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Cricket as a Charitable Object: Landmark Judgment in Punjab Cricket Association : Held that the commercial exploitation of the popularity of the game andthe property/infrastructure held by the assessee is not incidental to the main object but is one of the primary motives of the assessee.
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, “बी” च डीगढ़
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I VI SI O N B E N C H , ‘B ‘ , C H AND I G AR H
ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali
ी संजय गग , या यक सद य एवं डा. बी.आर.आर, कुमार, लेखा सद य
B E F OR E S HR I S A N J A Y GA R G, J U D I C I A L M E MB E R A N D
D R . B . R. R . KU M A R , AC C OU N T A N T M E M B E R
आयकर अपील सं./ ITA No. 4 2 7 / C H D / 2 0 1 7
नधा रण वष / Assessment Year : 2010-11
Punjab Cricket Association, बनाम The ACIT, Circle 6(1),
Sector 63, Mohali
थायी लेखा सं./PAN NO: AAATP3502C
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : S/Sh. Ajay Vohra, Sr. Counsel &
Shri Rajesh Marwah, CA
राज व क ओर से/ Revenue by : Sh. Manjit Singh, CIT DR
ु वाई क तार%ख/Date of Hearing : 14. 06.2019
उदघोषणा क तार%ख/Date of Pronouncement : 12.09.2019
Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 07.12.2016 of the Commissioner of Income Tax (Appeals)-2,
Chandigarh [hereinafter referred to as CIT(A)].
- The assessee in this appeal has taken following grounds of appeal:-
- i) That the Ld. Commissioner of Income-tax (Appeals) has erred in facts and law in confirming the conclusion drawn by the Ld. AO that the rendering of services in respect of Indian Premier League cricket (IPL) by the appellant is a business activity and hence not eligible for exemption u/s 11 & 12 as it is hit by the first proviso to section 2(15) of the Income Tax Act, 1961. The Ld. Commissioner of Income-tax (Appeals) as well as Ld. AO has failed to appreciate the arrangement of conducting Indian Premier League cricket (IPL) matches agreed between BCCI and Kings XI Punjab and the role of appellant therein. Therefore, the conclusions drawn are not sustainable.
- ii) That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on the facts in not following the ratio laid down by the Apex Court in the case of Addl. CIT V. Surat Art Silk Cloth Manufacturers Association  121 ITR 1 /  2 Taxmann 501, which is still applicable to the appellants case even after the insertion of first proviso to section 2(15) of the Income Tax Act, 1961 from the A.Y. 2009-10.
iii) That the Ld. Commissioner of Income-tax (Appeals) has erred in law and on the facts in not following the ratio laid down by the Hon’ble ITAT, Bench “A” judgment in the case of M/s Tamil Nadu Cricket Association V.DDIT (Exemption) Chennai ITA No.1535, 1536 & 1537/Mds/2014 dated 14/08/2015, on similar set of facts.
- iv) That the Ld. Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in denying
exemption under sections 11/12 of the Income Tax Act, 1961.
- The brief facts relating to the issue are that the assessee cricket association is a society registered under the Societies Registration Act 1860. It was earlier granted registration u/s 12A of the Act which was cancelled by Commissioner of Income Tax vide order dated 31.03.2009 and the cancellation was made from assessment year 2009-10 onwards in view of the amended provisions of section 2(15) of the Income Tax Act (in short ‘The Act’). On appeal by the assessee, the co-ordinate Chandigarh Bench of the Tribunal set aside the order of the Commissioner of Income Tax, against which the appeal of the Department is pending before Hon’ble Punjab and Haryana High Court.
- During the assessment proceedings for the year under consideration, the Assessing officer noted that assessee for the relevant assessment year had reported the following income: Nature of Income Amount Tournament Subsidy-others 4,75,000/- Reimbursement / subsidy-BCCI 1,86,64,990/-
Share of TV Subsidy from BCCI 18,00,76,452/-
IPL-Subvention from BCCI 8,10,43,200/-
Service charges IPL (NET) 6,41,100/-
Income from Member by way of 1,29,03,416/- contribution and use of Facilities
Income from International Matches (Net) 2,66,10,382/-
Interest from banks 4,27,58,0311/-
Other Income 8,91,949/-
5. On being asked to explain about the nature and source of income, the assessee v i d e i t s r e p l y d a t e d 2 5 . 0 9 . 2 0 1 2 s u b m i t t e d a s u n d e r :
- i) “Tournament Subsidy – Others:- Received from M/s Prokam International as Subsidy for the inter school tournament and claims were reimbursed to the districts on account of expenses incurred for the same for hosting these matches.
