Punjab Cricket Association vs. ACIT (ITAT Chandigarh)

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, “बी” च डीगढ़
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I VI SI O N B E N C H , ‘B ‘ , C H AND I G AR H

ी संजय गग , या यक सद य एवं डा. बी.आर.आर, कुमार, लेखा सद य
B E F OR E S HR I S A N J A Y GA R G, J U D I C I A L M E MB E R A N D
D R . B . R. R . KU M A R , AC C OU N T A N T M E M B E R

आयकर अपील सं./ ITA No. 4 2 7 / C H D / 2 0 1 7
नधा रण वष / Assessment Year : 2010-11
Punjab Cricket Association, बनाम The ACIT, Circle 6(1),
Sector 63, Mohali
Mohali
थायी लेखा सं./PAN NO: AAATP3502C
अपीलाथ /Appellant यथ /Respondent

नधा रती क ओर से/Assessee by : S/Sh. Ajay Vohra, Sr. Counsel &
Shri Rajesh Marwah, CA

राज व क ओर से/ Revenue by : Sh. Manjit Singh, CIT DR

सन
ु वाई क तार%ख/Date of Hearing : 14. 06.2019
उदघोषणा क तार%ख/Date of Pronouncement : 12.09.2019

आदे श/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the

order dated 07.12.2016 of the Commissioner of Income Tax (Appeals)-2,

Chandigarh [hereinafter referred to as CIT(A)].

2. The assessee in this appeal has taken following grounds of

appeal:-

i) That the Ld. Commissioner of Income-tax (Appeals)
has erred in facts and law in confirming the
conclusion drawn by the Ld. AO that the rendering
of services in respect of Indian Premier League
cricket (IPL) by the appellant is a business activity
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and hence not eligible for exemption u/s 11 & 12 as
it is hit by the first proviso to section 2(15) of the
Income Tax Act, 1961. The Ld. Commissioner of
Income-tax (Appeals) as well as Ld. AO has failed
to appreciate the arrangement of conducting Indian
Premier League cricket (IPL) matches agreed
between BCCI and Kings XI Punjab and the role of
appellant therein. Therefore, the conclusions
drawn are not sustainable.

ii) That the Ld. Commissioner of Income-tax
(Appeals) has erred in law and on the facts in not
following the ratio laid down by the Apex Court in
the case of Addl. CIT V. Surat Art Silk Cloth
Manufacturers Association [1980] 121 ITR 1 /
[1979] 2 Taxmann 501, which is still applicable to
the appellants case even after the insertion of first
proviso to section 2(15) of the Income Tax Act,
1961 from the A.Y. 2009-10.

iii) That the Ld. Commissioner of Income-tax
(Appeals) has erred in law and on the facts in not
following the ratio laid down by the Hon’ble ITAT,
Bench “A” judgment in the case of M/s Tamil
Nadu Cricket Association V.DDIT (Exemption)
Chennai ITA No.1535, 1536 & 1537/Mds/2014
dated 14/08/2015, on similar set of facts.

iv) That the Ld. Commissioner of Income-tax
(Appeals) erred on facts and in law in upholding
the action of the assessing officer in denying
exemption under sections 11/12 of the Income Tax
Act, 1961.

3. The brief facts relating to the issue are that the assessee cricket

association is a society registered under the Societies Registration Act

1860. It was earlier granted registration u/s 12A of the Act which was

cancelled by Commissioner of Income Tax vide order dated 31.03.2009
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and the cancellation was made from assessment year 2009-10 onwards in

view of the amended provisions of section 2(15) of the Income Tax Act

(in short ‘The Act’). On appeal by the assessee, the co-ordinate

Chandigarh Bench of the Tribunal set aside the order of the

Commissioner of Income Tax, against which the appeal of the

Department is pending before Hon’ble Punjab and Haryana High Court.

4. During the assessment proceedings for the year under

consideration, the Assessing officer noted that assessee for the relevant

assessment year had reported the following income:

Nature of Income Amount

Tournament Subsidy-others 4,75,000/-

Reimbursement / subsidy-BCCI 1,86,64,990/-

Share of TV Subsidy from BCCI 18,00,76,452/-

IPL-Subvention from BCCI 8,10,43,200/-

Service charges IPL (NET) 6,41,100/-

Income from Member by way of 1,29,03,416/-
contribution and use of Facilities

Income from International Matches (Net) 2,66,10,382/-

Interest from banks 4,27,58,0311/-

Other Income 8,91,949/-

Total 36,40,64,500/-
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5. On being asked to explain about the nature and source of income,

the assessee v i d e i t s r e p l y d a t e d 2 5 . 0 9 . 2 0 1 2 s u b m i t t e d a s u n d e r :

i) “Tournament Subsidy – Others:- Received from M/s
Prokam International as Subsidy for the inter school
tournament and claims were reimbursed to the districts
on account of expenses incurred for the same for
hosting these matches.
ii) Re-imbursement/subsidy from BCCI:- Amount received
towards expenses incurred by PCA for its participation
in dom estic interstate BCCI Tournaments.
iii) Share of TV Subsidy & IPL Subvention from BCCI:
The amount received by the PCA, like other
Associations, is an amount received for the development
of the game of Cricket and infrastructure in their
respective areas.

Above all, it may be pertinent to mention here that BCCI
being An Apex Body of the State Associations, grants
TV Subsidy and IPL subvention to its units for the
development of game and infrastructure in their
respective areas. The amount of Subsidy/subvention is
also being granted to those Associations who do not
participate. The system of subsidy paid to the State
Associations BCCI to control the budget.

iv) Service Charges for IPL (Net):- Net income after
meeting the expenses of Indian premier league during
the year.
v) Income from Members by way of con tribution and use
and facilities:- Received from members towards annual
subscription and use of facilities like Swimming, Lawn
Tennis, Billiard/Pool, Health Centre, Booking of hall &
lawn etc.
vi) Income from Intern ational Match (Net):- Net Income
after meeting out the expenses of international matches
during the year.
vii) Interest from Bank:- Interest received from various
banks on FDRs and saving accounts.
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viii) Other Income:- Received from members towards Guest
charges, Penalties, Sale of application forms, District
affiliation fees and Protest fees etc.”

The assessee further submitted to the assessing officer that as per

the Memorandum and Articles of Association of the assessee

Association, the main object of the assessee society inter alia was to

create, foster and maintain friendly relation with and amongst the

population of the area under its control through sports tournaments and

competition connected therewith and to create healthy spirit of

sportsmanship, to run a club house, banquet hall with catering facilities

and to instill keenness for the game and to instill and spirit of the

sportsmanship. That, therefore, the object of assessee would fall under

the limb ‘advancement of any other object of general public utility” and

thus included in the definition of ‘charitable purposes’ as per the

provisions of section 2(15) of the Act and thus the income of the

assessee was exempt from taxation u/s 11 of the Act.

6. The assessing officer, considering the reply of the assessee,

however, observed that the assessee was engaged in various activities

from which the above stated income was generated. He observed that the

income of the assessee was inclusive of an amount of Rs. 8,10,43,200/-

from IPL-Subvention from BCCI and Rs. 6,41,100/- as service charges

for IPL (NET). The Assessing officer observed that IPL event was a

highly commercial event and assessee had generated income from the
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same by hosting matches of Punjab franchisee ‘King, XI, Punjab’ during

the Indian Premier League through TV rights subsidy, service charges

from IPL and IPL subvention etc. Similarly, assessee had earned income

from the facilities of swimming pool, banquet hall, PCA chamber etc.

That the assessee hosted these facilities for the purpose of recreation or

one time booking for parties, functions etc. and these were commercial

activities in nature as the assessee was charging fees for providing these

facilities to its members. That assessee had also received income from

M/s Silver Services who provided catering services to Punjab Cricket

Club and its restaurant and this again was a commercial activity as the

assessee was earning income from the running of the restaurant which

was not related to the aims and objectives of the society. The Assessing

Officer found that in view of the amendment to section 2(15) of the Act,

the activities of the assessee were not for the charitable purpose and,

therefore, he disallowed claim of exemption u/s 11(2) of the Act and

brought to tax the income of the assessee and made addition of Rs.

30,13,91,457/-.

7. Aggrieved by the above order of the Assessing Officer, the

assessee preferred appeal before the CIT(A) and made the following

submissions, as reproduced in para 5.2 of the impugned order of the

CIT(A) :-

“5.2 Appellant made submission as under:-
i) The appellant was eligible for deduction u/s 11 as
it was duly granted registration u/s 12A. This
registration was withdrawn by the CIT-II,
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Chandigarh vide his order dated 31.03.2009 from
the A.Y. 2009-10 onwards on the ground that with
the amendment of section 2(15) by the Finance Act,
2008 the appellant cannot be regarded as
Charitable organization. Here it is pertinent to
mention that the said order was quashed by the
Hon’ble Bench “B” of ITAT, Chandigarh vide their
order dated 27.08.2009 and the registration u/s
12A was restored. This fact is evident from the
observation of the Ld. A.O at the page No. 2, Para
No. 3 of the assessment order. Therefore, it
becomes very clear that the order of the ITAT,
Chandigarh dated 27.08.2009 restoring the
registration u/s 12A was fully effective on the date
of passing of the assessment order and the reliance
of the Ld. AO on the order of the CIT-II,
Chandigarh that the appellant is not enjoying
exemption u/s 12 is contrary to the facts stated
above.

ii) The registration u/s 12A was again cancelled by the
Commissioner of Income Tax-ll, Chandigarh vide
his order dated 21.06.2012 from A.Y. 2009-10
onwards on the ground that appellant is earning
huge profit from business and training activities
according it is not falling under the category of
Charitable organization and with the amendment of
section 2(15) by the Finance Act, 2008 the
appellant has lost the right to be regarded as
Charitable organization. Appellant filed copy of the
order of the Hon’ble ITAT, Chandigarh dated
19.10.2015 (ITA No. 834/Chd./2012) through which
the said order dated – 21.06.2012 of the CIT-II,
Chandigarh has been quashed and the registration
u/s 12A has been restored and submitted that the
addition made on account of withdrawal of
registration u/s 12A needs to be deleted.

iii) It was submitted that object of the appellant
society is to promote the game of cricket in the
state of Punjab and the objects of the appellant are
covered under the clause ‘advancement of any
other object of general public utility’ of section
2(15) of the Act as clarified by CBDT vide circular
No. 395 dated 24.09.1984.
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iv) Regarding activities of holding IPL, it was
submitted that cricket matches including IPL are
being organized and conducted by the BCCI and
appellant being the member of BCCI hosts the
matches which are conducted by the BCCI for the
purpose of meeting its expenditure the BCCI
allocates funds from the revenue its collect from
advertisement and other sources. For holding of
IPL matches the appellant only provides its
stadium and other related facilities to the BCCI.
All the tickets of the IPL matches are being sold by
either BCCI or Franchisee Team. The state
associations have no roll in this. Therefore, it
cannot be concluded that the appellant is engaged
in any business activity. Appellant placed reliance
on the decision of ITAT, Chennai Bench in the case
of M/s Tamilnadu Cricket Association

v) It was submitted that the club facilities are being
run for the benefits of members and cricketers as
per the objects of the society on the principle of
mutuality. During the relevant year revenue of Rs.
123.03 lacs was generated from these facilities and
this includes a sum of Rs. 14.97 lacs from caterer
as a share from catering services. All the above
facilities e.g. Gym, Lawn Tennis, Swimming pool
etc. are interconnected and interwoven with the
objects of the appellant i.e. promotion of sport and
cannot be viewed separately. Without prejudice to
above the appellant is maintaining separate books
of accounts in respect of all above club activities.
Moreover these facilities are being provided on the
principle of mutuality. Accordingly these cannot be
termed as trade, commerce or business activity.

vi) During the year under consideration appellant
received Rs. 15,74,147/- from M/s Silver Services
as share for providing catering services in the
restaurant of the appellant. This share is charged
from the caterer on account of maintenance, wear
and tear, electricity expenses etc. of the restaurant
as all the above expenses are borne by the
appellant. It was submitted that the receipts from
the caterer for providing catering service during
the matches is intrinsically linked with the activity
of organizing matches and tournaments for the
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promotion of cricket. Accordingly this cannot be
considered as business even there is some surplus.
Appellant placed reliance or the decision of
Hon’ble Supreme Court in the case of M/s Surat Art
Silk Cloth Manufacturer Association (supra) in this
regard. It was submitted that the appellant is
running club on the principle of mutuality and only
members are allowed to use the facility. Appellant
also placed reliance on the decision of Hon’ble
Bombay High Court in the case of Lai Lajpatrai
Memorial Trust (supra).”

8. The Ld. CIT(A), however, did not get satisfied with the above

submissions of the assessee and dismissed the appeal of the assessee

observing as under:-

“5.3 I have caref ully considered the submission of the
appellant, assessment order and perused the material
available on record. It is seen that the assessee society was
registered u/s 12A of the Act on 27.03.1998. This
registration granted u/s 12A was cancelled by
Commissioner of Income Tax, Chandigarh vide his order
dated 31.03.2009 on the ground that the activities of the
assessee are hit by the proviso inserted to section 2(15) of
the Act with effect from assessment year 2009-10. Hon’ble
ITAT, Chandigarh Bench vide its order dated 27.08.2009 in
ITA 538/Chandi/2009 set aside the order of the
Commissioner of Income Tax cancelling the registration on
the ground that Commissioner of Income Tax is not having
power to cancel registration granted at any time under
section 12A. The appeal of the department against the said
order of ITAT is pending in Hon’ble Punjab & Haryana
High Court. Commissioner of Income Tax, Chandigarh
again vide his order dated 20.06.2012 cancelled the
registration granted to the appellant u/s 12A and this order
of the Commissioner of Income Tax cancelling the
registration was set aside by ITAT vide its order dated
19.10.2015(ITA 834/Chd./2012) on the ground that section
12AA (3) was amended by finance Act, 2010, gives power
to CIT to cancel registration granted u/s 12A but from
assessment year 2011-12 only. Thus it is clear from the
sequence of facts narrated above that the registration
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granted u/s 12A which was cancelled by Commissioner of
Income tax was restored to the appellant by ITAT on
27.08.2009 and the assessment order in this case was
passed on 29.09.2012 and therefore, on the date of
assessment order appellant was having the status of a
registered society u/s 12A and therefore, the contention of
the assessing officer that the registration u/s 12A has
already been cancelled is not factually correct and hence,
the exemption claimed by the appellant u/s 11(2) of the
Act cannot be disallowed on this ground only.

5.3.1 Hon’ble ITAT, Chandigarh Bench in its order
dated 19.10.2015 relied upon the propositions laid down by
ITAT, Amritsar Bench in deciding the issue of cancellation
of registration in the case of appellant and held as under:-

“(v). In order that the benefits under section 11
are declined to the assessee on the ground that it
is engaged in such activities as may be hit by the
first proviso to section 2(15) not only the
assessee must be engaged in car rying out such
activities as may hit the first proviso to section
2(15) but also the receipts of the assessee from
such activities must exceed a specified limit. The
second limb of this disability clause needs to be
satisfied with respect to each assessment year.
Obviously, therefore, this aspect of the matter
cannot be examined at the stage of the grant or
withdrawal of registration since the registration
exercise is a onetime exercise and not something
which must be done for each assessment year
separately. That is precisely the reason, as noted
in the Explanatory Memorandum, as to why the
remedy for the activities being hit by the first
proviso to section 2(15) lies not in grant, decline
or withdrawal of registration but in declining the
benefits of exemption u/s 11 on that count, on
year to year basis, notwithstanding the status of
registration.

(vi) The disentitlement for exemption u/s 11, as a
result of the activities of a assessee being held to
be not for charitable purposes under section
2(15) read with provisos thereto, is in respect of
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entire income of the assessee trust or institution
but only for the assessment year in respect of
which the first proviso to section 2(15) is
triggered. ”

5.3.2 From the above proposition, it is clear that the
activities of the assessee society whether being hit by first
proviso to section 2(15) is to be seen on year to year basis
to decide the exemption benefit u/s 11 of the Act. It cannot
be disputed that Indian Premier League matches is a highly
commercialized event in which huge revenue is generated
through TV rights, gate collection money, merchandizing
and other promotions. The franchisees have been sold to
corporate and individuals and in this process appellant has
received huge income of Rs. 8,10,43,200/- for IPL-
subvention from BCCI, service charges (Net) of Rs.
6,41,100/- and reimbursement of Rs. 1,86,64,990/- from
BCCI. The argument of the appellant that all the tickets of
the IPL matches are sold by BCCI or Franchisee Team and
IPL players are sold in public auction for a huge amount,
but this all is done by the BCCI and the appellant has no
role in conducting these matches cannot be accepted. The
fact remains that the huge revenue is generated in this
commercial activity and whether it was done by BCCI or by
the appellant, the share of the income so generated has
been passed on to the appellant. The appellant has relied
on the decision of the Hon’ble ITAT, Chennai Bench in the
case of Tamilnadu Cricket Association (supra) wherein it
has been held that the assessee has received funds from
BCCI for meeting the expenditure being the host and
therefore, it cannot be said that the assessee is conducting
any business activity and hence, proviso to section 2(15) is
not applicable. I would like to differ respectfully from the
conclusions drawn by Hon’ble ITAT, Chennai Bench as in
the case of appellant it is not only the reimbursement of
expenses but over and above that huge amount have been
passed on to the appellant and the income generated by
busines s activity whether undertaken by BCCI or by the
appellant is purely a business activity of which assessee is
a beneficiary. In my considered opinion the appellant has
rendered services in relation to the business activity and
therefore, is hit by the first proviso to section 2(15) of the
Act. Decisions relied upon by the appellant on the principal
of mutuality are distinguishable from the facts in the case
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of the appellant, as the appellant has not generated the
income from its facilities in pursuance of its dominant
object of the activity. Therefore, the assessee society
ceases to be for charitable purpose and the benefits of
deduction u/s 11(2) are not available to the assessee.
Assessing Officer has given reasoned finding in the
assessment order and the s ame are upheld. Gr ounds of
appeal taken by the appellant are dismissed.”

9. Aggrieved by the above order of the CIT(A), the assessee has

come in appeal before us.

