TaxTMI 
TaxTMI 
2019 (9) TMI 681
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....has failed to appreciate the arrangement of conducting Indian Premier League cricket (IPL) matches agreed between BCCI and Kings XI Punjab and the role of appellant therein. Therefore, the conclusions drawn are not sustainable. ii) That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on the facts in not following the ratio laid down by the Apex Court in the case of Addl. CIT V. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 / [1979] 2 Taxmann 501, which is still applicable to the appellants case even after the insertion of first proviso to section 2(15) of the Income Tax Act, 1961 from the A.Y. 2009-10. iii) That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on the facts in not following the ratio laid down by the Hon'ble ITAT, Bench "A" judgment in the case of M/s Tamil Nadu Cricket Association V.DDIT (Exemption) Chennai ITA No.1535, 1536 & 1537/Mds/2014 dated 14/08/2015, on similar set of facts. iv) That the Ld. Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in denying exemption under sections 11/12 of the Income Tax Act, 1961. ....
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....on is also being granted to those Associations who do not participate. The system of subsidy paid to the State Associations BCCI to control the budget. iv) Service Charges for IPL (Net):- Net income after meeting the expenses of Indian premier league during the year. v) Income from Members by way of contribution and use and facilities:- Received from members towards annual subscription and use of facilities like Swimming, Lawn Tennis, Billiard/Pool, Health Centre, Booking of hall & lawn etc. vi) Income from International Match (Net):- Net Income after meeting out the expenses of international matches during the year. vii) Interest from Bank:- Interest received from various banks on FDRs and saving accounts. viii) Other Income:- Received from members towards Guest charges, Penalties, Sale of application forms, District affiliation fees and Protest fees etc." The assessee further submitted to the assessing officer that as per the Memorandum and Articles of Association of the assessee Association, the main object of the assessee society inter alia was to create, foster and maintain friendly relation with and amongst the population of the....
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....5.2 of the impugned order of the CIT(A) :- "5.2 Appellant made submission as under:- i) The appellant was eligible for deduction u/s 11 as it was duly granted registration u/s 12A. This registration was withdrawn by the CIT-II, Chandigarh vide his order dated 31.03.2009 from the A.Y. 2009-10 onwards on the ground that with the amendment of section 2(15) by the Finance Act, 2008 the appellant cannot be regarded as Charitable organization. Here it is pertinent to mention that the said order was quashed by the Hon'ble Bench "B" of ITAT, Chandigarh vide their order dated 27.08.2009 and the registration u/s 12A was restored. This fact is evident from the observation of the Ld. A.O at the page No. 2, Para No. 3 of the assessment order. Therefore, it becomes very clear that the order of the ITAT, Chandigarh dated 27.08.2009 restoring the registration u/s 12A was fully effective on the date of passing of the assessment order and the reliance of the Ld. AO on the order of the CIT-II, Chandigarh that the appellant is not enjoying exemption u/s 12 is contrary to the facts stated above. ii) The registration u/s 12A was again cancelled by the Commissioner of Incom....
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....on of sport and cannot be viewed separately. Without prejudice to above the appellant is maintaining separate books of accounts in respect of all above club activities. Moreover these facilities are being provided on the principle of mutuality. Accordingly these cannot be termed as trade, commerce or business activity. vi) During the year under consideration appellant received Rs. 15,74,147/- from M/s Silver Services as share for providing catering services in the restaurant of the appellant. This share is charged from the caterer on account of maintenance, wear and tear, electricity expenses etc. of the restaurant as all the above expenses are borne by the appellant. It was submitted that the receipts from the caterer for providing catering service during the matches is intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. Accordingly this cannot be considered as business even there is some surplus. Appellant placed reliance or the decision of Hon'ble Supreme Court in the case of M/s Surat Art Silk Cloth Manufacturer Association (supra) in this regard. It was submitted that the appellant is running club on the princ....
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....in its order dated 19.10.2015 relied upon the propositions laid down by ITAT, Amritsar Bench in deciding the issue of cancellation of registration in the case of appellant and held as under:- "(v). In order that the benefits under section 11 are declined to the assessee on the ground that it is engaged in such activities as may be hit by the first proviso to section 2(15) not only the assessee must be engaged in carrying out such activities as may hit the first proviso to section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of the grant or withdrawal of registration since the registration exercise is a onetime exercise and not something which must be done for each assessment year separately. That is precisely the reason, as noted in the Explanatory Memorandum, as to why the remedy for the activities being hit by the first proviso to section 2(15) lies not in grant, decline or withdrawal of registration but in declining the benefits of exemption....
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....h assessee is a beneficiary. In my considered opinion the appellant has rendered services in relation to the business activity and therefore, is hit by the first proviso to section 2(15) of the Act. Decisions relied upon by the appellant on the principal of mutuality are distinguishable from the facts in the case of the appellant, as the appellant has not generated the income from its facilities in pursuance of its dominant object of the activity. Therefore, the assessee society ceases to be for charitable purpose and the benefits of deduction u/s 11(2) are not available to the assessee. Assessing Officer has given reasoned finding in the assessment order and the same are upheld. Grounds of appeal taken by the appellant are dismissed." 9. Aggrieved by the above order of the CIT(A), the assessee has come in appeal before us. 9.1 Shri Ajay Vohra, Ld. Sr. Counsel for the assessee has addressed orally, besides that written submissions have also been filed on behalf of the assessee. It has been submitted that the Registration of the assessee Cricket Association as a 'Charitable Organization' u/s 12 of the Income Tax Act, 1961 (in short 'the Act') has been restored.' Inviti....
