ORDER

J. Sudhakar Reddy, Accountant Member - This is an appeal filed by the assessee challenging the cancellation of the registration granted to it under s. 12A of the IT Act, 1961 (hereinafter referred to as 'the Act') by the Director of IT (Exemption) vide his order No. DIT/E/12AA(3)/2012-13/204, dt. 23rd May, 2012 (sic) (21st May, 2012) passed under s. 12AA(3) r/w s. 12A of the Act.

2. Facts in brief : The assessee was incorporated under s. 25 of the Companies Act, 1956 with an aim to promote the game of cricket in and around Delhi. It is affiliated to the Board of Control for Cricket in India (BCCI). Registration under s. 12A of the Act was granted by the IT Department to the assessee vide order No. 633/96, dt. 6th March, 1997, keeping in view its role in promoting the game of cricket in the country. The Director of IT (Exemption) vide Notice No. Director of IT (Exemption)/12A/2009-10/143, dt. 11th Nov., 2009, issued a show-cause notice to the assessee proposing withdrawal of registration granted under s. 12A of the Act.

2.1 The notice is extracted for ready reference :

"Registration under s. 12A was granted to you by this office vide order dt. 6th March, 1997.

In view of the latest amendment a following insertion has been made to the s. 2(15) of the Act from the asst. yr. 2009-10 which is reproduced as under :

(15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility : Provided that the advancement of any other object of general public utility shall not be a charitable purposes, if it involves the carrying on of any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.'

The association has been engaged in the activities of conducting cricket matches at national as well as international levels in Delhi. The activities which are for the promotion of sports come under the category of last limb of the s. 2(15) of the Act i.e. the advancement of the general public utility. But you are engaged in the holding cricket matches at national as well as international levels which are purely commercial in nature and come within the ambit of proviso to s. 2(15) of the Act. Some of the main activities and source of the game etc. as under which clearly fall under the proviso to s. 2(15) :

By insertion of the proviso in the latest amendment to s. 2(15), the legislature have intended to make a point that those of institutions or funds which are engaged in the activities of trade, commerce, business or rendering of any service in relation to any trade, commerce or business, for cess or fees or any other consideration, irrespective of the nature of use or application or retention, or income for such activity shall come under the mischief of proviso to s. 2(15) to the IT Act and shall be denied exemption under s. 11 or 12 of the IT Act.

In view of this, you are required to explain why registration granted under s. 12A could not be cancelled since your activities are not for charitable purposes as defined in the s. 2(15) of the IT Act but are commercial. You are required to appear before the undersigned with your explanation/submissions and also produce the complete books of account with bills/vouchers, bank statements and other misc. records since inception on 23rd Nov., 2009 at 11.30 AM"

3. In reply, the assessee submitted that the assessee company was incorporated on 19th Feb., 1936 under the Indian Companies Act, VII of 1913, in New Delhi as a company limited by guarantee, by taking over an association in the name of the ''M/s Delhi and District Cricket Association Ltd." Later the company was registered as a s. 25 company under the Companies Act, 1956. The main object of the association was to develop and promote the game of cricket and thus it was submitted that it is a charitable association.

The submissions of the assessee on its activities are summarized as follows :

3.1 The assessee further filed submissions on 9th March, 2010 and 12th March, 2010 before the Director of IT (Exemption) giving details of coaching and training expenses, physical training camp, pitch curator and various other activities for promotion of cricket including development of medical aid to players, etc.

3.2 The learned Director of IT (Exemption) in his impugned order No. Director of IT (Exemption)-12AA/3/2012-13/204, dt. 23rd May, 2012 withdrew the registration granted under s. 12A w.e.f. 1st April, 2009 for the following reasons :

3.3 Reliance was placed by the learned Director of IT (Exemption) on number of case law. At para 9, he concluded as follows :

"9. I have considered the entire facts and circumstances of the case. As per the provisions of s. 12AA(3), registration of an institution can be cancelled if the CIT/Director is satisfied that the activities of such Institution are not genuine. In view of the facts narrated in foregoing paras, it is only logical to hold that the activities of the assessee are no longer coming within the definition of charitable purposes after amendment of s. 2(15) of the IT Act, w.e.f. 1st April, 2009. The assessee is pursuing the objects of general public utility and conducting a business, the turnover of which far exceeds the threshold limit as per amended s. 2(15) of the IT Act. Once the activity ceases to qualify as charitable, the same cannot be said to be genuine for the purpose of charity. Accordingly, the registration granted to the assessee, i.e. DDCA is hereby cancelled w.e.f. 1st April, 2009 i.e. the applicable date of amendment to s. 2(15) of the IT Act."