9.1 Shri Ajay Vohra, Ld. Sr. Counsel for the assessee has addressed

orally, besides that written submissions have also been filed on behalf

of the assessee. It has been submitted that the Registration of the

assessee Cricket Association as a ‘Charitable Organization’ u/s 12 of the

Income Tax Act, 1961 (in short ‘the Act’) has been restored.’ Inviting

our attention to the Memorandum of Association / objects of the

assessee association, the Ld. counsel has submitted that the assessee is

basically a body for promotion of cricket and that the activities and

objects of the assessee are concentrated for advancement of its objects

of ‘general public utility’ and, thus, squarely covered within the

definition of ‘Charitable Purposes’ as defined u/s 2(15) of the I.T. Act.

9.2 Mr. Vohra, the Ld. Counsel for the appellant/assessee, has further

submitted that BCCI is the Apex body of different cricket associations

and is registered under the ‘The Tamil Nadu Societies Registration Act,

1975’ at Madras having its head office at Mumbai. He has further

submitted that the Indian Premier League (in short ‘IPL’) is a baby of
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the BCCI and that the assessee is not involved in any manner in

organizing or commercially exploiting the IPL matches. The commercial

exploitation, if any, of the IPL matches is done by the BCCI. That the

assessee i.e. Punjab Cricket Association (PCA) is a distinct and separate

entity from the BCCI. Inviting our attention to the copy of the sample

‘tripartite agreement’ / ‘stadium agreement’ entered into between the

Assessee, BCCI and KPH Dream Cricket Pvt Ltd. (franchisee/ owner of

Kings XI cricket team), the Ld. Sr. Counsel has submitted that the only

activity on the part of the assessee is the renting out its stadium to BCCI

for holding of IPL matches. That ‘T-20’ or to say ‘IPL’ is also a form of

popular cricket. That since the main object of the assessee is for the

promotion of the game of cricket, hence, considering the popularity of

the IPL matches, the renting out of the stadium for the purpose of

holding of IPL matches by the BCCI for a short period of 30 days in an

year, is an activity towards advancement of the objects of the assessee

association of promotion of the game. In lieu of the providing stadium,

the assessee gets the rental income for a short period and that the

renting out the stadium is not a regular business of the assessee. Inviting

our attention to the above reproduced table of income, the Ld. Counsel

has submitted that the grant received from the BCCI during the year

under consideration in the form of share of TV Subsidy of Rs.

18,00,76,452/- and IPL Subvention of Rs. 8,10,43,200/- is part of the

largesse distributed by BCCI to its member associations at its discretion

for promotion of the sport of cricket. That even as per the rules and
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regulations of the BCCI, the BCCI is not obliged to distribute the

earning generated by it to State Cricket Associations and no such

association, can claim, as an integral right, share in the earning of the

BCCI.

9.3 To apprise us about the nature, quantum and manner of the grants

given by the BCCI to member State Associations, Mr. Vohra, the Ld. Sr.

Counsel has drawn our attention to the page 77 of the paper book, which

is the copy of minutes of 79 t h Annual General Meeting of the BCCI held

on 27.9.2008, to submit that as per the said document, the TV subsidy to

members association of BCCI was payable as under:-

“1. Staging Test & ODI – Rs. 18,59,47,343/-

2. Staging Test – Rs. 16,82,38,072/-

3. Staging ODI – Rs. 14,97,23,835/-

4. Non Staging – Rs. 13,81,32,312/-

The total TV subsidy amount payable to Associations for
the year 2007-08 is Rs. 371,89,46,858/-.”

9.4 Mr. Vohra, has further contended that even if a Member State

Associations does not provide any assistance in holding of the IPL

matches or when the IPL match is not hosted or organized at the stadium

of an association, still the member cricket association gets grant out of

the TV subsidy. That in the year 2009, when the IPL matches were

played entirely in South Africa, still all the member associations

including the assessee received uniform subsidy of Rs. 8,10,43,200/-
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from the BCCI. However, if a match is staged or hosted at the ground of

an association, the amount of subsidy is increased. That as per the

sample agreement, the assessee has been paid Rs. 30 lacs + service tax

in respect of the each day on which the match is staged in whole or in

part at the stadium of the assessee. That for the financial year 2017-18,

the BCCI has not distributed any grant out of its earning from IPL to the

State Cricket Associations and even though substantial income was

generated.

9.5 It has, therefore, been submitted by the ld. Counsel for the

assessee/appellant that that whatever is/has been received from the

BCCI on account of IPL subvention is voluntary, unilateral donation

given by BCCI to various Cricket Associations including the assessee to

be expended for the charitable objects of promotion of game of Cricket

and not in lieu of carrying out any activity for conducting of IPL. Th a t

though the assessee is a full time member of the BCCI and entitled

to have representation on the Board of BCCI, however,

notwithstanding the above position, the assessee has no locus with

respect to the promotion and conduct of IPL, except of the limited

extent of providing its stadium and other allied services of holding

of the matches. That whether the conduct of IPL is a commercial

activity or not that question may be relevant from BCCI’s

standpoint, but not to the case of the assessee.
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9.6 The Ld. Counsel, alternatively, has submitted that even if the

assessee is not held to be a charitable trust / organization, then the

income received by the assessee in the shape of grants will not fall in

the definition of income as per section 2(24) of the Act as the grant

received by ‘Charitable Institution’ only has been included in the

definition of income. That otherwise there is no provision in the Income

Tax Act (as in force for the year under consideration) to tax the grants

received by a non-charitable trust or organization and that the same

would fall within the definition of the capital receipt. That the capital

receipts, even otherwise, are not taxable except specially provided under

the Act such as gifts u/s 56 of the Act. That as per the provisions of

section 2(24) (iia) of the Act, the voluntary contribution received by a

trust created wholly or partly for charitable / religious purpose has been

included in the definition of income. That in such circumstances, grants,

voluntarily contribution received by a non-charitable institution would

fall in the definition of capital receipt not exigible to tax.

9.7 The Ld. Counsel has further submitted that whatever is the income

of the assessee, including grants received from BCCI, that is applied for

attainment of objects of the assessee society i.e. mainly for promotion of

the game of cricket. That to achieve it objects, the assessee is running a

Regional Coaching Centre, wherein, gaming equipment / material is also

provided such as cricket balls, cricket nets etc. The assessee also

distributes grants to the District Cricket Associations attached with it
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for the purpose of laying and maintenance of grounds, purchase of

equipment etc. and as well as for holding of matches and for the purpose

of promotion of game of cricket by the District Cricket Association. The

assessee conducts various tournaments for the member District Cricket

Associations. On the basis of the inter District tournaments, players are

selected for Punjab team, who undergo various coaching camps and

thereafter the teams are selected to participle in the national

tournaments of different age groups. In addition, financial assistance

has also been provided to the Ex-Punjab players in the shape of monthly

grants. That the assessee is also maintaining International Cricket

Stadium namely ‘I.S. Bindra Stadium’ at Mohali, which gives needed

practice and exposure to the cricketers. Even other sports facilities like

swimming pool, billiards, lawn tennis etc. are provided to the members

as well as to the cricketers which activity is also towards the

achievement of objects of the assessee society. The assessee is in the

course of construction of a new stadium at the cost of over Rs. 250/-

crores, out of which Rs. 100 crores including land has been expended

till date with modern training and coaching facilities for players. That

the assessee has been spending substantial amount towards development

of game at grass root level and also for the development and promotion

of game by holding international matches. The Ld. Counsel, therefore,

has submitted that the assessee is only conducting activities in

pursuance of the objects i.e. the promotion of the game of cricket in

India and that merely because some Revenue has been generated in
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pursuance of such activities, the same is not hit by the proviso to section

2(15) of the Act. The Ld. counsel in this respect has relied upon the

decision of the Hon’ble Supreme Court in the case of ‘CIT vs

Distributors (Baroda) (P.) Ltd’ 83 ITR 377 (SC) and submitted that

the Hon’ble Supreme Court has held in the said decision that “business”

refers to real, substantial organized course of activity for earning

profits, as “profit motive’ is an essential requisite for conducting

business. The Ld. counsel has further relied upon the decision of the

Hon’ble Delhi High Court in the case of ‘India Trade Promotion

Organization vs DIT(E)’ 371 ITR 333 (Delhi) and has submitted that

the Hon’ble Delhi High Court reading down the scope of the proviso to

section 2(15) has held that an assessee could be said to be engaged in

business, trade or commerce only where earning of profit was the

predominant motive, purpose and object of the assessee and that mere

surplus from incidental or ancillary activities did not disentitle claim of

exemption under section 11 of the Act. The Ld. counsel has further

relied upon the composite decision of the Hon’ble Punjab & Haryana

High Court in the cases of ‘The Tribune Trust vs CIT’ &, CIT

(Exemptions) vs Improvement Trust, Moga’ [2017] 390 ITR 547

(P&H) and has s u b m i t t e d t h a t t h e H o n ‘ b l e H i g h C o u r t h a s a p p r o v e d

the predominant object theory that is, if the predominate motive

or act of the trust is to achieve its charitable objects, then merely

because some incidental income is being generated, that will not

disentitle the trust to claim exemption u/s 11 read with section
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2(15) of the Act. That all the incidental income/surplus so earned

by the assessee in the course of advancement of its objects of

p r o m o t i o n o f g a m e o f c r i c k e t h a s b e e n p l o u g h e d b a c k for charitable

purposes. That, profit making is not the motive of the assessee and the

only object of the assessee is to promote the game of cricket. That the

Hon’ble P&H High Court in the case of ‘Moga Improvement Trust’

(supra) has held that if the trust is not set up with a motive of making

profits but during carrying on of its activities according to the objects,

if any surplus is generated which is again ploughed back for the

activities of the trust exemption u/s 11 can not be denied. That the

Assessing officer while framing the assessment has only to see that the

assessee trust has carried out the activities in accordance with its

objects and 85% of the total receipts have been spent towards the

objects of the trust to which the assessee has complied with as per the

relevant provisions of section 11 of the Act. A p a r t f r o m t h a t , t h e L d .

Counsel to further support his contention has also relied upon the

following case laws:

i) BJP vs DCIT : 258 ITR 1 (SB) (AT)

ii) Ram Swaroop vs Janki Dass Jai Kumar : AIR 1976
Del 219

iii) CIT vs Andhra Chamber of Commerce : 55 ITR 722
(SC)

iv) CIT vs Federation of Indian Chambers of Commerce
and Industries, 130 ITR 186 (SC)
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v) Delhi & District Cricket Association vs
DIT(Exemptions) : 168 TTJ 425(Del – Trib)

vi) Tamil Nadu Cricket Association vs DDIT (Exemptions)
[2015] 70 SOT 242 (Chennai Trib.)

vii) Rajasthan Cricket Association vs ACIT [2017] 164 ITD
212 Jaipur Trib.)

10. The Ld. counsel lastly has relied upon the decision of the

Co-ordinate Ahmedabad Bench of the Tribunal in the case of

‘Gujarat Cricket Association vs JCIT (Exemptions)’ [2010] 101

taxmann.com 453 (Ahmedabad Trib.) and has submitted that under

similar facts and circums tances, the Coordinate Bench of the

Tribunal has held that the proviso to section 2(15) of the Act was

not applicable when the objects of the assessee trust clearly

demonstrate that it exists and operate purely for the purpose of

promotion of cricket and that the exemption for taxation u/s 11 of

the Act has been allowed in that case. The Ld. Counsel, therefore,

has submitted that applying the same ratio, the appeal of the

assessee also deserves to be allowed. The above oral submissions

by the Ld. Counsel have been further reiterated through written

submissions also.

11. The Department has put a strong defense against the

contentions raised by the counsel for the assessee through oral as

well as written submissions made by Sh. Manjit Singh, CIT (DR)

the Ld. Departmental Representative (in short D.R.). Since lengthy

written submissions have been submitted by the Ld. DR raising
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various issues, hence we deem it appropriate to reproduce the

relevant part of the same hereunder:

” I) …..

II) The relevant section 2(15) is reproduced below for the sake of
convenience:

“(15) “charitable purpose” includes relief of the poor, education,
medical relief, preservation of environment (including watersheds, forests
and wildlife) and preservation of monuments or places or objects of artistic
or historic interest, 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 any trade, commerce or business, for a
cess or fee or any other consideration, irrespective of the nature of use or
application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the
aggregate value of the receipts from the activities referred to
therein is (ten lakh rupees) or less in the previous year.”

III) CIRCULAR NO. 11/2008, DATED 19/12/2008

The definition and rationale of ‘Charitable purpose ‘u/s 2(15) of
the Income Tax Act has been elaborately explained vide the above
circular.

The circular basically re-iterates with requisite clarity the position
of law that it shall apply only to the fourth limb of the section, i.e. the
advancement of any other object of general public utility, if such
entity 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 any trade, commerce or business, for a cess or fee or any
other consideration, irrespective of the nature of use or application, or
retention, of the income from such activity.

The circular pointedly states that if an assessee is engaged in any
activity in the nature of trade, commerce or business or renders any
service in relation to trade, commerce or business, it would not be
entitled to claim that its object is charitable purpose. In such a case,
the object of ‘general public utility’ will be only a mask or a device
to hide the true purpose which is trade, commerce or business or the
rendering of any service in relation to trade, commerce or business.

The circular goes on to caution and advise the assessees who
claim their object to be ‘charitable purpose’ within the meaning of
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section 2(15) to eschew any activity which is in the nature of trade,
commerce or business or rendering of any service in relation to any
trade, commerce or business. The above Circular is strongly pressed
in for the defense of the Department’s case. The assessee’s case needs
to be strictly examined from the view point of amended section 2(15)
as suitably explained by the Circular No. 11/2008 dated 19/12/2008.
The twin aspects which are required to be adjudicated upon are
firstly, whether the BCCI-IPL matches are charitable activity and
secondly, whether there is any involvement of the assessee i.e. Punjab
Cricket Association, in BCCI-IPL matches.
IV) BCCI-IPL MATCHES ARE NOT CHARITABLE
ACTIVITIES.

A. 79th Annual Report of BCCI (Approved at Working
Committee Meeting held on 23/08/2008 at Mumbai)

During the course of hearing before the Hon’ble ITAT on
25/05/2018 a copy of the 79th Annual Report of BCCI was submitted
in the Court. The document vividly reveals the true commercial
character of IPL matches. The relevant pages were highlighted from
pages 15 to 19. The Annual Report of BCCI unhesitatingly proclaims
the glamorous world of India Premier League being the brain child of
Lalit Kumar Modi. It is dubbed as best ever reality TV shows. The
concept of IPL is described as merger of sport and business. The
report highlights that it is for the first time that any Indian sport has
adopted a franchisee model and conducted a Players’ auction.
It mentions at page 15 that BCCI went about looking for
potential buyers to BUY a franchise in the league. “Presentations
were made to corporate houses, film stars and the likes to inform them
about the Business of Sports and how this could well turn out to be a
lucrative investment option with good ROI, given the passion for
cricket in India post the presentations of, affair and transparent
bidding process saw Shah Rukh Khan, Preity Zinta, RIL Pvt. Ltd.,
GMR Holdings, UB Group, Indian Cements Ltd., Deccan Chronicle
and Emerging Media pick up the eight franchise of offer in the
inaugural addition of the DLF Indian Premier League. The rights for
the Mumbai franchise were won by RIL Pvt. Ltd. with a bid of US $
111.9 million, which was also the highest.”
At page 16 of the report it is mentioned- “Next on the BCCI’s
agenda was the Title Sponsor. DLF Ltd., India’s leading real estate
company, stepped bagged the Title Sponsorship rights. They won the
rights through a fair and transparent open-bid process, with a bid of
Rs. 40 crore per annum. The deal gave DLF Ltd. exclusive rights for
period of five years, valuing the Title Sponsorship in excess of Rs.
200 crore.”
The report goes on to state that the DLF Indian Premier
League’s next step was to rope in multiple co-sponsors disclosing
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names of Hero Honda, Pepsico, Kingfisher Airelines, ITC, Vodafone
and Anil Dhiru Bhai Ambani Gourp.
At page 16 of the report it is mentioned- ” With the business
end of DLF Indian Premier League all tied up, attention now turned to
the on-field action, the objective being to provide the global cricket
lover with some memorable high-octane action, which would keep
him coming back for more.”
At page 17 of the report it is mentioned- “The BCCI-IPL team
then organized the first ever Players auction to be held in professional
support in India. Each franchise was given total team cap minimum
cap of US $ 3.5 million and Maximum cap of US $ 5.00 million
within which the needed to purchase their respective team. The
Players were then grouped into Batsmen, Bowlers, all rounder’s etc.
with each player having a list price.”
At page 17 itself the report states-“At the first Players’
Auction, India’s T20 World Cup winning team captain MS. Dhoni
proved to be the hottest property, going for a whopping $ 1.5 million
(Rs. 60 million) to ‘Chennai Super Kings’, which was owned by India
Cements Ltd.”
The leading sports broadcaster SONY Max and World Sport
group bagged global media rights of US Dollar $ 1.026 billion as per
the report. The IPL events drew unprecedented TV viewership leaving
the soap serials far behind. The TRP rating touched unprecedented
heights.
The above activities which are mentioned in great detail in the
79th Annual Report of BCCI show that the entire IPL show is a huge
money spinner and has been rightly termed as CRICKETAINMENT
by the BCCI. There is not a whisper of any charitable activity
whatsoever in this huge entertainment industry inviting global star
players commanding huge price. It may be highlighted here that Ld.
Counsel for the assessee did not make any argument either to establish
that the activities of the BCCI-IPL are charitable in nature.

