2025 (4) TMI 740 - AT - Income Tax

Denial of exemption u/s 11 - assessee s registration u/s 12A of the Act has been cancelled w.e.f. 1st April 2009 - taxing the receipts of the assessee trust - Addition of T.V. subsidy received from Board of Control for Cricket in India (BCCI) - HELD THAT - We have perused the decision of the Hon ble Supreme Court in AUDA s case 2022 (11) TMI 255 - SUPREME COURT wherein as observed that In each case and for every year the tax authorities are under an obligation to carefully examine and see the pattern of receipts and expenditure and the party s contention in this regard are to be considered on their merits. This judgment of the Hon ble Apex Court was available with the Ld. CIT(A) at the time of passing of his appellate order however it remained to be considered by him vis- -vis the facts and merits of the assessee s case for the relevant AY 2011-12 under consideration. Thus in our considered view the issue(s) raised in various grounds of appeal by the assessee before us needs to be examined in light of the observations of the Hon ble Supreme Court in AUDA s case (supra). We also find some force in the arguments of the Ld. AR that the Ld. CIT(A) has passed a non-speaking order by simply upholding the observations and findings of the Ld. AO without himself going into the merits of the case and has also failed to consider the detailed submissions made by the assessee before him in support of its claim. Appeal of the assessee is allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the cancellation of the assessee trust's registration under Section 12A of the Income Tax Act was valid, thereby affecting its eligibility for exemption under Sections 11 and 12.

2. Whether the subsidies and grants received from the Board of Control for Cricket in India (BCCI) should be treated as voluntary donations or as commercial receipts, impacting the trust's tax liability.

3. Whether the capital subsidies received for infrastructure projects should be considered revenue receipts subject to taxation.

4. Whether the tournament receipts from BCCI should be treated as commercial income.

5. Whether the disallowance of the deficit claim regarding the application of income was justified.

ISSUE-WISE DETAILED ANALYSIS

1. Cancellation of Registration under Section 12A

- Legal Framework and Precedents: Section 12A of the Income Tax Act provides for registration of charitable trusts, which is a prerequisite for claiming exemptions under Sections 11 and 12. The amendment to Section 2(15) introduced restrictions on the definition of charitable activities.

- Court's Interpretation and Reasoning: The Tribunal noted that the registration under Section 12A was restored by a prior order of the Tribunal, which had not been stayed by the High Court. Consequently, the trust's registration was considered valid.

- Application of Law to Facts: The Tribunal emphasized that the trust's registration status was crucial for determining its eligibility for tax exemptions.

- Treatment of Competing Arguments: The Tribunal acknowledged the Revenue's argument that the registration was canceled due to non-communication of changes in the trust's objectives. However, it favored the assessee's position due to the subsisting Tribunal order restoring registration.

- Conclusion: The Tribunal directed the CIT(A) to re-evaluate the case, considering the restored registration and the Supreme Court's observations in a related case.

2. Nature of Subsidies and Grants from BCCI

- Legal Framework and Precedents: The characterization of receipts as voluntary donations versus commercial income affects their tax treatment under Sections 11 and 12.

- Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not adequately consider whether the subsidies were voluntary or commercial. The Tribunal referenced the Supreme Court's guidance on examining the nature of receipts.

- Key Evidence and Findings: Evidence showed that the subsidies were provided without the trust hosting international matches, suggesting a voluntary nature.

- Application of Law to Facts: The Tribunal suggested a detailed examination of the nature of subsidies, considering the Supreme Court's guidance.

- Treatment of Competing Arguments: The Tribunal acknowledged the Revenue's view of commercial intent but emphasized the need for a nuanced examination.

- Conclusion: The Tribunal remanded the issue for fresh adjudication, emphasizing the need to consider the Supreme Court's observations.

3. Capital Subsidies for Infrastructure Projects

- Legal Framework and Precedents: The characterization of capital subsidies impacts their tax treatment as revenue or capital receipts.

- Court's Interpretation and Reasoning: The Tribunal noted the need for a detailed analysis of whether these subsidies were capital or revenue in nature.

- Key Evidence and Findings: The subsidies were linked to specific infrastructure projects, suggesting a capital nature.

- Conclusion: The Tribunal directed the CIT(A) to reassess the nature of these subsidies.

4. Treatment of Tournament Receipts

- Legal Framework and Precedents: The classification of tournament receipts as commercial income affects the trust's tax liability.

- Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) did not adequately address whether these receipts were commercial.

- Conclusion: The Tribunal remanded the issue for a detailed examination.

5. Disallowance of Deficit Claim

- Legal Framework and Precedents: The treatment of deficit claims affects the calculation of taxable income.

- Court's Interpretation and Reasoning: The Tribunal noted the need for a detailed review of the deficit claim in light of the trust's registration status.

- Conclusion: The Tribunal directed a reassessment of the deficit claim.

SIGNIFICANT HOLDINGS

- The Tribunal emphasized that the trust's registration under Section 12A was valid, impacting its eligibility for exemptions.

- The Tribunal highlighted the need for a detailed examination of the nature of subsidies and grants, referencing the Supreme Court's guidance on such matters.

- The Tribunal directed the CIT(A) to reassess the nature of capital subsidies and tournament receipts, considering the trust's registration status and the Supreme Court's observations.

- The Tribunal remanded the case for fresh adjudication, emphasizing the need for a detailed examination of all issues in light of the Supreme Court's guidance.