, it would be falling within exception carved out in first proviso to Section 2(15) of said Act, then there would be no institution whatsoever which would qualify for exemption under Section 10(23C)(iv) of said Act. And, said provision would be rendered redundant. This is so, because, if institution had no income, recourse to Section 10(23C)(iv) would not be necessary. And, if such institution had income, it would not, on interpretation sought to be given by revenue, be qualified for being considered as institution established for charitable purposes. So, either way, provisions of Section 10(23C)(iv) would not be available, either because it is not necessary or because it Page 156 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT is blocked. intention behind introducing proviso to Section 2(15) of said Act could certainly not have been to render provisions of Section 10(23C)(iv) redundant. With this in mind, it is to be seen as to what is meant by expressions "trade", "commerce" or "business". word "trade" was considered by Supreme Court in its decision in case of Khoday Distilleries Ltd and Others v. State of Karnataka and Others: 1995 (1) SCC 574, whereby Supreme Court held that "the primary meaning of word 'trade' is exchange of goods for goods or goods for money". Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi and Bros: 1964 (5) STC 644 (SC), Supreme Court held that word "business" was of indefinite import and in taxing statute, it is used in sense of occupation, or profession which occupies time, attention or labour of person, and is clearly associated with object of making profit". This court, in ICAI (I) (supra) held that, while construing term "business" as appearing in proviso to Section 2(15), object and purpose of Section has to be kept in mind. It was observed therein that very broad and extended definition of term "business" was not intended for purpose of interpreting and applying first proviso to Section 2(15) of Act so as to include any transaction for cess, fee or consideration. Court specifically held that:- activity would be considered 'business' if it is undertaken with profit motive, but in some cases, this may not be determinative. Normally, profit motive test should be satisfied, but in given case activity may be regarded as business even when profit motive cannot be established / proved. In such cases, there should be evidence and material to show that activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that activity undertaken is in fact in nature of business. 141. From aforesaid decisions, it is apparent that merely because Association puts up tickets of international Page 157 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT cricket matches for sale and earns some profit out of same, it would not lose its character of having been established for charitable purpose. It is also important to note that we must examine as to what is dominant activity of institution in question. If dominant activity of institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within categories of trade, commerce or business. It is clear from facts of present case that driving force is not desire to earn profit but object is to promote game of cricket and nurture best of talent. 142. Latin word utilis means useful, beneficial, equitable, available . Chambers Dictionary of English defines utility as useful: power to satisfy wants of people in general: useful thing, public utility: public service or Association providing such public service. According to New Oxford Dictionary of English (1998), as Noun, utility is status of being useful, profitable or beneficial. 143. Corpus Juris Secundum Volume 73 page 990 elucidates following legal position. public utility has been described as business organization which regularly supplies public with some commodity or service, such as electricity, gas, water, transportation or telephone or telegraph service. While term has not been exactly defined, and, as has been said, it would be difficult to construct definition that would fit every conceivable case, distinguishing characteristic of public utility is devotion of private property by owner or person in control thereof to such use that public generally, or that part of public which has been served and has accepted service, has right to demand that use or service, s Page 158 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT long as it is continued shall be conducted with reasonable efficiency and under proper charges. term is sometimes used in extended sense to include great many matters of general welfare to State and its communities. 144. words public utility or general public utility are not capable of precise meaning. question whether service is public utility or not has to be discharged in context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon context in which it is used in statute or Rules. Indeed, in some decisions, public utility is considered very similar to one for public purpose (Hunter v A.G. 1909 AC 323, Babu Bankya Thakur v State of Bombay AIR 1960 SC 1203 and Jhandu Lal v State of Punjab AIR 1961 SC 343). 145. In cases arising under Income Tax Act, 1922 as well as 1961 Act, it is held that expression object of general public utility must be construed by applying standard of customary law and common knowledge amongst community to which parties interested belong. This test, applied in Trustees of Tribune, seems to have influenced judicial thinking in subsequent decisions as well. object of general public utility would include all objects which promote welfare of general public even it includes taking up steps effecting trade, commerce or manufacture if primary purpose is for advancement of objects of general public utility [Andhra Chamber of Commerce(supra)], even if in insignificant manner person makes some profit in carrying out objects [Surat Art Silk (supra)]. In other words, any activity for benefit of Page 159 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT public or section of public, as distinguished from benefit to individual or group of individuals, would be charitable purpose as object is for advancement of general public utility. expression includes all objects to promote welfare of public, and when object is to promote or protect interest of particular trade or industry that object becomes object of public utility and would be charitable purpose (Gujarat Maritime Board (2007) 295 ITR 561 (SC) [see Commissioner of Income Tax vs. Agricultural Market Committee, (2011) 336 ITR 641 (AP)] 146. In our opinion, this could be termed as charitable purpose which has as its motive advancement of object of general public utility to which exception carved out in first proviso to Section 2(15) of Act would not apply. 147. We may refer to and rely upon decision of this Court in case of Director of Income Tax (Exemption) vs. Sabarmati Ashram Gaushala Trust, reported in (2014) 44 taxmann.com 141 (Gujarat), wherein this Court was called upon to consider whether activities of respondent assessee-Sabarmati Ashram Gaushala Trust could be termed as charitable having regard to object with which trust was constituted. We may quote relevant observations; What thus emerges from statutory provisions, as explained in speech of Finance Minister and CBDT Circular, is that activity of trust would be excluded from term charitable purpose if it is engaged in any activity in nature of trade, commerce or business or renders any service in relation to trade, commerce or business for cess, fee and/or any other consideration. It is not aimed at excluding genuine charitable trusts of general Page 160 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT public utility but is aimed at excluding activities in nature of trade, commerce or business which are masked as charitable purpose . Many activities of genuine charitable purposes which are not in nature of trade, commerce or business may still generate marketable products. After setting off of cost, for production of such marketable products from sale consideration, activity may leave surplus. law does not expect Trust to dispose of its produce at any consideration less than market value. If there is any surplus generated at end of year, that by itself would not be sole consideration for judging whether any activity is trade, commerce or business particularly if generating surplus is wholly incidental to principal activities of trust; which is otherwise for general public utility, and therefore, of charitable nature. We are wholly in agreement with view of Tribunal. objects of Trust clearly establish that same was for general public utility and where for charitable purposes. main objectives of trust are to breed cattle and endeavour to improve quality of cows and oxen in view of need of good oxen as India is prominent agricultural country; to produce and sale cow milk; to hold and cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize objects of trust as also to open schools and hostels for imparting eduction in cow keeping and agriculture having regard to trust objects. All these were objects of general public utility and would squarely fall under section 2 (15) of Act. Profit Page 161 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT making was neither aim nor object of Trust. It was not principal activity. Merely because while carrying out activities for purpose of achieving objects of Trust, certain incidental surpluses were generated, would not render activity in nature of trade, commerce or business. As clarified by CBDT in its Circular No. 11/2008 dated 19 th December 2008 proviso aims to attract those activities which are truly in nature of trade, commerce or business but are carried out under guise of activities in nature of public utility . 148. Carrying on 'activity in nature of trade, commerce, or business' or rendering of any service in relation to trade etc. is sine qua non for taking away character of charitable purpose. activity in nature of trade, commerce or business is always carried on with prior object of earning income. What is relevant is intention of person before undertaking such activity. line of distinction needs to be drawn between activities undertaken by society, otherwise satisfying prescription .of section 2(15) 'prior to insertion of proviso, which are aimed at earning income divorced from objects for which it is charitable por una parte and activities which are aimed at attainment of objects for which It was set up por otra parte. Whereas former fall within mandate of proviso to section 2(15), latter do not. obvious reason is that latter activities are in furtherance of charitable objects of such society and income, if any, resulting from such activities and does not convert otherwise charitable activity [within definition of section 2(15)] into carrying on of business, trade or commerce. It can be understood with help of simple illustration. Supposing association set up for promotion of particular trade, has its own premises from which it carries out activities for promotion of such trade. If Page 162 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT association lets out its premises from time to time for enhancing its income, which letting out has no relation with objects for which it was set up as charitable institution, namely, promotion of that particular trade, resultant activity will amount to carrying on trade, commerce or business so as to fall within proviso to section 2(15). 0n other hand, if it uses its premises for undertaking activities for which it was set up and is charitable institution, and while doing so, there results some income, such income will not amount to carrying on any trade, commerce or business. crux of matter is to understand object of carrying on activity which resulted into income. If object is to simply earn income de hors promotion of objects for which it was set up, it will fall within ambit of proviso to section 2(15) and if object of activity is to promote objects for which it was set up, then it will not be caught within sweep of proviso notwithstanding fact that there results some income from carrying out such activity. core of matter is to see whether activity which resulted into some income or loss was carried on with object of doing some trade, commerce or business, etc., or it was in furtherance of objects (non-business) etc., for which assessee was set up. In other words, predominant object of activities should be seen as to whether it is aimed at carrying on some business, trade or commerce or furtherance of object for which it was set up. If it falls in first category, then, case would be covered within proviso to section 2(15) and, in otherwise scenario, assessee will be construed to have carried on its activities of general public utility. (see Society of Indian Automobile Manufactures vs. ITO, Delhi) Page 163 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 149. Delhi High Court in 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 writ petition, that holding interviews for fees for purpose of campus placements of its students does not amount to carrying on business so as to deny exemption u/s 11 of Act. It further observed that if object or purpose of institution is charitable, fact that institution collects certain charges does not alter character of institution. Delhi High Court further observed in para 67 that purport of first proviso to section 2(15) of Act is not to exclude entities which are essentially for charitable purpose, but are conducting some activities for consideration or fee. object of introducing first proviso is to exclude organizations which are carrying on regular business from scope of "charitable purpose'". High Court also noticed purpose of introducing proviso to section 2(15) of Act from Budget Speech of Finance Minister while introducing Finance Bill 2008 and reproduced relevant extract to Speech as under:' " .....Charitable purpose" includes relief of poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "charitable purpose". Obviously, this was not intention of Parliament and, hence, I propose to amend law to exclude aforesaid cases. Genuine charitable organizations will not in any way be affected. expressions "business", "trade or commerce" as Page 164 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT used in first proviso must, thus, be interpreted restrictively and where dominant object of organization is charitable any incidental activity for furtherance of object would not fall within expressions " business". "trade" or "commerce". Question with regard to Section 11(1)(d) of Act: 150. So far as question with regard to Section 11(1)(d) of Act is concerned, we may only say that charitable institution is entitled to exemption under Section 11 of Income Tax Act. Such exemption is subject to conditions prescribed therein. reading of Section 11 shows that subject to provisions of Sections 62 and 63 of Act, income enumerated therein shall not be included in total income of previous year of person in receipt of income. One of source of income that is enumerated in clause (d) of sub-section (1) of Section 11 is income in form of voluntary contributions made with specific direction that they shall form part of corpus of trust or institution. fact that donors had instructed that interest earned shall be added to corpus of trust is not in dispute. If that be so, interest earned on contributions already made by donors would also partake character of income in form of voluntary contributions made with specific direction that they shall form part of corpus of trust. If that be so, conclusion is irresistible that Tribunal has rightly held that interest earned would qualify for exemption under Section 11(1)(d) of Act. 151. In aforesaid context, findings of Tribunal are as under; 55. On perusal of BCCI Infrastructure Subsidy Page 165 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT rules, we find that what is given to assessee as infrastructure subsidy is reimbursement of 50% of costs in respect of certain expenditure on infrastructure which is inherently in capital field. mere fact that it is not reimbursement to outside party, such as district cricket association, does not really matter. As long as subsidy is relatable to capital asset created by assessee on his own or by eligible district cricket association, as present subsidy undisputedly is, it is outside ambit of revenue receipt and taxable income. very foundation of stand of Assessing Officer is thus devoid of legally sustainable merits. As such, there can hardly be occasion, in principle, to hold such subsidy as revenue receipt or taxable income. There is not even whisper of discussion by Assessing officer to effect that infrastructure subsidy is revenue in nature. As matter of fact, claim is made for subsidy only after expenditure having been incurred. authorities below have simply brushed aside case and submissions of assessee and proceeded to hold it as income. Looking to nature of subsidy, which is clearly relatable to capital assets generated, we are unable to hold this receipt in revenue field. We, therefore, uphold plea of assessee on this point as well and delete addition of Rs 2,13,34,033/-. 152. Gujarat Cricket Association received corpus donation of Rs.20,69,60,338/- from BCCI. Assessing Officer held that it is not corpus donation and added same to income. Before C.I.T (Appeals), Association drew attention to letter addressed to Officer dated 28 th December, 2011 where two specific letters from BCCI dated 12th October, .2001 and 13th October, 2001 respectively addressed to Secretary of Gujarat Cricket Association were produced. letter dated 12th October, 2001 from BCCI draws attention to decision in Annual General Meeting, and resolution incorporating said decision as follows Page 166 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 5. Chairman suggested that as already decided in working Committee henceforth TV subsidies should be sent towards 'Corpus Fund' and this decision can also be approved by members of this meeting. Thereafter members unanimously approved that henceforth TV subsidies should be sent by Board to Member Associations towards Corpus Fund instead of subsidy fund. 153. C.I.T.(Appeals), in his order, in para-18 noted that above donation of Rs.1,38,36,800/- was treated as Corpus donation in A.Y. 2002-03. . aforesaid resolution mentioned in letter of BCCI dated 12th October, 2001, which used word henceforth , which means in future also, was not considered good enough by him as specific direction as required by section 11(1)(d) and only on that reasoning, he held that It Is not corpus donation. Department did not file appeal against said decision but Association did file appeal to Tribunal against finding of absence of specific direction in every year. Tribunal, on page 242, para-49 reproduced from their order in A.Ys. 2004-05 to 2007-08 pointing out that similar amounts received in earlier years had been treated all along as corpus donation . Earlier Year means A.Ys. 2002- 03 and 2003-04. On page 245, Tribunal reproduced para- 15 of their order for A.Ys. 2004-05 to 2007-08 as follows: "15. We find that, at pages 46 and 47 of paperbook, assessee has filed specific confirmations to effect that these amounts were corpus donations. We have also perused BCCI resolution no 5 dated 29th September 2001 which specifically states that TV subsidies should henceforth be sent to Member Associations towards corpus funds". There is no dispute that TV subsidy in question is sent under this resolution. On these facts, and In light of provisions of Section 11(1)(d) which only require income to be by way of Page 167 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT voluntary contributions made with specific direction that they shall form part of corpus of trust or institution , we are of considered view that any payments made by BCCI, without legal obligation and with specific direction that it shall be for corpus fund as admittedly present receipt is, is required to be treated as corpus donation not includible in total income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by separate written document. contribution has to be voluntary and it has to be with specific direction that it will form corpus of trust . These conditions are clearly satisfied. Any payment which assessee is not under obligation to make, whatever be mode of its computation, is voluntary payment, and, any payment which is with specific direction that it for corpus fund is corpus donation. In our considered view, even without two specific confirmations filed by assessee, in light of BCCI resolution under which payment is made and in light of payment not being under any legal obligation, conditions under section 11(1)(d) are satisfied. We, therefore, uphold plea of assessee. Assessing Officer is accordingly directed to delete this addition of Rs.1,58,00,000. 154. In course of hearing of these tax appeals, learned counsel appearing for respective assessee also submitted that promotion of sports and games would fall within ambit of term education so as to fall in first limb of definition of term charitable purpose. In this regard, our attention was drawn to Circular No.395 dated 24th September, 1984 issued by Central Government in its Finance Department. circular reads thus; CIRCULAR:NO.395 [F.NO.181(5)82/IT(A-I)-SECTION 2(15) OF INCOME-TAX ACT, 1961-CHARITABLE PURPOSE-WHETHER PROMOTION OF SPORTS AND GAMES CAN BE CONSIDERED TO BE CHARITABLE Page 168 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT PURPOSE. SECTION 2(15) OF INCOME-TAX ACT, 1961- CHARITABLE PURPOSE-WHETHER PROMOTION OF SPORTS AND GAMES CAN BE CONSIDERED TO BE CHARITABLE PURPOSE Circular: No.395 [F.NO.181(5) 82/IT(A-I), DATED 24.9.1984. 1. expression charitable purpose is defined in section 2(15) to include relief of poor, education, medical relief and advancement of any other object of general public utility. 2. question whether promotion of sports and games can be considered as being charitable purpose has been examined. Board are advised that advancement of any object beneficial to public or section of public as distinguished from individual or group of individuals, would be object of general public utility. In view thereof, promotion of sports and games is considered to be charitable purpose within meaning of section 2(15). Therefore, association or institution engaged in promotion of sports and games can claim exemption under section 11 of 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 promotion, control, regulation and, encouragement of specified sports and games. 155. Mr. Bhatt raised strong objection as regards aforesaid issue. According to Mr. Bhatt, although submission in this regard was canvassed before ITAT, ITAT thought fit not to touch said issue for reason assigned in para-41 of impugned judgment. Para-41 reads thus; We have noted that all learned representatives have advanced detailed arguments on proposition that since assessee cricket associations are engaged in educational activities, it is not really material whether or not assessee has engaged itself in activities in Page 169 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT nature of trade, commerce or business. However, in light of our categorical finding that assessee cricket associations were not really engaged in activities in nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave question open for adjudication in flt case. 156.. In such circumstances, referred to above, Mr. Bhatt, learned senior counsel, submitted that this Court may not go into issue whether activities of Association could be termed as imparting education in sports. In other words, imparting training in sports whether could be termed as educational activity falling within ambit of Section 2(15) of Act. In this regard, submission canvassed on behalf of assessees is that imparting training in sports is nothing but education activity and, therefore, assessees would fall in first limb of definition of charitable purpose as defined under Section 2(15) of Act and not under residual clause of advancement of any other object of general public utility . argument canvassed on behalf of assessee is that if that be situation, Proviso to Section 2(15) would not apply at all. At this stage, we deem it appropriate to quote Section 260A(6) of Act, 1961 which reads thus; High Court may determine any issue which- (a) has not been determined by Appellate Tribunal, or (b) has been wrongly determined by Appellate Tribunal, by reason of decision on such question of law as is referred to in sub-section(1). 