B. 38TH REPORT OF STANDING COMMITTEE ON
FINANCE-15TH LOK SABHA

The 38th Report of Standing Committee on Finance was
presented to Lok Sabha on 2nd August, 2011. The subject matter of 38th
Report was Tax assessment/Exemptions and related matters concerning
IPL/BCCI. During the examination of the subject by the Standing
Committee the following important issues were discussed (page 9 of the
Report).
i) Formation of IPL teams;
ii) Funding pattern of the IPL and the franchisees;
iii) Violations of Income tax Laws, Prevention of
Money Laundering Act, Foreign Exchange
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Management Act (FEMA) and Companies Act
by the IPL franchisees and their associates;
iv) Tax exemptions granted of BCCI;
v) Tax assessment of IPL;
vi) Award of Media rights;
vii) Decision making process in the BCCI/IPL etc.
The Report at page 31 mentions that auction for IPL-1 which took
place on 24.01.2008 went on to fetch $ 723.59 million against the base
price of $ 400 million. It further, highlights the huge amount of
investments made by various entities that made successful biddings for
the IPL (page 31-32 of the Report).
The Report clearly mentions (page 34) that the income derived
from Media Rights and Sponsorships are shared with the Franchisees as
envisaged in the franchise agreement. The Franchisees have to pay the
BCCI an annual franchisee fee which BCCI distributes to the
Associations as subvention.
The Committee (page 43 of Report) has highlighted the break-up
of Gross Revenue earned by BCCI-IPL during financial year 2008-09
amounting to 661.79 Crores. The Report (page 49) mentions the awarding
of Media Rights which reveals that thousands of Crores worth of Media
Rights were awarded for the IPL show.
The Report suitably highlights (pages 52-54) the violation of
FEMA Rules including cases of Hawala Transactions and Round
Tripping.
The Report (pages 56 to 60, para d) further highlights that IPL-2
was held in April to May 2009 in South Africa. Funds were transferred to
Cricket South Africa (CSA) and expenses were incurred by Cricket South
Africa. It has been seen from the Ministry’s replies that the BCCI had not
taken permission from the Reserve Bank of India and Income Tax
Department for opening or/and operating Foreign Currency account in
South Africa. It has been observed that Reserve Bank of India has not
given any permission to BCCI to open a foreign currency account with a
bank in South Africa for the IPL-2 session. Therefore, the opening and
maintenance of a foreign currency account with a bank in South Africa by
the BCCI without the approval of the Reserve Bank would be a violation
of Notification No. FEMA 10/2000-RB dated May 03, 2000.
During evidence of the representative of BCCI/IPL, (pages 70 &
71) the Committee drew the attention of the witnesses to the fact that IPL
was not creating a good social impact, particularly on the younger
generation. It was also alleged that the facilities provided to a class of
spectators during the matches were of Five Star nature with luxurious
facilities of food and beverages. The Committee sought to know whether
such facilities were provided within the ticket amount and whether
receipts for providing such facilities have been accounted for in the
income. The Ministry of Finance (Department of Revenue) in their
written replies submitted as under:-
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“The tickets sold for the IPL matches were of various
denominations ranging from Rs. 200, 300, 500 etc. upt Rs. 10,000,
20,000 and Rs. 1,00,000/- depending upon the City in which the
matches were held and the importance of matches. In some matches,
luxurious facilities of food and beverages were also provided to the
spectators. The franchisee teams have submitted that no donations/
on-money etc. were collected for tickets with such luxurious facilities
of foods and beverages. The high denomination ticket prices are stated
to include provision for food and beverages. The IPL franchisees are
stated to have included these ticket receipts in their total income.
Some of the companies who were allotted a large bulk of tickets are
the various State Circket associations, Nike, Idea, Cellular, Coca
Cola, United Spirits Limited, Kingfisher, Jaiprakash Associates,
Apollo Hospitals etc.”
The Standing Committee of Lok Sabha took cognizance of various
irregularities in award of media rights and commercial contracts executed
in the course of the IPL (page 80 & 81). It was observed that the IPL
Governing Council allowed itself to be relegated to the position of a mere
rubber stamp of the then Chairman, IPL. The then treasurer Sh. N.
Srinivasan admitted before the committee the various irregularities and
pleaded sorry while stating ” ………. The powers given to him were like
that and that is how he acted. It is no defense for me to say that some of
us objected to it. What defense? No defense in front of you. So, I am not
pleading that at all. We just put our heads down”.
The 38th Report of the Standing Committee on Finance is
submitted before the Hon’ble ITAT Chandigarh, as judicial notice of the
same can be taken under Section 57 (4) of the Evidence Act and it is
admissible under Section 74 of the said Act. The position of law in this
regard stands approved by the recent judgment of the Constitution
Bench in the case of Kalpana Mehta & Others Versus UOI WP
(Civil) No 558 of 2012 dated 09/05/2018.
The purpose of citing the above report is to highlight the crass
commercial character of IPL, the notice of which was taken by the
Standing Committee of the Lok Sabha. The funding pattern of the IPL
and its franchisee: violation of Income Tax Law PMLA, FEMA,
Company Act by the IPL franchisee: award of Media Rights: decision
making process in BCCI/IPL all cumulatively establish that no charitable
activity was being promoted in organizing the commercial venture called
BCCI-IPL.

C. THE SUPREME COURT COMMITTEE REPORT (LODHA
COMMITTEE)
As per the judgment of Hon’ble Supreme Court dated 22th
January 2015 the Supreme Court committee was to i) Determine the
punishment to be awarded to Mr. Gurunath Meiyappan, Mr. Raj
Kundra, and there franchises ii) Examine the role of Mr. Sundar
Raman, and if found guilty impose a suitable punishment, and iii)
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Recommend reforms in the practices and procedures of the BCCI and
also amendments in the MOA and Rules & Regulations.
The Supreme Court Committee of Justice R. M. Lodha
(former CJI), Justice Ashok Bhan and Justice R. V. Ravindran
submitted its Report dated 18/12/2015 on the 3rd issue mentioned
above highlighting various areas of concern for the cricket
administration.
The Supreme Court Committee at chapter 4 (page 136) of its
Report on IPL states: “The phrase ‘cash cow’ has been employed to
describe the T-20 league that has captured the imagination of a
generation. Big money, Bollywood stars, expatriate cheerleaders,
blaring music and a global audience came together to create this grand
carnival in 2008, which looks set to continue unabated as it readies to
enter its ninth season. True to its name, it has become a premier
league. The fact that the IPL is the single largest revenue generator for
the BCCI cannot be lost sight of. Without the IPL, much of the media
attention and international interest would be lost….”
The Committee at Chapter 2 (page 121) of its Report
highlighted the Governance issue wherein at last para of the page 121
its states “There seems to be no collective interest in the game
being promoted, and cricket stands without a custodian for its
protection and propagation in its most passionately followed
nation.” At page 124 para (f) it is stated that no representation to
women has been accorded by the BCCI. At page 132 it termed it as
an unfortunate fact that Indian women cricket team had last played a
test match 8 years ago. The committee also lamented at page 133 that
there has been no suggestion in the BCCI for any promotion or
association with cricket for the differently-abled.
The Supreme Court Committee at chapter 9 of its report has
highlighted the unhealthy practices of match fixing and betting. The
above report clearly highlights the undisputable fact that there is
absolutely no charitable work which is undertaken by the BCCI or its
constituents while organizing the cricket especially IPL whereas the
entire spectacle of Cricketainment is glamorous money spinner on
which ironically no taxes are paid.

JUSTICE MUDGAL IPL PROBE COMMITTEE

The 3- Member Probe Committee was appointed by the
Supreme Court of India pursuant to an order dated 30th July, 2013 in
SLP No. 26633/2013 arising out of the judgment and order in PIL No.
55/2013 of Hon’ble High Court of Judicature at Bombay. The Probe
committee comprised of Mr. Justice Mukul Mudgal (Retd. Chief
Justice Punjab & Haryana High Court) as Chairman, Mr. L.
Nageswara Rao, Sr. Advocate & ASG and Mr. Nilay Dutta, Sr.
Advocate as Members.
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The Committee probed allegations of Betting and Spot fixing
against the Principal of Chennai Super Kings and team owner of IPL
franchisee Rajasthan Royals. It further looked into the conflict of
interest between the BCCI President and the owner of Chennai Super
Kings.
The committee in its report at pages 236 to 237 has
highlighted the allegation of match/spot fixing against players. It
further found that the measures undertaken by the BCCI in combating
sporting fraud are ineffective and insufficient (pages 243 to 244). The
Report at page 246 to 247 mentions that surreptitious amendment to
Rule 6.4.2 enabled BCCI official to own IPL team which finally led to
conflict of interest.
The report is cited to demonstrate that no charitable activity
was undertaken in various matches conducted by BCCI-IPL. The
report highlights the commercial character of the BCCI-IPL venture
sans any trace of charitable activity. It rather exposes the evils of
Betting and Spot fixing which crept in the game of cricket.
The Hon’ble ITAT, Chandigarh in its recent order dated 23-
02-2018 in the case of I K Gujral Punjab Technical University Vs
CIT(Exemption), ITA No. 910/Chd/2017 had duly taken cognizance
of various controversies which marred the functioning of the assessee.
At para 13 (2nd paragraph) page 16 of its order the Bench states: “We
can not close our eyes to the frequent news items in this respect
including the registration of an FIR against the Ex. Vice Chancellor of
the University on corruption charges. Though mere registration of an
FIR against the Vice Chancellor or the news items we come across,
may not be enough to drive to the conclusion about the genuineness or
otherwise of the activities of the assessee, however, at this stage, these
factors coupled with other facts as discussed can not be totally
ignored.”

BOMBAY HIGH COURT JUDGEMENT DATED 30/01/2018
The Bombay High Court in the concluding para of its Judgment dated
30/01/2018 in the case of Lalit Kumar Modi vs Special Director in WP No.
2803 of 2015 held as under:-
“47. Before parting, we must indicate that it is because of the acts
and deeds of the BCCI in relation to a tournament styled as IPL
that all these proceedings had to be initiated and now conducted in
accordance with the FEMA. If IPL has led to serious breaches
and violations of the FEMA, then, it is high time the organizers
realize that after 10 years of holding such tournaments what we
have achieved can be termed as a gain or advantage or benefit for
they are outweighed completely by the resultant illegalities and
breaches of law, which are projected in several courts consuming
a lot of precious judicial time. If the IPL has resulted in all of us
being acquainted and familiar with phrases such as “Betting”,
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“fixing of matches”, then, the RBI and the Central
Government should at least now consider whether holding
such tournaments serves the interest of a budding cricketer,
the sport, the game itself. There is a auction and buying and
selling of young cricket players by business houses and clubs.
Apart from huge money involved, the tournament has brought
with it crimes and casualties in the form of ban on clubs and
players allegedly involved in wrong doing and breaching of rules
and regulations. Now the worrying trend is that such events are
being organized even by those in-charge of other sports/games
such as Football, Hockey and Badminton. Therefore, it is for the
Central Government and the administrators to take a call on all
this. We say nothing more.

(SMT. BHARATI H. DANGRE, J) (S.C. DHARMADHIKARI, J) ”
(A copy of the judgement is enclosed).

Conclusion- A perusal of the above cited documents and judgment of
Bombay High Court leads to an inevitable conclusion that the entire
IPL venture is a huge commercial cricket entertainment which has
attracted the attention of the entire world. It needs to be highlighted at
this juncture that there is no such claim advanced even by the BCCI
itself that it is running a charitable show in the name of IPL. Rather,
as per 79th annual report of the BCCI immense satisfaction has been
derived that the IPL as a commercial venture has been huge success
wherein terms like CRICKETAINMENT and ‘Manoranjan Ka
Baap’ have been used.
Not only the IPL matches are epitome of crass
commercialization but they have brought in the evils of betting, match
fixing etc., which have done more harm than good to the cause of
cricket as a National Sport. This is well illustrated by the Supreme
Court Committee report (popularly known as Lodha Committee
Report) and recent judgment of Bombay High Court mentioned above
in the case of Lalit Kumar Modi vs Special Director dated
30/01/2018. Moreover, the IPL probe committee appointed by the
Hon’ble Supreme Court of India comprising of Mr. Justice Mukul
Mudgal in its report 09/02/2014 has probed the allegations of betting
and spot fixing. The Justice Mudgal IPL probe committee also
highlighted the issue of conflict of interest between the BCCI
President and the owner of Franchisee team. Therefore, it can be
safely concluded that IPL matches are outrightly commercial activity
and significantly without any claim or pretension of undertaking any
charitable activity.
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V) ‘INVOLVEMENT’ OF PUNJAB CRICKET ASSOCIATION IN
BCCI-IPL MATCHES
The involvement of the Punjab Cricket Association in carrying on of
activity in the nature of trade, commerce or business needs to be
examined from the mandate of the amended proviso to section 2(15)
which states:
“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 any trade,
commerce or business, for a cess or fee or any other
consideration, irrespective of the nature of use or
application, or retention, of the income from such activity,
unless—-”

A. The involvement of Punjab Cricket Association in hosting the
IPL matches is absolute primarily by virtue of it being a Full Member
of BCCI. As highlighted by the 38th Report of the Standing
Committee on Finance, the IPL is not a separate legal entity. It is part
of BCCI and is managed and controlled by a separate committee
known as IPL Governing Council (page 30 of the Report). The entire
expenses of running the IPL Tournament are met by BCCI (page 33
of Report). The Franchisees are responsible for meeting the expenses
of the players in the team (travel, marketing and all costs) associated
with the staging costs for the matches. The income derived from
Media Rights and Sponsorships are shared with the Franchisees as
envisaged in the Franchisee Agreement.

The Standing Committee at page 34 of the Report has clearly
mentioned that the franchisees have to pay the BCCI an annual
franchisee fee which BCCI distributes to the Associations as
subvention. It is thus, clear that the payments received by the BCCI
from the franchisee as annual franchisee fee is distributed by the
BCCI as subvention fee to the State Associations like Punjab Cricket
Association.

B. The involvement of Punjab Cricket Association in the BCCI-
IPL matches stands adequately formalized and established in view of
the minutes of 80th Annual General Meeting of BCCI held on
24/09/2009 and the Tripartite Agreement/Stadium Agreement, both
the documents submitted as Additional Evidence by the assessee
before the ITAT, Chandigarh.

During the course of hearing the Ld. Counsel for the assessee
made an attempt to establish that although the assessee i.e. the Punjab
Cricket Association is organizing IPL matches at the directions of
BCCI on its own grounds at Mohali, yet it is not involved in the
activities of IPL. A very convenient line of argument was taken by
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stating that apart from granting access to stadium for the IPL matches
the assessee has nothing to do with IPL matches. In order to buttress
its claim to this effect the assessee filed copy of Tripartite
agreement/stadium agreement between the assessee, BCCI and KPH
Dream Cricket (P) Ltd (on sample basis) as additional evidence. A
close examination of the agreement, however, would reveal that the
claim of the assessee is devoid of any substance. It rather
establishes/reiterates the Department’s stance that the assessee is
intrinsically and intimately involved in organizing the commercial
extravaganza of the IPL.

The salient features of the agreement delineated below reveal
the extent and depth of the involvement of PCA in organizing the
BCCI mandated IPL matches:-
1. Parties to Tripartite Stadium Agreement.

i) The Tripartite Agreement itself is primary evidence of
PCA’s involvement in the BCCI-IPL matches. The
Stadium agreement is executed between PCA
mentioned as the State Association. It is an
unambiguous assertion that PCA is the State
Association of BCCI i.e. the Federal constituent of the
Central body (BCCI).

ii) The IPL is a separate sub-committee unit of BCCI, its Central
Body.

iii) The BCCI-IPL is an owner of League whereas the PCA being
the federal constituent of BCCI is the owner and operator of
the stadium. It means that the federal constituent of the Apex
Body is the owner of the stadium and is organizing the IPL
matches in the stadium on the direction of BCCI.

2. Grant of Right (Articles 2.1 to 2.4).

(i) The agreement states the BCCI – IPL(the central unit) wishes to
be granted a right from the state association for the use of the
stadium. It is inconceivable that the PCA could have refused
granting the right of use of stadium to its central body.

(ii) The Supreme Court Committee at chapter 2 (page 121) of its
report (copy submitted to Hon’ble ITAT on the last date of
hearting i.e. 25/05/2018) has highlighted the governance structure
of the BCCI. At page 122 of its report mentioned the extent of
concentration of power has been revealed – “From overall
superintendence of the Board and its affairs to taking action
against players and even approving the composition of the team
chosen by the Selectors, the President is all-powerful. In practice,
this power was even abused with the exercise of veto over the
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changes in captaincy and selection of ICCV representatives.
Incumbents were also known to turn a blind eye when issue of
corruption and mismanagement were brought to their notice, even
going as far as permitting retrospective amendments to the bye-
laws to favour particular interests.”

(iii) Articles 2.2 to 2.4 of the agreement bring out the involvement of
the PCA, being State Association, in ensuring the organizing of
the IPL matches in while being consistent with grant of exclusive
right to use the stadium to the BCCI-IPL.

3. State Association Right/Obligations(Article 3.1 to 3.8)

(i) Article 3.1 and 3.2 reveal the duties of PCA which shall bound it
to provide all the necessary cooperation and support to the
BCCI-IPL and the franchisee.

(ii) Article 3.4 mandates the PCA to carry out upgradation of the
stadium at its own cost. Similarly, article 3.6 mandates the PCA
to ensure that the stadium adheres to the BCCI-IPL medical
guidelines at its own cost. Further, article 3.8 mandates the PCA
to provide adequate sufficiently skilled and trained personnel to
BCCI-IPL at its own cost.

4. Media Related (3.9 to 3.13).

(i) Article 3.9 of the agreement mandates the PCA to
ensure TV production of each match and of
entertainment activity on the day of match. It states
that PCA shall cooperate such third party
producers. The PCA is duty bound to ensure that such
production takes place at the stadium according to the
requirement of such TV producers.

(ii) Article 3.13 of the agreement mandates the PCA to
erect and install all desired facility, structure and
equipment required in connection with exploitation of
media right at its own cost.

5. License Related (3.14 to 3.18).

(i) Article 3.14 makes it mandatory for the PCA to make the
stadium available free from any commercial obligation or
advertising etc., which it may enter into with any entity. This
demonstrates that the PCA’s involvement in organizing
/arranging the IPL matches is at the cost of staging of its own
matches or other events at the stadium.

(ii) Article 3.18 mandates the PCA to take all reasonable steps to
prevent the exercise of any right by any third party. It further
mandates that the PCA shall use its best endeavor to make
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areas surrounding the stadium available for exploitation of
the commercial rights.