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....or promotion of the sport of cricket. That even as per the rules and regulations of the BCCI, the BCCI is not obliged to distribute the earning generated by it to State Cricket Associations and no such association, can claim, as an integral right, share in the earning of the BCCI. 9.3 To apprise us about the nature, quantum and manner of the grants given by the BCCI to member State Associations, Mr. Vohra, the Ld. Sr. Counsel has drawn our attention to the page 77 of the paper book, which is the copy of minutes of 79th Annual General Meeting of the BCCI held on 27.9.2008, to submit that as per the said document, the TV subsidy to members association of BCCI was payable as under:- "1. Staging Test & ODI - Rs. 18,59,47,343/- 2. Staging Test - Rs. 16,82,38,072/- 3. Staging ODI - Rs. 14,97,23,835/- 4. Non Staging - Rs. 13,81,32,312/- The total TV subsidy amount payable to Associations for the year 2007-08 is Rs. 371,89,46,858/-." 9.4 Mr. Vohra, has further contended that even if a Member State Associations does not provide any assistance in holding of the IPL matches or when the IPL match is not hosted or ....
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....le except specially provided under the Act such as gifts u/s 56 of the Act. That as per the provisions of section 2(24) (iia) of the Act, the voluntary contribution received by a trust created wholly or partly for charitable / religious purpose has been included in the definition of income. That in such circumstances, grants, voluntarily contribution received by a non-charitable institution would fall in the definition of capital receipt not exigible to tax. 9.7 The Ld. Counsel has further submitted that whatever is the income of the assessee, including grants received from BCCI, that is applied for attainment of objects of the assessee society i.e. mainly for promotion of the game of cricket. That to achieve it objects, the assessee is running a Regional Coaching Centre, wherein, gaming equipment / material is also provided such as cricket balls, cricket nets etc. The assessee also distributes grants to the District Cricket Associations attached with it for the purpose of laying and maintenance of grounds, purchase of equipment etc. and as well as for holding of matches and for the purpose of promotion of game of cricket by the District Cricket Association. The assessee conduct....
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....and that mere surplus from incidental or ancillary activities did not disentitle claim of exemption under section 11 of the Act. The Ld. counsel has further relied upon the composite decision of the Hon'ble Punjab & Haryana High Court in the cases of 'The Tribune Trust vs CIT' &, CIT (Exemptions) vs Improvement Trust, Moga' [2017] 390 ITR 547 (P&H) and has submitted that the Hon'ble High Court has approved the predominant object theory that is, if the predominate motive or act of the trust is to achieve its charitable objects, then merely because some incidental income is being generated, that will not disentitle the trust to claim exemption u/s 11 read with section 2(15) of the Act. That all the incidental income/surplus so earned by the assessee in the course of advancement of its objects of promotion of game of cricket has been ploughed back for charitable purposes. That, profit making is not the motive of the assessee and the only object of the assessee is to promote the game of cricket. That the Hon'ble P&H High Court in the case of 'Moga Improvement Trust' (supra) has held that if the trust is not set up with a motive of making profits but during carrying on of it....
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.... part of the same hereunder: " I) ..... II) The relevant section 2(15) is reproduced below for the sake of convenience: "(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: 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: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is (ten lakh rupees) or less in the previous year." III) CIRCULAR NO. 11/2008, DATED 19/12/2008 The definition and rationale of 'Ch....
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....l Report of BCCI unhesitatingly proclaims the glamorous world of India Premier League being the brain child of Lalit Kumar Modi. It is dubbed as best ever reality TV shows. The concept of IPL is described as merger of sport and business. The report highlights that it is for the first time that any Indian sport has adopted a franchisee model and conducted a Players' auction. It mentions at page 15 that BCCI went about looking for potential buyers to BUY a franchise in the league. "Presentations were made to corporate houses, film stars and the likes to inform them about the Business of Sports and how this could well turn out to be a lucrative investment option with good ROI, given the passion for cricket in India post the presentations of, affair and transparent bidding process saw Shah Rukh Khan, Preity Zinta, RIL Pvt. Ltd., GMR Holdings, UB Group, Indian Cements Ltd., Deccan Chronicle and Emerging Media pick up the eight franchise of offer in the inaugural addition of the DLF Indian Premier League. The rights for the Mumbai franchise were won by RIL Pvt. Ltd. with a bid of US $ 111.9 million, which was also the highest." At page 16 of the report it is mentioned- ....
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....e BCCI-IPL are charitable in nature. B. 38TH REPORT OF STANDING COMMITTEE ON FINANCE-15TH LOK SABHA The 38th Report of Standing Committee on Finance was presented to Lok Sabha on 2nd August, 2011. The subject matter of 38th Report was Tax assessment/Exemptions and related matters concerning IPL/BCCI. During the examination of the subject by the Standing Committee the following important issues were discussed (page 9 of the Report). i) Formation of IPL teams; ii) Funding pattern of the IPL and the franchisees; iii) Violations of Income tax Laws, Prevention of Money Laundering Act, Foreign Exchange Management Act (FEMA) and Companies Act by the IPL franchisees and their associates; iv) Tax exemptions granted of BCCI; v) Tax assessment of IPL; vi) Award of Media rights; vii) Decision making process in the BCCI/IPL etc. The Report at page 31 mentions that auction for IPL-1 which took place on 24.01.2008 went on to fetch $ 723.59 million against the base price of $ 400 million. It further, highlights the huge amount of investments made by various entities that made successful biddings for the IPL (....
