Income Tax Appellate Tribunal - Cochin
M/S.Kerala Cricket Association, ... vs The Dcit(Exemption), Trivandrum on 8 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
Before Shri Chandra Poojari, AM & Shri George George K, JM
ITA No.428/Coch/2016 : Asst.Year 2012-2013
ITA No.429/Coch/2016 : Asst.Year 2013-2014
M/s.Kerala Cricket The Dy.Commissioner of
Association, KCA Complex Vs. Income-tax (Exemption)
TC 24/131(1), Thycaud Thiruvananthapuram.
Thiruvananthapuram
Pin : 695 014.
PAN : AAATK8881B.
(Appellant) (Respondent)
Appellant by : Sri. S.Annamalai, Advocate
Respondent by : Sri. Santham Bose, CIT-DR
Date of
Date of Hearing : 08.02.2018 Pronouncement : 08.02.2018
ORDER
Per George George K., JM
These appeals at the instance of the assessee are directed against two orders of the Commissioner of Income- tax, passed u/s 263 of the Income-tax Act, 1961, both dated 22.07.2016. The relevant assessment years are 2012-2013 and 2013-2014.
2. Common issues are raised in these appeals, hence they were heard together and are being disposed off by this consolidated order. Identical grounds are raised for both the appeals, except for variance in figures. The 2 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
grounds relating to assessment year 2012-2013 are reproduced below:-
"1. The impugned order of the learned Commissioner of Income Tax (Exemptions) Kochi, passed under section 263 of the Income Tax Act, 1961 is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
2. The show cause notice issued under section 263 of the Act and consequent to order passed under section 263 of the Act is bad in law and without jurisdiction on various reasons on the facts and circumstances of the case.
3. The learned Commissioner of Income-tax (Exemptions) has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned CIT (E) is ultra vires to the scope of Section 263 and requires to be cancelled under the facts and circumstances of the Appellant's case. The direction to make fresh assessment amounts to ordering for making fishing and roving enquires without any material in support thereof and consequently the impugned order passed is bad in law is liable to be cancelled.
4. The learned Commissioner of Income-tax (Exemptions) erred in issuing the show cause notice under section 263 of the Act by stating that the appellant were getting income by way of sponsorship fee and also received money by sale of ticket in connection with the cricket matches conducted, hence the activities are not charitable on the facts and circumstances of the case.
3 ITA Nos.428 & 429/Coch/2016.M/s.Kerala Cricket Association.
5. The learned Commissioner of Income-tax (Exemptions) erred in issuing the show cause notice under section 263 of the Act by stating that the appellant were in receipt of Rs.31,22,19,927 /- from BCCI and same is not included in the receipt side or income side, contrary to the facts on record that the appellant has considered the amount of Rs.22,95,90,081/- in the income side and Rs.8,26,29,646/- included in the corpus fund in the balance sheet in. the books of accounts maintained by the appellant on the facts and circumstances of the case.
6. The learned Commissioner of Income-tax (Exemptions) failed to appreciate that the Assessing Officer before completing assessment order under section 143(3) of the Act on 18.03.2015 had made detailed enquiries and hence on the very same issue no action can be taken under section 263 of the Act as the action of the Assessing Officer is accordance with law under the facts and circumstances of the case.
7. The learned Commissioner of Income-tax (Exemption) failed to appreciate that the learned Assessing Officer had indeed verified the details and after being fully satisfied by the said explanation and after application of mind passed the assessment order in respect of the return of income filed by the appellant on the facts and circumstances of the case.
8. The learned Commissioner of Income Tax (Exemptions) is not justified in exercising revisionary powers under section 263 of the Act as the entire proceeding is without jurisdiction and not In accordance with law on the facts and circumstances of the case.
9. The learned Commissioner of Income-tax (Exemptions) is not justified in law in holding that the submission of the appellant that the assessment 4 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
order passed under section 143(3) of the Act is not erroneous and not prejudicial to the interest of the revenue are not at all convincing, without giving any reasons in the order passed under section 263 of the Act is not in accordance with law on the facts and circumstances of the case.
10. The learned Commissioner of Income-tax (Exemptions) is not justified in law in holding that the appellant has engaged in activities in the nature of rendering services in .relation to a purely commercial activity' and the proviso to section 2(15) of the Act is applicable and the appellant activities ceases to be charitable, hence the appellant is not eligible for benefits under section 11 and 12 of the Income-tax Act, 1961, and without prejudice further without giving any reasons in the order passed under section 263 of the Act in respect of the above finding is not in accordance with law on the facts and circumstances of the case.