6. Intellectual Property Rights (Article 3.19).

(i) As per article 3.19 of the agreement the PCA as the State
Association agrees to cooperate fully with BCCI-IPL and
assist BCCI-IPL to take such action as are reasonably
requested by BCCI-IPL to prevent infringement of commercial
rights etc., in relation to any of the same.

In the same article the PCA agrees to assist BCCI-IPL with
local trading standard department, Police, private security
arrangements, with a view to minimizing or eliminating
certain exigencies pertaining to matches,
advertising/promotions, unauthorized sale of tickets etc..

(ii) As per article 3.21 the PCA has waved in perpetuity all copy
rights in respect of each match, all rights to incorporate any
action, architectural feature etc., in stadium in any form of
audio visual etc., in connection with matches or as publicity
thereof, all rights to exploit any coverage and the commercial
right.

(iii) As per article 3.22 the PCA has undertaken that it shall not do
or permit to be done any act or thing which may in any way
harm, bring into disrepute, devalue, denigrate, impair or
otherwise adversely affect the league, the league marks and
franchisee marks or the right and interest of BCCI-IPL etc..

7. Ticket Related (Article 3.24 to 3.27).

(i) As per article 3.24 the PCA agreed not to sell or provide any
tickets, carry out any ticket promotions, produce/stock
pile/distribute/sell any merchandise in respect of any match.

(ii) As per article 3.25 he PCA will assist with reasonable requests
of BCCI-IPL/or franchisee in the promotion of the match and
will provide BCCI-IPL and franchisee with access to
database of ticket holders or corporate contacts.

(iii) The article 3.27 mandates that unless provided to the contrary
all of the costs related to provision by the State Association of
the services to be provided under this agreement shall be
borne by the State Association.

8. Consideration (Article 5.1 to 5.4).

(i) As per article 5.2 in consideration of making the stadium available
to BCCI-IPL/franchisee, in accordance with terms of the
agreement the franchisee will pay to the PCA i.e. State
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Association an amount of Rs. 30 lacs plus service tax as
applicable in respect of each day on which match is staged.

This arrangement of receiving Rs. 30 lacs in lieu of certain
facilities by the PCA brings it directly in the ambit of proviso to
Section 2(15) of Income Tax Act, 1961. It may be reiterated here
that the section unambiguously states that in such instances ‘or
any activity of rendering any service in relation to any trade,
commerce or business, for a cess or fee or any other
consideration, irrespective of the nature of use or application, or
retention, of the income from such activity,…’

Conclusion- The Ld. Counsel had made a self-serving statement
before the Hon’ble Bench that the assessee Punjab Cricket
Association is not involved (as mandated by proviso to section
2(15)) in the BCCI-IPL matches. However, the analysis of various
articles of the Tripartite Agreement reveals the extent and depth of
the involvement of PCA in the BCCI-IPL matches. The various
articles highlighted above amply demonstrate that the PCA being
the federal constituent and Full Member of BCCI had taken
various steps/initiative at its own cost to ensure that the BCCI-
mandated IPL matches are organized smoothly and are huge
commercial success. The Tripartite Agreement and Schedules 1
& 2 annexed to it are clinching documentary evidences of the full-
fledged involvement of PCA in BCCI-IPL matches.

Moreover, the arrangement of receiving Rs. 30 lacs in lieu of
certain facilities by the PCA including providing Stadium
alongwith other facilities brings it directly in the ambit of proviso
to Section 2(15) of Income Tax Act, 1961

The Tripartite Agreement, thus, clearly demonstrates that the
assessee was involved in BCCI-IPL matches in a much more
comprehensive manner than being a mere stadium provider as
claimed. In fact, the BCCI-IPL matches would have not been
possible in the first place without the stadiums owned by the Full
Members /Federal Constituents of BCCI. (Pages 81 to 107 of
assessee’s paper book).

VI) LEGAL ISSUES-

a) Misplaced Reliance on the judgment of -Addl.
Commissioner of Income Tax Vs Surat Art Silk Cloth
Manufacturers Association 121 ITR 01 (SC)- by the assessee.

During the course of hearing the Ld. Counsel placed heavy
reliance on the case law of Addl. Commissioner of Income Tax Vs
Surat Art Silk Cloth Manufacturers Association 121 ITR 01 (SC). The
Hon’ble Supreme Court in this land mark case had held that the
primary dominant purpose of the trust has to be examined to
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determine whether the said trust/institution was involved in carrying
out any activity for profit.

In the case of Punjab Cricket Association the Ld. Counsel
could not cite a single fact/reason/argument to claim that the BCCI-
IPL matches are charitable activities. In fact no claim/argument was
made by the Ld. Counsel that the BCCI-IPL activities are charitable in
nature. Whereas the involvement of the Punjab Cricket Association in
the commercial and profit oriented object of BCCI-IPL is absolute
and complete. In absence of the basic claim and distinguishable facts
of the case no benefit of legal proposition available in Surat Art Silk
can be derived by the assessee.

The bald claim to avail the ratio of the case of Surat Art Silk case is a
desperate attempt to somehow get shelter of the case of Surat Art Silk
without any parity of facts. The Hon’ble Apex Court has discouraged
such attempts in CIT Vs Sun Engineering Works Pvt. Ltd. 198 ITR
297. “It is neither desirable nor permissible to pick out a word or a
sentence from the judgment of this court, divorced from the context of
the question under consideration and treat it to be the complete “law”
declared by this court. The judgment must be read as a whole and the
observations from the judgment have to be considered in the light of
the questions which were before this court. A decision of this court
takes its colour from the questions involved in the case in which it is
rendered and, while applying the decision to a later case, the courts
must carefully try to ascertain the true principle laid down by the
decision of this court and not to pick out words or sentences from the
judgment, divorced from the context of the questions under
consideration by this court, to support their reasonings.”

Reliance is further placed on Padmasundara Rao (Decd.) and Others
Vs State of Tamil Nadu and Others 255 ITR 147. “Courts should not
place reliance on decisions without discussing as to how the factual
situation fits in with the fact situation of the decision on which
reliance is placed. There is always peril in treating the words of a
speech or judgment as though they are words in a legislative
enactment, and it is to be remembered that judicial utterances are
made in the setting of the facts of a particular case, said Lord Morrin
in Herrington v. British Railways Board [1972] 2 WLR 537 (HL).
Circumstantial flexibility, one additional or different fact may make a
world of difference between conclusions in two cases.”

b) In view of the fact that the involvement of the Punjab Cricket
Association in hosting the commercial venture of BCCI-IPL is not for
charitable purpose and is predominantly a profit earning venture the
ratio of Tribune Trust Vs CIT, Chandigarh (P & H) can safely be
invoked. On the basis of facts of that case the Hon’ble High Court
found that the case of Tribune Trust is hit by proviso to section 2(15).
The Hon’ble Court held that the activities of Tribune Trust were
carried on with predominant motive of making a profit. The Hon’ble
Court at para 57 of its order also explored the possibility as to whether
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the subsequent use of the profits for purposes of the trust would save
the assessee from the rigors of proviso of section 2(15).

c) Institute of Chartered Accountants of India Vs Director
General (Exemption), Delhi -347 ITR 99 (Delhi High Court).

The Hon’ble Delhi High Court in para 13 of its order states:

“Reliance place by the petitioners on Addl. CIT Vs Surat Silk Court
Mfrs. Association [1972] 2 Taxmann 501/[1980] 121 ITR 1 (SC) may
not be fully appropriate after introduction of the first proviso as the
statutory requirements were then different. Utilization of the funds or
income earned whether for charitable purpose or otherwise is not
relevant now in view of the first proviso and cannot be a determining
factor for deciding whether the petitioner institute is covered by
section 2(15) of the Act.”

The position of law as expounded by the Hon’ble Delhi High Court
explains the latter part of the amended proviso which states
‘irrespective of the nature of use or application, or retention, of the
income from such activity’. Therefore the involvement of the Punjab
Cricket Association in commercial activities renders it ineligible for
exemption u/s 11 of the Act. This is irrespective of the nature of use
or application, or attention of the income from such activity for which
an unsubstantiated argument was made by the Ld. Counsel during the
hearing.

c) The case laws as relied upon by Ld. Counsel.

The Ld. Counsel had relied upon certain case laws of Tribunals and
High Courts. A perusal of these case laws reveal that the Hon’ble
Courts therein were not presented with Public documents/Standing
Committee Reports/Facts wherefrom judicial notice could be taken as
per Evidence Act. The Public documents/Reports presented before
ITAT, Chandigarh unambiguously and indisputably demonstrate that
the BCCI-IPL matches are purely business/commercial venture with
profit earning as its sole objective. The agreements between BCCI-
IPL and Franchisee and Punjab Cricket Association further
reveal/demonstrate the extent and depth of the involvement of the
assessee in the Business/Commercial venture of BCCI-IPL. The case
of the assessee requires adjudication on the basis of its peculiar facts
as presented by the Department alongwith the relevant and legally
admissible documents.

Conclusion- The primary and dominant purpose of the BCCI-IPL
matches is ‘to merge Sport and Business’ as clearly mentioned in the
79th Annual Report of BCCI. The various reports including 38th
Report of Standing Committee; Lodha Committee’s Report; Justice
Mudgal Report IPL Probe Committee Report have clearly brought out
the predominant commercial character of BCCI-IPL matches. In fact
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the assessee has not even claimed that BCCI-IPL matches are
charitable activities. Moreover, in view of absolute involvement of
the assessee in the BCCI-IPL venture as evidenced by Tripartite
Agreements no benefit of the ratio enunciated in the case of Surat Art
Silk can be obtained by the assessee and is suitably covered by the
amended provisions of section 2(15) of the Act.”

12. The crux of the arguments of the Ld. Senior Counsel for the

assessee is that though the IPL may be the commercial activity of

the BCCI, however, the assessee is not involved in any commercial

exploitation of the IPL match. All the rights including the

commercial rights such as media rights, selling of tickets etc.

belong to the BCCI. Whatever grants have been received by the

assessee in the shape of TV subsidy, IPL subvention etc. is in the

nature of voluntary, unilateral grant / donation by the BCCI for

the advancement of the objects of the assessee society for the

promotion of game of cricket. That whatever is the income of the

assessee including the aforesaid grants from the BCCI, that is

applied for the promotion of game of cricket and hence sans profit

motive, therefore, the activities of the assessee/appellant fall in

the definition of charitable purposes as defined under section 2(15)

of the Act.

On the other hand, the crux of the contentions raised by

Sh. Manjit Singh, the Ld. DR, is that the assessee being a Member

of the BCCI is actively involved in the conduct and commercial

exploitation of the IPL matches.
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13. Since it is the main plea of the Ld. Counsel for the assessee

that the amounts received from the BCCI are in the nature of

grants, so as to ascertain these facts, it was deemed fit to summon

the concerned officials of the BCCI along with relevant record and

also to apprise us about the stand of the BCCI in this respect as to

what is the treatment given by the BCCI to the amounts granted to

the various cricket associations including the assessee. Hence, the

concerned official of the BCCI was summoned to clarify the

position. The BCCI has clarified its position vide letter dated

3.10.2018, contents of which are reproduced as under:-

“Date : 03 October, 2018

To,
The Assistant Registrar
Income Tax Appellate Tribunal
Ministry of Law & Justice,
Department of Legal Affairs
Kendriya Sadan, Sector 9-A, Chandigarh – 160009

Subject : Summons under section 131 read with section
255(6) of the Income-tax Act, 1961, in the case of
Punjab Cricket Association, Mohali vs ACIT, C-6(l) for
Assessment Year 2010-11

Ref: ITA No. 427/Chandi/2017 AY 2010-11 of the
appeal by the Punjab Cricket Association, Mohali vs
ACIT, C-6(l), Mohali pending adjudication before the
Chandigarh bench

Dear Sir,

We refer to the hearing held on 11th September, 2018, in front of
Hon’ble Chandigarh ITAT Bench, wherein we have been asked
to provide the documents as per attached statement for the
period AY 2008-09 to AY 2015-16.
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During the course of hearing we have been given to understand
that the major issue in the appeal by the Punjab Cricket
Association (PCA) is pending before your honours is in regard
to the taxability of payments made by the BCCI to State
associations.
The stand of the BCCI will be clear from the submissions made
before the assessing officer during the course of BCCI tax
assessments as well as the submissions made along with copies
of BCCI audited accounts and assessment order for the period
AY 2010-11 before the Hon’ble Chandigarh ITAT Bench during
the course of hearing held on 11 September, 2018.

Status of the BCCI

It is the BCCI’s case that it is registered under section 12A of the
Income Tax act 1961, and the said registration subsists to date.
It is therefore entitled to an exemption under section 11. The
grant of exemption is being denied by the tax authorities and the
dispute is pending adjudication before various authorities.

Payments by the BCCI to the State associations.

The payments made by the BCCI fall into two categories the first
being payments towards participation subsidy, matching and
staging subsidies. These are in the nature of reimbursements of
expenditure which the State associations have to incur for
conduct of matches. The second category of payments is in
regard to a share in the media rights income earned by the
BCCI. The entire claim of payments to the State associations is
being disputed by the tax authorities in the assessments of the
BCCI.
The claim of the BCCI is that the said payments are application
of income for the purpose of computation of income under
section 11.
Since the tax authorities are denying the exemption under
section 11 strictly in the alternative and without prejudice to its
contention that the entire sum is allowable as an application,
the BCCI has contended that the payments are allowable as a
deduction under section 37(1). However we bring to your
honours’ attention that the above ground also is denied by the
CIT(A) orders.
We trust that a perusal of the records being placed before your
honour will make the stand of the BCCI clear.
ITA No. 427/Chd/2017-
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Kindly take the above information on record. Thanking You.

Yours faithfully,

For The Board of control for Cricket in India
Sd/-
Santosh Rangnekar,
Chief Financial Officer

CC : The CIT(D.R.) ITAT, Chandigarh”

14. Voluminous documents such as the copies of the relevant

accounts of the BCCI, the stand/submissions of the BCCI before the tax

authorities in its cases, assessment orders and appellate orders for

different years in the cases of the BCCI have been furnished by the

BCCI to apprise and clarify its position in the matter.

15. We have perused the relevant evidences summoned from the

BCCI for the purpose of ascertaining the stand and treatment given by

the BCCI to the different amounts or to say the alleged grants to State

Associations. A perusal of the accounts of the BCCI reveals that the

BCCI has booked the aforesaid payments to the State Associations as

expenditure out of the gross receipts. The BCCI has taken a clear and

strong stand before the tax authorities including appellate authorities

that the payment to the State Associations is not at all appropriation of

profits. In fact, it is the plea of the BCCI that its registration u/s 12 of

the Act has been wrongly cancelled and that the appeal against the order

dated 30.03 2012 of the Mumbai Bench of the Tribunal confirming the

cancellation of registration is pending before the hon’ble Bombay High

Court. The BCCI still continue to claim that the payments made to the
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Member State Associations is application of the income as per

provisions of section 11 of the Act. This stand of the BCCI is in

anticipation of the decision of the hon’ble Bombay High court in its

favour. The BCCI in the alternative has claimed that the payment made

to the Member State Associations earned from IPL are clearly in the

nature of expenditure allowable under section 37 (1). This has been

consistently pleaded by the BCCI to the Income Tax Authorities in the

cases of the BCCI for different assessment years. For the sake of

reference, the relevant part of the contents from letter dated 30.1.2018

addressed to CIT(A)-54, Mumbai is reproduced as under:

“……During the year, BCCI has paid amounts to the state
associations under the head ” TV subvention”. This represents
payment of 70% of revenue from sale of media rights to state
associations. These payments were made out of the gross
revenue from media right and not out of the surplus.
Therefore it cannot be considered as distribution of profit.
Further it is important to note that even if there would be
losses in any year, TV subvention and subsidy would be
payable to state association and therefore considering it as
distribution of profit is vague”.,……

… “Assuming without admitting that if the income of the
appellant is assessed by denying exemption available under
section 11 and treating it as an AOP carrying on business,
then the expenditure incurred has to be treated as for the
activities of BCCI and has to be allowed as an expenditure
under section 37 of the Income Tax Act since the expenses are
incurred wholly and exclusively for the purposes of business”.
…..
“………. the state association is not holding the amount received as subsidies on behalf of BCCI and therefore the appellant should not be held liable on the examination of actual usage of such expenditure by state association. Any amount paid which is not specifically disallowed under the provision of income tax and the same is considered as income ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali of the recipient should be allowed as expenditure in the hands of payer in the course of carrying out its activities.” …. … “BCCI had undertaken development of the sport through itself and the state associations. BCCI in its objects has agreed to encourage the promotion of Cricket associations and in turn to generate the revenue f rom conducting the matches in various states which is not possible without the support of various cricket associations.

The arrangement is under:

The state associations are the members of BCCI, which in turn is a member of ICC (International Cricket Council) BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in- stadia sponsors hip 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% of the revenue to the member cricket association.” ……….. ……. “BCCI has created a very strong infrastructure in India for the cricketers as well as spectators through the state cricket associations . It has provided funds to the state associations to run coaching camps, academies, tournaments, and various leagues and to build infrastructure in the world. The stadiums are modern and the largest in the world. There are vibrant interstate tournaments, inter-zone tournaments, city leagues, inter-university matches and so on. Whenever a foreign team visits India, the international matches such as Test and ODI are allotted by BCCI to the state cricket associations by a rotation policy. The matches are conducted and managed by the respective state associations. It is not possible for BCCI to conduct all thes e matches with its own limited personnel.

It is dependent on the state associations, their office- bearers, their employees and their network and resources at the local center to conduct the matches.

The association manages the entire match right from provision of security to players, spectators in coordination with ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali respective state police pers onnel, taking other securit y measures like fire prevention etc. The association incurs a good chunk of expenditure in conducting an International Test/ODI/T20/IPL/CLT20 Matches.

