TaxTMI 
TaxTMI 
2019 (9) TMI 681
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....ucting 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. 3. The brief facts relating to the issue are that the assessee cric....
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....ciations 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 area under its control through sports tournaments and competition connected therewith and to create healthy spirit of sportsmanship, to run a clu....
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....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 Income Tax-ll, Chandigarh vide his order dated 21.06.2012 from A.Y. 2009-10 onwards on the ground that appellant is earning huge profit from business and training activiti....
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....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 principle of mutuality and only members are allowed to use the facility. Appellant also placed reliance on the decision of Hon'ble Bombay High Court in the case of Lai Lajpatrai Memorial Trus....
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.... 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 u/s 11 on that count, on year to year basis, notwithstanding the status of registration. (vi) The disentitlement for exemption u/s 11, as a result of the activities of a assessee being held to be not for c....
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....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.' Inviting our attention to the Memorandum of Association / objects of the assessee association, the Ld. counsel has submitted that the assessee is basically a body for promotion of cricket and that the activities and objects of th....
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...., 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 organized at the stadium of an association, still the member cricket association gets grant out of the TV subsidy. That in the year 2009, when the IPL matches were played entirely in South Africa, still all the member associations including the asses....
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....n 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 conducts various tournaments for the member District Cricket Associations. On the basis of the inter District tournaments, players are selected for Punjab team, who undergo various coaching camps and thereafter the teams are selected to participle in the natio....
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....f '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 its activities according to the objects, if any surplus is generated which is again ploughed back for the activities of the trust exemption u/s 11 can not be denied. That the Assessing officer while framing the assessment has only to see that the assessee....
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....eservation 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 'Charitable purpose 'u/s 2(15) of the Income Tax Act has been elaborately explained vide the above circular. The circular basically re-iterates with requisite clarity the position of law that it shall apply only to the fourth limb of the section, i.e. the advancement of any other object of general public utility, if such entity involves ....
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..... 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- "Next on the BCCI's agenda was the Title Sponsor. DLF Ltd., India's leading real estate company, stepped bagged the Title Sponsorship rights. They won the rights through a fair and transparent open-bid process, with a bid of Rs. 40 crore per annum. The deal gave DLF Ltd. exclusive rights for period of five years, valuing the Title Sponsorship in excess of Rs. 200 crore." The report....
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.... 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 (page 31-32 of the Report). The Report clearly mentions (page 34) that the income derived from Media Rights and Sponsorships are shared with the Franchisees as envisaged in the franchise agreement. The Franchisees have to pay the BCCI an annual franchisee fee which BCCI distributes to the Associations as subvention. The Committee (page 43 of Report) has highlighted the break-up of Gross Revenue earned by BCCI-IPL during financial year 2008-09 amounting to 661.79 Crores. The....
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....ese 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 irregularities and pleaded sorry while stating " .......... The powers given to him were like that and that is how he acted. It is no defense for me to say that some of us objected to it. What defense? No defense in front of you. So, I am not pleading that at all. We just put our heads down". The 38th Report of the Standing Committee on Finance is submitted before the Hon'ble ITAT Chandigarh, as judicial notice of the same can be taken under Section 57 (4) of the Evidence Act and it is admissible under Section 74 of the s....
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....ionately 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 which is undertaken by the BCCI or its constituents while organizing the cricket especially IPL whereas the entire spectacle of Cricketainment is glamorous money spinner on which ironically no taxes are paid. JUSTICE MUDGAL IPL PROBE COMMITTEE The 3- Member Probe Committee was appointed by the Supreme Court of India pursuant to an order dated 30th July, 2013 in SLP No. 26633/2013 arising out of the judgment and order in PIL No. 55/2013 of Hon'ble High Court of Judicature at Bombay. The Probe committee comprised of Mr. Justice Mukul Mudgal (Retd. Chief Jus....
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.... 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 Government should at least now consider whether holding such tournaments serves the interest of a budding cricketer, the sport, the game itself. There is a auction and buying and selling of young cricket players by business houses and clubs. Apart from huge money involved, the tournament has brought with it crimes and casualties in the form of ban on clubs and players allegedly involved in wrong doing and breaching of rules and regulations. Now the worrying trend is that such events are being organized even by those in-charge of other sports/games such as Football, Hockey and Badminton. Therefore, it is for the Central ....