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..... 10,000, 20,000 and Rs. 1,00,000/- depending upon the City in which the matches were held and the importance of matches. In some matches, luxurious facilities of food and beverages were also provided to the spectators. The franchisee teams have submitted that no donations/ on-money etc. were collected for tickets with such luxurious facilities of foods and beverages. The high denomination ticket prices are stated to include provision for food and beverages. The IPL franchisees are stated to have included these ticket receipts in their total income. Some of the companies who were allotted a large bulk of tickets are the various State Circket associations, Nike, Idea, Cellular, Coca Cola, United Spirits Limited, Kingfisher, Jaiprakash Associates, Apollo Hospitals etc." The Standing Committee of Lok Sabha took cognizance of various irregularities in award of media rights and commercial contracts executed in the course of the IPL (page 80 & 81). It was observed that the IPL Governing Council allowed itself to be relegated to the position of a mere rubber stamp of the then Chairman, IPL. The then treasurer Sh. N. Srinivasan admitted before the committee the various irregularit....
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....its ninth season. True to its name, it has become a premier league. The fact that the IPL is the single largest revenue generator for the BCCI cannot be lost sight of. Without the IPL, much of the media attention and international interest would be lost...." The Committee at Chapter 2 (page 121) of its Report highlighted the Governance issue wherein at last para of the page 121 its states "There seems to be no collective interest in the game being promoted, and cricket stands without a custodian for its protection and propagation in its most passionately followed nation." At page 124 para (f) it is stated that no representation to women has been accorded by the BCCI. At page 132 it termed it as an unfortunate fact that Indian women cricket team had last played a test match 8 years ago. The committee also lamented at page 133 that there has been no suggestion in the BCCI for any promotion or association with cricket for the differently-abled. The Supreme Court Committee at chapter 9 of its report has highlighted the unhealthy practices of match fixing and betting. The above report clearly highlights the undisputable fact that there is absolutely no charitable work ....
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....clusion about the genuineness or otherwise of the activities of the assessee, however, at this stage, these factors coupled with other facts as discussed can not be totally ignored." BOMBAY HIGH COURT JUDGEMENT DATED 30/01/2018 The Bombay High Court in the concluding para of its Judgment dated 30/01/2018 in the case of Lalit Kumar Modi vs Special Director in WP No. 2803 of 2015 held as under:- "47. Before parting, we must indicate that it is because of the acts and deeds of the BCCI in relation to a tournament styled as IPL that all these proceedings had to be initiated and now conducted in accordance with the FEMA. If IPL has led to serious breaches and violations of the FEMA, then, it is high time the organizers realize that after 10 years of holding such tournaments what we have achieved can be termed as a gain or advantage or benefit for they are outweighed completely by the resultant illegalities and breaches of law, which are projected in several courts consuming a lot of precious judicial time. If the IPL has resulted in all of us being acquainted and familiar with phrases such as "Betting", "fixing of matches", then, the RBI and the Central Govern....
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....aking any charitable activity. V) 'INVOLVEMENT' OF PUNJAB CRICKET ASSOCIATION IN BCCI-IPL MATCHES The involvement of the Punjab Cricket Association in carrying on of activity in the nature of trade, commerce or business needs to be examined from the mandate of the amended proviso to section 2(15) which states: "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, unless----" A. The involvement of Punjab Cricket Association in hosting the IPL matches is absolute primarily by virtue of it being a Full Member of BCCI. As highlighted by the 38th Report of the Standing Committee on Finance, the IPL is not a separate legal entity. It is part of BCCI and is managed and controlled by a separate committee known as IPL Governing Council (page 30 of the Report). The entire expense....
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....CCI-IPL matches. The Stadium agreement is executed between PCA mentioned as the State Association. It is an unambiguous assertion that PCA is the State Association of BCCI i.e. the Federal constituent of the Central body (BCCI). ii) The IPL is a separate sub-committee unit of BCCI, its Central Body. iii) The BCCI-IPL is an owner of League whereas the PCA being the federal constituent of BCCI is the owner and operator of the stadium. It means that the federal constituent of the Apex Body is the owner of the stadium and is organizing the IPL matches in the stadium on the direction of BCCI. 2. Grant of Right (Articles 2.1 to 2.4). (i) The agreement states the BCCI - IPL(the central unit) wishes to be granted a right from the state association for the use of the stadium. It is inconceivable that the PCA could have refused granting the right of use of stadium to its central body. (ii) The Supreme Court Committee at chapter 2 (page 121) of its report (copy submitted to Hon'ble ITAT on the last date of hearting i.e. 25/05/2018) has highlighted the governance structure of the BCCI. At page 122 of its report mentioned the extent of concentration ....
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....adium. (ii) Article 3.18 mandates the PCA to take all reasonable steps to prevent the exercise of any right by any third party. It further mandates that the PCA shall use its best endeavor to make areas surrounding the stadium available for exploitation of the commercial rights. 6. Intellectual Property Rights (Article 3.19). (i) As per article 3.19 of the agreement the PCA as the State Association agrees to cooperate fully with BCCI-IPL and assist BCCI-IPL to take such action as are reasonably requested by BCCI-IPL to prevent infringement of commercial rights etc., in relation to any of the same. In the same article the PCA agrees to assist BCCI-IPL with local trading standard department, Police, private security arrangements, with a view to minimizing or eliminating certain exigencies pertaining to matches, advertising/promotions, unauthorized sale of tickets etc.. (ii) As per article 3.21 the PCA has waved in perpetuity all copy rights in respect of each match, all rights to incorporate any action, architectural feature etc., in stadium in any form of audio visual etc., in connection with matches or as publicity thereof, all rights to....
