Why ITAT denied tax exemption to Hyderabad Golf Association
HYDERABAD: The Income Tax Appellate Tribunal (ITAT), Hyderabad bench, has upheld the Income Tax department’s decision to deny tax exemption to the Hyderabad Golf Association. It cited excess commercial income from the association’s restaurant and bar operations.
Commercial Income Breaches Limit
In the case DCIT vs Hyderabad Golf Association, the tribunal said the association’s main objective falls under “advancement of an object of general public utility.” However, its commercial activities crossed the limit set under the Income Tax Act.
The tribunal noted that the association earned ₹3.65 crore from its restaurant and bar. Its total receipts stood at ₹14.92 crore. This means commercial income made up 24.48% of total receipts.
As a result, the income exceeded the 20% cap under the proviso to Section 2(15). Therefore, the association lost its tax exemption for the 2018–19 assessment year.
Activities Seen as Commercial
The tribunal said the restaurant and bar operations ran in a “systematic and continuous” manner. It added that these services were offered for a fee.
Moreover, limiting services to members did not change their commercial nature. The tribunal made it clear that such activities still count as business operations.
Supreme Court Ruling Applied
The tribunal relied on the ACIT (Exemptions) vs Ahmedabad Urban Development Authority ruling.
It said the “dominant purpose test” cannot override the law once the commercial income limit is breached. In other words, even if the main goal is charitable, the exemption cannot continue if commercial receipts cross the threshold.
Earlier Relief Reversed
Earlier, the Commissioner of Income Tax (Appeals) had allowed the exemption in an order dated August 14, 2025. The authority had said the restaurant business was only incidental to promoting golf.
However, the Income Tax department challenged that order. The tribunal agreed with the department and restored the assessing officer’s order dated April 6, 2021.
As a result, the association’s surplus of ₹3.3 crore will now be taxed.
Separate Proceedings Ongoing
Separately, the department has started proceedings to cancel the association’s registration under Sections 12A and 12AB. This cancellation is proposed from April 1, 2021.
However, the tribunal did not examine this issue in the current appeal.