11. The learned Commissioner of Income-tax (Exemptions) is not justified in law invoking the first limb of the proviso to section 2(15) of the Act in the notice issued under section 263 of the Act by stating that the activity in the nature of trade, commerce or business and passing the order under section 263 of the Act by invoking the second limb of the proviso to section 2(15) of the Act by holding that the activity of rendering services relation to any trade, commerce or business and consequently the order passed on different issue other than notice issued is bad in law on the facts and circumstances of the case.
12. The learned Commissioner of Income-tax (Exemptions) is not justified in law in holding in the order passed under section 263 of the Act that the status of the appellant should have been treated as AOP and without prejudice further without putting notice to the appellant in the notice issued under 5 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
section 263 of the Act and consequently the notice issued on the one issue and the order passed on the other issue is not valid in law on the facts and circumstances of the case.
13. The learned Commissioner of Income Tax (Exemptions) is also not justified in law in setting aside assessment order passed u/s 143(3) of the Act with a direction to the Assessing Officer to redo the same afresh after considering the issues raised herein on the facts and circumstances of the case.
14. Without prejudice the order passed under section 263 of the Act by the learned Commissioner of Income-tax (Exemptions) is in violation of principles of natural justice and without giving proper opportunity of being heard and consequently the order passed under section 263 of the Act is liable to be quashed on the facts and circumstances of the case.
15. The show cause notice and order passed under section 263 of the Act is under surmise, suspicion and assumption and presumption and consequently the notice and the order passed under section 263 of the Act is not sustainable in law and liable to be quashed on the facts and circumstances of the case.
16. The appellant craves leave of the Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing of the appeal.
17. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity."
6 ITA Nos.428 & 429/Coch/2016.M/s.Kerala Cricket Association.
3. Briefly stated the facts of the case are as follow:-
3.1 The assessments for assessment years 2012-2013 and 2013-2014 were completed u/s 143(3) of the Income-tax Act, granting assessee, the benefit of deduction u/s 11 of the I.T.Act. Subsequently, the notice u/s 263 of the Income-tax Act was issued for denying the benefit of deduction u/s 11 of the I.T.Act. According to the CIT, assessee's activities are in the nature of trade, commerce or business and since it was getting fees or cess from such activities, the assessee would not be eligible for exemption u/s 11 of the I.T.Act. The assessee filed written submissions dated 13.07.2016 and 20.07.2016. The objections / submissions made by the assessee was rejected and the CIT passed order u/s 263 of the I.T.Act. The CIT held, the assessee is engaged in commercial activities and since the receipts are exceeding Rs.10 lakh, the proviso to section 2(15) of the I.T.Act are applicable, and assessee's activities ceased to be charitable. It was concluded by the CIT that assessee was not eligible for deduction u/s 11 and 12 of the I.T.Act and the status of the assessee should be treated as an A.O.P. The relevant finding of the CIT for assessment year 2012-2013 reads as follow:-
"4. I have gone through the submissions made by the assessee during the course of the proceedings u/s 263 of the Income Tax Act. The submissions of the assessee are not at all convincing. As per the Memorandum of Association/Bye-laws, the main objects of the assessee are as under :-
7 ITA Nos.428 & 429/Coch/2016.M/s.Kerala Cricket Association.
i. To instill, promote and propagate interest in cricket among the people.
ii. To popularise, regulate and control cricket in the State.
iii. To participate in, conduct and regulate matches and tournaments.
iv. To arrange for the coaching of the players.
v. To train and maintain a panel of umpires.
vi. To organise and affiliate District Cricket Associations; and vii. To resort to all such measures and do all such acts as are conducive to the furtherance of cricket.
From the above, it is clear that the objects of the assessee fall under the category of 'Advancement of any other object of General Public Utility'. Hence the amended proviso to section 2(15) will become applicable if the assessee is in receipt of amounts in the nature of commercial receipts. With effect from the assessment year 2009-10, proviso to section 2(15) of the Income Tax Act, 1961 has been amended which reads as under :-
"Chartiable purpose include relief to the poor, education, medical relief and the advancement of any other object of general public utility.
