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2015 (8) TMI 761 - ITAT CHENNAI

2015 (8) TMI 761 - ITAT CHENNAI - [2015] 42 ITR (Trib) 546 (ITAT [Chen]) - Registration granted under Section 12AA cancelled - claim of depreciation denied - Held that:- For assessment year 2008-09 when the assessee claims the cost of the capital expenditure as exemption under Section 11 of the Act, then the cost of the capital asset becomes NIL. Admittedly, depreciation under Section 32 of the Act has to be allowed only on written down value of the asset. When the written down value of the asse .....

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assessment years under consideration. - Decided against assessee.

Now coming to assessment years 2009-10 and 2010-11, the claim of the assessee was rejected by the lower authorities on the ground that the registration under Section 12AA was cancelled and it was confirmed by this Tribunal. The lower authorities have also found that the assessee is engaged in business activity. As regards the cancellation of registration, now the Madras High Court has set aside the order of this Tribuna .....

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ost in the State of Tamil Nadu, is only providing its stadium. The assessee has also received funds from BCCI for meeting the expenditure, being the host. Therefore, this Tribunal is of the considered opinion that at any stretch of imagination, it cannot be said that the assessee is conducting any business activity. The assessee is also not providing any service to any trade, commerce or industry. In those circumstances, this Tribunal is of the considered opinion that proviso to Section 2(15) of .....

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9 also.- Decided in favour of assessee. - ITA Nos.1535, 1536 & 1537/Mds/2014 - Dated:- 14-8-2015 - SHRI N.R.S. GANESAN AND SHRI A. MOHAN ALANKAMONY, JJ. For The Appellant : Shri V. Ravichandran, CA Shri P. B. Srinivasan, CA For The Respondent : Shri N. Rengaraj, CIT ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: All the three appeals of the assessee are directed against the common order passed by the Commissioner of Income Tax (Appeals)-VII, Chennai, dated 28.03.2014 and pertain to assessment year .....

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ain object of the assessee-society is to promote the sport of cricket in the State of Tamil Nadu and in the Union Territory of Puducherry. The Ld. representative submitted that the assessee-society conducts cricket tournaments including inter-university, inter-school, inter-association and inter-district tournaments. Apart from that, the Ld. representative clarified that the assessee-society is also providing coaching for the benefit of cricketers. According to the Ld. representative, the member .....

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I. 4. The Ld. representative for the assessee further submitted that BCCI holds test matches with visiting foreign teams and oneday international matches. Various cricket associations in State which play matches in their respective stadium. The inter-state and inter-zone tournaments such as Ranji Trophy, Duleep Trophy, Irani Trophy, etc. are organized by BCCI. However, the same was conducted by the State Cricket Association like assessee. The Ld. representative further submitted that BCCI also o .....

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The Ld. representative further submitted that the assessee has to incur all the expenditures at the stadium for conducting the matches. BCCI earns revenues by way of sponsorships and media rights for telecast and broadcast of the matches as well as franchise revenues from the Indian Premier League. According to the Ld. representative, BCCI distributes 70% of revenues to member cricket associations, including the assessee-society. The Ld. representative has clarified that the assessee earns incom .....

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r conducting international cricket matches. Over the decades of time, the sport of cricket became popular in the State of Tamil Nadu and several players from Tamil Nadu have gone on to win international and national acclaim. 5. The Ld. representative for the assessee submitted that in fact registration to the assessee-society under Section 12AA was granted by Director of Income Tax (Exemptions) on 28.03.2003 and the assessee had availed exemption under Section 11 to 13 of the Act upto assessment .....

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nature of commercial receipt for providing service to the members of the assessee-society. The Assessing Officer has also found that the assessee earns surplus profit on conducting test matches between India and England. Referring to Section 2(15) of the Act, the Ld. representative submitted that with effect from 01.04.1984, charitable purpose includes relief of poor, education, medical relief and advancement of any other object of general public utility. Referring to the circular issued by the .....