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....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 expenses of running the IPL Tournament are met by BCCI (page 33 of Report). The Franchisees are responsible for meeting the expenses of the players in the team (travel, marketing and all costs) associated with the staging costs for the matches. The income derived from Media Rights and Sponsorships are shared with the Franchisees as envisaged in the Franchisee Agreement. The Standing Committee at page 34 of the Report has clearly mentioned that the franchisees have to pay the BCCI an annual franchisee fee which BCCI distributes to the Associations as subvention. It is thus, clear that the payments received by the BCCI from the franchisee as annual franchise....
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....ral 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 of power has been revealed - "From overall superintendence of the Board and its affairs to taking action against players and even approving the composition of the team chosen by the Selectors, the President is all-powerful. In practice, this power was even abused with the exercise of veto over the changes in captaincy and selection of ICCV representatives. Incumbents were also known to turn a blind eye when issue of corruption and mismanagement were brought to their notice, even going as far as permitting retrospective amendments to the byelaws to favour particular interests.'' (iii) Articles 2.2 to 2.4 of the agreement bring out the involvement of the PCA, being State Association, in ensuring the organizing of th....
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....liminating 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 exploit any coverage and the commercial right. (iii) As per article 3.22 the PCA has undertaken that it shall not do or permit to be done any act or thing which may in any way harm, bring into disrepute, devalue, denigrate, impair or otherwise adversely affect the league, the league marks and franchisee marks or the right and interest of BCCI-IPL etc.. 7. Ticket Related (Article 3.24 to 3.27). (i) As per article 3.24 the PCA agreed not to sell or provide any tickets, carry out any ticket promotions, produce/stock pile/distribute/sell any merchandise in respect of any match. (ii) As per article 3.25 he PCA will assist with reasonable requests of BCCI-IPL/or franchisee in the promotion of the match and will provide BCCI-IPL and franchisee with access to database of ticket holders or corpo....
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....iums 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 the course of hearing the Ld. Counsel placed heavy reliance on the case law of Addl. Commissioner of Income Tax Vs Surat Art Silk Cloth Manufacturers Association 121 ITR 01 (SC). The Hon'ble Supreme Court in this land mark case had held that the primary dominant purpose of the trust has to be examined to determine whether the said trust/institution was involved in carrying out any activity for profit. In the case of Punjab Cricket Association the Ld. Counsel could not cite a single fact/reason/argument to claim that the BCCIIPL matches are charitable activities. In fact no claim/argument was made by the Ld. Counsel that the BCCI-IPL activities are charitable in nature. Whereas the involvement of the Punjab Cricket Association in the commercial and profit oriented object of BCCI-IPL is absolute and complete. In absence of the basic claim and distinguishable facts of the case....
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....ried 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) Institute of Chartered Accountants of India Vs Director General (Exemption), Delhi -347 ITR 99 (Delhi High Court). The Hon'ble Delhi High Court in para 13 of its order states: "Reliance place by the petitioners on Addl. CIT Vs Surat Silk Court Mfrs. Association [1972] 2 Taxmann 501/[1980] 121 ITR 1 (SC) may not be fully appropriate after introduction of the first proviso as the statutory requirements were then different. Utilization of the funds or income earned whether for charitable purpose or otherwise is not relevant now in view of the first proviso and cannot be a determining factor for deciding whether the petitioner institute is covered by section 2(15) of the Act." The position of law as expounded by the Hon'ble Delhi High Court explains the latter part of the amended proviso which states 'irrespective of the nature of use or application, or retention, of the income from such activity'. Therefore ....
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....y 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 whatever is the income of the assessee including the aforesaid grants from the BCCI, that is applied for the promotion of game of cricket and hence sans profit motive, therefore, the activities of the assessee/appellant fall in the definition of charitable purposes as defined under section 2(15) of the Act. On the other hand, the crux of the contentions raised by Sh. Manjit Singh, the Ld. DR, is that the assessee being a Member of the BCCI is actively involved in the conduct and commercial exploitation of the IPL matches. 13. Since it is the main plea of the Ld. Counsel for the assessee that the amounts received from the BCCI are in the nature of grants, so as to ascertain these facts, it was deemed fit to summon the concerned officials of the BCCI along with relevant record and also to apprise us about the stand of the BCCI in this respect as to what is the treatment given by the BCCI to the amounts granted to the various cricket associati....
