INCOME TAX OFFICER (EXEMPTION), WARD-1, Jaipur V. RAJASTHAN CRICKET ASSOCIATION, Jaipur

ITA 1355/JPR/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0093 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 03-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Business income; Charitable institution; Question of law; Capital receipt; Benefit of exemption; Cancellation of registration; Set aside
• Section: 143(3); 12AA; 13; 12; 10; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1355 & 1356/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2010-11 & 11-12. INCOME TAX OFFICER (EXEMPTIONS) WARD-1, JAIPUR. CUKE VS. RAJASTHAN CRICKET ASSOCIATION, NORTH BLOCK, SMS STADIUM, JAN PATH, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAATR 0798 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 04.12.2019. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 09/12/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT (A)-1, JODHPUR (CAMP AT JAIPUR) BOTH DA TED 20.09.2018 FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY. THE REVENUE HAS RAISED COMMON GROUNDS IN THESE APPEALS AS UNDER :- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING EXEMPTION U /S 11 OF THE I.T. ACT 1961 TO THE ASSESSEE DESPITE THE FACT THAT THE PROVISO TO SECTION 2(15) IS INVOKED IN THE CASE OF THE ASSESSE E AS THE ACTIVITIES OF THE ASSESSEE ARE BEING RUN ON COMMERC IAL BASIS, THERE BEING NO ELEMENT OF CHARITY. 2 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 2. ANY OTHER QUESTION OF LAW AS DEEMED FIT IN THE F ACTS AND CIRCUMSTANCES OF THE CASE MAY ALSO BE FRAMED BEFORE THE HONBLE TRIBUNAL IN THE INTEREST OF JUSTICE. 2. NONE HAS APPEARED ON BEHALF OF THE RESPONDENT AS SESSEE WHEN THESE APPEALS WERE CALLED FOR HEARING ON 2 ND DECEMBER, 2019 DESPITE THE NOTICE WAS DULY SERVED ON THE ASSESSEE AS PER THE REPORT OF THE AO. IT IS PERTINENT TO NOTE THAT THE ASSESSEE RESPONDENT HAS NOT BEEN APPEARING IN THESE CASES SINCE BEGINNING AND CONSEQUENTLY THE NOTICE WAS DIRECTED TO BE SERVED T HROUGH THE AO. THE LD. D/R HAS FILED THE REPORT OF THE AO ALONG WITH THE SERVICE R EPORT AND AS PER THE SERVICE REPORT, WE FIND THAT THE NOTICE WAS DULY SERVED ON THE ASSE SSEE RESPONDENT AS PER THE ACKNOWLEDGEMENT DATED 29.11.2019. TO GRANT ONE MORE OPPORTUNITY TO THE ASSESSEE RESPONDENT TO PARTICIPATE IN THE PROCEEDINGS, THE H EARING OF THE CASE WAS AGAIN DEFERRED TO 4 TH DECEMBER, 2019, HOWEVER, NONE HAS APPEARED ON BEHA LF OF THE ASSESSEE RESPONDENT DESPITE THE SAID OPPORTUNITY GR ANTED BY THE BENCH. ACCORDINGLY, WE PROPOSED TO HEAR AND DISPOSE OFF THESE APPEALS E X PARTE. 3. THE ASSESSEE IS A SOCIETY TRUST REGISTERED UNDER RAJASTHAN SOCIETY TRUST REGISTRATION ACT, 1958 VIDE S. NO. 267/86/87 DATED 18.02.1987 AND ALSO REGISTERED UNDER SPORT ASSOCIATIONS REGISTRATION ACCREDITATIO N ACT, 2005 ON 27 TH APRIL, 2005. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING T OTAL INCOME AT NIL AFTER CLAIMING THE EXEMPTION UNDER SECTION 11/12 OF THE IT ACT. T HE ASSESSEE WAS ALSO GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE ORD ER DATED 2 ND SEPTEMBER, 1998. SUBSEQUENTLY THE REGISTRATION UNDER SECTION 12AA WA S WITHDRAWN DUE TO THE REASON THAT THE ASSESSEE HAS AMENDED THE MEMORANDUM AND BY -LAWS CONTAINING THE OBJECTS OF THE ASSESSEE. HOWEVER, THE SAID ORDER WI THDRAWING THE REGISTRATION WAS 3 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. SET ASIDE BY THIS TRIBUNAL VIDE ORDER DATED 13.07.2 012 AND THE ASSESSEES REGISTRATION UNDER SECTION 12A/12AA WAS RESTORED. IN THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO WAS OF THE VIEW THAT THE ASSESS EE SOCIETY IS INVOLVED IN CARRYING ON THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND HAVING RECEIPTS IN EXCESS OF RS. 25,00,000/- AS THE THRESHOLD LIMIT PR OVIDED UNDER THE PROVISO TO SECTION 2(15) OF THE ACT. THEREFORE, THE FIRST PRO VISO TO SECTION 2(15) OF THE ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE. THE AO FIN ALLY HELD THAT THE ASSESSEE HAS BEEN REGULARLY INDULGING IN COMMERCIAL ACTIVITIES J UST LIKE ANY OTHER COMMERCIAL ENTERPRISES BY ORGANIZING MATCHES, SELLING TICKETS, SELLING ADVERTISEMENT CONTRACTS ETC. WHICH HAS RESULTED IN HUGE PROFITS YEAR AFTER YEAR. THE SURPLUS OF THE ASSESSEE HAS INCREASED EXPONENTIALLY AND WITHOUT FAIL FOR TH E PAST SEVERAL YEARS. THE AO HAS ALSO DISCUSSED THE ACTIVITY OF CONDUCTING THE IPL, TWENTY 20 CHAMPIONSHIP WHEREIN THE PLAYERS ARE BOUGHT AND SOLD BY ALL TEAMS IN AUC TIONS CONDUCTED PERIODICALLY AND HIGHEST BIDDER GETS THE BEST AVAILABLE PLAYER IN HI S TEAM. EVEN THE IPL TEAMS ARE OWNED BY DIFFERENT SPONSORS INCLUDING INDUSTRIAL HO USES AND FILM STARS. THUS THE AO HELD THAT ALL THESE ACTIVITIES ARE NOTHING BUT COMM ERCIAL AND BUSINESS FOR EARNING AND MAXIMIZING THE PROFITS. ACCORDINGLY, THE AO DEN IED THE BENEFIT OF SECTIONS 11 AND 12 OF THE IT ACT AND ASSESSED THE SURPLUS OF TH E ASSESSEE TO TAX. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND RELIED UPON VARIOUS DECISIONS OF THIS TRIBUNAL. THE LD. CIT (A) HELD T HAT THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATURE THOUGH THE SAME ARE THE OBJECT S OF GENERAL PUBLIC UTILITY BUT THE PRIMARY OR DOMINANT PURPOSE IS TO CARRYING OUT THE GENERAL PUBLIC UTILITY AND NOT EARNING THE PROFIT. HENCE THE LD. CIT (A) HAS DELET ED THE ADDITION AND ACCEPTED THE CLAIM OF THE ASSESSEE BEING ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE IT ACT. 4 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE R EVENUE HAS FILED THE PRESENT APPEALS. THE LD. CIT D/R HAS SUBMITTED THAT THE AO HAS NARRATED THE ACTIVITY OF THE ASSESSEE AS ORGANIZING THE CRICKET MATCHES INCLUDIN G THE IPL. FURTHER, THE ASSESSEE IS EARNING INCOME FROM VARIOUS ACTIVITIES WHICH HAS NOTHING TO DO WITH THE ACTIVITY OF PROMOTION OF SPORTS BUT THESE ARE PURE COMMERCIAL A CTIVITIES BEING IPL SUBVENTION FEES, TV SUBSIDY, IPL INCOME AND INCOME FROM ONE DA Y INTERNATIONAL MATCHES. THE AO HAS FURTHER POINTED OUT THAT 97% OF THE REVENUE RECEIPTS OF THE ASSESSEE RELATED TO ORGANIZING ONE DAY CRICKET MATCHES AND IPL MATCH ES THOUGH THE ASSESSEE HAS SHOWN THE REVENUE RECEIPTS FROM BCCI AS GRANTS, SUB SIDY AND SUBVENTION INCOME. HOWEVER, THE TRUE NATURE OF REVENUE RECEIPTS OF RS. 27.38 CRORES IS NOTHING BUT THE ASSESSEES SHARES IN THE TOTAL ADVERTISEMENT REVENU ES OF BCCI RELATED TO COMMERCIAL VENTURES OF ORGANIZING ONE DAY & TWENTY-TWENTY CRIC KET MATCHES SPECIALLY IPL MATCHES. THUS THE ASSESSEE IS EARNING THE REVENUE FROM ADVERTISEMENT RECEIPTS FROM BCCI BEING ITS SHARE IN THE ADVERTISEMENT RECE IPTS. WHEN THESE IPL TEAMS OF VARIOUS BUSINESS HOUSES, FILM STARS AND THE ENTIRE ACTIVITIES ARE CONDUCTED IN A COMMERCIAL MANNER, THEN THE INCOME EARNED BY THE AS SESSEE FROM THE SAID