9911796707
TMI Blog2019 (9) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, the Ld. CIT(A) has erred in deleting the additions of Rs. 54,84,00,000/- on Infrastructure subsidy received from BCCI denying exemption u/s.11(1)(d) of the Income Tax Act, 1961 on corpus donation without any 'specific direction' for the purpose. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of 'Bogus Donation' claimed on account of expenses relating to Tournament & Trophy and Ranji Trophy without considering that the expenses could not be substantiated during the assessment proceedings. 3. That on the facts and circumstances of the case, the decision of the Ld. CIT(A) is perverse in allowing expenditure without establishing genuineness of the same particular in the context that in the next assessment year, i.e., 2015- 16, the assessee itself suggested for special audit of its books of accounts regarding the claim of expenditure. 4. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing administrative and establishment expenses as application of income. 5. That on the facts and circumstances of the case as well as law, the Ld. CIT(A) has er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 taken in the assessee's own case in Appeal No. CIT(A), Kolkata-25/10144/2015-16, order dt. 06/01/2017, wherein he has held that the assessee has filed intimation u/s 11(2) and had deposited the amount as specified u/s 11(5) of the Act and alternatively that Section 11(1)(d) of the Act applies as the amount in question was received with a specific direction. He further held that the amount was given by BCCI specifically for construction of a cricket stadium and the assumptions of the Assessing Officer that the receipts are not donation since BCCI will be hosting cricket matches in future is a wrong assumption at para 7.3. of his order, he held as follows:- "7.3 To wind-up on this issue: Firstly, following my appeal order in the case of this same appellant for the AY 2012-13 [supra], the facts being the same/identical, the issue is Allowed. It is the case of section 11(l)(a) r.w.s. 12(1), and as the amount could not be applied, for accumulation u/s 11(2) - the funds having been already deposited/invested in the modes specified in section 11 (5). The belated Form No. 10 was due to circumstances beyond the control of the appellant, and in any case it was submitted before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dt. 15th March, 2019, wherein it has been held as follows:- "12. We now take up the issue as to whether the proviso to Section 2(15) of the Act, can be applied in the facts and circumstances of the case. Admittedly, the main and predominant object of the assessee company is to promote the game of cricket. There is no dispute between the parties that this object falls under the fourth limb of the definition of charitable purpose given u/s 2(15) of the Act i.e. "object of general public utility". The Assessing Officer came to a conclusion that the assessee is carrying on commercial activity in the nature of trade, commerce or business as the assessee has received amounts from BCCI on account of IPL Subvention, TV rights subsidy from BCCI, Instedia Advertisement etc. In our considered opinion, these receipts from BCCI cannot be considered as income received from activities in the nature of trade, commerce or business. The pith and substance of the argument of the ld. D/R is that the nature of receipt in the hands of BCCI is business or commercial receipts on account of IPL Subvention, T.V. Rights etc. and where these receipts are shared with the state association on an 30:7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I are correct or not, because that aspect of the matter would be relevant only for the purpose of proviso to Section 2(15) being invoked in the hands of the BCCI. We donot wish to deal with that aspect of the matter or to make any observations which would prejudge the case of the BCCI. Suffice to say that the very foundation of revenue's case is devoid of legally sustainable basis for the short reason that the commercialization of cricket by the BCCI, even if that be so, cannot be reason enough to invoke the proviso to Section 2(15). We are alive o learned Commissioner (DR)'s suggestion that the cricket associations cannot be seen on standalone basis as the BCCI is nothing but an apex body of these cricket associations at a collective level and whatever BCCI does is at the behest of or with the connivance of the local cricket associations, and that it is not the case that anyone can become a Member of the BCCI because only a recognized cricket association can become a Member of the BCCI. We are also alive to learned Commissioner's argument that what is being sought to be protected by the charitable status of these associations is the share of these cricket associations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessees before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. We have carefully analysed the annual reports and the annual financial statements of the assessee, and we do not find any objects, other than objects of the cricket associations, being pursed by these cricket associations. The objects of these cricket associations clearly demonstrate that these cricket associations exist and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on facts in denying the applicability of Sec. 11 including 11(1)(b) and holding that the assessee is not carrying on charitable activity. (a) The learned CIT(A) has erred in law and on facts in not accepting the claim of the assessee that the assessee is carrying on 'Educational Activity', and hence the amendment to Section 2(15) w.e.f 01-04-2009, vis-a-vis "business" is not applicable to assessee. (b) The learned CIT(A) has erred in law and on facts in holding that on the facts of case of the assessee proviso to Sec. 2(15) inserted w.e.f. 01-04-2009 is applicable, and is carrying on business. 