2025 (4) TMI 270 - AT - Income Tax

Characterization of receipt - one-time benefit received from by the assessee from Board of Control for Cricket in India (BCCI) - assessee is a former well renowned cricketer who had represented India in many international matches across the world - HELD THAT - The assessee had voluntarily come forward to offer the one- time benefit received from BCCI to tax in the return of income. Pursuant to the subsequent developments by way of certain tribunal decisions the assessee was advised that the said benefit received by the assessee would be exempt from tax in terms of Section 56(2)(vii) of the Act. The subsequent decision of the tribunal together with better understanding of provisions of section 56(2)(vii) had practically prompted the assessee to prefer an appeal per se before the CIT-A. It is trite law that right amount of tax should be collected from the right person in accordance with law. Article 265 of the Constitution provides that no tax could be collected except by an authority of law. When a statute specifically provides a particular exemption of a particular receipt from tax the said receipt cannot be brought to tax merely because the assessee had offered erroneously in the return of income. Ultimately income is to be determined in accordance with the provisions of the Act and revenue cannot take advantage of ignorance of the assessee while determining the taxable income. It is a fact that this one-time benefit received from BCCI in recognition of services would be eligible for exemption u/s 56(2)(vii) of the Act as BCCI is a trust or institution registered under Section 12AA of the Act. This fact has been endorsed in the case of Maninder Singh 2021 (1) TMI 1348 - ITAT DELHI Hence respectfully following the same we do not deem it fit to restore this appeal to the file of Learned CIT(A) for de novo adjudication and instead decide the issue here itself as the issue is already covered and the provisions of the Act are very clear in this regard.

ISSUES PRESENTED and CONSIDERED

The core legal question considered in this appeal was whether the one-time benefit received by the assessee from the Board of Control for Cricket in India (BCCI) could be subjected to tax under the Income-tax Act, 1961. Specifically, the issue was whether this benefit was exempt under Section 56(2)(vii) of the Act, given the circumstances of the case.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The relevant legal provision in question was Section 56(2)(vii) of the Income-tax Act, 1961, which provides for the exemption of certain receipts from taxation. The Tribunal also considered precedents, particularly the decision in the case of Maninder Singh Vs ACIT, which dealt with a similar issue involving a cricketer receiving a one-time benefit from BCCI.

Court's Interpretation and Reasoning:

The Tribunal examined the applicability of Section 56(2)(vii) and noted that the BCCI is a trust or institution registered under Section 12AA of the Act. This registration is crucial for determining the taxability of the benefit received. The Tribunal emphasized that the right amount of tax should be collected from the right person in accordance with the law, as mandated by Article 265 of the Constitution.

Key Evidence and Findings:

The Tribunal considered the affidavit filed by the assessee explaining the delay in appealing against the assessment order. The affidavit detailed the reasons for the delay, which included subsequent legal developments and tribunal decisions that clarified the taxability of the one-time benefit. The Tribunal found the reasons for the delay to be convincing and sufficient.

Application of Law to Facts:

The Tribunal applied the provisions of Section 56(2)(vii) to the facts of the case, acknowledging that the one-time benefit from BCCI was indeed eligible for exemption. The Tribunal noted that the assessee had initially offered the amount to tax due to ignorance of the law, but subsequent legal advice and tribunal decisions clarified the exemption status.

Treatment of Competing Arguments:

The Tribunal addressed the arguments presented by the Department Representative (DR), who contended that the assessee had made a conscious decision to offer the receipt to tax and had not revised the return. The DR relied on the Supreme Court decision in Goetze India Ltd, arguing that claims must be made in the return filed by the assessee. The Tribunal dismissed this argument, clarifying that the Goetze India decision restricts the assessing authority's power but does not limit the appellate authorities' powers.

Conclusions:

The Tribunal concluded that the one-time benefit received from BCCI was exempt under Section 56(2)(vii) of the Act. It determined that the appeal should not be remanded to the Commissioner of Income Tax (Appeals) for reconsideration, as the issue was already covered by precedent and the legal provisions were clear.

SIGNIFICANT HOLDINGS

The Tribunal held that the one-time benefit received from BCCI, in recognition of the assessee's services to Indian cricket, is exempt from tax under Section 56(2)(vii) of the Income-tax Act, 1961. This holding was based on the fact that BCCI is a trust or institution registered under Section 12AA, and the receipt falls within the exemption criteria specified in the Act.

Preserve verbatim quotes of crucial legal reasoning:

The Tribunal stated, "It is trite law that the right amount of tax should be collected from the right person in accordance with law. Article 265 of the Constitution provides that no tax could be collected except by an authority of law."

Core principles established:

The Tribunal reaffirmed the principle that exemptions provided by statute must be honored, and taxpayers should not be penalized for ignorance of the law when subsequent legal developments clarify their tax obligations.

Final determinations on each issue:

The Tribunal allowed the appeal, concluding that the one-time benefit received by the assessee from BCCI is exempt from tax under the relevant provisions of the Income-tax Act. The grounds raised by the assessee were accepted, and the appeal was decided in favor of the assessee.

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