2013 (5) TMI 155 - AT - Income Tax

Cancellation of Registration U/s 12AA - Established for the purpose of promoting and developing the game of cricket - Charitable activity u/s 2(15) - held that - It is not the physical factor as to whether the assessee is conducting cricket matches or not which is the issue to be looked into. It is the purpose for which those physical activities are carried out. There is no case as far as physical activities are concerned that the game conducted by the assessee is not genuine. It becomes not genuine when we look into the objects for which the association is formed and registered under section 12AA of the Act. The object of the assessee was to carry on an activity for advancement of an object of general public utility by promoting the cricket game - But it has deviated from the stated objective by carrying out the game of cricket as an entertainment industry generating huge revenue - We are of the considered opinion that the case of the assessee is covered by both the limbs stated in section 12AA(3) of the Act - We uphold the order of the Director of Income-tax (Exemptions) passed under section 12AA(3) of the Income-tax Act 1961 - The registration of the assessee granted under section 12AA has been rightly cancelled - Appeal is dismissed in favour of revenue.

Issues Involved:
1. Jurisdiction of the Director of Income-tax (Exemptions) under section 12AA(3) of the Income-tax Act.
2. Whether the activities of the assessee are genuine and in accordance with its declared objects.
3. Applicability of the proviso to section 2(15) of the Income-tax Act.
4. Nature of receipts and activities of the assessee, particularly in relation to commercial activities and revenue generation.

Detailed Analysis:

1. Jurisdiction of the Director of Income-tax (Exemptions) under section 12AA(3):
The Director of Income-tax (Exemptions) invoked his jurisdiction under section 12AA(3) to cancel the registration granted to the assessee, The Tamil Nadu Cricket Association. The assessee argued that the Director could not pass the impugned order as the pre-conditions necessary for invoking section 12AA(3) were not met. The Tribunal referred to the case of CIT v. Sarvodaya Ilakkiya Pannai [2012] 343 ITR 300 (Mad), which held that under section 12AA(3), the Commissioner is empowered to cancel the registration only if the activities of the trust or institution are not genuine or not carried out in accordance with its objects.

2. Whether the activities of the assessee are genuine and in accordance with its declared objects:
The assessee contended that its activities were in line with its objective of promoting and developing the game of cricket, which is considered a general public utility. However, the Director of Income-tax (Exemptions) concluded that the assessee was engaging in commercial activities, generating substantial revenue from ticket sales, advertisements, and broadcasting rights. The Tribunal agreed with the Director's findings that the assessee's activities were not genuine and not in accordance with its declared objects, as they were primarily revenue-oriented rather than charitable.

3. Applicability of the proviso to section 2(15) of the Income-tax Act:
Section 2(15) defines "charitable purpose" and includes the advancement of any other object of general public utility. However, the proviso inserted by the Finance Act, 2008, states that such advancement shall not be considered charitable if it involves trade, commerce, or business activities. The Tribunal noted that the assessee's significant revenue from commercial activities, such as IPL matches and advertisement rights, fell under the proviso, thus disqualifying it from being considered a charitable institution.

4. Nature of receipts and activities of the assessee:
The Director of Income-tax (Exemptions) meticulously examined the receipts of the assessee, which included substantial amounts from BCCI, termed as subsidies but actually representing revenue shares from advertisements. The Tribunal found that 86.5% of the assessee's total receipts were from commercial activities, including IPL matches and broadcasting rights. The Tribunal also highlighted that the high ticket prices and commercial nature of events like IPL and Celebrity Cricket Matches indicated a shift from charitable activities to revenue generation.

Conclusion:
The Tribunal upheld the order of the Director of Income-tax (Exemptions) canceling the registration of the assessee under section 12AA(3). It concluded that the assessee's activities were not genuine and not in accordance with its declared objects, as they were primarily commercial in nature. The appeal filed by the assessee was dismissed.

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