Full text of Income tax report on BCCI
Return of income declaring nil income is filed on 30.10.1998 along with audited Income & Expenditure account, Balance sheet and schedules. The assessee has computed its income under the provisions of Sec. 11. It has also filed copy of notification, dated 12.7.1996, notifying the Board of Control for Cricket in India under Sec. 10(23) of the Income-Tax Act 1961. The assessee has filed Form No. 10 along with return and claimed accumulation under section. 11(2) of the entire surplus. The total income computed under section 10(23) is taken at Nil. The return was processed under section 143(1)(a), thereafter the case was selected for scrutiny.
Notice under section 143(2) was issued to the assessee.
The first notice, under section 143(2) was issued by my predecessor on 23.9.1999, fixing date of appointment on 3.11.1999 to which there seems to be no response.
Thereafter, another notice under section 143(2) was issued by me on 31.10.2000, fixing date of appointment on 20.11.2000 for which also there was no response.
Thereafter, on 12.12.2000, Shri Prakash Gupta, CA, authorised representative attended when various details were called for as per order sheet noting. The case was adjourned to 10.1.2001.
Shri Prakash Gupta attended on 10.1.2001 and requested for adjournment on the ground that the details are under preparation, the case was accordingly adjourned as per his request giving him nearly one month time to 5.2.2001.
Shri Gupta, instead of attending on 5.2.2001, attended on 20.2.2001 and stated that the details called for vide order sheet noting dated 12.12.2000 was still under preparation as the vouchers etc. were lying in Jaipur. He requested for further adjournment to 1.3.2001. However, none attended on 1.3.2001.
Thereafter, a letter was served on the assessee on 5.3.2001 calling for certain more details and the case was refixed for 12.3.2001. On 12.3.2001 a letter was received from the assessee stating that preparing details called for required going through various vouchers and statements and as all the books of accounts and vouchers were kept at the office of the Treasurer in Jaipur and they were calling for books of account and vouchers to the BCCI office, Mumbai.
Further, Shri Prakash Gupta was admitted in ICU on 5.3.2001. BCCI asked for 15 days time.
A reply to this request was written by me on their letter dated 9.3.2001 itself which Records: "As you are aware that details are being called for right from December 2000 as per copy of order sheet sent to you vide my letter dated 5.3.01. Shri Gupta, your authorised representative, has all along been saying that details were under preperation as the vouchers, books etc. were lying in Jaipur. Please note that the assessment being a time-barring assessment, your request for 15 days time cannot be accepted. However, to enable you to furnish the details called for the case is being adjourned for final hearing and submission of details to 19.3.2001 at 10 a.m. Please note that if details are not furnished on the rescheduled date, the assessment would be completed on the basis of details on record."
The assessee filed a letter on 16.3.2001 in the tapal in which it has primarily challenged the validity of the issue of notice under section 143(2). The assessee has stated the notice under section 143(2) was without jurisdiction and requested to withdraw the same.
Three points mentioned in the letter are as under:
i) That we have filed the return of income for the above assessment year 1998-99 on 30.12.98 declaring income of Rs. nil.
ii) That we have claimed exemption under section 10(23) of the Act as per notification No. 10149 (F. No. 190/15/96-ITA-I) dated 12.7.1996.
iii) A notice can be issued under section 143(2) if the Assessing Officer considers it necessary or expedient to ensure that an assessee has not understated his income or has not computed excessive loss or has not under paid the tax in any manner. In our case exemption has been claimed under section 10(23) and it cannot be disputed that we have compiled with all the conditions necessary for the grant of such exemption. Therefore, the proceedings initiated by your notice under section 143(2) are without jurisdiction and we request you to withdraw the same.
Along with the above letter, the assessee also enclosed copy of agreement with ITC for receiving logo money, statement of logo money paid to players, match/tour fee paid to players and officials amount received from TransWorld International for sale of Television rights, logo money received from ITC and few sundry details. It is further stated in the letter referred above that other particulars were under preperation and would be furnished shortly.
