BCCI cannot be refused an income tax exemption just because the IPL is constructed in a more profitable manner.
Fact and Issue of the case
This appeal challenges correctness of the order dated 28th March 2019 passed by the learned Principal Commissioner of Income Tax, Central Charge 3, Mumbai (hereinafter referred to as the Commissioner), rejecting the application for registration under section 12A(1)(ab) r.w.s. 12AA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The registration of an institution is foundational, though not conclusive, a factor so far as tax exemption benefits under sections 11 and 12 of the Act to the assessee are concerned inasmuch as registration under section 12A or 12AA is a sine qua non for eligibility for the income tax exemption benefits under section 11 and 12 of the Act, but then such a registration per se does not confer any tax exemption benefit under section 11 and 12; the eligibility for exemption benefits is determined on a year to year basis depending upon on the actual activities of the assessee and other considerations germane to this context.
Granting registration as a charitable institution is usually a one-time exercise and the assessee institution has duly been granted registration under section 12A on 12th February 1996. That registration is yet to be cancelled or withdrawn. However, the assessee has applied for fresh registration, and the event triggering the present registration application is the amendment of its ‘memorandum of association, and rules and regulations’, to implement the recommendations of a Committee chaired by Justice R M Lodha, former Chief Justice of India (hereinafter referred to as ‘Justice Lodha Committee’) and as approved by Hon’ble Supreme Court of India, vide judgment dated 9th August 2018.
The assessee has taken as many as eleven grounds of appeal, which will be taken up together for our adjudication, as reproduced below:
- The learned Principal Commissioner of Income Tax (PCIT) erred in facts and in law in rejecting the application under section 12A(1) (ab) of the Income Tax Act made by the Appellant.
- The learned PCIT erred in facts and in law in denying registration to the Appellant under section 12AA of the Income Tax Act.
- The learned at PCIT ought to have held that clause (ab) of section 12A(1) of the Income Tax Act had no application to the new constitution as made applicable by the Hon’ble Apex Court by its order dated 9th August 2018, as the preconditions in the said clause had not been fulfilled in its case.
- The learned at PCIT ought to have held that as per the said new constitution the Appellant’s objects continued to be promotion of the game of cricket which is for advancement of an object of general public utility. Further, the said Constitution also did not render its activities to be non-genuine in any manner as to be not in accordance with its objects.
- The learned PCIT ought to have held that there is nothing in the said new constitution which would result in the activities of the Appellant becoming non- genuine and not in accordance with its objects.
- The learned PCIT erred in facts and in law in holding that the activities of the Appellant are in nature of “Business”.
- The learned PCIT erred in facts and in law in not appreciating that proviso to section 2(15) has no role to play at the time of granting registration under section 12AA of the Income Tax Act.
- The learned PCIT erred in facts and in law in placing undue reliance on the surplus generated from the activities pertaining to IPL, without considering overall activities of the Appellant in a holistic manner and in coming to a conclusion that the activities of the Appellant are not genuine.
- The learned PCIT erred in facts and in law in emphasizing on the surplus generated from the activities pertaining to IPL and completely disregarding the other activities, without appreciating that the such surplus is merely incidental to the primary objects of the Appellant
- The learned PCIT failed to appreciate the facts, material and the legal position applicable which were relevant for considering the appellant’s application under section 12A(1)(ab) of the Income Tax Act and instead erred in relying on facts and circumstances which were totally irrelevant thereby vitiating the impugned order on matters of facts and law.
- The appellant craves leave to add alter or amend any of the grounds of at any time before or at the time of hearing of the Appeal.