ii) Re-imbursement/subsidy from BCCI:- Amount received towards expenses incurred by PCA for its participation in domestic interstate BCCI Tournaments.
iii) Share of TV Subsidy & IPL Subvention from BCCI: The amount received by the PCA, like other Associations, is an amount received for the development of the game of Cricket and infrastructure in their
Above all, it may be pertinent to mention here that BCCI being An Apex Body of the State Associations, grants TV Subsidy and IPL subvention to its units for the development of game and infrastructure in their respective areas. The amount of Subsidy/subvention is also being granted to those Associations who do not participate. The system of subsidy paid to the State Associations BCCI to control the budget.
- iv) Service Charges for IPL (Net):- Net income after meeting the expenses of Indian premier league during the year.
v) Income from Members by way of con tribution and use and facilities:- Received from members towards annual subscription and use of facilities like Swimming, Lawn Tennis, Billiard/Pool, Health Centre, Booking of hall & lawn etc.
vi) Income from Intern ational Match (Net):- Net Income after meeting out the expenses of international matches during the year.
vii) Interest from Bank:- Interest received from various banks on FDRs and saving accounts.
viii) Other Income:- Received from members towards Guest charges, Penalties, Sale of application forms, District affiliation fees and Protest fees etc.” The assessee further submitted to the assessing officer that as per the Memorandum and Articles of Association of the assessee
Association, the main object of the assessee society inter alia was to
create, foster and maintain friendly relation with and amongst the population of the area under its control through sports tournaments and competition connected therewith and to create healthy spirit of sportsmanship, to run a club house, banquet hall with catering facilities and to instill keenness for the game and to instill and spirit of the sportsmanship. That, therefore, the object of assessee would fall under the limb ‘advancement of any other object of general public utility” and thus included in the definition of ‘charitable purposes’ as per the provisions of section 2(15) of the Act and thus the income of the assessee was exempt from taxation u/s 11 of the Act.
- The assessing officer, considering the reply of the assessee, however, observed that the assessee was engaged in various activities from which the above stated income was generated. He observed that the income of the assessee was inclusive of an amount of Rs. 8,10,43,200/- from IPL-Subvention from BCCI and Rs. 6,41,100/- as service charges for IPL (NET). The Assessing officer observed that IPL event was a highly commercial event and assessee had generated income from the same by hosting matches of Punjab franchisee ‘King, XI, Punjab’ during the Indian Premier League through TV rights subsidy, service charges from IPL and IPL subvention etc. Similarly, assessee had earned income from the facilities of swimming pool, banquet hall, PCA chamber etc. That the assessee hosted these facilities for the purpose of recreation or one time booking for parties, functions etc. and these were commercial activities in nature as the assessee was charging fees for providing these facilities to its members. That assessee had also received income from M/s Silver Services who provided catering services to Punjab Cricket Club and its restaurant and this again was a commercial activity as the assessee was earning income from the running of the restaurant which was not related to the aims and objectives of the society. The Assessing Officer found that in view of the amendment to section 2(15) of the Act, the activities of the assessee were not for the charitable purpose and, therefore, he disallowed claim of exemption u/s 11(2) of the Act and brought to tax the income of the assessee and made addition of Rs. 30,13,91,457/-.
- Aggrieved by the above order of the Assessing Officer, the assessee preferred appeal before the CIT(A) and made the following submissions, as reproduced in para 5.2 of the impugned order of the CIT(A) :-
“5.2 Appellant made submission as under:-
i) The appellant was eligible for deduction u/s 11 as it was duly granted registration u/s 12A. This registration was withdrawn by the CIT-II, Chandigarh vide his order dated 31.03.2009 from the A.Y. 2009-10 onwards on the ground that with the amendment of section 2(15) by the Finance Act, 2008 the appellant cannot be regarded as
Charitable organization. Here it is pertinent to mention that the said order was quashed by the Hon’ble Bench “B” of ITAT, Chandigarh vide their order dated 27.08.2009 and the registration u/s 12A was restored. This fact is evident from the observation of the Ld. A.O at the page No. 2, Para No. 3 of the assessment order. Therefore, it
becomes very clear that the order of the ITAT, Chandigarh dated 27.08.2009 restoring the registration u/s 12A was fully effective on the date of passing of the assessment order and the reliance of the Ld. AO on the order of the CIT-II, Chandigarh that the appellant is not enjoying exemption u/s 12 is contrary to the facts stated above.