The objection raised by assessee in respect of notice issued under section 143(2) is not valid as the notice under section 143(2) has to be issued in cases which have been selected for scrutiny and where the assessee files its return of income. The claim of the assessee for exemption under section 10(23) or any other provision of Income Tax-Act 1961 has to be examined by scrutinising the case of the assessee. Furthermore, notification under section 10(23) does not suo-motto entitle the assessee for exemption under section 10(23). The notification under section 10(23) granted is subject to certain conditions.
In the present case, the assessee notification dated 12.7.1996 is subject to the following four conditions:
i) The assessee will apply its income or accumulate it for application, in accordance with the provisions of sub-section (2) & (3) to section 11 as modified by the said clause (23) for such accumulation wholly and exclusively for the object for which it is established.
ii) The assessee will not invest or deposit its funds (other than voluntary contributions received and maintained in the form of Jewellery, furniture or any other article as may be notified by the Board under the third provisions to the aforesaid clause (23) for any period during the previous year relevant to the assessment years mentioned above otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11.
iii) The assessee will not distribute any part of its income in any manner to its members except as grants to any association or institution affiliated to it and
iv) This notification will not apply in relation to any income, being profits and gains of business unless the business is incidental to the attainment of the objectives of the assessee and separate books of accounts are maintained in respect of such business.
In view of the above the Assessment Officer has to verify whether the assessee has satisfied the conditions laid down in the aforesaid notification. The objection of the assessee with regard to issue of notice under section 143(2) and request for withdrawal of the same is therefore rejected.
The object of assessee is stated to be to control and regulate the game of cricket in India by organising coaching schemes, tournaments, Test matches, one-day internationals and by any other manner as well as to arrange, organise, control and finance the visit of the Indian cricket team to various countries; and to arrange, organise, control and finance the visits of cricket teams of other countries to India, to build, construct, maintain and repair the stadium and other amenities to help junior cricketers, needy cricketers, retiring cricketers, players, umpires and other persons connected with the game of cricket etc.
In this case a survey under section 133A of the Income-Tax Act, 1961 was conducted on 20.7.2000 in the office premises of Treasurer Shri Kishore Rungta in Jaipur. During the course of survey, the Department came across certain papers and documents. On analysis of the same, it is observed that personal expenses in the nature of telephone bills, mobile bills, travel expenses, hotel expenses, gift etc. to office-bearers (past and present) and other persons are borne by BCCI.
The bills and supporting documents for expenses incurred by them are not filed or maintained by office-bearers. Based on this analysis, the assessee was asked to furnish various details vide this office letter dated 5.3.2001 apart from the other details as called for vide order sheet noting dated 12.12.2000.
After submitting letter dated 16.3.2001, Shri Prakash Gupta attended on 19.3.2001 and filed letter dated 19.3.2001 wherein incomplete details in respect of Pepsi Independence Cup, Pepsi Asia Cup and Indian tour to Sri Lanka, Sahara Cup, India tour to Pakistan and other tours abroad. The basic bifurcation and details of expenses were not filed.
There were deficiencies in the few details furnished is recorded in order sheet noting dated 19.3.2001. It was brought to the notice of assessee's representative that even though it was given time up to 19.3.2001 to furnish all the details called for, none of the details as called for vide letter dated 5.3.2001 is submitted. They were given final opportunity to furnish all details on 21.3.2001.
Shri Prakash Gupta, Sunil Jhunjhunwala and Arvind Jhalani, Cas, attended on 21.3.2001 and filed letter dated 21.3.2001 with few details. It was brought to the notice of assessee's representatives that they had not furnished any details as called for vide this office letter dated 5.3.2001, except item No. 17 i.e. amount received receivable from ESPN for Sahara Cup 1998 and item Nos. 13 and 14 i.e. details of officials who have gone on foreign tour and details of foreign exchange given. The details given for item Nos. 13 and 14 as mentioned above is incomplete as recorded in order sheet noting dated 21.3.2001.
