Whether Income Received By Kerala Cricket Association Would Be Exempted Income Or Not? Kerala High Court Remands Back Matter To ITAT

The Kerala High Court has remanding the matter to the Income Tax Appellate Tribunal (ITAT) to determine whether income received by the Kerala Cricket Association during the assessment years 2010-11, 2012-13, and 2013-14 would partake of the nature of exempted income going by the provisions of Section 2(15) of the Income Tax Act.

The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has set aside the impugned orders of the Income Tax Appellate Tribunal and remand the matter to the Tribunal for a fresh determination of the issue in the light of the observations of the Supreme Court in Ahmedabad Urban Development Authority. The Supreme Court held that entities created with the object of advancing general public utility cannot seek exemption under the Income Tax Act 1961 under the heading "charitable purposes" if they are engaging in any trade, business, commerce, or providing any service for any consideration.

Section 2(15) of the Income Tax Act provides a definition of 'charitable purpose' which includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests, and wildlife), preservation of monuments or places, or objects of artistic or historic interest.

The petitioner/department has challenged the finding of the Income Tax Appellate Tribunal, Cochin Bench, on the issue as to whether the income received by the Kerala Cricket Association during the assessment years 2010-11, 2012-13, and 2013-14 would partake of the nature of exempted income going by the provisions of Section 2(15) of the Income Tax Act.

In the assessment for the assessment year 2010-11, the assessing authority found that the income earned by the assessee Cricket Association would be hit by the proviso to Section 2(15), and therefore, the assessee Cricket Association would not be entitled to the benefit of the exemption.

In the appeals preferred by the assessee Cricket Association before the First Appellate Authority, the First Appellate Authority found that the proviso to Section 2(15) of the Income Tax Act could not apply to deny the benefit of exemption to the assessee. The view of the First Appellate Authority was sustained by the Appellate Tribunal in the appeal carried by the department.

While the assessing authority had granted the benefit of exemption to the assessee Cricket Association, for the assessment years 2012-13 and 2013-14, the department had initiated suo motu revision proceedings, which culminated in an order of the Commissioner of Income Tax denying the benefit of exemption to the assessee Cricket Association for those years.

In appeals carried by the assessee before the Tribunal, the Tribunal followed its own earlier order for the assessment year 2010-11 and allowed the appeal and the claim for exemption preferred by the assessee Cricket Association.

The department relied on the decision of the Supreme Court in the case of Assistant Commissioner of Income Tax (Exemptions) v. Ahmedabad Urban Development Authority, in which it was held that in each case and for every year, the tax authorities are under an obligation to carefully examine and see the pattern of receipts and expenditures. While doing so, the nature of rights conveyed by the BCCI to the successful bidders—in other words, the content of broadcast rights as well as the arrangement with respect to state associations (either in the form of master documents, resolutions, or individual agreements with state associations)—have to be examined.

The court held that the appeals need to be remanded to the Appellate Tribunal for a fresh adjudication on the facts, especially with regard to whether or not the amount made over to the assessee Cricket Association by the Board for Control of Cricket in India (BCCI) was in the nature of an infrastructure subsidy or business income.

The court directed the Income Tax Appellate Tribunal to consider the matter afresh and pass final orders.

Counsel For Petitioner: Christopher Abraham

Counsel For Respondent: Sunil Nair Palakkat

Case Title: The Commissioner Of Income -Tax (Exemptions) Kochi Versus M/S.Kerala Cricket Association

Citation: 2024 LiveLaw (Ker) 494

Case No.: ITA NO. 182 OF 2019

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