BARODA CRICKET ASSOCIATION,,BARODA vs THE JT. CIT, RANGE-5,, BARODA

Income Tax Appellate Tribunal, AHMEDABAD BENCH D , AHMEDABAD

Per Pramod Kumar, Vice President:

These ten appeals are filed by various cricket associations in Gujarat, assail

stand of the tax authorities on a neatly identified central issue and were heard

together. Having regard to fair degree of commonality of core facts, central issue in

appeal and the legal arguments, it is only appropriate that these appeals are disposed

of by a common order. That’s the reason that we are taking up all these appeals, for

orders, together.

With the consent of the parties, rather at the request of the parties, we will

begin by taking up the central issue in these appeals, i.e. whether or not the

entitlement to exemption under section 11 of the Income Tax Act, 1961 (hereinafter

referred to as ‘the Act’), in the case of these cricket associations, is hit by the

proviso to Section 2(15).

The issue before us:

As we proceed to set on record facts of the case and rival contentions of the

parties, it is only appropriate that we take a quick look at the relevant legal provision

and identify the legal issue in dispute. Section 2(15), as it stood prior to the insertion

ITA Nos: 1257/Ahd/13, 3303/Ahd/16, 3304/Ahd/16, 408/Ahd/17 (Assessment years: 2009-10, 2010-11, 2011-12 and 2012-13) ITA Nos: 336 and 337/Ahd/2015 and 2957/Ahd/2014, (Assessment years: 2009-10, 2011-12, 2010-11) ITA Nos: 2839, 2840 and 2841/ Ahd/ 2017 (Assessment years: 2012-13, 2013-14 and 2014-15) Page 3 of 151

of proviso thereto with effect from 1st April 2009, was a relatively simple section

which stated that “charitable purpose includes relief of the poor, education,

medical relief, and the advancement of any other object of general public utility”. The proviso to this sub section, inserted with effect from 1st April 2009,

states as follows:

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

There have been several subsequent amendments to this statutory provision

but those amendments donot have much bearing on the issue before us. Suffice to

note that in plain words, all that this legislative amendment provided for was that in

a situation in which, in the course of advancement of any other object of public

utility, the activities of an institution involved “carrying on of any activity in the

nature of trade, commerce or business” or of “any activity of rendering any

service in relationship to any trade, commerce or business for a cess, fee or any other consideration”, then irrespective of what such an institution does to the

income, how that income is applied or how that income is retained, the institution, to

that extent, will cease to be carrying on charitable activities.

The case of the tax authorities, in substance, is that that the way and manner

in which the appellant cricket associations are carrying on their activities, these

activities in the nature of trade, commerce and business, and, therefore, these

associations are o longer entitled to the benefits of exemption under section 11 of

the Act. It is in this backdrop that we have to approach the issue.

The factual backdrop:

The material facts of the case, so far as these three cricket associations are

concerned, are similar. However, for the sake of convenience, we will begin by

summarizing the facts as recorded in the orders of the authorities below in the case

of Gujarat Cricket Association. This assessee, as indeed other cricket societies

before us, are registered under the Societies Registration Act, and are also

registered, as a charitable institution, under section 12AA of the Act.”. There is also

no dispute, as evident from the facts recorded in the assessment orders, that these

cricket associations are engaged in promoting and developing the game of cricket, at

different levels, in identified areas of the State of Gujarat. While these associations

have different areas assigned to them under their respective memorandums of

associations, the objects are similar. In the case of Gujarat Cricket Associations, the

objects, as noted in the memorandum of association, are as follows:

To control, supervise, regulate or encourage, promote and develop the game of cricket in the area under the jurisdiction of the Association. The Association can also undertake any other and all activities which may be beneficial to the Association.

To create, foster and maintain friendly and cordial relationship through sports tournaments and competitions connected therewith and to create a healthy spirit through the medium of sports in general and cricket in particular. 3. To instill the spirit of sportsmanship in students attending schools, colleges and members of other institutions and other citizens and to foster the spirit of sportsmanship and instill the ideal of cricket and educate them in the same. 4. To maintain a panel of approved Umpires who qualify themselves by passing the prescribed tests for purpose of officiating as such in the matches conducted by the Association. 5. To select teams to represent the Association in any tournaments, championship or fixture local or otherwise. 6. To arrange, supervise, hold, encourage and finance visits of teams. 7. To arrange, and/or manage among other things league and/or any other tournaments. 8. To promote and hold either alone or jointly with any other Association. Club or persons, sports, meetings, competitions and matches and to offer, give or distribute towards prizes, medals and awards. 9. To make provision for coaching deserving persons in the various departments of the game in general and cricket in particular. 10. To impart physical education through the medium of Cricket and take all steps to assist to the citizens to develop their physique. 11. To organise matches in aid of public charities and Relief Funds. 12. To lay out such ground or grounds for playing the game and for other purposes and to provide pavilion, stadiums, other conveniences and amenities in connection therewith. 13. To introduce a Scheme of professionalism and to implement the same. 14. To start and maintain a journal devoted to sports in general and cricket in particular. 15. To maintain a library of books, periodicals and other literature on sports i.e. general and cricket in particular and to start journal or journals on sports in general and/or cricket in particular. 16. To engage person or persons and professional cricketers, coaches, umpires, groundsmen and to pay remuneration or honorarium to them. 17. To start, sponsor and/or to subscribe to any fund for the benefit of players, umpires, coaches, groundsmen, employees or their families. 18. To collect funds for the purpose of the Association and to utilise such in such a manner as the Managing Committee of the Association consider desirable for the fulfillment of the objects of the Association. 19. To hold and maintain the Laws of Cricket and The Rules and Regulations of the Board of Control for Cricket in India. 20. To take such action as may be necessary to co-ordinate the activities of affiliated district Cricket Association institutions and their members in to the Association and amongst themselves. 21. To stage or sponsor and/or to subscribe funds to stage a match fc benefit of the Cricketers or persons who may have rendered service game of cricket or for their families or to denote towards the develop promotion of the game. 22. To appoint representative or representatives on the Cricket conference and other conferences, seminars, talent events, symposiums connected with the game of cricket.

23.

To invest moneys and funds of the Association in such a manner as may be decided upon by the Managing Committee of the Association capable of being conveniently carried on in connection with objects of the Association. 24. To carry on any other activity which may seem to the Association capable of being conveniently carried on in connection with objects of the Association. 25. To carry on any other activity for promoting the objects of the Association which are calculated directly or indirectly, to protect and/or to enhance the value of its properties or its rights and is conductive to the objects of the Association. 26. To acquire movable and immovable property and to apply both the capital and income thereof and the proceeds of the sale or mortgage thereof, for or towards, ail or any of the objects of the Board. 27. To start, assist, encourage or promote for training Cricketers and to provide for such amenities and facilities, usually provided in boarding schools. 28. To appoint Committee or Committees from time to time to organise matches for the achievement of the objects of the association and to utilise the net proceeds thereof towards the implementation of these objects. 29. To purchase, repair, make, supply, take on lease, hire or otherwise acquire any movable and/or immovable property, rights or privileges necessary or convenient for the purpose of carrying out the objects of the Association on such terms and conditions as the Managing Committee may at its discretion deem fit. 30. To sell, mortgage, exchange, lease, dispose of or otherwise deal with, all or any part of the property or funds of the Association it may at its discretion deem fit. 31. To borrow, whenever necessary by and mode with or without security, with or without interest and to purchase, redeem or pay off any such securities. 32. To employ, appoint executive secretaries and assistant secretaries, clerks, managers, coaches, professional cricketers, umpires, scorers, statisticians, groundsmen, peons, servants and other service personnel and staff and to pay to them and other persons in return for their services to the Association salaries, wages, gratuities, pensions, honorariums, compensations, any ex-gratia payments and/or provident funds, other funds and to remove or dismiss such employees. 33. To promote such benevolent or other funds and to donate such sum or sums for - 1. such causes as would be deemed fit by the Association conducive to the promotion of the game of cricket; 2. the benefit of a Cricketer or his widow or children as the Association may deem fit; 3. any other person who has served cricket or his widow or his children as the Association considers fit. 34. Generally to do all such other acts and things as may seem to the Association to be convenient and/or conducive to the carrying out of the objects of the Association.

On the similar lines, the objects of the Baroda Cricket Association are as

follows:

(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 are to the development of cricket at all levels within its jurisdiction. (e) To arrange for good cricket grounds and maintain the pitch for practice and matches arranged by the Association. (f) To popularize the game of cricket within its jurisdiction/by organising and/or conducting and/or controlling tournaments and matches. (g) To select teams to represent the Association in any tournament Championship or fixture local or otherwise. (h) To start or sponsor and/or to subscribe to funds or to stage a match for the benefit of cricketers or persons who have rendered services to the game of cricket or for their families or to donate to a sporting cause or institution. (i) To borrow or raise money which may be required for the purpose of the Association. (j) To collect funds and to utilise the same in such manner as may be considered fit for the fulfillment of the objects of the Association. (k) To invest moneys and funds of the Association in such manner as may be decided upon from time to time. (l) To train umpires and to form a panel of umpires. (m) To collect all the cricket statistics of different players and clubs so as to give guidance in the selection of players for important matches. (n) To do any other acts in furtherance of the above objects not inconsistent there with.

The position for Saurashtra Cricket Association is no different. As a matter of

fact, the CIT(A) has simply followed his order for Gujarat Cricket Association in

this case. Be that as it may, for a ready reference, the objects of the Saurashtra

Cricket Association are also reproduced below:

The objects of the Association are :

(a) To control the game of cricket in Saurashtra and Kutch and give its decision on all matters which may be referred to it by any District Cricket Association affiliated to Saurashtra Cricket Association.

(b) To encourage the formation of District Cricket Associations and the organisation of inter - district and other tournaments. (c) To arrange, control, regulate and if necessary finance visits of Teams that are Members of the Board of Control for Cricket in India and teams of other Districts in Saurashtra and Kutch. (d) To arrange, control, regulate and finance visits of Saurashtra Cricket Team to tour States/Districts that are Members of the Board of Control for Cricket in India or elsewhere in conjunction with the bodies governing cricket in the States to be visited. (e) To promote the game throughout Saurashtra and Kutch by organising coaching schemes, Tournaments, Exhibition Matches and by any other manner. (f) To foster the spirit of sportsmanship and the ideals of cricket amongst School, College and University students and others and educate them for the same. (g) To implement the Laws of cricket for various tournament and to make alteration, amendment or addition to the Laws of cricket for various tournaments whenever desirable or necessary. (h) To carry on any other activity which may seem to the Association capable of being conveniently carried on in connection with the above, or connected directly or indirectly to enhance the value of or render profitable any of the properties or rights of the Association. (i) To donate such sum or sums for (i) such causes as would be deemed fit by the Association conducive to the promotion of the game of Cricket (ii) the benefit of a cricketer or his widow or children as the Association may deem fit (iii) any other person who has served cricket or his widow or his children as the Association may consider fit. (j) To organise matches for the achievements of the objects of the Association and utilise the net proceeds thereof towards the implementation of the object set therein. (k) To lay out any ground for playing the game and for other purpose and to provide pavilion, canteen and other conveniences and amenities in connection therewith. (l) To impart physical education through the medium of cricket and take all steps to assist the citizens to develop their physique. (m) To appoint committees from time to time to organise matches for the achievement of the objects of the Association and to utilise the net proceeds thereof towards the implementation of the objects set out herein. (n) To take such action as may be necessary to co-ordinate the activities of affiliated Associations, institutions and their Members in relation to the Association and amongst themselves. (o) To select teams to represent Saurashtra in Ranji Matches played in Saurashtra and Kutch and other States and to select such other teams as the Association may decide from time to time. (p) To start and maintain a library of books, periodicals and museum on Sports in general and cricket in particular and to start journal or Journals on cricket. (q) Generally to do all such other acts and things as may seem to the Association to be convenient and/or conducive to the carrying out of the objects of the Association.

The assessee is also providing education for cricketers by providing for, as

noted in the assessment order, “school teams, district level teams, players of all age

groups, for learning the intricacies of cricket, by playing the matches and running a

coaching academy for teaching finer aspects of game to the budding cricketers”. The

stand of the revenue authorities, relying upon the CBDT circular No. 395 [F. No.

181(5) 82/IT(A-I)], dated 24-9-1984, is that the assessee, being a society for

promotion for sports, has its objects as “advancement of object of general public

utility”, and, for this reason, it falls in the category of charitable institutions. As a

corollary to this position, it is also contended that the proviso to Section 2(15),

which applies only in the context of this residuary class of objects pursued by the

charitable institutions, would into play in such cases. It was in this backdrop that the

assessee was put to notice that as to the assessee not be held to have been hit by the

proviso to Section 2(15). The first plea of the assessee was that since assessee was

only imparting education of cricket, the proviso to section 2(15), which is relevant

only for the residual clause (i.e. advancement of an object, other than relief to poor,

education and medical relief, of general public utility), had no application in the

matter. This plea, after extensively reproducing from the written submissions filed

by the assessee, was rejected, in the assessment year 2012-13, on the basis of

following reasoning:

The submissions made by the assessee have been carefully considered. The

assessee has submitted that the activity of promoting the game of cricket is an

educational activity. It has been further submitted that cricket is a subject

imparted in schools as per Gujarat State educational curriculum. It further

relied on the Department’s circular and Hon’ble Finance Minister’s speech to

establish its case as an educational institute. The issue in hand is to decide

whether activity of imparting education to persons/ students the game of

cricket is education as defined in section 2(15) of the Income Tax Act. Hence,

it is necessary to understand the scope of the term ‘education’. “Education” is

normally understood as the process of imparting knowledge and preparing

oneself intellectually for a mature life. It means systematic instructions,

training given to prepare a young person for work of life through systemic

schooling. Thus the very essence of the term education is to impart

knowledge through the mean of systemic schooling. In the instant case, the

assessee is only coaching students/ potential persons in the game of cricket

through coaching camps etc. The coaching is given to the persons who are

interested in the game and who have already reached certain level of

competence in the game. This is not the normal schooling as envisaged by

various Courts. Further, the assessee has submitted that cricket is a subject as

per the curriculum of the State of Gujarat. The submission of the assessee is

not acceptable since it is under subject of physical education and it is not of

scholastic instruction. Therefore, the submission of the assessee that it

imparts education is not acceptable since the very essence of “education” is

absent in the activity of the assessee.

10.

The Assessing Officer also noted that the assessee has mainly earned income

from the sale of advertising and ticket sales- a fact that clearly demonstrates that

main income of the assessee is from entertainment of public by arranging national

and international matches for a fee. The income generating activity, as is the stand

of the Assessing Officer, is holding cricket matches. It was noted, for example for

the assessment year 2012-13, that while the assessee has total income of Rs

20,24,81,544, it includes income of Rs 12,20,19,916 from hosting the cricket

matches and income of Rs 8,04,61,628 from other sources. The details of the income

were stated to be as follows:

The assessee is admittedly involved in promotion of cricket as game. On perusal of the income and expenditure statement of the assessee, it is evident that the assessee has a total income of Rs.20,24,81,544/- which includes Match income of Rs.12,20,19,916/- and other income of Rs.8,04,61,628/-. The details of match income are given below: -

Match Income Amount (Rs.) Income from India-West-indies day-night Match 3,60,84,687

Income from world cup matches 8,12,15,229 Reliance Sponsorship Income 10,00,000/- Subsidy from BCC1 37,20, 000/- Total 12,20,19,916

The details of the match income from the above matches is as under:-

Income World Cup Matches India West-Indies Match

Sale of space 8,11,15,229 2,09,80,000 (venue and advertisement) Ticket sale 1,49,01,915

Thus, it is evident that, more than 50% of the total receipts of the assessee are on account of match income which includes sale of space, ticket sale, A/C Cabin ticket sale, etc. The assessee is thus, engaged in the business of entertainment of public at large by arranging/posting national and international cricket tournaments for a fee/cess. The nature of receipts as mentioned in the above table amply explains the

nature of activity carried on by the assessee. The above table demonstrates that the assessee is involved in profit generating activity. The assessee carries out the activity of hosting matches at national/international at regular intervals which is clear from its income & expenditure statement of the year under consideration and of the earlier years. Therefore, the submission of the assessee that it is not carrying on any business activity is not acceptable. The assessee has relied on various decisions to explain its stand that the said activity of conducting cricket matches is not a business activity. The same have been considered and the facts of the instant case are quite different from the decisions cited by the assessee and are hence distinguishable.

11.

The Assessing Officer has also referred to, and relied upon, Hon’ble Calcutta

High Court’s judgment in the case of Cricket Association of Bengal Vs CIT

[(1959) 37 ITR 277 (Cal)] in support of the proposition that a club formed for the

development and promotion of cricket cannot be treated as a charitable institution. A

reference was then also made to a decision of Chennai Bench of the Tribunal in the

case of Tamilnadu Cricket Association Vs DIT Exemptions [(2013) 32

taxmann.com 50 (Chennai)]. A reference was also made to the decision of Panaji

bench of this Tribunal in the case of Entertainment Society of Goa Vs CIT [(2013)

43 taxmann.com 210 (Panaji). The Assessing Officer thus, so far as assessment

year 2012-13 in the hands of Gujarat Cricket Association is concerned, as follows:

In view of the above facts and the legal provisions, the assessee is held to

be carrying on the activity of advancement of other objects of general

public utility and which is in the nature of business, trade and commerce

and not in the nature of education as claimed by the assessee. Therefore

the assessee is covered by the provisions of Section 2(15) read with

proviso 1 and 2 of the Income Tax Act.

12.

Aggrieved by the stand so taken by the Assessing Officers, assessees carried

the matter in appeal before the CIT(A) but without any success. Learned CIT(A)

upheld the action of the Assessing Officer, and, in fact by referring to the findings in

the case of Board of Cricket Control of India to the effect that it was an organized

business activity being carried on by the BCCI, fortified the stand of the Assessing

Officer further. The sum and substance of the findings of the authorities below is

that development of cricket, as an activity, is not an educational activity, and the

way and manner in which the said cricket promotion activity is being carried out is

nothing but brute commerce. Learned CIT(A) also took note of the role played by

the Board of Cricket Control in India, and, discussed in detail, as to how the

activities carried on by the assessee amount to an activity in the nature of trade,

commerce or business. A part of his extensive findings by the CIT(A) for the

assessment year 2012-13, in the case of Gujarat Cricket Association, is being

reproduced below for ready reference:

5.2 I have carefully considered the rival contentions, case law relied upon and the observations made by the A.O. in the order. On going through the rival submissions, various case law, one of the main point that emerges is whether first proviso to section 2(15) of the Act is applicable to GCA or not? The appellant has raised this issue in ground of appeal 1 and 2. However as all the grounds i.e. ground no. 1 to 7 are closely linked to each other, all of them have been considered jointly and the decisions at later stage have been mentioned ground wise for the sake of convenience.