To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a society registered at Madras, on 28th November 1940, under Societies Registration Act 1880- now repealed and substituted, so far as the State of Tamilnadu is concerned, by the Tamilnadu Societies Registration Act 1975. Until the assessment year 1996- 97, the assessee was granted an exemption, as a notified institution, under section 10(23) of the Act. Section 10(23), it may be mentioned, stands omitted as of now. On 12th February 1996, the Director of Income Tax (Exemption) Mumbai issued a certificate of registration under section 12A to the assessee, with effect from 1st April 1995, i.e. financial year relevant to the assessment year 1996-97. On 1st June 2006, and then on 21st August 2007, certain amendments were made to the Memorandum of Association of the assessee society. These amendments were examined by the Director of Income Tax (Exemptions), and, vide communication dated 28th December 2012, he informed the assessee that “(i) when the objects of the institution, which are the basis of grant of registration are altered after grant of such registration, the very foundation of registration having been removed by the voluntary act of the assessee, the registration would not survive; (ii) the registration under section 12A, was granted vide order dated 12th February 1996, on the basis of the Memorandum and rules & regulations of the assessee as on the date of registration and that, admittedly, the amendments were made on 1st June 2006 and also on 21st August 2007, but this had not been informed to DIT, who had granted registration under section 12A of the Act and that this information on amendments had not been given the Department for more than three years and, hence, as the very foundation for grant of registration had been removed, the registration would not survive”. Aggrieved, assessee carried the matter in appeal before a co-ordinate bench of this Tribunal. While the co-ordinate bench dismissed the appeal as non-maintainable on the ground that there was no cancellation of registration as such and the impugned communication was no more than an ‘advisory in nature’, without the force of law, the co-ordinate bench did observe that “the registration granted under section 12A, on 12th February 1996, and the benefits flowing therefrom, cannot be extended to the amended objects of the society unless the DIT examines the same and comes to a conclusion that the registration under section 12A, can be extended to the revised objects, memorandum and by-laws” and that “the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law”. Subsequently, show cause notices were issued by the then Principal Commissioners on 30.11.2016, 13.11.2017 and 30.11.2017, requiring the assessee to show cause as to why the registration granted under section 12A not be cancelled or withdrawn. Elaborate submissions were made by the assessee explaining the reasons as to why no such withdrawal or cancellation of registration is justified on the facts and in the circumstances of the case, and that the amendments made in 2006 and 2007 were minor amendments without any impact on the basic objects. Copies of these show cause notices, as also replies thereto, have been placed in Volume II of the paper-books filed before us. One of the allegations against the assessee was that the assessee has not approached the Principal Commissioner with the amended memorandum of association etc and that the assessee does “not respect the Tribunal by carrying out their suggestions/ directions”. Implicit in these observations was the stand of the Commissioner that once there is an amendment in the memorandum of association, the assessee should approach the Principal Commissioner for re-examination of eligibility for registration. Be that as it may, the matter was, as evident from the show cause notices and replies thereto, examined in detail, and the contention of the assessee all along was that these amendments were insignificant and had no impact whatsoever on the basic objects of the institution. It appears that the further proceedings were dropped in the matter, as the proposed action was not really taken by the Commissioner, and the registration obtained by the assessee under section 12 A remained intact.
It is in this backdrop that we have to take note of certain amendments in the memorandum of association and rules and regulations of the assessee institution. These amendments were on the recommendations of a Committee appointed by Hon’ble Supreme Court of India, and chaired by one of the former Chief Justices of India, namely Hon’ble Justice R M Lodha.
Justice Lodha Committee submitted its very comprehensive report, making a large number of recommendations to achieve the objects for which the committee was set up, and this report also suggested, at Annexure A, the amended ‘Memorandum of Association’ and ‘Rules and Regulations’ to give effect to these recommendations. On 24th July 2017, Hon’ble Supreme Court, accepting the recommendations of the Justice Lodha Committee- except on a few points, directed that “all concerned shall implement the recommendations of the Justice Lodha Committee as far as practicable….. The purpose is to implement the report as far as practicable, and, thereafter, it shall be debated as to how the scheme of things can be considered so that the cricket, the ‘gentlemen’s game’, remains nearly perfect. Be it noted, the issue with regard to qualification or disqualification of the representative is kept open”. On 23rd August 2017, the Committee of Administrators (hereinafter referred to as the CoA), appointed by the Hon’ble Supreme Court of India, was entrusted with the task of preparing a draft constitution in accordance with the recommendations of the Justice Lodha Committee and judgments of Hon’ble Supreme Court. On 27th October 2017, the CoA submitted its draft constitution. Taking this draft into account, as also the comments and suggestions of the stakeholders’, Hon’ble Supreme Court, vide judgment dated 9th August 2018, approved the draft constitution of the assessee institution, though subject to certain modifications.