ACTIVITIES OF CONDUCTING THE IPL MATCHES IS ONLY FROM ACTIVITY OF TRADE, COMMERCE OR BUSINESS. THEREFORE, THE FIRST LEG OF PROVISIONS OF SECTION 2 (15) IS ATTRACTED IN THE CASE OF THE ASSESSEE WHEN 97% OF THE INCOME IS EARNED FROM THOS E ACTIVITIES IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. THE LD. D/R HAS RELIE D UPON THE DECISION OF THE CHANDIGARH BENCHES OF THE TRIBUNAL IN CASE OF PUNJA B CRICKET ASSOCIATION VS. ACIT IN ITA NO. 427/CHD/2017 DATED 12.09.2019 AND SUBMITTE D THAT THE TRIBUNAL WHILE DECIDING AN IDENTICAL ISSUE IN CASE OF PUNJAB CRICK ET ASSOCIATION HAS DISCUSSED ALL THE RELEVANT FACTS AND NATURE OF ACTIVITIES OF ICCI, BC CI AND STATE CRICKET ASSOCIATION 5 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. AND FOUND THAT THE ACTIVITIES OF ORGANIZING THE CRI CKET MATCHES PARTICULARLY IPL AND OTHER MATCHES ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. FURTHER EVEN IF THESE ACTIVITIES ARE CONSIDERED AS INCIDENTAL BUSIN ESS ACTIVITIES TO THE MAIN OBJECTS AND ACTIVITIES OF THE ASSESSEE, WHEN THE REVENUE EA RNED FROM THESE ACTIVITIES IS MORE THAN THE THRESHOLD LIMIT THEN THE FIRST PROVISO TO SECTION 2(15) IS ATTRACTED. THUS THE LD. CIT D/R HAS HEAVILY RELIED ON THE DECISION OF C HANDIGARH BENCHES OF THE TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE WAS GRANTED REGISTRATION UNDER SECTION 12A/12AA OF THE ACT THOUGH THE SAID REGISTRATION WAS WITHDRAWN BY THE L D. CIT (EXEMPTIONS) DUE TO THE REASON OF AMENDMENT OF MEMORANDUM AND BY-LAWS OF TH E ASSESSEE SOCIETY CONTAINING THE OBJECTS OF THE ASSESSEE WITHOUT PRIO R PERMISSION. HOWEVER, THE REGISTRATION WAS RESTORED BY THIS TRIBUNAL VIDE ORD ER DATED 13.07.2012. THEREFORE, EVEN IF THE ASSESSEE IS HAVING GRANTED REGISTRATION UNDER SECTION 12AA, THE EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT IS A S UBJECT MATTER OF ASSESSMENT AND FURTHER THE PROVISIONS OF SECTION 2(15) HAS ITS IND EPENDENT APPLICABILITY DESPITE THE REGISTRATION GRANTED UNDER SECTION 12A/12AA OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEES ACTIVITIES ARE CONSIDERED AS CHARITA BLE IN NATURE, HOWEVER, IT FALLS IN THE LAST LEG OF SECTION 2(15) BEING THE ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY. ONCE THE ACTIVITY OF THE ASSESSEE IS FALLING IN THE LAST LEG OF THE CHARITABLE PURPOSES BEING OBJECT OF GENERAL PUBLIC UTILITY THEN THE FIRST PROVISO TO SECTION 2(15) IS VERY MUCH RELEVANT FOR ALLOWING TH E EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. THE AO HAS EXAMINED THE NATURE OF A CTIVITY OF THE ASSESSEE AND HAS GIVEN THE DETAILS OF THE REVENUE EARNED BY THE ASSE SSEE DURING THE YEAR RELEVANT TO ASSESSMENT YEAR 2011-12 AS UNDER :- 6 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. A PERUSAL OF THE DETAILS OF REVENUE RECEIPTS SHOW S THAT THE ASSESSEE HAS RECEIVED THE FOLLOWING AMOUNTS DURING THE YEAR AS INCOME :- 1. IPL SUBVENTION RS. 8,10,43,200/- 2. TV SUBSIDY RS.15,55,74,613/- 3. IPL INCOME RS. 1,50,00,000/- 4. INCOME FROM ONE DAY INTERNATIONAL MATCH RS. 2,22,05 ,178/- TOTAL : RS.27,38,22,991/- ----------------------- THUS THE MAXIMUM REVENUE EARNED BY THE ASSESSEE IS FROM THE ACTIVITIES OF ORGANIZING THE IPL AND TWENTY TWENTY MATCHES AND TH E REVENUE FOR ONE DAY INTERNATIONAL IS ONLY RS. 2.22 CRORES. THEREFORE, OUT OF THE INCOME OF RS. 27.38 CRORES, ONLY RS. 2.22 CRORES IS EARNED FROM THE ONE DAY INTERNATIONAL MATCHES. IT IS UNDISPUTED FACT THAT THE BCCI AND STATE CRICKET ASS OCIATION ARE FACILITATING THE TOURNAMENTS OF IPL, TWENTY TWENTY CHAMPIONSHIP WHER EIN VARIOUS TEAMS OWNED BY THE INDIVIDUALS ARE PARTICIPATING IN THE SAID LEAGU E. THE OBJECT AND PURPOSE OF VARIOUS CRICKET TEAMS OWNED BY THESE PERSONS AND PA RTICIPATING IN THE TWENTY TWENTY CHAMPIONSHIP IS ONLY TO EARN THE BUSINESS PROFITS O R OTHERWISE TO SERVE THEIR COMMERCIAL AND BUSINESS OBJECTS. THESE PEOPLES ARE NO WAY ENGAGED IN THE ACTIVITIES FOR CHARITABLE PURPOSES BUT THEY ARE ENG AGED IN THIS EVENT ONLY FOR ADVANCEMENT OF THEIR OWN BUSINESS INTEREST. THUS FA CILITATING THE BUSINESS ACTIVITIES OF OTHER PERSONS BY THE STATE CRICKET ASSOCIATION P RIMARILY IS NOT IN THE NATURE OF CHARITABLE ACTIVITY. HOWEVER, INCIDENTALLY THESE AC TIVITIES MAY BE IN THE NATURE OF ADVANCEMENT OF ANY OTHER OBJECTS OF PUBLIC UTILITY AS THESE MATCHES ARE ORGANIZED FOR THE ENTERTAINMENT OF THE PUBLIC IN GENERAL AND SPECIALLY FOR CRICKET FANS. THERE MAY BE INCIDENTAL BENEFIT TO THE CRICKET SPORT BY T HESE ACTIVITIES OF ORGANIZING IPL 7 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. CHAMPIONSHIP, HOWEVER, PRIMARY OBJECT OF THESE ACTI VITIES ARE ONLY MAXIMIZING THE REVENUE FROM THESE EVENTS AND THE PARTICIPANTS ARE HAVING ONLY THEIR BUSINESS INTEREST AND NOT CHARITABLE PURPOSES. THEREFORE, IF THE ACTIVITIES OF THE ASSESSEE RESPONDENT BEING THE ADVANCEMENT OF OTHER OBJECTS O F GENERAL PUBLIC UTILITY AND ALSO FALLING IN THE AMBIT OF ACTIVITY IN THE NATURE OF T RADE, COMMERCE OR BUSINESS AS PER PROVISO TO SECTION 2(15), THEN IRRESPECTIVE OF THE REGISTRATION UNDER SECTION 12AA, THE BENEFIT OF SECTION 11 & 12 WILL NOT BE AVAILABLE TO THE ASSESSEE. THE CHANDIGARH BENCHES OF THE TRIBUNAL IN CASE OF PUNJAB CRICKET A SSOCITION VS. ACIT (SUPRA) HAS DISCUSSED THIS ISSUE ELABORATELY IN PARA 18 TO 46 A S UNDER : 18. BEFORE PROCEEDING FURTHER, FIRSTLY WE HAVE TO UNDE RSTAND THE RELATION BETWEEN THE STATE ASSOCIATIONS AND BCCI AND FURTHER HOW THE Y ARE CONSTITUTED. WHAT IS EMERGING FROM THE FACTS BROUGHT BEFORE US IS THAT BCCI IS A CONST ITUENT OF THE STATE ASSOCIATIONS. THE REPRESENTATIVES OF THE STATE ASSOCIATIONS ARE AT TH E 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 AS SESSEE ARE THE MEMBERS. THOUGH, THE BCCI HAS GOT ITSELF REGISTERED SEPARATELY AS A 'SOC IETY' 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 STAT E ASSOCIATIONS. THE MATTER DOES NOT END HERE. THERE IS A COMPLETE FEDERAL STRUCTURE STARTIN G FROM LOWER LEVEL I.E. DISTRICT CRICKET ASSOCIATIONS TO THE INTERNATIONAL CRICKET COUNCIL. DISTRICT CRICKET ASSOCIATIONS COLLECTIVELY FORM STATE CRICKET ASSOCIATIONS. STATE CRICKET ASSO CIATIONS COLLECTIVELY FORM THE NATIONAL BODY NAMED AS BCCI. THE SIMILARLY EXISTING NATIONAL CRICKET BOARDS/ASSOCIATIONS OF DIFFERENT COUNTRIES INCLUDING BCCI COLLECTIVELY CON STITUTE INTERNATIONAL CRICKET COUNCIL (IN SHORT 'ICC'). THERE IS NO REBUTTAL TO THE SUBMISSIO NS 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 IC C 'ICC-CRICKET.COM'. IT IS GATHERED THAT THE INTERNATIONAL CRICKET COUNCIL (ICC) IS THE GLOB AL 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. BCC I IS A FULL MEMBER OF THE ICC REPRESENTING INDIA. ICC EARLIER HAD ITS OFFICE AT L ORD'S (UK). HOWEVER, FOR BETTER TAX PLANNING, IT ESTABLISHED A COMPANY AT MONACO. THE I CC 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 IS LAND. 