6.1 In my opinion, one needs to go through the historical perspective of policy changes in section 2(15) as well as section 10 that deals with blanket exemption. This would help in understanding the position of GCA in respect to applicability of first proviso to section 2(15) to it.

6.2 The law makers have always believed that trade, commerce and business cannot be mixed with charity and they cannot go together. Hence, the definition of 'charitable

purpose' in Sec-2(15) as originally enacted was limited by the expression 'any other object of general public utility not involving carrying on any activity or profit’. However, the phrase that not involving 'the carrying on any activity for profit' was omitted by Finance Act, 1983 with effect from 1/4/1984, but with this, restrictions was imposed on business activities by way of introducing Section-11 (4A) of the Act at the same time.

6.3 Earlier u/s.10 of the Act income of certain bodies/organizations/ authorities/instrumentalities of the State such as Urban Development Authorities, Housing Board, Institutions/Organisations controlling/ supervising/regulating/ encouraging games of cricket, hockey etc., Coffee Board, Tea Board, research associations, news agency, SAARC Fund, securitisation trust etc. were given blanket exemption from the taxable income. As can be seen from variety of organisations and sectors covered, the consideration for such exemption u/s 10 of the Act had never been that these institutions are undertaking charitable activities. 6.4 The major change in the law came through Finance Act, 2002, w.e.f. 1/4/2003. Vide this Act the provision of Sec.10(20), 10(20A), 10(23), 10(29) underwent major change. Sec. 10(20A), 10(23) and 10(29) were omitted by Finance Act, 2002.

Prior to omission Sec-10(23) was as under:-

10(23) - "any income of an association or institution established in India which may be notified by the Central Government in the Official Gazette having regard to the fact that the association or institution has at its object the control, supervision, regulation or encouragement in India of the games of cricket, hockey, football, tennis or such other games or sports as the Central Government may, by notification in the Official Gazette, specify in this behalf....."

6.5 Thus, by omission of sec. 10(23), the exemption hitherto enjoyed by associations/institutions for sports such as Cricket, Hockey, Football, Tennis etc. was withdrawn. By omission of Sec. 10(29) the exemption available with authority for marketing of commodities was withdrawn. But the Sec.10 (29A) continued the exemption for Coffee Board, Rubber Board, Tea Board, Tobacco Board, Spices Board, Coir Board, Agricultural and Processed Food Products Export Development Authority etc. Similarly, the Finance Act, 2008, w.e.f. 01/04/2009 inserted the section 10(26AAB) that granted exemption to income of agricultural produce market committee/board. The intent of Parliament is clear from these changes. It can be seen that there were definitive changes in taxation policy and the Parliament consciously allowed the exemptions u/s 10 to be enjoyed by certain institutions and at the same time excluded certain institutions from blanket exemption u/s 10 of the Act.

6.6 This conscious policy change was distinctly visible in case of instrumentalities of the State, wherein by Finance Act, 2002 an explanation to 10 (20) was added to limit the applicability of blanket exemption. This explanation limited the scope of

'local authority’ enjoying exemption u/s.10(20) only to Panchayat, Municipalities, Municipal Committees/District Boards and Cantonment Boards. The said explanation is as follows: "Explanation:- For the purpose of this clause, the expression Local Authority' means- (i) Panchayat as referred to in clause(d) of article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of article 243P of the Constitution; or (iii) Municipal committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in section 3 of the Cantonments Act, 1924 (2 of 1924)".

6.7 By means of introducing an exhaustive definition of local authority, which was hitherto not there, the Parliament denied exemption to any other Authority beyond those mentioned in Explanation.

6.8 By these amendments the law makers categorically derecognized the principle that associations like GCA, should enjoy blanket exemption. GCA will have to stand to the test of the Income Tax Act and especially of section 2(15) of the Act. Hence, legislative intent was clear that such authorities were not to get indirect support of the Government through tax exemption route. Such de-recognition of the principle in respect of said institutions could be because of reasons such as need for higher revenue etc. over the indirect support like tax exemption.

6.9 At the same time, as earlier blanket exemption u/s.10(23) does not make these institutions or associations as entities undertaking activities for charitable purposes nor does omission of sec. 10(23) prohibit them in getting registered u/s. 11/12 of the Act as per the laid down procedure under the said sections. Though, it was never provided for or stated in any policy documents that these institutions/association would hereafter enjoy the benefits of the charitable institutions yet the associations like GCA, claimed exemption as if they were performing charitable activities. Even the Circular No. 395 dated 24th September, 1984 has further clarified this issue. The said circular is as follows:-

"SECTION 2(15) I CHARITABLE PURPOSE Whether promotion of sports and games can be considered to be charitable purpose

The expression "charitable purpose" is defined in section 2(15) to include relief of the poor, education, medical relief and the advancement of any other object of general public utility.

The question whether promotion of sports and games can be considered as being a charitable purpose has been examined. The Board are advised that the

advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individuals would be an object of general public utility. In view thereof, promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 of the Act, even if it is not approved under section 10(23) relating to exemption from tax of sports associations and institutions having their objects as the promotion, control, regulation and, encouragement of specified sports and games."

Thus apart from clarifying the issue that in absence of approval u/s 10(23) of the Act, the associations or institutions involved in promotion, control etc. of the games would be eligible for claiming exemption u/s 11 of the Act as the promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). The CBDT categorically held that promotion, control, supervision etc. of sports and games would fall under the clause 'advancement of any other object of general public utility' because this clause deals with any object beneficial to the public or section of the public as distinguished from an individual or group of individuals. Thus the activities of GCA are under the clause of general public utility i.e. beneficial to the public or section of the public as distinguished from an individual or group of individuals and no other clause.

6.10 The Parliament intervened again and introduced proviso to sec-2(15) by Finance Act, 2008 w.e.f. 1/4/2009. The first proviso reads as follows:-

"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." (Emphasis supplied)

6.11 Further, the Parliament added the second proviso vide Finance Act, 2010, with retrospective effect from, 1/4/2009 which stated that first proviso shall not apply if the receipts from such activities, did not exceed Rs. 10 lakhs in the previous year. The Parliament, vide Finance Act, 2011, decided to revise this threshold in the second proviso to section 2(15) from Rs. 10 lakhs to Rs. 25 lakhs w.e.f. 01/04/2012. 6.12 The Parliament made its intention further clear and obvious by amending the IT Act vide Finance Act, 2012 but with effect from 1/4/2009. A new section i.e. Sec-13(8) was inserted to the Act. By this amendment it was provided that benefit of Sec-11 or Sec- 12 would not be available if the receipts from the activity in the nature of trade, commerce or business or from any activity of rendering any service in relation to any trade, commerce or

business, for a cess or fee or any other consideration, exceeded the threshold provided for in the proviso to Sec-2(15) of the Act. The application of Sec. 13(8) is dependent upon the receipts in a given year from the activity in the nature of trade, commerce or business or from any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration. The application of sec. 13(8) is for each year, independently. The benefit of sec-2(15) would be denied irrespective of the charitable nature of the objects of the trust and irrespective of whether or not the trust or institution is entitled to registration. The Act has not given any discretion to the AO in application of section 13(8). The registration granted to GCA u/s 12A or whether the income of GCA is applied for the charitable purpose or not, would be immaterial once the AO is convinced that firstly, GCA is engaged in advancement of any other object of general public utility; secondly, it is involved in 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 and thirdly, the receipt from such activities exceed Rs. 10 (or 25) lakhs during the year under consideration. The GCA will have to convince the AO in respect all the three factors mentioned above. If not, then the AO would be left with no alternate but to invoke section 13(8) and deny exemption claimed u/s 11 or 12 of the Act.

6.13 The Hon'ble ITAT, Panaji Bench, in the case of Entertainment Society of Goa [2013] 34 Taxmann.com 210 (Panaji Tribunal) has observed on the issue of 'in the nature of trade, commerce or business' as under:

"This proviso in the last sentence further states that nature of use of application or retention of the income by the institution from such activity will not be a relevant consideration. In view of the this specific provision, we are not concerned to look into how an institution has used, applied or retained its income, if the said 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" not the words 'carrying on trade, commerce or business'. Using of the words 'any activity in the nature of prior to trade, commerce or business' in our opinion has a specific meaning while interpreting the proviso. These words cannot be ignored. This provision mandates that the institution need not actually be carrying on trade, commerce or business but the activity carried on by him is similar to trade, commerce or business. The profit motive is required while an institution is carrying on trade, commerce or business. The use of words "carrying on of any activity in the nature of trade, commerce or business" in our opinion will mean that there need not be profit motive in carrying on the activity by the institution..... The legislature is fully aware of that an institution which is incorporated for charitable purpose cannot have profit motive." (Emphasis supplied)

6.14 No contrary decision on this interpretation has been noticed. GCA has tried to negate the application of this decision in its own case by reasoning that the activities of assessee in this case are different from that of GCA. Agreed that the activities are different but the findings of Hon'ble ITAT are findings on the first proviso to section 2(15) and hence applicable to all.

6.15 These changes in Act clearly brought out that the application of proviso to sec- 2(15) is not only for the trust or institution engaged in trade, commerce or business but its activities have to be in the nature of trade, commerce or business. It means that the profit element of business may or may not be there, what is to be seen is the nature of trade, commerce or business. This difference between the business and the activities in nature of business should be kept in mind.

6.16 Further, the Parliament was clear that even if a part of the overall activity of the institution is 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 and if the receipts from such activity exceeded the threshold (Rs. 25 lakhs) then provisions of sec.13(8) would be applicable. Finally, the law makers were also clear that the application of income from such activities is of no consequences as brought out clearly in the proviso to sec-2(15) r.w.s. 13(8) of the Act in order to claim exemption u/s 11 or 12 of the Act.

The appellant has relied upon various decisions throughout its submissions. It must be kept in mind that the principle of res judicata does not apply to Income-tax proceedings. Each assessment year being the unit and what is decided in one year may not apply in the following year. Especially, when there have been changes in the provisions of concerned sections of the I.T. Act. Further the Hon'ble Supreme Court in the case of A Distributors (Baroda) Pvt. Ltd. vs Union of India and Others 155 ITR 120 has held that to perpetuate an error is not heroism, to rectify it, is the compulsion of the judicial conscience. 8.1 The CBDT had issued a circular No. 11 of 2008 dated 19/12/2008 wherein it has mentioned as follows :-

"3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is ' advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose’ contained in section 2 (15). Hence, such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.

3.1 .........

3.2 In the final analysis, however, whether the assesses has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose, in such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is ' charitable purpose' within the meaning of section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." (Emphasis supplied)

8.2 The perusal of the circular reflects that the Board has emphasized on applicability of proviso to section 2(15) of the Act as a 'question of fact' of each case. To understand the facts of the appellant looking at the balance sheet and income and expenditure account of the years under consideration is not sufficient. The appellant has reflected its income from 'match income', 'other income (mainly interest on FDs)'. The appellant has reflected a substantive portion of its receipts in the balance sheet. The TV subsidy and IPL subvention has been directly taken as 'corpus' by the appellant. The receipts from BCCI although called as subsidy or subvention, it need not necessarily have the meaning attributable to those words. These two words have often been used interchangeably by the BCCI (see the Annual Repots discussed in succeeding paras), and only reflect the practice of usage of these words irrespective of their real meaning. 9.1 In order to understand the real nature of receipts from BCCI, it is vital to understand the background of these receipts. The documents relied upon to understand these receipts are the (A) Annual Reports of BCCI, (B) the written submission given by BCCI to its AO during its own assessment proceeding on TV subsidy or IPL subvention, (C) minutes of AGMs of BCCI wherein decisions on TV subsidy or IPL subvention to State Cricket Associations (hereinafter referred to as SCAs) were taken, (D) the accounting of these receipts by the appellant as well as other SCAs in their books etc. It is also important to see the decision making process at BCCI. All these are vital pieces of information in order to understand the correct nature of receipts from BCCI to SCAs. These sources that would help to understand the nature of receipts from BCCI are discussed below. It would be pertinent to mention here that the proceedings of BCCI before the AO of BCCI referred in the order were available with the appellant. Secondly the appellant itself had submitted the minutes of AGMs of BCCI during the appellate proceedings of the appellant for AY 2011-12. Thirdly the Annual reports of the BCCI are public documents and are available on its website. In short all the document referred herein under were available with the appellant. Especially during the appellate proceedings for AY 2011-12.

9.2 BCCI:

The main object of the BCCI is (a) to control the game of cricket in India and give its decision on all matters including women cricket which may be referred to it by any member association in India; (b) To encourage the formation of state, regional other cricket association and the organisation of Inter-sate and other tournaments etc.

9.3 The working committee is the committee to whom the management of the affairs of the Board is entrusted with. There are three kinds of members of BCCI:- (a) Full Members (b) Associate Members and (c) Affiliated members. Every full member and chairman of meeting has one vote. The associated member or affiliated member have no vote but are eligible to attend and participate in the meetings of the Board, nor they would be eligible to be elected as a Member of the working committee or as an office bearer or Vice President of the Board. Thus the decisions of the Working Committee are the decision of the Full Members i.e. SCAs. The working committee which is also the governing body of the Board is the only powerful committee having various representatives. All the decisions of the Board are taken by majority of votes and in the case of an equality of votes the Chairman has the casting vote. 9.4 The MOA also mentions that all the members are required to submit their accounts within stipulated time and they shall not be entitled to vote at a meeting provided a due notice in writing is given.

9.5 The BCCI/Board shall be comprised of (a) President (b) 5 Vice Presidents one from each zone (c) an Hony. Secretary (d) an Hony. Jt. Secretary and (e) an Hony. Treasurer. All the members shall be entitled to have one representative on the Board.

9.6(A) Relevant extracts from the Annual Reports of immediately preceding four years that reflect the growth of revenue of BCCI. (Source: Website of BCCI)

Annual Report 2007-08 9.6.1 As per treasurers report BCCls financial performance in 2007-08 increased by leaps and bounds with overall income exceeding Rs. 1000 crores and surplus touching a new height of Rs. 303.15 crores. During the year BCCI has earned media rights income of Rs. 559.31 crores as against Rs. 313.62 crores in 2006-07 and Rs. 341.42 crores in 2005-06. The treasurer has reported that the TV subventions to State associations increased to Rs. 371.89 crores in 2007-08 as compared to Rs. 211.53 crores in 2006-07 and Rs. 224.51 crores in 2005-06. With regard to IPL subvention the treasurer has reported that Rs. 203 crores being 70% of Franchisee Fees is proposed to be given as subvention to the State Association for the year 2008-09. Further on IPL and its media rights the annual report has mentioned that leading sports broadcasters Sony Max and World Sports Group backed the DLF IPL Global Media rights for 10 years (2008-

17). The report further states that the DLF IPL has thus set new standard in entertainment, in stadium and on the TV.

Annual Report 2008-09 9.6.2 During the year, BCCI earned Media Rights amounting to Rs. 466 crores. The IPL contributed Rs. 662 crores to its income. The treasurer has mentioned under the heading ‘T.V Subvention’ that there is a remarkable increase in the payment of T.V Subsidy. IPL subvention, Infrastructure Subsidy through members association from Rs. 456 crores to Rs. 624 crores on which BCCI-IPL had also contributed in distribution of Rs. 202 crores as IPL Subvention during the year 2008-09 which is about 37% increase over the last year. The annual report also throws light on the Indian Premier League which has been emerged as cricket as most valuable property and the 6th more powerful property in the world as per the study conducted by the International renowned SPORTSPRO magazine. It is mentioned in the annual report that the IPL, the vision of BCCI Jt. President Lalit Modi has only been in existence for two tournaments but has already revolutionized cricket. The Broadcast rights were sold for $1.026 billion equivalent to $1.71 million per game. Title sponsorship rights were sold for $50 million over five years.

Annual Report 2009-10 9.6.3 The treasurer has mentioned that the overall income of BCCI excluding IPL and CLT rose to Rs. 847 crores as against Rs. 711 crores during the year 2008-09. The IPL suffered a loss of Rs. 41.90 crores because of increase in expenses due to its shifting to South Africa. However, the CLT 20 was able to generate profit of Rs. 39.27 crores. The treasurer has informed its members that the loss of IPL has been calculated after providing Rs.202.61 crores as IPL subvention to SCAs which were considered as expenses of IPL. During the year the BCCI has disbursed Rs. 128.45 crores on account of infrastructure subsidy. During the year it had earned media rights of Rs. 575.05 crores out of which 81.5 crores were given as TV subsidy to SCAs. Annual Report 2010-11 9.6.4 During F.Y.2010-11 BCCI have earned media rights amounting to Rs. 1047 crores out of total gross income for the year amounting to Rs. 2026 crores. Media rights comprised of more than 50% of the gross income of BCCI. Out of 1047 crores 422.94 crores were received on account of IPL and 235.57 crores were received on account of Champions League Tournament. The remaining 288.56 crores were the Media rights received by BCCI for rest of the tournaments. Out of 388.56 crores BCCI has given 237.57 crores as T.V Subsidy to SCAs. Further it has also given 202.61 crore as IPL subvention. It is also noticed that BCCI has given 130.97 crores as infrastructure subsidy to SCAs.

9.6.5 From the above referred Annual Reports it can be seen that nowhere BCCI has ever mentioned that the TV subsidy or IPL subvention are to be treated as 'corpus' by the SCAs. And secondly, the words subsidy and subvention have been used interchangeably.