On 15th September 2018, i.e. also immediately after the above directions of Hon’ble Supreme Court as above having been given effect, the assessee institution filed an application in Form 10A seeking registration under section 12AA r.w.s. 12A(1)(b). That is how the Commissioner was seized of the matter with respect to continuance of the registration.
Learned Principal Commissioner, however, did not accept the registration request of the assessee. She began by noting that “the date of original registration is 12.2.1996 by DIT(E) Mumbai, and the date of modification of its objects has been shown as 21.8.2018”. It was then noted that clause (s) of the amended Memorandum of Association provided that “to carry out any other activity which may seem to the BCCI capable of being conveniently carried out 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 BCCI”. It was further noted that there is a specific clause (p) inserted to provide for conducting the Indian Premier League (IPL) matches by stating that “GOVERNING COUNCIL is the standing committee constituted by the BCCI which shall in charge of and conduct the Indian Premier League”. Having noted inter alia the above, the learned Principal Commissioner opined that “it can be easily concluded that activities of the applicant specially in relation to the IPL are in the nature of trade, commerce or business, and therefore, the applicant is squarely covered by proviso to Section 2(15) and hence applicant’s claim of being covered by the last limb, i.e. advancement of any other object of general public utility cannot be held to be charitable purpose”. Learned Principal Commissioner then took note of the annual report for the year 2007-08 to form the view that the activities of the assessee trust have ‘entertainment value’ in the light of the fact that the assessee has been organizing IPL matches. A reference was then made to the findings in the assessment orders for the assessment years 2007-08 to 2016-17. It was the noted that the case of the assessee, in view of the quantum of earnings from the IPL, cannot be covered by the exceptions to the application of proviso to Section 2(15). Learned Principal Commissioner was of the view that “it is the objects alongwith the activities which decide the overall ‘form’ as well as ‘substance’ of the institution under which the case of the assessee is hit by section 115TD read with Section 12A(1)(ab) as discussed above”. The assessee was asked to show cause as to why the application of the assessee seeking registration under section 12AA not be rejected. In response to this show cause notice, it was explained by the assessee that the applicability of proviso to Section 2(15), even if that be so, cannot be reason enough to decline registration under section 12AA, as held by a co-ordinate bench of this Tribunal, in the case of Kapurthala Improvement Trust Vs CIT [(2016) 154 ITD 637 (Asr)], for the reason that, the application of proviso to Section 2(15) is an annual and year to year exercise, which leads to declining of exemption under section 13(8) in appropriate cases, the grant of registration is one time exercise. It was also submitted that while granting registration, what is to be considered is whether the objects of the trust are charitable in nature having regard to the established legal principles governing the concept of ‘charity’, while proviso to section 2(15) can only come into play while granting the exemption under section 11. Without prejudice to this line of argument, it was also emphasized that the activities of the BCCI, in any case, were well within the ambit of the expression ‘charitable purposes’ under section 2(15). It was further added that genuineness of the activities of the assessee are anyway not in doubt, and all that is to be seen, for the present purposes, is whether the amended objects are charitable or not. Elaborate submissions were made in support of the proposition that the activities of the assessee are wholly charitable, genuine and the element of profit, in organizing the IPL event, does not vitiate the predominant character of the assessee. As for the observation with regard to the insertion of the clause “to carry out any other activity which may seem to the BCCI capable of being conveniently carried out 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 BCCI” it was submitted that it was an ancillary object, preceded by elaborate main and primary objects, in order to facilitate smooth functioning of the Board, and to achieve its main objects, and that it should not be seen on a standalone basis. It was also submitted that the aforesaid clause only enables the BCCI to carry out incidental activities in connection with its main objects and to ensure optimal utilization of available resources and that the mere presence of this clause does not signify that profit earning is the main object of the assessee. It was also pointed out that the aforesaid clause was anyway present in the original memorandum of association, on the basis of which registration under section 12A was granted in 1996. Independent of this argument, it was further contended that the rejection of the application is being contemplated as (i) an attempt at better utilization of