TMI Blog2019 (9) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion, T.V. Rights etc. and where these receipts are shared with the state association on an 30:70 ratio basis, the nature of receipt does not change and it would be business receipts in the hands of the State Associations also. The allegation of revenue is that these receipts are couched in the form of subsidies. Disallowance u/ 69C - HELD THAT:- Addition cannot be sustained as the amounts in question were recorded in the books of accounts and are part of the income and expenditure account and the source of the expenditure has been disclosed in the books of account. Assessing Officer made quantum disallowance exceeding more than what was debited to the income and expenditure account. AO has mixed up the disallowance due to non deduction of TDS. When application of income is considered u/s 11 of the Act, disallowance u/s 40(a)(ia) of the Act, cannot be made for the impugned Assessment Year. no infirmity in this order of the ld. CIT(A) as explanation (iii) to Section 11(1) of the Act, was introduced by the Finance Act, 2018 only w.e.f. 01/04/2019. Thus, we uphold the order of the ld. CIT(A) as stated above - Decided against revenue D elay in filing Form No. 10 for setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng genuineness of the same particular in the context that in the next assessment year, i.e., 2015- 16, the assessee itself suggested for special audit of its books of accounts regarding the claim of expenditure. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing administrative and establishment expenses as application of income. 5. That on the facts and circumstances of the case as well as law, the Ld. CIT(A) has erred in allowing setting apart of fund u/s. 11(2) of the Income Tax Act,1961 without considering that there was not only the deficit of filing Form 10 in due time but also the same was not claimed in the return of income. 6. That on the facts and circumstances of the case as well as law, the Ld. CIT(A) has erred in allowing enhanced claim made by furnishing of Form 10 before the completion of assessment against the judgment of the Apex Court in the case of Goetze (India) Ltd vs. CIT reported in 284 ITR 323 (2006) that no fresh claim can be accepted during assessment proceedings. 7. That the appellant craves for leave to amend, alter, modify, substitute, add or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation since BCCI will be hosting cricket matches in future is a wrong assumption at para 7.3. of his order, he held as follows:- 7.3 To wind-up on this issue: Firstly, following my appeal order in the case of this same appellant for the AY 2012-13 [supra], the facts being the same/identical, the issue is Allowed. It is the case of section 11(l)(a) r.w.s. 12(1), and as the amount could not be applied, for accumulation u/s 11(2) - the funds having been already deposited/invested in the modes specified in section 11 (5). The belated Form No. 10 was due to circumstances beyond the control of the appellant, and in any case it was submitted before the completion of assessment; and, it is only a procedural intimation. In this regards, it also needs to borne in mind, that if at all for the delay, then at best there should be provisions for penalty imposable [as in the case of section late filing of audit report u/s 44AB/271B]; but there is not penalty for late filing of Form No. 10 - in fact there is no any penalty provisions for Chapter III of the Act - obviously since it is Exempted Incomes Chapter]. So, to deny accumulation u/s 11 (2) merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the fourth limb of the definition of charitable purpose given u/s 2(15) of the Act i.e. object of general public utility . The Assessing Officer came to a conclusion that the assessee is carrying on commercial activity in the nature of trade, commerce or business as the assessee has received amounts from BCCI on account of IPL Subvention, TV rights subsidy from BCCI, Instedia Advertisement etc. In our considered opinion, these receipts from BCCI cannot be considered as income received from activities in the nature of trade, commerce or business. The pith and substance of the argument of the ld. D/R is that the nature of receipt in the hands of BCCI is business or commercial receipts on account of IPL Subvention, T.V. Rights etc. and where these receipts are shared with the state association on an 30:70 ratio basis, the nature of receipt does not change and it would be business receipts in the hands of the State Associations also. The allegation of revenue is that these receipts are couched in the form of subsidies. 12.1. These issues have come up before the Ahmedabad D Bench of the ITAT in the case Gujarat Cricket Association vs. JCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue's case is devoid of legally sustainable basis for the short reason that the commercialization of cricket by the BCCI, even if that be so, cannot be reason enough to invoke the proviso to Section 2(15). We are alive o learned Commissioner (DR)'s suggestion that the cricket associations cannot be seen on standalone basis as the BCCI is nothing but an apex body of these cricket associations at a collective level and whatever BCCI does is at the behest of or with the connivance of the local cricket associations, and that it is not the case that anyone can become a Member of the BCCI because only a recognized cricket association can become a Member of the BCCI. We are also alive to learned Commissioner's argument that what is being sought to be protected by the charitable status of these associations is the share of these cricket associations from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body, as we have explained earlier, cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. We have carefully analysed the annual reports and the annual financial statements of the assessee, and we do not find any objects, other than objects of the cricket associations, being pursed by these cricket associations. The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. We are, therefore, of the considered view that the proviso to Section 2(15) has been wrongly invoked in these cases. 