9.7(B) Assessment Proceedings of BCCI:

9.7.1 It is important to go through the order of assessment of BCCI for AY 2010- 11 dated 12/2/2013. The said assessment order was also available with the appellant during the assessment proceedings. The main finding of the AO in the order is "payment of various Subsidies tantamount to distribution of profits of the assessee to its member state associations and therefore is ineligible business expenditure. The payments made to member cricket associations are utilized in their respective states and not by the assessee and therefore cannot be considered as expenditure incurred by the assessee on cricketing activities. "

9.7.2 The AO of BCCI, based on the communication of DIT(E), Mumbai, has not granted benefit of section 11 & 12 of the Act to BCCI. The stand taken by BCCI during its assessment proceedings is mentioned below. The BCCI vide its submission dated 03/12/2012 to the AO has explained its relationship with State Cricket Association as follows:-

"1. BCCI is society registered under the Tamil Nadu Societies Registration Act. It was formed in the year 1929 with the object of promotion and development of cricket in India and is a member of the International Cricket Council (ICC) the regulatory body for world cricket. As a member of ICC, BCCI represents India in bilateral tours between member countries and in ICC tournaments such as the World Cup. 2. BCCI has 30 members out of whom 25 are state cricket associations, 2 are private clubs and 3 are Central Government Institutions. BCCI does not own or manage the infrastructure and facilities that are required for cricket. It encourages and oversees the various state associations to promote the game, build the required infrastructure organize tournaments, leagues, coaching camps etc. in their respective states. Whenever a foreign team visits India, the international matches such as Test and ODI are allotted by BCCI to the State Cricket Associations by a rotation policy. The matches are conducted and managed by the respective state associations and over time, arrangements have evolved about the respective responsibilities, rights, shares of revenue etc. These have evolved in order to promote co-operation and unity among the member associations and by applying the principles of equity and fairness, for which the sport of cricket is renowned."

9.7.3 The BCCI in its submission dated 21/1/2013 earned subsidy paid to SCAs and TV Subvention as stated as follows:-

"13.2 PAYMENTS TO STATE ASSOCIATIONS

During the year, BCCI has paid amounts to the state associations under the head "TV, Subventions to Associations". This represents payment of 70% of the revenue from sale of media rights to the state associations".

Whenever a foreign team visits India, the international matches such as Test and ODI are allotted by BCCI to the state cricket associations by a rotation policy. The matches are conducted and managed by the respective state associations. It is not possible for BCCI to conduct all these matches with its own limited personnel. It is dependent on the state associations, their office bearers, their employees and their network and resources at the local centre to conduct the matches.

The association manage the entire match right from provision of security to players, spectators in coordination with respective state police personnel, taking other security measures like fire prevention etc. The association incurs a good chunk of expenditure in conducting an International Test/ODI/T20/IPL/CL T20 Matches. In order to have fair and equitable sharing of the revenues, arrangements have evolved over time, about the respective responsibilities, rights, shares of revenue etc. of BCCI and the state associations. The state association is entitled to the ticket revenue and ground sponsorship revenues. Expenses on account of security for players and spectators, temporary stands, operation of floodlights, Score Boards, management of crowd. Insurance for the match, electricity charges, catering etc are met by the state associations. On the other had expenditure on transportation of players and other 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 organised by BCCI and multiple state associations, it was found that if each state association were to negotiate the sale of rights to events in its centre, its 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 receipts from the sale of media rights 70% of the gross revenue less production cost would belong to the state associations. 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 respective associations to build infrastructure and promote cricket, making the game more popular, nurturing and encouraging cricket talent, and leading to higher revenues from media rights. (Emphasis supplied)

Come from sale of Media Payments to State Financial Year % Paid Rights (Nett) Associations 2001-02 46,00,00,000 32,20,00,000 70% 2002-03 46,00,00,000 32,20,00,000 70% 2003-04 46,00,00,000 32,20,00,000 70% 2004-05 143,48,76,209 100,44,13,347 70% 2005-06 320,72,29,934 224,50,60,954 70% 2006-07 296,16,61,646 211,53,63,213 70% 2007-08 531,27,81,225 371,89,46,858 70% 2008-09 438,98,30,523 307,28,81,366 70% 2009-10 545,00,66,045 381,50,46,232 70% 2010-11 339,39,09,746 237,57,36,822 70%

Even in the event that exemption under section 11 is denied, the payments to state associations must be allowed as a deduction, as expenditure laid out or expended wholly and exclusively for the purpose of earning such income, it must be appreciated that in order to earn revenues, BCCI was and continues to be highly dependent on the state associations. BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the state associations to conduct the matches. The income from media rights is dependent on the efforts of the state associations in conducting the matches from which the media rights accrue. The division of revenues and expenditure is a matter of arrangement between the parties. Certain incomes such as sale of ticket revenues belong to the state associations, who meet the expenditure on the matches such as security for players and spectators temporary stands, operation of floodlights, Score Boards, management of crowd, insurance for the match, electricity charges, catering etc. Whereas with regard to the income from sale of media rights, the arrangement between BCCI and the State Associations has been that 70% of the revenue would belong to the State Associations. As shown, this has been the arrangement between the parties for the twenty years. The State Associations are entitled by virtue of established practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches. This payment is therefore made only with a view to earn the income from media rights.

These payments do not represent distribution of profits to members, since the payment is at a percentage of the gross revenues and had been paid even in those years where BCCI had incurred a loss: besides, the amount was not paid to all members but only to the state associations. In other words, the payment is not made to the three private clubs or the government institutions, but only to state associations. Distribution of profits would always be to all the members and the fact that these other members have acquiesced in these payments demonstrates that the payments are not distribution of profits. We request you to consider these submissions." (Emphasis supplied)

9.7.4 The A.O in response to reply of BCCI has held as follows:-

"13.3 The reply of the assesses is considered but the same is not acceptable during the course of re-assessment proceedings, in the expenditure side of the income and expenditure account it is noticed that huge amounts were given to state association as subsidy. BCCI itself has not developed any infrastructure nor did it or construct any stadium or other amenities regarding provision for infrastructure Subsidy Scheme to Member Associations. The payments made to State Cricket Associations is utilized for the development of game of cricket in their respective states, for development of infrastructure faculties, facilities for spectators, conducting coaching camps, conducting local tournaments etc.

13.5 Thus, major part of the revenue is diverted as grants to state cricket associations. The amount distributed in this year Rs. 381,50,46,232/- as T.V. Subventions to Associations + Rs. 202,60,80,000/- as T.V. Subventions to Associations from IPL + Rs. 1,284,534,159/- infrastructure subsidy to Associations..."

13.6 The BCCI has distributed TV Subventions, subsidy/staging subsidy and infrastructure subsidy to its Associations. By this, BCCI has distributed part of its income of all its members associations. This is nothing but distribution of profit to its members.

Further the A.O has held as follows :

13.11 Further, infrastructure subsidy, TV Subvention and as subsidy/staging subsidy given by the assessee to State Association is not actually spent by the assessee it has simply been given to State Association. This is only be convection and faith on State Association but no proper control is there. Since there are no proper financial control of BCCI on its association to see that the money given are actually spent for the purpose of its object, it is not possible to allow it as deduction against the business income as the same are not actually incurred wholly and exclusively for the purpose of business.

13.13 In view of the above, this is nothing but distribution of profit to its members and in the absence of control mechanism and financial control the money given to State Association as infrastructure subsidy, TV Subvention and subsidy/staging subsidy cannot allowed to the assessee.

13.14 Further infrastructure subsidy to State Association, TV Subvention and as subsidy/staging subsidy given by the assessee is not actually spent by the assessee it has simply been given to state Association, as such these are not allowable herewith as expenditure which is incurred wholly and exclusively for business purposes. Even if the exemption would have granted by any Authority to the assessee, the T. V. Subvention and subsidy/staging subsidy given to the Member Association cannot be allowed as application as the same is given as subsidy to associations and not spent by assessee for its objects."

9.7.5 With regard to launching of IPL and allowing private entities to share revenue the A.O has observed as follows :-

"The BCCI has entered into this venture simply to earn profit. Promotion of cricket is no where concern of the BCCI. BCCI is already cash surplus. Therefore it cannot be said that it launched IPL in the interest of the game. Assessee had presented the IPL as business to investors. The franchisee owners were explained about the ROI i.e. return of Investment. This shows that the entire IPL was marketed as a business."

9.7.6 The receipts from sale of media right are purely the receipts from commercial business activity (also refer to Annual Report 2007-08 at para 9.6.1 above). During FY 2008-09, there had been a major controversy with regard to the allocation of TV/Media rights by the BCCI. There was a search & survey proceedings on World Sports Group (WSG) and Multi Screen Media (MSM) Pvt. Ltd. by the IT Department. The allotment of Media rights was not a non-controversial process. In the end, BCCI & MSM had restructured their Media Right Agreement and MSM had agreed to pay Rs. 425 crores to BCCI as facilitation fees etc. However, in the instant proceedings, no conclusions are drawn based on the said controversy that had engulfed BCCI and Media Rights. It only be inferred that the BCCI remained powerful in its negotiations on media rights mainly for the reason that all its full Members or SCAs had authorized BCCI to negotiate on their behalf. This is apparent from the submission of BCCI to its AO. This had helped BCCI to negotiate from the position of strength. What was at stake was large quantum of share of revenue that the SCAs had started getting as TV subsidy due to the negotiations by BCCI on their behalf.

9.7.7 The conclusions drawn by the AO of BCCI are in the perspective of assessment proceeding of BCCI. These assessment proceedings only help us in understanding the perspective of BCCI with regard to the TV subsidy and IPL

subvention. No support is drawn in the proceedings of the appellant from the findings of AO of BCCI.

98 (C) BCCI - Annual General Meetings (AGM)

During the course of appellate proceedings the GCA has submitted the minutes of Annual General Meetings (AGM) of BCCI normally held in the month of September of each year. The relevant issues in the Minutes are flagged hereunder:

9.8.1 AGM for FY 2000-01

It was in 2001 that the BCCI seems to have introduced the Rotation Policy in the allocation of venues for cricket matches. In the same meeting the AGM has adopted Hony. Treasurers report and the audited accounts for the year ending 31/3/2001 at item No.4. Hony. Treasurer had informed the AGM that henceforth the accumulation can be made only for five years instead of 10 years. He informed the AGM that the Finance Committee and the Working Committee had recommended for transfer of Rs. 10 crores to the infrastructure development funds and Rs. 7 crores to Ranji Trophy funds out of the current year profits. The AGM approved all these decisions. It was the Chairman who suggested that, as already decided in the working committee, henceforth the TV Subsidies should be sent towards 'corpus funds' and this decision can also be approved by the members of this meeting. Thereafter the members unanimously approved that henceforth the TV Subsidies should be sent by the Board to the member associations towards 'Corpus Fund' instead of ‘Subsidy Fund'. In the same AGM at item No. 12 the decision taken by the working committee on 25/08/2001 was approved unanimously. The decision was in respect of discontinuance of the policy of withholding 50% of TV Subsidy and about the decision to release 100% TV Subsidy to Members and increasing the limit for infrastructure subvention from Rs. 2 crores to Rs. 4 crores. Further the AGM also took the decision as per the submission of Hony. Treasurer that the total TV Subsidies received is Rs. 46 crores out of which the amount available for distribution among the members is Rs. 32 crores representing 70% which would be distributed on the following basis: - Share of non staging associations - Share of staging associations based on Test, ODI - Three day matches - staging associations

9.8.2 AGM for F.Y.2005-06 At item No.4 of the minutes it is stated as follows:-

sale of TV rights belongs to the affiliated units and only 30% of the TV rights revenue belongs to the Board.

The members unanimously endorsed the views expressed by Mr. I.S. Bindra and it was unanimously resolved that 70% of the sale of TV rights belongs to affiliated units and the balance 30% is only available for the calculation for the gross revenue share to the players from the year 2005-06. The definition of gross revenue for the purpose of arriving at 20% distribution to player is as follows :-

• Sale of Sponsorship rights, excluding agents, if any. • Sale of Media rights including TV (net of production cost) radio, internet, middle media and other mechanism designated to utilise digital technology excluding the agents fees, if any, and share of State Associations etc..." (Emphasis supplied) 9.8.3 AGM for FY 2007-08

The total TV subsidy amount payable to associations for the year 2007-08 is Rs. 3,71,89,46,858/-. It was resolved that 70% of the franchisee fees received will be distributed to associations as BCCI-IPL subvention. The subventions payable to associations for the season 2008 are as under :-

Staging: Rs. 10 crores Non staging; Rs. 7.21 crores The total BCCI-IPL subvention payable to associations for the season 2008 is Rs. 202.60 crores

9.8.4 AGM for F.Y.2008-09

Item No.4 - Adoption of the report of treasurer and the audited accounts for the year ending 31/3/2009. The Hony. Treasurer informed the house the TV Subsidy to be distributed to affiliated units was Rs. 307 crores. It was decided to distribute the surplus after meeting of expenses in the following manner. • Rs. 10.53 crores to the associations who did not stage any international match. • Rs. 33.3 crores to associations who have staged an ODI match. • Rs. 14.27 crores to the association who have staged the test match. • Rs. 17 crores to the association who have staged both ODI and test match.

The total subsidy on account of IPL was Rs. 202 crores. Hony. Treasurer informed that in 2009 as the IPL matches were played in South Africa all the affiliated units will get the same share of Rs. 8,10,43,200/-.

9.8.5 AGM for F.Y.2009-10

The Hony. Secretary announced that TV Subsidy is distributed as follows :- All the eligible members would get equal shares of Rs. 13.09 crores each and in addition the members who staged international matches would receive additional subsidy as under :- • ODI each Rs. 2.47 crores • Test Match each Rs. 3.30 crores • T-20 International Rs. 1.65 crores

The Hony. Treasurer further announced that IPL subsidy for the year would be distributed amongst the eligible members and the amount is Rs. 8,10,43,2007- each. (Eligible association are the full time members of BCCI i.e. 25 in number).

9.8.6 AGMforF.Y.2010-11 Mr. M.P Pandove then placed before the house the proposed amounts of TV Subsidy and IPL Subvention payable lo eligible associations.

TV Subsidy Equal to eligible association Rs. 8.14 crores each Additional subsidy to associations staging ODI: Rs. 2.31 crores each Additional subsidy to association staging tests: Rs. 3.08 crores each

IPL Subvention Total money available for subvention Rs. 429.08 crores Equal distribution to all eligible associations Rs. 17.16 crores each. He also informed the members that as per the past practice, on submission of audited annual accounts for the year 2010-11 from associations, the subsidies will be distributed.

9.9 (D) Treatment by Baroda Cricket Association, Saurashtra Cricket Association and GCA in respect of funds received from BCCI

9.9.1 It is noticed that based on the same Annual Report, same minutes of the AGMs of the BCCI, the receipts from BCCI to SCAs have been reflected differently in their financial statements by at least three SCAs that have presence in the state of Gujarat viz. Baroda Cricket Association, Saurashtra Cricket Association and the appellant. The treatment given by the appellant is already under consideration. Baroda Cricket Association (BCA) for A.Y.2012-13 and Saurashtra Cricket Association for A.Y.2012-13 have filed appeals before me. During the appellate proceedings this issue was also discussed with the AR of GCA. It was observed that Baroda Cricket Association has treated the TV Subsidy received from BCCI as corpus and has treated IPL Subvention received from BCCI in the income and expenditure account unlike GCA. Further BCA has also offered sale of tickets of ODI as its income and have paid taxes on the same. The Saurashtra Cricket Association on the other hand has reflected Subvention received from BCCI as its income from other sources. Similarly, the TV Subsidy received from BCCI is also shown under the head income from

other sources and has not treated the same as corpus like GCA. Saurashtra Cricket Association has reflected the amount received from BCCI under the Infrastructure Scheme as its corpus whereas GCA has taken this amount to balance sheet but not as corpus.

9.9.2 Thus, it can be seen that within Gujarat the three Cricket associations which are full members of the BCCI have treated the TV Subsidy, the IPL Subvention and the funds received under the Infrastructure Subsidy Scheme in different ways and manners. The treatment given by other SCAs i.e. outside of Gujarat is not known. The judgment of hon'ble ITAT Chennai in the case of Tamil Nadu Cricket Association is silent on corpus issue (referred later). BCCI has also not bothered to find out whether the treatment given by the various cricket associations in their audited accounts is right or wrong. In its AGMs, BCCI have resolved again and again to send the funds under the TV Subsidy or IPL Subvention to SCAs only when the audited accounts of SCAs would reach the BCCI. So it cannot be said that BCCI was unaware that differential treatment was given by various Cricket Associations to these receipts. It can be seen from the various Annual Reports of BCCI, minutes of AGMs of BCCI as well as the submissions of BCCI in its own assessment proceedings that there has been a consistency in the stand taken by BCCI. The consistency has been on the matter that 70% of the receipts from sale of media rights and IPL activities belong to SCAs and not to BCCI. The consistency is on the matter that both the receipts have emerged out of combined efforts of BCCI & SCAs. The consistency is on the issue that both the receipts are from commercial activities and finally the consistency on the issue that both the receipts are simply transferred to SCAs as TV subsidy and IPL subvention. There is no whisper of 'corpus' in the AGMs of BCCI except for one. It is the SCAs who have treated them in different manner in their own financial statements. This is evident from the para above. However, this does not mean that the nature of receipt, changes, even if the three SCAs in Gujarat are giving separate treatment to these receipts as per their convenience or understanding. Thus, I hereby hold that the TV subsidy and IPL subvention is the revenue receipt of the appellant. The activity of selling of media rights by the BCCI & SCAs and the activity of conducting the IPL are the activities that are in the nature of trade, commerce or business within the meaning of proviso to section 2(15) of the Act.

10.1 From Para 9.2 to Para 9.9 the relevant information with regard to the receipt of funds from BCCI to SCAs has been reproduced. BCCI and SCAs on the issues of their management, BCCI & its relationship with SCAs, controversies on venues of matches, unfortunate incidents of match fixing etc. have been in the center of controversies. Otherwise there had been no reason for the intervention from the Hon'ble Apex Court to order a very intrusive mandate to the Lodha Committee set up by it. There is no doubt that BCCI is managed by the Full Members. The decisions taken by the Working Committee are the decisions which are endorsed by the full members. All the full members are equally responsible and partner in the decision making process. BCCI and full members jointly take efforts for the cricketing activities in the country. It is the full members who have authorized BCCI to undertake the fixation of tour programmes or the matches at international as well as domestic level. That includes, Test Matches, ODI, T20 matches,

Ranji Trophy, Deodhar Trophy, Duleep Trophy, Vijay Hazare Trophy matches etc. In the process it is the SCAs that provide and facilitate the actual conduct of these matches. Although the matches are allotted by BCCI, it is always on behalf of the full members of BCCI.