resources which results in the generation of incremental generation of revenue is being treated as a basis for treating the applicant as non-charitable; and (ii) the fact that benefits of an activity accruing to persons other than BCCI (i.e. team owners in IPL) is also being held against the BCCI. Such an approach, as was submitted, would be erroneous for the reasons that (a) making an attempt to optimal use of resources cannot be put against an assessee for the purpose of declining registration under section 12AA; (b) when examining impact of an activity, the benefit, from such an activity, to persons other than the assessee cannot be a relevant consideration; (c) entertainment value of an activity cannot be a relevant factor for grant of registration, because, in that event, no music or dance institution would ever get registration under section 12A; and (d) while revenue of IPL event is being given undue attention, what is being clearly overlooked is that it is because of the IPL that several young talented cricketers are getting opportunities for growth and recognition. Elaborate submissions were then also made on the legal and factual aspects of the matter. None of these submissions, however, impressed the learned Principal Commissioner. She rejected the application for registration.
In response to a question from the bench as to what was the occasion of filing this fresh application for registration when, as is the claim of the assessee, the objects of the assessee trust are materially similar vis-à-vis the pre-amendment objects and the assessee had not “undertaken modifications of the objects which do not conform to the conditions of registration”, it was explained by the learned senior counsel that the assessee was indeed under no obligation to approach the Commissioner as the amendments in the assessee’s memorandum of association and rules and regulations did not even remotely affect its basic objects, for which registration was granted, the assessee nevertheless approached the Principal Commissioner in deference to the observations made by a co-ordinate bench to the effect that “the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law”.
The fact that the assessee did inform the Principal Commissioner, according to the learned senior counsel, of the changes in the Memorandum of Association should be seen in this light. Learned senior counsel, however, submits that once the assessee has moved the application, the Commissioner ought to have held that since there is no material change in the objects of the assessee institution, so far as entitlement to registration under section 12A is concerned, the assessee is entitled to registration. In any event, now that the registration has been declined by the learned Principal Commissioner, according to the learned senior counsel, we have to take a call on the correctness of her stand in doing so. It is once again submitted that her action is clearly erroneous and contrary to the scheme of the Income Tax Act. For this reason also, the impugned order is said to be vitiated in law.
The assessee is aggrieved of the stand so taken by the learned Principal Commissioner and is in appeal before the court.
Observation of the court
Court has heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
What is impugned in this appeal is the order passed by the learned Principal Commissioner on an application filed by the assessee under section 12A(1)(ab) but on a plain reading of Section 12A(1)(ab), we find that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A and, subsequently, “it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration”, such a person has to make an application to the Commissioner or the Principal Commissioner in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification. The true trigger for an application under section 12A(1)(b) has to be the modification of objects “which do not conform to the conditions of the registration”. In our considered view, therefore, unless such modifications are demonstrated, there is no occasion for the Principal Commissioner to assume jurisdiction. This aspect of the matter is thus a foundational aspect to the entire proceedings in question. We must therefore begin by looking at this aspect of the matter.
The registration granted vide order dated 12th February 1996, a copy of which was placed before us at page 275 of the paper-book, was on the basis of “memorandum of association dated 28th November 1940”. Unless, therefore, there are significant variations in the aforesaid memorandum of association and the amended memorandum of association, the provisions of Section 12A(1)(ab) will not come into play inasmuch these provisions come into play only when the assessee “has adopted or undertaken modifications of the objects which do not conform to the conditions of registration”.
Quite clearly, the provisions of Section 12A(1)(b) come into play not simply because there is a modification per se in the objects of the assessee trust or institution but because the modifications are such that these modifications do not conform to the conditions of registration i.e. the conditions in the memorandum of association on the basis of which the registration under section 12A was obtained.