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 OP TIMIZE REVENUES FOR THE BENEFIT OF THE GAME BY DELIVERING EXCITING, ENGAGING GLOBAL EVENTS THAT ATTRACT NEW AND DIVERSE FANS AND BY 8 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. BUILDING LONG-TERM SUCCESSFUL COMMERCIAL PARTNERSHI PS.' 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 YEARS 2003-0 4 & 2004-05 IT IS STATED AS : 'BUSINESS OF CRICKET : OBJECTIVE: WHILST PRESERVING THE CORE VAL UES OF THE GAME, OPTIMISE REVENUE CREATION THROUGH EFFECTIVE MANAGEMENT AND EXPLOITATION OF CO MMERCIAL RIGHTS, MARKETING STRATEGIES, PRODUCT DEVELOPMENT AND INTELLECTUAL PROPERTY.' FUR THER 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: PROMOTI NG AND PROTECTING THE GAME, AND ITS UNIQUE SPIRIT DELIVERING OUTSTANDING, MEMORABLE EVE NTS PROVIDING EXCELLENT SERVICE TO MEMBERS AND STAKEHOLDERS OPTIMISING ITS COMMERCIAL RIGHTS AND PROPERTIES FOR THE BENEFIT OF ITS MEMBERS.' THE ICC GENERATES INCOME FROM THE TOU RNAMENTS 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) PA YMENTS DUE TO MEMBERS: 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 CRIC KETING 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 M ANOHAR, REPRESENTATIVE OF THE BCCI IS THE PRESENT CHAIRMAN OF THE ICC. 19. IPL ORGANIZED BY BCCI IS THE DOMESTIC FORM OF INTE RNATIONAL CRICKET T-20, HOWEVER, IT IS NOT LIMITED TO DOMESTIC PLAYERS BUT PLAYERS FROM OT HER COUNTRIES ARE ALSO PURCHASED BY PRIVATE INVESTORS/FRANCHISE THROUGH AUCTION INVOLVI NG 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 IN VOLVED AND HUGE INVESTMENTS OF THE PRIVATE BUSINESS HOUSES HAVE BEEN ATTRACTED WITH SO LE MOTIVE OF MAXIMUM EXPLOITATION OF THE POPULARITY OF THE CRICKET FOR GENERATING AND AUGMEN TATION OF THE REVENUE WHICH IS SHARED AS PER THE ARRANGEMENTS OF THE BCCI WITH ITS CONSTITUE NT MEMBERS AND AS WELL AS THIRD PARTIES/FRANCHISE HOLDERS OF THE TEAMS. 20. THOUGH, APPARENTLY, THERE APPEARS NO DOUBT THAT IP L IS A COMMERCIAL VENTURE OF THE BCCI, HOWEVER BCCI BEFORE THE TAX AUTHORITIES HAS C LAIMED ITSELF TO BE A CHARITABLE INSTITUTION. WE HAVE BEEN TOLD THAT THE APPEAL OF T HE 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 AMOUN T GIVEN BY IT TO THE STATE ASSOCIATIONS IS APPLICATION OF INCOME. IN THE ALTERNATIVE IT HAS BE EN PLEADED THAT THE AFORESAID PAYMENTS TO THE STATE ASSOCIATIONS IS THE DEDUCTIBLE EXPENDITUR E 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 PAYME NTS MADE TO THE STATE ASSOCIATIONS IS APPLICATION OF INCOME TOWARDS THE ADVANCEMENT OF TH E CHARITABLE OBJECT OF PROMOTION OF CRICKET IS ANTAGONISTIC TO THE ALTERNATE PLEA OF TH E BCCI THAT THESE PAYMENTS ARE TOWARDS THE EXPENDITURE SOLELY INCURRED FOR EARNING OF THE INCO ME FROM IPL. WE ARE CONSCIOUS OF THE FACT THAT WE ARE NOT ADJUDICATING THE CASE OF THE BCCI A ND HENCE WE RESTRAIN OURSELVES AT THIS STAGE TO GIVE ANY FINDING AS TO WHICH OF THE PLEA O UT OF THE BOTH IS CORRECT. HOWEVER, THE ISSUE BEFORE US IS AS TO WHETHER BOTH THE ABOVE STATED PL EAS 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 A RE OF THE VIEW THAT THE ABOVE PLEAS OF THE BCCI ARE NOT INCONSISTENT, CONTRARY OR MUTUALLY DES TRUCTIVE FROM THE POINT OF VIEW OF THE BCCI AND AS PER THE TREATMENT GIVEN TO THE SAID PAY MENTS IN ITS ACCOUNTS. THE BCCI, AS NOTED ABOVE, HAS BOOKED THESE PAYMENTS TO THE ASSOCIATION S AS EXPENDITURE SET-OFF AGAINST THE GROSS 9 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 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 QU ESTION ARISES THAT IF THE INCOME OF A PERSON IS THE NET RECEIPT I.E. GROSS RECEIPTS MINUS EXPEND ITURE 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 ACCOUNT HAS BOOKED THE PAYMENTS TO THE STATE ASSOCIATIONS AS EXPENDITURE, IT IS THUS PAYME NT OUT OF ITS GROSS RECEIPTS AND NOT OUT OF INCOME AND THUS IT SHOULD NOT QUALIFY AS APPLICATIO N OF INCOME. HOWEVER, AS MOST OF THE CHARITABLE INSTITUTES DO, THE EXPENDITURE IS GENERA LLY BOOKED AS APPLICATION OF INCOME E.G. EDUCATIONAL INSTITUTIONS CLAIMING CHARI TABLE STATUS, GENERALLY CLAIM THE SALARY TO TEACHERS AS APPLICATION OF INCOME WHEREAS IN THE BO OKS OF ACCOUNT, THE SAME IS TREATED AS EXPENDITURE AND HENCE UNDER THE CIRCUMSTANCES, IN O UR VIEW, THE CLAIM OF THE BCCI IN THIS RESPECT IS NOT AN EXCEPTION. IN VIEW OF THIS, THE A LTERNATE PLEA OF THE BCCI IS NOT OPPOSITE OR DESTRUCTIVE TO ITS PRIMARY PLEA. HOWEVER, THE QUEST ION 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 I S BCCI IN ITS BOOKS OF ACCOUNT HAS NOT TREATED THE PAYMENTS TO STATE ASSOCIATIONS AS VOLUN TARY GRANTS OR LARGESSE, CAN THE DONNEE/RECIPIENT CLAIM THE SAME TO BE SO. THE ANSWE R TO THIS QUESTION, IN OUR VIEW, IS 'NO'. THE BCCI IN ITS CONSISTENT PLEA BEFORE THE TAX AUTH ORITIES HAS CLAIMED THAT THE PAYMENTS MADE TO THE STATE ASSOCIATIONS IS UNDER AN ARRANGEMENT O F SHARING OF REVENUES WITH THE STATE ASSOCIATIONS. THAT THE STATE ASSOCIATIONS ARE ENTIT LED BY VIRTUE OF ESTABLISHED PRACTICE TO 70% OF THE MEDIA RIGHT FEE. THAT IF EACH STATE ASSOCIAT ION WERE TO NEGOTIATE THE SALE OF RIGHTS TO EVENTS IN ITS CENTER, ITS NEGOTIATING STRENGTH WOUL D BE LOW, HENCE, IT WAS AGREED THAT BCCI WOULD NEGOTIATE THE SALE OF MEDIA RIGHTS FOR THE EN TIRE COUNTRY TO OPTIMIZE THE INCOME AND THAT OUT OF THE RECEIPTS FROM THE SALE OF MEDIA RIG HTS, 70% OF THE GROSS REVENUE LESS PRODUCTION COST WOULD BELONG TO THE STATE ASSOCIATI ONS. BY SAYING SO, BCCI HAS PLEADED THAT IT HAS JUST ACTED AS A FACILITATOR FOR SALE OF MEDI A RIGHTS COLLECTIVELY ON BEHALF OF THE STATE ASSOCIATIONS FOR THE PURPOSE OF MAXIMIZING THE PROF ITS, 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 ASSOCIA TION, 2 ARE PRIVATE CLUBS AND 3 ARE CENTRAL GOVERNMENT INSTITUTIONS, HOWEVER THE PAYMEN T OUT OF MEDIA RIGHTS IS PAID ONLY TO STATE ASSOCIATIONS AND NOT TO THE THREE PRIVATE CLU BS OR THE GOVERNMENT INSTITUTIONS. IT HAS ALSO BEEN PLEADED THAT IN THE BOOKS OF ACCOUNT 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 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 PAYMENT S HAVE BEEN MADE TO THE STATE ASSOCIATIONS UNDER AN ARRANGEMENT ARRIVED WITH STAT E ASSOCIATIONS FOR SHARING OF THE REVENUES FROM INTERNATIONAL MATCHES AND IPL, THEN U NDER THE CIRCUMSTANCES, THE PAYEE OR TO SAY RECIPIENT ASSOCIATIONS CANNOT CLAIM THE RECEIPT S 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 H AS BEEN DECLINED BY THE INCOME TAX AUTHORITIES AND THE PAYMENTS/GRANTS GIVEN TO THE ME MBER STATE ASSOCIATIONS HAS BEEN TREATED AS DISTRIBUTIONS OF PROFITS. THE REGISTRATION OF TH E BCCI UNDER SECTION 12 READ WITH SECTION 10 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 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 T ODAY, 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 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. TH E APPELLANT STATE ASSOCIATION AS IT WILL AMOUNT TO DOUBLE TAXATION OF THE SAME AMOUNT. 