46. So far as these grounds of appeal are concerned, we have, in our detailed analysis earlier in this order, held that the proviso to Section 2(15) does not come into play on the facts of these cases. Accordingly, we uphold the plea of the assessee to this extent. The assessee is thus held to be carrying out 'charitable activity' within the meanings of that expression under section 2(15) and, accordingly, the assessee is entitled to relief under section 11. As to whether the assessee is carrying out educational activities or not, given our above finding, that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific direction that they shall form part of the corpus of the trust or the institution". The Assessing Officer was of the view that what has been paid to the assessee is a share out of earnings by the BCCI, out of proceeds of sale of TV rights, and is, as such, taxable as income of the assessee. It was observed that it cannot be said to be voluntary contribution by the BCCI. The Assessing Officer also shows that as accepted by the auditor of the company the amount is relatable to the TV rights and it cannot, therefore, be treated as voluntary contribution in the nature of corpus donations. He also noted that as registration of the assessee, under section 12AA, stands cancelled, the assessee is anyway not eligible for the benefit of Section 11(1)(d). On the basis of this line of reasoning, the Assessing Officer treated the said amount of Rs. 1,58,00,000 as income of the assessee. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. It was pointed out to the CIT(A) that the BCCI has passed a specific resolution that the amount computed as TV subsidy is given to the Member associations as corpus donation. The CIT(A), identified the core issue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment which the assessee is not under an obligation to make, whatever be the mode of its computation, is a voluntary payment, and, any payment which is with a specific direction that it for corpus fund is a corpus donation. In our considered view, even without the two specific confirmations filed by the assessee, in the light of the BCCI resolution under which the payment is made and in the light of the payment not being under any legal obligation, the conditions under section 11(1)(d) are satisfied. We, therefore, uphold the plea of the assessee. The Assessing Officer is accordingly directed to delete this addition of Rs. 1,58,00,000. 50. We see no reasons to take any other view of the matter than the view so taken in assessee's own case. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to treat the TV subsidy of Rs. 20,69,60,338 received from the BCCI as a corpus donation. The assessee gets the relief accordingly. As we have decided the main grievance of the assessee, as set out in ground no. 3 (a), we see no need to adjudicate on the alternative plea set out in ground 3 (b). That aspect of the matter is rendered academi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.' 31. After the amendment in the year 2010, s. 12AA(3) of the IT Act reads as follows : '12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) or has obtained registration at any time under s. 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.' 32. Thus, in contrast to s. 12AA(1)(b) of the IT Act, 1961, where the grant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of s. 2(15) of the Act after the amendment come in effect from 1st April, 2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under s. 2(15) of the Act. 53. On going through the materials, the Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70 per cent of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking s. 12AA r/w s. 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Tribunal's view that it is an entertainment and hence offended s. 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the association. We can only say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration, the aggregate value of which should not exceed the amount specified in the second proviso to s. 2(15). (c) The earlier test that if the income so collected, is applied towards the charitable activity, then the trust cannot be held as non-charitable, is no longer relevant after the statutory amendment. (d) The scope of the term "activity in the nature of trade, commerce or business" would mean that : (i) It is undertaken with the profit motive; (ii) The activity is continued on sound and recognized business principles and is pursued with reasonable continuity; (iii) There should be facts and other circumstances which justify and show that the activity undertaken is in fact, in the nature of business; (iv) The five tests propounded in the case of CCE v. Lord Fisher (1981) STC 238 and the propositions in the case of CST v. Sai Publication Fund [2002] 258 ITR 70/122 Taxman 437 (SC) apply. (v) Business activity is an important prevailing element of self interest. (e) From a perusal of Circular No. 11 of 2008 [[2009] 17 DTR (St) 1 : [2009] 221 CTR (St) 1] issued by the CBDT, it is clear that the new proviso of s. 2(15) of the Act is applicable to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision making. 10.5 Applying these propositions to the facts of this case, we observe that : (a) the Director of IT (Exemption) at para 9 of his order agrees that the assessee is carrying on activity of "general public utility", which means that the charitable nature of assessee's activity is not disputed by the Revenue. Thus the Director of IT (Exemption) has contradicted himself by holding on one hand, that the assessee is a charitable institution carrying out charitable activity and on another hand, coming to a conclusion that the assessee is doing business. It is also not the case of the Director of IT (Exemption) that, the assessee is not carrying on its activities in accordance with the objects for which it is founded. No such finding is recorded in the order. Thus, the twin conditions mandatorily required for invoking the jurisdiction under s. 12AA(3) by the learned Director of IT (Exemption), to cancel the registration granted under s. 12AA i.e., the satisfaction of the Director of IT (Exemption) that (a) the activities of the trust or institution are not genuine, or (b) that the activities of trust or institution are not being carried out in accordance with the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not "trade, commerce or business" activities. 