In this light, let us now take a look at the two documents- i.e. memorandum of association dated 28th November 1940 and the memorandum of association dated 21st August 2018 as amended by order of Hon’ble Supreme Court (supra). Copies of these documents are placed before us at pages 116 to 122 and pages 16-115, respectively. Learned senior counsel has meticulously taken us through the object clauses in both of these documents to demonstrate that there is no material or significant change in the new memorandum of association which does not conform to the old memorandum of association, based on which the registration was granted. Learned senior counsel has also filed a statement comparing these two documents.
Our careful perusal of the charts, as indeed the object clauses in the two sets of memorandum of association, does not show any change in the present MoA which is contrary to the corresponding clause in the earlier MoA. In any event, these changes, as mentioned in the Justice Lodha Committee report and as approved by Hon’ble Supreme Court, stated to be changed “that will further the interest of the public at large in the sport of cricket, improve the ethical standards and discipline in the game, streamline and create efficiency in the management of the BCCI, provide accessibility and transparency, prevent conflicts of interest situations and eradicate political and commercial interference and abuse and create mechanisms for resolution of disputes and grievances” Hon’ble Supreme Court, as noted by Justice Lodha Committee, has reiterated that the BCCI is carrying out public functions– functions that govern the interests of the public – the necessary corollary is that BCCI is subject to the rigours of public law, which mandates that the BCCI acts in line with the general principles of reasonableness and fairness, and also that it adheres to the basic principles of accountability and transparency. Any changes to bring out these reforms and specifically approved by Hon’ble Supreme Court, cannot, by any stretch of logic, be such changes that dilute the fundamental objective of promoting the game of cricket, and “not in conformity” with the objects all along espoused by the BCCI and as set out in the pre-amendment MoA. The very foundation of the approach implicit in the impugned order is thus wholly unsustainable in law, and clearly misconceived.
No material has been brought before us to controvert the above position, and neither in the impugned order passed by the learned Principal Commissioner nor in the submissions made by the learned Commissioner (DR) any effort has been made to even indicate that the modifications in the objects of the amended deed do not conform to the objects in the memorandum of association based on which the registration was granted. It is also important to bear in mind the fact that Section 12A(1)(ab) specifically refers to ‘objects’ of the assessee trust or institution, and, it cannot, therefore, be open to the Principal Commissioner to go beyond the ‘objects’ so far as jurisdiction under this section 12A(1)(ab) is concerned. It is only when there is such a modification in the object clause that it does not conform to the conditions of registration, i.e. objects clause in the documents based on which registration was granted- only the memorandum of association in this case, that Section 12A(1)(ab) can come into play.
In the notes to clause of the Finance Bill 2017, inserting the provisions of Section 12A(1)(ab), it was inter alia stated that “(i)t is proposed to insert a new clause (ab) in sub- section (1) of said section so as to provide another condition for the applicability of sections 11 and 12, where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996], and, subsequently, it has adopted or undertaken modification of the objects which do not conform to the conditions of registration, it shall be required to make an application for registration in the prescribed form and manner, within a period of thirty days from the date of such adoption or modification in the objects, and that it is registered under section 12AA”. This also does not leave any doubt about the fact that it is not a change simpliciter in the memorandum of association, which was basis of the earlier registration granted to the assessee, that triggers the provisions of Section 12A(1))(ab) being invoked, the change has to be such that it does not conform to the original objects of the trust or institution based on which registration was granted.. As we have noted earlier as well, any changes to bring out reforms in the functioning of the BCCI and specifically approved by Hon’ble Supreme Court to be for that purpose, cannot be termed to be the changes that dilute the fundamental objective of promoting the game of cricket, or said to be “not in conformity” with the objects of promoting the game of cricket all along espoused by the BCCI and as set out in the pre-amendment MoA. In this view of the matter, the condition precedent for invoking section 12A(1)(ab), in our humble understanding, is not fulfilled on the facts of the present case.