In order to have fair and equitable sharing of the revenues, arrangements have evolved over time, about the respective responsibilities, rights, shares of revenue etc. of BCCI and the state associations. The state association is entitled to the ticket revenue and ground sponsorship revenues. Expenses on account of security for players and spectators, temporary stands, operation of floodlights, Score Boards, management of crowd, Insurance for the match, electricity charges, catering etc. are met by the state associations. On the other hand expenditure on transportation of players and other match officials, boarding and lodging, expenses on food for players and officials, tour fee. match fee, etc. are met by BCCI and revenues from sponsorship belong to BCCI.

In respect of revenues from sale of media rights, and arrangements has evolved over time. Until 1991-92, the income from media rights was meager. With the growth in income from media rights, it became necessary to optimize the arrangement for sale of media rights. For a Test series or ODI series conducted in multiple centers and organized by BCCI and multiple state associations, it was found that if each state association were to negotiate the sale of rights to events in its center, it negotiating strength would be low. It was, therefore, agreed that BCCI would negotiate the sale of media rights for the entire country to optimize the income under this head. It was further decided that out of the receipts from the sale of media rights, 70% of the gross revenue less production cos t would belong to the state associations. Every year, BCCI has paid out 70% of its receipts from media rights (less production cost) to the state associations. This amount has been utilized by the respective associations to build infrastructure and promote cricket, making the game more popular, nurturing and encouraging cricket talent, and leading to higher revenues from media rights.

Even in the event that exemption under section 11 is denied, the payments to state associations must be allowed as a deduction, as expenditure laid out or expended wholly and exclusively for the purpose of earning such income.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali It must be appreciated that in order to earn revenues, BCCI was and continues to be highly dependent on the state associations. BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the s tate associations to conduct the matches. The income from media rights is dependent on the efforts of the s tate associations in conducting the matches from which the media rights accrue. The division of revenues and expenditure is a matter of arrangement between the parties. Certain incomes such as sale of ticket revenues belong to the state associations, who meet the expenditure on the matches such as security for players and spectators temporary stands, operation of floodlights, Score Boards, management of crowd, Insurance for the match, electricity charges, catering etc. Whereas with regard to the income from sale of media rights, the arrangement between B CCI and the state associations has been that 70% of the revenue would belong to the state ass ociations. As shown, this has been the arrangement between the parties for twenty years. The state associations are entitled by virtue of establis hed practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and co-operate in the conduct of the matches. This payment is, therefore, made only with a view to earn the income from media rights. These payments do not represent distribution of profits to members, since the payment is at a percentage of the gross revenues and had been paid even in those years where BCCI had incurred a loss; besides, the amount was not paid to all members but only to the state associations. In other words, the payment is not made to the three private clubs or the government institutions, but only to state associations. Distribution of profits would always be to all the members and the fact that these other members have acquiesced in these payments demonstrates that the payments are not distribution of profits.

In the books of accounts of s tate association, any amount received as TV subvention and subsidies received from BCCI are treated as income of the state association. Therefore any surplus left out of the expenditure made by association is s ubmitted to tax in the hands of state association.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali In order to establish whether the expenditure incurred for cricketing activities depends on the nature of services provided by the state association to BCCI. It is well established fact that, state associations are providing all the infrastructure and assistance in carrying out cricketin g activities in the state. Therefore any payment for services provided by state association is a legitimate expenditure allowable under income tax.

By seeing the fact of the circums tances, assets held by the appellant are not capable of generating entire income which it is receiving through media right. Therefore when the appellant is carrying out cricketing activities by utilizing the facilities of the state association proportion of income must be shared with the state association. Therefore all the payment as TV subvention and subsidy are to carry out the cricketing activities and allowable as expenditure.

To reiterate we wis h to submit that when the learned AC concluded that the activities of the appellant is business activities, then expenditure incurred in carrying out of such activities should be allowed as business expenditure. Without such expenditure business of the appellant will never prosper. When department accepted that assessee is carrying out business then it how much expenditure made for carrying out the business should be left on the appellant., ……… ……. “What is to be seen is whether purposes of increasin g revenue and promoting the game of cricket are achieved by making these payments. We have by citing examples of the most recent match clearly pointed out that if it were not for the support of the appellant and the spending of monies, the purpose of “business”, namely expansion and augmenting of revenues never have been achieved. If the state associations did not upgrade their f acilities international tournaments would never again held in this country. Further if media facilities were not made available by the associations in that case also the game could not have been popularized to the extent that it has. Therefore there is a clear case for allowance of the expenditure under section 37(1).” ……….

(emphasis supplied by us) ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali
16. In view of the above consistent stand of the BCCI relating to the various payments made to the State Associations including the IPL subvention and TV subsidy, the Ld. Representatives of the parties were again given opportunity to put their respective submissions on this point.

Sh. Vohra, the Ld. Sr counsel for the appellant reiterated his submissions by stating that the primary plea/stand of the BCCI is that the payments/grants made by it to the State associations is application of income, hence it is only the voluntary grant given by the BCCI to the State Associations including the assessee for the purpose of the promotion of the game of cricket, hence, it can not be treated as income of the assessee from IPL matches. That the alternate stand of the BCCI that the payments to the State associations be treated as expenditure in the hands of the BCCI is opposite and mutually destructive to the primary stand of the BCCI and thus can not made basis to decide the nature of receipts from BCCI in the hands of the assessee. The Ld. Counsel has further submitted that the revenue authorities, even otherwise, have consistently rejected the aforesaid alternate contention of the BCCI and the entire receipts from the IPL have been taxed in the hands of the BCCI. That even otherwise, without prejudice to the primary contentions of the appellant, if the BCCI is treated as an Association of Persons (AOP) as per the plea of the revenue, still, once the entire income from IPL has been taxed at the hands of AOP, the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali further payment by the BCCI to its Member Associations can not be taxed as it will amount to double taxation of the same amount.

17. On the other hand, Sh. Manjit Singh, the Ld. DR, has made the following further written submissions:

1. “Brief overview of the Cricket Structure The International Cricket Council (ICC) is the Governing Body for cricket in the world. It was founded as Imperial Cricket Conference in 1909. It was renamed as International Cricket Conference in 1965 and took up its current name in 1989. The independent ICC was funded initially by commercial exploitation of rights to world cup of One Day International Cricket. As not all member countries had double tax agreement with United Kingdom, to protect cricket’s revenue a company namely ICC Development (International) Pvt. Ltd. was created. This was established in January 1994 in Monaco. The ICC had earlier requested the British Govt. to be given special exemption from paying UK Corp. Tax on its commercial income. As the British Govt. was unwilling, the ICC eventually settled in Dubai. The ICC is registered in British Virgin Island. The ICC has 12 full Members, which includes India and 93 Associate Members (Source-Wikipedia, Copy Enclosed, Page No. ).
The ICC in its Memorandum of Association at sub article (D) of Article 2.4 states that each member must:
“(D) manage its affairs autonomously and ensure that there is no Government (or other public or quais-public body) interference in its governance, regulation and/or administration of Cricket in its Cricket Playing Country (including in operational matters, in the selection and management of teams, and in the appointment of coaches or support personnel)” (Memorandum of Associations enclosed. Source-Internet Page No. ).
The Board of Control for Cricket in India (BCCI) headquartered at Mumbai is the national governing body for cricket in India. The Board was formed in the year 1929 with the object of promotion and development of cricket in India and is a society registered under Tamil Nadu Societies Registration Act, 1975. BCCI is a full fledged Member of International Cricket Council (ICC) which is the Governing Body for cricket in the world. As a member of the ICC, it ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali has the authority to select players, umpires and officials to participate in international events and exercises control over them. Without its recognition, no competitive cricket involving BCCI-contracted Indian players can be hosted within or outside the country (Source-38th Report of Standing Committee on Finance- 15th Lok Sabha).

BCCI has 30 members out of whom 25 are State Cricket Association, 2 are private clubs and 3 are Central Government institutions. BCCI does not own or manage the infrastructure and facilities that are required for cricket. (Source-CIT(A)’s order in case of BCCI for A.Y. 2010-11). The Punjab Cricket Association is registered under the Societies Registration Act 1860 and is one of the State Associations which is a Full Member of BCCI.

2. Involvement of PCA in commercial venture of BCCI-IPL matches is Absolute In the written submissions filed in the Departmental paper book earlier, detailed submissions have been made wherein on the basis of 79th Annual Report of the BCCI, the extent of the commercial venture of IPL has been highlighted. The 38th Report of the Standing Committee on Finance- XVth Lok Sabha has also been submitted wherein commercial character of IPL has been highlighted. In this regard the judgment of BCCI vs. Cricket Association of Bihar dated 22.01.2015 was also highlighted, wherein (relevant portion from Pages 106 to 112) the Hon’ble Apex Court at Para-91 has mentioned the submission of Sh. Kapil Sibal, Ld. Counsel of the BCCI, that IPL was conceived as a commercial enterprises. In these pages the business structure of the IPL stands duly explained. In this judgment the Hon’ble Supreme Court at Page-127 has formed a committee under the Chairmanship of Hon’ble Mr. Justice R.N. Lodha, former CJI. Subsequent to this judgment the Justice Lodha Committee gave its report highlighting that IPL is the single largest revenue generator for the BCCI. The report has been duly submitted in the earlier paper book. Further, the report of the Probe Committee under the Chairmanship of Mr. Justice Mukul Mudgil has also been submitted, which highlights the allegations and investigations conducted for betting and spot fixing in the IPL matches. The various documents mentioned above clearly bring out the gross commercial character of the BCCI-IPL venture sans any trace of charitable activity.

In the backdrop of the undisputed commercial character of the IPL venture the role of Punjab Cricket Association is clear- it is ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali absolutely involved the commercial venture of IPL. It is pertinent to mention here that as BCCI does not own any cricket stadium, the involvement of various State Associations including PCA is sine qua non for the success of the IPL format. In this regard the tripartite agreement/stadium agreement submitted as additional evidence by the assessee before the Hon’ble ITAT Chandigarh is itself an evidence of the complete involvement of PCA in the commercial venture of IPL. The BCCI’s stand qua the State Associations finds mentioned in its submission dated 21.01.2013 before its AO in Mumbai, wherein during assessment BCCI has explained that ‘BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the state associations to conduct the matches. The income from media rights is dependent on the efforts of the state associations in conducting the matches from which the media rights accrue’. The BCCI has further stated that ‘The State Associations are entitled by virtue of established practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches. This payment is therefore made only with a view to earn the income from media rights’. Therefore, it is clear that transaction between the BCCI and the PCA is purely commercial in nature and the income/receipts received by the PCA are in lieu of its services rendered to BCCI and while further ensuring the future IPL matches. In fact as per Article 3.21 of the Tripartite Agreement, the PCA has waived in perpetuity all copy rights in respect of each match, all rights to incorporate any action, architectural feature etc., in stadium in any form of audio visual etc., in connection with matches or as publicity thereof all rights to exploit any coverage and the commercial right. Such clauses & articles have been duly highlighted in the written submissions filed earlier by the Department in its paper book.

3. Payment to PCA is not a grant :

A. The Ld. Counsel of the assessee has taken a plea that the payments made by BCCI are in the form of a grant while stating that the BCCI distributes 70% of the revenue from sale of media rights to the State Associations for promotion of sports. The counsel further stated that there is no quid pro quo involved. It was further asserted that in this assessment year although the IPL was held in South Africa yet a grant was given to State Associations.

The argument taken by the Ld. Counsel is contrary to the facts of the case. A perusal of the franchise agreement (submitted by the assessee- Page 131 to 198) between BCCI and KPH Dream Cricket Pvt.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali Ltd. (the franchisee) (Clause 7) reveals that the franchisee shall be initially paying to BCCI-IPL franchise consideration for a period of nearly nine years i.e. from 2008 to 2017. In this period the franchisee shall be paying a fixed league deposit amounting to Rs. 9.12 cr. on or before 2nd January of each such year. It further provided that an amount equivalent to Rs. 21.28 cr. shall be paid by the franchisee on the date of 1st match in the league in each year. In fact after the period of nine years i.e. from the year 2018 onwards the franchisee shall be paying an amount equal to 20% of its income received in respect of such year.

It is pertinent to highlight that the franchisee is making payments to a body i.e. BCCI which does not owns any stadium. As per clause 2 of the agreement (supra), the BCCI grants the franchisee a right to be the only team in the league whose home stadium is located in the territory during a period of not less than the first three sessions. As per its sub clause-c, the BCCI shall be providing the franchisee a stadium to stage its home league matches at cost. This is to be done by way of an agreement between BCCI-IPL and the owner of the stadium which is the Punjab Cricket Association in this case.

At sub clause 2.3 of the agreement mentioned supra, the BCCI-IPL agrees to stage the league in each year. It is interesting to state here that in this very clause it is mentioned that in case the league is not staged at all then the obligation of the franchisee to pay the franchisee consideration and those of the franchisee’s obligation in respect of staging of matches shall be suspended until such time as the league is staged once more. This makes it amply clear that staging of league matches is a matter of utmost importance for the financial health of BCCI-IPL. As non staging of the league shall constrain it to forgo the hefty annual league deposit equivalent to Rs. 9.12 crores and Rs.21.28 crores which is to be paid by the franchisee on the date of first match in the league in such year.

In view of the clauses of the franchisee agreement it was imperative for the BCCI-IPL league to ensure conducting the matches even if it was to be hosted in South Africa. As otherwise a huge commercial loss was an imminent possibility.

The argument of the Ld. Counsel that even though the matches were not held in the instant year in the stadium owned by PCA yet it was granted 70% of the franchisee fee as the same was nothing but a grant devoid of any quid pro quo is equally misleading. As mentioned above, clause 7 of the Franchise Agreement stipulates a period of nearly 9 years i.e. 2008-2017 and still further from 2018 onwards. The schedule of ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali franchisee payments mentioned at Clause-7 is for all such years. Similarly, the Central Rights Income has been scheduled to be allocated for the period of 2008-2012, 2013-2017 and 2018 onwards as per Clause-8 of the agreement. These clauses unambiguously prove that the BCCI-IPL in order to ensure a hassle free and smooth running of IPL matches had to make such payments to various State Associations as a consequence of which a hefty receipt from the franchisees could flow without any problem. In fact these payments are nothing but a quid pro quo as the BCCI-IPL Body does not owns any cricket stadium at all and has admittedly limited infrastructure. In fact, in absence of its own cricket stadium it was all the more necessary and imperative upon BCCI to keep the State Associations in good humor.

In the case of Gujarat Cricket Association vs. JCIT (Exemptions), Ahmadabad -101 Taxmann.com-453 dated 24.01.2019, the BCCI’s stand during its assessment proceedings has been quoted. The BCCI vide its submission dated 03.12.2012 to it’s A.O. has explained its relationship with the State Cricket Associations as follows:

“1. BCCI is society registered under the Tamil Nadu Societies Registration Act. It was formed in the year 1929 with the object of promotion and development of cricket in India and is a member of the International Cricket Council (ICC) the regulatory body for world cricket. As a member of ICC, BCCI represents India in bilateral tours between member countries and in ICC tournaments such as the World Cup.
2. BCCI has 30 members out of whom 25 are state cricket associations, 2 are private clubs and 3 are Central Government Institutions. BCCI does not own or manage the infrastructure and facilities that are required for cricket. It encourages and oversees the various state associations to promote the game, build the required infrastructure organize tournaments, leagues, coaching camps etc. in their respective states. Whenever a foreign team visits India, the international matches such as Test and ODI are allotted by BCCI to the State Cricket Associations by a rotation policy. The matches are conducted and managed by the respective state associations and over time, arrangements have evolved about the respective responsibilities, rights, shares of revenue etc. These have evolved in order to promote co-operation and unity among the member associations and by applying the principles of equity and fairness, for which the sport of cricket is renowned.” 9.7.3 The BCCI in its submission dated 21/1/2013 earned subsidy paid to SCAs and TV Subvention as stated as follows:– “13.2 PAYMENTS TO STATE ASSOCIATIONS ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali
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Even in the event that exemption under section 11 is denied, the payments to state associations must be allowed as a deduction, as expenditure laid out or expended wholly and exclusively for the purpose of earning such income, it must be appreciated that in order to earn revenues, BCCI was and continues to be highly dependent on the state associations. BCCI does not have the infrastructure and the resources to conduct the matches by itself and is dependent on the state associations to conduct the matches. The income from media rights is dependent on the efforts of the state associations in conducting the matches from which the media rights accrue. The division of revenues and expenditure is a matter of arrangement between the parties. Certain incomes such as sale of ticket revenues belong to the state associations, who meet the expenditure on the matches such as security for players and spectators temporary stands, operation of floodlights, Score Boards, management of crowd, insurance for the match, electricity charges, catering etc. Whereas with regard to the income from sale of media rights, the arrangement between BCCI and the State Associations has been that 70% of the revenue would belong to the State Associations. As shown, this has been the arrangement between the parties for the twenty years. The State Associations are entitled by virtue of established practice to 70% of the media right fee. It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches. This payment is therefore made only with a view to earn the income from media rights.”
The stand of BCCI mentioned above confirms the fact that the payments received by the PCA from the BCCI cannot be termed as grant at all. As the BCCI itself has mentioned that ‘It is in expectation of this revenue that the various state associations take an active part and cooperate in the conduct of the matches’. It is further pertinent to mention that in absence of any cricket stadium the BCCI remains dependent on State Associations. Therefore, the various payments made by the BCCI ensures that the State Associations are ever ready with their stadium and other infrastructure to ensure smooth execution of IPL matches.

B. It is pertinent to point out that in the aftermath of Justice Lodha Committee’s report many structural changes were ordered by the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali Hon’ble Supreme Court. Unhappy with such changes the ousted high profile BCCI and State Associations officials attempted preventing matches from being held in the stadiums. As the cricket stadiums are owned by the State Associations, by not allowing matches to be played these State Associations made their intentions clear of with holding the usage of cricket stadiums by the BCCI (Newspaper report dated 07.01.2017 enclosed Page No. ). Similarly, earlier in wake of bitter experience of shifting cricket matches to alternate venues at the last moment the BCCI was reported to be planning building of its own stadiums. As per media reports the BCCI plans to buy land and build the cricket stadiums, which will be owned and administered by them and does not belong to any State Association (Newspaper report dated 29.06.2016 enclosed Page No. ). Such developments further confirm that the payments made to various State Associations by the BCCI can by no stretch of imagination be termed as grant. These are payments made in order to ensure that the State Associations like PCA ensure and execute smooth functioning of IPL matches for coming number of years. C. It is in the above background that the tripartite agreement between PCA, BCCI and KPH Dreams Pvt. Ltd. needs to be perused. In this tripartite agreement the obligations and duties expected of the Punjab Cricket Association have been mentioned in minute details. This amply demonstrates that the payments made by the BCCI to PCA cannot be termed as mere grant given by the BCCI to the PCA. The detailed clause-wise comments in this regard have been submitted at Pages 12 to 18 of the written submissions filed earlier.