4. Aggrieved the assessee is in appeal before us on the following grounds :

''1. That having regard to the facts and circumstances of the case, learned Director of IT (Exemption) has erred in law and on facts in cancelling the registration granted to the appellant w.e.f. 1st April, 2009 by observing that activities of the institution are not genuine and has further erred in holding that activities of the assessee society are not genuine and charitable under s. 2(15) of the Act and thus has erred in cancelling the registration granted to the appellant society.

2. That in any view of the matter and in any case, action of learned Director of IT (Exemption) in cancelling the registration under s. 12AA is bad in law and against the facts and circumstances of the case and is contrary to the principles of natural justice as the impugned order has been passed without granting adequate opportunity of hearing, by recording incorrect facts and findings and the appellant ought to have been granted benefit of registration under the law."

5. The learned counsel for the assessee Mr. Ashwani Taneja appearing along with Mr. Rahul Khare, submitted that the orders passed by the DIT(E) is contradictory to law and facts. His submissions are summarized as follows :

5.1 Reliance was placed on the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association v. DIT (Exemption) [2014] 360 ITR 633/221 Taxman 275/[2013] 40 taxmann.com 250 and it is submitted that the case of the assessee is squarely covered by this judgement, as the objects, activities and other facts are pari materia.

5.2 Mere charging of fees does not mean that the assessee is carrying out its activity in the nature of trade, commerce and business and thus the proviso to s. 2(15) is not automatically attracted. Reliance was placed on the following judgments :

5.3 The adverse observations made by the Director of IT (Exemption) are based on incorrect facts and contrary to the evidences placed on record. The assessee's submissions before the learned Director of IT (Exemption) meet the various allegations made by the Director of IT (Exemption), point-wise and issue-wise and contradict the adverse observations therein.

5.4 For achieving its main charitable object, if an institution carries on some commercial activity and there is profit, it cannot be considered to be a business activity, with profit motive, so long as the profit earned is utilized for the purpose of achieving the main charitable object.

5.5 Reliance was placed on the submissions made before the Director of IT (Exemption) in letter dt. 7th May, 2012 as well as on various case law.

6. Mrs. Sudha Kumari, learned CIT, Departmental Representative on the other hand, submitted that sale of liquor and providing facilities for playing cards cannot, by any stretch of imagination, be considered as charitable activity entitling the assessee for continuing the registration under s. 12A of the Act. She submitted that the assessee has entered into commercial agreements with profit motives, with M/s Twenty First Media (P.) Ltd. giving it the rights to sponsor Delhi Ranji Trophy, which included the right to reassign the entire sponsorship rights. She submitted that the rights were granted exclusively to TFM, to sell to one or more companies, the rights to use the image of ''DCCA cricket sponsorers" and to place "commercial logos" on the team clothing, practice kits, equipment bag and formal shirts and trousers. She submitted that a perusal of the agreement clearly demonstrates that it is commercial in nature. She submits that the DDCA involves in activities which are in the nature of trade, business or commercials or rendering of services in relation to the same. She submitted that business need not be confined to an active occupation, continuously carried out and entering into well structured commercial contracts, with corporate entities, who are the market leader of sports marketing, is business activity. She relied on the order of Director of IT (Exemption) and submitted that so long as the methods followed are commercial, the motive with which business is carried out is immaterial. She relied on certain case law, which we would be referring to if we find it relevant and necessary, in the course of our findings, in support of her contention that the activity undertaken by DDCA satisfies the requirements of the proviso to s. 2(15) of the Act. Without prejudice, she further submits that DDCA also falls squarely within the gamut of rendering of services in relation to the business of Twenty First Century Media Ltd.

6.1 She reiterated that the activity of sale of liquor carried on by the assessee and the activity of playing card facilities is in complete violation of general public utility claimed by the assessee. She further submits that health club facilities are availed by paying of fee.