We may, at this stage, once again reiterate, with respect, the view of the co-ordinate bench, as articulated in the assessee’s own case (supra), that “the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law”, but then this requirement, in our humble understanding, does not necessarily extend to the filing of the fresh application of registration under section 12A(1)(ab) unless the amendments are such as not in conformity with the documents based on which registration was originally granted. There is a difference in these two situations, i.e. between keeping the registration authority about the changes in the memorandum of association etc, and between making an application for fresh registration which comes into play only when the amendments in question do not conform to the objectives in respect of which registration was granted or obtained. Unless that condition is satisfied, Section 12A(1)(ab) come into play.
The mere fact that the assessee has filed an application under section 12A(1)(ab), even as he is all along contending that there is no material change in the object clause so as not to conform to the objects clause in the original memorandum of association, cannot vest jurisdiction in the Principal Commissioner to deal with the application on merits, unless it is established that there is indeed a modification in the object clause which does not conform to the conditions on which the original registration is granted i.e. the memorandum of association based on which the registration was originally granted. As Mr Pardiwalla rightly contends, there is a vital distinction between ‘object’ and ‘power’. It cannot even be in dispute that the object of the assessee institution is the promotion of cricket game, and, at best, the assessee has powers to hold IPL tournament for achieving this object. Whether this power of conducting IPL tournament is exercised with predominantly pecuniary gains in mind or not is a different aspect as of now, but then this is a ‘power’ not an ‘object’. So far as the provisions of Section 12A(1)(ab) are concerned, the Principal Commissioner was only required to examine the objects of the institution and not to extend her considerations to the powers vested in the institution. Unless the bridge of finding variations in objects of pre-amendment or post-amendment objects is crossed, there is no occasion to examine anything else. It is this foundational requirement that triggers the application of Section 12A(1)(ab). That is not satisfied on the facts of the present case. Of course, when there are any other reasons for cancellation of registration, such as lack of genuineness of activities or any other factors, it is open to the Principal Commissioner to cancel the registration under section 12AA(3), but then those proceedings, having been initiated by the Principal Commissioner, did not lead to cancellation of registration under section 12AA(3). We are, therefore, not really concerned with that aspect of the matter as on now.
In view of the above discussions, as also bearing in mind the entirety of the case, we are of the considered view that the learned Principal Commissioner erred in declining registration under section 12AA on the facts of this case; she ought to have held that the registration under section 12A dated 12th February 1996 not having been withdrawn or cancelled still holds good in law and in force.
In any event, however, entire basis of declining registration is invoking the proviso to Section 2(15) on the ground that the IPL activities are in the nature of commercial activities and cross the threshold limit specified in exceptions to the proviso to Section 2(15). It is, however, well-settled in law that so far as registration under section 12 AA is concerned, Section 2(15) has no application in the matter.
What essentially follows is that the remedy to the proviso to Section 2(15) coming into play is not denial of registration under section 12A or 12AA but denial of benefits of exemption under section 11 under section 13(8). That is the reason that along with the insertion of proviso to Section 2(15), effective from the same date, sub section 13(8) was also inserted and these two provisions are thus clearly complementary in nature. It is important to note that the Explanatory Memorandum to the Finance Bill categorically states that “there is need to ensure that if the purpose of a trust or institution does not remain charitable due to application of first proviso on account of commercial receipt threshold provided in second proviso in a previous year. Then, such trust or institution would not be entitled to get benefit of exemption in respect of its income for that previous year for which such proviso is applicable. Such denial of exemption shall be mandatory by operation of law and would not be dependent on any withdrawal of approval or cancellation of registration or a notification being rescinded”. The application of proviso to Section 2(15) is to be thus done on a year to year basis, while the grant of registration is a one time exercise.
