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ACIT (Exemptions) , Circle, Vijayawada Versus The Andhra Cricket Association

2017 (11) TMI 673 - ITAT VISAKHAPATNAM

Eligibility for exemption under section 11 - denial of claim by AO observing that the activities of the assessee are business activities - expenditure towards conducting various tournaments, grants to District associations for conducting league tournaments and development of game and other heads such as Administrative & Maintenance - what are the receipts of the assessee and how assessee has been incurred towards the objects - Held that:- The assessee has already constructed a stadium at Visakha .....

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e incurred expenditure towards conducting various tournaments, grants to District associations for conducting league tournaments and development of game and other heads such as Administrative & Maintenance. - From the above, it is very clear that the receipts received by the assessee in relation to sports of cricket and also incurring expenses towards development of the stadiums, which is also related to sports of cricket and also clearing the land for the purpose of construction of stadium .....

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business activities without making any enquiry, which object is converted into business. Simply making observations without recording the reasons, is not a sufficient to constitute that the assessee is converted from charitable to business activity. Therefore, the observations of the Assessing Officer are not correct and it has to be rejected. Assessing Officer is not correct in rejecting exemption claimed by the assessee under section 11 of the Act also not correct in rejecting the claim of the .....

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ssessment Year 2010-11. ITA No.241/VIZ/2015 & ITA No.01/VIZ/2016 are the appeals filed by the revenue against separate orders of the ld. CIT(A), Vijayawada, dated 25/03/2015 & 28/09/2015 for the Assessment Year 2011-12 & 2012-13. ITA No.93/VIZ/2015 2. Facts of the case, in brief, are that assessee-Andhra Cricket Association (ACA) was registered under section 12A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') w.e.f. 01/04/1993 vide proceedings of the Commis .....

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der section 143(1) of the Act. Subsequently, the assessee‟s case was selected for scrutiny and notice under section 143(2) was issued and after following due procedure, assessment is completed under section 143(3) of the Act. In the assessment order, the Assessing Officer has noted that the assessee allegedly receiving grants from the Board of Control for Cricket in India (BCCI) partly, as reimbursement for various tournaments conducted by the assessee. The assessee has already constructed .....

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ese receipts, the assessee incurred expenditure towards conducting various tournaments, grants to district associations for conducting league tournaments and development of game and other heads, such as Administrative & Maintenance. The assessee has shown the values of fixed assets and the infrastructure subsidy from the BCCI. 3. The Assessing Officer further observed that on verification of the copy of booklet of Memorandum and Articles of Association dated 18/07/1994, it is mentioned at pa .....

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iation and subsequent amendments made by the assessee on 04/08/1994, 23/07/1995 & 10/11/2007, he came to a conclusion that the assessee has not taken approval from the Commissioner of Income Tax and therefore, is not eligible for exemption under section 11 of the Act. For the sake of convenience, original objects of the assessee as per memorandum of association and subsequent amendments are extracted as under:- Objects as per Original Memorandum of Association Further amended objects deviati .....

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eadth of its area by establishing academies for coaching and conducting coaching camps and for by arranging schools for, coaching, lectures, tournaments and to run international matches between India and other leading foreign countries so as to develop goodwill and better understanding between India and other countries. (o) To regulate and control sports in general and the game of cricket in particular (o) To regulate and control the game of cricket (q) To encourage the formation of zonal clubs .....

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upervision of coaches from India or abroad This object is totally removed. (v) To collect funds for the purpose of the association and to utilize such funds in such manner as the Executive Committee may consider desirable for the ulfilment of the objects of the Association (t) To collect funds for the purpose of the association and to utilize such funds for the fulfilment of the objects of the Association (w) To invest monies and funds of the Association in such authorized securities and in such .....

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ects, right of properties of the Association (u) To carry out any other business or activity including the formation, running or leasing out of clubs or club houses in the stadia under the control of the association. With a view to accomplishing the major objects of the above (10) To vest the property of the association in a board of trustees elected by the General Body who shall carry out the objects of the Association under the general control, supervision and direction of the General Body thr .....

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ly passed amendments to the objects and rules conspiring with the BCCI and also at the convenient of the Executive Bodies of the ACA & BCCI to get benefit of alleged funds from BCCI and then to avail the benefits of sections 11 & 12 for both the organizations. The Assessing Officer also noted that the basis of which, granted registration under section 12A by the Commissioner of Income Tax are the original objects. Therefore, once amendments are made without approval of the Commissioner o .....