6.2 On income from corporate boxes, she submitted that the contracts provide that DDCA is to render various services to these boxes and that if these services are not provided, DDCA should reimburse to the end-user and hence it has the attributes of business. On sale of tickets, she submitted that the pricing ranges from Rs. 200 to Rs. 7,500 and this effectively excludes the commonman from being a spectator. She pointed out that the maximum expenditure is incurred on lunch and catering and this demonstrates that no element of charity, in application of the objects of the association is involved. She reiterated the findings of the Director of IT (Exemption) on the issue of contractual receipts and income from IPL matches. Written submissions were given citing case law, which we would be dealing in due course, if necessary.

7. In reply, Shri Ashwani Taneja, the learned counsel for the assessee relied on the reply given point-wise to the Director of IT (Exemption), on each of these issues and argued that there is no commercial element in any of the activities and even if there is a commercial element, the profits therefrom were applied towards the objects of the assessee. It reiterated his contention that the issue is covered in favour of the assessee by the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra).

8. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record, as well as the orders of the authorities below and case law cited, we hold as follows.

9. The first issue that comes for our consideration is whether the learned Director of IT (Exemption) is correct in law in withdrawing the registration of the assessee with retrospective effect.

9.1 This issue is no more res Integra

(a) The Hon'ble Delhi High Court in the case of DIT (Exemptions) v. Mool Chand Khairati Ram Trust [2011] 339 ITR 622/199 Taxman 1/11 taxmann.com 42 , held as follows :

"Held : Power of cancellation of registration obtained under s. 12A came to be incorporated by way of amendment introduced under s. 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010; Director of IT was not therefore justified in cancelling the registration under s. 12AA(3) w.e.f. December 2002-03 vide his order dt. 30th June, 2009."

(b) In the case of Kapoor Educational Society v. CIT [2011] 48 SOT 131 (URO)/15 taxmann.com 245 (Lucknow) it was held as follows :

"Held : Amendment of s. 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010 is prospective in nature and if any trust/institution has been registered prior to 1st Oct., 2004, either under s. 12A or 12AA, CIT has no power to cancel the registration under s. 12AA(3).''

9.2 In the above case, the Lucknow 'B' Bench of the Tribunal held that amendment to s. 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010 is prospective in nature and if any trust is registered under s. 12AA or under s. 12A, the learned CIT has no power to cancel the registration under s. 12AA(3).

9.3 At paras 8 and 9 of the order, the Tribunal held as under :

'8. In the case of Oxford Academy for Career Development (supra), a dispute arose whether s. 12AA(3) has retrospective effect and whether the CIT could cancel the registration granted to a trust/institution prior to 1st Oct., 2004. The Hon'ble jurisdictional High Court Lucknow Bench in the case of Oxford Academy for Career Development (supra) at headnotes held as under :

'The order cancelling the registration granted to a trust or institution under s. 12AA being a quasi-judicial order does not fall within the category of orders mentioned under s. 21 of the General Clauses Act, 1897, which provides that the power conferred on an authority to issue orders includes the power conferred on an authority to issue orders includes the power to rescind such orders, and the CIT earlier granting the registration to a trust or institution. Sec. 12AA(3) was incorporated w.e.f 1st Oct., 2004, to empower the CIT to cancel the registration granted to a trust or institution. The object of this provision is not clarificatory or explanatory. So prior to that date, the authorities granting registration had no inherent power to withdraw or revoke the registration already granted. (Emphasis supplied).

9. In the above decision, the Hon'ble High Court has clearly held that s.12AA(3) has no retrospective effect as it is neither explanatory nor clarificatory in nature and the CIT has no power to rescind the order passed by the CIT prior to 1st Oct., 2004. Now there is an amendment to s. 12AA(3) by the Finance Act, 2010, which has inserted the phrase 'or has obtained registration at any time under s. 12A' after the words 'sub-s. (1)' as appearing in s. 12AA(3). This amendment has been made applicable and effective from 1st June, 2010. Keeping in view the ratio laid down by the Hon'ble High Court in the case of Oxford Academy for Career Development (supra) and also the Amendment of s. 12AA(3) by the Finance Act, 2010 w.e.f. 1st June, 2010, it is amply clear that s. 12AA(3) is prospective in nature and if any trust/institution has been registered prior to 1st Oct., 2004 either under s. 12A or 12AA, the CIT has no power to cancel the registration under s. 12AA(3). In the instant case, registration to the assessee society was granted on 1st March, 1999 i.e. much prior to 1st Oct., 2004 when s. 12AA(3) was introduced and made effective from 1st Oct., 2004 and the CIT had no jurisdiction to cancel the registration granted to the assessee society under s. 12A and that the order passed by the CIT under s. 12AA(3) is without jurisdiction, bad in law and liable to be quashed. We accordingly quash the impugned order of the learned CIT cancelling the registration granted to the assessee society under s. 12A of the Act on 1st March, 1999. The appeal of the assessee stands allowed." (Emphasis supplied)

