TaxTMI 
TaxTMI 
2019 (9) TMI 624
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.... following grounds:- "1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the additions of Rs. 54,84,00,000/- on Infrastructure subsidy received from BCCI denying exemption u/s.11(1)(d) of the Income Tax Act, 1961 on corpus donation without any 'specific direction' for the purpose. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of 'Bogus Donation' claimed on account of expenses relating to Tournament & Trophy and Ranji Trophy without considering that the expenses could not be substantiated during the assessment proceedings. 3. That on the facts and circumstances of the case, the decision of the Ld. CIT(A) is perverse in allowing expenditure without establishing genuineness of the same particular in the context that in the next assessment year, i.e., 2015- 16, the assessee itself suggested for special audit of its books of accounts regarding the claim of expenditure. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing administrative and establishment expenses as application of income. 5. That....
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....frastructure fund given for construction of cricket stadium he held that, he is following his own decision for the Assessment Year 2012-13 taken in the assessee's own case in Appeal No. CIT(A), Kolkata-25/10144/2015-16, order dt. 06/01/2017, wherein he has held that the assessee has filed intimation u/s 11(2) and had deposited the amount as specified u/s 11(5) of the Act and alternatively that Section 11(1)(d) of the Act applies as the amount in question was received with a specific direction. He further held that the amount was given by BCCI specifically for construction of a cricket stadium and the assumptions of the Assessing Officer that the receipts are not donation since BCCI will be hosting cricket matches in future is a wrong assumption at para 7.3. of his order, he held as follows:- "7.3 To wind-up on this issue: Firstly, following my appeal order in the case of this same appellant for the AY 2012-13 [supra], the facts being the same/identical, the issue is Allowed. It is the case of section 11(l)(a) r.w.s. 12(1), and as the amount could not be applied, for accumulation u/s 11(2) - the funds having been already deposited/invested in the modes specified in....
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.... the assessee by the decision of the Ranchi Bench of the Tribunal in the case of M/s. Jharkhand State Cricket Association vs. DCIT(E), Ranchi in ITA Nos. 157 to 159/ Ran/2017 order dt. 15th March, 2019, wherein it has been held as follows:- "12. We now take up the issue as to whether the proviso to Section 2(15) of the Act, can be applied in the facts and circumstances of the case. Admittedly, the main and predominant object of the assessee company is to promote the game of cricket. There is no dispute between the parties that this object falls under the fourth limb of the definition of charitable purpose given u/s 2(15) of the Act i.e. "object of general public utility". The Assessing Officer came to a conclusion that the assessee is carrying on commercial activity in the nature of trade, commerce or business as the assessee has received amounts from BCCI on account of IPL Subvention, TV rights subsidy from BCCI, Instedia Advertisement etc. In our considered opinion, these receipts from BCCI cannot be considered as income received from activities in the nature of trade, commerce or business. The pith and substance of the argument of the ld. D/R is that the nature....
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....f activities of an entity other than the assessees- something which law does not permit. We are not really concerned, at this stage, whether the allegations about commercialization of cricket by the BCCI are correct or not, because that aspect of the matter would be relevant only for the purpose of proviso to Section 2(15) being invoked in the hands of the BCCI. We donot wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the BCCI. Suffice to say that the very foundation of revenue's case is devoid of legally sustainable basis for the short reason that the commercialization of cricket by the BCCI, even if that be so, cannot be reason enough to invoke the proviso to Section 2(15). We are alive o learned Commissioner (DR)'s suggestion that the cricket associations cannot be seen on standalone basis as the BCCI is nothing but an apex body of these cricket associations at a collective level and whatever BCCI does is at the behest of or with the connivance of the local cricket associations, and that it is not the case that anyone can become a Member of the BCCI because only a recognized cricket association can become a Member ....
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.... Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. We have carefully analysed the annual reports and the annual financial statements of the assessee, and we....
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.... dated 5th March 2013 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10. 45. In ground nos. 1 and 2, the grievances raised by the appellant are as follows: The learned CIT(A) has erred in law and on facts in denying the applicability of Sec. 11 including 11(1)(b) and holding that the assessee is not carrying on charitable activity. (a) The learned CIT(A) has erred in law and on facts in not accepting the claim of the assessee that the assessee is carrying on 'Educational Activity', and hence the amendment to Section 2(15) w.e.f 01-04-2009, vis-a-vis "business" is not applicable to assessee. (b) The learned CIT(A) has erred in law and on facts in holding that on the facts of case of the assessee proviso to Sec. 2(15) inserted w.e.f. 01-04-2009 is applicable, and is carrying on business. 46. So far as these grounds of appeal are concerned, we have, in our detailed analysis earlier in this order, held that the proviso to Section 2(15) does not come into play on the facts of these cases. Accordingly, we uphold the plea of the assessee to this extent. The....