23. HOWEVER, INTERESTINGLY, THE ASSESSEE PCA HAS DENIE D THAT BCCI IS ITS AOP, RATHER THE PLEA OF THE ASSESSEE IS THAT IT IS A CHARITABLE INS TITUTION AND THAT THE AMOUNT RECEIVED BY IT FROM BCCI IS GRANT, HENCE WOULD FALL IN THE DEFINIT ION OF ITS INCOME U/S. 2(24)(IIA) OF THE ACT AND FURTHER EXEMPT U/S. 11 OF THE ACT. TO EXAMINE T HIS PLEA OF THE APPELLANT, FIRSTLY, WE WILL HAVE TO EXAMINE WHETHER THE ACTIVITIES OF THE ASSES SEE 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 SO CIETY 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 DI SCUSSED 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 APPEL LANT. 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 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 , H OWEVER, 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 GRAN T OR TO SAY LARGESSE BY THE PAYER TO THE PAYEE. MORE INTERESTINGLY IS THE FACT THAT THERE TH E 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 CONS TITUENT & 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 R EGISTERED UNDER THE TAMIL NADU SOCIETIES REGISTRATION ACT, AND THEREBY COLLECTIVELY ENGAGE I N 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 MEMB ER OF THE BCCI. THE ASSESSEE 'PCA' INDIVIDUALLY IS TAKING TOTALLY OPPOSITE STAND TO TH E 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 H AS ITS HEADQUARTERS AT MUMBAI FROM WHERE ITS ENTIRE OPERATIONS ARE RUN, HOWEVER, IT HA S BEEN REGISTERED UNDER THE STATE ACT I.E. 'TAMIL NADU SOCIETIES REGISTRATION ACT'. T HE 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 BC CI ARE DONE AS PER THE AIMS AND OBJECTS UNDER WHICH IT HAS BEEN REGISTERED AND THAT THERE I S NO VIOLATION OF RULES AND REGULATIONS OF THE STATE SOCIETIES REGISTRATION ACT, AS ALL THE AC TIVITY 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 11 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. REGISTERED, HOWEVER, IN THE CASE OF THE BCCI, THE E NTIRE OPERATIONS OF THE BCCI ARE FROM A PLACE OUT OF THE JURISDICTION OF THE STATE AUTHORIT IES WITH WHOM IT HAS BEEN REGISTERED AS A SOCIETY. THE LD. DR IN THIS RESPECT HAS SUBMITTED T HAT 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 ASSOCIATION S AND BEING SO, IF THE BCCI IS INVOLVED IN COMMERCIAL VENTURE, THE STATE ASSOCIATIONS CANNOT C LAIM THAT THEY HAVE NOTHING TO DO WITH THE ACTIVITY OF THE BCCI. IT HAS BEEN SUBMITTED THAT WH AT IS DONE BY THE BCCI IS THE ACT OF THE STATE ASSOCIATIONS COLLECTIVELY DONE UNDER THE UMBR ELLA 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 CO MMERCIALLY EXPLOITING THE INTERNATIONAL MATCHES IN COLLABORATION WITH BCCI AND OTHER MEMBER ASSOCIATIONS. 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. D R, 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 SOCIET IES SHORT TITLE, REGISTRATION ACT, 1975. (2) IT EXTENDS TO THE WHOLE OF THE STATE OF TAMIL N ADU. (3) IT SHALL COME INTO FORCE ON SUCH DATE AS THE GO VERNMENT 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 CO MMENCEMENT OF THIS ACT SHALL, IN RELATION TO ANY AREA, BE CONSTRUED AS A REFERENC E 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 L ITERATURE, SCIENCE, RELIGION, CHARITY, SOCIAL REFORM, ART, REGISTERED, CRAFTS, COTTAGE IND USTRIES, ATHLETICS, SPORTS (INCLUDING INDOOR GAMES) RECREATION, PUBLIC HEALTH, SOCIAL SER VICE, CULTURAL ACTIVITIES, THE DIFFUSION OF USEFUL KNOWLEDGE OR SUCH OTHER USEFUL OBJECT WIT H RESPECT TO WHICH THE STATE LEGISLATURE HAS POWER TO MAKE LAWS FOR THE STATE, W HICH MAY BE PRESCRIBED, MAY BE REGISTERED UNDER THIS ACT. (2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1), NO ASSOCIATION WHICH HAS FOR ITS OBJECT THE IMPROVEMENT OF THE ECONOMIC CONDITIO N OF WORKMEN, NO CLUB WHERE GAMES OF CHANCE PROVIDING PRIZES FOR WINNERS ARE PLAYED A ND NO SOCIETY WHICH DOES NOT CONSIST OF AT LEAST SEVEN PERSONS SHALL BE REGISTERED UNDER THIS ACT. 12 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. MANAGEMENT AND ADMINISTRATION. 13. EVERY REGISTERED SOCIETY SHALL (1) HAVE A REGISTERED OFFICE TO WHICH ALL COMMUNICA TIONS AND NOTICES MAY BE ADDRESSED AND SHALL FILE WITH THE REGISTRAR NOTICE OF SITUATI ON OF SUCH OFFICE AND OF ANY CHANGE THEREOF WITHIN SUCH PERIOD AS MAY BE PRESCRIBED AFT ER THE DATE OF THE REGISTRATION OF THE SOCIETY OR AFTER THE DATE OF CHANGE, AS, THE CASE M AY BE ; (2) KEEP DISPLAYED ON THE OUTSIDE OF ITS REGISTERED OFFICE ITS NAME IN A CONSPICUOUS POSITION, IN LEGIBLE CHARACTERS AND, IF THE CHARACT ERS 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 FOLL OWING 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 SECRET ARIAT OF THE BOARD.' 29. APPARENTLY, THERE SEEMS FORCE IN THE CONTENTIONS R AISED BY THE LD. DR THAT THE TAMIL NADU SOCIETIES REGISTRATION ACT, PRIMARILY, HAS BEE N 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 NO T OPERATE IN TAMIL NADU RATHER ALL ITS OPERATIONS AND FUNCTIONS ARE CONDUCTED FROM MUMBAI AND ITS HIGHLY DOUBTFUL THAT THE REGISTRAR OF THE TAMIL NADU SOCIETIES COULD EXERCIS E ANY JURISDICTIONAL POWER OVER THE BCCI. UNDER THE CIRCUMSTANCES, IT APPEARS THAT BCCI HAS S HIELDED ITSELF BEHIND VEIL OF REGISTRATION UNDER THE TAMIL NADU SOCIETIES REGISTRATION ACT , W HEREAS 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 FOLL OWING 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. STAT E ASSOCIATIONS; '2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUI RES (A) ' COMMITTEE'' MEANS THE GOVERNING BODY OF A REG ISTERED 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 V ESTED 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 ASS OCIATION OF THE BCCI IS ENOUGH TO GATHER THAT THE BCCI IS A COMMERCIAL VENTURE OF THE STATE ASSOCIATIONS : 'MEMORANDUM OF ASSOCIATION 13 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. (K) TO CARRY ON ANY OTHER ACTIVITY WHICH MAY SEEM T O THE BOARD CAPABLE OF BEING CONVENIENTLY CARRIED ON IN CONNECTION WITH THE ABOV E, OR CALCULATED DIRECTLY OR INDIRECTLY TO ENHANCE THE VALUE OF, OR RENDER PROFITABLE ANY O F THE PROPERTIES OR RIGHTS OF THE BOARD;' 32. IT IS SETTLED LAW THAT WHAT CANNOT BE DONE DIRECTL Y, THAT CANNOT BE DONE INDIRECTLY ALSO. IF AN INSTITUTION CLAIMING CHARITABLE STATUS BEING CON STITUTED 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 AL SO BY FORMING A PARTNERSHIP FIRM OR AN AOP OR A SOCIETY WITH SOME OTHER PERSONS AND INDULG E IN COMMERCIAL ACTIVITY. ANY CONTRARY CONSTRUCTION OF SUCH PROVISIONS OF LAW IN THIS RESP ECT 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 B E 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 SA ID 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 APPLIE D 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 SH ARE 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 U S, IT IS APPARENT THAT THE APPELLANT, HEREIN, IS INVOLVED IN COMMERCIAL ACTIVITY IN A SYS TEMIC AND REGULAR MANNER NOT ONLY BY OFFERING ITS STADIUM AND OTHER SERVICES FOR CONDUCT OF IPL MATCHES BUT BY ACTIVELY INVOLVING IN THE 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 INVO LVING HUGE STAKES, HEFTY INVESTMENTS BY THE FRANCHISEES, AUCTION OF PLAYERS FOR HUGE AMOUNT S, EXPLOITING TO THE MAXIMUM THE POPULARITY OF THE GAME AND THE LOVE AND CRAZE OF TH E 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 CL EARLY REVEALED THAT THE ASSESSEE/APPELLANT IS SYSTEMATICALLY INVOLVED IN THE CONDUCT OF IPL MATCH ES. 