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erefore, the assessee-society has to be treated as charitable institution. In fact, according to the Ld. representative, the registration granted to the assessee-society under Section 12AA of the Act was cancelled by the Director of Income Tax (Exemptions) by an order dated 29.12.2011, a copy of which is available at page 197 of the paper-book. The assessee challenged the correctness of the order of the Director of Income Tax (Exemptions) cancelling the registration granted under Section 12AA of .....

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egistration granted under Section 12AA of the Act. Therefore, according to the Ld. representative, as on today, the registration granted under Section 12AA of the Act stands restored. Therefore, the assessee is entitled for exemption under Section 11 of the Act. Referring to the order of the assessment for assessment year 2008-09, Ld. representative pointed out that the assessee claimed depreciation in respect of the capital asset to the extent of ₹ 1,61,75,931/-. However, in the revised r .....

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of India (199 ITR 43). After condoning the delay in filing Form 10 of accumulation of income, exemption was allowed under Section 11(2) of the Act. Referring to the order of the Tribunal in the assessee's own case for assessment year 2007-08 in I.T. A. No.1851/Mds/201(1) dated 10.04.2012, the Ld. representative submitted that in the assessee's own case for assessment year 2007-08, this Tribunal granted depreciation after following its earlier order in Sri Mariamman Educational Health an .....

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tted that the Assessing Officer estimated the television audience more than 200 millions in India and Indian Premier League match has a global reach in respect of the advertisement pertaining to new production launch. Therefore, the Assessing Officer found that it is a commercial venture. According to the Ld. representative, the Assessing Officer placed his reliance on the order of this Tribunal confirming the cancellation of registration under Section 12AA of the Act. The Assessing Officer had .....

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The entire funds generated in the course of its sport activity is re-invested in training the students and other players. Therefore, according to the Ld. representative, the Assessing Officer is not justified in disallowing the claim of the assessee under Section 11 of the Act. Similarly, for assessment year 2010-11, the CIT(Appeals) disallowed the claim of the assessee. According to the Ld. representative, the Assessing Officer is influenced by the Indian Premier League matches. According to t .....

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he State of Tamil Nadu and in the Union Territory of Puducherry. Therefore, the Assessing Officer is not justified in disallowing the claim of the assessee. 8. On the contrary, Shri N. Rengarajan, the Ld. Departmental Representative, submitted that the assessee-society is conducting cricket matches like a trade/business. According to the Ld. D.R., sharing the revenue from BCCI in advertisement is definitely a commercial receipt. During the assessment year 2010-11, the assessee received Rs. 22,29 .....

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the assessee-society is totally changed into a commercial venture. 9. According to the Ld. D.R., the assessee has received ₹ 14,27,16,192/- in the assessment year 2010-11 from TV subsidy. TV subsidy admittedly is a share received from BCCI on account of audit revenues arising from telecast of test matches. The Ld. D.R. further submitted that assessee-society was expected to host test matches, one-day matches, T-20 matches and Indian Premier League matches. According to the Ld. D.R., the sh .....

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sessment year 2008-09, the Ld. D.R. submitted that in fact the Assessing Officer allowed exemption under Section 11 of the Act. What was disallowed was only depreciation claimed by the assessee. According to the Ld. D.R., the assessee in one hand is claiming as application of income while purchasing the asset and on the very asset, the assessee is claiming depreciation. According to the Ld. D.R., once the cost of the capital asset was allowed as application of income under Section 11 of the Act, .....

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spect of depreciation of- (i) buildings, machinery, plant or furniture being tangible assets ; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession the following deductions shall be allowed- (i) in the case of assets of an undertaking engaged in gener .....

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used-(i) in a business of running it on hire for tourists; or(ii) outside India in his business or profession in another country ; and(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42: Provided further that where any asset referred to in clause (i) 6or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use .....