4. Reliance by the Ld. Counsel on the order of Gujarat Cricket Association vs. JCIT (Exemptions), Ahmedabad -101 Taxmann.com-453 :

The Ld. Counsel of the assessee has placed strong reliance on the above case law to support his case. The reasoning and the decision of the Hon’ble ITAT, Ahmadabad can be safely observed from Para-35 of its order. In order to appreciate the reasoning behind its adjudication the Para-35 of the above order by the Hon’ble ITAT, Ahmadabad is quoted as below:

“Let us take a pause here and examine as to what are the activities of the assessee cricket associations so as to be brought within the ambit of trade, commerce or business. We have seen objects of the association, which are reproduced earlier in our order, and it is not even the case of the revenue that these objects have anything to do with any trade, commerce or business; these objects are simply to ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali promote cricket. The trigger for invoking proviso to Section 2(15), as Shri Soparkar rightly contends, has to an activity of the assessee which is in the nature of trade, commerce or business. However, the case of the revenue authorities hinges on the allegation that the way and manner in which cricket matches are being organized, particularly the IPL matches, the activity of organizing cricket matches is nothing but brute commerce. Undoubtedly, it would appear that right from the time Kerry Packer started his World Series Cricket in 1977, there has been no looking back in commercialization of cricket and the impact of this commercialization has not left Indian cricket intact. The Indian Premier League and the rules of the game being governed by the dictates of commercial considerations may seem to be one such example of commercialization of Indian cricket. The difficulty for the case of the revenue before us, however, is that these matches are not being organized by the local cricket associations. We are told that the matches are being organized by the Board of Cricket Control of India, but then, if we are to accept this claim and invoke the proviso to Section 2(15) for this reason, it will amount to a situation in which proviso to Section 2(15) is being invoked on account of activities of an entity other than the assessees- something which law does not permit. We are not really concerned, at this stage, whether the allegations about commercialization of cricket by the BCCI 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 do not 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 of 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 from the commercial profits earned by the BCCI by organizing the cricket matches. The problem, however, is that the activities of the apex body, as we have explained earlier, ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali cannot be reason enough to trigger proviso to Section 2(15) in these cases. Whether these cricket associations collectively constitute BCCI or not, in the event of BCCI being involved in commercial activities, the taxability of such commercial profits will arise in the hands of the BCCI and not the end beneficiaries. Even in such a case the point of taxability of these profits is the BCCI and not the cricket associations, because, even going by learned Commissioner’s arguments, these receipts in the hands of the cricket associations is nothing but appropriation of profits. What can be taxed is accrual of profits and not appropriation of profits. In any event, distinction between the cricket associations and the BCCI cannot be ignored for the purposes of tax treatment. There is no dispute that the matches were organized by the BCCI, and the assessee cannot thus be faulted for the commercial considerations said to be inherent in planning the matches. As we make these observations, and as we do not have the benefit of hearing the perspective of the BCCI, we make it clear that these observations will have no bearing on any adjudication in the hands of the BCCI. Suffice to say that so far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of ‘charitable activities’ in the hands of the cricket associations before us- particularly as learned Commissioner has not been able to point out a single object of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are “objects of general public utility” under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility.” (emphasis supplied).

A careful perusal of the above para clearly brings out the fact that the Hon’ble ITAT has substituted the word ‘involves’ as mentioned in Sec. 2(15) of the I.T.Act, 1961 by the word ‘organized’. The legislation has deliberately used the term ‘involves’ in Sec. 2(15), and not the word ‘organized’. I take this opportunity in quoting from the authority on the subject i.e. Principles of Statutory Interpretation by Justice G.P. Singh. The primary guiding principle in this regard has been that the language of the statute should be read as it is. It is worth quoting from Page-64 of the book:

ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali ” Avoiding addition or substitution of words As stated by the Privy Council: We cannot aid the Legislature’s defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there. “It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so.” Similarly it is wrong and dangerous to proceed by substituting some other words for words of the statute. Speaking briefly the court cannot reframe the legislation for the very good reason that it has no power to legislate. ”
It is humbly submitted that the above order of the Hon’ble ITAT, Ahmadabad Bench is a clear case of substitution of the word ‘involves’ as mentioned in the Income Tax Act by the word ‘organized’, which has no legislative mandate. This casual substitution of legally mandated word effectively renders the whole judgment Per incuriam.

The dictionary meaning of the word ‘involve’ is : “to envelop; to entangle; to include; to contain; to imply” (See the Shorter Oxford English Dictionary, III edition, page 1042), whereas the term ‘organized’ would mean: to form with suitable organs to incorporate; establish; create; form. Give orderly structure; systematize; bring into working order (The Law Lexicon by P. Ramanatha Aiyar, 3rd Edition 2012). The legislature deliberately used the word ‘involves’ i.e. where mere involvement with carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of nature of use or application, or retention, of the income from such activity shall bring it under the ambit of Sec. 2(15). For falling under the said section an assessee need not organize itself any such activity as mentioned in the Section. Rather its mere involvement i.e. it being enveloped by, entangled to, even included in or even contained by it or merely by implication would bring it under the ambit of Sec. 2(15). The substitution of word ‘involves’ with the word ‘organize’ clearly defeats the legislature’s letter and intent, which is not permissible in law. The undisputed guiding principle is that the language of the statute should be read as it is and the Courts should avoid addition or substitution of words.

In view of the above the order of the Hon’ble ITAT Ahmadabad may not be the correct judicial precedence to be followed.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali
5. Chandigarh Lawn Tennis Association vs. ITO (Exemptions), Chandigarh- 95 Taxmann.com-308 The Hon’ble ITAT Ahmadabad has relied on and referred to various judgments including the latest judgment from the Hon’ble Pb. & Haryana High Court in the case of Tribune Trust vs. CIT -390 ITR

547. However, the Hon’ble ITAT Chandigarh in the case of Chandigarh Lawn Tennis Association vs. ITO (Exemptions), Chandigarh- 95 Taxmann.com-308 has rendered a landmark judgment interpreting Sec. 2(15) after painstakingly delineating the legislature history behind Section 2(15). The Hon’ble ITAT, Chandigarh has carefully analyzed the legal history of the section right from its earlier avtar as Sec. 4(3) of the I.T.Act, 1922 and its interpretation by the Privy Council in the case of Trustees of The Tribune Press vs. CIT- 7 ITR-

415. It further discusses threadbare the introduction of Sec. 2(15) in Income Tax Act, 1961. After taking due note of the Hon’ble Supreme Court judgments in the cases of Sole Trustee, Lok Shikshana Trust vs. CIT – 101 ITR 234 and Indian Chamber of Commerce vs. CIT – 101 ITR 796, it highlights the over ruling of these judicial precedence by the larger bench judgment in the case of Addl.CIT vs. Surat Art Silk Cloth Mfg. – 121 ITR 1; wherein the theory of predominant object was laid down. The Hon’ble ITAT, Chandigarh in its path breaking judgment has taken due cognizance of introduction of 2nd Proviso to Sec. 2(15) of the Act inserted with retrospective effect from 01.04.2009. The Hon’ble ITAT, Chandigarh respectfully analyzed the latest judgment of Hon’ble P & H High Court in the case of Tribune Trust vs. CIT -390 ITR 547 and observed that there is no discussion in it about the effect of introduction of 2nd Proviso to Sec. 2(15), amendments in Sec. 10(23C), Sec. 13 and Sec. 143 of the Act. In my humble opinion the Hon’ble ITAT, Chandigarh has correctly interpreted Sec. 2(15) alongwith amendments/ introduction of 2nd Proviso in the Section and in other Sections of the Act. Moreover, being the latest judgment on the issue and unturned by any superior Court hitherto it has a binding value as on date.

Therefore, in view of the gross commercial character of the IPL venture and direct involvement of Punjab Cricket Association the case of Chandigarh Lawn Tennis Association vs. ITO (Exemptions), Chandigarh- 95 Taxmann.com-308 is directly applicable in the case of assessee.

O/o CIT (DR) ITAT, Chandigarh”

18. Before proceeding further, firstly we have to understand the relation between the State Associations and BCCI and further how they ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali are constituted. What is emerging from the facts brought before us is that BCCI is a constituent of the State Associations. The representatives of the State Associations are at the helm of the affairs of the BCCI. The status of the BCCI under the circumstances is nothing but of an Association of Persons (in short ‘AOP’) of which State Associations including the assessee are the members. Though, the BCCI has got itself registered separately as a ‘Society’ under the ‘Tamil Nadu Societies Registration Act’ but with the mere registration of the BCCI as a society, in our view, does not change its nature of being an ‘AOP’ of the State Associations. The matter does not end here. There is a complete federal structure starting from lower level i.e. District Cricket Associations to the International Cricket Council. District Cricket Associations collectively form State Cricket Associations. State Cricket Associations collectively form the National Body named as BCCI. The similarly existing National Cricket Boards/associations of different countries including BCCI collectively constitute International Cricket Council (in short ‘ICC’). There is no rebuttal to the submissions of the Ld. DR that ICC commercially exploit the International Cricket matches. However, to be sure enough about the activities of the ICC, we have gone through the website of the ICC “Icc-cricket.com”. It is gathered that the International Cricket Council (ICC) is the global governing body for international cricket. There are 12 Full Members and 92 Associate Members who are the governing bodies for cricket of a country recognised by the ICC. BCCI is a full member of the ICC ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali representing India. ICC earlier had its office at Lord’s (UK). However, for better tax planning, it established a company at Monaco. The ICC had earlier requested the British Govt. to be given special exemption from paying UK Corporation Tax on its commercial income. As the British Govt. was unwilling, the ICC eventually settled in tax efficient country ‘Dubai’. The ICC is registered in British Virgin Island. There is no denial that ICC is commercially exploiting the game of cricket. In an overview of its partners, it has been mentioned, ” The ICC Commercial programme aims to optimize revenues for the benefit of the game by delivering exciting, engaging global events that attract new and diverse fans and by building long-term successful commercial partnerships.” It is clearly stated that apart from promotion and controlling the game of cricket, ICC has clear cut objective of Business of Cricket. In its annual reports for the year 2003-04 & 2004-05 it is stated as : “Business of Cricket : Objective: Whilst preserving the core values of the game, optimise revenue creation through effective management and exploitation of commercial rights, marketing strategies, product development and intellectual property.” Further in the Annual report for 2009-10, it is stated : “The ICC Mission : As the international governing body for cricket, the International Cricket Council will lead by: • Promoting and protecting the game, and its unique spirit • Delivering outstanding, memorable events • Providing excellent service to Members and stakeholders •Optimising its commercial rights and properties for the benefit of its Members.” The ICC generates income ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali from the tournaments it organises, primarily the Cricket World Cup, and it distributes the majority of that income to its members. In its financial statements, it has been mentioned, “n) Payments due to Mem bers: Payments due to Members represent those amounts that are determined by the Board of Directors as due for distribution to Members at the conclusion of a cricketing event. These payments are treated as expenses within the accounts and are deducted in arriving at the profit/(loss) before tax.” It is pertinent to mention here that Sh. Shashank Manohar, representative of the BCCI is the present Chairman of the ICC.

19. IPL organized by BCCI is the domestic form of international cricket T-20, however, it is not limited to domestic players but players from other countries are also purchased by private investors/franchise through auction involving huge money. There is no denial by the appellant that IPL is a commercial venture of BCCI which is a mixture of sports, entertainment and business. That high stakes are involved and huge investments of the private business houses have been attracted with sole motive of maximum exploitation of the popularity of the cricket for generating and augmentation of the Revenue which is shared as per the arrangements of the BCCI with its constituent members and as well as third parties / franchise holders of the teams.

20. Though, apparently, there appears no doubt that IPL is a commercial venture of the BCCI, however BCCI before the tax authorities has claimed itself to be a charitable institution. We have ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali been told that the appeal of the BCCI against its cancellation of registration as a charitable institution is pending before the hon’ble Bombay High Court. It has been further claimed by the BCCI that the amount given by it to the State Associations is application of income. In the alternative it has been pleaded that the aforesaid payments to the State Associations is the deductible expenditure of the BCCI out of the gross receipts.

Before proceeding further, we at this stage deem it appropriate to firstly consider as to whether the primary plea of the BCCI that the payments made to the State Associations is application of income towards the advancement of the charitable object of promotion of cricket is antagonistic to the alternate plea of the BCCI that these payments are towards the expenditure solely incurred for earning of the income from IPL. We are conscious of the fact that we are not adjudicating the case of the BCCI and hence we restrain ourselves at this stage to give any finding as to which of the plea out of the both is correct. However, the issue before us is as to whether both the above stated pleas of the BCCI are opposite and mutually destructive and as to what is the effect of plea of the BCCI on the case of the assessee?

After examination of the accounts of the BCCI, we are of the view that the above pleas of the BCCI are not inconsistent, contrary or mutually destructive from the point of view of the BCCI and as per the treatment given to the said payments in its accounts. The BCCI, as ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali noted above, has booked these payments to the associations as expenditure set off against the gross receipts. However, the primary plea of the BCCI is that it is an application of income as per the provisions of section 11 of the Act. Now the question arises that if the income of a person is the net receipt i.e. gross receipts minus expenditure then, can the expenditure incurred from gross receipts be said to be the ‘application of income’. If we go strictly by the provisions of the Act, since the BCCI in its books of accounts has booked the payments to the State Associations as expenditure, it is thus payment out of its gross receipts and not out of income and thus it should not qualify as application of income. However, as most of the charitable institutes do, the expenditure is generally booked as application of income e.g. educational institutions claiming charitable status, generally claim the salary to teachers as application of income whereas in the books of accounts, the same is treated as expenditure and hence under the circumstances, in our view, the claim of the BCCI in this respect is not an exception. In view of this, the alternate plea of the BCCI is not opposite or destructive to its primary plea. However, the question that whether the expenditure can be considered as application of income for the purpose of claiming exemption as per the provisions of section 11 of the Act is left open to be decided in appropriate case.

21. Now the question arises that when the donor that is BCCI in its books of account has not treated the payments to State Associations as ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali voluntary grants or largesse, can the donnee/recipient claim the same to be so. The answer to this question, in our view, is ‘no’. The BCCI in its consistent plea before the tax authorities has claimed that the payments made to the State Associations is under an arrangement of sharing of revenues with the State Associations. That the State Associations are entitled by virtue of established practice to 70% of the media right fee. That if each state association were to negotiate the sale of rights to events in its center, its negotiating strength would be low, hence, it was agreed that BCCI would negotiate the sale of media rights for the entire country to optimize the income and that out of the receipts from the sale of media rights, 70% of the gross revenue less production cost would belong to the state associations. By saying so, BCCI has pleaded that it has just acted as a facilitator for sale of media rights collectively on behalf of the State Associations for the purpose of maximizing the profits, for which it retains 30% of the profits and rest 70% belong to the State associations. And that is why the payment out of media rights had been paid even in those years where BCCI had incurred a loss. That the BCCI has 30 members out of whom 25 are State Cricket Association, 2 are private clubs and 3 are Central Government institutions, however the payment out of Media Rights is paid only to State Associations and not to the three private clubs or the government institutions. It has also been pleaded that in the books of accounts of state association, any amount ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali received as TV subvention and subsidies received from BCCI are treated as income of the state association. Therefore, any surplus left out of the expenditure made by association is submitted to tax in the hands of state association. Thus, when the payer i.e. BCCI in this case has not recognized the payments made by it to State Associations as voluntary grants or donations, rather the BCCI has stressed the payments have been made to the State Associations under an arrangement arrived with State Associations for sharing of the revenues from International matches and IPL, then under the circumstances, the payee or to say recipient Associations cannot claim the receipts as voluntary grants or donations at discretion from the BCCI.

22. However, the fact on the file is that the claim of the BCCI to treat the aforesaid payments as expenditure incurred for earning of the income has been declined by the income Tax Authorities and the payments/grants given to the Member State Associations has been treated as distributions of profits. The registration of the BCCI under section 12 read with section 2(15) of the Act since stood cancelled on the date, hence the payments made by it to the State Associations has not been treated as application of income for the purpose of section 11 of the Act. Hence, as per legal status of BCCI as on today, the BCCI is being treated by the tax authorities as an ‘AOP’ only and the payments made to the State Associations as distribution of profits. Under the circumstances, these payments by the BCCI to the State Associations ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali including the appellant, having already been taxed at the hands of BCCI can not be now taxed in the hands of the member of the AOP i.e. the appellant State Association as it will amount to double taxation of the same amount.

23. However, interestingly, the assessee PCA has denied that BCCI is its AOP, rather the plea of the assessee is that it is a charitable institution and that the amount received by it from BCCI is grant, hence would fall in the definition of its income u/s 2(24)(iia) of the Act and further exempt u/s 11 of the Act. To examine this plea of the appellant, firstly, we will have to examine whether the activities of the assessee fall within the scope of the term “charitable purposes” as defined u/s 2(15) of the Act for claiming exemption u/s 11 of the Act. The BCCI, though registered separately as a society under the ‘The Tamil Nadu Societies Registration Act, 1975’, however, admittedly is the Apex body of different cricket associations and the appellant society is also its member. As discussed above, the legal status of the BCCI as on today is that of an AOP and it is held to be involved in large scale commercial venture named ‘IPL’.

