Income Tax Officer (Exemption) vs Wrestling Federation of India

Court/Forum: ITAT

Bench: Delhi Bench, E: New Delhi, Shri Raj Kumar Chauhan, Judicial Member and Shri Brajesh Kumar Singh, Accountant Member

Order Date: 2026-03-30

Outcome: Assessee

Sections: Section 2(15), Section 11, Section 12, Section 143(3)

Core Ratio

The proviso to Section 2(15) does not apply if the receipts are incidental to the fulfillment of the charitable objectives and not used as business receipts.

Outcome

The ITAT upheld the CIT(A)'s decision allowing the assessee's appeal, confirming that the receipts from royalty and sponsorship fees were not business income and thus eligible for exemption under sections 11 and 12.

Favourability

Assessee

Core Issue

The central legal question was whether the receipts from royalty and sponsorship fees constituted business income under the amended proviso to section 2(15), thereby disqualifying the assessee from claiming exemption under sections 11 and 12.

Facts of the Case

The Wrestling Federation of India, registered under section 12A, received royalty and sponsorship fees. The AO treated these as business income under section 2(15) and denied exemption under sections 11 and 12. The CIT(A) reversed this decision, which was upheld by the ITAT.

Arguments by Assessee

The assessee argued that its activities were charitable under section 2(15) and that the receipts were incidental to its objectives, not business income.

Arguments by Revenue

The Revenue contended that the receipts were business income exceeding 20% of total receipts, thus falling under the proviso to section 2(15) and disqualifying the assessee from exemptions under sections 11 and 12.

Key Sections & Provisions

Section 2(15) - Definition of charitable purpose; Section 11 and 12 - Exemptions for income from property held for charitable or religious purposes.

Ratio Decidendi

The ITAT found that the assessee's activities were not business activities as there was no profit motive. The receipts from royalty and sponsorship fees were incidental to the charitable objectives of promoting wrestling, and thus, the proviso to Section 2(15) did not apply.

Court Reasoning & Analysis

• The ITAT noted that the assessee's activities were not aimed at profit-making.
• The receipts were incidental to the charitable objectives of promoting wrestling.
• The proviso to Section 2(15) did not apply as the receipts were not used as business income.
• The ITAT relied on its previous decisions in the assessee's own cases for earlier years.

Key Observations

• The assessee's activities were not business activities as there was no profit motive.
• The receipts were used to promote wrestling, not for profit distribution.

Case Laws Cited

• CIT vs Angels Educational Trust (2022) 440 ITR 449 (MAD)
• Creative Museum Designers (2022) 443 ITR 173 (CAL)
• Dayanand Pushpadevi Charitable Trust (2021) 436 ITR 406 (DEL)

Related Issues

• Application of proviso to section 2(15) in charitable organizations
• Eligibility for exemption under sections 11 and 12

Important Passages

• The royalty and sponsorship fees which are received are incidental for the fulfillment of the objectives of the assessee.

Not Decided / Remanded

No issues were explicitly left open or remanded.

Practical Takeaway

Practitioners should note that receipts incidental to charitable objectives may not be treated as business income under section 2(15), preserving eligibility for exemptions under sections 11 and 12.

Supporting Judgments

• Radhasoami Satsang, Saomi Bagh, Agra vs Commissioner of Income Tax (SC) — A fundamental aspect permeating through different assessment years, if sustained by not being challenged, should not be changed in a subsequent year without mat
• Anand Education Society vs Asstt. Director of Income Tax(E) (ITAT) — The AO must substantiate claims of excessive payments to relatives with evidence of unreasonableness compared to market standards.
• NAYAN C SHAH vs INCOME TAX OFFICER (HC, 2016) — A mere technical breach does not warrant the imposition of penalty under section 271(1)(c) of the Income Tax Act.
• M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax (ITAT, 2020) — Disallowance under section 14A is not applicable if no exempt income is earned during the assessment year.
• DCIT-7(1)(1) vs Goldman Sachs (India) Securities Pvt. Ltd. (ITAT) — Discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business.
• Deputy Commissioner of Income Tax vs IBM India Private Limited (ITAT) — ESOP expenditure is allowable as a revenue expenditure if it forms part of employee remuneration and is supported by judicial precedents.

Contrary Judgments

• J K Investo Trade (India) Limited vs DCIT (ITAT, 2023) — The assessee is eligible to claim deduction under Section 80G irrespective of the fact that the corpus contribution relates to CSR activities.
• M/s. Alubound Dacs India Private Limited vs. Dy. CIT (ITAT, 2024) — CSR expenses mandated by law can be claimed as a deduction under Section 80G if they meet the stipulated conditions.
• The Deputy Commissioner of Income Tax, LTU, Bangalore vs M/s. Biocon Limited (ITAT) — The provisions of Section 10B are exemption provisions, and profits of the eligible unit should not be set off against losses of non-eligible units.
• Action Gold vs Deputy Commissioner of Income Tax (ITAT) — A liability that is subsequently discharged cannot be treated as having ceased during the year under consideration.
• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax (SC) — A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• Delhi Duty Free Service [P] Ltd Vs. The Dy. CI.T. (ITAT, 2025) — CSR expenses can qualify for deduction under Section 80G if they meet the necessary criteria outlined in the Income Tax Act.