Wrestling Federation of India not Taxable for Royalty and Sponsorship Fee for Organizing Sports Activity: ITAT [Read Order]

Wrestling Federation of India

While granting relief to the Wrestling Federation of India, the Income Tax Appellate Tribunal (ITAT), Delhi has held that the federation is not liable to pay tax for the royalty and sponsorship fee for organizing the sports activities.

The assessee, as part of its objectives, conducts sports activities in connection with which it collects royalty and sponsorship fee.

The Assessing Officer, while completing assessment proceedings against the assessee, observed that the end use of business profit for charitable purpose is of no relevance due to amendment in Section 2(15) and the payer has also deducted TDS, since the main activity of the assessee falls under the category of general public utility, therefore, the first proviso to Section 2(15) of the Act is invoked and receipt on account of royalty and sponsorship fee is stated as business income of the assessee within the meaning of the first proviso to Section 2 (15) of the Income Tax Act and no expenditures have been incurred by the assessee towards earning of these incomes.

On the first appeal, the Commissioner (Appeals) held that the assessee is not involved in any business activity as there is no apparent motive to earn the profit. According to the authority, the royalty and sponsorship fees which are received are incidental for the fulfillment of the objectives of the assessee. The receipts are not being used as business receipts in order to be utilized as profit to any person but instead is used to promote the sport of wrestling.

After hearing the contentions from both the sides, the Tribunal held that “Considering the above discussion made by the ld. CIT(A), we do not find any infirmity in the order of the CIT (A). The assessee has received royalty and sponsorship fee towards organizing of the sports activity it is not a regular business activity of the society which has been spent for the object of the Society. The ld. CIT(A) has given cogent reasoning for holding that provision to section 2(15) would not apply in the facts of the present case, against which there is nothing on record from the side of the Revenue.”

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