157. plain reading of aforesaid provision indicates that High Court may determine any issue which has not been Page 170 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT determined by Appellate Tribunal. 158. It is not in dispute that in none of tax appeals, any substantial question of law as regards whether training in sports (game of cricket) would fall within ambit of term education so as to fall in first limb of definition of term charitable purpose as defined under Section 2(15) of Act. In absence of any substantial question of law being formulated in this regard, whether we should go into this question and express any opinion of our own is something we should look into closely. 159. Clause (a) of sub-section (6) to Section 260A of Act states that High Court may decide issue, which is not determined by Appellate Tribunal. word determined means that issue is not dealt with, though it was raised before Tribunal. word determined presupposes issue was raised or argued but there is failure of Tribunal to decide or adjudicate same. In given case, substantial question of law may arise because of facts and findings recorded by Tribunal, but said issue/question is not determined. In such cases, appeal under Section 260A of Act can be entertained. This would depend upon facts of each case and reasoning and findings recorded by Tribunal. 160. In aforesaid context, we may refer to decision of Supreme Court in case of M. Janardhana Rao vs. Joint Commissioner of Income Tax, 2005 (273) ITR 50, wherein Supreme Court has observed as under; Under Section 260A(2)(c) appeal under Section 260A Page 171 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT shall be (a) in form of memorandum of appeal and (b) precisely stating therein substantial question of law involved. Under Section 260A(3) when High Court is satisfied that substantial question of law is involved in any case it shall formulate that question and under section 260A(4) appeal is to be heard only on question formulated under preceding sub- section. It has to be noted that in terms of Section 260A(4) respondent in appeal is allowed to argue at time of hearing of appeal that case does not involve substantial question of law as formulated. However, proviso to Section 260A(4) specifically lays down that nothing in Section 260A(4) shall be deemed to take away power of High Court to hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it, in case it is satisfied that case involves such question. Section 260A(5) provides that High Court to decide question of law as formulated and to deliver judgment thereon containing grounds on which such decision is founded. Sub-section (6) empowers High Court to determine any such issue which has not been determined by Appellate Tribunal or has been wrongly determined by Appellate Tribunal by reasons of decision of such question of law as is referred to in sub-section (1) It is important to note that appeal to High Court lies only when substantial question of law is involved. It is essential for High Court to first formulate question of law and thereafter proceed in matter. Without insisting on statement of substantial question of law in memorandum of appeal and formulating same at time of admission, High Court is not empowered to generally decide appeal under Section 260A without adhering to procedure prescribed under Section 260A. Further, High Court must make every effort to distinguish between question of law and substantial question of law. In exercise of powers under Section 260A, findings of fact of Tribunal cannot be disturbed. It has to be kept in mind that right of appeal is neither natural nor inherent right attached to litigation. Being substantive statutory right, it has to be regulated in accordance with law in force at relevant time. conditions mentioned in Section 260A must be strictly fulfilled before appeal can be Page 172 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT maintained under Section 260A. Such appeal cannot be decided on merely equitable grounds. appeal under Section 260A can be only in respect of `substantial question of law'. expression `substantial question of law' has not been defined anywhere in statute. But it has acquired definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd., AIR (1962) SC 1314, this court laid down following tests to determine whether substantial question of law is involved. tests are: (1) whether directly or indirectly it affects substantial rights of parties, or (2) question is of general public importance, or (3) whether it is open question in sense that issue is not settled by pronouncement of this Court or Privy Council or by Federal Court, or (4) issue is not free from difficulty, and (5) it calls for discussion for alternative view. There is no scope for interference by High Court with finding recorded when such finding could be treated to be finding of fact. On reading of impugned judgment of High Court it is clear that no substantial question of law was formulated at time of admission of appeal. Obviously, High Court has formulated questions subsequently after conclusion of arguments for purpose of adjudication. That is clearly against scheme of Section 260A. Additionally , grievance that certain points which were urged have not been dealt with by High Court appears to be correct. 161. aforesaid decision of Supreme Court has been exhaustively discussed by Division Bench of Gauhati High Court in case of Meghalaya Steels Ltd. & Ors. vs. Commissioner of Income Tax, 2013 (358) ITR 551, wherein following has been observed; It follows, therefore, that satisfaction of High Court that appeal involves substantial question of law is sine qua non for appeal to be admitted for hearing. This position of law will not remain in doubt, when we proceed to minutely examine provisions embodied in section 260A. Page 173 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Sub-section (2) of section 260A permits Chief Commissioner or Commissioner as well as assessee, who may feel aggrieved by order passed by appellate Tribunal, to appeal to High Court provided that appeal is filed within one hundred and twenty days from date on which order, appealed against, is received by assessee or Chief Commissioner or Commissioner, as case may be. This apart, as indicated above, appeal has to be in form of memorandum of appeal precisely stating therein substantial question or questions of law involved. Thus, apart from period of limitation within which appeal has to be preferred and form in which appeal has to be preferred, section 260A necessitates that memorandum of appeal clearly states substantial question or questions of law, which, according to appellant, is, or are, involved in appeal. Sub-section (3) of section 260A shows that when appeal is filed, as prescribed by sub-section (2), stating substantial question or questions of law involved, this would not, automatically, make appeal admissible in law inasmuch as sub-sections (1) and (3) of section 260A make it clear that if appeal, preferred under section 260A, does not state substantial question or questions of law involved, then, appeal may not be admitted by High Court. Coupled with above, sub-section (3) of section 260A lays down that where High Court is satisfied that substantial question of law is involved in appeal, it shall formulate that question. Conversely speaking, if High Court finds, on examination of memorandum of appeal, that appeal does not give rise to substantial question of law, High Court is duty bound to dismiss appeal in limine. If, however, High Court takes view that appeal has given rise to substantial question or questions of law, then, High Court is under legal obligation to formulate substantial question or questions of law, which, according to High Court, appeal has raised, and, then, High Court shall hear appeal on question or questions so formulated. When appeal is heard, in light of sub-section (4) of section 260A on substantial question or questions of law, which court has formulated in appeal, Page 174 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT respondents shall be allowed to argue, at time of hearing of appeal, that no such substantial question or questions of law, as formulated by High Court, has or have arisen for being answered in appeal. What further follows from close reading, as whole, of section 260A is that if High Court decides to give notice to respondent, in appeal, before formulating substantial question or questions of law, respondent, in appeal, shall have right to satisfy High Court that substantial question or questions of law, as contended by appellant, is, or are, not really involved; or else, there would be no meaning and purpose in giving notice to respondent, in appeal, before appeal is admitted by formulating substantial question or questions of law on which, in view of High Court, appeal needs to be heard. In other words, if respondent, in appeal, made under section 260A, is given notice before admission of appeal, it necessarily follows that respondent has been given opportunity by High Court to satisfy High Court that no substantial question or questions of law, as contended by appellant, has or have arisen for determination and it would be thereafter that High Court would take decision whether appeal has or has not given rise to any substantial question of law and if High Court finds that substantial question or questions of law has or have arisen, it shall admit appeal by formulating, for hearing, such substantial question or questions of law, which, according to High Court, appeal has given rise to for adjudication and, then, answer question or questions, so formulated, by according opportunity of hearing to parties concerned on substantial question or questions of law, which High Court may have formulated. Logically extended, what above scheme of hearing of appeal conveys is that if High Court, without admitting appeal, chooses to issue, in given appeal, notice to respondent, in appeal, to have latter's say in matter, parties to appeal would have right to address court. Necessarily, therefore, at stage of admission, in such situation, while appellant can address court to show as to Page 175 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT how substantial question of law or more than one substantial question of law can be said to have arisen, for determination, in appeal, respondent would have equally good right to try to satisfy court on merit that substantial question or questions of law, which appellant contends to have arisen, has or have not arisen. If, thereafter, High Court is satisfied that substantial question or questions of law is, or are, indeed, involved, notwithstanding submissions made to contrary by respondent, then, High Court has to formulate substantial question or questions of law on