40. We have noted that there are a large number of judicial precedents, in the cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on charitable activity. (a) The learned CIT(A) has erred in law and on facts in not accepting the claim of the assessee that the assessee is carrying on 'Educational Activity', and hence the amendment to Section 2(15) w.e.f 01-04-2009, vis-a-vis business is not applicable to assessee. (b) The learned CIT(A) has erred in law and on facts in holding that on the facts of case of the assessee proviso to Sec. 2(15) inserted w.e.f. 01-04-2009 is applicable, and is carrying on business. 46. So far as these grounds of appeal are concerned, we have, in our detailed analysis earlier in this order, held that the proviso to Section 2(15) does not come into play on the facts of these cases. Accordingly, we uphold the plea of the assessee to this extent. The assessee is thus held to be carrying out 'charitable activity' within the meanings of that expression under section 2(15) and, accordingly, the assessee is entitled to relief under section 11. As to whether the assessee is carrying out educational activities or not, given our above finding, that aspect of the matter is wholly academic as on now and we decline to addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income by way of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution . The Assessing Officer was of the view that what has been paid to the assessee is a share out of earnings by the BCCI, out of proceeds of sale of TV rights, and is, as such, taxable as income of the assessee. It was observed that it cannot be said to be voluntary contribution by the BCCI. The Assessing Officer also shows that as accepted by the auditor of the company the amount is relatable to the TV rights and it cannot, therefore, be treated as voluntary contribution in the nature of corpus donations. He also noted that as registration of the assessee, under section 12AA, stands cancelled, the assessee is anyway not eligible for the benefit of Section 11(1)(d). On the basis of this line of reasoning, the Assessing Officer treated the said amount of ₹ 1,58,00,000 as income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. It was pointed out to the CIT(A) that the BCCI has passed a specific resolution that the amount computed as TV subsidy is given to the Member associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it has to be with specific direction that it will form corpus of the trust'. These conditions are clearly satisfied. Any payment which the assessee is not under an obligation to make, whatever be the mode of its computation, is a voluntary payment, and, any payment which is with a specific direction that it for corpus fund is a corpus donation. In our considered view, even without the two specific confirmations filed by the assessee, in the light of the BCCI resolution under which the payment is made and in the light of the payment not being under any legal obligation, the conditions under section 11(1)(d) are satisfied. We, therefore, uphold the plea of the assessee. The Assessing Officer is accordingly directed to delete this addition of ₹ 1,58,00,000. 50. We see no reasons to take any other view of the matter than the view so taken in assessee's own case. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to treat the TV subsidy of ₹ 20,69,60,338 received from the BCCI as a corpus donation. The assessee gets the relief accordingly. As we have decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provision inserted under the Finance Act, 2004 : '12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.' 31. After the amendment in the year 2010, s. 12AA(3) of the IT Act reads as follows : '12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) or has obtained registration at any time under s. 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the huge profits received and hence the amount received from BCCI as subsidy is commercial. As regards conducting of IPL matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of s. 2(15) of the Act after the amendment come in effect from 1st April, 2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under s. 2(15) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the grant of registration was not based on materials indicating objects of general public utility. 56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket associations which organise the matches in their stadia. The franchisees conduct matches in the stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70 per cent of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking s. 12AA r/w s. 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 12AA(3) of the Act. (b) For an assessee to be classified as charitable under the residuary category i.e. advancement of any other object of general public utility under s. 2(15) of the Act, the following four factors have to be satisfied : (i) Activity should be for advancement of 'general public utility'. (ii) Activity should not involve any activity in the nature of trade, commerce and business. (iii) Activity should not involve rendering of services in relation to any trade, commerce or business. (iv) Activities in clauses (b) and (c) above, should not be for a fees, cess or other consideration, the aggregate value of which should not exceed the amount specified in the second proviso to s. 2(15). (c) The earlier test that if the income so collected, is applied towards the charitable activity, then the trust cannot be held as non-charitable, is no longer relevant after the statutory amendment. (d) The scope of the term activity in the nature of trade, commerce or business would mean that : (i) It is undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the residuary clauses, should be wholly, substantially or in part be funded by voluntary contributions. (l) A pragmatic view is required when we examine the data, which should be analysed objectively. A narrow and coloured view will be counterproductive and contrary to s. 2(15) of the Act. (m) Accumulation of money/funds over a period of two to three years may not be relevant in determining the nature and character of activity and whether the same should be treated indicative of profit motive i.e. desire or intention to carry on business or commerce. (n) The so-called business activities, when intrinsically woven into and is part of the charitable activity undertaken, the business activity is not feeding charitable activities, as they are integral to the charity/charitable activity. (o) What has to be seen is as to what is the core/main activity of the assessee. The predominant activity shall be the basis of decision making. 