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n this count also, the Assessing Officer denied exemption under section 11 of the Act. 6. On appeal, ld. CIT(A) directed the Assessing Officer to grant exemption under section 11 of the Act by observing as under:- 5. I have gone through the facts of the case, assessment order and written submissions filled by the appellant. The Assessing Officer mainly concluded that these amendments to the Rules and Bye-laws to the Original Memorandum and Articles of Association were in the absence of prior app .....

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pellant submitted that the AO has not established as to which activity of the appellant was commercial in nature during the year. The appellant also contends that the AO has failed to bring on record necessary evidence to prove that the appellant has indulged in commercial activity before making such sweeping allegation. From the assessment order I also observed that Assessing Officer actually mention the business activity and hot established the same. 7. On being aggrieved, revenue carried the .....

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ctivities, therefore, Assessing Officer by considering the same, denied exemption under section 11 of the Act. 10. On the other hand, learned counsel for the assessee has submitted that the assessee-association has been granted registration by the Commissioner of Income Tax under section 12A of the Act on 21/02/1995. Since then, the assessee is continuously enjoying registration under section 12A of the Act. Subsequently, the assessee association has made certain amendments which are only clarif .....

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re is a proposal by the learned Commissioner to cancel the registration granted under section 12A to the assessee, and a notice was issued to the assessee on 04/03/2014 calling explanation from the assessee. In response to the notice, assessee has submitted a detailed representation to the Commissioner on 10/03/2014. By considering the same, the Commissioner has dropped the proceedings initiated for cancellation of registration under section 12A of the Act. 12. Learned counsel for the assessee h .....

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ssing Officer without considering the same, rejected the claim of exemption made by the assessee. Learned counsel for the assessee has further submitted that the objects of the assessee-association, originally framed and filed before the learned Commissioner and subsequently, the some changes by way of amendments were made without effecting the character of the original objects. Therefore, the Assessing Officer is not justified in rejecting exemption under section 11 of the Act. Learned counsel .....

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iv) of the Act. 13. We have heard both the sides, perused the material available on record and orders of the authorities below. 14. The assessee - M/s. The Andhra Cricket Association has been granted registration by the learned Commissioner on 21/02/1995. Subsequently, learned CCIT granted approval under section 10(23C)(iv) of the Act on 27/02/2009. The assessee filed its return of income for the year under consideration by declaring total loss of Rs. 1,92,29,098/- after claiming exemption under .....

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rther amended to the Memorandum of association and Articles of association on 24/06/2001, 25/06/2011 & 17/08/2012. By considering the above the Assessing Officer is of the opinion that the assessee intentionally passed the amendments to the objects and rules conspiring with the BCCI and also at the convenient of the Executive Bodies of the ACA & BCCI to get benefit of alleged funds from BCCI and then to avail benefits of section 11 & 12 for both the organizations. Insofar as amendmen .....

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ble for exemption under section 10(23C)(iv) of the Act which is effective from Assessment Year 2008-09 onwards, thereby exemption under section 11 has to be granted to the assessee association. 15. So far as amendments are concerned, we have considered the original objects and subsequent amendments and found that there are no major changes, which are also not affected to the objects of the assessee. The Assessing Officer is also not able to point out which activity of the assessee is converted f .....

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In the present case, the Assessing Officer has not given any reasons why the assessee is not eligible for exemption under section 11 or 10(23C)(iv) of the Act. The only reason given by the Assessing Officer is that assessee has amended Articles of association and there is no approval from the jurisdictional Commissioner, therefore, not eligible. In this context, it is necessary to note that the learned Commissioner has issued a notice to the assessee on 04/03/2011 (page No. 45 of the paper book .....

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ture and for the purpose of more effective and practical execution of the objects. 16. The learned Commissioner after receiving reply from the assessee, he has dropped the proceedings initiated for cancellation of registration under section 12A of the Act and therefore it has to be presumed that the amendments made by the assessee-association are not affected the original objects of the assessee. In our opinion, on account of amendments, which are subsequently approved by the learned Commissione .....