which, according to High Court, appeal needs to be heard and it is only on substantial question or questions of law, so formulated, that hearing of appeal would take place and, on this hearing, both parties to appeal would have right to place their arguments. Obviously, while appellant would try to show, at time of hearing of appeal, on its admission, that substantial question or questions of law has or have arisen for determination and needs or need to be decided, respondent would resist that substantial question of law (as suggested by appellant and/or formulated by High Court), does not really arise. In short, hearing of appeal, under section 260A, can, in given case, be in two different stages once, before admission of appeal, and, once again, after admission of appeal. We may, however, hasten to add that there is no impediment, on part of High Court, to admit appeal without giving notice to respondent; but if High Court decides to give notice before admitting appeal and if it decides to hear respondent on admission of appeal, High Court cannot straight away allow appeal on basis of substantial question or questions of law, which appellant may have formulated inasmuch as section 260A provides that if High Court finds that appeal needs to be heard, High Court is legally bound to formulate substantial question or questions of law, which, according to High Court, has or have arisen for determination. Put shortly, appeal, under section 260A, can be heard subsequent to formulation of substantial question of questions of law, which, according to High Court, has or have arisen for determination. Page 176 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT We may hastily add that proviso to sub-section (4) of section 260A empowers High Court to formulate any other substantial question of law if it is satisfied that case involves such question, though appellant may not have raised such substantial question of law. Sub-section (5) of section 260A makes it crystal clear that appeal can be decided only on substantial question of law, which has been formulated by High Court, and not on basis of substantial question or questions of law, which appellant may have mentioned in memorandum of appeal, and High Court has to deliver judgment not on substantial question or questions of law which appellant may have framed, but only on that substantial question of law or those substantial questions of law, which High Court has already formulated. It clearly follows, therefore, that no appeal can be heard, as already pointed out above, until time High Court is satisfied that appeal involves substantial question of law for determination and no appeal can be heard until time substantial question of law or questions of law, as case may be, has or have been formulated by High Court for purpose of hearing of appeal. Incidentally, one may also point out that High Court, under section 260A(6), has power to determine issue, which has not been determined by appellate Tribunal or has been wrongly determined by appellate Tribunal. Sub-section (7) makes it further clear that provisions, relating to second appeal, as embodied in section 100, CPC, shall, as far as may be, applied to appeals under section 260A. Supreme Court has pointed out, at para 11, in M. Janardana Rao v. Joint Commissioner of Income- tax, (2005) 2 SCC 324, which Mr. Bhattacharjee, learned senior counsel, has relied upon, that under section 260A(c), appeal, under section 260A, shall be (a) in form of memorandum of appeal, and (b) memorandum of appeal must precisely state substantial question or questions of law involved and section 260A(3) lays down that when High Court is satisfied that substantial question of law is involved, in given appeal, it shall formulate that question and Page 177 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT appeal, in terms of provisions of section 260A(4), has to be heard only on question formulated by High Court and that in terms of section 260A(4), respondent, in appeal, has to be allowed to argue, at time of hearing of appeal, (wherein substantial question or questions of law-stands or stand already formulated by High Court), that appeal does not involve substantial question or questions of law as has been, or have been, formulated by High Court. In M. Janardana Rao (supra), Supreme Court has also clarified, at para 11, that proviso to section 260A(4) lays down that nothing in section 260A(4) shall be deemed to take away power of High Court to hear, for reasons to be recorded, appeal on any substantial question or questions of law not formulated by it provided that High Court is satisfied that case involves such question. In no uncertain words, Supreme Court has held, at para 11, in M. Janardana Rao (supra), that High Court cannot, but decide substantial question of law, as formulated by it under section 260A, and deliver judgment thereon containing grounds on which its decision is founded. observations, appearing at para 11, in M. Janardana Rao (supra), read as under: 11. Various essentials as culled out from relevant provisions of Act are as follows: Under section 260A(2)(c) appeal under section 260A shall be (a) in form of memorandum of appeal, and (b) precisely stating therein substantial question of law involved. Under section 260A(3) when High Court is satisfied that substantial question of law is involved in any case, it shall formulate that question and under section 260A(4) appeal is to be heard only on question formulated under preceding sub-section. It has to be noted that in terms of section 260A(4) respondent in appeal is allowed to argue at time of hearing of appeal that case does not involve substantial question of law as formulated. However, proviso to section 260A(4) specifically lays down that nothing in section 260A(4) shall be deemed to take away power of High Court to hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it, in case it is satisfied that case involves such question. Section 260A(5) provides Page 178 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT that High Court is to decide question of law as formulated and to deliver judgment thereon containing grounds on which such decision is founded. (Emphasis is added) Leaving none in doubt, Supreme Court, in M. Janardana Rao (supra), has laid down scope of section 260A by observing, in clear terms, that it is essential for High Court to, first, formulate substantial question of law and, thereafter, proceed in matter. In other words, clarifying scope of section 260A, Supreme Court, in M. Janardana Iiao v. Joint Commissioner of Income-tax, (2005) 2 SCC 324, has pointed out, at para 13, thus: 13. It is important to note that appeal to High Court lies only when substantial question of law is involved. It is essential for High Court to first formulate question of law and thereafter proceed in matter. (emphasis is added) Supreme Court has pointed out, in M. Janardana Iiao (supra), that conditions, mentioned in section 260A, must be strictly fulfilled before appeal can be maintained under section 260A meaning thereby that if appellant is unable to show that substantial question of law has arisen for determination, there is no impediment, on part of High Court, to dismiss appeal without even admitting appeal. Logically extended, it would mean that if respondent has been given notice before High Court decides to admit appeal, it would remain open to respondent to show that no substantial question of law has arisen and in order to show that no substantial question of law has arisen, it would be, ordinarily, necessary for respondent to make his submission on merit if respondent seeks to satisfy High Court that no substantial question of law for determination has arisen in appeal. relevant observations, appearing in this regard, in M. Janardana Iiao (supra), read as under: 14. Without insisting on statement of substantial question of law in memorandum of appeal and formulating same at time of admission, High Court is not empowered to generally decide appeal Page 179 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT under section 260A without adhering to procedure prescribed under section 260A. Further, High Court must make every effort to distinguish between question of law and substantial question of law. In exercise of powers under section 260A, findings of fact of Tribunal cannot be disturbed. It has to be kept in mind that right of appeal is neither natural nor inherent right attached to litigation. Being substantive statutory right, it has to be regulated in accordance with law in force at relevant time. conditions mentioned in section 260A must be strictly fulfilled before appeal can be maintained under section 260A. Such appeal cannot be decided on merely equitable grounds. (emphasis is added) three Judge Bench, in M. Janardana Rao (supra), culled out test to determine as to what question can be treated as substantial question of law. Having referred, in this regard, to case of Sir Chunilal V. Mehta and Sons Ltd. v. Century Spg. and Mfg. Co. Ltd., (AIR 1962 SC 1314), Supreme Court has hold, at para 15, in M. Janardana Rao (supra), as under: 15. appeal under section 260 can only be in respect of substantial question of law . expression substantial question oflaw has not been defined anywhere in statute. But it has acquired definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta and Sons Ltd. v. Century Spg. and Mfg. Co. Ltd., this court laid down following tests to determine whether substantial question of law is involved. tests are: (1) whether directly or indirectly it affects substantial rights of parties, or (2) question is of general public importance, or (3) whether it is open question in sense that issue is not settled by pronouncement of this court or Privy Council or by Federal Court, or (4) issue is not free from difficulty, and (5) it calls for discussion for alternative view. There is no scope for interference by High Court with finding recorded when such finding could be treated to be finding of fact. (emphasis is added) In M. Janardana Rao (supra), having found that High Court had not formulated any substantial question of law at time of admission of appeal, but formulated, Page 180 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT for purpose of adjudication of appeal, question subsequent to conclusion of arguments, Supreme Court took view that procedure, so adopted, is clearly against scheme of section 260A. In face of facts, as indicated above, Supreme Court, in M. Janardana Rao, (supra) interfered with order, which had been passed, in appeal, by High Court. In case at hand, too, if this court finds, in light of clearly laid down position of law, in M. Janardana Rao (supra), that this court formulated substantial question or questions of law for adjudication subsequent to admission of appeal, as is contended by respondent-opposite party, then, such breach by High Court would make its judgment and order open to review if power of review is, otherwise, found to be available to High Court in case of present nature. relevant observations, appearing at para 1.6, in M. Janardana Rao (supra), read as under: 16. On reading of impugned judgment of High Court it is clear that no substantial question of law was formulated at time of admission of appeal. Obviously, High Court has formulated questions subsequently after conclusion of arguments for purpose of adjudication. That is clearly against scheme of section 260A. Additionally, grievance that certain points which were urged have not been dealt with by High Court appears to be correct. (emphasis is added) Relying heavily on case of Kanan (dead) by Lrs. v. V.S Pandurangam (dead) by Lrs., (2007) 15 SCC 157, Mr. Pathak, learned Additional Solicitor General, has submitted that mere omission to frame substantial question