This is an appeal filed by the assessee directed against the order of the Commissioner (Appeals)V, Baroda "Commissioner (Appeals)" dated 2-9-2005, and the assessment year under reference is assessment year 2002-03.
The only issue relates to the eligibility for exemption, or otherwise, of an expenditure in the sum of Rs. 2.40 lakhs laid out by the assesseeAssociation, assessed as an assessing officer, and formed in the year 1937 for the promotion of the game of cricket in the areas falling within its jurisdiction, on distribution of mementos on the occasion of the Diamond Jubilee of the Association.
The assessing officer found, with reference to section 11(1)(a) of the Income Tax Act, 1961 ("Act" hereinafter referred to) that the said sum cannot be considered to have been applied to any charitable purpose, as it did not lead to the fulfilment of any object of general public utility, which, the promotion of the game of cricket, qualifies to be (so as to fall within the definition of charitable purpose in terms of section 2(15) of the Act), as the distribution of mementos to its members by the association could not, in any manner, be considered as towards, or lead to, the promotion of the game. He, accordingly, included the said amount in the assessee's taxable income and which action stood confirmed in appeal on the same basis, leading to the present appeal.
Before us, the learned authorised representative made out a strong case for the assessee. The assessee had, in commemoration of its Diamond Jubilee, which fell in the current year, decided to give mementos - a glass inscribed with the logo of the Association printed on it, and costing at around Rs. 60 a piece - to its members. In this background, it was argued as : (a) It cannot be considered as not a proper charge to the Profit and Loss Account, ie., one which would not qualify as falling within its 'objects' and once it is so, there cannot be any question of its disallowance and/or considered as not a proper application (of income); (b) Income under the Act, has to be construed not in a technical sense, but as a man of business/ commerce would understand, so that all expenses that go in the conduct of the business would warrant an apriori deduction, as per the settled law. There has been, it was submitted, an error on the part of the authorities below in construing the sum as an application of income, so as to merit examination under section 11(1)(a), being only an expense incurred in the running of the association by its management, and over the affairs of which it has complete charge, and no interference from any quarter can be countenanced, least of all from the tax authorities. Towards this end, he also listed some case law; (c) The concept of sanctity of book result was advanced, by placing reliance on the decision of the Apex Court in the case of Apollo Tyres Ltd. v. CIT (2002) 255 ITR 273 (SC), wherein, in the context of MAT provisions, per which an alternate mechanism of charge of tax with respect to book profit stands legislated, it stands held that accounts being drawn in compliance of the governing Act, the Companies Act, 1956 in that case, the book results cannot be subject to further scrutiny for the purpose of application of the MAT provisions, i.e., the Act, that being in the domain of the authorities under the respective law.
The learned Departmental Representative, on the other hand, relied on the orders of the authorities below, contending that all that was relevant for the purpose was, whether, the said transaction, not representing an expenditure, did constitute an apposite payment, ie., in the satisfaction of the objectives of the Trust/ Association.
In our view, the question that arises for consideration is, whether, in deciding to distribute the mementos to its members) as a part of its celebration of 75 years of its existence) and thus history, as any institution/ organization, similarly placed, is wont to, the Management of the Association acted outside the framework of the object(s) of the Association. The 'object' without doubt, succinctly stated, is the promotion of the game of cricket, including carrying out of all acts in furtherance thereto, and not inconsistent therewith. It is also undisputed that the said 'objects', by themselves, are of the general public utility, so as to fall within the definition of the term 'charitable purpose' (Section 2(15)). Surely, if so, it cannot be said to be an application of income not for charitable purpose so as to stand disqualified in terms of section 11(1)(a). And if not, it would necessarily imply as being not spent for charitable purpose(s).
At the outset, it would also require" mention that the ratio of the decision of the Apex Court in the case of Apollo Tyres Ltd. (supra) cannot be imported in the present case as in that case the term 'book profit' stands defined with reference to the appropriate Chapter (Parts II and III to Schedule 6) of the Companies Act, while in the present case, the issue at large is whether the impugned act of spending the amount in the manner aforesaid did, in fact, fall within the 'object' of the Trust. No doubt, the books of the association may also be audited under the provisions of the governing statute (Bombay Public Trust Act, 1950), but there is nothing on record to suggest if the same stands examined with reference to the provisions of the same; the relevant audit report obtained thereunder; if this matter stood reported and examined by the competent authority constituted thereunder, etc. The same, if so done, would definitely have a bearing in the matter, as the relevant authorities can only be assumed to have passed their edict based on all relevant considerations. For all we know, this matter may never have been the subject-matter of reporting, as the impugned sum stands charged to the Profit and Loss account under the head 'Administrative expenses'.
The objects of the Association stand enlisted vide clause 4 of Memorandum of Association, as : (b) To arrange and promote the establishment of Cricket clubs within its jurisdiction.
(d) To do any other acts in furtherance of the above objects not inconsistent therewith.
It is apparent, therefore, that the association stands established for the purpose of promoting the game of cricket in all its facets. The Managing Committee of the Association, vide its meeting dated 12-6-2000, passed a resolution unanimously sanctioning a budget of Rs. 5 lakhs towards the commemoration celebration of its Diamond Jubilee, including the gifting of an item to all its members. The members, and contributions therefrom, both in cash and in kind, particularly through rendering of services forms the edifice of its work, and therefore, the fulfilment of its objects. The same, rather, bulwark the Society's work against all types of disruptive/ disintegrative forces, to which all entities are subject, and thereby enabled it to serve/achieve the stated purpose of its existence. In honouring its members, on whose largesse, both pecuniary and non-pecuniary, the association thrives, its Managing Committee was only, to our mind, on a befitting occasion, acknowledging their contribution towards its cause, i.e., the promotion of cricket. The Association, as a running concern, did require the continuous support of its member!;, as well as to attract new membership. By appreciating their services, therefore, it was not only celebrating its long history, a sense of which is necessary for an Institution to remain on course, but also encouraging them by generating some selfesteem, and thus, targeting its needs. There is, thus, a live link between the 'object' of the association and the impugned layout. Ofcourse, the proposition cannot be stretched beyond a limit; its limits implicit therein; a sense of proportion, and which is not under question, has to prevail. If the view adopted by the revenue authorities is to be accepted, the entire allotted budget of Rs. 5 lakhs, ie., including another sum of Rs. 2.60 lakhs, would stand to be similarly disallowed, as, apparently, celebrating its long period of existence cannot, by itself, lead to the promotion of the game. The issue cannot be, and does not admit of, being viewed in a parochial manner.
The benefit received, if it can be so termed, by the receipt of the mementos, by the members, is only incidental, and in fact, to our mind, cannot be considered as one; the mementos only serving as a trangible reminder of acknowledgement of their services /contribution - ala certificate of merit.
In view of the foregoing, we find the assessee's claim as sustainable in law in the facts and circumstances of its case and, resultantly, the order of the learned Commissioner (Appeals) is set aside. We order accordingly.