11. We now take up each of the issues raised by the learned Director of IT (Exemption) in his order. 11.1 On the issue of sponsorship income from M/s Twenty First Century Media (P) Ltd. (TFCM), it was explained that despite the receipt of sponsorship money during the year of Rs. 31,01,038 and receiving a sum of Rs. 14,20,000 from BCCI as subsidy, there was a shortfall of Rs. 29,84,835, which was met by the assessee. It was specifically argued by the learned Departmental Representative that the agreement with "M/s Twenty First Century Media (P) Ltd." is commercial in nature. The reply of the assessee is that it should be appreciated that for any organization to run and survive it is essential that it should augment some funds to meet the cost/expenditure, as required to be incurred, to carry out the activities meant to achieve its object. We agree with the submissions of the assessee. 11.2 The assessee has to perform many activities and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MOA of DDCA is to lay ground for playing game of cricket and to provide pavilion, refreshment rooms and other facilities in connection therewith. Therefore, an eatery was established which was eventually shaped as a canteen for the benefit of the members as well as few other persons associated with DDA e.g. players, coaches, staff, other guests, etc." 11.4 In our view, for the purpose of making this canteen self-sustainable. It has to follow global standards and international protocols, since cricket is played at international level. Canteen keeps various items as per menu. Liquor is just part of this menu. It is not sold independently as trading item. The eatery is available for the use only of members, players, staff, other guests of DDCA. It is not open for public. A walk-in customer/guest cannot enjoy the facility of this eatery. The basic fact is that this canteen has direct and inextricable link with one of the core activities of DDCA i.e., maintaining such a huge cricket stadium and promoting the game of cricket. The Revenue, in this case is trying to project that the assessee is a liquor dealer. This is not correct. Internationally, when facilities are provided to players ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which any amount has been spent by the assessee. Similarly, when we analyse the receipt side, we would find that the receipts are directly or inextricably linked with the organizing of matches and tournaments or for promotion of game of cricket in any other manner or for maintenance or building up the infrastructure meant for the promotion of the game of cricket. Thus, it can be safely said that the DDCA exists for cricket and cricket only. The CBDT has already clarified that sports is a matter of general public utility. Therefore DDCA satisfies the condition of having a charitable object as mentioned in s. 2(15) of the IT Act, 1961. It does not violate any condition as mentioned in proviso to s. 2(15). The apprehension that certain income received by the assessee during the year partakes the character of business income, is ill-founded. In this regard we have submitted in detail that this apprehension is misplaced on account of various submissions as per details given below : 1. The entire receipts have been received for the promotion of game of cricket. 2. The assessee is not free to use it as per its convenience for any purpose other than for promotion of cricket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such recreation facility to its members. The receipts are miniscule and hence, negligible. 11.10 Similarly as far as receipt from health club is concerned, we find that only a part of the expenditure incurred on health club is recovered by way of charges from members who are using the health club facility. These are all, at best be called user charges. In our view these receipts cannot be termed as an activity in the nature of "trade, commerce or business". In fact, health club facility is recognized to promote the game of cricket. 11.11 All the receipts of the assessee are intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. User charges are required for maintaining the facilities that are provided as part of the infrastructure for conducting the activities of the assessee. 11.12 On consideration of all the facts and circumstances of the case and when viewed in totality, we have to come to a conclusion that the assessee is not carrying on the activities with any profit motive or with any self-interest. The contributions received by way of sponsorship, advertisement, sale of tickets, etc. and user charges on the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th. He has held that the disallowance u/ 69C of the Act, cannot be sustained as the amounts in question were recorded in the books of accounts and are part of the income and expenditure account and the source of the expenditure has been disclosed in the books of account. He further held that the Assessing Officer made quantum disallowance exceeding more than what was debited to the income and expenditure account. He found that the Assessing Officer has mixed up the disallowance due to non deduction of TDS. Further he held that, when application of income is considered u/s 11 of the Act, disallowance u/s 40(a)(ia) of the Act, cannot be made for the impugned Assessment Year. We find no infirmity in this order of the ld. CIT(A) as explanation (iii) to Section 11(1) of the Act, was introduced by the Finance Act, 2018 only w.e.f. 01/04/2019. Thus, we uphold the order of the ld. CIT(A) and dismissed Ground Nos. 3 & 4 raised by the revenue. 8. Ground No. 5 & 6, are on the issue of delay in filing Form No. 10 for setting apart funds u/s 11(2) of the Act. The ld. D/R relies on the judgment of the Hon'ble Apex Court in the case of Goetze (India) Ltd. vs CIT [2006] 284 ITR 323 SC. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
