Hyderabad: In an order likely to have wider implications, particularly for bodies claiming income tax (I-T) exemptions while earning significant revenue from commercial operations, the income tax appellate tribunal (ITAT), Hyderabad bench, has upheld I-T department’s order denying tax exemption to Hyderabad Golf Association.It held that while the association’s principal object fell under advancement of an object of general public utility, its restaurant, bar and related activities were commercial in nature and had crossed the statutory limit prescribed under the provisions of the Income Tax Act. The order reinforces that the nature, scale and volume of such activities, and whether they breach the statutory threshold, would be decisive in determining eligibility for tax exemption.In its order in DCIT vs Hyderabad Golf Association, the tribunal upheld the assessing officer’s decision to deny exemption under relevant sections of the Income Tax Act.The tribunal recorded that receipts from the association’s restaurant and bar operations stood at Rs 3.65 crore while total receipts were Rs 14.92 crore. It held that such commercial receipts constituted about 24.48% of the total, exceeding the statutory threshold of 20% under the proviso to Section 2(15) and consequently disentitling the association from claiming exemption for the assessment year 2018-19.The order said the bar and restaurant operations were being carried out systematically and continuously for consideration, and that restricting such services to members did not alter their commercial character.Relying on the Supreme Court’s ruling in ACIT (Exemptions) vs Ahmedabad Urban Development Authority (2022), the tribunal held that after the amendment to Section 2(15), the dominant purpose test could not override the statutory bar once the prescribed threshold of commercial receipts was breached, irrespective of the application of surplus for charitable purposes.This reversed the relief granted earlier by the commissioner of income tax (Appeals), who on Aug 14, 2025, held that the restaurant business was intrinsic and incidental to the association’s main object of promoting golf. The I-T revenue challenged that order before the tribunal, which allowed the appeal and restored the assessing officer’s view.The assessing officer originally passed the order on April 6, 2021, taxing a surplus of Rs 3.33 crore after denying the exemption claim. The ruling relates to the denial of exemption for the 2018-19 assessment year. Separately, the I-T department has initiated proceedings cancelling the association’s registration under Sections 12A and 12AB with effect from April 1, 2021, an issue that did not arise for consideration before the tribunal in the appeal.
