Tribunal sets aside I-T order denying charitable entity status to BCCI

Rejects tax authorities' argument that IPL is a money-making exercise disguised as cricket promotion

The Board of Control for Cricket in India (BCCI) may continue to get tax exemption as an income tax tribunal has ruled that the Board can't be denied registration as the charitable entities after it amends its memorandum of association (MoA) to undertake Indian Premier League (IPL) and other commercial activities.

The Income Tax Appellate Tribunal (ITAT), Mumbai held denial of registration for BCCI as a charitable institution by the tax authorities as legally misconceived.

It rejected the tax authorities' argument that IPL is a money-making exercise in the garb of cricket promotion.

"Improvising the rules of the game, adding entertainment value to it and making it economically attractive may be a purist's nightmare but the same factors can also be viewed as radical and innovative ideas to popularise a game--the very raison d'etre of an institution," the tribunal said.

BCCI was granted registration as a charitable institution in 1996. It applied for fresh registration due to amendments made in the (MoA) for incorporating the recommendations made by Justice Lodha Committee, as approved by the Supreme Court.

The amendment allowed the Board to carry out any activity which directly or indirectly enhances the “value or render profitable or generate better income/revenue from any of the properties, assets and rights” and also provided for conducting IPL.

The principal commissioner of income tax held that the Board is using the charitable purpose for commercially exploiting the game of cricket through franchise agreements for conducting IPL and thus rejected its registration as a charitable entity.

However, ITAT noted that the changes have been approved by the Supreme Court which also reiterated that the Board carries out public functions and is subject to the rigours of public law.

As such changes in MoA cannot dilute the fundamental objective of promoting the game of cricket.

It held that “the very foundation of the approach implicit in the impugned order is thus wholly unsustainable in law, and clearly misconceived”.

ITAT accepted the Board's submission that the latter's objective  is the promotion of cricket and it enjoys the power of holding IPL for achieving its objective. Whether the power for pecuniary gains or not is a different aspect.

The tribunal remarked that if there is a lack of genuineness of activities or any other factors, it is open to the tax authorities' move to cancel the registration which is not its case.

Om Rajpurohit, director (Corporate and International Tax) at AMRG & Associates, said as long as the main object of promoting cricket remains intact, the Board cannot be said to be deviating from the objective simply because of the operational model of the cricket tournaments or IPL.

To a query over tax exemption to BCCI, he said it may continue, but the Board needs to comply with other regulations.