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M/s Tamil Nadu Cricket Association Versus The Deputy Director of Income Tax (Exemptions) , Chennai - 600 034.

2015 (8) TMI 761 - ITAT CHENNAI

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 asset becomes NIL since the entire cost was allowed as application of income un .....

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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 Tribunal and restored the registration under Section 12AA of the Act. Therefore, a .....

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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 the Act is not applicable to the assessee. In view of the above discussion .....

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014 - 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 years 2008-09, 2009-10 & 2010-11. Since common issue arises for considerati .....

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e 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 members of the assessee-society are the district associations and the cricket clu .....

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olds 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 organizes twenty over cricket matches between various franchisees which is o .....

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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 income under the following heads:- (1) Subscription from members (2) Sale of tic .....

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port 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 year 2008-09. For the assessment years 2009-10 and 2010-11, the assessee c .....

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sessee-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 CBDT in Circular No.395 dated 24.09.1984, the Ld. representative submitted .....

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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 the Act, in I.T. A. No.396/Mds/2012. This Tribunal by an order dated 22.02 .....

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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 return, the assessee claimed depreciation to the extent of ₹ 1,61,75,9 .....

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mulation 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 and Charitable Trust v. ACIT in I.T. A. Nos.142 to 144/Mds/2010 dated 02.02.2 .....

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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 no benefit of going through the judgment of the High Court which reverses t .....

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ted 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 the Ld. representative, Indian Premier League is conducted by BCCI and the a .....

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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. 22,29,49,392/- from BCCI. The assessee has also received Indian Premier League s .....

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ding 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 share received by the assessee from BCCI in the form of subsidy / grant is no .....

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ficer 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, the cost of the said asset becomes NIL. Therefore, there is no question of .....

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g 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 generation or generation and distribution of power, such percentage on the actua .....

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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 for the purposes of business or profession for a period of less than one hu .....

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9, 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" and "medium passenger motor vehicle" but does not include "m .....

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8). 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 Taxation Laws (Amendment) Act, 1991. Provided also that the aggregate deduc .....

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ion, 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 company, or the demerged company and the resulting company, as the case may be, .....

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ement 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" shall mean- (a) tangible assets, being buildings, machinery, plant or furniture .....

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ing 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 engaged in the business of manufacture or production of any article or thin .....

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ice 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 and allowed under clause (i) and which is sold, discarded, demolished or d .....

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nt 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 be a sum which bears to the amount for which the motor car is sold or, as .....

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, 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 the Central Government under sub-section (7) of section 45 of that Act, of .....

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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 asset owned by the assessee and used for the purpose of business or profes .....

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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 Act, it is not eligible for depreciation under Section 32 of the Act. For t .....

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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 spend at least 75 per cent of its total income, for religious or charitabl .....

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ression "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 business undertaking held under trust, its "income" will be the income .....

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d 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 any debits made for capital expenditure incurred for the purposes of the t .....

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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 follows:- Held, that after writing off the full value of the capital expenditu .....

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t 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 in [1993] 199 ITR 15(Cal.) that The income contemplated by the provisions .....

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on 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 Section 32 of the Act. In view of the above, this Tribunal is of the considered .....

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ties 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 carefully gone through the provisions of Section 2(15) of the Act and the circular .....

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ility : 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 appl .....

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s, 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. For the purpose of convenience, we are reproducing the object:- (a) To tak .....

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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 caste, creed, religion or sex. (d) To maintain a library of books, publications .....

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rounds, 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 objects of the Association. (g) To lay our any ground for playing the game and .....

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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 relations with and among the population of the area under its control throu .....

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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 to run such matches for the achievement of the objects of the Association an .....

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ions 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 and conduct matches and tours of representative teams visiting its area on .....

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d 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 India and abroad. (v) To collect funds and whenever necessary borrow with .....

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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 the objects, rights or properties of the Association. (y) To maintain a pane .....

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ssee-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 the State of Tamil Nadu and in the Union Territory of Puducherry. 15. Now, .....

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I. 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 conducts the public auction for selling premier players at a huge premium rate. .....

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