Briefly the deficiencies are discussed as under:
i) Mr. J. Y. Lele, Secretary was given $ 3500 for 10 days to attend series of ICC and ACC meetings in London from June 9 to 18, 1997. However, they have not submitted any details as to when the ICC/ACC meetings were and that the meetings were for how many days?
ii) Mr. Raj Singh Dungarpur was given Pounds 3300 to attend a series of ICC and ACC meetings in London. They have not submitted any details as to for how many days he had gone and how many days did those meetings last, his entitlement for foreign exchange etc.
iii) Mr. S. K. Nair, Treasurer, was given $ 3000 to attend ICC/ACC meetings in London from June 9 to 18, 1997. No details are submitted as to when exactly was the meeting and for how many days?
iv) Mr. J. Dalmiya was given $ 5000 towards entertainment expenses. No expenses vouchers of amount spent on entertainment is available with BCCI. Hence it is not verifiable as to how much is actually spent on entertainment?
v) Out of details submitted in respect of Anshuman Gaekwad, who was coach during the year, it is seen that Rs. 7600 is given TA/DA for meeting on 18.12.1997 at Mumbai. However TA/DA entitlement is not submitted. Similarly TA/DA for one day meeting at Mumbai on 21.1.1998 he is paid Rs. 13,480 no explanation was forthcoming as to how Rs. 13480 is given as TA/DA for one day meeting.
vi) Air fare of Rs. 13,650 given to Anshuman Gaekwad for Baroda-Mumbai-Chennai and back. No purpose of travel is submitted.
vii) Air Fare of Rs. 4480 and DA of Rs. 5400 for three days given to Anshuman Gaekwad from February 14 to 16, 1998 . No purpose of travel is submitted. Further it is seen that expenses of Rs. 24,000 for the period for Financial Year 1997-98 in respect of Telephone/Fax expenses @ 2000 per month is claimed by Mr. Anshuman Gaekwad. Similarly entertainment expenditure @ 1500 per month amounting to Rs.18,000 is claimed. It was stated by assessee's representatives that these amounts were paid in subsequent accounting year. It is further stated that there is no commitment by Board for such payment but it is still being paid.
viii) Out of details of legal expenses, it is seen that Rs.47,900, Rs.89,000, Rs.18,470, Rs. 59,110 and Rs.13,729 is paid for travelling charges of Mr. U. N. Bannerjee. Further Rs. 10148, Rs 10,190 is paid for hotel accommodation of U. N. Banerjee. No details or supporting documents is submitted for the nature of work done by him nor the places travelled by him is submitted. Similarly an amount of Rs. 1,70,000 is paid to Rangarajan and Prabhakaran stating that fee payable towards legal service rendered in connection with AGM, assisting Senior Advocate holding discussions with senior advocates, Committee Members. No explanation as to for which case discussions held, what legal services rendered is submitted. The authorised representatives of the assessee also could not say anything in respect of these expenses claimed.
The assessee was specifically asked vide letter dated 5.3.2001 to produce bank statement of Indian Overseas Bank, Calcutta (A/c No. 1223) which was opened in the name of INDCOM and the name of which was changed with effect from 1.1.98 to World Cup 98. The bank statement was called for with complete narration of receipts and withdrawl from the said account to see the extent of personal benefit enjoyed by Shri J. Dalmiya who operates the account. However the assessee has failed to produce details called for.
From above observations, it is obvious that fund of BCCI is being handled and spent as per whims and fancies of office-bearer as there is no accountability of the office-bearers to anyone. Even after lapse of more than three months, the assessee has not furnished the required details.
The primary reason behind this is the lack of accountability of BCCI to anyone. The structure of BCCI is as such that it very difficult for any person who has not previously held any post in BCCI or affiliate units to get into cricket administration in India. This not only prevents infusion of fresh blood and ideas but also perperuates the system of self-aggrandisement.
BCCI has been dominated any persons who are working for their individual interest and the objects of the BCCI are not being pursued by its members properly. The funds are being diverted for expenses incurred for the luxurious lifestyle of the members and office-bearers of the Board.