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....he BCCI. The entire claim of payments to the State associations is being disputed by the tax authorities in the assessments of the BCCI. The claim of the BCCI is that the said payments are application of income for the purpose of computation of income under section 11. Since the tax authorities are denying the exemption under section 11 strictly in the alternative and without prejudice to its contention that the entire sum is allowable as an application, the BCCI has contended that the payments are allowable as a deduction under section 37(1). However we bring to your honours' attention that the above ground also is denied by the CIT(A) orders. We trust that a perusal of the records being placed before your honour will make the stand of the BCCI clear. Kindly take the above information on record. Thanking You. Yours faithfully, For The Board of control for Cricket in India Sd/- Santosh Rangnekar, Chief Financial Officer CC : The CIT(D.R.) ITAT, Chandigarh" 14. Voluminous documents such as the copies of the relevant accounts of the BCCI, the stand/submissions of the BCCI before the tax authorities in its cases, assessment orders and appellate orders f....
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....r section 11 and treating it as an AOP carrying on business, then the expenditure incurred has to be treated as for the activities of BCCI and has to be allowed as an expenditure under section 37 of the Income Tax Act since the expenses are incurred wholly and exclusively for the purposes of business". ..... ".......... the state association is not holding the amount received as subsidies on behalf of BCCI and therefore the appellant should not be held liable on the examination of actual usage of such expenditure by state association. Any amount paid which is not specifically disallowed under the provision of income tax and the same is considered as income of the recipient should be allowed as expenditure in the hands of payer in the course of carrying out its activities." .... ... "BCCI had undertaken development of the sport through itself and the state associations. BCCI in its objects has agreed to encourage the promotion of Cricket associations and in turn to generate the revenue from conducting the matches in various states which is not possible without the support of various cricket associations. The arrangement is under: The state associations are the members of BC....
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.... the match, electricity charges, catering etc. are met by the state associations. On the other hand expenditure on transportation of players and other match officials, boarding and lodging, expenses on food for players and officials, tour fee. match fee, etc. are met by BCCI and revenues from sponsorship belong to BCCI. In respect of revenues from sale of media rights, and arrangements has evolved over time. Until 1991-92, the income from media rights was meager. With the growth in income from media rights, it became necessary to optimize the arrangement for sale of media rights. For a Test series or ODI series conducted in multiple centers and organized by BCCI and multiple state associations, it was found that if each state association were to negotiate the sale of rights to events in its center, it negotiating strength would be low. It was, therefore, agreed that BCCI would negotiate the sale of media rights for the entire country to optimize the income under this head. It was further decided that out of the receipts from the sale of media rights, 70% of the gross revenue less production cost would belong to the state associations. Every year, BCCI has paid out 70% of its rec....
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....lways be to all the members and the fact that these other members have acquiesced in these payments demonstrates that the payments are not distribution of profits. 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. In order to establish whether the expenditure incurred for cricketing activities depends on the nature of services provided by the state association to BCCI. It is well established fact that, state associations are providing all the infrastructure and assistance in carrying out cricketing activities in the state. Therefore any payment for services provided by state association is a legitimate expenditure allowable under income tax. By seeing the fact of the circumstances, assets held by the appellant are not capable of generating entire income which it is receiving through media right. Therefore when the appellant is carrying out cricketing activities by utilizing the facilities of the state association proportion of income mus....
