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By Najib Shah/Deccan Herald
Bengaluru November 30: The fact that Board of Control for Cricket in India (BCCI) is by far the country’s richest sports body is well known. It is also by an innings and 500 runs, (to use a cricket analogy) the richest cricket body in the world. Its net worth is estimated to be in excess of Rs.14,680 crore, which translates to about USD 2 Billion.
Its annual income is estimated to be in excess of Rs.3750 crore. This includes a 26% share from the International Council of Cricket (ICC), as part of the Future Tours Programme (FTP), again by far the highest among the cricket playing nations.
The annual revenue also includes the cash cow – Indian Premier League (IPL). The media rights of the IPL circus are arguably the most sought after in cricket. Currently, Star India is paying BCCI Rs 16,347 crore in a five-year deal which is set to end in 2022.With two extra teams for the next edition leading to 14 extra matches, the rights are expected to touch Rs.30,000 crore.
Income Tax Order
All this background is necessary to put in perspective the recent order (ITA No.330/Mum/2019 BCCI vs PCIT dated 2nd November 2021) of the Mumbai bench of the Income Tax Appellate Tribunal (Tribunal) in respect of BCCI.
The issue before the Tribunal was whether BCCI could continue to get the benefit of registration under a provision of the Income Tax Act (ITA Sec 12 A). This provision extends exemption from tax on income earned subject to the conditions specified therein. The BCCI had been granted such beneficial registration on 12 Feb 1996 in continuum and on the basis of a Memorandum of Association (MoA) dated 28th November 1940. They had applied for fresh registration in 2018 to incorporate amendments in the MoA to implement the recommendations of the Supreme Court appointed Justice R.M.Lodha Committee.
The Principal Commissioner of Income Tax (PCIT) had rejected the application for registration necessitating the appeal. The entire thrust of BCCI’s case was that they fulfill the conditions of ‘charitable purpose ‘as spelt out under the ITA’. Charitable purpose has been defined as per section 2 (15) of the ITA. It is an inclusive definition with ‘any other object of public utility ‘also qualifying under the expression ‘charitable purpose’ The proviso to section 2(15) ibid stipulates that ‘advancement of an object of general public utility shall not be a charitable purpose if it involves carrying out a commercial activity – unless such activity is undertaken in the actual advancement of the object of general public utility.’
The PCIT had held that the conduct of IPL by BCCI was an activity hit by the proviso insofar as it was a commercial activity and could not be held to be said to be actual advancement of the object of general public utility. Consequently, the PCIT had held that registration could not be extended to BCCI as a charitable institution.
The BCCI has argued in the Tribunal that the conduct of IPL involves promotion of cricket and should be read as an object of general public utility. The Tribunal, adopting a narrow, legalistic view has not even debated on this issue. It has instead held that the request for registration could not be denied since there was no change between the MoA of 1940 and the MoA of 2018. That changes, if any, were in the context of the Supreme Court’s recommendations. The Tribunal has held that the provision specifies only the objects of the institutions, which objects have not changed. It has emphasised that since the objects have not changed the request for registration cannot be denied in terms of the extant provisions.
The Tribunal has held that the BCCI is carrying out public functions. The changes sought cannot be said to diluting the fundamental objective of promoting the game of cricket. The Tribunal held that BCCI was entitled to continuation of its registration. The order of the PCIT has been quashed.
It is a different matter that IPL was never there in 1940 or in 1996. It is a different matter that the BCCI ought to have informed the fact of change of activity, to the IT department. The IPL was definitely a game changer in every which way, not just for BCCI but for the world of cricket. The Tribunal has held that the fact that profits were being made because of the ‘more effective and financially optimal manner’ was not relevant to the issue of registration.
One would think that with all the money that IPL generates for the BCCI, they could pay tax rather than take shelter under exemptions. And the next time you fork out anything between Rs.700 to Rs.7000 or even more to watch an IPL match at Chinnaswamy Stadium, do not crib. Remember you are doing an act of general public utility and partnering BCCI in promoting the glorious game of cricket.
Najib Shah Chairman (Retired) Central Board of Indirect Taxes & Customs of India
