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TMI Blog2019 (7) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant are in nature of trade, commerce and business and therefore covered by the proviso to section 2(15) of the Act. 3.The learned CIT(A) erred in fact and in law in confirming the action of the AO in applying the proviso to section 2(15) r.w.s. 13(8) of the Act and thereby taxing the entire income of the Appellant. 4.Without prejudice to the above the learned CIT(A) erred in fact and in law in confirming the action of the AO in taxing the income of the Appellant despite the fact that the receipts on account of sale of tickets, sponsorship income did not exceed the statutory limit of Rs. 25,00,0007- as specified in the second proviso to section 2(15). 5.The learned CIT(A) erred in fact and in law in confirming the action of the AO in holding the activities of promoting the game of cricket as business income u/s. 28 without establishing that the said activities are in nature of business, trade or commerce. 6. The learned CIT(A) erred in fact and in law in confirming the action of the AO in taxing the net surplus of Rs. 20,62,53,049 as per income and expenditure account of the Appellant. 7. The learned CIT(A) erred in fact and in law in confirming the action of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to the above letter dtd 26.1 1.2015 & 07.03.2016, a reply vide letter dtd. 06.02.2016 and 08.03,2016 received from the assessee. The relevant portion of the above letter is as under: "Vide point no. (5) of your notice dated 26. ] 1. 2015. your kind office has asked to show cause as to why the earned out by the Assessee in nature of general public utility are not covered under the proviso of section 2(15) of the Income Tax Act, 1961. hi this regard we would like to submit as under: About BCA and its objects: (i) The BCA was established in. 1937 and registered, at Public Trust Registration office of Baroda region, Baroda vide public trust register no. F/ 88 1/ Baroda as evident from copy of certificate of registration No. 7894 issued on 04.1 1.1 996. The objects of the BCA set out as per its memorandum of association are as under: ; (a) To promote develop and. encourage cricket within its jurisdiction. (b) To arrange and promote the establishment of Cricket clubs within its jurisdiction. (c) To directly control and manage all cricket activities within its jurisdiction. (d) To pay special attention and care to the development of cricket at all levels within its jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with many initiatives to spread the game to the grass root level by introducing the game to the remotest areas of the state such as Navsari, Bilimora and. Mehsana. It may also be noted that BCA not only promotes the game of cricket but also spreads it awareness in the schools and encourages children to take up the game. BCA organizes school tournaments which inculcates a sportsman spirit in a child and. at the same tune promotes the game of cricket. Activities during the year: iii.) During the year in question, it is submitted that BCA has undertaken various activities starting from identifying the new talent from the remote villages of Vadodara vis a vis focused on providing specialized, training, through modem, equipments and. coaches. BCA also organized various matches including Ranji matches and training sessions for all these players. Also to improve the skill of umpire and to meet the shortage of professional and skilled umpire in India, various sessions and training programs have been undertaken by BCA. In order to encourage all the players and in order to ensure fitness and skill of players at optimum, level, teams of seniors and juniors have been sent to outstations f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sios. g.) During the year, BCA team represented Vadodara at various tournaments whereby various talents have been identified. Many players performed exceptionally well scored century and many took wickets. These are future stars which will be contributed by BCA. The following BCCI matches have been undertaken and played by BCA team: 1. Ranji Trophy Inter State Tournament (Vijay Hazare Trophy) 2. Sued Mustaq AH Trophy (T 20 Matches) 3. U-25 Col. C.K. Nayudu Trophy 4. Li-1 9 Cooch Behar Trophy 5. U-l 9 Vinod Mankad Trophy (One Day Matches) 6. U-16 Vij ay Marchanl Trophy 7. U-l-l West Zone Tournament. 8. Senior Women One Day Inter State Matches 9. Senior Women T 20 Inter State Matches 10. Under 19 Women One Day Inter State Matches i.) During the year BCA has provided employment {Part time/Full time) or regular monetary emoluments to various ex-crickets for various segments such as Manager Cricket Operator (MCO), Coaches, Assistant Coach for various segment of categories of . team. Trainers, Chairman Selector, Bowling Coach, Fielding Coach etc. ....... j) During the year, BCA organized following educational programs for improvement of the skill and awareness of the players ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities resulting in the said receipts are also charitable activities and not ''trade, commerce or business" activities. DIT (Exemption) v. Tamilnadu Cricket Association (2013) 40 taxmann.com 250 (Madras) "Section 12AA, read