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....I and thus can not made basis to decide the nature of receipts from BCCI in the hands of the assessee. The Ld. Counsel has further submitted that the revenue authorities, even otherwise, have consistently rejected the aforesaid alternate contention of the BCCI and the entire receipts from the IPL have been taxed in the hands of the BCCI. That even otherwise, without prejudice to the primary contentions of the appellant, if the BCCI is treated as an Association of Persons (AOP) as per the plea of the revenue, still, once the entire income from IPL has been taxed at the hands of AOP, the further payment by the BCCI to its Member Associations can not be taxed as it will amount to double taxation of the same amount. 17. On the other hand, Sh. Manjit Singh, the Ld. DR, has made the following further written submissions: 1. "Brief overview of the Cricket Structure The International Cricket Council (ICC) is the Governing Body for cricket in the world. It was founded as Imperial Cricket Conference in 1909. It was renamed as International Cricket Conference in 1965 and took up its current name in 1989. The independent ICC was funded initially by commercial exploitation of righ....
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....er of BCCI. 2. Involvement of PCA in commercial venture of BCCI-IPL matches is Absolute In the written submissions filed in the Departmental paper book earlier, detailed submissions have been made wherein on the basis of 79th Annual Report of the BCCI, the extent of the commercial venture of IPL has been highlighted. The 38th Report of the Standing Committee on Finance- XVth Lok Sabha has also been submitted wherein commercial character of IPL has been highlighted. In this regard the judgment of BCCI vs. Cricket Association of Bihar dated 22.01.2015 was also highlighted, wherein (relevant portion from Pages 106 to 112) the Hon'ble Apex Court at Para-91 has mentioned the submission of Sh. Kapil Sibal, Ld. Counsel of the BCCI, that IPL was conceived as a commercial enterprises. In these pages the business structure of the IPL stands duly explained. In this judgment the Hon'ble Supreme Court at Page-127 has formed a committee under the Chairmanship of Hon'ble Mr. Justice R.N. Lodha, former CJI. Subsequent to this judgment the Justice Lodha Committee gave its report highlighting that IPL is the single largest revenue generator for the BCCI. The report has been duly submitte....
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....ploit any coverage and the commercial right. Such clauses & articles have been duly highlighted in the written submissions filed earlier by the Department in its paper book. 3. Payment to PCA is not a grant : A. The Ld. Counsel of the assessee has taken a plea that the payments made by BCCI are in the form of a grant while stating that the BCCI distributes 70% of the revenue from sale of media rights to the State Associations for promotion of sports. The counsel further stated that there is no quid pro quo involved. It was further asserted that in this assessment year although the IPL was held in South Africa yet a grant was given to State Associations. The argument taken by the Ld. Counsel is contrary to the facts of the case. A perusal of the franchise agreement (submitted by the assessee- Page 131 to 198) between BCCI and KPH Dream Cricket Pvt. Ltd. (the franchisee) (Clause 7) reveals that the franchisee shall be initially paying to BCCI-IPL franchise consideration for a period of nearly nine years i.e. from 2008 to 2017. In this period the franchisee shall be paying a fixed league deposit amounting to Rs. 9.12 cr. on or before 2nd January of each such year. It further ....
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.... mentioned at Clause-7 is for all such years. Similarly, the Central Rights Income has been scheduled to be allocated for the period of 2008-2012, 2013-2017 and 2018 onwards as per Clause-8 of the agreement. These clauses unambiguously prove that the BCCI-IPL in order to ensure a hassle free and smooth running of IPL matches had to make such payments to various State Associations as a consequence of which a hefty receipt from the franchisees could flow without any problem. In fact these payments are nothing but a quid pro quo as the BCCI-IPL Body does not owns any cricket stadium at all and has admittedly limited infrastructure. In fact, in absence of its own cricket stadium it was all the more necessary and imperative upon BCCI to keep the State Associations in good humor. In the case of Gujarat Cricket Association vs. JCIT (Exemptions), Ahmadabad -101 Taxmann.com-453 dated 24.01.2019, the BCCI's stand during its assessment proceedings has been quoted. The BCCI vide its submission dated 03.12.2012 to it's A.O. has explained its relationship with the State Cricket Associations as follows: "1. BCCI is society registered under the Tamil Nadu Societies Registration Act. It....
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....orary 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 the 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 cooperate in the conduct of the matches. This payment is therefore made only with a view to earn the income from media rights." The stand of BCCI mentioned above confirms the fact that the payments received by the PCA from the BCCI cannot be termed as grant at all. As the BCCI itself has mentioned that 'It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches'. It is further pertinent to mention that in absence of any cricket stadium the BCCI remains dependent on State Associations. Therefore, the various p....