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....eral constituent and Full Member of BCCI had taken various steps/initiative at its own cost to ensure that the BCCImandated IPL matches are organized smoothly and are huge commercial success. The Tripartite Agreement and Schedules 1 & 2 annexed to it are clinching documentary evidences of the fullfledged involvement of PCA in BCCI-IPL matches. Moreover, the arrangement of receiving Rs. 30 lacs in lieu of certain facilities by the PCA including providing Stadium alongwith other facilities brings it directly in the ambit of proviso to Section 2(15) of Income Tax Act, 1961 The Tripartite Agreement, thus, clearly demonstrates that the assessee was involved in BCCI-IPL matches in a much more comprehensive manner than being a mere stadium provider as claimed. In fact, the BCCI-IPL matches would have not been possible in the first place without the stadiums owned by the Full Members /Federal Constituents of BCCI. (Pages 81 to 107 of assessee's paper book). VI) LEGAL ISSUES- a) Misplaced Reliance on the judgment of -Addl. Commissioner of Income Tax Vs Surat Art Silk Cloth Manufacturers Association 121 ITR 01 (SC)- by the assessee. During t....
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....is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Herrington v. British Railways Board [1972] 2 WLR 537 (HL). Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases." b) In view of the fact that the involvement of the Punjab Cricket Association in hosting the commercial venture of BCCI-IPL is not for charitable purpose and is predominantly a profit earning venture the ratio of Tribune Trust Vs CIT, Chandigarh (P & H) can safely be invoked. On the basis of facts of that case the Hon'ble High Court found that the case of Tribune Trust is hit by proviso to section 2(15). The Hon'ble Court held that the activities of Tribune Trust were carried on with predominant motive of making a profit. The Hon'ble Court at para 57 of its order also explored the possibility as to whether the subsequent use of the profits for purposes of the trust would save the assessee from the rigors of proviso of section 2(15). c) Ins....
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.... 38th Report of Standing Committee; Lodha Committee's Report; Justice Mudgal Report IPL Probe Committee Report have clearly brought out the predominant commercial character of BCCI-IPL matches. In fact the assessee has not even claimed that BCCI-IPL matches are charitable activities. Moreover, in view of absolute involvement of the assessee in the BCCI-IPL venture as evidenced by Tripartite Agreements no benefit of the ratio enunciated in the case of Surat Art Silk can be obtained by the assessee and is suitably covered by the amended provisions of section 2(15) of the Act." 12. The crux of the arguments of the Ld. Senior Counsel for the assessee is that though the IPL may be the commercial activity of the BCCI, however, the assessee is not involved in any commercial exploitation of the IPL match. All the rights including the commercial rights such as media rights, selling of tickets etc. belong to the BCCI. Whatever grants have been received by the assessee in the shape of TV subsidy, IPL subvention etc. is in the nature of voluntary, unilateral grant / donation by the BCCI for the advancement of the objects of the assessee society for the promotion of game of cricket. That wha....
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....officer during the course of BCCI tax assessments as well as the submissions made along with copies of BCCI audited accounts and assessment order for the period AY 2010-11 before the Hon'ble Chandigarh ITAT Bench during the course of hearing held on 11 September, 2018. Status of the BCCI It is the BCCI's case that it is registered under section 12A of the Income Tax act 1961, and the said registration subsists to date. It is therefore entitled to an exemption under section 11. The grant of exemption is being denied by the tax authorities and the dispute is pending adjudication before various authorities. Payments by the BCCI to the State associations. The payments made by the BCCI fall into two categories the first being payments towards participation subsidy, matching and staging subsidies. These are in the nature of reimbursements of expenditure which the State associations have to incur for conduct of matches. The second category of payments is in regard to a share in the media rights income earned by the BCCI. The entire claim of payments to the State associations is being disputed by the tax authorities in the assessments of the BCCI....
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....ive has claimed that the payment made to the Member State Associations earned from IPL are clearly in the nature of expenditure allowable under section 37 (1). This has been consistently pleaded by the BCCI to the Income Tax Authorities in the cases of the BCCI for different assessment years. For the sake of reference, the relevant part of the contents from letter dated 30.1.2018 addressed to CIT(A)-54, Mumbai is reproduced as under: "......During the year, BCCI has paid amounts to the state associations under the head "TV subvention". This represents payment of 70% of revenue from sale of media rights to state associations. These payments were made out of the gross revenue from media right and not out of the surplus. Therefore it cannot be considered as distribution of profit. Further it is important to note that even if there would be losses in any year, TV subvention and subsidy would be payable to state association and therefore considering it as distribution of profit is vague".,...... ... "Assuming without admitting that if the income of the appellant is assessed by denying exemption available under section 11 and treating it as an AOP carrying on business, ....
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....otted by BCCI to the state cricket associations by a rotation policy. The matches are conducted and managed by the respective state associations. It is not possible for BCCI to conduct all these matches with its own limited personnel. It is dependent on the state associations, their officebearers, their employees and their network and resources at the local center to conduct the matches. The association manages the entire match right from provision of security to players, spectators in coordination with respective state police personnel, taking other security measures like fire prevention etc. The association incurs a good chunk of expenditure in conducting an International Test/ODI/T20/IPL/CLT20 Matches. In order to have fair and equitable sharing of the revenues, arrangements have evolved over time, about the respective responsibilities, rights, shares of revenue etc. of BCCI and the state associations. The state association is entitled to the ticket revenue and ground sponsorship revenues. Expenses on account of security for players and spectators, temporary stands, operation of floodlights, Score Boards, management of crowd, Insurance for the match, e....
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.... players and spectators temporary stands, operation of floodlights, Score Boards, management of crowd, Insurance for the match, electricity charges, catering etc. Whereas with regard to the income from sale of media rights, the arrangement between BCCI and the state associations has been that 70% of the revenue would belong to the state associations. As shown, this has been the arrangement between the parties for twenty years. The state associations are entitled by virtue of established practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and co-operate in the conduct of the matches. This payment is, therefore, made only with a view to earn the income from media rights. These payments do not represent distribution of profits to members, since the payment is at a percentage of the gross revenues and had been paid even in those years where BCCI had incurred a loss; besides, the amount was not paid to all members but only to the state associations. In other words, the payment is not made to the three private clubs or the government institutions, but only to state associations. Distribution of prof....
