BCCI will qualify for Tax Exemption even if IPL makes profits says ITAT
IPL activity of BCCI Qualifies for Income Tax Exemption
BCCI was granted registration as a charitable institution in 1996. It applied for fresh registration due to amendments made in the (MoA) for incorporating the recommendations made by Justice Lodha Committee, as approved by the Supreme Court. The Board Of Cricket Control of India (BCCI), which is a society registered under the Tamil Nadu Societies Registration Act, had a registration under Section 12A of the Income Tax Act, as a charitable institution.
Later, in 2018, the Society filed an application for fresh registration in terms of the changes in its memorandum of association effected on the basis of the Justice Lodha committee recommendation. The amendment allowed the Board to carry out any activity which directly or indirectly enhances the “value or render profitable or generate better income/revenue from any of the properties, assets and rights” and also provided for conducting IPL.
This was rejected by the Principal Commissioner. The application was rejected on the basis that IPL activities are in the nature of commercial activities and cross the threshold for exemptions in proviso to Section 2(15), which defines “charitable activities”.
The principal commissioner of income tax held that the Board is using the charitable purpose for commercially exploiting the game of cricket through franchise agreements for conducting IPL and thus rejected its registration as a charitable entity.
It held that “the very foundation of the approach implicit in the impugned order is thus wholly unsustainable in law, and clearly misconceived”.
ITAT accepted the Board’s submission that the latter’s objective is the promotion of cricket and it enjoys the power of holding IPL for achieving its objective. Whether the power for pecuniary gains or not is a different aspect.
The tribunal remarked that if there is a lack of genuineness of activities or any other factors, it is open to the tax authorities’ move to cancel the registration which is not its case.
“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 it in more paying sponsorships and greater mobilisation of resources, the basic character of activity of popularising cricket is not lost,” said the bench of judicial member Ravish Sood and vice president Pramod Kumar, while rejecting the contention of the revenue department.
ITAT bench, comprising Mahavir Singh, vice-president, and Manoj Kumar Aggarwal, accountant member, observed that the dominant object of the trust or non-profit entity has to be looked at, including the manner and form in which the objects are achieved.
The bench lent weightage to the spirit of the law, “…the intent of the legislation was to curb the practice of claiming exemption on the pretext of carrying out objects of general public utility and thereby taking the benefit of exemption in respect of business carried out in the mask of charity,” it pointed out.
The bench added that it was clear that the members of the chamber did not stand to gain personally, as no portion of the income or property was paid or transferred to them directly or indirectly.
“These facts highlight the fundamental point that the chamber by and large strives to promote and protect the trade, commerce and manufacturers of India without seeking to make profits for its members,” summed up the ITAT.
Thus, the bench held it to be eligible for I-T exemption.
The ITAT ruling will have huge implications on the public trusts as now they will be outside the gamut of taxation if they are using the money generated for the stated purposes