10.2.1 It is the full members who have decided on the Infrastructure scheme of the BCCI. The main reason for the developing the scheme is to further enable the SCAs to hold matches in their respective jurisdiction.

10.2.2 Infrastructure scheme is the scheme of BCCI that encourages its affiliated units to create infrastructure both for international and domestic cricketing activities. The scheme is of financial assistance by way of reimbursement of expenditure incurred by State Association on infrastructure development. It is a well documented scheme and the items of expenditures that are reimbursable have been listed by BCCI for the SCAs. The subsidy available under the scheme is 50% of the expenditure actually incurred. The extent to which such expenditure can be incurred has varied from year to year based on the decision of the full members of BCCI. The Infrastructure subsidy scheme is based on the principle of reimbursement of expenses up to 50% incurred by the said Cricket Association.

10.3 Various Annual Reports throw a light on how the revenue from media rights have gone up substantively. The facts and figures have already been mentioned above. In FY 2010-11 the BCCI had earned revenue from media rights that comprised of more than 50% of its gross income. As far as IPL is concerned, BCCI has always accepted in its Annual Reports that it is one of the most successful commercial product/venture/model launched by it. SCAs are also equal partner in the said activity. For this precise reason BCCI has always equally distributed the revenue from IPL activity amongst all its full members irrespective of the fact that a particular SCA has been able to stage a match or not. In fact, no SCA can refuse the BCCI from holding match at its venue for the reason of expectation of revenue. Logistics of the full members is always available with BCCI for the IPL activities which are purely commercial in nature.

10.4 From the assessment order passed by the AO in the case of BCCI, the relevant part which is mentioned above, it is discernible that the BCCI and SCAs jointly hold all the cricketing activities in the country. For a smooth conduct of the activities the full members have developed a 'Rotation Policy' in the BCCI. The existence of Rotation Policy is admitted by the BCCI. According to BCCI the arrangements of conducting cricketing activities have evolved over time and are based on the cooperation and unity amongst the SCAs.

10.5 The basis for transfer of funds on account of TV subsidy and the IPL subvention from BCCI to SCAs is same. The BCCI, itself has not treated that these funds belong to it. BCCI has mentioned in Annual Report for 2007-08 that Rs. 203 crores of IPL subventions being 70% of franchisee fees was proposed to be given as subvention to SCAs.

This is apparent from submissions made by the BCCI to its AO as well as from the decision taken during the AGMs. BCCI has categorically mentioned to its AO as follows:

"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 organised by BCCI and multiple state associations, it was found that if each state association were to negotiate the sale of rights to events in its centre, its 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 receipts from the sale of media rights 70% of the gross revenue less production cost would belong to the state associations. Every year, BCCI has paid out exactly 70% of its receipts from media rights (less production cost) to the state associations."

10.6 It can be seen from the submissions of BCCI as mentioned above that in the process of conducting matches such as Test/ODI and including IPL the SCAs incur expenses. Further, the BCCI has also admitted that there is need to have fair and equitable sharing of revenues and the arrangements have evolved over time. The share in media rights pertains to time period and not to a particular match. The matches are never played in isolation but are always in a Test/ODI series. It is joint organisation of an event over a time by BCCI and the SCAs. BCCI has admitted that the SCAs are entitled to these revenue receipts. Further the BCCI has also admitted that it was agreed amongst all the SCAs that BCCI would be negotiating the media rights on their behalf to optimise the revenue and the BCCI has also stated that it was decided with the SCAs that 70% of net revenue would belong to the SCAs. According to BCCI, in expectation of these revenue receipts the SCAs actively participate in the cricketing activities. Thus, it is apparent that arrangements have been evolved to share the revenue from the joint activity of sale of media rights on 70:30 basis. This position has been made amply clear by Mr. I.S. Bindra, the then President of BCCI during the AGM for F.Y.2005-06. At item No.4 of the minutes it is stated as follows:-

"Mr Bindra observed that since the last two years the entire income from TV Subsidy rights has been reflected as the income of the Board in the accounts and that this was wrong presentation. According to him 70% of the income from the sale of TV rights belongs to the affiliated units and only 30% of the TV rights revenue belongs to the Board.

The members unanimously endorsed the views expressed by Mr I. S. Bindra and it was unanimously resolved that 70% of the sale of TV rights belongs to affiliated units and the balance 30% is only available for the calculation for the gross revenue share to the players from the year 2005-06." (Emphasis supplied)

10.7 From above minutes the position becomes clear in respect of to whom these receipts belong to 70% is that of SCAs and 30% is that of BCCI. As the receipts from the sale of

media rights were that of BCCI as well as SCAs, similarly the income from the commercial activity of IPL is the joint income of BCCI and SCA/full/eligible members. It is discernible from the minutes of various AGMs that distribution of the revenue from media rights as well as IPL subvention are part of the same agenda item. The only difference is that the net media rights revenue, is shared by all SCAs as well as an extra share of revenue goes to those SCAs staging the matches whereas the IPL revenue is shared equally amongst all the SCAs. The BCCI keeps 30% of the net revenue with itself. It is discernible from the various Annual Reports of BCCI, minutes of AGMs of BCCI as well as the submissions of BCCI in its own assessment proceedings that there has been a consistency in the stand taken by it. The consistency has been on the matter that 70% of the receipts from sale of media rights and IPL activities belong to SCAs and not to BCCI. The consistency is on the matter that both the receipts have emerged out of combined efforts of BCCI & SCAs; that both the receipts are from commercial activities and finally, that both the receipts are simply transferred to SCAs as TV subsidy and IPL subvention as their share and not as corpus. It is the SCAs who have treated them in different fashion in their own financial statements. However, this does not mean that the nature of receipt changes.

10.8 Therefore, I am of the considered opinion that "receipts from BCCI on account of sale of media rights as well as the receipts from IPL activities are in the nature of revenue income of the GCA/Appellant". These receipts represent 70% of share of the net income. There is no doubt that the receipts are from the activities that are purely in the nature of trade, commerce and business or from activities of rendering any service in relation to any trade, commerce or business, for a cess or fee.

13.

On materially similar lines, the appeals of the two other cricket associations

before us, i.e. Baroda Cricket Association and Saurashtra Cricket Associations, were

also dismissed by the CIT(A). The assessees are not satisfied by the consistent stand

so taken by the CIT(A)s and are in appeal before us.

Rival contentions:

14.

Shri S N Soparkar, learned Sr Advocate, opened the arguments for the cricket

associations. Learned counsel begins by inviting our attention to the wordings of

Section 2 (15), and pointing out that the so far as residuary clause in the definition

of ‘charitable institution’, i.e. “any other object of general public utility”, is

concerned, such other object of general public utility will cease to be a charitable

activity only when “it involves the carrying on of any activity in the nature of trade,

commerce or business” or when it involves “any activity of rendering any service in

relation to any trade, commerce or business for a cess, fees or any other

consideration”. Essentially, therefore, the emphasis is on the nature of activity and

nothing else. The question to be considered by us, therefore, really is whether or not

the activities of the cricket associations before us involve trade, commerce or

business. In this backdrop, we were taken to the object clauses of the cricket

associations. An effort was made to demonstrate that each and every activity pursued

by the cricket associations before us was for promotion of cricket. It is submitted

that there is not even a single object of the association which does not deal with

promotion of cricket. Learned counsel then invited our attention to the fact that all

the cricket matches under the Indian Premier League as indeed the other cricket

matches, such as one day international matches and the international test matches,

are organized by the Board of Cricket Control of India (BCCI) and not by the cricket

associations before us. He submits that the entire case of the revenue authorities is

that these test matches are organized on the commercial lines, and, for this reason,

the cricket associations before us must be held to have been hit by proviso to Section

2(15), but then, according to the learned counsel, what this argument overlooks is

the fact that no such activities of organizing the matches are carried on by the local

cricket associations. Therefore, going by the learned counsel, if at all the allegation

of the revenue authorities is to lead to some logical conclusion in respect of the

organizing bodies, that is in respect of the BCCI and not the local cricket

associations. He hastens to add that as he is representing a local cricket association,

he need not address himself to this larger issue about correctness or otherwise of

even the allegations. In response to a question from the bench, learned counsel for

the assessee submits that even if it is correct that the assessee is an affiliate of the

BCCI, so far as taxation of income is concerned, the assessee is an independent

assessment unit and the actions of the BCCI cannot vitiate the assessments of its

affiliates. There is no provision under the statute which could enable the assessment

of an entity being influenced by the actions or inactions of another group entity.

Learned counsel then invited our attention to the nature of expenses incurred by the

assessee, as noted by the Assessing Officer himself in the assessment orders. He

points out that the expenses incurred are on account of local cricket tournaments,

district cricket expenses for promotion of cricket in the districts assigned to the

respective association, seminar, training, meeting, exhibition etc for coaches,

umpires, trainers, physiotherapists, scorers and other supporting staff, junior cricket

expenses for youngsters below the age of below 12 years, below 14 years, below 16

years and below 19 years play in various tournaments organized by the cricket

associations, senior cricketing expenses incurred in participation in matches

organized by the associations and by the BCCI, sports material, prize distribution,

women’s cricket, ground maintenance expenses, fees paid to professionals whose

services were used by the associations, and all other establishment and other related

expenditure. Learned counsel submits that since all the activities of the assessee for

the development of cricket, the assessee has rightly claimed the exemption under

section 11. He submits that the proviso to Section 2(15) will not come into play

since these activities are not in the nature of business, trade or commerce. Learned

counsel reiterates that trigger for invoking proviso to Section 2(15) can only be

activity of the assessee and not of anyone other than the assessee. He then

reemphasizes that all the activities of the assessee cricket associations are for

promotion of cricket and not for any trade, commerce or business and not even

organizing the matches with commercial considerations as is the case of the revenue

authorities.

15.

Learned counsel the touches a different chord. He submits that the

expression “education”, in the context of section 2(15), is required to be interpreted

in a broader sense rather than confining it to the formal education in pure arts and

humanities or science and commerce in schools and colleges. He submits that we are

living in a world in which the connotations of “education” extend to the skills that

can earn livelihood, and rightly so, since keeping the education confined to

traditional subjects will be contrary to the values of the contemporary society. It is

submitted that cricket, as a career, has more potential than perhaps any other

traditional subject or even any other field of art, and, therefore, education in cricket

cannot be relegated to insignificance by not treating it as education at all. He

submits that physical education is also education, and cricket is a part of physical

education. Learned counsel than takes us through the judgment of Hon’ble

jurisdictional High Court in the case of Gujarat State Cooperative Union Vs CIT

[(1992) 195 ITR 279 (Guj)], wherein elaborating upon Hon’ble Supreme Court’s

observations in the case of Lok Shiksha Trust Vs CIT [(1975) 101 ITR 234 (SC)],

Their Lordships have given much wider a meaning to the connotations of

“education”, and observed that education “surely would encompass systematic

dissemination of knowledge and training in specialized subjects” and that “it is not

necessary to nail down the concept of education to a particular formula or to flow it

only through a defined channel; its progress lies in the acceptance of new ideas and

development of appropriate means to reach them to the recipients”. Learned counsel

then invites our attention to the judgment of Hon’ble jurisdictional High Court’s

judgment in the case of DIT Vs Ahmedabad Management Association [(2014) 366

ITR 85 (Guj)], on the same lines, wherein it is held that conducting continuing

education diploma and certificate program, management development program,

public talk, seminars and conferences etc are educational activities. It is thus

contended that development of cricket is an educational activity, and, as it is an

educational activity, proviso to Section 2(15) has no application in the matter. The

whole case of the revenue authorities is thus ill conceived.

16.

It is then contended that whether or not cricket associations can be allowed

the benefits of Section 11, and whether section 2(15) will come into play in respect

of the same, is no longer res integra. There are large number of decisions of the

coordinate benches, as also from certain non-jurisdictional High Courts as well.

Learned counsel refers to the judgment of Hon’ble Madras High Court in the case of

Tamil Nadu Cricket Association vs. Director of Income Tax (Exemptions) [2014]

360 ITR 633 (Mad), decision of ITAT Chennai Bench ‘A’ in the case of Tamil

Nadu Cricket Association vs. Dy. Director of Income Tax (Exemptions) [2015] 42

ITR (T) 546 (Chennai-Trib.), judgement of Hon’ble Rajasthan High Court in the

case of Commissioner of Income Tax (Exemptions) vs. Rajasthan Cricket

Association [2018] 98 taxmann.com 425 (Rajasthan), order of ITAT Jaipur Bench in

the case of Rajasthan Cricket Association vs. Addl. Commissioner of Income Tax,

Range-2(3), Jaipur – [2017] 79 taxmann.com 464 (Jaipur) [2017] 164 ITD 212

(Jaipur.), order of ITAT Pune Bench ‘A’ in the case of Maharashtra Cricket

Association vs. Commissioner of Income Tax-1, Pune [2015] 152 ITD 1 (Pune -

Trib.), order of ITAT Rajkot Bench in the case of Saurashtra Cricket Association vs.

Commissioner of Income Tax, Rajkot [2014] 148 ITD 58 (Rjt) order of ITAT Delhi

Bench ‘A’ in the case of Deputy Director of Income Tax vs. All India Football

Federation [2015] 62 taxmann.com 362 (Delhi - Trib.) [2015] 43 ITR(T) 656 (Del),

and order of ITAT Mumbai Bench ‘SMC’ in the case of Dahisar Sports Foundation

vs. Income Tax Officer (Exemptions)-(1), Mumbai [2017] 167 ITD 710 (Mum). The

common thread in all these decisions, according to the learned counsel, is that

despite the fact that a case was made out in all these cases for denial of exemption

under section 2(15) by invoking the proviso to the said sub section and by alleging

that the activity of the assessee cricket associations was in the nature of trade,

commerce or business, these cricket associations have been held to be eligible for

exemption under section 11 and that proviso to Section 2(15) has been held to be not

applicable on the facts of these cases. He suggests that the activities of these cricket

associations are no different than these cricket associations which have been

successful in their claims for exemption under section 11. We are thus urged to

uphold the plea of the assessee, to hold that the proviso to Section 2(15) was not

applicable on the facts of these cases.

17.

Learned counsel then refers to and relies upon the judgments of Hon’ble

jurisdictional High Court in the cases of Ahmedabad Urban Development Authority

Vs ACIT [(2017) 396 ITR 323 (Guj)] and CIT Vs Gujarat Industrial Development

Corporation [(2017) 83 taxmann.com 366 (Guj)] in support of the proposition that

when activities of the assessee are not in the nature of trade, commerce or business,

proviso to Section 2(15) cannot be invoked. Our attention was also invited to

Hon’ble Punjab & Haryana High Court’s judgment in the case of Tribune Trist Vs

CIT [(2017) 390 ITR 547 (Guj)] on the same lines and wherein a series of decisions

by the coordinate benches of this Tribunal, holding that section 2(15) cannot be

invoked in the cases of city improvement trusts even though there is a sale of

developed plots and such other activities by these trusts. It is contended that just

because the sale is on the basis of ground realities and is not subsidized it cannot be

said that the assessee is in business, trade or commerce. Learned counsel further

submits that merely because a surplus is generated by the assessee, the fact of

generating surplus would not convert a charitable activity into a non-charitable

activity. In support of this proposition, learned counsel relied upon Hon’ble

jurisdictional High Court’s judgment in the case of DIT Vs Sabarmati Gaushala

Trust [(2014) 362 ITR 539 (Guj)].

18.

Learned counsel then refers to the judicial precedents relied upon, by the

authorities below, to support the case of the revenue authorities. As regards the

coordinate bench in the case of Jalandhar Development Authority - 124 TTJ 598

(Amritsar) and Improvement Trust vs. CIT [2013] 30 taxmann.com 58 (Amritsar)]

he submits that these decision stand reversed by the Hon’ble P&H High Court in the

case of Tribune (supra). As regards the decision of coordinate bench in the case of

Tamilnadu Cricket Association Vs DIT [2013] 32 taxcmann.com 50 (Chennai),

learned counsel submits that this decision was also reversed by the respective High

Court i.e. Hon’ble Madras High Court in the case of Tamilnadu Cricket Association

Vs CIT [(2014) 360 ITR 633 (Mad)]. Learned counsel submits that the decision of

Madras Sports Club Vs DIT [(2013) 30 taxmann.com 130 (Chennai)] is not

applicable to the facts of this case as the dispute in that case was confined to the

quantum of receipts for the purpose of Section 2(45) rather than application of

Section 2(15). On the Entertainment Society of Goa vs. CIT [2013] 34 taxmann.com

210 (Panaji), learned counsel points out that this decision has been distinguished by

another coordinate bench decision in the case of Rajasthan Cricket Association

(supra). Similarly, as regards Punjab Seed Certification Authority Vs CIT [(2013) 37

taxmann.com 81 (Chandigarh)], our attention was invited to the fact that this judicial

precedent is distinguished by Hon’ble Delhi High Court in the case of Bureau of

Indian Standards Vs DGIT [(2013) 358 ITR 78 (Del)]. On the strength of these

submissions, learned counsel contended that the judicial precedents cited by the

authorities below are of not of any support to the revenue’s case.

19.

Shri Mehul Patel, learned counsel appearing for Gujarat Cricket Association,

graciously adopts the arguments advanced by Shri Soparkar, and says there can be

little to add to these comprehensive arguments. He, nevertheless, reiterates those

points. He submits that as per the objects of assessee institution, it is engaged in (i)

providing infrastructure for the game of cricket; (ii) education for cricketers for

learning intricacies of game of cricket by playing matches and running a coaching

academy for teaching the finer aspects of the game to the budding cricketers.