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 ASSE SSEE 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 INFRAS TRUCTURE. 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 PART ICIPATION OF THE STATE ASSOCIATIONS IS NECESSARY FOR GENERATION OF REVENUE BY EXPLOITING C OMMERCIALLY THE CONDUCT OF MATCHES IN THEIR STADIA. WE FIND FORCE IN THE CONTENTION OF TH E LD. DR THAT DESPITE THE APPELLANT ALREADY HAVING AN INTERNATIONAL STADIUM AT MOHALI, THE APPE LLANT 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 TH AT THIS HUGE INVESTMENT IS MADE BY THE 14 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. APPELLANT NOT WITH THE PREDOMINANT OBJECT OF PROMOT ION 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 APPEL LANT BEING PARTY TO THE TRIPARTITE AGREEMENT IS ITSELF AN EVIDENCE OF THE APPELLANT BE ING 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 APPELLAN T, AS THAT OF THE BCCI ALSO, IS TO CONTROL THE CRICKET UNDER ITS AREA AND THIS CONDUCT OF THE ASSE SSEE IS NOT IN THE INTEREST OR PROMOTION OF CRICKET RATHER TO ESTABLISH ITS MONOPOLY AND DOMINA NCE IN THE FIELD. THE LD. DR IN THIS RESPECT HAS INVITED OUR ATTENTION TO THE OBJECTS OF THE ASS ESSEE SOCIETY WHICH INTER ALIA INCLUDE THE FOLLOWING: '(C) TO REGULATE AND CONTROL THE GAME AND GENERAL S PORTS (J) TO ADD, ALTER, MAINTAIN AND ENFORCE RULES AND R EGULATIONS FOR THE CONTROL AND GOVERNANCE OF THE GAME IN AREA UNDER CONTROL OF THE ASSOCIATION AND TO MAINTAIN DISCIPLINE AMONGST PLAYERS, OFFICIALS, CLUBS AND IN STITUTIONS.' 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 C RICKET, THEY ARE ACTIVELY INVOLVED IN FIRMLY SUPPRESSING ANY EFFORTS BY ANY OTHER PARTY TO ESTAB LISH AN ALTERNATE BODY CONCERNED WITH CRICKET, ESPECIALLY IN THE ECONOMIC SPHERE OF THE G AME. THAT THE MAIN INTEREST OF THE BCCI IS TO CONTROL AND MONOPOLISE CRICKET IN INDIA AND OTHE R ORGANISATIONS HAVING SIMILAR OBJECTS ARE NOT ALLOWED TO FUNCTION IN A FAIR AND COMPETITIVE A TMOSPHERE. IT HAS BANNED PLAYERS IN THE PAST WHO WERE ASSOCIATED WITH OTHER SIMILAR ORGANIS ATIONS. FOR INSTANCE, INDIAN CRICKET LEAGUE (ICL), A PRIVATE CRICKET LEAGUE FUNDED BY PA RTIES 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 ASSO CIATIONS 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 MATCH ES 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 I TSELF, IT WOULD HAVE TAKEN STEPS TO ENCOURAGE AND SUPPORT OTHER ASSOCIATIONS TO PROMOTE THE GAME OF CRICKET BY HOLDING AND CONDUCTING THE MATCHES IRRESPECTIVE OF THEIR AFFILI ATION TO THE ASSESSEE. RATHER THE BCCI AND ITS MEMBER ASSOCIATIONS HAVE CONTROLLED AND MAINTAI NED 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 CRI CKET. FACED BY THE THREAT OF DIVERSION OF PLAYING TALENT AND ASSOCIATED CRICKETING REVENUE, T HEY TOOK REPRESSIVE STEPS LIKE IMPOSING A BAN ON PLAYERS WHO WERE ASSOCIATED WITH ICL FROM PA RTICIPATING IN DOMESTIC AND INTERNATIONAL CRICKET MATCHES, NOT PROVIDING THE ST ADIUMS WHICH WERE UNDER THE CONTROL OF VARIOUS STATE CRICKET ASSOCIATIONS FOR THE ICL MATC HES, WHICH EVENTUALLY THWARTED ATTEMPTS OF CREATING A LEVEL PLAYING FIELD BY A POTENTIAL CO MPETITOR. THE LD. DR HAS FURTHER INVITED OUR ATTENTION TO THE ASSESSMENT ORDER PASSED IN THE CAS E OF THE BCCI WHEREIN THE ASSESSING OFFICER HAS REPRODUCED SOME OF THE RULES AND REGULA TIONS OF THE BCCI , WHICH READ AS UNDER: (A) 'NO CLUB AFFILIATED TO A MEMBER OR ANY OTHER OR GANIZATION SHALL CONDUCT OR ORGANIZE ANY TOURNAMENT OR ANY MATCH/MATCHES IN WHICH PLAYER S/TEAMS FROM THE REGION WITHIN THE 15 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. JURISDICTION OF A MEMBER ARE PARTICIPATING OR ARE L IKELY TO PARTICIPATE WITHOUT THE PREVIOUS PERMISSION OF THE MEMBER AFFILIATED TO THE BOARD.... (B) PERMISSION FOR CONDUCTING OR ORGANIZING ANY TOU RNAMENT 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-TIM E BAN ON PARTICIPATION IN UNAPPROVED TOURNAMENTS: (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, ASSO CIATE WITH AN APPROVED TOURNAMENT. (F) ANY INDIVIDUAL DERIVING FINANCIAL OR ANY OTHER BENEFIT SHALL NOT ASSOCIATE HIMSELF WITH AN UNAPPROVED TOURNAMENT; THE WORKING COMMITTEE WOU LD TAKE APPROPRIATE ACTION INCLUDING SUSPENSION AND STOPPAGE OF FINANCIAL BENE FITS AND ANY OTHER ACTION AGAINST IN INDIVIDUALS/MEMBERS CONTRAVENING THESE RULE.' THE LD. AO HAS FURTHER OBSERVED: 'THE ABOVE PROVISIONS ARE RESTRICTIVE AND ANTI-COMP ETITIVE 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 I NDIA. THE RULES ARE VERY STRINGENT AND REGIMENTED AND THERE IS A BLANKET BAN ON ANY UNAPPR OVED 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 CONCER N IS EXERCISING COMPLETE CONTROL OVER CRICKET AND MORE SIGNIFICANTLY, THE REVENUE FROM TH E 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 ALLOW ED TO ORGANIZE AN INTERNATIONAL TOURNAMENT OR INTERNATIONAL MATCH/MATCHES IN WHICH FOREIGN PLAYERS/TEAMS ARE PARTICIPATING OR LIKELY TO PARTICIPATE. IF AT ALL S UCH A TOURNAMENT/MATCH/MATCHES IS TO BE STAGE, THEN IT SHOULD BE EXCLUSIVELY BY THE AFFILIA TED MEMBER WHICH RECOMMENDS THE PROPOSAL AND WITHIN WHOSE JURISDICTION THE TOURNAME NT/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 TOUR NAMENT NOT REGISTERED WITH OR APPROVED BY THE ASSOCIATION OR BOARD OR ICC OR ANY OF ITS AFFILIATED MEMBERS WITHOUT THE WRITTEN PERMISSION OF THE BOARD EITHER IN INDIA OR ABROAD.' 