- ii) The registration u/s 12A was again cancelled by the Commissioner of Income Tax-ll, Chandigarh vide his order dated 21.06.2012 from A.Y. 2009-10 onwards on the ground that appellant is earning huge profit from business and training activities according it is not falling under the category of Charitable organization and with the amendment of section 2(15) by the Finance Act, 2008 the appellant has lost the right to be regarded as Charitable organization. Appellant filed copy of the order of the Hon’ble ITAT, Chandigarh dated 10.2015 (ITA No. 834/Chd./2012) through which the said order dated – 21.06.2012 of the CIT-II, Chandigarh has been quashed and the registration u/s 12A has been restored and submitted that the addition made on account of withdrawal of registration u/s 12A needs to be deleted.
iii) It was submitted that object of the appellant society is to promote the game of cricket in the state of Punjab and the objects of the appellant are covered under the clause ‘advancement of any other object of general public utility’ of section 2(15) of the Act as clarified by CBDT vide circular No. 395 dated 24.09.1984.
- iv) Regarding activities of holding IPL, it was submitted that cricket matches including IPL are being organized and conducted by the BCCI and appellant being the member of BCCI hosts the matches which are conducted by the BCCI for the purpose of meeting its expenditure the BCCI allocates funds from the revenue its collect from
advertisement and other sources. For holding of IPL matches the appellant only provides its stadium and other related facilities to the BCCI. All the tickets of the IPL matches are being sold by either BCCI or Franchisee Team. The state associations have no roll in this. Therefore, it cannot be concluded that the appellant is engaged
in any business activity. Appellant placed reliance on the decision of ITAT, Chennai Bench in the case of M/s Tamilnadu Cricket Association
- v) It was submitted that the club facilities are being run for the benefits of members and cricketers as per the objects of the society on the principle of mutuality. During the relevant year revenue of Rs. 123.03 lacs was generated from these facilities and this includes a sum of Rs. 14.97 lacs from caterer as a share from catering services. All the above facilities e.g. Gym, Lawn Tennis, Swimming pool etc. are interconnected and interwoven with the objects of the appellant i.e. promotion of sport and cannot be viewed separately. Without prejudice to above the appellant is maintaining separate books of accounts in respect of all above club activities. Moreover these facilities are being provided on the principle of mutuality. Accordingly these cannot be termed as trade, commerce or business activity.
- vi) During the year under consideration appellant received Rs. 15,74,147/- from M/s Silver Services as share for providing catering services in the restaurant of the appellant. This share is charged from the caterer on account of maintenance, wear and tear, electricity expenses etc. of the restaurant as all the above expenses are borne by the appellant. It was submitted that the receipts from the caterer for providing catering service during the matches is intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. Accordingly this cannot be considered as business even there is some surplus. Appellant placed reliance or the decision of Hon’ble Supreme Court in the case of M/s Surat Art Silk Cloth Manufacturer Association (supra) in this It was submitted that the appellant is running club on the principle of mutuality and only members are allowed to use the facility. Appellant also placed reliance on the decision of Hon’ble Bombay High Court in the case of Lai Lajpatrai Memorial Trust (supra).”