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....untry. Further if media facilities were not made available by the associations in that case also the game could not have been popularized to the extent that it has. Therefore there is a clear case for allowance of the expenditure under section 37(1)." .......... (emphasis supplied by us) 16. In view of the above consistent stand of the BCCI relating to the various payments made to the State Associations including the IPL subvention and TV subsidy, the Ld. Representatives of the parties were again given opportunity to put their respective submissions on this point. Sh. Vohra, the Ld. Sr counsel for the appellant reiterated his submissions by stating that the primary plea/stand of the BCCI is that the payments/grants made by it to the State associations is application of income, hence it is only the voluntary grant given by the BCCI to the State Associations including the assessee for the purpose of the promotion of the game of cricket, hence, it can not be treated as income of the assessee from IPL matches. That the alternate stand of the BCCI that the payments to the State associations be treated as expenditure in the hands of the BCCI is opposite and mut....
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....Associations enclosed. Source-Internet Page No. ). The Board of Control for Cricket in India (BCCI) headquartered at Mumbai is the national governing body for cricket in India. The Board was formed in the year 1929 with the object of promotion and development of cricket in India and is a society registered under Tamil Nadu Societies Registration Act, 1975. BCCI is a full fledged Member of International Cricket Council (ICC) which is the Governing Body for cricket in the world. As a member of the ICC, it has the authority to select players, umpires and officials to participate in international events and exercises control over them. Without its recognition, no competitive cricket involving BCCI-contracted Indian players can be hosted within or outside the country (Source-38th Report of Standing Committee on Finance- 15th Lok Sabha). BCCI has 30 members out of whom 25 are State Cricket Association, 2 are private clubs and 3 are Central Government institutions. BCCI does not own or manage the infrastructure and facilities that are required for cricket. (Source-CIT(A)'s order in case of BCCI for A.Y. 2010-11). The Punjab Cricket Association is registered under the Soc....
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....d 21.01.2013 before its AO in Mumbai, wherein during assessment BCCI has explained that 'BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the state associations to conduct the matches. The income from media rights is dependent on the efforts of the state associations in conducting the matches from which the media rights accrue'. The BCCI has further stated that 'The State Associations are entitled by virtue of established practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches. This payment is therefore made only with a view to earn the income from media rights'. Therefore, it is clear that transaction between the BCCI and the PCA is purely commercial in nature and the income/receipts received by the PCA are in lieu of its services rendered to BCCI and while further ensuring the future IPL matches. In fact as per Article 3.21 of the Tripartite Agreement, the PCA has waived in perpetuity all copy rights in respect of each match, all rights to incorporate any action, architectural feature etc., in....
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....at in this very clause it is mentioned that in case the league is not staged at all then the obligation of the franchisee to pay the franchisee consideration and those of the franchisee's obligation in respect of staging of matches shall be suspended until such time as the league is staged once more. This makes it amply clear that staging of league matches is a matter of utmost importance for the financial health of BCCI-IPL. As non staging of the league shall constrain it to forgo the hefty annual league deposit equivalent to Rs. 9.12 crores and Rs. 21.28 crores which is to be paid by the franchisee on the date of first match in the league in such year. In view of the clauses of the franchisee agreement it was imperative for the BCCI-IPL league to ensure conducting the matches even if it was to be hosted in South Africa. As otherwise a huge commercial loss was an imminent possibility. The argument of the Ld. Counsel that even though the matches were not held in the instant year in the stadium owned by PCA yet it was granted 70% of the franchisee fee as the same was nothing but a grant devoid of any quid pro quo is equally misleading. As mentioned above, clause 7 ....
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....he respective responsibilities, rights, shares of revenue etc. These have evolved in order to promote co-operation and unity among the member associations and by applying the principles of equity and fairness, for which the sport of cricket is renowned." 9.7.3 The BCCI in its submission dated 21/1/2013 earned subsidy paid to SCAs and TV Subvention as stated as follows:- "13.2 PAYMENTS TO STATE ASSOCIATIONS -------------- -------------- Even in the event that exemption under section 11 is denied, the payments to state associations must be allowed as a deduction, as expenditure laid out or expended wholly and exclusively for the purpose of earning such income, it must be appreciated that in order to earn revenues, BCCI was and continues to be highly dependent on the state associations. BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the state associations to conduct the matches. The income from media rights is dependent on the efforts of the state associations in conducting the matches from which the media rights accrue. The division of revenues and expenditure is a matter of arr....
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....t stadiums, which will be owned and administered by them and does not belong to any State Association (Newspaper report dated 29.06.2016 enclosed Page No. ). Such developments further confirm that the payments made to various State Associations by the BCCI can by no stretch of imagination be termed as grant. These are payments made in order to ensure that the State Associations like PCA ensure and execute smooth functioning of IPL matches for coming number of years. C. It is in the above background that the tripartite agreement between PCA, BCCI and KPH Dreams Pvt. Ltd. needs to be perused. In this tripartite agreement the obligations and duties expected of the Punjab Cricket Association have been mentioned in minute details. This amply demonstrates that the payments made by the BCCI to PCA cannot be termed as mere grant given by the BCCI to the PCA. The detailed clause-wise comments in this regard have been submitted at Pages 12 to 18 of the written submissions filed earlier. 4. Reliance by the Ld. Counsel on the order of Gujarat Cricket Association vs. JCIT (Exemptions), Ahmedabad -101 Taxmann.com-453 : The Ld. Counsel of the assessee has placed strong ....
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.... 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 of 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 of the BCCI. We are also alive to learned Commissioner's argument that what is being sought to be protected by the charitable status of these associations is the share of these cricket associations from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body, as we have explained earlier, can....
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....ct i.e. Principles of Statutory Interpretation by Justice G.P. Singh. The primary guiding principle in this regard has been that the language of the statute should be read as it is. It is worth quoting from Page-64 of the book: " Avoiding addition or substitution of words As stated by the Privy Council: We cannot aid the Legislature's defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there. "It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so." Similarly it is wrong and dangerous to proceed by substituting some other words for words of the statute. Speaking briefly the court cannot reframe the legislation for the very good reason that it has no power to legislate. " It is humbly submitted that the above order of the Hon'ble ITAT, Ahmadabad Bench is a clear case of substitution of the word 'involves' as mentioned in the Income Tax Act by the word 'organized', which has no legislative mandate. This casual substitution of legally mandated word effectively renders the whole judgment Per incuriam. The dictionary meaning o....
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....t further discusses threadbare the introduction of Sec. 2(15) in Income Tax Act, 1961. After taking due note of the Hon'ble Supreme Court judgments in the cases of Sole Trustee, Lok Shikshana Trust vs. CIT - 101 ITR 234 and Indian Chamber of Commerce vs. CIT - 101 ITR 796, it highlights the over ruling of these judicial precedence by the larger bench judgment in the case of Addl.CIT vs. Surat Art Silk Cloth Mfg. - 121 ITR 1; wherein the theory of predominant object was laid down. The Hon'ble ITAT, Chandigarh in its path breaking judgment has taken due cognizance of introduction of 2nd Proviso to Sec. 2(15) of the Act inserted with retrospective effect from 01.04.2009. The Hon'ble ITAT, Chandigarh respectfully analyzed the latest judgment of Hon'ble P & H High Court in the case of Tribune Trust vs. CIT -390 ITR 547 and observed that there is no discussion in it about the effect of introduction of 2nd Proviso to Sec. 2(15), amendments in Sec. 10(23C), Sec. 13 and Sec. 143 of the Act. In my humble opinion the Hon'ble ITAT, Chandigarh has correctly interpreted Sec. 2(15) alongwith amendments/ introduction of 2nd Proviso in the Section and in other Sections of the Act. Moreover, being t....
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....ritish Govt. to be given special exemption from paying UK Corporation Tax on its commercial income. As the British Govt. was unwilling, the ICC eventually settled in tax efficient country 'Dubai'. The ICC is registered in British Virgin Island. There is no denial that ICC is commercially exploiting the game of cricket. In an overview of its partners, it has been mentioned, " The ICC Commercial programme aims to optimize revenues for the benefit of the game by delivering exciting, engaging global events that attract new and diverse fans and by building long-term successful commercial partnerships." It is clearly stated that apart from promotion and controlling the game of cricket, ICC has clear cut objective of Business of Cricket. In its annual reports for the year 2003-04 & 2004-05 it is stated as : "Business of Cricket : Objective: Whilst preserving the core values of the game, optimise revenue creation through effective management and exploitation of commercial rights, marketing strategies, product development and intellectual property." Further in the Annual report for 2009-10, it is stated : "The ICC Mission : As the international governing body for cricket, the International ....
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....whether the primary plea of the BCCI that the payments made to the State Associations is application of income towards the advancement of the charitable object of promotion of cricket is antagonistic to the alternate plea of the BCCI that these payments are towards the expenditure solely incurred for earning of the income from IPL. We are conscious of the fact that we are not adjudicating the case of the BCCI and hence we restrain ourselves at this stage to give any finding as to which of the plea out of the both is correct. However, the issue before us is as to whether both the above stated pleas of the BCCI are opposite and mutually destructive and as to what is the effect of plea of the BCCI on the case of the assessee? After examination of the accounts of the BCCI, we are of the view that the above pleas of the BCCI are not inconsistent, contrary or mutually destructive from the point of view of the BCCI and as per the treatment given to the said payments in its accounts. The BCCI, as noted above, has booked these payments to the associations as expenditure set off against the gross receipts. However, the primary plea of the BCCI is that it is an application of income as per....
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.... of maximizing the profits, for which it retains 30% of the profits and rest 70% belong to the State associations. And that is why the payment out of media rights had been paid even in those years where BCCI had incurred a loss. That the BCCI has 30 members out of whom 25 are State Cricket Association, 2 are private clubs and 3 are Central Government institutions, however the payment out of Media Rights is paid only to State Associations and not to the three private clubs or the government institutions. It has also been pleaded that in the books of accounts of state association, any amount received as TV subvention and subsidies received from BCCI are treated as income of the state association. Therefore, any surplus left out of the expenditure made by association is submitted to tax in the hands of state association. Thus, when the payer i.e. BCCI in this case has not recognized the payments made by it to State Associations as voluntary grants or donations, rather the BCCI has stressed the payments have been made to the State Associations under an arrangement arrived with State Associations for sharing of the revenues from International matches and IPL, then under the circumstance....
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.... has been paid by it to the payee (PCA) is out of the consideration for the services rendered by the payee and the payments is made as per the arrangements arrived at with the payee for sharing of the revenue out of the proceeds of a common venture , however, at the same time, the payee (PCA) is claiming that the payments received by it is not as a consideration for its services, rather, the same is a voluntary, discretionary grant or to say largesse by the payer to the payee. More interestingly is the fact that there the payer is a collective constituent of, as well as, apex body of the payees (State Associations). 25. More surprisingly, the State Associations in their individual capacity are pleading that the IPL may be the commercial venture of their constituent & apex body i.e.' BCCI' but they are not involved in conduct of IPL. But the fact is that these Associations have collectively formed this apex Association named 'BCCI', get it registered under the Tamil Nadu Societies Registration Act, and thereby collectively engage in operation and conduct of the IPL through their representatives in the name of 'BCCI'. It is pertinent to mention here that it is an admitted fact tha....