Learned counsel highlights the fact that appellant carries out various activities for

the sole purpose of development of the game of cricket in Gujarat. Its activities

span the entire year in the conduct of cricket promotion related activities. It is

pointed out that the appellant employed various coaches, doctors, physio trainers,

pitch curators, renowned players and umpires for the purposes of imparting

knowledge and skills to budding players, and that these coaches/ trainers are paid

fees for imparting the practical aspects of the game. It is also pointed out that the

assessee conducts various classes for audio visual teaching, mental toughness, yoga,

motivation, fitness etc. There are various object clauses in the memorandum of

association of the appellant which demonstrate that the appellant was engaged in

educational activities. The appellant also conducts various matches like under 23,

under 19, under 16, under 14, women cricket etc which are at own cost and free for

viewers and no tickets are sold for the same. The assessee also supports and bears

the expenses of 8 districts across the State of Gujarat and similar Academy is run by

all the Districts. In the present case, the appellant is engaged in the development of

the game of cricket. It is submitted that his game is not merely a pleasure game

today and that the ever growing popularity of cricket in India has changed the

scenario completely. Cricket is now being pursued as a ‘career’. This is evidenced

through the increasing the number of cricket coaching institutes and summer camps

which are seen every nook and corner of the country. This being the case, it is a

form of education given to those individuals who wish pursue this game as their

‘profession’ or ‘career’. It is in this context that the learned counsel seeks to rely on

Hon’ble jurisdictional High Court’s judgment in the case of Gujarat State Co-

operative Union v. CIT (1992) 195 ITR 279 (GUJ) the Jurisdictional High Court has

held, inter alia, that “the changing time and the ever widening horizons of

knowledge may bring in changes in the methodology of teaching and a shift for the

better in the institutional setup. Advancement of knowledge bring within its fold

suitable methods of its dissemination and though the primary method of sitting in a

class-room may remain ideal for most of the initial education, it may become

necessary to have a different outlook for further education. It is not necessary to nail

down the concept of education to a particular formula or to flow it only through a

defined channel. Its progress lies in acceptance of new ideas and development of

appropriate means to reach them to the recipients.” A reference is then made to

Hon’ble jurisdictional High Court decision in the case of Director of Income Tax

(Exemptions) v. Ahmedabad Management Association 366 ITR 85(Guj) wherein

Their Lordships have referred to the Supreme Court decision in the case of Sole

Trustee Lok Shikshan Trust (supra) and have held that ‘Education’ under section

2(15) does not have a restricted meaning whereby only normal schooling i.e.

‘scholastic’ education is covered. It has been held that section 2(15) covers

education which is provided in non-scholastic manner also. A reference is then made

to Hon’ble Delhi High Court in the case of Delhi Music Society 357 ITR 265(Delhi)

wherein it is said to have been held that teaching and promoting all forms of music

and dance, western, Indian, and any other according to the objects of the Trust is

also imparting of Education. On the strength of these arguments, it is contended that

the assessee is engaged in imparting of Education and hence, the amended proviso to

section 2(15) wef 1.4.2009 is not applicable to the assessee, and exemption u/s 11 of

the Act may kindly be allowed.

20.

Learned counsel then submits, without prejudice to his basic stand that as

promoting cricket is an educational activity, proviso to Section 2(15) cannot be

invoked at all, it is engaged in the activity that is to be treated as “advancement of

objects of general public utility”. The appellant is covered within the last limb of

the definition of charitable purpose under section 2(15) which include advancement

of any other object of general public utility. Though promotion of games like

cricket may not be advantageous to the entire mankind, the promotion of cricket is

advantageous to a section of the society which plays, follows and enjoys it. This has

been statutorily acknowledged by Circular No.395 dated 24.9.1984 issued by the

Central Board of Direct Taxes. It is contended that this aspect is not disputed by the

Assessing Officer who has concurred that the appellant is covered within the last

limb of the definition in section 2(15) and that the dispute is confined to the question

whether the appellant is covered within the gamut of first proviso to section 2(15)

which reads as “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”. Learned counsel contends that the aforesaid proviso was

inserted by Finance Act 2008. The proviso aims to reduce the scope of section 2(15)

by narrowing down the objects falling thereunder, It seeks to provide that the

objects for advancement of general public utility involving commercial activity will

not be charitable any longer. The proviso is therefore restricted only to the fourth

limb of section 2(15). The first three limbs are unaffected by the proviso. This has

been clarified by the CBDT circular No. 11 of 2008 dated 19.12.2009; the relevant

portion of which reads as under:

“2.1 The newly inserted proviso to section 2(15) will not apply in respect of

the first three limbs of section 2(15) i.e. relief of the poor, education or

medical relief. Consequently, where the purpose of a trust or institution is

relief of the poor, education or medical relief, it will constitute charitable

purpose, even if it incidentally involves the carrying on of commercial

activities.”

21.

It is submitted that the appellant is involved in cricket coaching and

promotion which is a form of ‘education’ and thereby qualifying itself as a

‘charitable institution’ under section 2(15). Since the appellant is carrying on an

‘educational’ activity, according to the learned counsel, the proviso to section 2(15)

is not applicable.

22.

Learned counsel adds that, assuming without admitting that the appellant is

not involved in carrying out educational activities but is involved in advancement of

any other object of general public utility, the submissions are made with regard to

applicability of the aforesaid proviso in the present case are as follows:

In the assessment order, it is concluded that the appellant is not a charitable

organisation as per the definition of ‘charitable purpose’ under section 2(15)

read with provisos thereunder. The learned officer arrived at this conclusion

based on the following grounds:

a) During the year under consideration, the appellant received

substantial Match income (which includes sale of space, ticket sale etc). The

appellant is thus concluded to be engaged in the business of entertainment of

public at large by arranging national and international tournaments.

b) The decisions relied upon by the assessee to substantiate that activity

of conducting cricket matches is not a business activity was distinguished on

facts.

c) Reliance has been placed on the Calcutta High Court decision in the

case of Cricket Association of Bengal v CIT (1959) 37 ITR 277 (Cal)

Role of the appellant

In this regard, the appellant wishes to submit that the impugned ‘Match

income’ arises from international matches and matches allotted under Indian

Premier League (“IPL”). The appellant has no role to play in fixing the

match, much less the players, the opponent country, dates of match, umpires

and other related logistics. All these are within the control of Board of

Control for Cricket in India (“BCCI”). The appellant is an affiliate of BCCI

which is the national governing body for cricket in India. It is one of the

organizations which may get the privilege of hosting a cricket test or one day

internationals. The international matches are allotted to the appellant by the

BCCI at its discretion. The petitioner has no inherent right to demand the

allotment of such matches to be conducted by it. IPL matches are not

conducted by the petitioner. IPL matches are organized and conducted by the

franchisees and appellant only gets rent for providing the ground. The

Appellant which is affiliated to the BCCI has to make available the stadium at

the instance of BCCI and it has no decision making authority as to the

schedule / conduct of these matches.

The frequency of the matches is very low. Except for International Matches,

in case of all other matches there are no fees or charges collected from the

spectators.

Apart from the International matches, the appellant has conducted many

matches at state level. No fees have been charged in such matches.

The main object of the appellant is to promote and develop the game of

cricket in the State of Gujarat. None of the objects of the appellant are

commercial or in the nature of business or trade and all the activities are

undertaken with a sole view to promote cricket and not to carry on any

activity in the nature of trade, commerce or business.

Meaning of profit generating activity

The learned officer observed that the appellant is engaged in ‘profit

generating activity’ and therefore ineligible to be termed as ‘charitable

organisation’ The object of general public utility to be regarded as

‘charitable’ in nature was not to involve the carrying on of any activity of

profit. In other words, profit making is a precondition to deny exemption to

the concerned entity. The Supreme Court in the case of Surat Art Silks

Organisation v CIT (1980) 121 ITR 1 (SC) held that a charitable organisation

cannot be expected to balance its account in such a manner that the income

for the year matches exactly with the expenditure. Incidental generation of

any surplus in the course of one’s activity without an intention to make profit,

will not make the activity a business. One may refer to the decision of the

Supreme Court in Sole Trustee, Loka Shikshana Trust v. CIT, [1975] 101 ITR

234 (SC) in this regard. “If the profits must necessarily feed a charitable

purpose, under the terms of the trust, the mere fact that the activities of the

trust yield profit will not alter the charitable character of the trust. The test

now is, more clearly than in the past, the genuineness of the purpose tested by

the obligation created to spend the money exclusively or essentially on

"charity". If that obligation is there, the income becomes entitled to

exemption. That, in our opinion, is the most reliable test.”

The Supreme Court has held that the acid test is whether, on an overall

view of the matter, the object is to make profit. The Court held that if after

meeting the expenditure, if any surplus results incidentally from the activity

lawfully carried on by the educational institution, it will not cease to be one

existing solely for educational purposes, since the object is not one to make

profit. [Aditanar Educational Institution v. Addl CIT [1997] 224 ITR 310

(SC)].

It is inevitable that in carrying on the activities, certain surplus may

ensue. The earning of surplus itself would not mean that the appellant existed

for profit. ‘Profits’ means that surplus over which the owners of the entity

have a right to withdraw for any purpose including the personal purpose.

Profit making would therefore means private profit. Profit making would not

mean the surplus that results from certain activities for which the

organisation is devoted is ploughed back for the promotion of the very same

activities.

In the present case, the appellant has conducted only few matches

which have yielded a surplus. It has also conducted many other matches

where it has incurred a huge loss. The appellant has not been formed and is

not carrying on activities with profit motive. There is no intention to make

profits. The objects of appellant are to promote the game of cricket in

Gujarat. The surplus, if any, arising from the activities are solely utilized for

the achievement of its objects and no portion is utilized for distribution of any

income or profits. The activities of appellant are therefore charitable in

nature. Further, for the reasons given above, the requirements of proviso to

section 2(15) would also not be satisfied. Accordingly, the contention of the

assessing officer that the appellant is ineligible for exemption due to its profit

making activity is bad in law and is not tenable.

Being an assessee which has always been held to be charitable cannot

be jettisoned on certain interpretation and inferences. The objective of the

association, conduct and documentation sufficiently spell out that the

appellant is a charitable organisation striving towards welfare and promotion

of the game of cricket.

We draw Your Honour’s kind attention to the recent Gujarat High

Court decision in the case of Director of Income Tax (Exemption) Vs.

Sabarmati Ashram Gaushala Trust (2014) 362 ITR 539 (Guj). We reproduce

here below the relevant paragraphs from the said decision:

“6. The legal controversy in the present Tax Appeal centers around the first

proviso. In the plain terms, the proviso provides for exclusion from the main

object of the definition of the term "Charitable purposes" and applies only to

cases of advancement of any other object of general public utility. If the

conditions provided under the proviso are satisfied, any entity, even if

involved in advancement of any other object of general public utility by virtue

to proviso, would be excluded from the definition of "charitable trust".

However, for the application of the proviso, what is necessary is that the

entity should be involved in carrying on activities in the nature of trade,

commerce or business, or any activity of rendering services in relation to any

trade, commerce or business, for a cess or fee or any other consideration. In

such a situation, the nature, use or application, or retention of income from

such activities would not be relevant. Under the circumstances, the important

elements of application of proviso are that the entity should be involved in

carrying on the activities of any trade, commerce or business or any activities

of rendering service in relation to any trade, commerce or business, for a cess

or fee or any other consideration. Such statutory amendment was explained

by the Finance Minister's speech in the Parliament. Relevant portion of which

reads as under:-

"I once again assure the House that genuine charitable organizations will not

in any way be affected. The CBDT will, following the usual practice, issue an

explanatory circular containing guidelines for determining whether any entity

is carrying on 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. Whether the purpose is a charitable purpose will depend on the

totality of the facts of the case. Ordinarily, Chambers of Commerce and

similar organizations rendering services to their members would not be

affected by the amendment and their activities would continue to be regarded

as "advancement of any other object of general public utility".

In view of the above it be held that the assessee is not engaged in any trade,

commerce or business.

23.

Learned counsel then refers to the judicial precedents in favour of the

assessee, by which the issue in appeal is said to be squarely covered, which are

exactly the same as pointed out by Shri Soparkar. His defence on the judicial

precedents relied upon by the authorities below is also materially similar to that by

Shri Soparkar. Therefore, for the sake of brevity, we see no need to again reproduce

these arguments. On the strength of these submissions, we are once again urged to

uphold the plea of the assessee.

24.

Shri Tushar Hemani, learned counsel for Saurashtra Cricket Association, also

adopts the arguments advanced by his learned predecessors and submits that in his

case, CIT(A) has simply followed his decision in the case of Gujarat Cricket

Association. Whatever, therefore, is decided in the case of Gujarat Cricket

Association must mutatis mutandis follow in this case as well. Learned counsel

submits that the arguments put forward by his predecessors hardly leave any area

uncovered, and that he has little to add. Having said that learned counsel adds that

there is no commercial activity which is pursued by the association and yet all that

has been put against the assessee is that the assessee is carrying on business, trade

and commerce in the name of promoting cricket. Learned counsel submits that

cricket is a game of masses in this country and the number of people following

cricket is so high that anything doing with cricket will result in mass public

involvement of huge magnitude. This popularity cannot be put against the cause of

cricket promotion. Learned counsel submits that imparting training in sports is

nothing but education activity and therefore the assessee would fall in the first limb

of definition of “charitable purpose” as defined u/s.2(15) of the Act and not under

the residual clause of ‘the advancement of any other object of general public utility’.

Learned counsel adds that if that be the situation, proviso to S.2(15) would not apply

at all. Reliance is placed on the decision of Hon’ble Gujarat High Court in the case

of Director of Income-tax (Exemption) v. Ahmedabad Management Association

[2014] 366 ITR 85 (Gujarat)] It is further submitted that since the terms trade,

commerce or business is not defined under the scheme of the Act, general or

dictionary meaning has to be resorted to. In order to determine whether an activity is

in the nature of trade, commerce or business OR charitable, the determining factor is

profit motive. The nature of activities may remain the same. However, if they are

carried out for profit motive, the same are to be characterized as trade, commerce or

business. Conversely, if the profit motive is absent, these very activities become

charitable. Viewed thus, the activities of the assessee cannot be said to be

commercial activities. Learned counsel further submits that it has been observed by

the lower authorities that the Assessee – Trust has arranged one day international

matches of cricket and in turn has received TV subsidy / subvention income i.e

sharing of TV broadcasting right income from BCCI and Advertisement sales

income, and therefore, such activities are in the nature of trade, commerce or

business in view of first proviso to S.2(15). He submits that the entire issue has to

be seen from two limbs of the provisions of S.2(15) of the Act viz.:

(a) whether the promotion of sports and games, cricket in the present case is

charitable or not within the definition as provided u/s 2(15) of the Act and

(b) whether such promotion of sports and games of cricket are carried out

with the profit – motive or not so to be treated as in the nature of trade,

commerce or business or charitable purpose.

25.

It is then pointed out that insofar as the first limb as mentioned in (a) above is

concerned, attention is invited to the Circular No. 395 [F. No. 181(5) 82/IT(A-I)],

dated 24-9-1984, wherein the Board has advised that promotion of sports and games

is considered to be a charitable purpose within the meaning of section 2(15). As for

the second limb i.e first proviso to S.2(15) of the Act as inserted by the Finance Act,

2008 w.e.f 01/04/2009 is concerned, it is submitted that the law is settled by the

larger bench of Supreme Court in the case of ACIT vs. Surat Art Silk Cloth

Manufacturers Association reported in 121 ITR 1 (SC) that (a) the primary or

dominant purpose of the trust or institution has to be examined to determine whether

the said trust / institution is involved in carrying out any activity for the profit and

(b) if the “object” of the trust or institution is to carry out object of general public

utility and this is the primary or dominant purpose and not carrying on any activity

for profit, the same would satisfy the requirements of S.2(15) of the Act. It is further

submitted that (a) first proviso to S.2(15) of the act should not generalized to each

and every facts of the case where there is a surplus over the expenditure in respect of

the activities or objects carried out by the Trust which are in any case of the

charitable purpose, (b) the cardinal principle is the predominant object of the Trust.

If the predominant object of the Trust is of charitable nature and with no-profit

motive, the said activities cannot be treated as trade, commerce or business merely

because some surplus has remained left over the expenditure to carry out such

activities. The essence of trade, commerce or business is profit motive and absence

thereof makes such activities charitable. Learned counsel further points out that

even after insertion of proviso to S.2(15) of the Act w.e.f. 01/04/2009, the following

authorities, after following the law laid down by Apex Court in Surat Art Silk

(supra), have taken a view that if the predominant object of the Trust is of charitable

nature and with no-profit motive, the said activities cannot be treated as trade,

commerce or business merely because some surplus has remained left over the

expenditure to carry out such activities :

(a) CIT v. Gujarat industrial Development Corporation [2017] 83

taxmann.com 366 (Gujarat)

(b) Director of Income-tax (Exemption) v. Ahmedabad Management

Association [2014] 366 ITR 85 (Gujarat)

ITR 539 (Gujarat)

(d) Institute of Chartered Accountants of India vs. DGIT reported in 347

ITR 99 (Delhi)

(e) ACIT vs Delhi & District Cricket Association (ITA No. 361/Del/2016

for AY 2010-11, dated 19/09/2018)

26.

Learned counsel further submits that in the present case, the main object of

the Trust is to promote and encourage the game of cricket in Saurashtra and Kutch

by organizing coaching schemes, tournaments, exhibition matches and other matches

etc. The attention is further invited to the clause 3(j) of MOA which provides “to

organize matches for the achievements of the objects of the Association and utilize

the net proceeds thereof towards the implementation of the object set therein”. It is

submitted that all the receipts arising or accruing to the Assessee-Trust are on

account of the activities carried out to meet the object of the Assessee-Trust i.e. to

promote and encourage the game of cricket in Saurashtra and Kutch by organizing

coaching schemes, tournaments, exhibition matches and other matches etc, and they

are not with the intention to carry out any trade, commerce or business with profit –

motive. Such receipts should be strictly confined to the attainment of the objects of

the Assessee-Trust and with the intention to carry out any trade, commerce or

business.

27.

Learned counsel concludes by submitting that it is well settled that while

adjudicating upon an appeal, where two views are possible, the view in favour of the

assessee should be adopted. In the facts of the present case, there are large numbers

of decisions which are in favour of the assessee and therefore, even if the view

against the assessee is plausible and probable, the view in favour may kindly be

adopted. In support of this proposition, learned counsel for the assessee relies upon a

host of judicial precedents including in the cases of Mysore Minerals Ltd. V CIT 239

ITR 775 (SC), Orissa State Warehousing Corporation v CIT 237 ITR 589 (SC), CIT

v. Podar Cement Pvt. Ltd. and Others. 226 ITR 625 (SC), CIT v Vegetable Products

Ltd. 88 ITR 192 (SC), and CIT v Naga Hills Tea Co. Ltd. 89 ITR 236, 240 (SC). We

are thus urged to follow the division bench decisions in the cases of other cricket

associations and hold that the assessee is not hit by proviso to Section 2(15).

28.