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to 8 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application of retention of the income from such activity. "
5. In the light of the above discussion, I find that the assessee has engaged in activities in the nature of rendering services in relation to a purely commercial activity and the receipts from the same exceeds Rs.10 lakhs, proviso to section 2(15) are applicable and the assessee's activities ceases to be charitable. Hence as per the provisions of section 13(8) of the Income Tax Act, the assessee is not eligible for the benefit of exemption under section 11 and 12 of the Income Tax Act and the status of the assessee should have been treated as AOP. As the Assessing Officer has failed to consider the above issues, the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act dated 30-12-2014 for the assessment year 2012-13 is erroneous in so far as it is prejudicial to the interests of revenue. Accordingly, invoking the provisions of section 263 of the Income Tax Act, 1961, the assessment order dated 30-12-2014 is set aside with a direction to the Assessing Officer to redo the same afresh after considering all issues raised herein above and after affording an opportunity of being heard to the assessee."
4. Aggrieved by the revisionary order passed by the CIT u/s 263 of the I.T.Act for assessment years 2012-2013 and 2013- 2014, the assessee has filed the present appeals before the Tribunal.
5. The learned Counsel for the assessee submitted, the Cochin Bench of the Tribunal in assessee's own case for assessment year 2010-2011 had held the activities of 9 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
assessee would not come within the proviso to section 2(15) of the I.T.Act since the assessee was not carrying on any business, trade or commerce. Copy of the order of the Tribunal in assessee's own case in ITA No.78/Coch/2015 dated 18.12.2017 was placed on record.
6. The learned Departmental Representative supported the revisionary order of the CIT passed u/s 263 of the I.T.Act.
7. We have heard the rival submissions and perused the relevant material on record. The Cochin Bench of the Tribunal had held in assessee's own case for assessment year 2010- 2011 (supra) that activities of the assessee are charitable in nature and was not hit by the proviso to section 2(15) of the I.T.Act, and consequently, the assessee was entitled to exemption u/s 11 and 12 of the I.T.Act. The relevant finding of the Cochin Bench of the Tribunal in assessee's own case for assessment year 2010-2011, reads as follow:-
4.6.7 In view of the aforesaid reasoning and the judicial pronouncements, we hold that the activity of the assessee is not hit by the proviso to sub-section (15) of section 2 of the Act.
Therefore, as regards exemption u/s. 11, we summarize our reasoning as follows:
(i) The receipts from BCCI are not in the nature of trade, business or commerce and consequently the proviso to section 2(15) of the Act was not applicable.
(ii) The assessee is an affiliate of the Board for Control of Cricket in India (BCCI in short) and is the body representing cricketing activities in Kerala. The assessee carries out various activities for the sole purpose of development of the game of cricket in Kerala.
(iii) The assessee is also not providing any service to any trade, commerce or Industry.10 ITA Nos.428 & 429/Coch/2016.
M/s.Kerala Cricket Association.
(iv) The assessee is not created for earning profit as its motive and object of the assessee is towards the uplifment of game of cricket in the state of Kerala. The assessee is not driven with any profit motive.
(v) Any excess of income over expenditure is not distributed to the members, as the same is absent i.e. distribution of surplus among the members the object of the assessee is one of charitable in nature and the proviso to section 2(15) of the Act is not attracted.
(vi) The one day international matches T-20 matches and IPL matches are all conducted by the BCCI and the assessee is only providing the infrastructural facilities available in the stadium. The assessee receives funds from BCCI for meeting the expenditure being the host.
(vii) The amendment to section 2(15) of the Act was carried out to tax entities wearing the mask of charity but in fact carrying on commercial activities.
a. In the course of budget speech for 2008-2009, Hon'ble Finance Minister observed that "Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under "Charitable Purpose". Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable Organizations will not in any way be affected".
b. The memorandum explaining the provisions of Finance Bill is to a similar effect. While replying in to a debate on the Finance Bill, the Finance Minister assured that genuine charitable institutions would not be brought within the ambit of Section 2(15).
(viii) It is relevant to point out that the statement made by the mover of the Finance bill can be used for demonstrating the objects of the amendment. Reliance is placed on the decision of the Apex court in the case of K.P. Varghese 131 ITR Page 597. It is also well settled law that circulars issued by the Board are binding on the revenue.
11 ITA Nos.428 & 429/Coch/2016.M/s.Kerala Cricket Association.
(ix) The assessee has a history of distinguished record in serving the cause of the sport of cricket. It has been in public focus as a premier body serving, promoting and developing the sport of cricket. As a part of its commitment, the Association is actively involved for promoting infrastructure, conducting and also participation in tournaments.
(x) As per Board Circular No. 39 5 dated 24/09/1984 the promotion of sports and games can be considered to be charitable purpose. The Board Circular are binding in nature on the department.