with sections 2(15), 11.12,12A and 13, of the Incometax Act, 1961 - Charitable or religious trust -Registration procedure/Cancellation of registration) - Assessee, a cricket association, applied for grant of registration under section 12AA - Commissioner after satisfying! himself about genuineness of objects of assessee granted registration to it under section 12AA on 28-3-2003 Later on 19-7-2011 Commissioner examined income and expenditure statement of assessee and held that assessee was receiving income from holding of matches, which ivas in nature of trade or commerce or business and hit by proviso to section 2(15) - He further held that activities of assessee not being charitable as per section 2(15), same could not be held to be genuine and assessee was not a chcmiahle institution - He, Therefore, cancelled registration granted to assessee - whether since objects remained as they were in year 2003, Commissioner had erred in cancelling registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of players and the match officials, boarding and lodging, expenses on food for players and officials, tour fee, match fee, etc. are met by BCCI and revenues from sponsorship belong to BCCI. In respect of revenues 'from sale of media rights, an arrangement has evolved over time. Until 1991- 92, the-income from media rights was meager. With the' growth in income from media rights, it became necessary to optimize the arrangement for sale of media rights. For a Test series or ODI series conducted in multiple centers and organized by BCCI and multiple state associations, it was found that if each stare association were to negotiate the sale of rights to events in its center, it negotiating strength would be low. It was, therefore, agreed that BCCI would negotiate the sale of media rights for the entire country to optimize the income under this head. It was further decided that out. of the receipt from the sale of media rights 70% of the gross revenue less production cost would belong to the state association. Every year, BCCI has paid out. exactly 70% of its receipts from media rights(less production cost) to the state associations. This amount has been utilized by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be carrying on the activity of 'advancement of other objects of general public utility' as per the definition of Sec 2(15) of the Act. During the course of scrutiny assessment of A.Y 2009-10, A.Y.2010-11, 2011- 12 and A.Y. 2012-13, it was established that the assessee was not doing any 'charitable/educational activity' but it" was in the business oi entertainment of people at large by arranging/hosting national and international levels cricket tournaments for a fee/cess. Since the provisions of See 2(15) read with the proviso 1 & 2 are squarely applicable to the facts of the ease, the claim of exemption u/s 11 of the Act was disallowed by the AO for A.Y 2009-10 and A.Y. 2010-11. The C1T (A) has dismissed the appeal of the assessee for A.Y 2009-10, 2O1O-11 & 2011-12 and against the order of Ld. CIT (A), the assessee is in further appeal in Hon'ble ITAT for A.Y. 2012-13 is pending with first appellate authority. 4.7 It is pertinent to mention that as per the CBDT Circular No. 395 dated 24/09/1984, it was held that promotion of sports and games is "advancement of objects of genera! public utility'. Thus, in the instant case, the assessee is clearly engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts activities outside holding matches was limited entirely to its own members and only contact it had with_ public was by way of having them as spectators, on payment of fee, of matches arranged by it - Whether income that was derived from fees charged for admission to games held under auspices of association could not be said to be income derived from any property - Held, yes - Whether further, there was no general public utility, so as to amount to charity, in arranging cricket matches which public could see on payment arid hence, assessee was not entitled to exemption conferred by sections 4(3)(i) and 4(3)(ia) of 1922 Act - Held, yes" 4.7.2 In this regard reliance is placed on the decision of the ITAT Chennai Bench 'B' In the case of Tamil Nadu Cricket Association [32 taxmann.com 5O] "The question is whether assessee is promoting and developing the cricket game as an activity of general public utility. This is the crucial question to be asked. 'Die physical play of cricket game is not the sole point which will decide as to whether the assessee is carrying on its activities as stated in its Memorandum of Association or the assessee's activities are genuine or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of general public utility. The embargo states that if the institution is engaged in carrying on of any activity in the nature of trade, commerce or business or any activity or rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, the institution shall not be regarded to have been involved in carrying on charitable purpose. This proviso in the last sentence further states that nature of use or application or retention of the income by the institution from such activity will not be relevant consideration. In view of this specific provision, one is not concerned to look into how an