of law before hearing of appeal cannot be reason for interfering with impugned, judgement and order, dated 16.9.2010, unless prejudice is shown to have been caused. In Kanan (Dead) (supra), Supreme Court has held that when parties, in appeal, go to appeal knowing fully well issue, order, which is finally passed in second appeal, cannot be interfered with unless prejudice is shown to have been caused as result of omission to frame substantial question of law. Page 181 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT While considering case of Kanan (supra), it may be noted that, while decision, in Kanan (supra), has been rendered by two-Judge Bench of Supreme Court, decision, in M. Janardana Rao v. Joint Commissioner of Income-tax, (2005) 2 SCC 324, has been rendered by three-Judge Bench of Supreme Court. In M. Janardana Rao (supra), Supreme Court has emphasized, at para 13, that it is essential for High Court to, first, formulate question of law and, thereafter, proceed with matter and, at para 14, Supreme Court has held, in M. Janardana Rao (supra), that conditions, mentioned in section 260A, must be strictly fulfilled and that such appeal cannot be decided merely on equitable grounds. In fact, in M. Janardana Rao (supra), Supreme Court interfered with order, made in appeal under section 260A, on ground that no substantial question of law had been framed at time of admission of appeal and that High Court had formulated, for purpose of adjudication, questions subsequent to conclusion of arguments, which procedure is against scheme, which section 260A propounds. In face of decision, in M. Janardana Rao (supra), there can be no escape from conclusion that disposal of appeal without formulating substantial questions of law and without hearing parties, on such substantial questions of law, is illegal even if High Court formulates question, for purpose of adjudication, subsequent to conclusion of arguments. question, therefore, of prejudice having been caused or not does not arise. This apart, in case at hand, it is grievance of review petitioners that as substantial questions of law had not been formulated for purpose of hearing of appeal, review petitioners could not make their submissions on merit of substantial questions of law, which High Court has, subsequent to admission hearing, ultimately, decided inasmuch as one of issues in appeal has been decided against review petitioners without according them opportunity to have their say after making it clear to them that substantial questions of law, which memorandum of appeal had mentioned, were substantial questions of law, which, even according to High Court, had arisen for determination Page 182 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT and these were questions, which would be finally taken up for adjudication by court. Coupled with above, decisions, which have been referred to in Kanan (dead) by Lrs. v. VS. Pandurangam (dead) by Lrs., (2007) 15 SCC 157, are not on substantial questions of law, but on question of issues. It is trite that even if issue was not framed, it would not disable court from refusing to interfere with decree if parties were, otherwise, well aware of issues and if omission to frame issues has not caused any prejudice to either of parties. In face of fact that no substantial question of law was formulated by High Court before appeal was heard for purpose of disposal and this court had not made it clear to parties, in appeal, that appeal would be disposed of on hearing parties concerned at admission stage itself, it logically follows that decision, rendered in appeal, was contrary to, and in violation of, mandatory requirements as regards procedure to be followed in appeal under section 260A. Consequently, impugned judgment and order, dated 16.9.2010, cannot survive. 162. In view of aforesaid discussion, we are not going into question whether assessees could be said to be engaged in imparting education in form of promoting game of cricket. 163. We sum up our final conclusions as under; (i) In carrying on charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if assessee existed for profit. word profit means that owners of entity have right to withdraw surplus for any purpose including personal purpose. (ii) It is not in dispute that three Associations have not Page 183 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT distributed any profits outside organization. profits, if any, are ploughed back into very activities of promotion and development of sport of cricket and, therefore, assessees cannot be termed to be carrying out commercial activities in nature of trade, commerce or business. (iii) It is not correct to say that as assessees received share of income from BCCI, their activities could be said to be activities of BCCI. Undoubtedly, activities of BCCI are commercial in nature. activities of BCCI is in form of exhibition of sports and earn profit out of it. However, if Associations host any international match once in year or two at behest of BCCI, then income of Associations from sale of tickets etc., in such circumstances, would not portray character of commercial nature. (iv) State Cricket Associations and BCCI are distinct taxable units and must be treated as such. It would not be correct to say that member body can be held liable for taxation on account of activities of apex body. (v) Irrespective of nature of activities of BCCI (commercial or charitable), what is pertinent for purpose of determining nature of activities of assessees, is object and activities of assessees and not that of BCCI. nature of activities of assessee cannot take its colour from nature of activities of donor. Discussion of case law: 164. We shall now proceed to deal with decisions, upon which, strong reliance has been placed on behalf of Page 184 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Revenue. 165. In case of Truck Operators Association (supra), assessee Truck Operators Association had filed application in Form No.10A for registration of Society under Section 12AA of Act along with certificate of registration granted by Registrar of Societies and copy of Memorandum and By-Laws of Society. Commissioner rejected application holding that Association was not formed for advancement of object of general public utility within meaning of Section 2(15) of Act. Tribunal allowed assessee's appeal and directed Commissioner to grant registration under Section12AA to assessee- Society. Revenue went in appeal before High Court of Punjab & Haryana. High Court thought fit to allow appeal, observing as under; 9. On examination of objects and purpose of Association in present case, it emerges that respondent-Association is union of Truck Operators constituted for facilitating its members to carry on trade of transportation and not to allow outsider or non-member to undertake any business activity within precincts of Hansi Town/village. Association charges fees from its members before transportation on basis of distance involved. membership and payment of fees are mandatory and element of voluntary contribution is missing. association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. welfare activities adopted for truck drivers, cleaners and mechanics of truck owners are in nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility. 17. assessee was union of transport operators registered as Trade Union under Indian Trade Page 185 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Unions Act, 1926. On analysis of objects of union for which it was constituted, it was discerned that surplus funds of trade union could be distributed among members at time of its dissolution. In other words, it was held that rules and regulations do not impose legal obligation on assessee or its members to hold income of assessee only for charitable purposes and element of private gain could not be excluded. union was, thus, held not to be Charitable Institution. 166. Thus, on facts of that case, High Court took view that assessee was not carrying on activities for charitable purposes and, therefore, was not entitled to benefit of registration under Section 12AA of Act. One important aspect which was noticed by High Court was that surplus funds of Trade Union could be distributed among members at time of its dissolution. High Court noticed that rules and regulations did not impose legal obligation on assessee or its members to hold income of assessee only for charitable purposes and element of private gain could not be excluded. This decision, in our opinion, is of no avail to Revenue. 167. In National Institute of Aeronautical Engg. Educational Society (supra), assessee was educational society. It moved application before Commissioner for grant of registration under Section12AA of Act. Commissioner, after examining record before him, concluded that assessee was not carrying any charitable activity within meaning of Section 2(15) as it was charging substantial fees from students and making huge profits from that business. Consequently, assessee's application was rejected. Tribunal, however, allowed appeal of assessee. Revenue went in appeal before High Court of Uttarakhand. Page 186 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT High Court, while allowing appeal preferred by Revenue, observed as under; 10. Section 12AA of Act provides procedure for registration. Clause (a) of sub Section (1) of Section 12AA empowers CIT to call for such documents or information from trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries, as he may deem necessary in this behalf. Said provision in Section 12AA makes it clear that CIT is not supposed to allow registration with blind eyes. In present case, CIT has considered relevant papers before him, which included income and expenditure accounts of previous years after society got registered with Assistant Registrar Firms, Societies and Chits. CIT, after considering record before him, has observed that society (present respondent) is charging substantial fees from students and making huge profits. 11. After considering submissions of learned Counsel for parties, we are of view that mere imparting education for primary purpose of earning profits cannot be said to be charitable activity. We are of firm view that, in expression 'charitable purpose', 'charity' is soul of expression. Mere trade or commerce in name of education cannot be said to be charitable purpose. And Commissioner Income Tax has to satisfy itself as provided under Section 12AA of Act before allowing registration. Question of law stands answered. 