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....ara-35 of the above order by the Hon'ble ITAT, Ahmadabad is quoted as below: "Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends, has to an activity of the assessee which is in the nature of trade, commerce or business. However, the case of the revenue authorities hinges on the allegation that the way and manner in which cricket matches are being organized, particularly the IPL matches, the activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from the time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and the impact of this commercialization has not left Indian cricket intact. The Indian Premier League an....
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....cial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner's arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial considerations said to be inherent in planning the matches. As we make these observations, and as we do not have the benefit of hearing the perspective of the BCCI, we make it clear that these observations will have no bearing on any adjudication in the hands of the BCCI. Suffice to say that so far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of 'charitable activities' in the hands of the cricket associations before us- particularly as....
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....Give orderly structure; systematize; bring into working order (The Law Lexicon by P. Ramanatha Aiyar, 3rd Edition 2012). The legislature deliberately used the word 'involves' i.e. where mere involvement with 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 nature of use or application, or retention, of the income from such activity shall bring it under the ambit of Sec. 2(15). For falling under the said section an assessee need not organize itself any such activity as mentioned in the Section. Rather its mere involvement i.e. it being enveloped by, entangled to, even included in or even contained by it or merely by implication would bring it under the ambit of Sec. 2(15). The substitution of word 'involves' with the word 'organize' clearly defeats the legislature's letter and intent, which is not permissible in law. The undisputed guiding principle is that the language of the statute should be read as it is and the Courts should avoid addition or substitution of words. In view of the above the order ....
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....n vs. ITO (Exemptions), Chandigarh- 95 Taxmann.com-308 is directly applicable in the case of assessee. O/o CIT (DR) ITAT, Chandigarh" 18. Before proceeding further, firstly we have to understand the relation between the State Associations and BCCI and further how they are constituted. What is emerging from the facts brought before us is that BCCI is a constituent of the State Associations. The representatives of the State Associations are at the helm of the affairs of the BCCI. The status of the BCCI under the circumstances is nothing but of an Association of Persons (in short 'AOP') of which State Associations including the assessee are the members. Though, the BCCI has got itself registered separately as a 'Society' under the 'Tamil Nadu Societies Registration Act' but with the mere registration of the BCCI as a society, in our view, does not change its nature of being an 'AOP' of the State Associations. The matter does not end here. There is a complete federal structure starting from lower level i.e. District Cricket Associations to the International Cricket Council. District Cricket Associations collectively form State Cricket Associations. State Cricket Associations colle....
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....from the tournaments it organises, primarily the Cricket World Cup, and it distributes the majority of that income to its members. In its financial statements, it has been mentioned, "n) Payments due to Members: Payments due to Members represent those amounts that are determined by the Board of Directors as due for distribution to Members at the conclusion of a cricketing event. These payments are treated as expenses within the accounts and are deducted in arriving at the profit/(loss) before tax." It is pertinent to mention here that Sh. Shashank Manohar, representative of the BCCI is the present Chairman of the ICC. 19. IPL organized by BCCI is the domestic form of international cricket T-20, however, it is not limited to domestic players but players from other countries are also purchased by private investors/franchise through auction involving huge money. There is no denial by the appellant that IPL is a commercial venture of BCCI which is a mixture of sports, entertainment and business. That high stakes are involved and huge investments of the private business houses have been attracted with sole motive of maximum exploitation of the popularity of the cricket for generating ....
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....ince the BCCI in its books of accounts has booked the payments to the State Associations as expenditure, it is thus payment out of its gross receipts and not out of income and thus it should not qualify as application of income. However, as most of the charitable institutes do, the expenditure is generally booked as application of income e.g. educational institutions claiming charitable status, generally claim the salary to teachers as application of income whereas in the books of accounts, the same is treated as expenditure and hence under the circumstances, in our view, the claim of the BCCI in this respect is not an exception. In view of this, the alternate plea of the BCCI is not opposite or destructive to its primary plea. However, the question that whether the expenditure can be considered as application of income for the purpose of claiming exemption as per the provisions of section 11 of the Act is left open to be decided in appropriate case. 21. Now the question arises that when the donor that is BCCI in its books of account has not treated the payments to State Associations as voluntary grants or largesse, can the donnee/recipient claim the same to be so. The answer to ....