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.... upon the following provisions of the Tamil Nadu Societies Registration Act :- " THE TAMIL NADU SOCIETIES REGISTRATlON ACT, 1975" " An Act to provide for the registration of literary, scientific, religious, charitable and other societies in the State of Tamil Nadu." ....... 1. (1) This Act may be called the Tamil Nadu Societies Short title, Registration Act, 1975. (2) It extends to the whole of the State of Tamil Nadu. (3) It shall come into force on such date as the Government may, by notification, appoint and different dates may be appointed for different areas and for different provisions of this Act: Provided that any reference in any such provision to the commencement of this Act shall, in relation to any area, be construed as a reference to the coming into force of that provision in such area. ........... CONSTITUTION AND REGISTRATION. 3. (1) Subject to the provisions of sub-section (2), any societies which society which has for its object the promotion of education, may be literature, science, religion, charity, social reform, art, registered, crafts, cottage industrie....
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....hereas the entire activity of the BCCI is being run out of the State of Tamil Nadu. 30. The Ld. DR has further placed reliance on the following sections of the Tamil Nadu Societies Registration Act to contend that even as per the provisions of the said Act, all the property of the BCCI vests in its members i.e. State Associations; 2. In this Act, unless the context otherwise requires- (a) " committee'' means the governing body of a registered society to whom the management of its affairs is entrusted ; 18. All property, movable and immovable, belonging to a registered society, whether acquired before or after its registration, if not vested in trustees, shall vest in the committee ; and any such property may in any legal proceeding, be referred to as the property of the committee." 31. Even the following clause of the Memorandum of Association of the BCCI is enough to gather that the BCCI is a commercial venture of the State Associations :- "MEMORANDUM OF ASSOCIATION (k) To carry on any other activity which may seem to the Board capable of being conveniently carried on in connection with the above, or calculated direc....
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....rity of the game and the love and craze of the people in India for the cricket matches. From the discussion made above and also considering the stand of the BCCI and further from analysis of the Tripartite Agreement, it is clearly revealed that the assessee/appellant is systematically involved in the conduct of IPL matches. It is not a simple case of offering of its stadium on rent to BCCI for conduct of the matches. The assessee association not only being the member of the BCCI which is the AOP of the assessee along with other members, but also, is individually involved in a systematic and regular manner in commercial exploitation of the popularity of cricket matches and its infrastructure. The appellant has pleaded that it is in the course of construction of a new stadium at the cost of over Rs. 250/- crores at Mohali, out of which Rs. 100 crores including land has been expended till date. However, the stand of the BCCI is that since the BCCI does not have its own infrastructure for conduct of matches, the participation of the State associations is necessary for generation of revenue by exploiting commercially the conduct of matches in their stadia. We find force in the conten....
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....et League (ICL), a private cricket league funded by parties outside the realm of the assessee was started in 2007. However, it was not recognized by the BCCI and its member State Associations including the assessee. The State Associations refused to provide its stadiums for holding of ICL matches under the directions of the BCCI. Had the assessee's interest been of renting out its stadium for the holding of matches for the purpose of promotion of game, it would have promptly offered its stadium for conduct of ICL matches also. That, if the assessee intended to promote and develop the game itself, it would have taken steps to encourage and support other Associations to promote the game of cricket by holding and conducting the matches irrespective of their affiliation to the assessee. Rather the BCCI and its member associations have controlled and maintained the exclusive domain over the game, to the exclusion of others. The BCCI and its member associations chose to suppress the rival body against the better interest of the game of cricket. Faced by the threat of diversion of playing talent and associated cricketing revenue, they took repressive steps like imposing a ban on players w....
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....rt. 7.9.5 It can be seen that the assessee's key concern is exercising complete control over cricket and more significantly, the revenue from the game. The activities and the structural framework of operations of the assessee, are clearly not in the interest of the game which is stated to be the main purpose of the assessee. On the contrary, the same, as discussed above, consist of preemptive measures taken to safeguard its commercial interests." Our attention has also been drawn to the following rules also: "....33-d. Private organizations shall not be allowed to organize an International Tournament or International match/matches in which foreign players/teams are participating or likely to participate. If at all such a tournament/match/matches is to be stage, then it should be exclusively by the affiliated member which recommends the proposal and within whose jurisdiction the tournament/match/matches will be staged." "33-e All International Tournaments, except in very exceptional cases, should be managed by the Board only......." "No registered player can play or participate in a Cricket match or Tournament organized as Festival/Charity/Benefit m....
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.... matters relating to its commercial activities; iii) establish an effective internal control system to the satisfaction of the CCI, in good faith and after due diligence; and iv) refrain from placing blanket restrictions on the organisation of professional domestic cricket leagues or events by non-members. 36. At this stage, it is also relevant to note that the object of the assessee PCA states:- "....maintain friendly relations with and amongst the population of the area under its control through sports tournaments...." (emphasis supplied). The above crucial words "area under its control" show that the activities of the assessee are restricted to the area under its control as determined by the BCCI for the State Associations under its control. Which means the activities as well area of operation of the assessee is controlled by BCCI, hence, under the circumstances, assessee's activities and status cannot be said to be entirely separate or distinct from BCCI. 37. From the above facts, it is established beyond doubt that that the BCCI which is constituted of the Assessee and other State associations has acted in monopolizing its control over the cricket and h....