16 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 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 V. BCCI', WHEREBY THE COMMISSION HAS RE-IMPOS ED A PENALTY OF RS. 522.4 MILLION ON THE BOARD OF CONTROL FOR CRICKET IN INDIA (BCCI) AN D 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 FO R THE BROADCASTING OF IPL MATCHES TO ONE TV CHANNEL FOR A 10-YEAR PERIOD. THE CCI ALSO DIFFE RENTIATED INTERNATIONAL AND OTHER DOMESTIC CRICKET FROM PROFESSIONAL LEAGUES, SUCH AS THE IPL. THE CCI NOTED THAT IN INTERNATIONAL AND DOMESTIC CRICKET, THE PLAYERS REP RESENT THE NATION OR CONCERNED STATE. HOWEVER, IN PROFESSIONAL LEAGUES, FOREIGN PLAYERS A RE 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 CONSIDERATION S INVOLVED, THE IPL AND SIMILAR PROFESSIONAL LEAGUES DIFFER CONSIDERABLY FROM INTER NATIONAL AND DOMESTIC CRICKET. THE CCI CONCLUDED THAT THE BCCI WAS DOMINANT IN THE RELEVAN T MARKET AND HAS ABUSED ITS DOMINANT POSITION AND ITS SUCH CONDUCT HAS 'RESULTED IN DENI AL OF MARKET ACCESS' FOR IPL COMPETITORS. THE CCI OBSERVED THAT UNDER RULE 28B OF THE BCCI RU LES, NO AFFILIATED MEMBER, PLAYER OR UMPIRE COULD PARTICIPATE OR SUPPORT A LEAGUE UNAPPR OVED BY THE BCCI. AS SUCH, NO PARTY COULD ORGANISE A LEAGUE WITHOUT BCCI APPROVAL. SINC E 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-I MPOSING A PENALTY OF RS. 522.4 MILLION, THE CCI DIRECTED THE BCCI : (I) TO CEASE AND DESIST FR OM ANY FUTURE PRACTICE WHICH WOULD DENY MARKET ACCE SS TO POTENTIAL COMPETITORS, INCLUDING THE INCLUSION OF S IMILAR CLAUSES IN ANY AGREEMENT; (II) DESIST FROM USING ITS REGULATORY POWERS WHEN CONSID ERING AND DECIDING ON ANY MATTERS RELATING TO ITS COMMERCIAL ACTIVITIES; (III) ESTABLISH AN EFFECTIVE INTERNAL CONTROL SYSTEM TO T HE SATISFACTION OF THE CCI, IN GOOD FAITH AND AFTER DUE DILIGENCE; AND (IV) REFRAIN FROM PLACING BLANKET RESTRICTIONS ON THE OR GANISATION OF PROFESSIONAL DOMESTIC CRICKET LEAGUES OR EVENTS BY NON-MEMBERS. 36. AT THIS STAGE, IT IS ALSO RELEVANT TO NOTE THAT TH E OBJECT OF THE ASSESSEE PCA STATES:- '.MAINTAIN FRIENDLY RELATIONS WITH AND AMONGST THE POPULATION OF THE AREA UNDER ITS CONTROL THROUGH SPORTS TOURNAMENTS.' (EMPHASIS SUPPLIED). THE ABOVE CRUCIAL WORDS 'AREA UNDER ITS CONTROL' SHOW THAT THE ACTIVITIES OF THE ASSESS EE ARE RESTRICTED TO THE AREA UNDER ITS CONTROL AS DETERMINED BY THE BCCI FOR THE STATE ASSOCIATION S UNDER ITS CONTROL. WHICH MEANS THE ACTIVITIES AS WELL AREA OF OPERATION OF THE ASSESSE E IS CONTROLLED BY BCCI, HENCE, UNDER THE CIRCUMSTANCES, ASSESSEE'S ACTIVITIES AND STATUS CAN NOT BE SAID TO BE ENTIRELY SEPARATE OR DISTINCT FROM BCCI. 37. FROM THE ABOVE FACTS, IT IS ESTABLISHED BEYOND DOU BT THAT THAT THE BCCI WHICH IS CONSTITUTED OF THE ASSESSEE AND OTHER STATE ASSOCIA TIONS HAS ACTED IN MONOPOLIZING ITS CONTROL OVER THE CRICKET AND HAS ALSO ADOPTED RESTRICTIVE T RADE PRACTICE BY NOT ALLOWING THE OTHER ASSOCIATIONS WHO MAY POSE COMPETITION TO THE BCCI T O HOLD AND CONDUCT CRICKET MATCHES FOR THE SOLE PURPOSE OF CONTROLLING AND EXCLUSIVELY EAR NING THE HUGE REVENUE BY WAY OF EXPLOITING THE POPULARITY OF THE CRICKET. THE ASSESSEE CRICKET ASSOCIATION BEING THE CONSTITUENT MEMBER OF 17 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. THE BCCI HAS ALSO ADOPTED THE SAME METHOD AND RULES OF THE BCCI FOR MAINTAINING ITS MONOPOLY AND COMPLETE DOMAIN OVER THE CRICKET IN TH E '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 TO WARDS 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 TH E ABOVE DISCUSSION, THE CONTENTION OF THE LD. COUNSEL THAT THE PAYMENT BY THE BCCI TO THE APP ELLANT IS A GRANT TO CHARITABLE INSTITUTION CANNOT BE ACCEPTED. EVEN AS DISCUSSED ABOVE, THE NA TURE OF PAYMENT BY THE BCCI, IS NOT VOLUNTARY GRANT OR LARGESSE RATHER THE SAME IS A PA YMENT 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 T REATED AS A CAPITAL RECEIPT IN ITS HAND IS NOT TENABLE. 38. NOW COMING TO THE NEXT SUBMISSION OF SH. VOHRA, TH E LD. COUNSEL FOR THE ASSESSEE, THAT EVEN IF IT IS HELD THAT THE APPELLANT IS INVOLVED I N 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 WIT H THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. AS DISCUSSED ABOVE, THE COMMERCIA L 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 PERUS AL OF GROUNDS OF APPEAL REVEALS THAT STRONG RELIANCE HAS BEEN PLACED BY THE ASSESSEE ON THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF 'SURAT ART SILK CLOTH MANUFACTURERS ASSOCIA TION' (SUPRA). HOWEVER, IN SAID DECISION OF THE HON'BLE SUPREME COURT, ITSELF, THE EXAMPLE O F TRUST HAVING ITS OBJECT OF PROMOTION OF SPORTS AND HAVING INVOLVED IN ORGANIZING THE CRICKE T MATCHES FOR PROFIT HAS BEEN GIVEN WHICH DIRECTLY FITS INTO THE FACTS AND CIRCUMSTANCES OF T HE CASE OF THE ASSESSEE. APART FROM THAT, THE HON'BLE SUPREME COURT HAS ALSO DISCUSSED THE EXAMPL E OF A PUBLICATION, WHICH IS INVOLVED IN PROPAGATION OF GANDHIAN THOUGHT AND PHILOSOPHY, WHI CH 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 AC TIVITY 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 S UCH A CASE, THE BLOOD BANK WOULD BE SERVING AN OBJECT OF GENERAL PUBLIC UTILITY BUT SIN CE 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 JU DGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF 'SURAT ART SILK CLOTH MANUFACTURERS ASSOCIA TION' (SUPRA) IS REPRODUCED AS UNDER: '15. WE MUST THEN PROCEED TO CONSIDER WHAT IS THE M EANING OF THE REQUIREMENT THAT WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS ADVA NCEMENT 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 PUR POSE IS AS TO WHEN CAN THE PURPOSE OF A TRUST OR INSTITUTION BE SAID TO INVOLVE THE CARRYIN G ON OF ANY ACTIVITY FOR PROFIT THE WORD 'INVOLVE' ACCORDING TO THE SHORTER OXFORD DICTIONAR Y MEANS 'TO ENWRAP IN ANYTHING, TO ENFOLD OR ENVELOP; TO CONTAIN OR IMPLY'. THE ACTIVI TY FOR PROFIT MUST, THEREFORE, BE INTERTWINED OR WRAPPED UP WITH OR IMPLIED IN THE PU RPOSE OF THE TRUST OR INSTITUTION OR IN OTHER WORDS IT MUST BE AN INTEGRAL PART OF SUCH PUR POSE ... TAKE, FOR EXAMPLE, A CASE WHERE A TRUST OR I NSTITUTION IS ESTABLISHED FOR PROMOTION OF SPORTS WITHOUT SETTING OUT ANY SPECIFI C MODE BY WHICH THIS PURPOSE IS 18 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 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 PURP OSE 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 CARRIE D OUT AND THEN ENGAGE ITSELF IN AN ACTIVITY FOR PROFIT IN THE COURSE OF ACTUALLY CARRY ING 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 EMASCULA TE THESE LAST CONCLUDING WORDS AND RENDERS THEM MEANINGLESS AND INEFFECTUAL.' .. 18. THE APPLICATION OF THIS TEST MAY BE ILLUST RATED BY TAKING A SINGLE EXAMPLE. SUPPOSE, THE GANDHI PEACE FOUNDATION WHICH HAS BEEN ESTABLISHED FOR PROPAGATION OF GANDHIAN THOUGHT AND PHILOSOPHY, WHICH WOULD ADMITT EDLY 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 PRIC E WHICH IS MORE THAN THE COST OF THE PUBLICATION AND LEAVES A LITTLE PROFIT, WOULD IT DE PRIVE THE GANDHI PEACE FOUNDATION OF ITS CHARITABLE CHARACTER? THE PRICING OF THE MONTHL Y 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, B UT 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 WOUL D BE TO CARRY OUT THE CHARITABLE PURPOSE BY PROPAGATING GANDHIAN THOUGHT AND PHILOSO PHY 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 MONT HLY JOURNAL IS CARRIED ON WHOLLY ON COMMERCIAL LINES AND THE PRICING OF THE MONTHLY JOU RNAL 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 RESIST THE INFERENCE THAT THE ACTIVITY OF PUBLICATION OF THE JOURNAL IS CARRIED ON FOR PROFIT AND THE PURPOSE IS NON-CHARIT ABLE. 