Learned Commissioner (DR) defence primarily consists of his reliance on Hon’ble Kerala High Court’s judgment in the case of Mahatma Gandhi Charitable Society Vs Commissioner of Income Tax [(2019) 107 taxmann.com 309 (Kerala)]. That is a case in which cancellation of registration under section 12AA(3) was held to be justified on the ground that the proviso to Section 2(15) was attracted on the facts of this case. It is thus contended that, to that extent, the decision of the co-ordinate bench does not hold good law. That plea, however, does not appeal to us. As learned senior counsel rightly points out, Hon’ble Kerala High Court has upheld the stand of the Tribunal on the ground that “the activity specifically carried on by the assessee is the execution of contract awarded by the Indian Railways” and “this (activity) does not come within any of the objects professed by the assessee in its MoA”. Once the activity of the assessee trust is held to be not for the objects professed in the MoA, the very justification for registration as a charitable institution ceases to hold good in law. In the entire operative portion of this judgment, which is reproduced below in its entirety, there is not even a whisper about the application of proviso to Section 2(15). Therefore, irrespective of what was observed by the Commissioner cancelling the registration or the Tribunal upholding the cancellation, this decision of Hon’ble Kerala High Court cannot be an authority for the proposition that application of proviso to Section 2(15) has a role to play in cancellation or registration of a trust or an institution. As held by Hon’ble jurisdictional High Court in the case of CIT v. Sudhir Jayantilal Mulji [(1995) 214 ITR 154 (Bom)], a judicial precedent is only “an authority for what it actually decides and not what may come to follow from some observations which find place therein”. The propositions which are assumed by the Court to be correct for the purpose of deciding the same are, according to this judgment of the Hon’ble jurisdictional High Court, lack precedence value and are not binding in nature. In the present case, there is not even a mention of the proviso to Section 2(15) in the operative portion of the order.
The above decision does not, therefore, negate or even deal with the proposition liad down by the co-ordinate bench in the Kapurthala Improvement Trust case (supra). In view of the above discussions, and respectfully following co-ordinate bench decision in the case of Kapurthala Improvement Trust (supra), we hold that the application of proviso to Section 2(15), even if that be so, cannot be reason enough to decline the registration under section 12AA, and there is nothing more than the application of proviso to Section 2(15) to justify the registration being declined in the impugned order. The impugned order of the learned Principal Commissioner does not, therefore, meet our judicial approval for this reason as well.
As for the basic issue raised by the revenue authorities, which has witnessed vehement arguments from both sides, i.e. whether the IPL matches can indeed be said to be commercial in nature in the sense that the entire orientation of these matches is aimed at making money in the garb of promotion of cricket, strictly speaking, it is not necessary for us to go into this aspect of the matter at this stage, as the impugned order is held to be vitiated in law on account of factors discussed hereinabove. We may, however, add that on the face of it merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in more paying sponsorships and greater mobilization of resources, the basic character of the activity of popularizing cricket is not lost. It is indeed possible that the predominant object remains the promotion of cricket but that activity is done in a more effective and financially optimal manner, and that there is no conflict in the cricket becoming more popular and the cricket becoming more entertaining. It results in providing significant economic opportunities to those associated with the holding of the IPL tournament and, in the process, enriching the resources of the assessee trust. As long as the object of promoting cricket remains intact, and that continues to be the predominant object, the assessee cannot be said to be not following the object of promoting cricket, just because the operational model of a cricket tournament, whether IPL or any other tournament, is more entertaining, more economically viable, provides greater economic opportunities to all those associated with that tournament, and mobilizes greater financial resources for popularising cricket. The purpose for which all the funds at the disposal of the assessee trust, including the additional funds generated by holding the IPL tournament, are employed is certainly for promoting cricket, and that is what really matters. Improvising the rules of the game, adding entertainment value to it and making it economically attractive, may be a purist’s nightmare but the same factors can also be viewed as radical and innovative ideas to popularise a game- the very raison d’être of an institution like this assessee, and that is how we view it.
Conclusion
In view of the above discussions, as also bearing in mind the entirety of the case, we hold that the assessee was entitled to the continuance of its registration under section 12 A dated 12th February 1996 and that, accordingly, the impugned order passed by the learned Principal Commissioner stands quashed. The assessee gets the relief accordingly.
In the result, the appeal is allowed in the terms indicated above
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