Shri Vaishnav, learned Commissioner- DR, begins by pointing out how the

game of cricket has undergone huge paradigm shift as a sport and as a business. He

points out that the control of cricket is in a few powerful hands and that cricket is

completely monopolized by the Board of Cricket Control in India. It is then

submitted that the BCCI is not a rank outsider for these cricket associations but the

apex bodies of these cricket associations. These cricket associations act in tandem

with the BCCI and the cricket is pursued in as commercial a manner as it can be

pursued. Learned Commissioner refers to auction of players for playing matches and

the format of the matches being improvised as per the requirements of commercial

interests. It is submitted that cricket as it is pursued by the BCCI and its affiliates is

pure entertainment, and these are the dictates of its entertainment value that decides

the form and presentation of cricket. If it is a noble activity of education in a

gentleman’s sport, where is the need of auctioning of the players. The commerce is

glaring in each facet of cricket today. He also submits that even imparting cricket

coaching is a big business rather than a selfless education. As regards parity with the

Improvement Trusts and Ahmedabad Urban Development Authority, learned

Commissioner points out that these bodies are creatures of law for noble purposes.

That’s is quite unlike the pure entertainment generation by the activities of these

associations and the BCCI. What is being pursued by these associations, according

to the learned Commissioner, is pure commercial exploitation of cricket and that is

the reason that the profits of these associations needs to be brought to tax. The

financial relationship between the assessees and the BCCI cannot be without quid

pro quo between the BCCI and these cricket associations, or else why would anyone

share such huge amounts with cricket associations. BCCI organizes the events on

pure commercial lines, makes huge monies on organizing these events, and share the

monies with the local cricket associations. What the associations get is on account of

fruits of the commercial operations, and that precisely is the reason these monies

should be brought to tax. Learned Commissioner then takes us through the

legislative amendments to Section 2(15) and links the same to how the sports have

been exploited commercially in the last few decades. He submits that it is an

admitted position that the cricket associations were all along treated as involved in “advancement of an object of general public utility” and, effective 1st April 2009,

the proviso to Section 2(15) came in force which made it clear that if the activities

of such institutions is in the nature of trade, commerce or business or rendition of

services, for a cess, fee or any other consideration, to the business entities. The

principle, according to the learned Departmental Representatives, is clear. When you

are here to make money from such activities on commercial lines, in the garb of

pursuing advancement of an object of general public utility, you may as well pay tax

on the earnings from such activities. There is no dispute that the cricket is now

biggest source of making money and, therefore, the income of the entities organizing

cricket events should also be taxed. Learned Departmental Representative then takes

us through the orders of the authorities below, and places his vehement reliance on

the same. Learned Commissioner then submits that one has to bear in mind the

difference between the main activity and the auxiliary activity. He submits that

investing hundreds of crores of rupees in cricket stadiums cannot be to teach cricket;

it can only be to build infrastructure for reaping commercial profits out of exhibiting

cricket matches, and, if that be so, the cricket education is not the predominant or

core activity of the assessee. We cannot be so naïve, according to the learned

Commissioner, to be oblivious of these ground realities. We are thus urged to hold

that the appellants before us are engaged in commercial activities and that they are

not entitled to be treated as charitable institutions under section 2(15).

29.

In a brief rejoinder, the common points made by the learned counsel for the

assessee were that the activities of the BCCI cannot be subject matter of debate of

this forum nor any conclusions can be drawn in respect of the same without even

hearing the BCCI. In any case, even if it is assumed that BCCI is engaged in

commercial activities, that would impact on taxability in the hands of the BCCI and

not in the hands of the local cricket associations. It is submitted that these state

cricket associations and the BCCI are distinct taxable units and must be treated as

such, as there is no provision in the law that a member body can be held liable for

taxation on account of activities of the apex body. Quite to the contrary, according

to the learned counsel, in case BCCI is held to be involved in carrying out

commercial activities, which is what the case of the revenue authorities is, the

profits are taxable in the hands of the BCCI and the disbursements of these profits to

the cricket associations, as is alleged during the arguments, cannot be taxed again in

the hands of the cricket associations. It is again urged that the trigger for denial of

Section 2(15) benefit, or for the proviso to Section 2 (15) being invoked, is activity

of the assessee and not an outsider. Learned counsel once again takes us through

Hon’ble Supreme Court judgment in the case of Surat Art (supra). Finally, it is

submitted that since there are large number of division bench decisions in the cases

of other similarly placed cricket associations, in favour of the assessee, even if this

bench is not inclined to be guided by these decisions, these appeals can at best be

referred to a larger bench. A large number of judicial precedents are cited in support

of this proposition as well. We are thus once again urged to uphold the plea of the

assessee to the effect that proviso to Section 2(15) cannot be invoked on the facts of

this case.

30.

We have conscientiously heard the rival contentions, carefully perused the

material on record and duly considered the applicable legal position.

Our analysis:

31.

As we proceed to deal with the impact of insertion of proviso to Section

2(15), we consider it appropriate to look at a coordinate bench decision, in the case

of Hoshiarpur Improvement Trust Vs ACIT [(2015) 155 ITD 570 (Asr)],

wherein, speaking through one of us (i.e. the Vice President), the coordinate bench

has, inter alia, observed as follows:

14.

Before we address ourselves to the facts of this case, let us analyse the

relevant legal provisions. Section 2 (15), which defines ‘charitable purposes’

though in an inclusive rather than an exhaustive manner, had a rather quiet

existence, unaffected by the frequent amendments to the Income Tax Act 1961,

till 1st April 1984. Vide Finance Act, 2013, and with effect from 1st April

1984, the words ‘not involving the carrying on any activity for profit’ were

deleted from Section 2(15), and, with this amendment, this definition was as

follows:

"Charitable purpose" includes relief of the poor, education, medical

relief, and the advancement of any other object of general public

utility:

15.

Vide Finance Act, 2008, the words “preservation of environment

(including watersheds, forests and wildlife) and preservation of monuments or

places or objects of artistic or historic interest)”, were added and, on a more

relevant note, a new proviso (i.e. fist proviso) was added to this provision,

carving out an exception in the cases of ‘advancement of any other object of

general utility’, and, by the immediately following Finance Act 2009, there

was yet another proviso (i.e. second proviso) introduced to carve out an

exception from the exception itself. In essence, the effect of these provisos

was that even when an assessee was pursuing ‘a charitable purpose’ in the

event of advancement of any other object of public utility’ it would cease to

be for charitable purposes if it involves (a) carrying on an activity in the

nature of trade, commerce or business; or (b) rendering any service in

relation to any trade, commerce or business, for a cess or fee or any other

consideration, irrespective of nature of use or application or retention of the

income from such activity. However, these provisions are not to apply when

the activities are such a modest scale that the value of receipts in respect of

the same are less than Rs 25 lakhs. These two provisos, as they stand now,

are as follows:

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 apply if the aggregate

value of the receipts from the activities referred to therein is twenty

five lakh rupees or less in the previous year.’

16.

Explaining the scope of these provisions, a coordinate bench of this

Tribunal, in the case of Himachal Pradesh Environment Protection and

Pollution Control Board Vs CIT [(2010) 9 ITR Trib 204 (Chandigarh)], has

observed as follows:

13.

It is also important to bear in mind that the insertion of proviso

to s. 2(15) does not mean that in case an assessee is to receive any

payment for anything done for trade, commerce or business, the

assessee will be hit by the said proviso. It may be recalled that

elaborating the scope of this amendment, CBDT, vide Circular No. 11,

dt. 19th Dec., 2008 [(2009) 221 CTR (St) 1], has observed as follows:

"3. The newly amended s. 2(15) will apply only to the entities

whose purpose is ‘advancement of any other object of general

public utility’ i.e., the fourth limb of definition of ‘charitable

purpose’ contained in s. 2(15). Hence, such entities will not be

eligible for exemption under s. 11 or under s. 10(23C) of the

Act, if they carry on commercial activities. Whether such an

entity is carrying on an activity in the nature of trade,

commerce or business is a question of fact which will be decided

based on the nature, scope, extent and frequency of activity.

3.1 There are industry and trade associations who claim

exemption from tax under s. 11 or on the ground that their

objects are for charitable purposes as these are covered under

the ‘any other object of public utility’. Under the principle of

mutuality, if trading takes place between the persons who are

associated together and contribute to a common fund for the

financing of some venture or object, and in this respect have no

dealings or relations with any outside body, then the surplus

returned to such persons is not chargeable to tax. Therefore,

where industry or trade associations claim both to be charitable

institutions as well as mutual members, these would not fall

under the purview of s. 2(15) owing to the principle of

mutuality. However, if such organizations have dealings with

the non-members, their claim for charitable institution would

now be governed by the additional conditions stipulated in

proviso to s. 2(15).

3.2 In the final analysis, whether the assessee has for its object

‘the advancement of any other object of general public utility’ is

a question of fact. If such assessee is engaged in any activity in

the nature of trade, commerce or business or renders any

service in connection to trade, commerce or business, it would

not be entitled to claim that its object is for charitable purposes.

In such a case, the object of ‘general public utility’ will only be

a mask or a device to hide the true purpose which is trade,

commerce, or business or rendering of any service in relation to

trade, commerce or business. Each case would, therefore, have

to be decided on its own facts, and generalizations are not

possible. An assessee who claims that their object is ‘charitable

purpose’ within the meaning of s. 2(15) would be well advised

to eschew any activity which is in the nature of trade, commerce

or business or rendering of any service in relation to any trade,

commerce or business.

14.

As the above CBDT circular, which is binding on the CIT under

s. 119(1)(a) of the Act, aptly puts it, whether the assessee has, as its

object, advancement of any other object of general public utility is

essentially a question of to be decided on the facts of the assessee’s

own case and where object of general public activity is only a mask or

device to hide the true purpose of trade, business or commerce, or

rendering of any service in relation thereto, the assessee cannot be

said to be engaged in a charitable activity within meanings of s. 2(15)

of the Act. As a corollary to this approach adopted by tax

administration, in our considered view, it cannot be open to learned

CIT to contend that where an object of general public utility is not

merely a mask to hide true purpose or rendering of any service in

relation thereto, and where such services are being rendered as purely

incidental to or as subservient to the main objective of ‘general public

utility’, the carrying on of bona fide activities in furtherance of such

objectives of ‘general public utility’ will also be hit by the proviso to s.

2(15).

15.

As CBDT rightly puts it, sweeping ‘generalizations are not

possible’ and ‘each case will have to decided on its facts’. The

question then arises whether on the present set of facts it can be said

that the assessee was engaged in trade, commerce or business or in

rendering of a service to trade, commerce or business.

17.

Therefore, as the legal position stands as on now, even after the

insertion of the above two provisos, as long as the object of general public

utility is not merely a mask to hide true purpose or rendering of any service

in relation thereto, and where such services are being rendered as purely

incidental to or as subservient to the main objective of ‘general public

utility’, the carrying on of bonafide activities in furtherance of such

objectives of ‘general public utility’ cannot be hit by the proviso to s. 2(15).

By the Finance Act 2015, these two provisos also stand substituted, with

effect from 1st April 2016, a new proviso to Section 2(15). This new proviso is

as follows:

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, unless—

(i) such activity is undertaken in the course of actual

carrying out of such advancement of any other object of general

public utility; and

(ii) the aggregate receipts from such activity or activities

during the previous year, do not exceed twenty per cent. of the

total receipts, of the trust or institution undertaking such

activity or activities, of that previous year

18.

It may be noted that while the earlier proviso simply stated that

exclusion from ‘charitable purposes’ will come into play “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”, the requirement of exclusion clause extends even to situations “in

which such activity is undertaken in the course of actual carrying out of such

advancement of any other object of general public utility”. In other words,

the exclusion clause, by proviso to Section 2 (15), was earlier triggered by

“involvement in any activity in the nature of trade, commerce or business

etc” but, post Finance Act 2015 amendment, it will be triggered even if “such

an activity in the nature of trade, commerce or business etc is undertaken in

the course of carrying out such advancement of any other object of general

public utility”.

19.

This substitution of proviso to Section 2(15), in our considered view,

may be viewed as representing a paradigm shift in the scope of the exclusion

clause.

20.

The paradigm shift is this. So far as the scope of earlier provisos is

concerned, the CBDT itself has, dealing with an assessee pursing “the

advancement of any object of general pubic utility”, observed that “If such

assessee is engaged in any activity in the nature of trade, commerce or

business or renders any service in connection to trade, commerce or business,

it would not be entitled to claim that its object is for charitable purposes”

because “In such a case, the object of ‘general public utility’ will only be a

mask or a device to hide the true purpose which is trade, commerce, or

business or rendering of any service in relation to trade, commerce or

business.” The advancement of any objects of general public utility and

engagement in trade, commerce and business etc. were thus seen as mutually

exclusive in the sense that either the assessee was pursuing the objects of

general public utility or pursuing trade, commerce or business etc. in the

garb of pursing the objects of general public utility. As the CBDT circular

itself demonstrates, there could not have been any situation in which the

assessee was pursing the objects of general public utility as also engaged in

trade, commerce of business etc. In the new proviso, however, even when the

assessee is engaged in the activities in the nature of trade, commerce or

business etc. and “such activity is undertaken in the course of actual carrying

out of such advancement of any other object of general public utility” it is

excluded from the scope of charitable purposes only when “the aggregate

receipts from such activity or activities during the previous year, do not

exceed twenty per cent of the total receipts, of the trust or institution

undertaking such activity or activities, of that previous year”. In other words,

even when the activities are in the course of advancement of any other object

of general public utility, but in the nature of trade, commerce or business etc,

the proviso seeks to exclude it only when the threshold level of activity is not

satisfied. Whether such a statutory provision stands the legal scrutiny or not

is another aspect of the matter, and that is none of our concern at present

anyway, it is beyond doubt that the new proviso, with effect from 1st April

2016, seeks to exclude, from the scope of section 2(15), the situations in

which even in the course of pursuing advancement of any objects of general

public utility when any activities in the nature of trade, commerce or business

etc “is undertaken in the course of actual carrying out of such advancement

of any other object of general public utility”, unless, of course, the activity

level remains within the threshold limit i.e. receipts from such activities are

less than twenty percent of total receipts of that year.

21.

As the above provisions, which, in our humble understanding, seeks to

restrict the scope of Section 2(15) is effective from the assessment year 2016-

17, in our considered view, these provisions are only prospective in effect. As

a corollary to this legal position, in our considered view, even if the activities

in the nature of trade, commerce or business etc are undertaken in the course

of actual carrying out of advancement of any object of general public utility,

till the end of the previous year relevant to the assessment year 2016-17, the

activities will continue to be covered by the scope of Section 2 (15).

…………………

32.

The views so expressed by the coordinate bench were approved by Hon’ble

Punjab & Haryana High Court in the case of CIT (Exemptions) Vs Improvement

Trust Monga [ITA No. 147 of 2016; reported as Tribune Trust Vs CIT (2017) 390

ITR 547 (P&H] wherein Their Lordships have, inter alia, observed as follows:

…………The Tribunal by the impugned order held that the stand of the

authorities was unsustainable as even assuming that all the allegations of the

Assessing Officer with respect to the profit motive in the activities of the

assessee are correct, the same were carried out with the larger and

predominant objective of general public utility. Relying upon the CBDT

circular the Tribunal observed that it is only when the Assessing Officer finds

that "the income is from any other business which is not incidental to the

attainment of the objectives of the trust or institution", that such an income

will "not be exempt from tax". The Tribunal noted that there is no finding to

that effect by any of the authorities and that it is not even the case of the

revenue that the activities of the trusts do not serve the objects of the general

public utility. The Tribunal held that the activities of the trust fall within the

category "objects of general public utility". It was also held that separate

books of account for the business activities were maintained. This was not

challenged before us. It is not necessary in these appeals to decide the effect

of the amendment to Section 2(15) introduced with effect from 01.04.2016.

The Tribunal then dealt with the main contention of the revenue that the

assessee was involved in the activities of developing and selling the

residential and commercial units with the sole aim of making profits. The

conclusions of the Tribunal in this regard are as follows; the profit on sale

does not necessarily imply profit motive in the activities of the assessee. What

is important is the motive or the predominant object of the activities. The bids

are invited by the assessee who allots the plots to the highest bidders. This,

however, is because it is not desirable for the State to subsidise its

businesses. A bidding process ensures transparency in the functioning of the

trusts and therefore, it does not make the bidding process a commercial

venture. Further the bids are invited only in the context of commercial units.

Under the Rules there is a formula on the basis of which the price is worked

out. The revenue did not deny the same but alleged that the profit motive is

embedded in this formula as shown by the adjustments for various charges.

72.

The Tribunal rightly rejected the contention that to fall within the ambit

of the words "advancement of any other object of general public utility" the

trust must necessarily be involved only in implementing poverty alleviation

programs or doing other acts of charity. It is sufficient if it does precisely

what the last category in Section 2(15) states namely being involved in

activities for the advancement of an object of general public utility. They

include a proper systematic development of certain areas. These activities are

by virtue of the PTI Act undertaken by this assessee.

73.

The Tribunal also rightly held that an object of general public utility does

not necessarily require the activities to be funded or subsidized by the State.

So long as the objects fall within the ambit of the words "object of general

public utility", it is sufficient. The achievements of those objects do not have

to be as a result of State funding or State subsidy. The Tribunal accordingly

rightly held that the authorities were not justified in denying the benefit of

section 11 and holding that the assessee was not covered by the words

"advancement of any other object of general public utility" in Section 2(15).

The Tribunal, therefore, rightly directed the Assessing Officer to delete

disallowance of exemption.

33.

On a similar and detailed note, our jurisdictional High Court, in the case of

Sabarmati Gaushala Trust (supra), has observed as follows:

Term "Charitable Trust" is defined in Section 2 (15) of the Act which includes the

relief to the poor, education, medical relief, preservation of environment; including

watersheds, forests and wildlife and preservation of monuments or places or

objections of artistic or historic interest and advancement of any other object of

general public utility. Proviso to Section 2 (15) and further proviso whereof inserted

by Finance Act 2010 w.e.f 1st April 2009 read, thus —

"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 apply if the aggregate value of

the receipts from the activities referred to therein is twenty five lakh rupees or

less in the previous year."

