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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
O R D E R
Per George George K, JM
This appeal at the instance of the assessee is directed against the CIT(A)’s order dated 04.09.2019. The relevant assessment year is 2013-2014.
In the memorandum of appeal, ten grounds are raised. However, during the course of hearing, the learned AR pressed only ground 4, which reads as follows:-
“4. The sum of Rs.60 lakhs was an ex gratia payment voluntarily made by the BCCI and represents capital receipt not of the nature of income, as such, voluntary receipts are treated as capital in character.”
Brief facts of the case are as follows: The assessee an individual, is a retired professional cricketer. For the assessment year 2013-2014, the return of Sri.Sunil Bandacharya Joshi. income was filed on 03.08.2013 declaring total income of Rs.24,41,890. The assessment u/s 143(3) of the I.T.Act was completed vide order dated 21.03.2016 by determining the total income at Rs.96,03,433. One of the additions made by the Assessing Officer was a sum of Rs.60 lakh being “onetime benefit” received from BCCI. The assessee, in the return of income, has claimed the same as a capital receipt and not liable to be taxed. The A.O. held that Rs.60 lakh is liable to be taxed u/s 56(2)(vii) of the I.T.Act since BCCI did not have the registration u/s 12A of the I.T.Act. The relevant finding by the A.O. in bringing to tax the sum of Rs.60 lakh, reads as follows:-
However as per section 56(2)(v) under sub clause (g), `this clause shall not apply to any sum of money received from any trust or institution registered under section 12AA’. But as per the submission of the assessee (as quoted above), the 12AA registration of BCCI has been withdrawn by the Income Tax Department. Hence the amount of Rs.60,00,000/- received by the assessee from BCCI, will be added back to the total income under the head income from other sources and charged to tax under section 56 of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee has filed an appeal before the first appellate authority. Before the first appellate authority it was contended that the assessee was entitled to the benefit of proviso (g) to section 56(2)(vii) of the I.T.Act since the registration of BCCI u/s 12AA of the Act was not disturbed for the relevant assessment year. The CIT(A), however, rejected the contention of the assessee and upheld the addition of Rs.60 lakh. The CIT(A) after perusal of Sri.Sunil Bandacharya Joshi. the annual report for the financial year 2014-2015, held that from assessment year 2008-2009 onwards the benefit of exemption u/s 11 was withdrawn by cancelling the registration u/s 12AA of the Act. The CIT(A) alternatively held that the amount of Rs.60lakh was received on account of assessee being a cricketer and he had provided services to BCCI in the earlier years. Therefore, the said sum is liable to be taxed in view of provisions of section 28(iv) of the I.T.Act. The relevant finding of the CIT(A) reads as follows:-
“5.3 Thus this cannot be said that BCCI was still being held to be eligible to the benefit of Section 11 of the Act and that its registration under Section 12AA was still in existence. So the benefit of proviso (g) to Section 56(2)(vii) of the Act is not available to the appellant. 5.4 Without prejudice to above, another important aspect which needs to be noted is that the provisions of Section 56(2)(vii) of the Act get attracted if the amount is received without any consideration. However, this is not so in the case under consideration. The amount of Rs.60,00,000/- was received by the appellant from BCCI as onetime benefit as the appellant was a cricketer and he had provided services to BCCI in earlier years. The criteria fixed for the benefit was the number of test matches played by the cricketers. It is noted that the amount was paid to the appellant by BCCI as he had played test matches numbering between 25 to 49. The appellant is a professional who had rendered services to BCCI in past as well as during the year under consideration. So the amount has been received by the appellant on account of rendering such services in past to BCCI and in view of provisions of Section 28(iv) of the Act, the said amount is a revenue receipt and as such not a capital receipt. So the amount cannot be said to have been received by the appellant without any consideration so as to attract the provisions of Section 56(2)(vii) of the Act.”
Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned AR
Sri.Sunil Bandacharya Joshi. submitted that the A.O. has solely disallowed the assessee’s claim and taxed Rs.60 lakh u/s 56(2)(vii) of the Act on account of that BCCI was not having registration u/s 12AA of the Act. In this context, the learned AR submitted that the CIT(A) erred in placing reliance on the annual report of the BCCI for financial year 2014-2015 when the relevant assessment year was 2013-2014. It was further submitted that the registration for BCCI u/s 12AA of the I.T.Act was restored by the Mumbai Bench of the Tribunal in case ;of BCCI v. Pr.CIT in (order dated 02.11.2011). As regards the CIT(A)’s alternative case that the said amount would be taxable in view of the provisions of section 28(iv) of the Act, the learned AR submitted that the CIT(A) did not give adequate notice before rendering such a finding. It was submitted that the provisions of section 28(iv) of the Act would not apply when the sum of Rs.60 lakh was a capital receipt. In this context, the learned AR relied on the judgment of the Hon’ble Apex Court in the case of CIT v. Mahindra and Mahindra Limited reported in 404 ITR 1 (SC) and order of the Bangalore Bench of the Tribunal in the case of ITO v. Peethadhipati Trust in ITA No.1382 and 1535/Bang/2010 (order dated 03.01.2012).
The learned Departmental Representative strongly supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The sole reason for bringing to tax a sum of Rs.60 lakh by the Assessing Officer was that BCCI was not Sri.Sunil Bandacharya Joshi. having registration u/s 12AA of the I.T.Act. In this context, the learned AR has placed reliance on the order of the Mumbai Bench of the Tribunal in the case of BCCI v. Pr.CIT (supra). The relevant portion of the Mumbai Tribunal order reads as follows:-
“3. Granting registration as a charitable institution is usually a one-time exercise and the assessee institution has duly been granted registration under section 12A on 12th February 1996. That registration is yet to be cancelled or withdrawn. However, the assessee has applied for fresh registration, and the event triggering the present registration application is the amendment of its ‘memorandum of association, and rules and regulations’, to implement the recommendations of a Committee chaired by Justice R M Lodha, former Chief Justice of India BCCI Vs PCIT Page 2 of 25 (hereinafter referred to as ‘Justice Lodha Committee’) and as approved by Hon’ble Supreme Court of India, vide judgment dated 9th August 2018.”
7.1 In view of above order of the Tribunal, we direct the A.O. to examine whether BCCI was having registration u/s 12AA of the I.T.Act for the relevant assessment year. If the A.O. is satisfied that BCCI was having registration for the relevant assessment year, necessarily the amount of Rs.60 lakh cannot be taxed u/s 56(2)(vii) of the I.T.Act in view of 2nd proviso (g) to the said section.
7.2 The CIT(A) alternatively held that the amount of Rs.60 lakh is also taxable u/s 28(iv) of the I.T.Act. The reasoning of CIT(A) for holding so is at para 5.4 of the impugned order. As mentioned earlier, the A.O. held that receipt of Rs.60 lakh is liable to be taxed u/s 56(2)(vii) of the I.T.Act when CIT(A)
Sri.Sunil Bandacharya Joshi. wants to tax Rs.60 lakh also u/s 28(iv) of the I.T.Act, he ought to put the assessee on notice and called for his explanation as to why the said sum of Rs.60 lakh cannot be brought to tax u/s 28(iv) of the I.T.Act. In the instant case, prima facie, the CIT(A) has not undertaken such an exercise. Moreover, it is settled position of law that for section 28(iv) of the I.T.Act to attract, the business or profession must have been carried on by the assessee at any time during the previous year (emphasis supplied). The CIT(A) in the impugned order has stated that assessee was rendering services to BCCI during the year under consideration, however, he has not elaborated how assessee was rendering services to BCCI during the relevant assessment year. The assessee was paid Rs.60 lakh as an ex gratia amount for having played cricket for his country (between 25 to 49 tests). The assessee being a retired cricketer, prima facie, section 28(iv) of the I.T.Act will not have application. Therefore, in the interest of justice and equity, we are of the view that the case needs to be considered afresh by the A.O. Accordingly, all the issues raised in this appeal are restored to the files of the A.O. The A.O. is directed to examine afresh whether a sum of Rs.60 lakh received by the assessee is taxable or not. The A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in this case. It is ordered accordingly.
Sri.Sunil Bandacharya Joshi. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes.