Tax Exemption can’t be denied to Indian Olympic Association Merely for Receiving Sponsorship: ITAT [Read Order]

Indian Olympic Association - Taxscan

While granting relief to the Indian Olympic Association, the Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) the sponsorship contract with Samsung India Electronics Pvt. Ltd would not constitute carrying on of any activity in the nature of trade, commerce or business by the Association.

The assessee is an Apex sports body for selecting athletes to represent India at Olympic Games, Asian Games and other international athlete meets at these events.

AO held that the assessee received income from sponsorship amounting to Rs. 86 lakhs from M/s Samsung India Electronics Pvt Ltd for 2010 Asian Games and 2010 Youth Olympic Games which is a commercial activity which would defeat the charitable nature of the organization.

The bench noted that section 2(15) was added to the Income Tax Act only to exclude from exemption, entities carrying on business and earning incomes for which exemption was claimed on the basis that the purpose would fall under charitable purpose.

Diving deeply into the facts of the case, the bench noted that the fundamental or dominant function of the association is to represent the country in international forums. Associations of different disciplines in sports in India are members/affiliated to IOA. “In furtherance of its activities, the association not only requires grants from the Government, but on many occasions sponsorships. This cannot be an activity by itself amounting to carrying on of any business, trade or commerce. The impugned association is engaged in multi-level activities of diverse nature but the primary and dominant activity is promoting sports activities not only in India but also in international forum. The impugned association would not lose its character of charitable purpose merely because some sponsorship was accepted.”

“In our considered 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 is also no material which could suggest that the assessee association has deviated from its objects which it has been pursuing since past many decades. In our humble opinion and understanding of law, proviso to section 2(15) of the Act is not applicable to the facts of the case and the assessee-association deserves benefit u/s 11/12 of the Act,” the bench said.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader