ITAT Hyderabad rescinds the order of withdrawing registration granted to the Hyderabad Cricket Association.
The Hyderabad bench of the Income Tax Appellate Tribunal, has recently overruled the order withdrawing the registration granted to the Hyderabad Cricket Association under section 12AA of the Income Tax Act 1961.
While allowing the appeal preferred by the association, the division bench held that various activities carried out by the assessee as part of IPL programme can be treated as “for the advancement of any other object of general public utility” which is permitted under section 2(15) of the Income Tax Act. In the opinion of the Tribunal, these activities would not result in losing the assessee society’s charitable nature.
In the instant case, the registration granted to the Hyderabad Cricket Association was withdrawn on ground that the assessee is no more a charitable society since it is deriving income from various commercial sources including receipts from league fees, sale of tickets of ODI & IPL matches, advertisement charges, franchise fee, subsidy and sponsorship money from various companies.The DIT(E) further observed that the assessee conducted a cricket match for women, which is against the objects of the Trust and some of the expenses incurred by the assessee are not supported by vouchers.The assessee challenged the order before the ITAT.
The tribunal noted that after the insertion of section 2(15) of the Income Tax Act, the definition of the term “charitable activity” has undergone a major change. Now the position is that if the assessee carries on commercial activities for the advancement of any other object of general public utility and its turnover is less than the prescribed limit, it does not lose its charitable nature.
The Tribunal further relied upon the decision of the Madras High Court in the case of Tamil Nadu Cricket Association, in which the Court considered the CBDT circular 1/2011 and also the Hon’ble Supreme Court’s decision in the case of CIT vs. Andhra Chamber Of Commerce and held that if the primary or dominant purpose of the Trust or Institution is charitable, another object which by itself may not be charitable, but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the Trust or Institution from being a valid charity.
The Tribunal further noticed the decision of the Bombay High Court in DIT (E) vs. Khar Gymkhana, in which the Court opined that the DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carrying on commercial activities which are in breach of the amended definition of “charitable purpose” in section 2(15) and that registration can be cancelled only if the activities of the trust are not genuine or are not being carried out in accordance with its objects and further that this is clarified by Circular No.21 of 2016.
It was further observed that “as regards the other grounds i.e. holding of a cricket match for women in violation of the object No.(xxviii), we find that the main object of the assessee is to promote the game of cricket and particularly for men only as there is a separate cricketing body for women. The reason given by the assessee for holding women’s cricket match is that it was held at the instance of the BCCI particularly since the women cricket association was not functioning. We find that this activity cannot be said to be exactly in contravention of the objects of the assessee society. Even if it is to be considered to be in violation of the object, it is a solitary deviation and the AO might consider disallowing the income derived by the assessee from conducting of such a match while computing the exempt income u/s 11 of the Income Tax Act.”
Read the full text of the order below.