- The Ld. CIT(A), however, did not get satisfied with the above submissions of the assessee and dismissed the appeal of the assessee observing as under:-
“5.3 I have caref ully considered the submission of the appellant, assessment order and perused the material available on record. It is seen that the assessee society was registered u/s 12A of the Act on 27.03.1998. This registration granted u/s 12A was cancelled by Commissioner of Income Tax, Chandigarh vide his order dated 31.03.2009 on the ground that the activities of the assessee are hit by the proviso inserted to section 2(15) of the Act with effect from assessment year 2009-10. Hon’ble ITAT, Chandigarh Bench vide its order dated 27.08.2009 in ITA 538/Chandi/2009 set aside the order of the Commissioner of Income Tax cancelling the registration on the ground that Commissioner of Income Tax is not having power to cancel registration granted at any time under section 12A. The appeal of the department against the said order of ITAT is pending in Hon’ble Punjab & Haryana High Court. Commissioner of Income Tax, Chandigarh again vide his order dated 20.06.2012 cancelled the registration granted to the appellant u/s 12A and this order of the Commissioner of Income Tax cancelling the registration was set aside by ITAT vide its order dated 19.10.2015(ITA 834/Chd./2012) on the ground that section 12AA (3) was amended by finance Act, 2010, gives power to CIT to cancel registration granted u/s 12A but from assessment year 2011-12 only. Thus it is clear from the sequence of facts narrated above that the registration granted u/s 12A which was cancelled by Commissioner of Income tax was restored to the appellant by ITAT on 27.08.2009 and the assessment order in this case was passed on 29.09.2012 and therefore, on the date of assessment order appellant was having the status of a registered society u/s 12A and therefore, the contention of the assessing officer that the registration u/s 12A has already been cancelled is not factually correct and hence, the exemption claimed by the appellant u/s 11(2) of the Act cannot be disallowed on this ground only.
5.3.1 Hon’ble ITAT, Chandigarh Bench in its order dated 19.10.2015 relied upon the propositions laid down by ITAT, Amritsar Bench in deciding the issue of cancellation of registration in the case of appellant and held as under:-
“(v). In order that the benefits under section 11 are declined to the assessee on the ground that it is engaged in such activities as may be hit by the first proviso to section 2(15) not only the assessee must be engaged in car rying out such activities as may hit the first proviso to section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of the grant or withdrawal of registration since the registration exercise is a onetime exercise and not something which must be done for each assessment year separately. That is precisely the reason, as noted in the Explanatory Memorandum, as to why the remedy for the activities being hit by the first proviso to section 2(15) lies not in grant, decline or withdrawal of registration but in declining the benefits of exemption u/s 11 on that count, on year to year basis, notwithstanding the status of registration.
(vi) The disentitlement for exemption u/s 11, as a result of the activities of a assessee being held to be not for charitable purposes under section 2(15) read with provisos thereto, is in respect of entire income of the assessee trust or institution but only for the assessment year in respect of which the first proviso to section 2(15) is triggered. ”
5.3.2 From the above proposition, it is clear that the activities of the assessee society whether being hit by first proviso to section 2(15) is to be seen on year to year basis to decide the exemption benefit u/s 11 of the Act. It cannot be disputed that Indian Premier League matches is a highly commercialized event in which huge revenue is generated through TV rights, gate collection money, merchandizing
and other promotions. The franchisees have been sold to corporate and individuals and in this process appellant has received huge income of Rs. 8,10,43,200/- for IPL- subvention from BCCI, service charges (Net) of Rs. 6,41,100/- and reimbursement of Rs. 1,86,64,990/- from BCCI. The argument of the appellant that all the tickets of the IPL matches are sold by BCCI or Franchisee Team and
IPL players are sold in public auction for a huge amount, but this all is done by the BCCI and the appellant has no role in conducting these matches cannot be accepted. The fact remains that the huge revenue is generated in this commercial activity and whether it was done by BCCI or by the appellant, the share of the income so generated has
been passed on to the appellant. The appellant has relied on the decision of the Hon’ble ITAT, Chennai Bench in the case of Tamilnadu Cricket Association (supra) wherein it has been held that the assessee has received funds from BCCI for meeting the expenditure being the host and therefore, it cannot be said that the assessee is conducting any business activity and hence, proviso to section 2(15) is not applicable. I would like to differ respectfully from the conclusions drawn by Hon’ble ITAT, Chennai Bench as in the case of appellant it is not only the reimbursement of expenses but over and above that huge amount have been passed on to the appellant and the income generated by busines s activity whether undertaken by BCCI or by the appellant is purely a business activity of which assessee is a beneficiary. In my considered opinion the appellant has rendered services in relation to the business activity and
therefore, is hit by the first proviso to section 2(15) of the Act. Decisions relied upon by the appellant on the principal of mutuality are distinguishable from the facts in the case of the appellant, as the appellant has not generated the income from its facilities in pursuance of its dominant object of the activity. Therefore, the assessee society
ceases to be for charitable purpose and the benefits of deduction u/s 11(2) are not available to the assessee. Assessing Officer has given reasoned finding in the assessment order and the s ame are upheld. Grounds of appeal taken by the appellant are dismissed.”