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....g involved in organizing the cricket matches for profit has been given which directly fits into the facts and circumstances of the case of the assessee. Apart from that, the hon'ble Supreme court has also discussed the example of a publication, which is involved in propagation of Gandhian thought and philosophy, which would apparently be an object of general public utility, but, it has been held that if the pricing of the journal is done on commercial lines, the inference will be that the activity is carried on for profit and the purpose is non-charitable. Even an example has also been given of an institution involved in the noble cause of Blood Bank, but it has been held that if such an activity is done for a higher price on commercial basis; undoubtedly, in such a case, the blood bank would be serving an object of general public utility but since it advances the charitable object by sale of blood as an activity carried on with the object of making profit, it would be difficult to call its purpose charitable. The relevant part of the judgement of the Hon'ble Supreme court in the case of " Surat Art Silk Cloth Manufacturers Association" (supra) is reproduced as under:- " 1....
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....ying out this charitable object and charges a small price which is more than the cost of the publication and leaves a little profit, would it deprive the Gandhi Peace Foundation of its charitable character? The pricing of the monthly journal would undoubtedly be made in such a manner that it leaves some profit for the Gandhi Peace Foundation, as, indeed, would be done by any prudent and wise management, but that cannot have the effect of polluting the charitable character of the purpose, because the predominant object of the activity of publication of the monthly journal would be to carry out the charitable purpose by propagating Gandhian thought and philosophy and not to make profit or, in other words, profit-making would not be the driving force behind this activity. But it is possible that in a given case the degree or extent of profit-making may be of such a nature as to reasonably lead to the inference that the real object of the activity is profit-making and not serving the charitable purpose. If, for example, in the illustration given by us, it is found that the publication of the monthly journal is carried on wholly on commercial lines and the pricing of the monthly journal....
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....usiness activity beyond the prescribed limit of Rs. 10 Lakh for the year under consideration as per second proviso to section 2(15) of the Act will be taxable as its business income. The coordinate Chandigarh Bench in the case of "Chandigarh Lawn Tennis Association"(supra) has extensively discussed this issue and has duly analyzed and deliberated upon various case laws including the decision of the Hon'ble Pb. & Haryana High Court in the cases of Tribune Trust & Moga Improvement Trust -390 ITR 547 (supra), the decision of the Privy Council in the case of Trustees of The Tribune Press vs. CIT- 7 ITR-415; the judgement of the Hon'ble Supreme Court in the cases of "Sole Trustee, Lok Shikshana Trust vs. CIT" - 101 ITR 234 and Indian Chamber of Commerce vs. CIT - 101 ITR 796 and also the larger bench judgment of the hon'ble Supreme Court in the case of "Addl. CIT vs. Surat Art Silk Cloth Mfg". - 121 ITR 1 and has also considered the effect of introduction of 2nd Proviso to Sec. section 2(15), amendments in section 10(23C), provisions of section 11(4), 11(4A), 13(8) and Sec. 143 of the Act after delineating the legislature history behind Section 2(15). It is to be noted that the effect o....
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....ng with restrictions put by the provisos to section 2(15), will apply for claiming exemption under section 10(23) (iv). 40. Even the impact of the first and second proviso to section 2(15) has also been considered by the Coordinate Mumbai Benches of the Tribunal in the cases of "Ghatkopar Jolly Gymkhana v. Director of Income-tax (E)" reported in [2013] 40 taxmann.com 207 (Mumbai - Trib.) and "Cotton Textiles Exports Promotion Council v. Director of Income-tax (Exemption), Mumbai reported in [2014] 44 taxmann.com 168 wherein it has been held as per the second proviso w.e.f. 01.04.2009, where the gross receipts of a charitable institution from its business activities exceeds limit of Rs. 10 lakhs, assessee will not be entitled for exemption or other admissible tax benefits for that relevant year but it does not result in cancellation of its registration as charitable institution. The above view has been affirmed by the Hon'ble Bombay High Court in the case of Director of Income-tax (Exemption) v. North Indian Association [2017] 79 taxmann.com 410 (Bombay) wherein the Hon'ble High court while further relying upon its another decision in the case of "DIT (Exemption) v. Khar Gymkhana....
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....ligible for exemption under the relevant provisions. However, the income from activity in the nature of trade, commerce or business over the above limit prescribed from time to time as per the second proviso to section 2(15), should be treated as income from the business activity and liable to be included in the taxable total income. In view of the above, if the plea of the Ld. counsel for the assessee that the income from commercial activity of the assessee is incidental to the activity of the assessee towards pre-dominant object of charitable nature, even then in view of the proposition laid down by the coordinate Bench in the case "Chandigarh Lawn Tennis Association" (supra), the income from commercial activity i.e. by way of commercial exploitation of the international matches and IPL which is over and above the prescribed limit of the Rs. 10 lakhs for the assessment year under consideration will be exigible to taxation. However, since we have already observed that the assessee is regularly following commercial activity by commercially exploiting its property and rights to hold matches and thereby earning huge income, hence the said activity can not be said to be incidental ....
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....essee. 42. Under the circumstances, the appellant cannot be granted exemption under section 11 of the Act as its activities no more fall under the definition of charitable purposes as per the provisions of section 2(15) of the Act. In view of the discussion made above, the amount paid by the BCCI to the appellant which has already been taxed at the hands of BCCI, cannot be now taxed in the hands of the member of the AOP i.e. the appellant State Association as it will amount to double taxation of the same amount. However, if the claim of the BCCI for treating the payments made to the State Association as deductible expenditure is accepted by any higher appellate authority in its case for the year under consideration, it will be open to the assessing officer of the appellant to reopen the case of the appellant and to decide whether the said payments received from BCCI can be taxed as income of the appellant which will be subject to our observations given on other issues raised in this appeal. However, the income received by the appellant/assessee otherwise, except the club income, which has not been taxed at the hands of the BCCI, will be assessed as per the normal provisions o....