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2020 (7) TMI 641 - AT - Income TaxExemption u/s 11 and 12 - Charitable activity u/s 2(15) - activities of the appellant, i.e. holding of matches, sale of match tickets, receipt from booking of corporate boxes by companies, receipt of IPL subvention from BCCI, income from club facilities, receipt from sponsors etc - whether activities of the appellant, i.e. holding of matches, sale of match tickets, receipt from booking of corporate boxes by companies, receipt of IPL subvention from BCCI, income from club facilities, receipt from sponsors etc,services in respect of Indian Premier League cricket (IPL) by the appellant is a business activity and hence it not eligible for exemption u/s 11 12? - HELD THAT - in view of the provisions of Section115TD of the Act, the accreted income of the assessee due to the exemption, if any, granted to the assessee in earlier years become taxable in view of the amended objects of the assessee, hence, even if the claim of exemption is allowed to the assessee for the assessment years under consideration that will not serve any useful purpose as the assessee in the subsequent years will be liable to pay tax on such accreted income. Double taxation of income in the hands of BCCI and Assessee, as the member of AOP - Held that - As decided in 2019 (9) TMI 681 - ITAT CHANDIGARH amount paid by the BCCI to the appellant which has already been taxed at the hands of BCCI, cannot be now taxed in the hands of the member of the AOP i.e. the appellant State Association as it will amount to double taxation of the same amount. if the claim of the BCCI for treating the payments made to the State Association as deductible expenditure is accepted by any higher appellate authority in its case for the year under consideration, it will be open to the assessing officer of the appellant to reopen the case of the appellant and to decide whether the said payments received from BCCI can be taxed as income of the appellant which will be subject to our observations given on other issues raised in this appeal - income received by the appellant/assessee otherwise, except the club income, which has not been taxed at the hands of the BCCI, will be assessed as per the normal provisions of the Act. So far as the income from club facilities and from caterer this issue is required to be re-examined by the Assessing officer after verification of the accounts of the assessee as to ascertain which part of the club income and catering services has been generated from the members of the assessee association and which part of the income is earned from non-members. It is also to be looked into whether the income from the club house and other facilities is generated generally from the members only and the receipt from the non-members is an exception or the income is generated from members and non-members in normal course of business. Whether the catering services are limited to the members and their guests only or the same are also provided to non-members also on commercial basis. The Assessing officer after thoroughly examining the above facts will decide if the principle of mutuality applies to the club income including catering contract in accordance with law. This issue is accordingly restored to the file of the Assessing officer. The findings / directions as given vide order dated 12.09.2019 (supra), will be applied accordingly in the captioned appeals. Appeals of the assessee partly allowed for statistical purposes.
Issues involved:
1. Whether the activities of the appellant/assessee are of a commercial nature and thus hit by the proviso to section 2(15) of the Income Tax Act, 1961. 2. Whether the Assessing Officer (AO) was justified in disallowing the claim of exemption to the assessee under section 11 of the Act. 3. Whether the sum received as Infrastructure Subsidy from BCCI is of capital nature and wrongly taxed as revenue receipt. 4. Whether the one-time entrance fee from new members should be considered as a capital receipt or revenue receipt. 5. Whether the principles of mutuality apply to the club income and catering services. 6. Application of the decision of the Hon’ble Gujarat High Court in the case of Gujarat Cricket Association to the present case. 7. Examination of the amended objects of the assessee and their impact on the taxability of income. Detailed Analysis: 1. Commercial Nature of Activities and Section 2(15): The primary issue was whether the activities of the appellant, such as holding matches, selling match tickets, and receiving income from various sources, are of a commercial nature, thus falling under the proviso to section 2(15) of the Income Tax Act, 1961. The Tribunal noted that the appellant cricket association is a society registered under the Societies Registration Act, 1860, and was earlier granted registration under section 12A of the Act, which was later canceled. The AO held that the activities were not charitable in nature due to the amended provisions of section 2(15) and denied exemption under section 11. The Tribunal upheld this view, stating that the activities were concentrated on revenue generation by exploiting the popularity of cricket, thus not qualifying as charitable. 2. Disallowance of Exemption under Section 11: The Tribunal referenced its own decision in the appellant’s case for the assessment year 2010-11, where it was decided that the appellant's activities did not fall under the definition of charitable purposes as per section 2(15). The Tribunal reiterated that the appellant cannot be granted exemption under section 11, as the activities were commercial in nature. 3. Infrastructure Subsidy from BCCI: The appellant contended that the sum received as Infrastructure Subsidy from BCCI was of capital nature and should not be taxed as revenue receipt. The Tribunal noted that the AO treated this amount as revenue receipt, and the CIT(A) upheld this view. The Tribunal did not provide a specific ruling on this issue in the summary, indicating that the matter might require further examination. 4. One-Time Entrance Fee from New Members: The appellant argued that the one-time entrance fee from new members should be considered a capital receipt. The Tribunal noted that the AO treated this amount as revenue receipt, and the CIT(A) upheld this view. The Tribunal did not provide a specific ruling on this issue in the summary, indicating that the matter might require further examination. 5. Mutuality Principle for Club Income and Catering Services: The Tribunal restored the issue of club income and catering services to the AO for re-examination. It directed the AO to verify whether the income was generated from members or non-members and whether the principle of mutuality applied. The AO was instructed to determine if the income from club facilities and catering services was commercial in nature or derived from members on a mutual basis. 6. Application of Gujarat High Court Decision: The Tribunal discussed the decision of the Hon’ble Gujarat High Court in the case of Gujarat Cricket Association, which favored the assessee. However, it noted that the facts of the present case were distinguishable. The Tribunal emphasized that the payments from BCCI to the appellant were not voluntary donations but were under an obligation, thus not qualifying as corpus donations. The Tribunal concluded that the decision of the Gujarat High Court could not be applied to the present case due to different facts and circumstances. 7. Amended Objects and Taxability: The Tribunal observed that the amended objects of the appellant included activities directed towards revenue generation by exploiting its rights and properties. It noted that this change brought clarity about the appellant’s operations and activities. The Tribunal highlighted the provisions of section 115TD, which tax the accreted income of a trust or institution if it modifies its objects to non-charitable purposes. The Tribunal indicated that even if exemption were granted for the assessment years under consideration, the appellant would be liable to pay tax on accreted income in subsequent years due to the amended objects. Conclusion: The Tribunal concluded that the appellant cannot be granted exemption under section 11 as its activities are commercial in nature. It restored the issue of club income and catering services to the AO for re-examination. The Tribunal emphasized that the decision of the Gujarat High Court could not be applied to the present case due to distinguishable facts. The appeals were treated as partly allowed for statistical purposes.
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