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age No. 7) that in this context of sports, promoting cricket would be a charitable activity, it did not involve any element of trade, commerce or business. The conduct of certain activities and receipt of income from these activities clearly show that these activities are totally commercial and there is no element of any charity in the conduct of the assessee. A perusal of the relevant details of financial transactions clearly shows that the activities and source of income which clearly fall in .....

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s‟. During the year under consideration, the assessee has also commenced construction of stadiums at various places like Mangalagiri, Kurnool & Kadapa. During the year, it has also acquired land at Nellore for the purpose of constructing a stadium. The assessee has admitted the incomes under the major heads such as BCCI reimbursements of Rs. 20,64,17,339/- and interest of Rs. 1,26,10,435/- on FDR‟s & SB accounts. Out of these receipts, the assessee incurred expenditure toward .....

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orts of a cricket. Certain funds are granted to the District Associations for the purpose of development of cricket sports. Therefore, all the receipts received by the assessee are incurred in connection with sports of the cricket. Therefore, the Assessing Officer is not justified in observing that the activities of the assessee are business activities. 19. We find that the Assessing Officer simply observed that the activities of the assessee are converted into business activities without making .....

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11 of the Act also not correct in rejecting the claim of the assessee under section 10(23C)(iv) of the Act. Thus, ld. CIT(A) has considered the entire facts and circumstances of the case and also details submitted by the assessee, directed the Assessing Officer to allow claim under section 11 of the Act to the assessee. We find no reason to interfere with the order passed by the ld. CIT(A). 20. So far as case-law relied on by the assessee in the case of Tamil Nadu Cricket Association (supra), th .....

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al Institute & another (supra) has no application to the facts of the present case. In view of the above, the appeal filed by the revenue is dismissed. ITA Nos. 241/VIZ/2015 & 01/VIZ/2016 21. So far as Assessment Years 2011-12 & 2012-13 are concerned, both the parties have submitted that the facts involved in Assessment Year 2010-11 are similar to the facts of the Assessment Years 2011-12 & 2012-13. 22. The Assessing Officer, in the Assessment Years 2011-12 & 2012-13, has exp .....

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. We also find that all the activities carried out by the assessee in connection with the sports of the cricket. The assessee has got registration under section 12A as well as 10(23C)(iv) in connection with the sport of the cricket. The activities carried out by the assessee are only relate to the sports of the cricket and therefore, denial of exemption by the Assessing Officer is not correct when the activities carried out by the assessee have been considered by the learned Commissioner, who gr .....

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urn submissions and assessment order. The ACA is a registered society and registered under registration of society Act 1950 on 12-07-1996, mainly with the object to maintain a general control of the game of cricket in the State. This ACA shall be affiliated to the Board of Control for Cricket in India (BCCI). 6.1 On verification of Income and expenditure account for this year ended 31st march 2011 the main sources of income was of BCCI reimbursements of ₹ 23.01cr, interest on FDRs & SB .....

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of certain activities and receipt of income from these activities clearly shows that these activities are totally commercial and there is no element of any charity in the conduct of the ACA. Perusal of the relevant details of financial transactions clearly shows that the activities and source of income which clearly fall in the definition of 'Business'. It is also evident that the major income arises not from the game of cricket but from the 'Business' of cricket." 6.2.1 &qu .....

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vities are not in conformity with the objects of the trust. 6.4 Page 9 para2 "From the discussion, it is clear that the ACA is not acting as a charitable organization. The entire character and focus of ACA has become totally commercial. There is generation of huge profits year after year, a part of which is used, to enhance the investment and income earning infrastructure and apparatus, of ACA." 6.5 As per para 3 "Further, it is clear that entire character and focus of The ACA has .....

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ilised for maintenance of the cricket academy and promotion of the cricket. The excess income deposited in the banks and disclosing interest income as per the provisions of the secl.1 of the I.T. Act, 1961. 6.6 As per para 4 "The amended objects have the effect of not only altering the purpose and intention of the original objects stipulated but also changed its democratic functioning by usurping the powers of nominated executives. The dispute raised by the interested members of association .....

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aking the amendments to the rules and Bye-laws mentioned in the original memorandum and articles of association based on which the registration u/s.12A was granted or in the absence of fresh registration u/s. 12AA for the amendments made to the rules and Bye-Laws mentioned in the Original Memorandum and Articles of Association, Exemption u/s. 11 of the I.T. Act claimed by the assessee cannot be allowed. According to section 12A, the provisions of sec. 11 and 12 shall not apply in relation to the .....

