TaxTMI 
TaxTMI 
2013 (5) TMI 155
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....he main objects. 3. The main object of the assessee is to maintain a general control of the game of cricket in the State of Tamil Nadu and in the Union Territory of Puducherry and give its decision on all matters concerning the game either when referred to or suo motu. The Association proposes to spread the game throughout the State of Tamil Nadu by organising tournaments, including Inter-University, Inter-School and Inter-Association Matches, to educate young sportsmen in the game generally and also in the field of physical culture and the spirit of sportsmanship. It is declared that the benefits would be available to the general public irrespective of caste, creed, religion or sex. The objects of the Association continue to state as to maintain a library, to communicate with public authorities in India and abroad, to provide, acquire and maintain play grounds and other facilities, to act in tandem with similar Associations for the development of cricket, etc. It also provides for conducting coaching for the benefit of cricketers and also to do all other lawful and possible needs to promote the overall development of the sports of cricket within its jurisdiction. 4. The inci....
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....added to the main body of definition provided under section 2(15). The said proviso reads as below : "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity." 9. The result of the amendment brought in by the Finance Act, 2008 with effect from April 1, 2009 by inserting the above proviso to section 2(15) is to explain the scope of the expression "advancement of any other object of general public utility". The general expression earlier stood in the provision of law stated under section 2(15) as "advancement of any other object of general public utility" was very wide, so that even activities of commercial nature were coloured as charitable activities by applying the touchstone that those commercial activities are of general public utility. It is in order to bridle the uncontroll....
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....008. He accordingly cancelled the registration exercising the powers conferred on him under section 12AA(3) of the Income-tax Act, 1961. 13. The assessee is aggrieved and, therefore, this appeal before us. 14. It is useful to reproduce the relevant portions of the grounds of appeal raised by the assessee before the Tribunal as under :- "1. The Director of Income-tax (Exemption) erred in invoking his jurisdiction under section 12AA(3) of the Income-tax Act (the Act) cancelling the registration granted to the appellant under section 12AA with effect from April 1, 2009. 2. The Director of Income-tax (Exemption) failed to appreciate that he could not have passed the impugned order under section 12AA(3) of the Act as the pre-conditions necessary for invoking the provisions of the said section, viz., the appellant's activities (a) are not genuine or (b) are not being carried out in accordance with its objects, had not been fulfilled in the present case. 3. The Director of Income-tax (Exemption) erred in holding that the activities of the appellant were not charitable and in such a case its activitie....
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.... It is not carrying on any other activity. The assessee is carrying on the very same activities, for which it is established and, therefore, the Director of Income-tax (Exemptions) has no reason to satisfy that the activities carried on by the assessee are not genuine. For the same reason, it is not possible for the Director of Income-tax (Exemptions) to hold that the assessee is not carrying on its activities in accordance with the objects declared in its Memorandum of Association. 16. The learned counsel further explained that the registration under section 12AA has been granted to the assessee after satisfying that the assessee is established for carrying on activities of promoting and developing the game of cricket. The assessee is actually carrying on its activities in pursuance of those objects. The matter being so, the registration already granted under section 12AA can be cancelled only under two specific circumstances, namely : (i) the authority is satisfied that the activities of such trust or institution are not genuine, and (ii) the authority is satisfied that the activities of the assessee are not being carried out in accordance with its declared objects. 17. In ....
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....s of section 12AA(3) for the purpose of cancelling the registration. 20. We heard Shri Guru Bashyam, the learned Joint Commissioner of Income-tax, who appeared for the Revenue. 21. The learned officer explained that The Tamil Nadu Cricket Association was registered as a charitable society with the main object of promoting and developing the game of cricket in Tamil Nadu and Puducherry and also to develop the overall scenario of sports and physical activities in these two States. But, on examining the details of the activities carried on by the assessee, the Director of Income-tax (Exemptions) has come to a conclusion that the assessee is not carrying on the activities for which it was registered, but it is carrying on activities of commercial nature, even though the activities are centred around the game of cricket. The assessee is collecting substantial amounts by way of sale of tickets while conducting National and International Matches, including One Day Internationals and Indian Premier League (IPL) Matches. In addition to the income derived out of sale of tickets, the assessee is generating huge amount of income out of advertisement revenue arising out of the telecast ri....
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....re was the intention of participating the public in the development of the game of cricket, but now it is not so. The public are not participating in the development of the game. They are only spectators to view the costly matches played in the stadium. Therefore, the second condition provided in section 12AA(3) is satisfied in the present case. The first condition is also satisfied inasmuch as the present activities carried on by the assessee are not genuinely for the benefit of public. 27. Therefore, the learned officer submitted that in the facts and circumstances of the case, the Director of Income-tax (Exemptions) is justified in cancelling the registration to the assessee under section 12AA(3) of the Income-tax Act, 1961. He submitted that the appeal filed by the assessee may be dismissed. 28. We have heard both sides in detail, considered the rival contentions, perused the orders of the lower authorities and also considered the case laws and the decisions cited before us. 29. Before insertion of the first proviso to section 2(15) with effect from 1st April, 2009, the inclusive definition of "charitable purpose" has made reference to relief of the poor, education, me....