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....the income Tax Authorities and the payments/grants given to the Member State Associations has been treated as distributions of profits. The registration of the BCCI under section 12 read with section 2(15) of the Act since stood cancelled on the date, hence the payments made by it to the State Associations has not been treated as application of income for the purpose of section 11 of the Act. Hence, as per legal status of BCCI as on today, the BCCI is being treated by the tax authorities as an 'AOP' only and the payments made to the State Associations as distribution of profits. Under the circumstances, these payments by the BCCI to the State Associations including the appellant, having already been taxed at the hands of BCCI can not 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. 23. However, interestingly, the assessee PCA has denied that BCCI is its AOP, rather the plea of the assessee is that it is a charitable institution and that the amount received by it from BCCI is grant, hence would fall in the definition of its income u/s 2(24)(iia) of the Act and further exempt u/s 11 of t....
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.... from where its entire operations are run, however, it has been registered under the State Act i.e. 'Tamil Nadu Societies Registration Act'. The Ld. DR in this respect has raised a question that as to how the Tamil Nadu State Govt. authorities will be able to regulate and monitor or verify as to if the activities of the BCCI are done as per the aims and objects under which it has been registered and that there is no violation of rules and regulations of the state Societies Registration Act, as all the activity being done by the BCCI is from the head office which is situated outside the State of Tamil Nadu. The Ld. DR has submitted that though there is no bar for a society to extend its activities out of a state where it has been registered, however, in the case of the BCCI, the entire operations of the BCCI are from a place out of the jurisdiction of the State Authorities with whom it has been registered as a Society. The Ld. DR in this respect has submitted that the facts, itself, speak that the BCCI has shielded itself under the veil of registration under the Tamil Nadu Societies Registration Act just to plead that it is a separate entity from the State Associations, whereas, i....
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....1), no association which has for its object the improvement of the economic condition of workmen, no club where games of chance providing prizes for winners are played and no society which does not consist of at least seven persons shall be registered under this Act. MANAGEMENT AND ADMINISTRATION. 13. Every registered society shall- (1) have a registered office to which all communications and notices may be addressed and shall file with the Registrar notice of situation of such office and of any change thereof within such period as may be prescribed after the date of the registration of the society or after the date of change, as, the case may be ; (2) keep displayed on the outside of its registered office its name in a conspicuous position, in legible characters and, if the characters employed therefor are not those of Tamil, also in the characters of Tamil." (emphasis supplied by us) 28. The Ld. DR has further placed reliance on the following rules and Regulations of the BCCI. 2. HEADQUARTERS: The Headquarters of the Board shall be located at Mumbai." 14. ADMINISTRATION : i) Mumbai shall be the administrative headquarters where the office of the Board....
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....ip firm or an AOP or a society with some other persons and indulge in commercial activity. Any contrary construction of such provisions of law in this respect would defeat the very purpose of its enactment. The assessee in this case is a member of the BCCI and the status of the BCCI as on date is that of an AOP and it has been held to be actively involved in a large scale commercial venture by way of organizing IPL matches, hence under the circumstances, the appellant as per the position as on date, can be said to have been involved in commercial venture as a Member of the BCCI irrespective of the fact that it receives any payment from the BCCI or not or whether such receipts are applied for objects of the appellant society or not. However, once the income is taxed at the hands of the AOP, the receipt of share out of the income of the AOP cannot be taxed in the hands of the member of the AOP. Which means that though, for the sake of ease of taxation, the AOP has been recognized as a separate entity, however actually its status cannot be held to be entirely distinct and separate from its members. Had it been so, then the receipt of the share by a member from the income of its AOP wi....