BCCI is in control of huge amount of public funds without any concomitant rules and regulations or laws that govern the manner in which public funds are being utilised. There is no accountability of any office-bearer of BCCI similar to the one imposed on a public servant who is dealing with public funds.
The BCCI receives money though sponsorship, TV rights etc. and has started the process of commercialisation of cricket without any vision as to how this money could be ploughed back to ensure better administering of the game of cricket. For office-bearers, both past and present, running the Board is an end in itself and the game of cricket is only incidental. The office-bearers are of running the Board more for their personal benefits as there is lack of accountability of BCCI to anyone.
The analysis of some of the papers seen during the survey under section 133A by the department on 20.7.2000 in the office of Treasurer in Jaipur show that:
i) During financial year 1999-2000, personal telephone charges and mobile charges to Mr. Sharad Diwadkar and Mr. Raj Singh Dungarpur amounting to Rs.29,933 and Rs. 1,24,326 were borne by BCCI.
ii) The residential telephone bill amounting to Rs. 1,75,505 and the mobile bill amounting to Rs.35,737 of the Secretary has been reimbursed by the BCCI.
iii) For attending three days meeting from August 18 to 20, 1999, Mr. Jyoti Bajpai has claimed seven days D.A.
iv) Rs. 89,800 and Rs. 1,58,865 was paid to Mr. P. M. Rungta for expenses incurred in diwali for dry fruits and liquor for presentation to various officials and for entertainment on December 25 and 31. However, no bills were submitted by Shri Rungta.
v) Shri P. M. Rungta was given J-class airfare for his travelling Mumbai-Calcutta-Mumbai in the months of November 1999 and January 2000, though he was not an office-bearer. The decision regarding J-class airfare entitled all the former Presidents was decided by the Finance Committee on 2.2.2000. However, in the instance case, P. M. Rungta's travel took place much before 2.2.2000.
vi) Mr. Raj Singh Dungarpur was given $ 350/- per day for 45 days and entertainment allowance of $ 3000 for ICC meeting which was for one week.
vii) There is no proper supporting or any bill attached for the amount spent by P. M. Rungta out the advance given to him. Only a letter from P. M. Rungta about the expenses incurred by him has been given to the Board.
It is obvious that such type of expenses for personal benefits of the office-bearers have been borne even during the financial 1997-98 also. Keeping in view the above type of expenses the assessee was asked to furnish various details as mentioned in the order sheet dated 12.2.2000 and letter dated 5.3.2001 which they had to submit.
The non-submission of details is obviously due to the fact that such type of expenses have been incurred and for which the Board has no explanation. In view of the discussion made above, the BCCI has clearly violated the conditions of the notification under section 10(23) viz. the assessee will not distribute of any part of income in any manner to its members except as grants to any association or institution affiliated to it.
The Board also violates condition No. 1 as it has not applied the income wholly and exclusively to the object for which its established.
In view of the above, the asseessee is being denied the benefit of Section 10(23), as discussed above, the office-bearers of BCCI are running the Board as an end in itself and there is no accountability of any office-bearer of the BCCI and the Board has started the process of commercialisation of cricket for the personal benefit of the office-bearers, both past and present. Hence, the activity of the BCCI is treated as of commercial nature and accordingly the income is being treated as business income of the Board.
Since the assessee has not submitted details in respect of expenses it is not possible to verify and quantify fully the extent of personal element therein, as discussed above, hence out of total expenses of Rs. 3,86,22,435, an amount of Rs. 3,08,82,243 being 10 per cent, is being disallowed on estimate basis treating it as having spent for personal benefits of office-bearers, past and present, and on other persons.
Subject to the above, total income of BCCI is computed as under treating it as business income.
Income as per Income & Exp. Account Rs.49,07,10,175/-
Less : Expenses claimed as per statement 30,86,22,435/-
Less : 10 per cent being disallowed as 3,08,62,243/-
Total Income Rs. 21,29,49,984/-
Assessed u/s 143(3). Issue D.N. Issue show cause notice u/s 271(1)(c) of the Income-tax Act, 1961. Charge tax at maximum marginal rate.