168. Thus, in aforesaid case, High Court took view that as Society was charging substantial fees from students and making huge profits, it could not be said that assessee was carrying on any charitable activity. This decision also is of no avail to Revenue. Page 187 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 169. In Hyderabad Race Club (supra), assessee was Society registered under Societies Registration Act, 1860 and objects, for which, assessee was established were specified in Para No.3 of Memorandum of Association. objects were to encourage, promote scientific breeding and training of horses, ponies and mules and to carry on business of race club in all its branches etc. ITO rejected assessee's claim that it was charitable institution and that its income was exempt under Section 11 on ground that assessee was carrying on business by conducting races which was activity for profit. On appeal by assessee, Tribunal upheld ITO's order. matter was ultimately heard by Full Bench of High Court of Andhra Pradesh. While answering substantial question of law in favour of Revenue and against assessee, Full Bench observed as under; 9. It would thus be seen that scientific breeding and training of horses and imparting of instructions relating to horse breeding in all its aspects, is shown as incidental or ancillary object in memorandum of association of assessee-company which was established in April 1971. Learned counsel submits that in memorandum of association constituting assessee as company in April, 1971, carrying on business of race club in all its branches had to be specified as main object in order to meet requirements of company law, although in point of fact main object for which assessee-company was established, was what was stated as incidental or ancillary object against sl. no. 4 referred to above. It is pointed out that for purpose of incorporating company, business which company carries on has to be specified as main object and all other objects have to be specified as incidental or ancillary objects, and this classification for limited purpose of Companies Act should not, according to learned counsel, be confused with real object for which Page 188 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT assessee-company was established. According to learned counsel, basic or dominant object for which assessee was established, whether as society prior to April, 1971, or as company from April, 1971, was to encourage and promote scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to learned counsel, are objects of general public utility. other objects specified, whether in memorandum of association relating to assessee as society or in memorandum of association relating to assessee as company, are all subservient to main object of "scientific horse breeding". Consequently, doctrine of dominant or primary object should be invoked in present case in order to examine whether dominant or primary object for which assessee is established, is charitable in character. 10. We are unable to agree with learned counsel that dominant or primary object for which assessee is established either as society or as company, is scientific breeding of horses, and not for purpose of carrying on business in conducting races. Referring to memorandum of association of assessee as society under Societies Registration Act, we see no ground to regard object specified in clause (c) of para 3 as power conferred on society to carry on business to advance and promote so- called main object of scientific breeding and training of horses. In first place, paragraph 3 specifically mention that carrying on business of race club is object for which society is established. It is not in nature of power conferred on society. It is true that some of objects specified in para 3 of memorandum of association relate to powers conferred on society and there is, to some extent, mix-up of objects and powers in pars. 3. We have, however, no difficulty in regarding carrying on of business by conducting races as being in nature of objects rather than power. If any doubt in above regard subsists as regards memorandum of association of society, that is clearly set at rest while setting out objects for which assessee was established as company. As we have already referred to above, memorandum of association of assessee after its Page 189 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT incorporation in April, 1971, as company clearly states that main object to be pursued by assessee- company on its incorporation, is to carry on business of race club in all its branches. Even when assessee was society, carrying on business of race club was obviously main object although it was mixed up with other objects, as there was no statutory requirement that main objects and ancillary objects should be separately specified in case of society. We are unable to appreciate learned counsel's contention that notwithstanding memorandum of association specifying carrying on of business of race club as main object for which assessee-company was incorporated, we should hold that main object for purpose of Companies Act is carrying on of business of race club, and main object for purpose of I.T. Act is scientific breeding of horses. We must reject contention that main objects for which assessee was established should be regarded differently for purpose of companies Act and I.T. Act. provision contained in memorandum of association is unlearned counsel. We have, therefore, no difficulty in coming to conclusion that main object for which assessee was established whether as society or as company, was to carry on business of race club and all other objects are either incidental or ancillary to above main object. Thus, even invoking doctrine of dominant or primary object, we must hold that assessee was established with dominant or primary object of carrying on business of race club by conducting races which, on own admission of learned counsel, is not charitable in character. This itself is sufficient to demolish assessee's claim that it must be regarded as having been established for charitable purposes by invoking doctrine of dominant or primary object. 170. Thus, on facts of that case, Full Bench, ultimately, held that assessee was established with dominant or primary object of carrying on business of race club by conducting races which cannot be termed as charitable in character. This decision also is of no avail to Revenue in Page 190 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT case at hand. 171. In Dharmaposhanam Co. (supra), objects of assessee Company were to raise funds by conducting kuries with Company as foreman, receiving donations and subscriptions by lending money on interest and by such other means as Company would deem fit to do needful for promotion of charity, industries etc. appellant derived income from property, money lending and business in kuries or chit funds held under trust and claimed exemption from tax in respect of said income under Section 11. Tribunal held that assessee was not entitled to exemption. matter went right upto Supreme Court. Supreme Court, while dismissing appeal of assessee, observed as under; On consideration of rival contentions of parties, position appears to be this. appellant can succeed in his claim to exemption under section 11 (1)(a) of Act if income from business of conducting kuries and of money lending can be said to be income derived from property held under trust wholly for charitable purposes. It is well settled that business is "property" within meaning of section 11(1)(e). C.I.T. v. Krishna Warrier, (1964) 53 ITR 176 (SC). That is also evident from provisions of section 11 (4), and reference may be made also to section 13(1)(bb). Further, it is apparent from terms of Memorandum of Association and Articles of Association that business of conducting kuries and of money lending is held under trust. question is : Is business held under trust for charitable purposes ? There can be little doubt that when sub-clause (a) of clause 3 of Memorandum says "To raise funds by conducting kuries, with company as foreman, receiving donations and subscriptions by lending money on interest and by such other means as company deem fit". it refers to powers conferred on appellant to raise Page 191 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT money in aid of, and for purpose of accomplishing, objects mentioned in sub-clause (b) of clause 3 of Memorandum. Upto June 6, 1965 sub-clause (b) read : "To do needful for promotion of charity, education, industries, etc. and public good". Can all purposes mentioned in sub-clause (b) be described as charitable purposes ? Section 2(15) of Act defines expression "charitable purpose" as including "relief of poor, education, medical relief and advancement of any other object of general public utility not involving carrying on of any activity for profit." Two objects in sub-clause (b) of clause (3) of Memorandum need to be considered, "industries" and "public good". As regards latter, decision on what should be "purposes of common good" was left to general meeting by Article 58 of Articles of Association. Having regard to context in which these words appear in Memorandum and Articles, they must evidently be referred to residue general head in definition in section 2(15) of Act, that is to say, "the advancement of any other object of general public utility............ But this head is qualified by restrictive words "not involving carrying on of any activity for profit." operation of industry ordinarily envisages profit making activity, and so far as advancement of public good is concerned, it is open to appellant to pursue profit making activity in course of carrying out that purpose, which of course depends on nature and purpose of "public good. Nowhere do we find in material before us any limiting provision that if appellant carries on any activity in course of actually carrying out those purposes of trust it should refrain from adopting and pursuing profit making activity. In Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-Tax, Mysore, (1975) 101 ITR 234, 243 (SC), Khanna and Gupta, JJ., dealing with case in which assessee carried on business in course of actual carrying out of primary purpose of trust, rejected claim to exemption and declared :- "The fact that appellant trust is engaged in business of printing and publication of newspaper and journals and further fact that aforesaid activity yields or is one likely to yield profit and there are no restrictions on appellant-trust earning profits in Page 192 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT course of its business would go to show that purpose of appellant- trust does not satisfy requirement that it should be one 'not involving carrying on of any activity for profit........ Ordinarily profit is normal incident of business activity and if activity of trust consists of carrying on of business and there are no restrictions on its making profit, Court would be well justified in assuming in absence of some indication to contrary that object of trust involves carrying on of activity for profit." Beg, J., in same case, observed "The deed puts no condition upon conduct of newspaper and publishing business from which we could infer that it was to be on "no profit and no loss" basis .... That character (i.e. of deed) is determined far more certainly and convincingly by absence of terms which could eliminate or prevent profit making from becoming real or dominant purpose of trust. It is what provisions of trust make possible or permit coupled with what had been actually done without any illegality in ;Nay of profit making, in case before us, under cover of provisions of deed, which enable us to decipher predominantly profit making character of trust." In subsequent case, Commissioner of Income-Tax, Kerala v. Cochin Chamber of Commerce and Industry, (1975) 101 ITR 796 (SC), this Court extended test to income derived from activities carried on in aid of, and incidental to, primary object of trust. We may note that no attempt has been made by appellant before us to cast doubt on validity of observations made in those two cases, and we proceed on footing that they convey true content of law. It is, therefore, apparent that among objects contained in original unamended sub-clause (b) of clause (3) of Memorandum are objects which, while referable to residual general head in definition of "charitable purpose" in section 2(15) of Act, nonetheless do not satisfy condition that they should not involve "the carrying on of any activity for profit." result is that objects "industries" and "common good" Page 193 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT cannot be described as "charitable purposes". What follows then is this, that said sub-clause (b) can be said to contain some objects which are charitable and others which are non- charitable. They are all objects which appear to enjoy equal status. It is open to appellant, in its discretion, to apply income derived from conducting kuries and from money lending, to any of objects. No definite part of business or of its income is related to charitable purposes only. Consequently, in view of Mohammed Ibrahim Raza v. Commissioner of Income-'Tax, (1930) LR 57 IA 260; AIR 1930 PC 226 and East India Industries (Madras) Private Limited v. Commissioner of Income-Tax, (1967) 65 ITR 611 (SC), , entire claim to exemption must fail and it cannot be said that any part of income under consideration is exempt from tax. That is position in regard to assessment years 1962-63 to 1965-66 before us 172. Thus, in facts of that case, Supreme Court, ultimately, held that objects industries and common good could not be described as charitable purposes . This decision also, in our opinion, is of no avail to Revenue. 