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NEW DELHI: With cricket associations being run on business lines, the high Court said that the activities of sports bodies, including the Board of Control for Cricket in India (BCCI), cannot fall within the meaning of ‘education’ to claim tax exemption as they spend insignificant amounts of money on coaching camps or academies.
After analyzing the books of accounts of Gujarat Cricket Association and Saurashtra Cricket AssociationA bench of Chief Justice UU Lalit and Justices S Ravindra Bhat and PS Narasimha also said that administrative bodies may not fall within the ambit of ‘general public utility’ (GPU) to get tax exemption.
The bench said the Supreme Court and the Income Tax Appellate Tribunal (ITAT) erred in concluding that the associations are involved in charitable activities and that the funds given by BCCI are a form of subsidy. The issue of income tax exemptions for sports bodies was part of the order related to GPUs, which also dealt with professional bodies such as the Institute of Chartered Accountants of India, trade agencies as well as state housing and industrial corporations.
“On a careful examination of the expenditure incurred, keeping in mind the nature of receipts, the expenditure incurred by cricket associations does not reveal that any significant part is spent on sustained or organized coaching camps or academies. Therefore, in the opinion of this court, the ITAT erred in not considering the nature of receipts flowing from the BCCI to the corpus of GCA and SCA – as well as other associations,” the bench said said.
The associations contended that the sport of cricket is a form of education, and they function merely to promote the sport and they should not be regarded as engaging in activities for the promotion of trade, commerce or business.
However, the court said that the term ‘education’ used in Section 2(15) of IT Act means formal schooling and dismissed the plea saying, “there is no doubt that the demand of the present sports associations not within ‘education’”.
“It is clear that the activities of the cricket associations are run on business lines. The societies own physical and other infrastructure, maintain it, have arrangements for permanent manpower,” the court said.
Referring to the auctioning of media rights to broadcast cricket by BCCI and passing on the proceeds of sale to state associations entitled to 70% of the revenue, the bank said this forms part of the arrangement whereby the consideration arising from such commercial rights flows agreed to be shared among all members of the BCCI and these rights appear to be commercial.
“In light of this, the court is of the view that the ITAT, as well as the High Courts, erred in accepting the submission at face value that the amounts remitted by BCCI to the cricket associations were in the nature of infrastructure subsidy. In each case, and for each year, the tax authorities are obliged to carefully examine and see the pattern of receipts and expenses,” the statement said.
“While doing so, the nature of rights transferred by the BCCI to the successful bidders, in other words, the content of broadcasting rights as well as the arrangement relating to state associations (either in the form of master documents, decisions or individual agreements with state associations) should be investigated,” the bench said, adding that its comments should not be treated as final and that the parties’ contentions in this regard should be considered on their merits.
After analyzing the books of accounts of Gujarat Cricket Association and Saurashtra Cricket AssociationA bench of Chief Justice UU Lalit and Justices S Ravindra Bhat and PS Narasimha also said that administrative bodies may not fall within the ambit of ‘general public utility’ (GPU) to get tax exemption.
The bench said the Supreme Court and the Income Tax Appellate Tribunal (ITAT) erred in concluding that the associations are involved in charitable activities and that the funds given by BCCI are a form of subsidy. The issue of income tax exemptions for sports bodies was part of the order related to GPUs, which also dealt with professional bodies such as the Institute of Chartered Accountants of India, trade agencies as well as state housing and industrial corporations.
“On a careful examination of the expenditure incurred, keeping in mind the nature of receipts, the expenditure incurred by cricket associations does not reveal that any significant part is spent on sustained or organized coaching camps or academies. Therefore, in the opinion of this court, the ITAT erred in not considering the nature of receipts flowing from the BCCI to the corpus of GCA and SCA – as well as other associations,” the bench said said.
The associations contended that the sport of cricket is a form of education, and they function merely to promote the sport and they should not be regarded as engaging in activities for the promotion of trade, commerce or business.
However, the court said that the term ‘education’ used in Section 2(15) of IT Act means formal schooling and dismissed the plea saying, “there is no doubt that the demand of the present sports associations not within ‘education’”.
“It is clear that the activities of the cricket associations are run on business lines. The societies own physical and other infrastructure, maintain it, have arrangements for permanent manpower,” the court said.
Referring to the auctioning of media rights to broadcast cricket by BCCI and passing on the proceeds of sale to state associations entitled to 70% of the revenue, the bank said this forms part of the arrangement whereby the consideration arising from such commercial rights flows agreed to be shared among all members of the BCCI and these rights appear to be commercial.
“In light of this, the court is of the view that the ITAT, as well as the High Courts, erred in accepting the submission at face value that the amounts remitted by BCCI to the cricket associations were in the nature of infrastructure subsidy. In each case, and for each year, the tax authorities are obliged to carefully examine and see the pattern of receipts and expenses,” the statement said.
“While doing so, the nature of rights transferred by the BCCI to the successful bidders, in other words, the content of broadcasting rights as well as the arrangement relating to state associations (either in the form of master documents, decisions or individual agreements with state associations) should be investigated,” the bench said, adding that its comments should not be treated as final and that the parties’ contentions in this regard should be considered on their merits.
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