The legal controversy in the present Tax Appeal centers around the first proviso. In

the plain terms, the proviso provides for exclusion from the main object of the

definition of the term "Charitable purposes" and applies only to cases of advancement

of any other object of general public utility. If the conditions provided under the

proviso are satisfied, any entity, even if involved in advancement of any other object

of general public utility by virtue to proviso, would be excluded from the definition of

"charitable trust". However, for the application of the proviso, what is necessary is

that the entity should be involved in carrying on activities in the nature of trade,

commerce or business, or any activity of rendering services in relation to any trade,

commerce or business, for a cess or fee or any other consideration. In such a

situation, the nature, use or application, or retention of income from such activities

would not be relevant. Under the circumstances, the important elements of

application of proviso are that the entity should be involved in carrying on the

activities of any trade, commerce or business or any activities of rendering service in

relation to any trade, commerce or business, for a cess or fee or any other

consideration. Such statutory amendment was explained by the Finance Minister's

speech in the Parliament. Relevant portion of which reads as under :—

'I once again assure the House that genuine charitable organizations will not in

any way be affected. The CBDT will, following the usual practice, issue an

explanatory circular containing guidelines for determining whether any entity is

carrying on 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.

Whether the purpose is a charitable purpose will depend on the totality of the

facts of the case. Ordinarily, Chambers of Commerce and similar organizations

rendering services to their members would not be affected by the amendment and

their activities would continue to be regarded as "advancement of any other

object of general public utility".'

In consonance with such assurance given by the Finance Minister on the floor of

the House, CBDT issued a Circular No. 11 of 2008 dated 19th December

2008 explaining the amendment as under :—

"3. The newly inserted proviso to section 2 (15) will apply only to entities whose

purpose is ' advancement of any other object of general public utility' ie., the

fourth limb of the definition of ' charitable purpose' contained in section 2 (15).

Hence, such entities will not be eligible for exemption under section 11 or under

section 10 (23C) of the Act if they carry on commercial activities. Whether such

an entity is carrying on any activity in the nature of trade, commerce or business

is a question of fact which will be decided based on the nature, scope, extent and

frequency of the activity.

3.1 There are industry and trade associations who claim exemption from tax

under section 11 on the ground that their objects are for charitable purpose as

these are covered under ' any other object of general public utility'. Under the

principle of mutuality, if trading takes place between persons who are associated

together and contribute to a common fund for the financing of some venture or

object and in this respect have no dealings or relations with any outside body,

then any surplus returned to the persons forming such association is not

chargeable to tax. In such cases, there must be complete identity between the

contributors and the participants. Therefore, where industry or trade

associations claim both to be charitable institutions as well as mutual

organizations and their activities are restricted to contributions from and

participation of only their members, these would not fall under the purview of the

proviso to section 2 (15) owing to the principle of mutuality. However, if such

organizations have dealings with non-members, their claim to be chargeable

organizations would now be governed by the additional conditions stipulated in

the proviso to section 2 (15).

3.2 In the final analysis, however, whether the assessee has for its object ' the

advancement of any other object of general public utility' is a question of fact. If

such assessee is engaged in any activity in the nature of trade, commerce or

business or renders any service in relation to trade, commerce or business, it

would not be entitled to claim that its object is charitable purpose. In such a

case, the object of ' general public utility' will be only a mask or a device to hide

the true purpose which is trade, commerce or business or the rendering of any

service in relation to trade, commerce or business. Each case would, therefore,

be decided on its own facts and no generalization is possible. Assessees, who

claim that their object is ' charitable purpose' within the meaning of section

2(15), would be well advised to eschew any activity which is in the nature of

trade, commerce or business or the rendering of any service in relation to any

trade, commerce or business."

What thus emerges from the statutory provisions, as explained in the speech of

Finance Minister and the CBDT Circular, is that the activity of a trust would be

excluded from the term ' charitable purpose' if it is engaged in any activity in the

nature of trade, commerce or business or renders any service in relation to trade,

commerce or business for a cess, fee and/or any other consideration. It is not aimed

at excluding the genuine charitable trusts of general public utility but is aimed at

excluding activities in the nature of trade, commerce or business which are masked as

' charitable purpose'.

Many activities of genuine charitable purposes which are not in the nature of trade,

commerce or business may still generate marketable products. After setting off of the

cost, for production of such marketable products from the sale consideration, the

activity may leave a surplus. The law does not expect the Trust to dispose of its

produce at any consideration less than the market value. If there is any surplus

generated at the end of the year, that by itself would not be the sole consideration for

judging whether any activity is trade, commerce or business - particularly if

generating ' surplus' is wholly incidental to the principal activities of the trust; which

is otherwise for general public utility, and therefore, of charitable nature. ……………

…………………………….

11.

We are wholly in agreement with the view of the Tribunal. The objects of the Trust

clearly establish that the same was for general public utility and where for charitable

purposes. The main objectives of the trust are - to breed the cattle and endeavour to

improve the quality of the cows and oxen in view of the need of good oxen as India is

prominent agricultural country; to produce and sale the cow milk; to hold and

cultivate agricultural lands; to keep grazing lands for cattle keeping and breeding; to

rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for

getting informatics and scientific knowledge and to do scientific research with regard

to keeping and breeding of the cattle, agriculture, use of milk and its various

preparations, etc.; to establish other allied institutions like leather work and to

recognize and help them in order to make the cow keeping economically viable; to

publish study materials, books, periodicals, monthlies etc., in order to publicize the

objects of the trust as also to open schools and hostels for imparting eduction in cow

keeping and agriculture having regard to the trust objects.

12.

All these were the objects of the general public utility and would squarely fall

under section 2 (15) of the Act. Profit making was neither the aim nor object of the

Trust. It was not the principal activity. Merely because while carrying out the

activities for the purpose of achieving the objects of the Trust, certain incidental

surpluses were generated, would not render the activity in the nature of trade,

commerce or business. As clarified by the CBDT in its Circular No. 11/2008 dated

19th December 2008 the proviso aims to attract those activities which are truly in the

nature of trade, commerce or business but are carried out under the guise of activities

in the nature of ' public utility'.

34.

What essentially follows from the above discussions is that, even after the

2008 amendment and insertion of proviso to Section 2(15), so far as ‘any other

object of general public utility is concerned, as long as profit earning is not the

predominant purpose of the activity of the assessee, the benefit of Section 2(15)

cannot be declined. In other words, the accrual of profits to the assessee, by itself,

cannot, therefore, be reason enough to hold that the assessee is not covered by the

definition of ‘charitable institution’ under section 2(15). Of course, all these

discussions are relevant only for the residuary clause i.e. “any other object of

general public utility”. In case, therefore, where the objects being pursued by the

assessee is “relief of the poor”, “education” or “medical relief”, it is not even

material whether or not the assessee is carrying on an activity in the nature of trade,

commerce or business in the course of such activities. The key factor is as to what

are the activities of the assessee institution and as to what these activities seek to

achieve.

35.

Let us take a pause here and examine as to what are the activities of the

assessee cricket associations so as to be brought within the ambit of trade, commerce

or business. We have seen objects of the association, which are reproduced earlier in

our order, and it is not even the case of the revenue that these objects have anything

to do with any trade, commerce or business; these objects are simply to promote

cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly

contends, has to an activity of the assessee which is in the nature of trade, commerce

or business. However, the case of the revenue authorities hinges on the allegation

that the way and manner in which cricket matches are being organized, particularly

the IPL matches, the activity of organizing cricket matches is nothing but brute

commerce. Undoubtedly, it would appear that right from the time Kerry Packer

started his World Series Cricket in 1977, there has been no looking back in

commercialization of cricket and the impact of this commercialization has not left

Indian cricket intact. The Indian Premier League and the rules of the game being

governed by the dictates of commercial considerations may seem to be one such

example of commercialization of Indian cricket. The difficulty for the case of the

revenue before us, however, is that these matches are not being organized by the

local cricket associations. We are told that the matches are being organized by the

Board of Cricket Control of India, but then, if we are to accept this claim and invoke

the proviso to Section 2(15) for this reason, it will amount to a situation in which

proviso to Section 2(15) is being invoked on account of activities of an entity other

than the assessees- something which law does not permit. We are not really

concerned, at this stage, whether the allegations about commercialization of cricket

by the BCCI are correct or not, because that aspect of the matter would be relevant

only for the purpose of proviso to Section 2(15) being invoked in the hands of the

BCCI. We donot wish to deal with that aspect of the matter or to make any

observations which would prejudge the case of the BCCI. Suffice to say that the very

foundation 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 constitute BCCI or not, in the event

of BCCI being involved in commercial activities, the taxability of such commercial

profits will arise in the hands of the BCCI and not the end beneficiaries. Even in

such a case the point of taxability of these profits is the BCCI and not the cricket

associations, because, even going by learned Commissioner’s arguments, these

receipts in the hands of the cricket associations is nothing but appropriation of

profits. What can be taxed is accrual of profits and not appropriation of profits. In

any event, distinction between the cricket associations and the BCCI cannot be

ignored for the purposes of tax treatment. There is no dispute that the matches were

organized by the BCCI, and the assessee cannot thus be faulted for the commercial

considerations said to be inherent in planning the matches. As we make these

observations, and as we do not have the benefit of hearing the perspective of the

BCCI, we make it clear that these observations will have no bearing on any

adjudication in the hands of the BCCI. Suffice to say that so far as the cricket

associations are concerned, the allegations of the revenue authorities have no

bearing on the denial of the status of ‘charitable activities’ in the hands of the

cricket associations before us- particularly as learned Commissioner has not been

able to point out a single object of the assessee cricket associations which is in the

nature of trade, commerce or business, and, as it is not even in dispute that the

objects being pursued by the assessee cricket associations are “objects of general

public utility” under section 2(15). All the objects of the assessee cricket

associations, as reproduced earlier in this order, unambiguously seek to promote the

cricket, and this object, as has been all along accepted by the CBDT itself, an object

of general public utility.

36.

Cricket is indeed an immensely popular game in this part of the world, and

anything to do with cricket results in mass involvement of public at large. The sheer

strength of these numbers results in higher visibility of cricketing activities and the

scale of operations on which the work for development of cricket is to be carried

out. These facts, by itself, and without the assessees before us deviating from their

objects or venturing into trade, commerce or business, cannot require the 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.

37.

Let us also quickly deal with the judicial precedents cited at the bar and in the

orders of the authorities below. As regards the case of Jalandhar Development

Authority (supra), this decision does not constitute a binding judicial precedent as

contrary view in the case of Hoshiarpur Improvement Trust (supra) stands approved

by Hon’ble Punjab & Haryana High Court in the case of Improvement Trust Monga

(supra). Tamilandu Cricket Association decision (supra) by the coordinate bench

was disapproved by Hon’ble Madras High Court in the judgment reported as

Tamilnadu Cricket Association Vs CIT [(2014) 360 ITR 633 (Mad)]. As regards

Cricket Association of Bengal judgment (supra), that was a case in which admittedly

no training, coaching or assistance was provided to the players or aspiring players

and the association was formed only for watching the matches by making payment.

It was on these facts that the association was held to be not for any object of general

public utility. This case has no relevance in the present context since admittedly

even the CBDT circular treats the cricket associations as pursuing objects of general

public utility and the dispute is confined to the alleged element of trade, commerce

and business in so pursuing the objects of general public utility. As regards

peculiarities of Cricket Association of Bengal case (supra), the following

observations made by Hon’ble Court are relevant:

The facts of the present case are that the assessee Association merely held

certain demonstration or exhibition matches. It does not provide any

training in the game of cricket to novices or any advanced training for

persons who are already practised players. Its activities outside the

holding of the exhibition matches is limited entirely to its own members.

The only contact it has with the public is by way of having them as

spectators, on payment of a fee, of matches arranged by it. I find it

impossible to hold that any benefit or entertainment which is thus paid

for and which is availed of by only such members of the public as can or

wish to pay for it can in any sense be a purpose of a charity. It is true that

charity in the income-tax sense need not have any eleemosynary element

in it and that an object of general public utility is under the income-tax

law a charitable object. Indeed, if the objects professed by the Association

are to be treated as charitable objects at all, they can be so treated only if

they can be regarded as objects of general public utility. I find it

impossible to hold that there is any general public utility, so as to amount

to a charity, in arranging for cricket matches which the public can see on

payment

38.

The revenue thus does not derive any advantage from Cricket Association of

Bengal’s case (supra). The reliance of the Assessing Officer, on this judicial

precedent, is wholly misplaced and in fact contrary to the stand of the CBDT on this

issue. The CBDT circular No. 395 [F. No. 181(5) 82/IT(A-I)], dated 24-9-1984,

accepts the positions that a cricket association, being a society for promotion for

sports, has its objects as “advancement of object of general public utility”, and, for

this reason, it falls in the category of charitable institutions. The dispute is only with

respect to the activities being in the nature of trade, business or commerce. Clearly,

this judicial precedent, if held to be applicable on the facts of this case, will result in

a much harsher a position than accepted by the CBDT. Be that as it may, that is not

the situation and this judicial precedent cannot be held to be applicable on the facts

of this case.

39.

As regards the decision of the coordinate bench in the case of Entertainment

Society of Goa (supra), we are of the considered view that in the light of subsequent

judgments of Hon’ble High Courts in the case of Tribune Trust (supra) and

Sabarmati Gaushala Trust (supra), which uphold the contrary view, this coordinate

bench decision does not constitute a binding judicial precedent.

40.

We have noted that there are a large number of judicial precedents, in the

cases of various other cricket associations- details of which are set out earlier in this

order, holding that the proviso to Section 2(15) cannot be invoked in the cases of

such similarly placed cricket associations. Respectfully following the same, and also

for the detailed reasons set out above, we uphold the plea of the assessee. We are not

reproducing extracts from these decisions, for the sake of brevity, but we adopt, and

concur with, the reasoning of these decisions. When proviso to Section 2(15) cannot

be invoked on the facts of these cases, the benefits of Section 11 and 12, which were

declined only by invoking the proviso to Section 2 (15), could not have been

declined on the facts of these cases.

41.

We have noted that all the learned representatives have advanced detailed

arguments on the proposition that since the assessee cricket associations are engaged

in educational activities, it is not really material whether or not the assessee has

engaged itself in the activities in the nature of trade, commerce or business.

However, in the light of our categorical finding that the assessee cricket associations

were not really engaged in the activities in the nature of trade, commerce or

business, it is not really necessary to adjudicate on this plea. We leave the question

open for adjudication in a fit case.

Conclusions on this issue:

42.

For the detailed reasons set out above, we are of the considered view that the

authorities below were in error in invoking the proviso to Section 2(15) and thus in

declining the benefit of Section 11 and 12 to the appellant cricket associations. To

this extent, plea of the appellants must be upheld. We uphold the plea.

Individual appeals

43.

Let us now take up each appeal and each ground of appeal individually.

ITA No 1257/ Ahd/ 2013

This appeal is directed against the order dated 5th March 2013 passed by the 44.

CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act,

1961, for the assessment year 2009-10.

45.

In ground nos. 1 and 2, the grievances raised by the appellant are as follows:

(1) The learned CIT(A) has erred in law and on facts in denying the

applicability of Sec. 11 including 11(1)(b) and holding that the assessee is

not carrying on charitable activity.

(2) (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 asseesee 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 address that issue.

47.

Ground nos. 1 and 2 are thus allowed in the terms indicated above.

48.

In ground no. 3, the assessee has raised the following grievances:

(3) (a) The learned CIT(A) has erred in law and on facts in not

accepting the submissions of the assessee with relevant evidences in

respect of the claim that the amount received from BCCI,

Rs.20,69,60,338/- is towards corpus donation. Hon. CIT (Appeals) has

erred in not considering the BCCI AGM resolution which provides that

all future payments by BCCI shall be towards corpus by using word

'Henceforth'.

(b) Alternatively, the learned CIT(A) has erred in law and on facts when

the status of the assessee is held to be AOP and Section 2(15) held to be

not applicable, then as per the provisions of Sec.2(24) (iia) r.w.s. 13(8)

and 56, the corpus donation of Rs.20,69,60,338/- cannot be added as

income.

49.

As regards grievance raised by the assessee in ground no. 3(a), we have

already decided this issue in favour of the assessee, vide our order of even date for

the assessment years 2004-05 to 2007-08, and we have observed as follows:

12.

So far as this grievance of the assessee is concerned, the relevant

material facts are like this. The assessee before us is a cricket association,

registered under the Societies Registration Act 1860, and is engaged in

promotion of cricket in specified areas of Gujarat State. In the course of the

reassessment proceedings, the Assessing Officer noted that assessee 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 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 Rs 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 associations as

corpus donation. The CIT(A), identified the core issue for adjudication as

follows: “the fundamental question which now arises is whether the specific

direction once issued is sufficient for the purpose of section 11(1)(d) or

specific direction is required for each year individually”. He then proceeded

to answer this question by observing as follows:

As per section 11(1)(d), a written specific direction is necessary to

claim it as corpus donation. For a donation as a corpus donation, a

written document with specific direction from the donor should be

obtained and should accompany the donation from the donor. In

absence of written direction, for a donation in a given assessment year,

a donation would not be considered as a corpus donation and the

organization (in this case, GCA) would not be entitled to claim full

exemption. To add, donation covered by a written document but

without any specific direction cannot be claimed as corpus donation

13.

The assessee is not satisfied and is in further appeal before us.

14.

We have heard the rival contentions, perused the material on record

and duly considered facts of the case in the light of the applicable legal

position.

15.

We find that, at pages 46 and 47 of the paperbook, the assessee has

filed specific confirmations to the effect that these amounts were corpus donations. We have also perused the BCCI resolution no 5 dated 29th

September 2001 which specifically states that the TV subsidies should

henceforth be sent to the Member Associations towards “corpus funds”.

There is no dispute that the TV subsidy in question is sent under this

resolution. 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 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.

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 Rs 20,69,60,338

received from the BCCI as a corpus donation. The assessee gets the relief

accordingly. As we have decided the main grievance of the assessee, as set out in

ground no. 3 (a), we see no need to adjudicate on the alternative plea set out in

ground 3 (b). That aspect of the matter is rendered academic and does not call for

any adjudication as on now.

51.

Ground no. 3 is partly allowed in the terms indicated above.

52.

