Carrying IPL matches is not a Charitable Activity

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ITAT CHENNAI BENCH ‘B’

Tamil Nadu Cricket Association

v.

Director of Income-tax (Exemptions)

Income Tax Appeal No. 396 (Mds.) of 2012

Date of pronouncement – 22.02.2013

 

In addition to the regular cricket matches, the assessee is conducting commercially oriented matches like Indian Premier League (IPL). Players of IPL teams are selected by sponsors to play under their brand names. Players are selected through auctions. Players choose that sponsor which offers the highest amount of money. IPL Matches are played with hype and celebration so as to create more and more revenue out of sale of telecast rights. All these activities when read together, one has to come to a finding that the entire activities of the Association is poised towards generating huge amount of income through the game of cricket.

Instead of promoting and developing the game of cricket in Tamil Nadu and Puducherry, the assessee is in fact carrying on the activities of promoting and developing cricket as an entertainment. The price of tickets sold to the public is so high that tickets are as good as highly priced market products.

In these circumstances, the learned officer explained that the assessee has shifted from its earlier activities of general public utility to commercial activities of generating income and revenue.

This change of character proves that the activities of the assessee carried on at present are not in accordance with the objects proclaimed in its Memorandum of Association. The earlier objects for which the assessee was formed into a society were charitable in nature inasmuch as it focused on the promotion and development of the game of cricket as an object of public utility in the State of Tamil Nadu and in the Union Territory of Puducherry. There was the intention of participating the public in the development of the game of cricket, but now it is not so. The public are not participating in the development of the game. They are only spectators to view the costly matches played in the stadium. Therefore, the second condition provided in section 12AA(3) is satisfied in the present case. The first condition is also satisfied inasmuch as the present activities carried on by the assessee are not genuinely for the benefit of public.

Therefore, the learned officer submitted that in the facts and circumstances of the case, the Director of Income-tax (Exemptions) is justified in cancelling the registration to the assessee under section 12AA(3) of the Income-tax Act, 1961.

There cannot be a conflict between the first proviso inserted under section 2(15) and the conditions laid down in section 12AA(3) for cancelling the registration. If there is a conflict between the two, the law stated in the proviso will be defeated. So also, the law stated in section 12AA(3) will be defeated. Therefore, when the assessee is hit by the proviso to section 2(15), its consequential reflection is automatic on section 12AA(3), which prima facie establishes that the activities carried on by the assessee are not genuine, inasmuch as it is not for advancement of any object of public utility. The two conditions laid down in section 12AA(3) cannot be read and understood in disregard of the proviso to section 2(15).

Therefore, the two conditions stated in section 12AA(3) have reference to the de facto nature of the activities carried on by the assessee. The assessee was given registration under section 12AA on the ground that it is a charitable institution inasmuch as it is engaged in the advancement of an object of general public utility in the form of developing and promoting the game of cricket in Tamil Nadu and Puducherry. But, now it is seen that its activities are oriented towards generating income and revenue by converting the sport of cricket into a celebrated industry. It means, the present activities carried on by the assessee are not genuine, when compared to the objects stated at the time of getting registration under section 12AA of the Act. It is not the physical factor as to whether the assessee is conducting cricket matches or not, which is the issue to be looked into. It is the purpose for which those physical activities are carried out. There is no case, as far as physical activities are concerned, that the game conducted by the assessee is not genuine. It becomes not genuine when we look into the objects for which the association is formed and registered under section 12AA of the Act.

Likewise, it is further seen that the object of the assessee was to carry on an activity for advancement of an object of general public utility by promoting the cricket game. But, it has deviated from the stated objective by carrying out the game of cricket as an entertainment industry, generating huge revenue.

Therefore, in the facts and circumstances of the case, we are of the considered opinion that the case of the assessee is covered by both the limbs stated in section 12AA(3) of the Act. We uphold the order of the Director of Income-tax (Exemptions) passed under section 12AA(3) of the Income-tax Act, 1961. The registration of the assessee granted under section 12AA has been rightly cancelled.