173. In case of Sole Trustee Loka Shikshana Trust (supra), appellant was sole trusty of trust. object of trust was to educate people of India in general and of Karnataka in particular by (a) establishing, conducting and helping directly or indirectly institutions calculated to educate people by spread of knowledge on all matters of general interest and welfare; (b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding publication of books, booklets, leaflets, pamphlets, magazines etc., in Kannada and other languages, all these activities being started, conducted and carried on with object of educating people; (c) supplying Page 194 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Kannada speaking people with organ or organs of educated public opinion and conducting journals in Kannada and other language for dissemination of useful news and information and for ventilation of public opinion on matters of general public utility; and (d) helping directly or indirectly societies and institutions which have all or any of aforesaid objects in view. High Court held that income of trust was not entitled to exemption under Section 11 read with Section 2(15) of Act. assessee, went in appeal before Supreme Court. Supreme Court, while dismissing appeal of assessee, observed as under; In addition to power which sole trustee had to collect donations and subscriptions for trust. he had all powers which sole manager of business may have in order to carry it on profitably. He had power of transferring trust properties and funds if he thought "it expedient in interest of objects of Trust, to transfer assests and liabilities of this Trust to any other Charitable Trust or institution conducted by such Trust which in opinion of original Trustee or Board of Trustee has objects similar to objects of this Trust and is capable of carrying out objects and purposes of this Trust either fully or partially" (Paragraph 17 of Trust deed). Although, "original trustee" was not "to take any remuneration" for discharging his duties as trustee, yet, he was not precluded "from being paid out of Trust fund such remuneration as may be deemed propellor carrying out any work and duty in connection with conduct or management of institutions of Trust, or with business of printing, publishing or other activities carried on by Trust". He was to be paid expenses incurred in travelling or otherwise in connection with his duties as trustee (paragraph 16 of Trust deed). "original trustee" could invest trust monies and profits "in any investment authorised by law for investment of Trust funds or in shares, or securities or debentures of Limited Companies in India or outside" (para 4 of Trust deed). He had "power to mortgage, sell, transfer and give on lease or to otherwise deal with Trust Page 195 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT property or any portion thereof for purpose of Trust and to borrow monies or raise loans for purpose of Trust whenever he may deem it necessary to do so" (para 8 of Trust deed). Furthermore, Trustee had "power and authority to spend and utilise money and property of Trust for any of purposes of this Trust in such manner as to him may appear proper". It appears to us that, with this profit making background of trust, its loosely stated objects wide powers of sole trustee, and apparently profitable mode of conducting business, just like any commercial concern, disclosed not only by terms of trust but by statement of total expenditure and income by trustee it is very difficult to see what educational or other charitable purpose trust was serving unless dissemination of information and expression of opinions through publications of trust was in itself treated as really educational and charitable purpose. In trust deed before us, as we have already indicated, trustee had not only wide powers of utilisation of trust funds for purposes of trust but could divert its assets as well as any of funds of Trust to other institutions whose objects are "similar to objects" of trust and of "carrying out objects and purposes of this trust either fully or partially". whole deed appears to me to be cleverly drafted so as to make purpose of clause 2(c) resemble one which was held to be protected from income-tax in Tribune case (supra). Indeed very language used by Privy Council in Tribune case (supra), for describing objects of Trust in that case, seems to have been kept in view by draftsman of trust deed before us. And, we find that power of diverting assets and income of Trust although couched in language which seems designed to counsel their real effect is decisive on question whether trust is either wholly or predominantly for charitable purpose or not. trustees is given power of deciding what 485 purpose is allowed to or like object covered by trust and how it is to be served by diversion of trust properties and funds. If trustee is given power to determine proportion of such diversion, as he is given here, trust could not be said to be wholly charitable. He could divert as much as to make charitable part or aspect, if any, purely illusory. Indeed, this was law even before qualifying words introduced by 1961 Act. [See: East India Industries (Madras) Pvt. Ltd. v. Commissioner of Income-tax, Madras, (1967) 65 ITR 611 (SC), Commissioner of Income-tax, Madras v. Andhra Page 196 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Chamber of Commerce, (1965) 55 ITR 722 (SC) and Md. Ibrahim Riza v. Commissioner of Income-tax, Nagpur, AIR 1930 PC 226. Such "trust" would be of doubtful validity, but I refrain from further comment or any pronouncement upon validity of such trust as that was neither question referred to High Court in this case nor argued anywhere. 174. Thus, it appears that Supreme Court looked into trust deed of trust in details and noticed that sole trustee had not only wide powers of utilization of trust funds for purposes of trust but he could divert its assets as well as any of funds of trust, to other institutions whose objects were similar to objects of trust and of carrying out objects and purposes of such trust either fully or partially. Supreme Court observed that whole deed appeared to be very cleverly drafted so as to make purpose of clause (2)(c) resemble one which was held to be protected from income tax in Tribune case (1939) 7 ITR 415. (PC). Supreme Court observed that if trustee is given power to determine proportion of such diversion, trust could not be said to be wholly charitable. This decision also is of no avail to Revenue in case at hand. 175. In case of Cricket Association of Bengal (supra), assessee was unregistered and unincorporated body. Its membership was open to clubs, District Associations, Universities, Indian States, and subject to certain conditions, individuals. Its objects were roughly summarized as promotion of game of cricket played in accordance with highest standard. Association received payments by way of subscriptions and donations. ITO did not accept plea of assessee, seeking exemption. ITO held that object Page 197 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT of Association was merely promotion of game and could not be termed as pursuing charitable object. order of ITO was upheld by AAC as well as Tribunal. matter went in appeal before High Court of Calcutta. High Court, while rejecting appeal of assessee, observed as under; 12. question we have to consider is whether promotion of cricket as general purpose or more particularly promotion of cricket in form in which Association professes to promote it can at all be charitable purpose. In England, it has repeatedly been held that no gift or bequest made merely for promotion of some game or pastime can be called gift or bequest for charitable purpose. exception is to be found with respect to cases where provision is made for training in game as part of education of youth. In those cases, gift or bequest is regarded as charitable on ground that it advances cause of education. As instances of gifts or bequests for such purposes, I may refer to case of In re, Mariette : Mariette v. Governing Body of Aldenham School, (1915) 2 Ch. 284, where bequest was made to Governing Body of school for purpose of building some squash racket courts and further bequest was made to Head Master for time being upon trust to use interest for providing prize for some event in school athletic sports every year. This bequest was upheld as charitable, because it was considered essential in school of learning that there should be organised games as part of daily routine in order that boys might not be left to themselves and that their bodily welfare might be promoted. Another instance is case of Dupree's Deed Trusts, In re, Daley v. Lloyds Bank, Ltd., (1945) 114 LJ Ch L where deed of gift, expressed to be for encouragement of chess playing by holding annual chess tournament limited to boys and, young-men under age of 21 years resident in particular area, was held to be good gift for charitable purpose. It appears that Vaisey, J. who decided case had to struggle good deal against his own inclinations in order to arrive at conclusion which he ultimately reached, but he said that Page 198 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT in view of evidence before him that chess was included in school curriculum and that according to experience of members of teaching profession game promoted concentration, self- reliance and reasoning, he would not condemn gift as bad. learned Judge, however, expressed difficulty he felt in following words : "One feels perhaps that one is on rather slippery slope. It chess, why not draughts? if draughts, why not bezique? and so on, through to bridge, whist, and by another route, stamp collecting and acquisition of birds' eggs?" I need not, however, deal with this class of cases, because gifts in them were not merely for promotion of some game or sports, but they were for training of youth in some game of skill or in athletic sports as part of their education. Where, however, gift or bequest has been made solely for promotion of game or pastime, it has always been struck down as not charitable. To take case of In re: Nottage: Jones v. Palmer, (1895) 2 Ch. 649 which is so often cited, four Judges who decided it, one in High Court and three in Court of Appeal, all held that bequest for encouragement of yacht racing, although it might be beneficial to public, could not be upheld as charitable, because it was bequest for encouragement of mere sport. Lindley, L. J. in Court of Appeal made observation in course of his judgment which is peculiarly appropriate to present case, since it mentions encouragement of game of cricket : "Now, I should say", observed learned Judge, "that every healthy sport is good for nation--cricket, football, fencing, yachting, or any other healthy exercise and recreation; but if it had been idea of lawyers that gift for encouragement of such exercises is therefore charitable, we should have heard of it before now." It will be noticed that learned Lord Justice