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....arrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. 34. The present case now placed before us is to be examined in the above background of genealogy of the concept of "charitable purpose". 35. In his order passed under section 12AA(3) of the Act, the learned Director of Income-tax (Exemptions) has examined the components of the total receipts accounted by the assessee for the financial year 2008-09, relevant to the assessment year 2009-10. The total receipts accounted by the assessee comes to Rs. 34,25,86,309. Out of the above total amount of receipts, a sum of Rs. 26,82,38,072 was received from BCCI. The assessee has stated that the said sum of Rs. 26,82,38,072 is a subsidy given by the BCCI. Out of the said amount of Rs. 26,82,38,072, the amount given by BCCI towards IPL matches is Rs. 10 crores. The balance of Rs. 16,82,38,072 was given by BCCI towards test matches and in particular relating to television subsidy. Another ma....
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.... for which the assessee was formed and registration under section 12AA was granted. In that way, the Director of Income-tax (Exemptions) held that the case of the assessee has satisfied the requirement of first limb of section 12AA(3) so as to justify the cancellation of 12AA registration. The Director of Income-tax (Exemptions) also held that as a consequence, the second limb is also satisfied. 39. Regarding the composition of the receipts of the assessee for the financial year 2008-09, there is no scope for any dispute. The heads, under which different receipts were accounted by the assessee, have been extracted in the order of the Director of Income-tax (Exemptions). On an examination of the nature of receipts made by the assessee, it is obvious that the main source of revenue of the assessee is what is called "subsidy" from BCCI. It is explained by the assessee as in the nature of grant. This subsidy amounted to Rs. 26,82,38,072. We agree with the finding of the Director of Income-tax (Exemptions) that the expression of subsidy/grant from BCCI is a misleading nomenclature. In fact, it is not a subsidy/grant given by the BCCI. It represented the share due to the assessee in t....
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....t cricket matches. The costs of tickets are very high. It is not possible for a layman to buy a ticket and witness a cricket match. The advancement of an object of general public utility cannot be disassociated from general public which includes poor and laymen. 44. In the course of hearing of the case, we have asked the learned counsel as to whether the assessee is issuing free/concessional tickets to witness the cricket matches to the so called slum-dogs and other poor people ? The learned counsel fairly and honestly replied that they do not give such free/ concessional tickets to the poor people to come and witness the highly celebrated cricket matches. On the other hand, the assessee is issuing free tickets to VIPs and high dignitaries of the society, that too after paying entertainment tax on those free tickets. Whose interest is being looked after by the assessee by showing this differential attitude ? ; of course, not of general public. 45. Therefore, it is to be seen that almost the entire income of the assessee is generated out of activities of commercial nature oriented towards earning hyper-profits. These activities contributed 86.5 per cent of the receipts of the ....
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....rying on its activities in accordance with its objects. To support the same, the learned counsel has also relied on two decisions of the Income-tax Appellate Tribunal. The first decision is that of the Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association v. DIT (Exemption) [2012] 19 ITR (Trib) 520 (Ahd) in ITA No.93(Ahd)/2011, dated January 31, 2012 and the other one is that of the Nagpur Bench rendered in the case of Vidarbha Cricket Association v. Commissioner of Income-tax-I, Nagpur in ITA No. 3/Nag/10, dated May 30, 2011. 50. We respectfully subscribe to the legal proposition laid down in the above judgment of the honourable Madras High Court and in the orders of the Tribunal. Registration granted under section 12AA can be cancelled only if any of the two conditions stated in section 12AA(3) are satisfied, i.e., the activities of the trust are not genuine or the institution is not carrying on the activities in accordance with its objects. We have absolutely no quarrel with the above legal proposition. 51. But, while presenting those cases under their respective jurisdictions, certain important facts of the cases seem to have not been highlighted before th....
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....and the decisions cited by the learned counsel are not applicable to the present case for the reason that only one aspect of the issue was presented before the honourable court and co-ordinate Benches of the Tribunal. The necessary link between charity and the activities has not been highlighted before their Lordships and before the co-ordinate Benches of the Tribunal. It is necessary for the purpose of section 2(15) that the objects are carried out not only in their physical aspect but also in their conceptual framework, so as to claim the benefit of registration under section 12AA. In the present case, the conceptual framework has not been followed. 55. The Director of Income-tax (Exemptions) has clearly stated that the activities of the association are not in the nature of activities for advancement of any object of general public utility. But the activities involve carrying on activity in the nature of trade, commerce or business or any other activity of rendering any service for a cess or fee. Therefore, it is clear that the first proviso inserted under section 2(15) hits the case of the assessee. 56. There cannot be a conflict between the first proviso inserted under se....