Sections 11, 12 – Tax exemption u/s. 11/12 cannot be denied merely for receiving sponsorship from a corporate business entity.

23.  (2018) 66 ITR (Trib.) 82 (Delhi) D.C.I.T. vs. India
Olympic Association ITA No.:
1130/DEL/2016 A.Y.: 2011-12 Dated: 19^th July, 2018

Sections
11, 12 – Tax exemption u/s. 11/12 cannot be denied merely for receiving
sponsorship from a corporate business entity.

FACTS 

The
assessee-society was an Apex sports body for selecting athletes to represent
India at Olympic Games, Asian Games and other international athlete meets at
these events. It was registered u/s. 12A of the Act. The assessee received an
income from sponsorship amounting to Rs. 86 lakh received from Samsung India
Electronics Pvt. Ltd for 2010 Asian Games and 2010 Youth Olympic Games.
Therefore, the Assessing Officer (AO) formed an opinion that the assessee had carried
out the activities for the purposes of general public utility in the nature of
trade, commerce or business. The AO further formed a belief that this
transaction of the assessee was in the nature of rendering services in relation
to business of Samsung in lieu of consideration from Samsung India Electronics
Pvt. Ltd.  The AO was convinced that
proviso to section 2(15) of the Act squarely applies and hence the assessee
does not fall within the category of ‘charitable organisation’. Accordingly,
benefit u/s. 11/12 of the Act was denied to the assessee. Being aggrieved, the
assessee carried the matter before the first appellate authority and reiterated
that the proviso to section 2(15) of the Act does not apply in the case of the
assessee and the AO had wrongly denied claim of exemption u/s. 11/12 of the
Act.

HELD

The
Tribunal allowed the assessee’s appeal and held as under:

1.  On drawing support from the speech of the Finance Minister and
subsequent clarification issued by the CBDT within the framework of amended
provisions of section 2(15) of the Act, the Tribunal was of the view that an
object of public utility need not be an object in which the whole of the public
is interested. It is sufficient if well defined section of the public benefits
by the objects which means that the expression “object of general public
utility” is not restricted to objects beneficial to the whole mankind.

2.  Receiving sponsorship is not a part of any business carried out by
the appellant. Merely receiving sponsorship from a business entity cannot
tantamount to a conclusion that the assessee has entered into a business
activity with such sponsorer.

3.  The Hon’ble ITAT relied on the following decisions:

(a) CIT vs. Swastik Trading Co. Ltd. (113 ITR 852) wherein it was
held that establishing and maintaining Gaushalas and Panjrapole constitutes
charitable purpose.

(b) ICAI vs. Director General of Income Tax (Exem) (347 ITR 99)
where ICAI which was denied exemption u/s. 10(23C)(iv) of the Act because in
the opinion of the DGIT (Exem.) the institute was holding coaching classes and
therefore was not an educational institution. The Hon’ble Delhi High Court held
that the order denying the exemption was not valid.

Thus, in the Tribunal’s opinion, there was no material
which may suggest that the assessee association was conducting its affairs
solely on commercial lines with the motive to earn profit. There was also no
material which could suggest that the assessee association had deviated from
its objects which it had been pursuing since past many decades. The proviso to
section 2(15) of the Act was not applicable to the facts of the case and the
assessee-association deserved benefit u/s. 11/12 of the Act.