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.... sport of cricket rather the main object is the augmentation of the revenue. The BCCI in clear terms has pleaded that without the involvement of State Associations, the conduct of the IPL matches and huge revenue generation from the same is not possible. The appellant being party to the Tripartite Agreement is itself an evidence of the appellant being commercially involved in BCCI-IPL matches. 34. The Ld. DR at this stage has submitted that apart from assessee involving in commercial venture, the objects of the assessee, otherwise are not entirely for the promotion of the game of cricket. One of the main objects of the appellant, as that of the BCCI also, is to control the cricket under its area and this conduct of the assessee is not in the interest or promotion of cricket rather to establish its monopoly and dominance in the field. The Ld. DR in this respect has invited our attention to the objects of the assessee society which inter alia include the following:- " (c) To regulate and control the game and general sports...... (j) To add, alter, maintain and enforce Rules and Regulations for the control and governance of the game in area under control of the Association and....
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....ns of the BCCI , which read as under: (a) "No Club affiliated to a member or any other organization shall conduct or organize any tournament or any match/matches in which players/ teams from the region within the jurisdiction of a member are participating or are likely to participate without the previous permission of the member affiliated to the Board.... (b) Permission for conducting or organizing any tournament or match / matches will be accorded only to the members of the Board and will be in accordance with the rules framed by the Board in this regard from time to time BAN ON PARTICIPATION IN UNAPPROVED TOURNAMENTS: (c) No member; Associate Member or Affiliate Member shall participate, or extend help of any kind an unapproved tournament. (d) No player (Junior & senior) registered with the BCCI or its members, Associate Member of Affiliate Member shall participate in any unapproved tournament. (e) No Umpire, Scorer on the BCCI Panel shall, associate with an approved tournament. (f) Any individual deriving financial or any other benefit shall not associate himself with an unapproved tournament; The Working Committee would take appropriate action including su....
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...., which had previously been set aside by way of a February 23, 2015 Competition Appellate Tribunal (COMPAT) order. The CCI held that the BCCI had abused its dominant position in the market by restricting competition while conducting IPL tournaments; and granting exclusive media rights for the broadcasting of IPL matches to one TV channel for a 10-year period. The CCI also differentiated international and other domestic cricket from professional leagues, such as the IPL. The CCI noted that in international and domestic cricket, the players represent the nation or concerned state. However, in professional leagues, foreign players are also involved and the main aim of each party is to profit. Further, the CCI found that due to the method of selecting players (by auction) and the amount of commercial considerations involved, the IPL and similar professional leagues differ considerably from international and domestic cricket. The CCI concluded that the BCCI was dominant in the relevant market and has abused its dominant position and its such conduct has "resulted in denial of market access" for IPL competitors. The CCI observed that under Rule 28B of the BCCI rules, no affiliated member....
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....said to be purely towards the promotion of game rather the same can be said to be an act towards the depression and regression of the game. Hence the claim of the assessee that its activity is entirely and purely for the promotion of game cannot be accepted. In view of the above discussion, the contention of the Ld. Counsel that the payment by the BCCI to the appellant is a grant to Charitable Institution cannot be accepted. Even as discussed above, the nature of payment by the BCCI, is not voluntary grant or largesse rather the same is a payment in an arrangement of sharing of Revenue from commercial exploitation of the Cricket and infrastructure thereof, hence, the plea of the assessee that the income from BCCI be treated as a capital receipt in its hand is not tenable. 38. Now coming to the next submission of Sh. Vohra, the Ld. Counsel for the assessee, that even if it is held that the appellant is involved in incidental business activity yet all the incidental income/surplus so earned by the assessee has been ploughed back for charitable purposes. That, profit making is not the motive of the assessee, hence exemption u/s can not be denied to the assessee. We are not convinced....
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.... profit must, therefore, be intertwined or wrapped up with or implied in the purpose of the trust or institution or in other words it must be an integral part of such purpose............... ............ Take, for example, a case where a trust or institution is established for promotion of sports without setting out any specific mode by which this purpose is intended to be achieved. Now obviously promotion of sports can be achieved by organising cricket matches on free admission or no-profit no-loss basis and equally it can be achieved by organising cricket matches with the predominant object of earning profit. Can it be said in such a case that the purpose of the trust or institution does not involve the carrying on of an activity for profit, because promotion of sports can be done without engaging in an activity for profit. If this interpretation were correct, it would be the easiest thing for a trust or institution not to mention in its constitution as to how the purpose for which it is established shall be carried out and then engage itself in an activity for profit in the course of actually carrying out of such purpose and thereby avoid liability to tax. That would be too na....