- Aggrieved by the above order of the CIT(A), the assessee has come in appeal before us.
9.1 Shri Ajay Vohra, Ld. Sr. Counsel for the assessee has addressed orally, besides that written submissions have also been filed on behalf of the assessee. It has been submitted that the Registration of the assessee Cricket Association as a ‘Charitable Organization’ u/s 12 of the Income Tax Act, 1961 (in short ‘the Act’) has been restored.’ Inviting our attention to the Memorandum of Association / objects of the assessee association, the Ld. counsel has submitted that the assessee is basically a body for promotion of cricket and that the activities and objects of the assessee are concentrated for advancement of its objects of ‘general public utility’ and, thus, squarely covered within the definition of ‘Charitable Purposes’ as defined u/s 2(15) of the I.T. Act.
9.2 Mr. Vohra, the Ld. Counsel for the appellant/assessee, has further submitted that BCCI is the Apex body of different cricket associations and is registered under the ‘The Tamil Nadu Societies Registration Act, 1975’ at Madras having its head office at Mumbai. He has further submitted that the Indian Premier League (in short ‘IPL’) is a baby of
the BCCI and that the assessee is not involved in any manner in organizing or commercially exploiting the IPL matches. The commercial exploitation, if any, of the IPL matches is done by the BCCI. That the assessee i.e. Punjab Cricket Association (PCA) is a distinct and separate entity from the BCCI. Inviting our attention to the copy of the sample ‘tripartite agreement’ / ‘stadium agreement’ entered into between the Assessee, BCCI and KPH Dream Cricket Pvt Ltd. (franchisee/ owner of Kings XI cricket team), the Ld. Sr. Counsel has submitted that the only activity on the part of the assessee is the renting out its stadium to BCCI for holding of IPL matches. That ‘T-20’ or to say ‘IPL’ is also a form of popular cricket. That since the main object of the assessee is for the promotion of the game of cricket, hence, considering the popularity of the IPL matches, the renting out of the stadium for the purpose of holding of IPL matches by the BCCI for a short period of 30 days in an year, is an activity towards advancement of the objects of the assessee
association of promotion of the game. In lieu of the providing stadium, the assessee gets the rental income for a short period and that the renting out the stadium is not a regular business of the assessee. Inviting our attention to the above reproduced table of income, the Ld. Counsel has submitted that the grant received from the BCCI during the year under consideration in the form of share of TV Subsidy of Rs. 18,00,76,452/- and IPL Subvention of Rs. 8,10,43,200/- is part of the largesse distributed by BCCI to its member associations at its discretion for promotion of the sport of cricket. That even as per the rules and regulations of the BCCI, the BCCI is not obliged to distribute the earning generated by it to State Cricket Associations and no such association, can claim, as an integral right, share in the earning of the BCCI.
9.3 To apprise us about the nature, quantum and manner of the grant given by the BCCI to member State Associations, Mr. Vohra, the Ld. Sr. Counsel has drawn our attention to the page 77 of the paper book, which is the copy of minutes of 79 t h Annual General Meeting of the BCCI held on 27.9.2008, to submit that as per the said document, the TV subsidy to members association of BCCI was payable as under:-
“1. Staging Test & ODI – Rs. 18,59,47,343/-
- Staging Test – Rs. 16,82,38,072/-
- Staging ODI – Rs. 14,97,23,835/-
- Non Staging – Rs. 13,81,32,312/-
The total TV subsidy amount payable to Associations for
the year 2007-08 is Rs. 371,89,46,858/-.”
9.4 Mr. Vohra, has further contended that even if a Member State Associations does not provide any assistance in holding of the IPL matches or when the IPL match is not hosted or organized at the stadium of an association, still the member cricket association gets grant out of the TV subsidy. That in the year 2009, when the IPL matches were played entirely in South Africa, still all the member associations including the assessee received uniform subsidy of Rs. 8,10,43,200/- from the BCCI. However, if a match is staged or hosted at the ground of an association, the amount of subsidy is increased. That as per the sample agreement, the assessee has been paid Rs. 30 lacs + service tax in respect of the each day on which the match is staged in whole or in part at the stadium of the assessee. That for the financial year 2017-18, the BCCI has not distributed any grant out of its earning from IPL to the State Cricket Associations and even though substantial income was