In ground no. 4, the assessee has raised the following grievances:

(4) (a) The learned CIT(A) has erred in law and on facts in not accepting

the submissions of the assessee with relevant evidences in respect of

the claim that the amount received from BCCI Rs.2,13,34,033/-,

being infrastructure subsidy is towards capital receipt, when the

amount being in the nature of Grant. Hon. CIT(A) has erred in

stating that assessee has offered no rebuttal to the same (Para 39 of

CIT(A) order),

(b) Alternatively, the learned CIT(A) has erred in law and on facts

when the status of the assessee is held to be AOP and Section 2(15)

held to be not applicable, then as per the provisions of Sec. 2 (24)

(iia) r.w.s. 13(8) and 56, the corpus capital receipt of

Rs.2,13,34,033/- cannot be added as income.

53.

So far as this grievance of the assessee is concerned, the relevant material

facts are like this. During the course of the assessment proceedings, the Assessing

Officer noted that the assessee has received infrastructure subsidy of Rs 3,52,86,521

from the BCCI, out of which the assessee has utilized the same only to the extent of

Rs 1,39,52,488 by way of payment to District Cricket Association, and, therefore,

the balance amount of Rs 2,13,34,033 is taxable in the hands of the assessee.

Aggrieved, assessee carried the matter in appeal before the CIT(A). It was

contended, as evident from the grounds of appeal, that the said amount was brought

to tax, in the hands of the assessee, without giving any opportunity to the assessee. It

was also contended that it was an infrastructure subsidy, in the nature of corpus

donation, and, therefore, outside the ambit of taxable income. The appeal to the

CIT(A) did not yield any success to the assessee. The assessee is now in second

appeal before us.

54.

We have heard the rival contentions, perused the material on record and duly

considered facts of the case in the light of the applicable legal position.

55.

On a perusal of the BCCI Infrastructure Subsidy rules, we find that what is

given to the assessee as infrastructure subsidy is reimbursement of 50% of costs in

respect of certain expenditure on infrastructure which is inherently in the capital

field. The mere fact that it is not a reimbursement to an outside party, such as a

district cricket association, does not really matter. As long as the subsidy is relatable

to a capital asset created by the assessee on his own or by an eligible district cricket

association, as the present subsidy undisputedly is, it is outside the ambit of revenue

receipt and taxable income. The very foundation of the stand of the Assessing

Officer is thus devoid of legally sustainable merits. As such, there can hardly be an

occasion, in principle, to hold such a subsidy as a revenue receipt or taxable income.

There is not even a whisper of a discussion by the Assessing Officer to the effect

that infrastructure subsidy is revenue in nature. As a matter of fact, the claim is

made for the subsidy 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.

56.

Ground no. 4 (a) is thus allowed, and ground no. 4(b) is dismissed as

infructuous at this stage.

57.

In ground no. 5, the assessee has raised the following grievance:

The learned CIT(A) has erred in law and on facts in denying exemption of

Mutuality Income vis-a-vis club activities without any discussion of the

claim of the assessee.

58.

Learned counsel submits that as there was no adjudication on this grievance

raised before the CIT(A), the matter may be restored to the file of the CIT(A) for

adjudication on merits. This plea is not opposed by the learned DR.

59.

With the consent of the parties, and in the light of the above discussions, the

matter is restored to the file of the CIT(A) for adjudication on merits.

60.

Ground no. 5 is thus allowed for statistical purposes.

61.

In ground no. 6, the assessee has raised the following grievance:

The learned CIT(A) has erred in law and on facts in holding that

deprecation is not to be allowed on assets purchased in prior years, which

amount of purchase has been allowed (when no such capital expenses are

allowed in prior years) and has erred in restricting the depreciation on

current year's purchases. It is claimed that even if full purchase cost is

allowed (not allowed on facts) in prior years, as per judicial

pronouncements, depreciation on such assets is to be allowed.

62.

Learned representatives fairly agree that this issue now stands concluded by

Hon’ble Supreme Court’s judgment in the case of CIT Vs Rajasthani & Gujarati

Charitable Foundation [(2018) 402 ITR 441 (SC)] wherein Their Lordships have,

inter alia, observed as follows:

…………………… It is a matter of record that all the assessees are charitable

institutions registered under Section 12A of the Income Tax Act (hereinafter

referred to as 'Act'). For this reason, in the previous year to the year with which

we are concerned and in which year the depreciation was claimed, the entire

expenditure incurred for acquisition of capital assets was treated as application

of income for charitable purposes under Section 11(1)(a) of the Act. The view

taken by the Assessing Officer in disallowing the depreciation which was

claimed under Section 32 of the Act was that once the capital expenditure is

treated as application of income for charitable purposes, the assessees had

virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the

grant of depreciation would amount to giving double benefit to the assessee.

Though it appears that in most of these cases, the CIT (Appeals) had affirmed

the view, but the ITAT reversed the same and the High Courts have accepted the

decision of the ITAT thereby dismissing the appeals of the Income Tax

Department. From the judgments of the High Courts, it can be discerned that the

High Courts have primarily followed the judgment of the Bombay High Court in

'CIT v. Institute of Banking Personnel Selection (IBPS)'[2003] 131 Taxman 386.

In the said judgment, the contention of the Department predicated on double

benefit was turned down in the following manner:

"3. As stated above, the first question which requires consideration by this

Court is: whether depreciation was allowable on the assets, the cost of

which has been fully allowed as application of income under section 11 in

the past years? In the case of CIT v. Munisuvrat Jain 1994 Tax Law

Reporter, 1084 the facts were as follows. The assessee was a Charitable

Trust. It was registered as a Public Charitable Trust. It was also registered

with the Commissioner of Income Tax, Pune. The assessee derived income

from the temple property which was a Trust property. During the course of

assessment proceedings for assessment years 1977-78, 1978-79 and 1979-

80, the assessee claimed depreciation on the value of the building @ 2½%

and they also claimed depreciation on furniture @ 5%. The question which

arose before the Court for determination was : whether depreciation could

be denied to the assessee, as expenditure on acquisition of the assets had

been treated as application of income in the year of acquisition? It was held

by the Bombay High Court that section 11 of the Income-tax Act makes

provision in respect of computation of income of the Trust from the property

held for charitable or religious purposes and it also provides for

application and accumulation of income. On the other hand, section 28 of

the Income-tax Act deals with chargeability of income from profits and

gains of business and section 29 provides that income from profits and

gains of business shall be computed in accordance with section 30 to

section 43C. That, section 32(1) of the Act provides for depreciation in

respect of building, plant and machinery owned by the assessee and used for

business purposes. It further provides for deduction subject to section 34. In

that matter also, a similar argument, as in the present case, was advanced

on behalf of the revenue, namely, that depreciation can be allowed as

deduction only under section 32 of the Income-tax Act and not under

general principles. The Court rejected this argument. It was held that

normal depreciation can be considered as a legitimate deduction in

computing the real income of the assessee on general principles or under

section 11(1)(a) of the Income-tax Act. The Court rejected the argument on

behalf of the revenue that section 32 of the Income-tax Act was the only

section granting benefit of deduction on account of depreciation. It was held

that income of a Charitable Trust derived from building, plant and

machinery and furniture was liable to be computed in normal commercial

manner although the Trust may not be carrying on any business and the

assets in respect whereof depreciation is claimed may not be business

assets. In all such cases, section 32 of the Income-tax Act providing for

depreciation for computation of income derived from business or profession

is not applicable. However, the income of the Trust is required to be

computed under section 11 on commercial principles after providing for

allowance for normal depreciation and deduction thereof from gross income

of the Trust. In view of the aforesatated judgment of the Bombay High

Court, we answer question No. 1 in the affirmative i.e., in favour of the

assessee and against the Department.

Question No. 2 herein is identical to the question which was raised

before the Bombay High Court in the case of Director of Income-tax

(Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR 463. In that

case, the facts were as follows: The assessee was the Trust. It derived its

income from depreciable assets. The assessee took into account

depreciation on those assets in computing the income of the Trust. The ITO

held that depreciation could not be taken into account because, full capital

expenditure had been allowed in the year of acquisition of the assets. The

assessee went in appeal before the Assistant Appellate Commissioner. The

Appeal was rejected. The Tribunal, however, took the view that when the

ITO stated that full expenditure had been allowed in the year of acquisition

of the assets, what he really meant was that the amount spent on acquiring

those assets had been treated as 'application of income' of the Trust in the

year in which the income was spent in acquiring those assets. This did not

mean that in computing income from those assets in subsequent years,

depreciation in respect of those assets cannot be taken into account. This

view of the Tribunal has been confirmed by the Bombay High Court in the

above judgment. Hence, Question No. 2 is covered by the decision of the

Bombay High Court in the above Judgment. Consequently, Question No. 2 is

answered in the Affirmative i.e., in favour of the assessee and against the

Department."

After hearing learned counsel for the parties, we are of the opinion that the

aforesaid view taken by the Bombay High Court correctly states the principles

of law and there is no need to interfere with the same.

It may be mentioned that most of the High Courts have taken the aforesaid

view with only exception thereto by the High Court of Kerala which has taken a

contrary view in 'Lissie Medical Institutions v. CIT [2012] 24 taxmann.com

9/209 Taxman 19 (Mag.)/348 ITR 344'.

It may also be mentioned at this stage that the legislature, realising that there

was no specific provision in this behalf in the Income-tax Act, has made

amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which

became effective from the Assessment Year 2015-2016. The Delhi High Court

has taken the view and rightly so, that the said amendment is prospective in

nature.

It also follows that once assessee is allowed depreciation, he shall be entitled

to carry forward the depreciation as well.

63.

Respectfully following the esteemed views of Hon’ble Supreme Court, we

uphold the plea of the assessee and direct the Assessing Officer to grant the

depreciation even upon full cost of the asset being allowed. The assessee gets the

relief accordingly.

64.

Ground no. 6 is thus allowed.

65.

In ground no. 7 to 11, the assessee has raised the following grievances:

(7) The learned CIT(A) has erred in law and on facts in not allowing the set

off of brought forward losses and unabsorbed depreciation which claim is

supported by Jurisdictional High Court and other High Courts' decisions

(Amount as may be determined in pursuance to Appellate Orders from A.Y.

2004-05 to 2008-09).

(8) The learned CIT(A) has erred in law and on facts denying the

deduction of capital expenditure of Rs.4,61,70,970/- as allowable.

(9) Alternatively, the learned CIT(A) has erred in law and on fact in not

granting deduction of expenditure including depreciation and B/F deficit and

unabsorbed depreciation after considering the assessee's income as business

income.

(10) Alternatively, the learned CIT(A) has erred in law and on facts in

not accepting the assessee's claim that if the amount received from BCCI

Rs.20,69,60,338/- is not considered as corpus donation then the same should

be considered in the nature of grant with special purpose to utilize the same

in building infrastructure and promote cricket etc.

(11) The learned CIT(A) has erred in law and on facts in not granting

deduction of 15% u/s 11(1)(b) as computed after making the additions.

66.

As regards ground no. 10 above, this has become infructuous in view of the

receipt in question having been held to be in capital field outside the ambit of

income. As regards all other grievances noted above, learned counsel fairly states

that these are consequential in nature and will require to be taken into account by the

Assessing Officer while framing the assessment. We are, therefore, of the considered

view that no specific adjudication is required in respect of the same. These

grievances are dismissed as infructuous at this stage.

67.

Ground nos. 7 to 11 are dismissed as infructuous.

68.

In the result, the ITA No 1257/Ahd/13, i.e. Gujarat Cricket Association’s

appeal for the assessment year 2009-10, is thus partly allowed in the terms indicated

above.

ITA No. 3303/Ahd/16

69.

We now take up appeal filed by the Gujarat Cricket Association for the

assessment year 2010-11.

70.

In ground nos. 1 the assessee has raised the following grievances:

The learned A.O. has erred in law and on facts in applying Proviso to

section 2(15) that assessee is engaged in activity in the nature of business

and consequently section 13(8) of Income Tax Act, 1961 and there by

rejecting the applicability of section 11 and 12 claimed by the assesses

and the Hon'ble CIT(Appeals) has erred in confirming the decision of

learned A.O.

71.

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.

72.

Ground no. 1 is thus allowed.

73.

In ground no. 2, the assessee has raised the following grievance:

The learned A.O. and Hon'ble CIT(Appeals) have erred in law and on

facts in rejecting the assessee's claim that it is engaged in "Education"

and hence the provision of proviso to section 2(15) and section 13(8) are

not applicable.

74.

As we have held that the assessee was not engaged in any activity in the

nature of trade, commerce or business, we see no need to deal with this alternative

plea of the assessee. The grievance of the assessee is thus dismissed as infructuous.

75.

Ground no. 2 is dismissed as infructuous.

76.

In ground nos. 3 and 4, which we will take up together, the assessee has

raised the following grievance:

(i) The learned A.O. and Hon'ble CIT( Appeals) have erred in law

and in facts in rejecting the assessee's claim that various amounts

received from BCCI, viz. T.V. Subsidy, IPL subvention etc are corpus

donations which have been credited as capital receipts and holding

that it is an income received from BCCI.

(ii) The learned A.O. and Hon'ble CIT(Appeals) have erred in law and on

facts in rejecting the above claim of corpus donations even though the

learned A.O. in the case of BCCI has held that the amounts paid to

various State Cricket Associations in the form of T.V, Rights, IPL

subsidy etc is a voluntary payment by BCCI and when such

distribution by BCCI has not been granted as a deduction to BCCI by

it's A.O.

(ii) Alternative Ground of Appeal.

The learned A.O. and Hon’ble CIT(Appeals) have erred in law and on

facts in rejecting the claim of assessee that when Exemption u/s 11 and

12, is not granted to assessee by applying Proviso to section 2(15) and

section 13(8), the amounts paid by BCCI being non contractual

payments i.e. voluntary payment, these receipts are not income as

defined in section 2(24) of Income Tax Act, 1961.

The learned A.O. has erred in law and on facts in not allowing the capital

expenditure as an expenditure towards objects of trust which is supported

by various decisions of Honourable High Courts and Hon. CIT(A) has

erred in law and on facts in not accepting the said claim of the assessee.

77.

We find that identical issues came up for our adjudication for the assessment

year 2009-10 and we have allowed the plea of the assessee in the terms indicated

earlier in this order while dealing with the assessment year 2009-10. We see no

reasons to take any other view of the matter for this assessment year. Respectfully

following the stand taken for the assessment year 2009-10, we uphold the plea to

that extent. As regards allowing the capital expenditure towards object of trust, that

issue is infructuous at this stage and will come up for consideration before the

Assessing Officer while giving effect to this order and computing income in terms of

the Section 11. The AO shall deal with the same by way of a speaking order.

78.

Ground nos. 3 and 4 are allowed in the terms indicated above.

79.

In ground no. 5, the assessee has raised the following grievance:

The learned A.O. has erred in law and on facts in not allowing 15% of

income as per provisions of Act by not considering the addition made to

the income (Though such addition is not accepted by assessee) and Hon.

CIT(A) has erred in law and on facts in not accepting the claim of the

assessee.

80.

As regards this grievance, all that learned counsel prays is that a direction

may be given to compute the income as per provisions of section 11 of the Act, after

giving deduction of 15%. Learned Departmental Representative does not oppose the

prayer. We, therefore, direct the Assessing Officer accordingly.

81.

Ground no. 5 is allowed in the terms indicated above.

82.

In ground no. 6, the assessee has raised the following grievance:

The learned A.O. has erred in law and on facts in not allowing the claim

of mutuality vis-a-vis the income of members' club activity as claimed by

the assessee and Hon'ble CIT(appeals) has erred in law and on facts in

not accepts claim of assessee.

83.

Learned counsel submits that as there was no adjudication on this grievance

raised before the CIT(A), the matter may be restored to the file of the CIT(A) for

adjudication on merits. This plea is not opposed by the learned DR.

84.

With the consent of the parties, and in the light of the above discussions, the

matter is restored to the file of the CIT(A) for adjudication on merits.

85.

Ground no. 6 is thus allowed for statistical purposes.

86.

In the result, ITA No. 3303/Ahd/16 i.e. appeal of the assessee for the

assessment year 2010-11 is partly allowed in the terms indicated above.

ITA No. 3304/Ahd/ 2016

87.

We now take up appeal filed by the Gujarat Cricket Association for 2011-12.

88.

In ground nos. 1 the assessee has raised the following grievances:

The learned A.O. has erred in law and on facts in applying Proviso to

section 2(15) that assessee is engaged in activity in the nature of business

and consequently section 13(8) of Income Tax Act, 1961 and there by

rejecting the applicability of section 11 and 12 claimed by the assesses

and the Hon'ble CIT(Appeals) has erred in confirming the decision of

learned A.O.

89.

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.

90.

Ground no. 1 is thus allowed.

91.

In ground no. 2, the assessee has raised the following grievance:

The learned A.O. and Hon'ble CIT(Appeals) have erred in law and on

facts in rejecting the assessee's claim that it is engaged in "Education"

and hence the provision of proviso to section 2(15) and section 13(8) are

not applicable.

92.

As we have held that the assessee was not engaged in any activity in the

nature of trade, commerce or business, we see no need to deal with this alternative

plea of the assessee. The grievance of the assessee is thus dismissed as infructuous.

93.

Ground no. 2 is dismissed as infructuous.

94.

In ground nos. 3 and 4, which we will take up together, the assessee has

raised the following grievance:

(i) The learned A.O. and Hon'ble CIT( Appeals) have erred in law

and in facts in rejecting the assessee's claim that various amounts

received from BCCI, viz. T.V. Subsidy, IPL subvention etc are corpus

donations which have been credited as capital receipts and holding

that it is an income received from BCCI.

(ii) The learned A.O. and Hon'ble CIT(Appeals) have erred in law and on

facts in rejecting the above claim of corpus donations even though the

learned A.O. in the case of BCCI has held that the amounts paid to

various State Cricket Associations in the form of T.V, Rights, IPL

subsidy etc is a voluntary payment by BCCI and when such

distribution by BCCI has not been granted as a deduction to BCCI by

it's A.O.

(ii) Alternative Ground of Appeal.

The learned A.O. and Hon’ble CIT(Appeals) have erred in law and on

facts in rejecting the claim of assessee that when Exemption u/s 11 and

12, is not granted to assessee by applying Proviso to section 2(15) and

section 13(8), the amounts paid by BCCI being non contractual

payments i.e. voluntary payment, these receipts are not income as

defined in section 2(24) of Income Tax Act, 1961.

The learned A.O. has erred in law and on facts in not allowing the capital

expenditure as an expenditure towards objects of trust which is supported

by various decisions of Honourable High Courts and Hon. CIT(A) has

erred in law and on facts in not accepting the said claim of the assessee.

95.