(xi) The Chennai Tribunal in the case of Tamil Nadu Cricket Association Vs. DDIT (Exemptions) (2015) 60 taxmann.com 287 (Chennai-Trib). was considering the case of T.N. Cricket Association which was in receipt of (i) Subscription from members
(ii) Sale of tickets (iii) Revenue from advertisements (iv) Receipts from BCCI (v) Interest from Bank deposits. The Tribunal also noticed that the assessee is in receipt of funds from BCCI. The Tribunal, after considering the submissions, held that it cannot be said that the Tamil Nadu Cricket Association is conducting any business activity, nor was it rendering any service in relation to any trade, commerce or industry. In those circumstances, the Tribunal concluded that proviso to section 2(15) of the Act is not applicable to the assessee. Further the Tribunal had observed as under:
"15. Now, let's examine whether the activity of conducting one-day matches, T-20 matches and Indian Premier League matches would amount to doing business or trade. It is the case of the Revenue that the assessee-society is conducting or organizing T-20, one-day matches or India Premier League matches. In fact, BCCI, the parent organization which is a national body in India, is organizing and conducting the matches. The assessee-society, being a member of BCCI, hosts the matches which are conducted by BCCI. For the purpose of meeting its expenditure, the BCCI allocates funds from the revenue it collected from advertisement and other sources. The assessee-society is allowed to sell tickets to the cricket viewers. No doubt, the players of Indian Premier League are sold in public auction for very huge amount. But the question is who is conducting and who is auctioning, whether the assessee- society or BCCI? In fact, BCCI conducts the public auction for selling premier players at a huge premium rate. In fact, the BCCI collects the money. The role of the assessee-society is only to provide stadium for conducting matches. Other than that, the assessee-society has no role in conducting the international matches and Indian Premier League matches.12 ITA Nos.428 & 429/Coch/2016.
M/s.Kerala Cricket Association.
16. The other activity of the assessee-society is to conduct training programmes, coaching classes for college students at district level in the State of Tamil Nadu and in the Union Territory of Puducherry. The assessee is also conducting inter-university, inter- school and inter-association matches. Expenditures involved in such activities were met out of surplus funds remaining with the assessee-society. The Assessing Officer got confused himself with the activity carried on by the BCCI as that of the activity carried on by the assessee-society. 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 2010-11 are 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".
(xii) The Delhi Tribunal in the case of Delhi & District Cricket Association Vs. DIT (E) in ITA No.3095/Del/2012 dated 13/01/2015 held that proviso to section 2(15) does not have application to Delhi Cricket Association. The relevant finding of the Tribunal reads as follows:
"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 of the activities with any profit motive or with any self interest. The contribution received by way of sponsorship, advertisement, sale of tickets etc and user charges on the facts of the case, do not convert the charitable activity into "trade, commerce or business"
activity."
(xiii) For the assessment years 2012-13 and 2013-14, the Assessing officer has accepted the contention of the assessee that 13 ITA Nos.428 & 429/Coch/2016. M/s.Kerala Cricket Association.
the proviso to section 2(15) of the Act is not applicable and granted exemption under section 11 of the Act. (Assessment orders are placed at Page No. 56-57 and 58-59 of the Paper Book filed by the assessee).
(xiv)) In view of above reasoning, we conclude that the assessee's activities are charitable and is not hit by the proviso to section 2(15) of the Act and consequently the assessee is entitled for exemption under section 11 and 12 of the Act.
4.6.8 No other arguments were raised by the Ld. DR or by the Ld. AR concerning the appeal filed by the assessee, hence the grounds raised in the Revenue's appeal are rejected."
8. In view of the above order of the Tribunal in assessee's own case for assessment year 2010-2011, we hold that there is no error in the assessment orders for assessment years 2012-2013 and 2013-2014 in granting exemption u/s 11 and 12 of the I.T.Act. Since there is no error in the assessment orders for assessment years 2012-2013 and 2013-2014, we hold the revisionary order passed u/s 263 is bad in law. It is ordered accordingly.
9. In the result, the appeals filed by the assessee are allowed.
Order pronounced on this 08th day of February, 2018.
Sd/- Sd/-
(Chandra Poojari) (George George K.)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 8th February, 2018.
Devdas*
14 ITA Nos.428 & 429/Coch/2016.
M/s.Kerala Cricket Association.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(E) Thiruvananthapuram.
4. CIT Kochi.
5. DR, ITAT, Cochin
6. Guard file.
BY ORDER,
(Asstt. Registrar)
ITAT, Cochin