24. However, the plea of the appellant Punjab Cricket Association is that the IPL may be the commercial venture of the BCCI but not of the appellant. That the appellant is a separate entity. It is a classic case where the payer ( BCCI) is pleading that what has been paid by it to the payee (PCA) is out of the consideration for the services rendered by the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali payee and the payments is made as per the arrangements arrived at with the payee for sharing of the revenue out of the proceeds of a common venture , however, at the same time, the payee (PCA) is claiming that the payments received by it is not as a consideration for its services, rather, the same is a voluntary, discretionary grant or to say largesse by the payer to the payee. More interestingly is the fact that there the payer is a collective constituent of, as well as, apex body of the payees (State Associations).

25. More surprisingly, the State Associations in their individual capacity are pleading that the IPL may be the commercial venture of their constituent & apex body i.e.’ BCCI’ but they are not involved in conduct of IPL. But the fact is that these Associations have collectively formed this apex Association named ‘BCCI’, get it registered under the Tamil Nadu Societies Registration Act, and thereby collectively engage in operation and conduct of the IPL through their representatives in the name of ‘BCCI’. It is pertinent to mention here that it is an admitted fact that assessee ‘PCA’ is a full member of the BCCI. The assessee ‘PCA’ individually is taking totally opposite stand to the stand it has taken collectively with other Associations under the umbrella named and styled as ‘BCCI’.

26. Another noticeable fact is that though, the BCCI has its headquarters at Mumbai from where its entire operations are run, however, it has been registered under the State Act i.e. ‘Tamil Nadu ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali Societies Registration Act’. The Ld. DR in this respect has raised a question that as to how the Tamil Nadu State Govt. authorities will be able to regulate and monitor or verify as to if the activities of the BCCI are done as per the aims and objects under which it has been registered and that there is no violation of rules and regulations of the state Societies Registration Act, as all the activity being done by the BCCI is from the head office which is situated outside the State of Tamil Nadu. The Ld. DR has submitted that though there is no bar for a society to extend its activities out of a state where it has been registered, however, in the case of the BCCI, the entire operations of the BCCI are from a place out of the jurisdiction of the State Authorities with whom it has been registered as a Society. The Ld. DR in this respect has submitted that the facts, itself, speak that the BCCI has shielded itself under the veil of registration under the Tamil Nadu Societies Registration Act just to plead that it is a separate entity from the State Associations, whereas, in fact, it is nothing more than an ‘AOP’ of the State Associations and being so, if the BCCI is involved in commercial venture, the State Associations cannot claim that they have nothing to do with the activity of the BCCI. It has been submitted that what is done by the BCCI is the act of the State Associations collectively done under the umbrella named as ‘BCCI’ which is nothing but constituent of the State Associations. Further the ICC is a constituent of National Associations including BCCI, which admittedly is commercially exploiting the international matches in collaboration with BCCI and other member Associations.

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M/s Punjab Cricket Association, Mohali
27. To buttress his contention that the BCCI has just tried to shield it behind veil of the registration under the state Societies Registration Act, otherwise it is nothing but an AOP of the State Associations, Sh. Manjit Singh, the Ld. DR, has placed reliance upon the following provisions of the Tamil Nadu Societies Registration Act :-

” THE TAMIL NADU SOCIETIES REGISTRATlON ACT, 1975″
” An Act to provide for the registration of literary, scientific, religious, charitable and other societies in the State of Tamil Nadu.”
…….
1. (1) This Act may be called the Tamil Nadu Societies Short title, Registration Act, 1975.
(2) It extends to the whole of the State of Tamil Nadu.
(3) It shall come into force on such date as the Government may, by notification, appoint and different dates may be appointed for different areas and for different provisions of this Act:
Provided that any reference in any such provision to the commencement of this Act shall, in relation to any area, be construed as a reference to the coming into force of that provision in such area.
………..
CONSTITUTION AND REGISTRATION.
3. (1) Subject to the provisions of sub-section (2), any societies which society which has for its object the promotion of education, may be literature, science, religion, charity, social reform, art, registered, crafts, cottage industries, athletics, sports (including indoor games) recreation, public health, social service, cultural activities, the diffusion of useful knowledge or such other useful object with respect to which the State Legislature has power to make laws for the State, which may be prescribed, may be registered under this Act.
(2) Notwithstanding anything contained in subsection (1), no association which has for its object the improvement of the economic condition of workmen, no club where games of chance providing prizes ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali for winners are played and no society which does not consist of at least seven persons shall be registered under this Act.
MANAGEMENT AND ADMINISTRATION.
13. Every registered society shall–
(1) have a registered office to which all communications and notices may be addressed and shall file with the Registrar notice of situation of such office and of any change thereof within such period as may be prescribed after the date of the registration of the society or after the date of change, as, the case may be ;
(2) keep displayed on the outside of its registered office its name in a conspicuous position, in legible characters and, if the characters employed therefor are not those of Tamil, also in the characters of Tamil.”
(emphasis supplied by us)
28. The Ld. DR has further placed reliance on the following rules and Regulations of the BCCI.
2. HEADQUARTERS:
The Headquarters of the Board shall be located at Mumbai.”
14. ADMINISTRATION :
i) Mumbai shall be the administrative headquarters where the office of the Board shall be permanently situated. It shall be Central Secretariat of the Board.”
29. Apparently, there seems force in the contentions raised by the Ld. DR that the Tamil Nadu Societies Registration Act, primarily, has been enacted for registration and regulating the societies in the State of Tamil Nadu. The BCCI though, having itself registered with the Tamil Nadu Societies Registration Act, yet, does not operate in Tamil Nadu rather all its operations and functions are conducted from Mumbai and ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali its highly doubtful that the Registrar of the Tamil Nadu Societies could exercise any jurisdictional power over the BCCI. Under the circumstances, it appears that BCCI has shielded itself behind veil of registration under the Tamil Nadu Societies Registration Act , whereas the entire activity of the BCCI is being run out of the State of Tamil Nadu.

30. The Ld. DR has further placed reliance on the following sections of the Tamil Nadu Societies Registration Act to contend that even as per the provisions of the said Act, all the property of the BCCI vests in its members i.e. State Associations;

2. In this Act, unless the context otherwise requires–
(a) ” committee” means the governing body of a registered society to whom the management of its affairs is entrusted ;
18. All property, movable and immovable, belonging to a registered society, whether acquired before or after its registration, if not vested in trustees, shall vest in the committee ; and any such property may in any legal proceeding, be referred to as the property of the committee.”
31. Even the following clause of the Memorandum of Association of the BCCI is enough to gather that the BCCI is a commercial venture of the State Associations :-

“MEMORANDUM OF ASSOCIATION
(k) To carry on any other activity which may seem to the Board capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value of, or render profitable any of the properties or rights of the Board;”
32. It is settled law that what cannot be done directly, that cannot be done indirectly also. If an institution claiming charitable status being constituted for the advancement of other objects of public utility, as per the provisions of law, is barred from involving in any commerce or business, it cannot do so indirectly also by forming a partnership firm or ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali an AOP or a society with some other persons and indulge in commercial activity. Any contrary construction of such provisions of law in this respect would defeat the very purpose of its enactment. The assessee in this case is a member of the BCCI and the status of the BCCI as on date is that of an AOP and it has been held to be actively involved in a large scale commercial venture by way of organizing IPL matches, hence under the circumstances, the appellant as per the position as on date, can be said to have been involved in commercial venture as a Member of the BCCI irrespective of the fact that it receives any payment from the BCCI or not or whether such receipts are applied for objects of the appellant society or not. However, once the income is taxed at the hands of the AOP, the receipt of share out of the income of the AOP cannot be taxed in the hands of the member of the AOP. Which means that though, for the sake of ease of taxation, the AOP has been recognized as a separate entity, however actually its status cannot be held to be entirely distinct and separate from its members. Had it been so, then the receipt of the share by a member from the income of its AOP will constitute taxable income at the hands of the member; however, actually it is not so.

33. Even from the facts and evidences brought before us, it is apparent that the appellant, herein, is involved in commercial activity in a systemic and regular manner not only by offering its Stadium and other services for conduct of IPL matches but by actively involving in the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali conduct of matches and exploiting its rights commercially in an arrangement arrived at with the BCCI. Even there is no denial or rebuttal by the appellant to the contention that the IPL is purely a large scale commercial venture involving huge stakes, hefty investments by the franchisees, auction of players for huge amounts, exploiting to the maximum the popularity of the game and the love and craze of the people in India for the cricket matches. From the discussion made above and also considering the stand of the BCCI and further from analysis of the Tripartite Agreement, it is clearly revealed that the assessee/appellant is systematically involved in the conduct of IPL matches. It is not a simple case of offering of its stadium on rent to BCCI for conduct of the matches. The assessee association not only being the member of the BCCI which is the AOP of the assessee along with other members, but also, is individually involved in a systematic and regular manner in commercial exploitation of the popularity of cricket matches and its infrastructure.

The appellant has pleaded that it is in the course of construction of a new stadium at the cost of over Rs. 250/- crores at Mohali, out of which Rs. 100 crores including land has been expended till date. However, the stand of the BCCI is that since the BCCI does not have its own infrastructure for conduct of matches, the participation of the State associations is necessary for generation of revenue by exploiting commercially the conduct of matches in their stadia. We find force in ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali the contention of the Ld. DR that despite the Appellant already having an international stadium at Mohali, the appellant realizing the need of a bigger infrastructure to accommodate the huge crowds at a centrally located place and for the purpose of augmentation of the revenue has started to construct a second international stadium in the same city. The facts itself speak that this huge investment is made by the appellant not with the predominant object of promotion of the sport of cricket rather the main object is the augmentation of the revenue. The BCCI in clear terms has pleaded that without the involvement of State Associations, the conduct of the IPL matches and huge revenue generation from the same is not possible. The appellant being party to the Tripartite Agreement is itself an evidence of the appellant being commercially involved in BCCI-IPL matches.

34. The Ld. DR at this stage has submitted that apart from assessee involving in commercial venture, the objects of the assessee, otherwise are not entirely for the promotion of the game of cricket. One of the main objects of the appellant, as that of the BCCI also, is to control the cricket under its area and this conduct of the assessee is not in the interest or promotion of cricket rather to establish its monopoly and dominance in the field. The Ld. DR in this respect has invited our attention to the objects of the assessee society which inter alia include the following:-

” (c) To regulate and control the game and general sports……
ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali
(j) To add, alter, maintain and enforce Rules and Regulations for the control and governance of the game in area under control of the Association and to maintain discipline amongst players, officials, clubs and institutions.”
The Ld. DR has further submitted that the assessee has been in hand in glove with the BCCI and in the name of controlling and regulating the cricket, they are actively involved in firmly suppressing any efforts by any other party to establish an alternate body concerned with cricket, especially in the economic sphere of the game. That the main interest of the BCCI is to control and monopolise cricket in India and other organisations having similar objects are not allowed to function in a fair and competitive atmosphere. It has banned players in the past who were associated with other similar organisations. For instance, Indian Cricket League (ICL), a private cricket league funded by parties outside the realm of the assessee was started in 2007. However, it was not recognized by the BCCI and its member State Associations including the assessee. The State Associations refused to provide its stadiums for holding of ICL matches under the directions of the BCCI. Had the assessee’s interest been of renting out its stadium for the holding of matches for the purpose of promotion of game, it would have promptly offered its stadium for conduct of ICL matches also. That, if the assessee intended to promote and develop the game itself, it would have taken steps to encourage and support other Associations to promote the game of cricket by holding and conducting the matches ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali irrespective of their affiliation to the assessee. Rather the BCCI and its member associations have controlled and maintained the exclusive domain over the game, to the exclusion of others. The BCCI and its member associations chose to suppress the rival body against the better interest of the game of cricket. Faced by the threat of diversion of playing talent and associated cricketing revenue, they took repressive steps like imposing a ban on players who were associated with ICL from participating in domestic and international cricket matches, not providing the stadiums which were under the control of various State Cricket Associations for the ICL matches, which eventually thwarted attempts of creating a level playing field by a potential competitor. The Ld. DR has further invited our attention to the Assessment order passed in the case of the BCCI wherein the Assessing officer has reproduced some of the rules and regulations of the BCCI , which read as under:

(a) “No Club affiliated to a member or any other organization shall conduct or organize any tournament or any match/matches in which players/ teams from the region within the jurisdiction of a member are participating or are likely to participate without the previous permission of the member affiliated to the Board….

(b) Permission for conducting or organizing any tournament or match / matches will be accorded only to the members of the Board and will be in accordance with the rules framed by the Board in this regard from time to time BAN ON PARTICIPATION IN UNAPPROVED TOURNAMENTS:

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M/s Punjab Cricket Association, Mohali
(c) No member; Associate Member or Affiliate Member shall participate, or extend help of any kind an unapproved tournament.

(d) No player (Junior & senior) registered with the BCCI or its members, Associate Member of Affiliate Member shall participate in any unapproved tournament.

(e) No Umpire, Scorer on the BCCI Panel shall, associate with an approved tournament.

(f) Any individual deriving financial or any other benefit shall not associate himself with an unapproved tournament; The Working Committee would take appropriate action including suspension and stoppage of financial benefits and any other action against in individuals/members contravening these rule.” The Ld. AO has further observed:

” The above provisions are restrictive and anti-competitive and deal more with controlling and regulating rather than promotion of the game. The assessee is clearly interested in controlling cricket to the exclusion of other organizations who are also interested in promotion of the game of cricket in India. The rules are very stringent and regimented and there is a blanket ban on any unapproved tournament, which is clearly against the spirit of competition essential for the holistic development of any sport.
7.9.5 It can be seen that the assessee’s key concern is exercising complete control over cricket and more significantly, the revenue from the game. The activities and the structural framework of operations of the assessee, are clearly not in the interest of the game which is stated to be the main purpose of the assessee. On the contrary, the same, as discussed above, consist of preemptive measures taken to safeguard its commercial interests.”
Our attention has also been drawn to the following rules also:

“….33-d. Private organizations shall not be allowed to organize an International Tournament or International match/matches in which foreign players/teams are participating or likely to participate. If at all such a tournament/match/matches is to be stage, then it should ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali be exclusively by the affiliated member which recommends the proposal and within whose jurisdiction the tournament/match/matches will be staged.” “33-e All International Tournaments, except in very exceptional cases, should be managed by the Board only…….”
“No registered player can play or participate in a Cricket match or Tournament organized as Festival/Charity/Benefit match or Tournament not registered with or approved by the Association or B oard or ICC or any of its affiliated members without the written permission of the Board either in India or abroad.”
35. We have also come across the order dated November 29, 2017 of the Competition Commission of India (in short ‘CCI’) passed in the case of ” Sh. Surinder Singh Barmi vs BCCI”, whereby the Commission has re-imposed a penalty of Rs522.4 million on the Board of Control for Cricket in India (BCCI) and reiterated the findings of its February 2, 2013 order, which had previously been set aside by way of a February 23, 2015 Competition Appellate Tribunal (COMPAT) order. The CCI held that the BCCI had abused its dominant position in the market by restricting competition while conducting IPL tournaments; and granting exclusive media rights for the broadcasting of IPL matches to one TV channel for a 10-year period. The CCI also differentiated international and other domestic cricket from professional leagues, such as the IPL. The CCI noted that in international and domestic cricket, the players represent the nation or concerned state. However, in professional leagues, foreign players are also involved and the main aim of each party is to profit. Further, the CCI found that due to the method of selecting players (by auction) and the amount of commercial ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali considerations involved, the IPL and similar professional leagues differ considerably from international and domestic cricket. The CCI concluded that the BCCI was dominant in the relevant market and has abused its dominant position and its such conduct has “resulted in denial of market access” for IPL competitors. The CCI observed that under Rule 28B of the BCCI rules, no affiliated member, player or umpire could participate or support a league unapproved by the BCCI. As such, no party could organise a league without BCCI approval. Since the BCCI had stated that it would approve no other professional league for 10 years, the market was foreclosed and competitors had been denied access. Apart from re-imposing a penalty of Rs522.4 million, the CCI directed the BCCI :

i) to cease and desist from any future practice which would deny market access to potential competitors, including the inclusion of similar clauses in any agreement;
ii) desist from using its regulatory powers when considering and deciding on any matters relating to its commercial activities;
iii) establish an effective internal control system to the satisfaction of the CCI, in good faith and after due diligence; and
iv) refrain from placing blanket restrictions on the organisation of professional domestic cricket leagues or events by non-members.
36. At this stage, it is also relevant to note that the object of the assessee PCA states:- “….maintain friendly relations with and amongst the population of the area under its control through sports ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali tournaments….” (emphasis supplied). The above crucial words “area under its control” show that the activities of the assessee are restricted to the area under its control as determined by the BCCI for the State Associations under its control. Which means the activities as well area of operation of the assessee is controlled by BCCI, hence, under the circumstances, assessee’s activities and status cannot be said to be entirely separate or distinct from BCCI.

37. From the above facts, it is established beyond doubt that that the BCCI which is constituted of the Assessee and other State associations has acted in monopolizing its control over the cricket and has also adopted restrictive trade practice by not allowing the other associations who may pose competition to the BCCI to hold and conduct cricket matches for the sole purpose of controlling and exclusively earning the huge revenue by way of exploiting the popularity of the cricket. The assessee cricket association being the constituent member of the BCCI has also adopted the same method and rules of the BCCI for maintaining its monopoly and complete domain over the cricket in the ‘area under its control’. As observed above, such an act of exclusion of others cannot be said to be purely towards the promotion of game rather the same can be said to be an act towards the depression and regression of the game. Hence the claim of the assessee that its activity is entirely and purely for the promotion of game cannot be accepted. In view of the above discussion, the contention of the Ld. Counsel that the payment by the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali BCCI to the appellant is a grant to Charitable Institution cannot be accepted. Even as discussed above, the nature of payment by the BCCI, is not voluntary grant or largesse rather the same is a payment in an arrangement of sharing of Revenue from commercial exploitation of the Cricket and infrastructure thereof, hence, the plea of the assessee that the income from BCCI be treated as a capital receipt in its hand is not tenable.