included cricket among games in illustrations he gave. case was decided in 1895 and it may be said that ideas have since changed and that cricket has grown so much in popularity and general public have come to be Page 199 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT associated so much with game that observations made so long ago are no longer valid. Any such contention must be overruled because even recentmost cases have not expressed any dissent from view taken in Nottage case(1895-2 Ch. 649). It has often been cited and very recently it was cited in case of Baddeley v. Inland Revenue Commissioners, (1953) 1 Ch 504 in Court of Appeal and in same case, Baddeley v. Inland Revenue Commra., (1955) AC 572 in House of Lords. "In re Nottage, 1895-2 Ch 649 was cited for proposition" observed Jenkins L. J. in Court of Appeal. "that encouragement of mere sport is not charitable purpose. With regard to this authority, I need only say that in my view, neither of trust here in question is trust for encouragement of mere sport". It is noticeable that learned Lord Justice did not dissent from decision cited before him. more elaborate reference to case was made in House of Lords and among other Lords, Lord Reid made comments on it. Referring to view taken in Court of Appeal of Nottage case, 1895-2 Ch 649, Lord Reid observed as follows : "In re Nottage, 1895-2 Ch 649 is clearly distinguishable : money was bequeathed to provide annually cup for yacht racing, so only possible beneficiaries were yacht owners who would be somewhat strange objects of charity. But what appellants found on is reasoning in Court of Appeal to effect that encouragement of mere sport or game is not charitable though sport or game may be beneficial to public. No doubt that is true in main, but it cannot apply to provision or support of playing fields: yacht racing is far removed from kind of recreation which Parliament has declared to be charitable. And charitable purpose such as education may well be achieved in part at least by promoting. sport or games. emphasis is on mere sport or games, and I cannot suppose that any of learned Judges had in mind Acts of Parliament dealing-with recreation or would have denied that encouragement of games, as means to achieve charitable purpose for those who took part in them, was quite different matter." It will thus be seen that while promotion of games as Page 200 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT part of education of those who participate in them may be charitable purpose, promotion of practice of game in general either for entertainment of public or for advancement of. game itself has never been held to be charitable. So far as cricket is concerned, I shall content myself with citing only one other case, In re Patten, Westminster Bank, Limited v. Carlyon, 1929-2 Ch. 276. trust was created for benefit of Sussex County Cricket Club and in order to bring trust within statute of Elizabeth, it was said that trust was "for supportation aid and help of young tradesmen handicraftsmen and persons decayed". Really, however, it was trust for promotion of cricket among boys of working and lower middle classes who might not be well off financially. Romer, J. who decided case said that it might be that with aid of assistance provided from this trust, some boys would be enable to embark, upon life as professional cricketers, but he continued. to say : "It is, I think, reasonably clear that object of fund is encouragement of game of cricket and nothing else, and it has been held by authorities that are binding upon me that such bequest is not charitable." He then proceeded to refer to case of In re Nottage, 1895-2 Ch 649 as laying down proposition to which he was giving effect. 13. I do not think I should multiply citations in order to illustrate point that gift or bequest merely for promotion of game has never been considered charitable : Clifford, In re : Mallam v. McFie, (1911) 81 LJ Ch 220 was case of angling; Trustees of Warnher's Charitable Trust v. Commissioners of Inland Revenue, (1937) 21 Tax Cas 137, case of playing fields. Scottish Flying Club, Ltd. v. Commissioners of Inland Revenue, (1936) 20 Tax. Cas 1, case of Aviation Club which held aerial pageants and charged fees for admission to display and Inland Revenue Commissioners v. City of Glasgow Police Athletic Association, 1953 AC 380, case of athletic sports of police club. It is true that some of decisions ultimately turned on point that beneficiary was not public or section of it, as understood in law, but incidentally observations were made in all of them as regards when promotion of game can be charitable purpose and when it cannot be. 14. facts of present case are that assessee Page 201 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT Association merely held certain demonstration or exhibition matches. It does not provide any training in game of cricket to novices or any advanced training for persons who are already practiced players. Its activities outside holding of exhibition matches is limited entirely to its own members. only contact it has with public is by way of having them as spectators, on payment of fee, of matches arranged by it. I find it impossible to hold that any benefit or entertainment which is thus paid for and which is availed of by only such members of public as can or wish to pay for it can in any sense be purpose of charity. It is true that charity in income-tax sense need not have any eleemosynary element in it and that object of general public utility is under income-tax law charitable object. Indeed, if objects professed by Association, are to be treated as charitable objects at all, they can be so treated only if they can be regarded as objects of general public utility. I find it impossible to hold that there is any general public utility, so as to amount to charity, in arranging for cricket matches which public can see on payment. How untenable must be contention that such object is object of general public utility and, therefore, must be held to be charitable will appear if one considers certain parallel cases. Suppose body of men bind themselves together into club and collect annually some musicians from all parts of country to give demonstrations for number of days and suppose public are admitted to such demonstrations on payment of fee. If contention of Association in present case is to be accepted, it must equally be held that body of men in hypothetical case I have mentioned who derive large income by selling admission to musical demonstrations organised by them, are also exercising themselves for charitable purpose and that their earnings must be equally exempt from tax. 15. It was contended that game of cricket had place of its own among games and that it inculcated spirit of fairness and honourable conduct to such ah extent that term 'cricket' had come to be synonym for fairness and honour. That may be so, but I am unable to understand how fairness and honour can be inculcated by game of cricket in any person other than those who actually take part in it. In present case, we are not Page 202 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT concerned with players who play at matches arranged by Association, for they are members of visiting teams or it might be local teams, but so far as Association is concerned they are mostly outsiders. Association is claiming to be advancing charitable purpose only by providing opportunity to public to witness games arranged by it. It can by no means be said that any spirit of fairness and honour is inculcated in spectators of game of cricket or perhaps any other game, played not by individuals but by teams. Indeed, there is school of opinion, now growing in volume, which thinks that games played by rival teams drawn from different parts of country or different countries and witnessed by multitudes do not serve any beneficial purpose, but, on other hand cause deterioration of mind by fostering fanatical partisanships or generating mass hatreds. This, however, is matter of opinion. Whether this extreme view is right or wrong, I find it impossible to hold that any benefit of public character is conferred on society or section of it merely by arrangement of exhibition games of cricket or tournaments and admission of public thereto for fee, on basis of which purpose of arranging for such matches can be said to be charitable purpose. 16. There is another ground too upon which Association's claim must fail. I have already hinted at it, but will now point it out specifically. Among objects set out in Rules is one which authorises Association to carry out any other business or activity which may seem to Association capable of being carried on in connection with above. Section 4 (3) (i) (a) and (b) of Act which I have already read contemplate either business carried on in course of carrying out of primary purpose of Association or business, work in connection with which is mainly carried on by beneficiaries. There is no question of business of playing cricket here being carried on by beneficiaries of Association, because games are mainly played by outsiders. But authority which Rules confer on Association to carry out any other business "in connection with above," that is to say, in connection with promotion of objects set out earlier, does not seem to me to come within terms of Section 4 (3) (i) (a) which requires business to be carried on in course of Page 203 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT carrying out one of primary purposes of Association. If so, it appears to me that even assuming that there is property and even assuming that purpose of promoting game of cricket is charitable purpose, property is here held not wholly for that purpose but it is held for other purposes as well. 176. High Court, in aforesaid case, took notice of fact that Association merely held certain demonstration or exhibition matches. It did not provide any training in game of cricket to novices or any advanced training for persons who were already practiced players. High Court further noticed that activities of Association, outside holding of exhibition matches, was limited entirely to its own members. High Court also noticed that only contact Association had with public was by way of having them as spectators on payment of fee of matches arranged by it. Thus, having regard to what has been referred to above, High Court, ultimately, took view that Association was engaged in any charitable objects. facts in case on hand are altogether different. 177. In case of N.N. Desai Charitable Trust (supra), this Court ruled that howsoever laudable objects of trust may be, and such objects may lead one to believe that activities of trust are charitable in nature, but for purpose of seeking exemption under Section 11 of Act, actual activities are to be seen and not just objects. There need not be any debate on this proposition of law. In case on hand, after detailed scrutiny of various activities, tribunal has recorded finding of fact that activities, in fact, are charitable in nature. Page 204 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 C/TAXAP/268/2012 JUDGMENT 178. In such circumstances, referred to above, we are of view that Tribunal could be said to have taken reasonable view of matter, and having recorded finding of fact based on material on record, we should not disturb such finding of fact. 179. In result, all tax appeals fail and are hereby dismissed. substantial questions of law, formulated in all tax appeals, are answered in favour of assessees and against Revenue. (J. B. PARDIWALA, J) (A. C. RAO, J) Vahid Page 205 of 205 Downloaded on : Sat Oct 26 09:21:29 IST 2019 Director of Income-tax (Exemption) v. Gujarat Cricket Association
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