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 P AYMENT AND SUPPLIES BLOOD FOR A HIGHER PRICE ON COMMERCIAL BASIS. UNDOUBTEDLY, IN S UCH A CASE, THE BLOOD BANK WOULD BE SERVING AN OBJECT OF GENERAL PUBLIC UTILITY BUT SIN CE IT ADVANCES THE CHARITABLE OBJECT BY SALE OF BLOOD AS AN ACTIVITY CARRIED ON WITH THE OB JECT OF MAKING PROFIT, IT WOULD BE DIFFICULT TO CALL ITS PURPOSE CHARITABLE. ORDINARIL Y, THERE SHOULD BE NO DIFFICULTY IN DETERMINING WHETHER THE PREDOMINANT OBJECT OF AN AC TIVITY 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 SOLUTIO N OF THE PROBLEM WHETHER THE PURPOSE IS CHARITABLE OR NOT MAY INVOLVE MUCH REFINEMENT AN D PRESENT REAL DIFFICULTY.' (EMPHASIS SUPPLIED BY US) FROM THE ABOVE EXAMPLES GIVEN BY THE HON'BLE SUPREM E COURT, IT IS TO BE NOTED THAT DIFFERENTIATION LIES BETWEEN 'IF SOME SURPLUS HAS B EEN LEFT OUT OF INCIDENTAL COMMERCIAL 19 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. ACTIVITY' AND 'THE ACTIVITY IS DONE FOR THE GENERAT ION OF SURPLUS'. ALTHOUGH SUCH AN ACTIVITY FOR GENERATION OF SURPLUS MAY ALSO BE SERVING THE PURPO SE OF CHARITABLE OBJECT OF GENERAL PUBLIC UTILITY, STILL IT WILL NOT BE COVERED AS FOR 'CHARI TABLE PURPOSES'. THE CASE OF THE ASSESSEE IS SQUARELY COVERED WITH THE ABOVE EXAMPLES GIVEN BY T HE 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 LI NES WILL EXCLUDE IT FROM THE SCOPE OF CHARITABLE ACTIVITY. 39. MOREOVER, EVEN IT IS ASSUMED FOR THE SAKE OF ARGUM ENTS 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 DECISION OF THE THE CO-ORD INATE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF 'CHANDIGARH LAWN TENNIS ASSOCIATION V. ITO (EXEMPTION)' [2018] 95 TAXMANN.COM 308 (CHD. - TRIB.) , THE INCOME OF THE ASSESSEE FROM THE INCIDENTAL BU SINESS ACTIVITY BEYOND THE PRESCRIBED LIMIT OF RS. 10 LAKH S FOR THE YEAR UNDER CONSIDERATION AS PER SECOND PROVISO TO SECTION 2(15) OF THE ACT WILL BE TAXABLE AS ITS BUSINESS INCOME. THE CO- ORDINATE CHANDIGARH BENCH IN THE CASE OF 'CHANDIGAR H LAWN TENNIS ASSOCIATION' (SUPRA) HAS EXTENSIVELY DISCUSSED THIS ISSUE AND HAS DULY A NALYZED AND DELIBERATED UPON VARIOUS CASE LAWS INCLUDING THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASES OF TRIBUNE TRUST & MOGA IMPROVEMENT TRUST (SUPRA), THE DECISION OF THE PRIVY COUNCIL IN THE CASE OF TRUSTEES OF THE TRIBUNE PRESS INRE [1939] 7 ITR-415 ; THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASES OF 'SOLE TRUSTEE, LOK SH IKSHANA TRUST V. CIT ' [1975] 101 ITR 234 AND INDIAN CHAMBER OF COMMERCE V. CIT [1976] 101 I TR 796 AND ALSO THE LARGER BENCH JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F 'ADDL. CIT V. SURAT ART SILK CLOTH MFG'. 121 ITR 1/[1979] 2 TAXMAN 501 AND HAS ALSO CONSIDERED THE EFFECT OF INTRODUCTION OF 2ND PROVISO TO SEC. 2(15), AMENDMENTS IN SECTION 10 (23C), PROVISIONS OF SECTIONS 11(4), 11(4A), 13(8) AND SEC. 143 OF THE ACT AFTER DELINEA TING THE LEGISLATURE HISTORY BEHIND SECTION 2(15). IT IS TO BE NOTED THAT THE EFFECT OF INTRODU CTION OF 2ND PROVISO TO SECTION 2(15) OF THE ACT HAS NOT BEEN DISCUSSED IN ANY OF THE DECISIONS RELI ED UPON BY THE LD. COUNSEL FOR THE ASSESSEE. THE CO-ORDINATE BENCH AFTER THOROUGH DISC USSION OF THE MATTER, {IN THE CASE OF CHANDIGARH LAWN TENNIS ASSOCIATION (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 PRESERVATIO N 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 INS TITUTION {AS PROVIDED UNDER SECTION 11(4A)}, ARE ENTITLED TO CLAIM EXEMPTION OF THEIR INCOME INC LUDING 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 INS TITUTIONS 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 INVO LVES THE CARRYING OF INCIDENTAL ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVIT Y 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 S HOULD BE IN THE COURSE OF ACTUAL CARRYING OUT OF THE MAIN OBJECT AND THE RECEIPTS THEREFROM SHOUL D 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 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 FIR ST PROVISO TO SECTION 2(15) WOULD COME INTO 20 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. PLAY. HOWEVER, THE OTHER RESTRICTIONS AS PROVIDED U NDER SECTIONS 11(4A), 13(8) AND 143(3), WOULD ACCORDINGLY APPLY FOR CLAIMING EXEMPTION UNDE R SECTION 11; FURTHER, THE RESTRICTION INTER ALIA PUT UNDER THE PROVISOS TO SE CTION 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 CO-ORDINATE MUMBAI BENCHES OF THE TRIBUNAL I N THE CASES OF 'GHATKOPAR JOLLY GYMKHANA V. DIT (E)' [2013] 40 TAXMANN.COM 207/[2014] 147 ITD 112 (MUM. - TRIB.) AND 'COTTON TEXTILES EXPORTS PROMOTION COUNCIL V. DIT ( EXEMPTION), [2014] 44 TAXMANN.COM 168/64 SOT 167 (MUM. - TRIB.) 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 YEA R BUT IT DOES NOT RESULT IN CANCELLATION OF ITS REGISTRATION AS CHARITABLE INSTITUTION. THE ABOVE V IEW HAS BEEN AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMPTION) V. NORTH INDIAN ASSOCIATION [2017] 79 TAXMANN.COM 410/246 TAXMAN 318/393 ITR 206 WHEREIN THE HON'BLE HIGH COURT WHILE FURTHER RELYING UPON ITS ANOTHER DECISION IN THE CA SE OF 'DIT(EXEMPTION) V. KHAR GYMKHANA [2016] 385 ITR 162/240 TAXMAN 407/70 TAXMANN.COM 18 1 (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 ITSE LF, 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 FURTH ER PROBE/INQUIRY BEFORE CONCLUDING THAT THE TRUST IS NOT GENUINE. THIS IS ALSO SO HELD IN THE O WN 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 FO R THE YEAR I.E. RS. 10 LAKHS, THUS HIT BY THE SECOND PROVISO TO SECTION 2(15) OF THE ACT. HENCE T HE CASE OF ASSESSEE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE (SUPRA) OF THE ASSESSEE. HOWEVER, THE CO-ORDINATE CHANDIGARH BENCH IN THE CA SE OF 'CHANDIGARH LAWN TENNIS ASSOCIATION' (SUPRA) READING DOWN THE RELEVANT PROV ISIONS, 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 BUSINE SS AND GENERATING INCOME THEREFROM, THE INCOME TO SUCH AN EXTENT AS IS LIMITED BY THE SECON D PROVISO TO SECTION 2(15) SHOULD BE TAKEN AS EXEMPT BEING TREATED AS INCOME FROM CHARITABLE P URPOSES 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 FRO M THE COMMERCIAL ACTIVITY, SUCH AS, BY WAY OF VOLUNTARY DONATIONS, CONTRIBUTIONS, GRANTS O R NOMINAL REGISTRATION FEE ETC. OR OTHERWISE WILL REMAIN TO BE FROM CHARITABLE PURPOSE S AND ELIGIBLE FOR EXEMPTION UNDER THE RELEVANT PROVISIONS. HOWEVER, THE INCOME FROM ACTIV ITY 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 21 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. THAT