(c) The Hon'ble Allahabad High Court in the case of Oxford Academy for Career Development v. Chief CIT [2009] 315 ITR 382 , held as follows :

"Sec. 12AA(3) was incorporated in the Act w.e.f. 1st Oct., 2004 and not applicable retrospectively; registration granted to assessee on 1st April, 1999 could not therefore be cancelled by CIT by invoking powers under s. 12AA(3), even assuming, the CIT has power to rescind the order of registration on the ground that the registration had been obtained by practicing fraud or forgery, there was nothing in the show-cause notice or in the impugned order, alleging that the petitioner had obtained the registration by practicing fraud or forgery."

(d) Similarly in the case of South East Education Trust v. Income Tax [2010] 42 SOT 415 (Ahd.) , it was held that "Amendment of sub-s. (3) of S. 12AA w.e.f. 1st June, 2010 should not be applicable retrospectively and its operation has to be effective from the date it was introduced and onwards and therefore, CIT was not justified in cancelling, saying there was nothing to show-cause notice in the impugned order alleging that the petitioner had obtained the registration by practicing fraud or forgery."

(e) Similar is the proposition in the case of DIT (Exemption) v. N.H. Kapadia Education Trust [2012] 136 ITD 111/20 taxmann.com 702 (Ahd.) '.

9.4 Coming to the decision relied upon by the learned Departmental Representative i.e. in the Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT [2012] 343 ITR 23/206 Taxman 319/19 taxmann.com 136 it was held as under :

"Sec. 12AA : Trust or Institution-Registration-Charitable purposes-Registration- Constitutional validity-Amendment of s. 12AA(3) is held to be valid. The CIT issued the notice under s. 12AA(3) on 31st July, 2007 for cancellation of the registration granted to the petitioner for the asst. yr. 1999-2000 on the ground that the petitioner is charging capitation fee and donations in respect of admissions and diverting them in respect of personal gain of trustees. The proceedings were initiated and order was passed cancelling the registration. The said order was challenged before the Tribunal . The Tribunal allowed the appeal of assessee on the ground that the registration was granted under s. 12A , which cannot be invoked by s. 12AA(3) , which was brought on the statute book w.e.f 1st Oct., 2004. The appeal against the order of Tribunal is admitted and pending for final disposal before the High Court. Sec. 12AA(3) has been amended by the Finance Act of 2010, w.e.f. June, 2010, giving the power to cancel the registration under s. 12A. The CIT issued fresh show-cause notice on 11th March, 2011 for cancellation of registration for reasons mentioned in his order dt. 9th Oct., 2007. The assessee challenged the constitutional validity of provision of sub-s. (3) of the s. 12AA as amended by the Finance Act of 2010 w.e.f. 1st June, 2010 to the extent they provide for revocation of a registration granted under s. 12A. The Court held that amendment of s. 12AAA(3) by the Finance Act, 2010 is not arbitrary and it does not take away vested right nor does it create new obligation in respect of past actions and cannot be said to be retrospective in operation; even if construed to be retrospective, it cannot be held to be violative of Art. 14. Accordingly the petition was dismissed. (asst. yr. 1999-2000)." (Emphasis supplied)

In this case the assessee challenged the constitutional validity of the amendment and the Court upheld the constitutional validity. While doing so it held that this amendment cannot be said to be retrospective in nature. It was held that the learned CIT has power to cancel the registration w.e.f. 1st June, 2010. The Hon'ble Court held that the CIT can exercise power under s. 12AA(3) in respect of a trust registered prior to 1st June, 2010. This does not mean that the Hon'ble Court laid down that registration granted under s. 12A or under s. 12AA, prior to the amendment can be withdrawn retrospectively. In fact the contention of the assessee that the learned CIT or Director of IT (Exemption) cannot exercise the power of withdrawing the registration retrospectively is supported by this judgment.

9.5 In view of the above discussion, following the binding judgement of the jurisdictional High Court, we uphold the contention of the assessee that the withdrawal of registration with retrospective effect from 1st April, 2009 by the order passed under s. 12AA(3), is bad in law.

