2015 (8) TMI 761 - AT - Income Tax

Registration granted under Section 12AA cancelled - claim of depreciation denied - Held that - For assessment year 2008-09 when the assessee claims the cost of the capital expenditure as exemption under Section 11 of the Act, then the cost of the capital asset becomes NIL. Admittedly, depreciation under Section 32 of the Act has to be allowed only on written down value of the asset. When the written down value of the asset becomes NIL since the entire cost was allowed as application of income under Section 11 of the Act, this Tribunal is of the considered opinion that there cannot be any further claim for deduction under Section 32 of the Act. In view of the above, this Tribunal is of the considered opinion that the assessee is not eligible for deduction under Section 32 of the Act towards depreciation. However, it is made clear that the assessee is eligible for exemption under Section 11 of the Act for all the assessment years under consideration. - Decided against assessee. Now coming to assessment years 2009-10 and 2010-11, the claim of the assessee was rejected by the lower authorities on the ground that the registration under Section 12AA was cancelled and it was confirmed by this Tribunal. The lower authorities have also found that the assessee is engaged in business activity. As regards the cancellation of registration, now the Madras High Court has set aside the order of this Tribunal and restored the registration under Section 12AA of the Act. Therefore, as on today, the registration under Section 12AA is restored. - Decided in favour of assessee. Whether the activity of conducting oneday matches, T-20 matches and Indian Premier League matches would amount to doing business or trade? - Held that - The material available on record shows that one-day matches, T-20 matches and Indian Premier League matches are all conducted by the BCCI and the assessee, being the host in the State of Tamil Nadu, is only providing its stadium. The assessee has also received funds from BCCI for meeting the expenditure, being the host. Therefore, this Tribunal is of the considered opinion that at any stretch of imagination, it cannot be said that the assessee is conducting any business activity. The assessee is also not providing any service to any trade, commerce or industry. In those circumstances, this Tribunal is of the considered opinion that proviso to Section 2(15) of the Act is not applicable to the assessee. In view of the above discussion, the assessee is eligible for exemption under Section 11 of the Act for all the assessment years under consideration. Accordingly, the orders of the lower authorities for assessment years 2009-10 and 2010- 11are set aside and the Assessing Officer is directed to grant exemption under Section 11 of the Act. The Assessing Officer is also directed to grant exemption under Section 11 of the Act for the assessment year 2008-09 also.- Decided in favour of assessee.

Issues Involved:
1. Eligibility for exemption under Section 11 of the Income-tax Act.
2. Cancellation and restoration of registration under Section 12AA.
3. Nature of income and activities of the assessee-society.
4. Claim of depreciation under Section 32.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption Under Section 11 of the Income-tax Act:
The assessee, a registered society under the Tamil Nadu Societies Registration Act, was registered under Section 12AA of the Income-tax Act, 1961, as a charitable institution. The main object of the assessee-society is to promote the sport of cricket in Tamil Nadu and Puducherry. The society conducts various cricket tournaments and provides coaching for cricketers. The assessee claimed exemption under Section 11 for the assessment years 2009-10 and 2010-11, which was initially denied by the Assessing Officer on the grounds that the activities involved commercial receipts. The Tribunal found that the promotion of sports is a charitable purpose as per CBDT Circular No. 395 dated 24.09.1984, which states that promoting sports and games amounts to the advancement of an object beneficial to the public. Therefore, the assessee-society should be treated as a charitable institution eligible for exemption under Section 11.

2. Cancellation and Restoration of Registration Under Section 12AA:
The registration of the assessee-society under Section 12AA was canceled by the Director of Income Tax (Exemptions) on 29.12.2011, which was confirmed by the Tribunal. However, the High Court set aside this cancellation, restoring the registration. As a result, the assessee's registration under Section 12AA stands restored, making it eligible for exemption under Section 11.

3. Nature of Income and Activities of the Assessee-Society:
The assessee-society earns income from various sources, including subscriptions from members, sale of tickets, revenue from advertisements, receipts from BCCI, and interest from bank deposits. The Assessing Officer initially treated these incomes as commercial receipts. However, the Tribunal noted that the assessee's activities, including hosting matches organized by BCCI and conducting training programs, are aimed at promoting cricket, which is a recognized sport in India. The Tribunal clarified that the assessee's role in Indian Premier League matches is limited to providing the stadium and making arrangements, with BCCI conducting the matches and auctions. Therefore, the assessee's activities do not amount to business or trade, and the proviso to Section 2(15) is not applicable.

4. Claim of Depreciation Under Section 32:
For the assessment year 2008-09, the assessee claimed depreciation on capital assets. The Assessing Officer disallowed this claim, citing the Supreme Court judgment in Escorts v. Union of India (199 ITR 43), which held that once the cost of the capital asset is allowed as application of income under Section 11, the cost of the asset becomes NIL, and no further depreciation can be claimed. The Tribunal upheld this view, stating that the provisions of Section 32 apply only to assets used for business or profession, which is not the case for a charitable organization. Therefore, the assessee is not eligible for depreciation under Section 32 but is eligible for exemption under Section 11 for all assessment years under consideration.

Conclusion:
The Tribunal directed the Assessing Officer to grant exemption under Section 11 for the assessment years 2008-09, 2009-10, and 2010-11. The assessee's appeal for the assessment year 2008-09 was partly allowed, and the appeals for the assessment years 2009-10 and 2010-11 were fully allowed.

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