THE INCOME FROM COMMERCIAL ACTIVITY OF THE ASS ESSEE IS INCIDENTAL TO THE ACTIVITY OF THE ASSESSEE TOWARDS PREDOMINANT OBJECT OF CHARITABLE N ATURE, EVEN THEN IN VIEW OF THE PROPOSITION LAID DOWN BY THE CO-ORDINATE BENCH IN T HE CASE 'CHANDIGARH LAWN TENNIS ASSOCIATION' (SUPRA), THE INCOME FROM COMMERCIAL AC TIVITY I.E. BY WAY OF COMMERCIAL EXPLOITATION OF THE INTERNATIONAL MATCHES AND IPL W HICH IS OVER AND ABOVE THE PRESCRIBED LIMIT OF THE RS. 10 LAKHS FOR THE ASSESSMENT YEAR U NDER CONSIDERATION WILL BE EXIGIBLE TO TAXATION. HOWEVER, SINCE WE HAVE ALREADY OBSERVED THAT THE AS SESSEE IS REGULARLY FOLLOWING COMMERCIAL ACTIVITY BY COMMERCIALLY EXPLOITING ITS PROPERTY AND RIGHTS TO HOLD MATCHES AND THEREBY EARNING HUGE INCOME, HENCE THE SAID ACTIVIT Y 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 T HE 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 O F 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 MONOPOLISATI ON AND HAVING DOMINANT CONTROL OVER THE CRICKET TO THE EXCLUSION OF OTHERS. WHAT WE WAN T 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 I S 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 OF THE APPELLANT PCA DONE IN COMPLIANC E 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 REGISTRA R OF FIRMS AND SOCIETIES PUNJAB, THE OBJECTS OF THE PCA INTER ALIA, INCLUDE THE FOLLOWIN G: 'TO CARRY OUT ANY OTHER ACTIVITY WHICH MAY SEEM TO THE PCA CAPABLE OF BEING CONVENIENTLY CARRIED ON IN CONNECTION WITH THE ABOV E, OR CALCULATED DIRECTLY OR INDIRECTLY TO ENHANCE THE VALUE OR RENDER PROFITABLE OR GENERA TE BETTER INCOME/REVENUE, FROM ANY OF THE PROPERTIES, ASSETS AND RIGHTS OF THE PCA;' 41. THE ABOVE OBJECT REVEALS THAT NOW THE ASSESSEE'S A CTIVITIES INTER ALIA ARE ALSO DIRECTED FOR GENERATION AND AUGMENTATION OF REVENUE BY WAY OF EX PLOITATION OF ITS RIGHTS AND PROPERTIES. THE ASSESSEE IN THE EARLIER YEARS (BEFORE THE INTRO DUCTION OF THE ABOVE REVISED OBJECT) MIGHT HAVE CLAIMED THE APPLICATION OF INCOME ON CAPITAL A SSETS/INFRASTRUCTURE AS APPLICATION FOR CHARITABLE PURPOSES. HOWEVER NOW WITH THE AMENDED O BJECTS, 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 CL ARITY ABOUT THE MANNER OF OPERATION AND ACTIVITIES OF THE ASSESSEE. 42. UNDER THE CIRCUMSTANCES, THE APPELLANT CANNOT BE G RANTED EXEMPTION UNDER SECTION 11 OF THE ACT AS ITS ACTIVITIES NO MORE FALL UNDER THE DE FINITION OF CHARITABLE PURPOSES AS PER THE PROVISIONS OF SECTION 2(15) OF THE ACT. IN VIEW OF THE DISCUSSION MADE ABOVE, THE AMOUNT PA ID 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 ASSOCIAT ION 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 ACCE PTED BY ANY HIGHER APPELLATE AUTHORITY IN 22 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. 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 T O DECIDE WHETHER THE SAID PAYMENTS RECEIVED FROM BCCI CAN BE TAXED AS INCOME OF THE AP PELLANT WHICH WILL BE SUBJECT TO OUR OBSERVATIONS GIVEN ON OTHER ISSUES RAISED IN THIS A PPEAL. HOWEVER, THE INCOME RECEIVED BY THE APPELLANT/ASSESSEE OTHERWISE, EXCEPT THE CLUB INCOM E, WHICH HAS NOT BEEN TAXED AT THE HANDS OF THE BCCI, WILL BE ASSESSED AS PER THE NORMAL PRO VISIONS 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 T HE APPELLANT I.E. PROMOTION OF SPORT AND CANNOT BE VIEWED SEPARATELY. WITHOUT PREJUDICE TO A BOVE, IT HAS BEEN SUBMITTED THAT THE APPELLANT IS MAINTAINING SEPARATE BOOKS OF ACCOUNT IN RESPECT OF ALL ABOVE CLUB ACTIVITIES. THAT THESE FACILITIES ARE BEING PROVIDED ON THE PRI NCIPLE OF MUTUALITY, ACCORDINGLY, THESE CANNOT BE TERMED AS TRADE, COMMERCE OR BUSINESS ACT IVITY. THAT THE RECEIPTS FROM THE CATERER FOR PROVIDING CATERING SERVICE DURING THE MATCHES I S INTRINSICALLY LINKED WITH THE ACTIVITY OF ORGANIZING MATCHES AND TOURNAMENTS FOR THE PROMOTIO N 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 AS SESSEE EARNED HUGE INCOME OF RS. 123.03 LAKHS DURING THE YEAR FROM THESE FACILITIES AND THI S INCLUDES A SUM OF RS. 14.97 LAKHS 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 FACI LITIES. 44. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IN OUR VI EW, THIS ISSUE IS REQUIRED TO BE RE- EXAMINED BY THE ASSESSING OFFICER AFTER VERIFICATIO N OF THE ACCOUNTS OF THE ASSESSEE AS TO ASCERTAIN WHICH PART OF THE CLUB INCOME AND CATERIN G 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 I NCOME 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 SER VICES ARE LIMITED TO THE MEMBERS AND THEIR GUESTS ONLY OR THE SAME ARE ALSO PROVIDED TO NON-MEMBERS ALSO ON COMMERCIAL BASIS. THE ASSESSING OFFICER AFTER THOROUGHLY EXAMINING TH E ABOVE FACTS WILL DECIDE IF THE PRINCIPLE OF MUTUALITY APPLIES TO THE CLUB INCOME INCLUDING C ATERING CONTRACT IN ACCORDANCE WITH LAW. THIS ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF T HE 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 FAV OUR 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 T HE 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 O N CERTAIN BUNDLE OF FACTS. OUR FINDINGS ABOVE ARE BASED ON THE DISTINGUISHED AND SPECIFIC F ACTS BROUGHT OUT AND EVIDENCES FURNISHED BEFORE US BY THE PARTIES AND OUR FINDINGS MAY NOT B E TREATED IN ANY MANNER AS LAYING DOWN ANY CONTRARY PROPOSITION OF LAW TO THE DECISIONS CI TED BY THE LD. COUNSEL FOR THE ASSESSEE. 46. IT IS ALSO MADE CLEAR THAT OUR OBSERVATIONS MADE A BOVE WILL NOT HAVE ANY BEARING AS SUCH ON ANY ADJUDICATION IN THE CASES OF THE BCCI AND TH AT THE BCCI WILL HAVE RIGHT AND LIBERTY TO 23 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR. CONTEST ITS CASES IRRESPECTIVE OF THE OBSERVATIONS GIVEN ABOVE AS OUR FINDINGS RESTS ON THE PLEADINGS OF THE PARTIES BEFORE US THOUGH, THE VIEW POINT OF THE BCCI HAS ALSO BEEN CONSIDERED AFTER GIVING DUE OPPORTUNITY TO THE BCCI. IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT TO OUR NOTICE TO THE VIEW TAKEN BY THE CHANDIGARH BENCH OF THE TRIBUNAL, WE SET ASIDE THE ORDER OF THE LD. CIT (A) AND RESTORE THE ORDER OF THE AO. WE MAY CLARIFY THAT OU R VIEW IS BASED ON THE PECULIAR FACT OF THE ACTIVITIES OF THE ASSESSEE DURING THESE YEARS AND THEREFORE IS CONFINED TO THE FACTS OF THE CASE FOR THESE TWO YEARS. 6. IN THE RESULT, APPEALS OF THE REVENUE ARE ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 09/12/2019 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKWO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/12/2019. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-THE ITO (EXEMPTIONS) WARD-1, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-RAJASTHAN CRICKET ASSOCIATION, JAIPU R. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1355 & 1356/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 24 ITA NOS. 1355 & 1356/JP/2018 RAJASTHAN CRICKET ASSOCIATION, JAIPUR.