10.5 Applying these propositions to the facts of this case, we observe that : (a) the Director of IT (Exemption) at para 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Renting for hiring cricket ground rooms and premises 3. Fee for providing services for IPL 4. Income from advertisement 5. Subsidy from BCCI 6. Sale of tickets for conducting the matches and 7. Restaurant and catering income. Such receipts of money by the Tamil Nadu Cricket Association were not considered by the Hon'ble Madras High Court, as activities in the nature of trade, commerce or business . There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 10.9 Thus respectfully following the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from (a) ground booking charges, (b) health club charges, (c) income from corporate boxes, (d) lawn booking income, (e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are clearly defined, to avoid any confusion or chaos. It will be further good, if these terms and conditions are reproduced in writing, in the form of an agreement. Merely because an activity is performed in an organized manner, that alone will not make these activities as business/commercial activity. Profit motive is one essential ingredient, which is apparently missing in this case. In carrying out an activity, one may earn profit, or one may incur loss. But for making it as business activity, the presence of profit motive is a sin qua non i.e. condition precedent at the time of entering into transaction. In this case the facts demonstrate that despite the receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by the assessee. Thus this adjustment resulted in subsidizing the cost of the assessee and hence there is no profit motto. This cannot be termed as business activity. Similar is the view of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra). 11.3 On the issue of sale of liquor, it was submitted that initially DDCA was formed as a club to take over the assets and liabilities of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent with the view expressed by us, when we were dealing with sponsorship money, we hold that these contractual receipts go to reduce part of the cost incurred by the assessee for its charitable activity and hence, cannot be termed as business or that the assessee has undertaken activity in the nature of trade, commerce or business . 11.7 On receipts from IPL an elaborate Explanation was given, the pith and substance is that expenditure has to be incurred by the DDCA on various items, as coordination has to be done and the aggregate of expenditure incurred for the same is ₹ 238 lakhs. It was submitted that the DDCA initially meets this expenditure out of its own sources and thereafter the BCCI and legal franchisee contribute and compensate part of this expenses. The same arguments as were advanced by the assessee in the cases where sponsorship money received, were made here also. The summary of the submissions are as follows : Our respectful submission is that, as we have given detailed submission in earlier part of our submissions wherein we have made analysis of receipts as well as of the expenses incurred by the assessee. The analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any commercial attributes. The revenue is generated for recovering the cost, at least partly if not fully. 7. The assessee has not entered any transaction with any person on profit motive. The other person may be an entrepreneur or may be doing business but the assessee has entered (into) the transaction only for the sole and dedicated purpose i.e. for the promotion of cricket. 8. These facts are worth noting that (a) the assessee has not diverted its funds for any purpose other than promotion of cricket; (b) the assessee has not done any activity or transaction with profit motive; (c) the assessee has not done any activity beyond and outside its objects; and (d) there is no change in facts so as to deviate from the stand taken by learned AO in all the past years accepting the claim of the assessee all along on facts as well as on law. 11.8 In view of our decision of sponsorship and such other receipts, we agree with the arguments made by the assessee. Regarding sale of tickets, the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, ₹ 200 per ticket are levied, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from advertisement 5) Subsidy from BCCI 6) Sale of tickets for conducting the matches and 7) Restaurant and catering income and has come to a conclusion that the proviso to Section 2(15) of the Act, cannot be invoked on the ground that these receipts are in the nature of trade, commerce and business. 14. The argument of the ld. D/R which is brought out above has been considered in this above referred decisions and the issue under adjudication was in favour of the assessee. Consistent with the view taken by the Ahmedabad and Delhi Benches of the ITAT, under similar circumstances, we come to a conclusion that the proviso to Section 2(15) of the Act has been wrongly invoked. The assessee is eligible for exemption u/s 11 12 of the Act. The grounds are allowed accordingly. 15. The next issue that comes for our adjudication is whether the infrastructural subsidy received from BCCI is a revenue receipt or a capital receipt. This issue was also considered by the Ahmedabad D Bench of the Tribunal and it was adjudicated that the receipts in question are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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