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....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. Ordinarily, there should be no difficulty in determining whether the predominant object of an activity is advancement of a charitable purpose or profit-making. But cases are bound to arise in practice which may be on the border line and in such cases the solution of the problem whether the purpose is charitable or not may involve much refinement and present real difficulty." (emphasis supplied by us ) From the above examples given by the hon'ble Supreme court, it is to be noted that differentiation lies between 'if some surplus has been left out of incidental commercial activity' and 'the activity is done for the generation of surplus'. Although such an activity for generation of surplus may also be serving the purpose of charitable object of general public utility, still it will not be covered as for "charitable purposes". The case of the assessee is squarely covered with the above examples given by the hon'ble supreme court and hence, despite having the objects of promotion of sports, the activity of the as....
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.... places or objects of artistic or historic interest and are also carrying on the business activity which is incidental to the attainment of objective of such trust or institution {as provided under section 11(4A)}, are entitled to claim exemption of their income including the income from incidental business activity under section 11 subject to the compliance and applicability of the other relevant provisions of the Act, irrespective of the quantum of income earned from such incidental business activity. That, however, the trusts or institutions falling in the last limb of the definition of charitable purposes as defined under section 2(15) i.e. 'for the advancement of any other object of public utility' which also involves the carrying of incidental 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, as per the restrictions put by the provisos to section 2(15) the incidental business activity should be in the course of actual carrying out of the main object and the receipts therefrom should not cross the limit or cap (as applicable from time to time). That it will be immateri....
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....assessment year will not be available. However, it has been further held that if this happens on continuous / regular basis, it could justify further probe / inquiry before concluding that the trust is not genuine. This is also so held in the own case of the assessee by the coordinate Bench of this Tribunal vide order dated 19.10 2015 in an appeal filed by the assessee against the cancellation of its registration u/s 12AA (3) of the Act bearing ITA No.834/Chd/2012. Admittedly the receipt from commercial exploitation of the cricket matches for the year under consideration has increased the prescribed limit for the year i.e. Rs. 10 lakhs, thus hit by the second proviso to section 2(15) of the Act. Hence the case of assessee is covered against the assessee by the decision of the Tribunal in the own case (supra) of the assessee. However, the coordinate Chandigarh bench in the case of "Chandigarh lawn Tennis Association" (supra) reading down the relevant provisions, has held that the proper and harmonious construction of the relevant provisions will be that the institution carrying out the object of advancement of general public utility which involve the incidental or ancillary activi....
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....generation and augmentation of the revenue by exploiting the popularity of the game and towards monopolisation and having dominant control over the cricket to the exclusion of others. What we want to convey is that the commercial exploitation of the popularity of the game and the property/infrastructure held by the assessee is not incidental to the main object but is apparently and inter alia one of the primary motives of the assessee. At this stage, we deem it fit to refer to the revised constitution of the appellant PCA done in compliance of the directions of the Hon'ble Supreme Court dated 9.8.2018 passed in Civil Appeal No. 4235 of connected matter, as revised upto 11.8.2019 and registered with Registrar of firms and societies Punjab, the objects of the PCA interalia, include the following: "To carry out any other activity which may seem to the PCA capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value or render profitable or generate better income/revenue, from any of the properties, assets and rights of the PCA;" 41. The above object reveals that now the assessee's activities inter alia are als....
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....activity. 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. It has been submitted that the club facilities are being run for the benefits of members and cricketers as per the objects of the society on the principle of mutuality. However, the Assessing officer observed that the assessee earned huge income of Rs. 123.03 lacs during the year from these facilities and this includes a sum of Rs. 14.97 lacs from caterer. That the assessee hosted these facilities for the purpose of recreation or one time booking for parties, functions etc. and these were commercial activities in nature as the assessee was charging fees for providing these facilities. 44. After considering the rival submissions, in our view, this issue is required to be reexamined by the Assessing officer after verification of the accounts of the assessee as to ascertain which part of the club income and catering services has been generated from the members of the assessee association and which part of the income is earned from non-members. It is also to be looked into whether....