TaxTMI 
TaxTMI 
2010 (9) TMI 533
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....orts Association working for the advancement and promotion of games and sports, particularly cricket in the State of U.P. It was affiliated to the BCCI and was responsible for organizing of the prestigious Cricket tournaments including Ranji Trophy, test matches and One day International in the State of U.P. 4. The assessee-society has accumulated Rs. 5,05,26,154 as on 31-3-2005. A sum of Rs. 50 lacs was set apart and accumulated during the year under section 11(2) of the I.T. Act. The assessee had applied a sum of Rs. 6,80,781 and the balance amount of Rs. 5,48,45,373 was available with it on 2nd September, 2005. As per resolution dated 3-9-2005, in the extraordinary General Meeting, it has been resolved that the association stands dissolved and its assets, liabilities and functions were transferred to a new company, namely, M/s. Utter Pradesh Cricket Association licensed under section 25 of the Companies Act, 1956. By a simultaneous resolution in the meeting of Board of Directors on 3-9-2005, the aforestated Uttar Pradesh Cricket Association had taken over all the asset, liabilities and functions of the assessee. 5. The accounts of the assessee were closed on 2-9-2005 in pursua....
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....anting the exemption. It was also contended that the funds were transferred to the aforestated company M/s. Uttar Pradesh Cricket Association, which had taken over all the assets, liabilities and had similar objects and functions of the assessee and the funds were therefore transferred by the assessee to another institution engaged in the similar nature of work i.e., conducting and promoting sports in the State of UP. 8. The AO rejected the explanation of the assessee as per decision in para 7.1 of the assessment order dated 10-2-2008 under section 143(3) of the I.T. Act and held that the accumulated funds under section 11(2)of the I.T. Act amounting to Rs. 5,48,45,373 were deemed to be the income of the assessee-society for the assessment year 2006-07 for the reason that the assessee had violated the provisions of section 11(3)(d) of the Act in sofar as it has transferred its accumulated funds to the company, Uttar Pradesh, Cricket Association. The total taxable income was accordingly determined at Rs. 5,55,26,154 which also included addition of Rs. 6,80,781 on account of deemed income as per provisions of section 11(3) of the I.T. Act made as per discussion in paras 7.3 and 7.4 ....
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....IT (1998) 229 ITR 534(SC). 11. The ld. Counsel for the assessee reiterated the submissions made before the lower authorities. He also submitted that the provisions of the Income-tax Act are to be liberally construed and the ld.CIT (A) has rightly held that as per the second proviso to section 11(3A) of the Act if the trust or institution, which has invested or deposited its income in accordance with the provisions of section 11(2)(b) of the Act, is dissolved, the AO may allow application of such income for the purpose referred to in section 11(3)(d) in the year in which such trust or institution was dissolved. He also pointed out that earlier as per proviso to section 11(3A) of the Act, in case due to circumstances beyond the control of the trust or institution in receipt of the income, the accumulated income could not be applied for the purposes for which it was accumulated or set apart, transfer of any such accumulated income to other charitable trusts/institutions was not allowed as application of income towards charitable purposes. But, in order to remove the hardships, the Finance Act, 2003 amended the proviso to sub-section (3A) of section 11 so as to empower the AO to allow....
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....ble institution registered under section 12A of the Act, it cannot be accepted that the transfer of funds accumulated by it to the aforestated Uttar Pradesh Cricket Association was not application of funds as per section 11 of the Act only because the accumulated profits have been transferred in violation of the Societies Registration Act. 13. The decisions relied upon by the ld.D.R. with due respect, are of no help to the Revenue, In the case of Maddi Venkataraman and Co. (P.) Ltd. (supra), the Hon'ble Supreme Court was dealing with a case where the assessee had indulged in transactions in violation of the provisions of Foreign Exchange (Regulation) Act and the loss incurred by the assessee was not accepted as justification for contravention of law. The Hon'ble Supreme Court did not allow the expenditure incurred for offending the provisions of the Act and the penalty levied for such evasion, as deduction. It was held that to allow the benefit of deduction under one statute or any expenditure incurred in violation of the provisions of another Statute or any penalty imposed under another Statute, would be against public policy and the penal provisions of the Foreign Exchange Regul....