institution has used, applied or retained its income, if the same has been received by the institution from any activity carried out in the nature of trade, commerce or business or from any activity of rendering any service in relation to trade, commerce or business. The words used in the proviso are 'carrying on of any activity in the nature of trade, commerce or business' and not the words 'carrying on trade commerce or business'. Using of the words 'any activity in the nature of prior to 'trade, commerce or business1 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l kind oj support each association need in order to develop and maintain the cricket and other functioning of the association. BCC! accordingly assists till the associations as per the requirements of sports. As per lire functioning of working committee on the BCCI. every year they monitor the technology development in the sports vi.s a vis functions of these associations and assess the requirement of Cricket kits accessories equipments etc. and accordingly allot equipment and other supports in the form of subsidy. Pursuant to above, during the year under consideration we have been aliened equipments under the Umpiring Assessment program from BCCI. This subsidy is not in the. form of cash receipts rather it is allotment of equipment from BCCI for usage only. Copy of intimation issued by BCCI and copies of hills appended therewith is enclosed herewith marked as Annexure-7. These instruments have been allotted so as to improve the skill and proficiency of Umpire so that not only quality umpiring facilities can he assured at all the national and Ranji level matches hut also to assure international standards when international matches are being played at Vadodara. Thus, your kind offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Sec. 2(15) r.w.s proviso 1 & 2 of the l.T Act. Further it is gathered that above amount of Rs. 27,09,94s/- is not routed through P & L account. 3. But ld. A.O. was not agree with the contention of the appellant and made addition of Rs. 27,09,948/- and treated the said amount income of the assessee. 4. Thereafter, assessee preferred first statutory appeal before the ld. CIT(A) who partly allowed the appeal of the assessee. 5. We have gone through the relevant record and impugned order. Now question is before us whether assessee is eligible for exemption u/s. 11& 12 and need to see whether assessee is engaged in the charitable activities or not. 6. At the outset, in support of its contention, ld. A.R. cited an order of Coordinate Bench in the case of Gujarat Cricket Association vs. Joint Commissioner of Income -tax (Exemptions), [2019] 101 taxmann.com 453 (Ahmedabad - Tribunal) wherein on similar ground for assessment year 2009- 10, relief was granted by the Tribunal with following observations: 129. We will now take up the appeals filed by Baroda Cricket Association. ITA No: 336/Ahd/2015 130. This appeal challenges correctness of the order dated 7th Novembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 143(3) of the Income Tax Act, 1961, for the assessment year 2010- 11. 141. Ground nos, 1, 4, 5 and 7, which we will take up together, raise the following grievances: 1. The C.I.T. (Appeals) erred in applying the provision of section 13(8) r.w.s.2(15) of the income Tax Act, 1961 as return was filed based on Finance Act, 2009 and on that day section 13(8) was not even in the Statue Book. 4. The C.I.T. (Appeals) erred in not allowing exemption u/s 11(l)(a) of the Income Tax Act, 1961 based on provision of section 2(15) of the Income Tax Act, 1961. 5. The C.I.T. (Appeals) erred in taxing the income from the cricketing activities as business income u/s 28 without establishing the said activities as in nature of business trade or commerce. 7. The C.I.T. (Appeals) erred in not appreciating that impugned Assessment order was passed based on the Assessment Order for A.Y.2010-11 of The Board of Control For Cricket in India ("BCCI" for short) that too without providing copy of said order. 142. In view of our findings on the core issue in these appeals before us, as set out earlier in this order at pages 2 to 55 and in view of our decision above in the case of Gujarat Cricket As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. It was also explained that similar amounts received in the earlier years have been treated all along as corpus donations, and, therefore, the corpus donation received by the assessee, though termed as TV Rights, is not taxable. The Assessing Officer noted this contention as also the fact that under section 11(1)(d), what cannot be included as total income of the assessee is "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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpus fund- as admittedly the present receipt is, is required to be treated as corpus donation not includible in total income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by a separate written document. The contribution has to be voluntary and 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 Rs. 1,58,00,000. 146. We see no reasons to take any other view of the matter than the view so taken in the case of Gujarat Cricket Association. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,34,033. 