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....ed all along as corpus donations, and, therefore, the corpus donation received by the assessee, though termed as TV Rights, is not taxable. The Assessing Officer noted this contention as also the fact that under section 11(1)(d), what cannot be included as total income of the assessee is "income by way of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution". The Assessing Officer was of the view that what has been paid to the assessee is a share out of earnings by the BCCI, out of proceeds of sale of TV rights, and is, as such, taxable as income of the assessee. It was observed that it cannot be said to be voluntary contribution by the BCCI. The Assessing Officer also shows that as accepted by the auditor of the company the amount is relatable to the TV rights and it cannot, therefore, be treated as voluntary contribution in the nature of corpus donations. He also noted that as registration of the assessee, under section 12AA, stands cancelled, the assessee is anyway not eligible for the benefit of Section 11(1)(d). On the basis of this line of reasoning, the Assessing Officer treated the said amoun....
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....quired to be treated as corpus donation not includible in total income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by a separate written document. The contribution has to be voluntary and it has to be with specific direction that it will form corpus of the trust'. These conditions are clearly satisfied. Any payment which the assessee is not under an obligation to make, whatever be the mode of its computation, is a voluntary payment, and, any payment which is with a specific direction that it for corpus fund is a corpus donation. In our considered view, even without the two specific confirmations filed by the assessee, in the light of the BCCI resolution under which the payment is made and in the light of the payment not being under any legal obligation, the conditions under section 11(1)(d) are satisfied. We, therefore, uphold the plea of the assessee. The Assessing Officer is accordingly directed to delete this addition of Rs. 1,58,00,000. 50. We see no reasons to take any other view of the matter than the view so taken in assessee's own case. Respectfully following the same, we uphold the....
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....nce Act, 2010, w.e.f. 1st June, 2010, therein empowering the CIT to cancel the registration granted under the stated circumstances, reads as under : Provision inserted under the Finance Act, 2004 : '12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.' 31. After the amendment in the year 2010, s. 12AA(3) of the IT Act reads as follows : '12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) or has obtained registration at any time under s. 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the CIT is satisfied that the activities of such trust or i....
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....laimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy is commercial. As regards conducting of IPL matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of s. 2(15) of the Act after the amendment come in effect from 1st April, 2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the ....
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....There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility. 56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket associations which organise the matches in their stadia. The franchisees conduct matches in the stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70 per cent of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking s. 12AA r/w s. 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by th....
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.... (b) For an assessee to be classified as charitable under the residuary category i.e. "advancement of any other object of general public utility" under s. 2(15) of the Act, the following four factors have to be satisfied : (i) Activity should be for advancement of 'general public utility'. (ii) Activity should not involve any activity in the nature of trade, commerce and business. (iii) Activity should not involve rendering of services in relation to any trade, commerce or business. (iv) Activities in clauses (b) and (c) above, should not be for a fees, cess or other consideration, the aggregate value of which should not exceed the amount specified in the second proviso to s. 2(15). (c) The earlier test that if the income so collected, is applied towards the charitable activity, then the trust cannot be held as non-charitable, is no longer relevant after the statutory amendment. (d) The scope of the term "activity in the nature of trade, commerce or business" would mean that : (i) It is undertaken with the profit motive; (ii) The activity is continued on sound and recognized business principles and is p....
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....nd coloured view will be counterproductive and contrary to s. 2(15) of the Act. (m) Accumulation of money/funds over a period of two to three years may not be relevant in determining the nature and character of activity and whether the same should be treated indicative of profit motive i.e. desire or intention to carry on business or commerce. (n) The so-called business activities, when intrinsically woven into and is part of the charitable activity undertaken, the business activity is not feeding charitable activities, as they are integral to the charity/charitable activity. (o) What has to be seen is as to what is the core/main activity of the assessee. The predominant activity shall be the basis of decision making. 10.5 Applying these propositions to the facts of this case, we observe that : (a) the Director of IT (Exemption) at para 9 of his order agrees that the assessee is carrying on activity of "general public utility", which means that the charitable nature of assessee's activity is not disputed by the Revenue. Thus the Director of IT (Exemption) has contradicted himself by holding on one hand, that the assessee is ....