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1st day of April, 1999, and is put to use before the 1st day of April, 1999, for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation - For the purposes of this proviso,- (a) the expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" .....

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as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988). Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent. of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the .....

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e amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated compa .....

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, in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation - 2. For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43; Explanation - 3. For the purposes of this sub-section, 10the expressions "assets" shal .....

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sits (including searching for discovery or testing of deposits for the winning of access thereto) ; Explanation - 5. For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income ; (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee .....

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ion, including accommodation in the nature of a guest-house ; or(C) any office appliances or road transport vehicles ; or(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any one previous year ; (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed .....

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- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to .....

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n under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is 8an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by .....

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ion (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years. In view of Section 32 of the Act, depreciation has to be allowed only in respect of an .....

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pplication at all. The provisions of Section 32 in fact were not brought to the notice of this Tribunal while deciding the assessee's own case for assessment year 2007-08 and also the decision of Sri Mariamman Educational Health and Charitable Trust (supra). In fact, this Tribunal examined the issue elaborately in The Anjuman-EHimayath- E-Islam v. ADIT in I.T. A. No.2271/Mds/2014 by order dated 2nd July, 2015 and found that when the assessee is eligible for exemption under Section 11 of the .....

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1968 which has not been considered by the other decisions. The Circular No. 5P(LLX-6) is reproduced herein below for reference:- 1. Circular No. 5-P (LXX-6) of 1968, dated 19-6-1968. Subject : Section 11-Charitable trusts-Income required to be applied for charitable purpose-Instructions regarding. In Board's Circular No. 2-P(LXX-5) of 1963, dated the 15th May, 1963, it was explained that a religious or charitable trust claiming exemption under section 11(1) of the Income- tax Act, 1961, must .....

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variably to "income" and not to "total income". The expression "total income" has been specifically defined in section 2(45) of the Act as "the total amount of income . . . computed in the manner laid down in this Act". It would accordingly be incorrect to assign to the word "income" used in section 11(1)(a), the same meaning as has been specifically assigned to the expression "total income" vide section 2(45). 3. In the case of a busin .....

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he account will be eligible for exemption under section 11(1), the permitted accumulation of 25 per cent will also be calculated with reference to this income. 4. Where the trust derives income from house property, interest on securities, capital gains, or other sources, the word "income" should be understood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purposes of the trust or otherwise, and also after adding back .....

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l benefit of the exemption under section 11(1). 5. To sum up, the business income of the trust as disclosed by the accounts plus its other income computed above, will be the "income" of the trust for purposes of section 11(1). Further, the trust must spend at least 75 per cent of this income and not accumulate more than 25 per cent thereof. The excess accumulation, if any, will become taxable under section 11(1). After considering the Circular, the Hon ble Kerala High Court held as fol .....

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e books in this fashion and there would be violation of section 11(1)(a). It was for the assessee to write back the depreciation and if that was done, the Assessing Officer would modify the assessment determining higher income and allow recomputed income with the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes. Further Hon ble Calcutta High Court has held in the case DCIT VS. Girdharilal Shewnarain Tantia Trust reported .....

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ssessee claims the cost of the capital expenditure as exemption under Section 11 of the Act, then the cost of the capital asset becomes NIL. Admittedly, depreciation under Section 32 of the Act has to be allowed only on written down value of the asset. When the written down value of the asset becomes NIL since the entire cost was allowed as application of income under Section 11 of the Act, this Tribunal is of the considered opinion that there cannot be any further claim for deduction under Sect .....

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12AA was cancelled and it was confirmed by this Tribunal. The lower authorities have also found that the assessee is engaged in business activity. As regards the cancellation of registration, now the Madras High Court has set aside the order of this Tribunal and restored the registration under Section 12AA of the Act. Therefore, as on today, the registration under Section 12AA is restored. 14. The next contention of the Ld. D.R. that the assessee is engaged in business activity. We have carefull .....