38. Now coming to the next submission of Sh. Vohra, the Ld. Counsel for the assessee, that even if it is held that the appellant is involved in incidental business activity yet all the incidental income/surplus so earned by the assessee has been ploughed back for charitable purposes. That, profit making is not the motive of the assessee, hence exemption u/s can not be denied to the assessee. We are not convinced with the above argument of the Ld. Counsel for the assessee. As discussed above, the commercial exploitation of the popularity of the cricket and its infrastructure by the assessee, in our view, is not incidental but is inter alia, one of the main activities of the assessee. A perusal of grounds of appeal reveals that strong reliance has been placed by the assessee on the decision of the hon’ble Supreme Court in the case of ” Surat Art Silk Cloth Manufacturers Association” (supra). However, in said decision of the Hon’ble Supreme Court, itself, the example of trust having its object of promotion of sports and having involved in organizing the cricket matches for profit has been given which directly fits into the facts and ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali circumstances of the case of the assessee. Apart from that, the hon’ble Supreme court has also discussed the example of a publication, which is involved in propagation of Gandhian thought and philosophy, which would apparently be an object of general public utility, but, it has been held that if the pricing of the journal is done on commercial lines, the inference will be that the activity is carried on for profit and the purpose is non-charitable. Even an example has also been given of an institution involved in the noble cause of Blood Bank, but it has been held that if such an activity is done for a higher price on commercial basis; undoubtedly, in such a case, the blood bank would be serving an object of general public utility but since it advances the charitable object by sale of blood as an activity carried on with the object of making profit, it would be difficult to call its purpose charitable. The relevant part of the judgement of the Hon’ble Supreme court in the case of ” Surat Art Silk Cloth Manufacturers Association” (supra) is reproduced as under:-

” 15. We must then proceed to consider what is the meaning of the requirement that where the purpose of a trust or institution is advancement of an object of general public utility, such purpose must not involve the carrying on of any activity for profit. The question that is necessary to be asked for this purpose is as to when can the purpose of a trust or institution be said to involve the carrying on of any activity for profit The word “involve” according to the Shorter Oxford Dictionary means “to enwrap in anything, to enfold or envelop; to contain or imply”. The activity for profit must, therefore, be intertwined or wrapped up with or implied in the purpose of the trust or institution or in other words it must be an integral part of such purpose……………
ITA No. 427/Chd/2017-
M/s Punjab Cricket Association, Mohali ………… Take, for example, a case where a trust or institution is established for promotion of sports without setting out any specific mode by which this purpose is intended to be achieved. Now obviously promotion of sports can be achieved by organising cricket matches on free admission or no-profit no-loss basis and equally it can be achieved by organising cricket matches with the predominant object of earning profit. Can it be said in such a case that the purpose of the trust or institution does not involve the carrying on of an activity for profit, because promotion of sports can be done without engaging in an activity for profit. If this interpretation were correct, it would be the easiest thing for a trust or institution not to mention in its constitution as to how the purpose for which it is established shall be carried out and then engage itself in an activity for profit in the course of actually carrying out of such purpose and thereby avoid liability to tax. That would be too narrow an interpretation which would defeat the object of introducing the words “not involving the carrying on of any activity for profit”. We cannot accept such a construction which emasculate these last concluding words and renders them meaningless and ineffectual.”

…….. 18. The application of this test may be illustrated by taking a single example. Suppose, the Gandhi Peace Foundation which has been established for propagation of Gandhian thought and philosophy, which would admittedly be an object of general public utility, undertakes publication of a monthly journal for the purpose of carrying out this charitable object and charges a small price which is more than the cost of the publication and leaves a little profit, would it deprive the Gandhi Peace Foundation of its charitable character? The pricing of the monthly journal would undoubtedly be made in such a manner that it leaves some profit for the Gandhi Peace Foundation, as, indeed, would be done by any prudent and wise management, but that cannot have the effect of polluting the charitable character of the purpose, because the predominant object of the activity of publication of the monthly journal would be to carry out the charitable purpose by propagating Gandhian thought and philosophy and not to make profit or, in other words, profit-making would not be the driving force behind this activity. But it is possible that in a given case the degree or extent of profit-making may be of such a nature as to reasonably lead to the inference that the real object of the activity is profit-making and not serving the charitable purpose. If, for example, in the illustration given by us, it is found that the publication of the monthly journal is carried on wholly on commercial lines and the pricing of the monthly journal is made on the same basis on which it would be made by a commercial organisation leaving a large margin of profit, it might be difficult to ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali resist the inference that the activity of publication of the journal is carried on for profit and the purpose is non-charitable. We may take by way of illustration another example given by Krishna Iyer, J. in Indian Chamber of Commerce case (supra) where a blood bank collects blood on payment and supplies blood for a higher price on commercial basis. Undoubtedly, in such a case, the blood bank would be serving an object of general public utility but since it advances the charitable object by sale of blood as an activity carried on with the object of making profit, it would be difficult to call its purpose charitable. Ordinarily, there should be no difficulty in determining whether the predominant object of an activity is advancement of a charitable purpose or profit-making. But cases are bound to arise in practice which may be on the border line and in such cases the solution of the problem whether the purpose is charitable or not may involve much refinement and present real difficulty.”

(emphasis supplied by us ) From the above examples given by the hon’ble Supreme court, it is to be noted that differentiation lies between ‘if some surplus has been left out of incidental commercial activity’ and ‘the activity is done for the generation of surplus’. Although such an activity for generation of surplus may also be serving the purpose of charitable object of general public utility, still it will not be covered as for “charitable purposes”. The case of the assessee is squarely covered with the above examples given by the hon’ble supreme court and hence, despite having the objects of promotion of sports, the activity of the assessee being also directed for generation of profits on commercial lines will exclude it from the scope of charitable activity.

39. Moreover, even it is assumed for the sake of arguments that the commercial exploitation of the cricket and infrastructure is incidental to the main purpose of promotion of cricket, even then in view of the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali decision of the the co-ordinate Chandigarh Bench of the Tribunal in the case of “Chandigarh Lawn Tennis Association vs Income Tax Officer (Exemption)” reported in [2018] 95 taxmann.com 308 (Chandigarh – Trib.), the income of the assessee from the incidental business activity beyond the prescribed limit of Rs. 10 Lakh for the year under consideration as per second proviso to section 2(15) of the Act will be taxable as its business income. The coordinate Chandigarh Bench in the case of “Chandigarh Lawn Tennis Association”(supra) has extensively discussed this issue and has duly analyzed and deliberated upon various case laws including the decision of the Hon’ble Pb. & Haryana High Court in the cases of Tribune Trust & Moga Improvement Trust -390 ITR 547 (supra), the decision of the Privy Council in the case of Trustees of The Tribune Press vs. CIT- 7 ITR-415; the judgement of the Hon’ble Supreme Court in the cases of “Sole Trustee, Lok Shikshana Trust vs. CIT” – 101 ITR 234 and Indian Chamber of Commerce vs. CIT

– 101 ITR 796 and also the larger bench judgment of the hon’ble Supreme Court in the case of “Addl. CIT vs. Surat Art Silk Cloth Mfg”.

– 121 ITR 1 and has also considered the effect of introduction of 2nd Proviso to Sec. section 2(15), amendments in section 10(23C), provisions of section 11(4), 11(4A), 13(8) and Sec. 143 of the Act after delineating the legislature history behind Section 2(15). It is to be noted that the effect of introduction of 2 n d proviso to section 2(15)of the Act has not been discussed in any of the decisions relied upon by the Ld. Counsel for the assessee. The coordinate Bench after thorough ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali discussion of the matter, {in the case of Chandigarh Lawn Tennis Association vs. ITO (Exemptions), (supra)} has held the trusts or the institutions carrying on the activity included in the first part of definition of ‘charitable purposes’ as defined under section 2(15) viz. for the objects of relief to the poor, education yoga, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic interest and are also carrying on the business activity which is incidental to the attainment of objective of such trust or institution {as provided under section 11(4A)}, are entitled to claim exemption of their income including the income from incidental business activity under section 11 subject to the compliance and applicability of the other relevant provisions of the Act, irrespective of the quantum of income earned from such incidental business activity. That, however, the trusts or institutions falling in the last limb of the definition of charitable purposes as defined under section 2(15) i.e. ‘for the advancement of any other object of public utility’ which also involves the carrying of incidental activity in the nature of trade commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee, as per the restrictions put by the provisos to section 2(15) the incidental business activity should be in the course of actual carrying out of the main object and the receipts therefrom should not cross the limit or cap (as applicable from time to time). That it will be immaterial that the funds or the profits from business activity are ploughed back to sub serve the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali main or the predominant object of the trust. In this respect the words ‘irrespective of the nature of use or application, or retention, of the income from such activity’ finding place in the first proviso to section 2(15) would come into play. However, the other restrictions as provided under sections 11(4A), 13(8) and 143(3), would accordingly apply for claiming exemption under section 11; Further, the restriction inter alia put under the provisos to section 10(23C)(iv) and section 143(3) along with restrictions put by the provisos to section 2(15), will apply for claiming exemption under section 10(23) (iv).

40. Even the impact of the first and second proviso to section 2(15) has also been considered by the Coordinate Mumbai Benches of the Tribunal in the cases of “Ghatkopar Jolly Gymkhana v. Director of Income-tax (E)” reported in [2013] 40 taxmann.com 207 (Mumbai – Trib.) and “Cotton Textiles Exports Promotion Council v. Director of Income-tax (Exemption), Mumbai reported in [2014] 44 taxmann.com 168 wherein it has been held as per the second proviso w.e.f. 01.04.2009, where the gross receipts of a charitable institution from its business activities exceeds limit of Rs. 10 lakhs, assessee will not be entitled for exemption or other admissible tax benefits for that relevant year but it does not result in cancellation of its registration as charitable institution. The above view has been affirmed by the Hon’ble Bombay High Court in the case of Director of Income-tax (Exemption) v. North Indian Association [2017] 79 taxmann.com 410 (Bombay) wherein the ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali Hon’ble High court while further relying upon its another decision in the case of “DIT (Exemption) v. Khar Gymkhana[2016] 385 ITR 162/240 Taxman 407/70 taxmann.com 181 (Bom.) has duly taken note of the provisions of section 13(8) of the Act inserted vide Finance Act 2012 w.r.e.f. 1.4.2009 as well as the CBDT Circular No.21 of 2016 and though, held that merely because in one year income of assessee-trust exceeded prescribed limit provided under second proviso to section 2(15), that by itself, could not warrant cancellation of registration of trust, however, where the receipts are hit by the proviso to Section 2(15) of the Act, the benefit of exemption to its income for the previous year relevant to the subject assessment year will not be available. However, it has been further held that if this happens on continuous / regular basis, it could justify further probe / inquiry before concluding that the trust is not genuine. This is also so held in the own case of the assessee by the coordinate Bench of this Tribunal vide order dated 19.10 2015 in an appeal filed by the assessee against the cancellation of its registration u/s 12AA (3) of the Act bearing ITA No.834/Chd/2012. Admittedly the receipt from commercial exploitation of the cricket matches for the year under consideration has increased the prescribed limit for the year i.e. Rs. 10 lakhs, thus hit by the second proviso to section 2(15) of the Act. Hence the case of assessee is covered against the assessee by the decision of the Tribunal in the own case (supra) of the assessee.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali However, the coordinate Chandigarh bench in the case of “Chandigarh lawn Tennis Association” (supra) reading down the relevant provisions, has held that the proper and harmonious construction of the relevant provisions will be that the institution carrying out the object of advancement of general public utility which involve the incidental or ancillary activity in the nature of trade, commerce or business and generating income therefrom, the income to such an extent as is limited by the second proviso to section 2(15) should be taken as exempt being treated as income from charitable purposes as per the relevant provisions of sections 2(15), section 10, section 11, section 12 or section 13, as the case may be and wherever applied. The other income which is not from the commercial activity, such as, by way of voluntary donations, contributions, grants or nominal registration fee etc. or otherwise will remain to be from charitable purposes and eligible for exemption under the relevant provisions. However, the income from activity in the nature of trade, commerce or business over the above limit prescribed from time to time as per the second proviso to section 2(15), should be treated as income from the business activity and liable to be included in the taxable total income. In view of the above, if the plea of the Ld. counsel for the assessee that the income from commercial activity of the assessee is incidental to the activity of the assessee towards pre-dominant object of charitable nature, even then in view of the proposition laid down by the coordinate Bench in the case “Chandigarh Lawn Tennis Association” (supra), the income from ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali commercial activity i.e. by way of commercial exploitation of the international matches and IPL which is over and above the prescribed limit of the Rs. 10 lakhs for the assessment year under consideration will be exigible to taxation.

However, since we have already observed that the assessee is regularly following commercial activity by commercially exploiting its property and rights to hold matches and thereby earning huge income, hence the said activity can not be said to be incidental activity rather the commercial exploitation of the match is one of the main activity of the assessee, hence, the case of the assessee ,in our view, for the year under consideration will not fall within the definition and scope of section 2(15) of the Act and thus the assessee is not entitled to exemption u/s 11 of the Act. While holding so, we do not mean that the assessee’s activity is not at all for promotion of the game of cricket. No doubt, the assessee is also activity contributing towards the promotion and popularity of the cricket but at the same time its activities are also concentrated for generation and augmentation of the revenue by exploiting the popularity of the game and towards monopolisation and having dominant control over the cricket to the exclusion of others. What we want to convey is that the commercial exploitation of the popularity of the game and the property/infrastructure held by the assessee is not incidental to the main object but is apparently and inter alia one of the primary motives of the assessee. At this stage, we deem it fit to refer to the revised constitution ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali of the appellant PCA done in compliance of the directions of the Hon’ble Supreme Court dated 9.8.2018 passed in Civil Appeal No. 4235 of connected matter, as revised upto 11.8.2019 and registered with Registrar of firms and societies Punjab, the objects of the PCA interalia, include the following:

“To carry out any other activity which may seem to the PCA capable of being conveniently carried on in connection with the above, or calculated directly or indirectly to enhance the value or render profitable or generate better income/revenue, from any of the properties, assets and rights of the PCA;”
41. The above object reveals that now the assessee’s activities inter alia are also directed for generation and augmentation of revenue by way of exploitation of its rights and properties. The assessee in the earlier years (before the introduction of the above revised object) might have claimed the application of income on capital assets/infrastructure as application for charitable purposes. However now with the amended objects, it may exploit the so created infrastructure for commercial purposes. This leads to a very peculiar situation. In our view, the introduction of the above object has brought clarity about the manner of operation and activities of the assessee.

42. Under the circumstances, the appellant cannot be granted exemption under section 11 of the Act as its activities no more fall under the definition of charitable purposes as per the provisions of section 2(15) of the Act.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali In view of the discussion made above, the amount paid by the BCCI to the appellant which has already been taxed at the hands of BCCI, cannot be now taxed in the hands of the member of the AOP i.e. the appellant State Association as it will amount to double taxation of the same amount. However, if the claim of the BCCI for treating the payments made to the State Association as deductible expenditure is accepted by any higher appellate authority in its case for the year under consideration, it will be open to the assessing officer of the appellant to reopen the case of the appellant and to decide whether the said payments received from BCCI can be taxed as income of the appellant which will be subject to our observations given on other issues raised in this appeal. However, the income received by the appellant/assessee otherwise, except the club income, which has not been taxed at the hands of the BCCI, will be assessed as per the normal provisions of the Act.

43. However, so far as the income from club facilities and from caterer is concerned, the plea of the assessee is that all the above facilities e.g. Gym, Lawn Tennis, Swimming pool etc. are interconnected and interwoven with the objects of the appellant i.e. promotion of sport and cannot be viewed separately. Without prejudice to above, it has been submitted that the appellant is maintaining separate books of accounts in respect of all above club activities. That these facilities are being provided on the principle of mutuality, accordingly, ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali these cannot be termed as trade, commerce or business activity. That the receipts from the caterer for providing catering service during the matches is intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. It has been submitted that the club facilities are being run for the benefits of members and cricketers as per the objects of the society on the principle of mutuality.

However, the Assessing officer observed that the assessee earned huge income of Rs. 123.03 lacs during the year from these facilities and this includes a sum of Rs. 14.97 lacs from caterer. That the assessee hosted these facilities for the purpose of recreation or one time booking for parties, functions etc. and these were commercial activities in nature as the assessee was charging fees for providing these facilities.

44. After considering the rival submissions, in our view, this issue is required to be reexamined by the Assessing officer after verification of the accounts of the assessee as to ascertain which part of the club income and catering services has been generated from the members of the assessee association and which part of the income is earned from non-members. It is also to be looked into whether the income from the club house and other facilities is generated generally from the members only and the receipt from the non-members is an exception or the income is generated from members and non-members in normal course of business. Whether the catering services are limited to the members and their guests only or the same are also provided to non-members also ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali on commercial basis. The Assessing officer after thoroughly examining the above facts will decide if the principle of mutuality applies to the club income including catering contract in accordance with law. This issue is accordingly restored to the file of the Assessing officer.

45. Before parting, we deem it appropriate to mention here that in some of the case laws cited by the Ld. Counsel for the assessee the issue regarding the charitable nature in the case of other state associations has been decided in favour of those assessees, however, after going through the said decisions, with due respect to the said decisions and most humbly we are of the view that those decisions are based on the facts presented before the respective Benches in those cases. What is to be applied from a decision having precedential value is the proposition of law laid down after discussion on certain bundle of facts. Our findings above are based on the distinguished and specific facts brought out and evidences furnished before us by the parties and our findings may not be treated in any manner as laying down any contrary proposition of law to the decisions cited by the Ld. counsel for the assessee.

46. It is also made clear that our observations made above will not have any bearing as such on any adjudication in the cases of the BCCI and that the BCCI will have right and liberty to contest its cases irrespective of the observations given above as our findings rests on the pleadings of the parties before us though, the viewpoint of the BCCI has also been considered after giving due opportunity to the BCCI.

ITA No. 427/Chd/2017-

M/s Punjab Cricket Association, Mohali With the above observations, the appeal of the assessee is treated as partly allowed for statistical purposes.

Order pronounced on 12.09.2019.

Sd/- Sd/-
( बी,आर.आर. कुमार / B.R.R. KUMAR) (संजय गग / SANJAY GARG )
लेखा सद य/ Accountant Member या यक सद य /Judicial Member

Dated : 09/ 2019