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t these amendments do not change the basic character of the objects of the Association and that these were done for practical needs and for more effective administration of the Association. Moreover these amendments were within the knowledge of the department, as the Chief Commissioner has granted the approval for exemption u/s 10(23C)(iv) subsequently on 27-2-2009. The amendments alleged to have been done on 24-6-2001, 25-6-2011 and 17-8-2012 as stated in the assessment order were not actually .....

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dt.26-04-2013 with ackmnt. enclosed) and therefore there is no violation on the part of the appellant. Therefore the appellant cannot be declared ineligible for exemption on the ground that the very foundation on the basis of which the appellant was registered stands removed and ceased to be operative. The important point that was missed by the A.O was that the learned CCIT granted registration u/s 10(23C) (iv) after examining these amendments, so the department is aware of the amendments There .....

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occasions one or two players who were members of those bodies played. The receipts which constituted the income in question came entirely from the members of the public who came to witness the game. If the income in question was derived from the fees charged for admission to the games held under the auspices of the association it was difficult to see how it was derived from any property. 6.8.1 This observation and case law relayed on AO is not relevant and the facts of the case cricket associati .....

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t be constructed literally and in absolute terms. It has to take colour and be considered in the context of section 10 (23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted i .....

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any other consideration. In the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in re .....

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to be read down in the manner indicated by us. As a consequence, the impugned order dated 23/01/2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C)(iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs. 6.10 Keeping in view of the above, the appellant is eligible for exemptions the provisions of section 11,12,and 13 of IT Act, .....

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2015 for the Assessment Year 2011-12. The relevant portion of the above is reproduced as under:- 6.5.1 These observations of the AO is not correct as there is no profit motive as the funds received from the BCCI were utilised for maintenance of the cricket academy and promotion of the cricket. The excess income deposited in the banks and disclosing interest income as per the provisions of the secl.1 of the I.T. Act, 1961. .......................................................................... .....

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absolute terms. It has to take colour and be considered in the context of section 10 (23C)(iv) of the said Act. It is also clear that if the literal interpretation is given to the proviso to section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and interpreted in the context of section 10(23C)(i .....

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tivities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or b .....

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icated by us. As a consequence, the impugned order dated 23/01/2013 is set aside and a mandamus is issued to the respondent to grant approval to the petitioner under section 10(23C)(iv) of the said Act within six weeks from the date of this judgment. The writ petition stands allowed as above. The parties are left to bear their own costs. 6.10 Keeping in view of the above, the appellant is eligible for exemptions the provisions of section 11,12,and 13 of IT Act, 1961 and also section 10(23C)(iv) .....

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ioned in order u/s 10(23C)(iv). The sole object of the appellant society is to promote sport of cricket in the state of Andhra Pradesh. Hence, I hold that the appellant is eligible for exemptions under provisions of section 11, 12 and 13 of the Act and also section 10(23C)(iv) which was already granted to the appellant for the assessment year 2008-09 onwards vide CCIT Hyderabad-Ill letter dated 27.02.2009. Therefore, the Assessing Officer is directed to allow the exemptions to the appellant. 7.1 .....

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dvertisement 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 of BCCI? In fact, BCCI conducts the public auction for selling premier players at a huge premium rate. In fact, the BCCI collects money. The role of the assessee-society is only to provide stadium for conducti .....

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plus funds remaining with the assessee-society. The Assessing Officer got confused himself with the activity carried on by the BCCI as that of the activity carried on by the assessee-society. The material available on record shows that one-day matches, T-20 matches and Indian Premier League matches are all conducted by the BCCI and the assessee, being the host In the State of Tamil Nadu, is only providing its stadium. The assessee has also received funds from BCCI for meeting the expenditure, be .....

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t for all the assessment years under consideration. Accordingly, the orders of the lower authorities for assessment years 2009-10 and 2010-11 are set aside and the Assessing Officer is directed to grant exemption under section 11 of the Act The Assessing Officer is also directed to grant exemption under section 11 of the Act for the assessment year 2008-09 also." 7.2 It was further held that - "In view of Section 32 of the Act, depreciation has to be allowed only in respect of an asset .....

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