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ric 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 .....

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siness, or rendering any activity in relation to trade, commerce or business, the same shall not be treated as charitable purpose. The question arises for consideration is whether the assessee involves itself in any activity in the nature of trade, commerce or business or its activity would amount to rendering any service in relation to trade, commerce or business. We have carefully gone through the object of the assessee-society, a copy of which is available at pages 62 to 65 of the paper-book. .....

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rritory of Pondicherry and give Its decision on all matters concerning the same either when referred to or suo moto. The activities would be confined to India. (c) To spread the game throughout the State by organizing tournaments, including Inter-University, Inter-School and Inter-Association matches, to educate youn sportsmen in the game generally and also in the field of physical culture and the spirit of sportsmanship. The benefits would be available to the General Public irrespective of cast .....

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with the game. (f) To provide, acquire and maintain suitable places, playgrounds, buildings and club houses to afford required facilities for the cricketers, officials such as Managers, Coaches, Umpires, Selectors and others who are directly connected with the game, members to acquire by purchase, lease, hire or Otherwise suitable playgrounds, stadia and any other property, movable and immovable, rights or privileges to the same and to provide all amenities thereon for the promotion of the obje .....

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orporated or not whose objects are similar or in part to the objects of the Association, the establishment or promotion of which may be beneficial to the Association and in particular to subscribe to, finance, give or lend money to, and guarantee the contracts of the Board of Control for Cricket in India or any other body for the time being controlling the game in India or any part thereof and any state or Regional Association recognized by such body. (i) To create, foster and maintain friendly .....

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ve a healthy mind and healthy body. (k) To spread the ideals of cricket and all that it stands for throughout the length and breadth of its area by arranging schools for coaching, lectures, tournaments and run international matches between India and other leading foreign countries so as to develop mutual goodwill and better understanding between India and other countries. (l) ……. …. ….. ….. ….. ….. ….. ….. ….. …. time t .....

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lleges and members of affiliated Clubs / District Associations and Institutions and thus enable them to develop a good physique and a good standard of the game and to afford facilities to the poorer classes of citizens to attain efficiency in the game. (o) To regulate and control sports in general and the game of cricket in particular. (p) To give decisions on the relevant matters referrd to the Association by affiliated clubs/district associations and institutions and, if necessary, to finance .....

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ful means of movable and immovable property on behalf of the Association and to sell, manage, mortgage lease and exchange, dispose off or otherwise deal with all or any of its properties and/or any income therefrom. (t) To promote and to contribute to any enterprise conducted by individuals or Associations in conformity with the objects of the Association. (u) To organize a proper coaching scheme for the benefit of cricketers in the City and in the Districts under the supervision of coaches from .....

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funds of the Association as per Section 11(5) of the Income-tax Act, 1961 and to reconvert in such manner as may be decided upon by the General Body of the Members of the Association from time to time. (x) To carry out any other business or activity which may seem to the committee capable of being conveniently carried out in connection with and in conformity to the objects of the Association and which is connected directly or indirectly to enhance the value of or render more profitable any of t .....

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ayers, officials, clubs and affiliated institutions. The object of the assessee-society is to control game of cricket in the State of Tamil Nadu and in the Union Territory of Puducherry and also to organize tournaments, including inter-university, interschool and inter-association matches, to educate young sportsmen in the game generally and also in the field of physical culture and the spirit of sportsmanship. Therefore, the sole object of the assessee-society is to promote sport of cricket in .....

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ciety, being a member of BCCI, hosts the matches which are conducted by BCCI. For the purpose of meeting its expenditure, the BCCI allocates funds from the revenue it collected from advertisement and other sources. The assessee-society is allowed to sell tickets to the cricket viewers. No doubt, the players of Indian Premier League are sold in public auction for very huge amount. But the question is who is conducting and who is auctioning, whether the assessee-society or BCCI? In fact, BCCI cond .....

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