151. We see no reasons to take a different view, in principle, in this case. However, as relevant facts ned to be examined, the matter is remitted to the file of the Assessing Officer for fresh adjudication, in the light of our above observations. We order accordingly. 152. Ground no. 3 is thus allowed for statistical purposes in the terms indicated above. 153. In ground no. 6, the assessee has raised the following grievance: 6. The C.I.T. (Appeals) erred in not appreciating the fact that hosting of One Day International match ("ODI" for short) is one off adventure to raise funds to carry out objects of the Trust. The income from said ODI cannot take colour of commercial activities or income. 154. We find that though there are findings to the above effect in the order of the Assessing Officer, the CIT(A) has dealt with the same in a very causal manner and without specific and categorical discussions on the same. We, therefore, deem it fit and proper to remit the matter to the file of the CIT(A) on this issue. We order so. As we do so, and for the detailed reasons set out earlier while dealing with Gujarat Cricket Associations case, we make it clear that it is only in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2009 and on that day section 13(8) was not even in the Statute book. 3. The ld. CIT(A) erred in confirming view of the ld. AO of applying the provision of section 13(8) r.w.s. 2(15) of the Income Tax Act, 1961 on whole of the income of your appellant whereas section 13(8) clearly speaks about denying exemption to such income which is covered by proviso to section 2(15) of the Act and not entire income. 4. The ld. CIT(A) erred in not appreciating that the ld. AO has made high pitched assessment by taking base from the Assessment Order for A.Y. 2010-11 passed in the case of the Board of Control For Cricket in India ("BCCI" for short) that too without providing copy of said order to appellant. 7. The ld. CIT(A) erred in upholding view of ld. AO of not allowing exemption u/s.11(1)(a) of the Income Tax Act, 1961 on provision of section 2(15) of the Income Tax Act, 1961. 8. The ld. CIT(A) erred in upholding view of ld. AO of taxing the income of appellant from the cricketing activities as business income u/s.28 without establishing the said activities as in nature of business trade or commerce. 9. The ld. CIT(A) erred in upholding view of ld. AO of taxing interest income earned f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has received a sum of Rs. 1,58,00,000 from the Board of Cricket Control of India (BCCI, in short) as towards the TV rights. When he probed the matter further, it was explained by the assessee that nomenclature of the receipt apart, what has been received by the assessee is a corpus donation and the assessee did not have any right to get the said money from the BCCI, under a contract or otherwise. It was also explained that similar amounts received in the earlier years have been treated all along as corpus donations, and, therefore, the corpus donation received by the assessee, though termed as TV Rights, is not taxable. The Assessing Officer noted this contention as also the fact that under section 11(1)(d), what cannot be included as total income of the assessee is "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On these facts, and in the light of the provisions of Section 11(1)(d) which only require the income to be "by way of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution", we are of the considered view that any payments made by the BCCI, without a legal obligation and with a specific direction that it shall be for corpus fund- as admittedly the present receipt is, is required to be treated as corpus donation not includible in total income. We are unable to find any legal support for learned CIT(A)'s stand that each donation must be accompanied by a separate written document. The contribution has to be voluntary and 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only after the expenditure having been incurred. The authorities below have simply brushed aside the case and the submissions of the assessee and proceeded to hold it as an income. Looking to the nature of the subsidy, which is clearly relatable to the capital assets generated, we are unable to hold this receipt in the revenue field. We, therefore, uphold the plea of the assessee on this point as well and delete the addition of Rs. 2,13,34,033. 175. We see no reasons to take a different view, in principle, in this case. However, as relevant facts ned to be examined, the matter is remitted to the file of the Assessing Officer for fresh adjudication, in the light of our above observations. We order accordingly. 176. Ground no. 6 is thus allowed for statistical purposes in the terms indicated above. 177. In ground no. 10, the assessee has raised the following grievance: The ld. CIT(A) erred in not appreciating the fact that hosting of One Day International match ("ODI" for short) is one of adventure to raise funds to carry out objects of the Trust. The income from said ODI cannot take colour of commercial activities or income. 178. We find that though there are findings to the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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