HC grants relief to BCCI in tax exemption case

The dispute arose over amendments in BCCI’s memorandum of association in June 2006 and August 2007, which the tax authority claimed resulted in the loss of its tax exemption

MUMBAI: The Bombay high court on Tuesday set aside the Income Tax Appellate Tribunal’s (ITAT) order upholding the cancellation of tax exemption granted to the Board of Control for Cricket in India (BCCI) in 1996. Tax authorities need to follow due process in deciding the exemption issue independently, the division bench of justices MS Sonak and Jitendra Jain clarified.

HC grants relief to BCCI in tax exemption case

“The revenue cannot adopt such contradictory stances or blow hot and cold in the same breath,” they said.

The BCCI is a society registered under the Tamil Nadu Societies Registration Act, 1975, with the aim of promoting sports, particularly cricket. On February 12, 1996, it was granted exemption as a charitable institution under the Income Tax Act, 1961.

The dispute arose over amendments in BCCI’s memorandum of association in June 2006 and August 2007, which the tax authority claimed resulted in the loss of its tax exemption. On December 28, 2009, director of income-tax (exemptions) (DIT) wrote to the BCCI, saying, “It is quite clear that the registration granted to BCCI under the Income Tax Act vide order dated 12.02.1996 does not survive from the date on which the objects were changed, i.e., 01.06.2006.”

In February 2010, the BCCI then filed an appeal with the Income Tax Appellate Tribunal (ITAT), which was rejected the following month based on maintainability. Thereafter, in November 2012, BCCI filed a writ petition in the high court challenging the ITAT’s order along with DIY’s communication.

Senior counsel PJ Pardiwalla, representing BCCI, asserted that cancelling the registration was unlawful, null, and void. The 2006 and 2007 amendments in BCCI’s memorandum of association were minor and did not affect its objectives, he told the court. The ITAT had also exceeded its jurisdiction in referring to the Indian Premier League (IPL) and making observations on the merits of the DIT communication, he said.

Advocate PC Chhotaray, counsel for revenue, defended the ITAT order based on its reasoning. He highlighted the BCCI’s failure in informing the DIT about the amendments and said it had ceased to be a charitable institution and had become a commercial entity.

The division bench noted that ITAT had exceeded its jurisdiction by making observations on merits of the communication. “If the appeal was not maintainable, there was no question of the ITAT evaluating the impugned communication/ order on its merits or making any observations or recording any findings regarding its validity or otherwise.” the bench clarified.

Referring to DIT’s 2009 communication, the court said it was neither an order for cancellation of exemption nor for withdrawal of BCCI’s registration. The IT Act empowers statutory authorities to issue “advisories” or non-statutory opinions intended to affect an assessee like the BCCI, the court said.

The court held that the department could proceed on the premise that BCCI’s registration stood cancelled or that it was not entitled to any exemption under Section 11 of the IT Act, 1961.

“Based upon the same non-statutory order or advisory, the assessee’s rights cannot be affected, or a situation created in which the assessee cannot claim an exemption or is liable to have its registration cancelled,” the division bench said, directing that the issue of tax exemption be decided by prescribed authorities on merit, independently, without being influenced by ITAT’s observations.