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....iation were not considered by the Hon'ble Madras High Court, as activities in the nature of "trade, commerce or business". There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 10.9 Thus respectfully following the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from (a) ground booking charges, (b) health club charges, (c) income from corporate boxes, (d) lawn booking income, (e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in the nature of "trade, commerce or business". These receipts are intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not "trade, commerce or business" activities. 11. We now take up each of the issues raised by the learned Director of IT (Exemption) in his order. ....
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....loss. But for making it as business activity, the presence of profit motive is a sin qua non i.e. condition precedent at the time of entering into transaction. In this case the facts demonstrate that despite the receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by the assessee. Thus this adjustment resulted in subsidizing the cost of the assessee and hence there is no profit motto. This cannot be termed as business activity. Similar is the view of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra). 11.3 On the issue of sale of liquor, it was submitted that initially DDCA was formed as a club to take over the assets and liabilities of the association called, "Delhi Cricket Association". He referred to the objects and submitted as follows : "One of the objects as given in the MOA of DDCA is to lay ground for playing game of cricket and to provide pavilion, refreshment rooms and other facilities in connection therewith. Therefore, an eatery was established which was eventually shaped as a canteen for the benefit of the members as well as few other persons associated with DDA e.g. players, c....
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....ination has to be done and the aggregate of expenditure incurred for the same is Rs. 238 lakhs. It was submitted that the DDCA initially meets this expenditure out of its own sources and thereafter the BCCI and legal franchisee contribute and compensate part of this expenses. The same arguments as were advanced by the assessee in the cases where sponsorship money received, were made here also. The summary of the submissions are as follows : "Our respectful submission is that, as we have given detailed submission in earlier part of our submissions wherein we have made analysis of receipts as well as of the expenses incurred by the assessee. The analysis of expenses has revealed that the expenses have been incurred on the promotion of the game of cricket. These expenses have been incurred either for the development of game of cricket or the development of players. There is no other cause or item for which any amount has been spent by the assessee. Similarly, when we analyse the receipt side, we would find that the receipts are directly or inextricably linked with the organizing of matches and tournaments or for promotion of game of cricket in any other manner or for....
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....t done any activity beyond and outside its objects; and (d) there is no change in facts so as to deviate from the stand taken by learned AO in all the past years accepting the claim of the assessee all along on facts as well as on law." 11.8 In view of our decision of sponsorship and such other receipts, we agree with the arguments made by the assessee. Regarding sale of tickets, the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, Rs. 200 per ticket are levied, with a sole intention to control the crowds and that the cost incurred per ticket is much more than the amount which is charged for ticket. Under these circumstances, the sale of tickets cannot be considered as an activity of "trade, commerce or business". We agree with the submissions of the assessee. 11.9 Regarding playing cards, it is an incidental recreation activity undertaken in most clubs and what is charged by the assessee goes to recover the costs for providing such recreation facility to its members. The receipts are miniscule and hence, negligible. 11.10 Similarly as far as receipt from health club is concerned, we find that only a ....
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....for exemption u/s 11 & 12 of the Act. The grounds are allowed accordingly. 15. The next issue that comes for our adjudication is whether the infrastructural subsidy received from BCCI is a revenue receipt or a capital receipt. This issue was also considered by the Ahmedabad D Bench of the Tribunal and it was adjudicated that the receipts in question are in the capital field. Consistent with the view taken therein, we allow this ground of the assessee." 5.3. Respectfully following the proposition of law laid therein and as the order of the ld. CIT(A), on this issue is in line with the view taken by the Ranchi Bench of the Tribunal we uphold the order of the ld. CIT(A) on this issue and dismiss this Ground No. 1 of the revenue. 6. Ground No. 2, in our view does not arise from the assessment order. There is no finding in the assessment order that certain donations are bogus donations. Hence, this ground raised by the revenue is misconceived and dismissed as such. 7. Ground Nos. 3 & 4 are on the issue of expenditure claimed by the assessee. The ld. CIT(A) at para 8.2. has discussed the issue at length. He has held that the disallowance u/ 69C of the Act, cannot ....