BCCI Can't Be Denied Income Tax Exemption Just Because IPL Makes Profits : ITAT

The Income Tax Appellate Tribunal has held that the Board of Control for Cricket in India (BCCI) is entitled to registration under Section 12A of the Income Tax Act, which makes it eligible for tax exemption, despite the launch of the Indian Premier League Tournament.

The ITAT held that just because IPL is structured in a more profitable manner, the exemption cannot be denied to the BCCI, and so long as the object of promoting cricket is remaining intact, the society is entitled to retain its exemption registration.

The BCCI, which is a society registered under the Tamil Nadu Societies Registration Act, had a registration under Section 12A of the Income Tax in 1996. 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. 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".

Challenging this, the BCCI approached the ITAT.

The ITAT ruled that even though IPL may be more profitable, BCCI is entitled to tax exemptions as long as the primary objective of BCCI to promote cricket remains intact.

The ITAT held that the Principal Commissioner erred in applying the proviso of Section 2(15) at the stage of application for registration.

"It is however well settled that so far as registration under Section 12AA is concerned, Section 2(15) has no application in the matter", the order said.

Findings

The Mumbai Bench of the ITAT comprising of Judicial Member Ravish Sood and Vice President Pramod Kumar was of the view that the question as to whether the IPL matches can be said to be commercial in nature in the sense that the entire orientation of the matches is aimed at making money in the garb of promotion of cricket, was not necessary to be considered at the present stage as the issue was related only to entitlement of registration under Section 12.

"We may, however, add that on the face of it merely because a sports tournament is structured in such a manner so as to a 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," the Tribunal said.

It added:

"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 : 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."

"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."

Significantly, Section 12 A requires a trust to inform the principal commissioner about any change in its activities, within 30 days. The income tax department referred to IPL as a change in activity.

On this aspect the Tribunal observed,

"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."

Accordingly, the Tribunal quashed the impugned order passed by the Principal Commissioner.

Click Here To Read Order