10. The next issue that comes for our consideration is whether the registration can be cancelled on the ground that the activities of the assessee are commercial in nature.

10.1 The Hon'ble Delhi High Court in the case of GS1 India (supra) held that :

"Sec. 2(15) of the IT Act, 1961, was amended by the Finance Act, 2008, w.e.f. 1st April, 2009, and a proviso was added to it. A second proviso was inserted to s. 2(15) by the Finance Act, 2010, with retrospective effect from 1st April, 2009. There are four main factors that need to be taken into consideration before classifying the activity of the assessee as 'charitable' under the residuary category, i.e., 'advancement of any other object of general public utility' under s. 2(15) of the Act. The four factors are (i) the activity should be for advancement of general public utility; (ii) the activity should not involve any activity in the nature of trade, commerce and business; (iii) the activity should not involve rendering any service in relation to any trade, commerce or business; and (iv) the activities in cls. (ii) and (iii) should not be for fee, cess or other consideration and if for fee, cess or consideration the aggregate value of the receipts from the activities under (ii) and (iii) should not exceed the amount specified in the second proviso. The earlier test of business feeding or application of income earned towards charity because of the statutory amendment is no longer relevant and apposite. It is evident from Circular No. 11 of 2008 that a new proviso to s. 2(15) of the Act is applicable to assessees who are engaged in commercial activities, i.e., carrying on business, trade or commerce, in the garb of 'public utility' to avoid tax liability. The legal terms 'trade, commerce, or business' in s. 2(15) mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce. Business activity has an important pervading element of self-interest, though fair dealing should and can be present, whilst charity or charitable activity is the anti-thesis of activity undertaken with profit motive or activity undertaken on sound or recognised business principles. The quantum of fee charged, the economic status of the beneficiaries who pay commercial value of benefits, in comparison to the fee, the purpose and object behind the fee, etc., are several factors which will decide the seminal question, is it business ? Charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in the long run. There is no statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions. A practical and pragmatic view is required to examine the data, which should be analysed objectively and a narrow and coloured view will be counter-productive and contrary to the language of s. 2(15). The second proviso applies when business was/is conducted and the quantum of receipts exceeds the specified sum. The proviso does not seek to disqualify a charitable organization covered by the last limb, when a token fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which it is established and it undertakes." (Emphasis supplied)

10.2 The Hon'ble Madras High Court in Tamil Nadu Cricket Association's case (supra), on identical facts held as follows :

"29. Sec. 12AA of the Act prescribes procedure for registration. As per this, on receipt of the application for registration, the CIT is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of activities of the trust or institution. The section further empowers the CIT to make such enquiry as he deems necessary in this regard. Once the CIT is satisfied himself about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an order in writing refusing to register the trust or institution.

30. Sec. 12AA(3) of the Act inserted w.e.f. 1st Oct., 2004, under the Finance (No. 2) Act, 2004, and the amendment inserted by the Finance Act, 2010, w.e.f. 1st June, 2010, therein empowering the CIT to cancel the registration granted under the stated circumstances, reads as under :

Provision inserted under the Finance Act, 2004 :

'12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution :

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.'

31. After the amendment in the year 2010, s. 12AA(3) of the IT Act reads as follows :

'12AA. (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) or has obtained registration at any time under s. 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution :

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.'

32. Thus, in contrast to s. 12AA(1)(b) of the IT Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as the genuineness of the activities, for the cancellation of the registration under s. 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one, i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the CIT on findings given on the parameters given in ss. 12AA(1) and 12AA(3) of the Act, as the case may be.

51. As already noted in the preceding paras, considering the provision under s. 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances under s. 12AA(3) of the Act and in the background of the definition relevant to the particular year of registration. As rightly pointed out by the assessee, Revenue does not allege anything against the genuineness of the objects of the assessee or its activities. It rests its order only on the ground of the assessee receiving income from holding of matches which according to the assessee were not held by it. Thus, as regards the question as to whether the particular income qualified under s. 11 of the Act or not is not the same as activity being genuine or not. In the circumstances, we do not agree with the view of the Tribunal that the order passed by the Director of IT (Exemption) was in accordance with the provisions of the IT Act, 1961. He viewed that the conduct of test matches and ODI are in the nature of commerce or business. Though the assessee claimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy is commercial. As regards conducting of IPL matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of s. 2(15) of the Act after the amendment come in effect from 1st April, 2009.

52. As rightly pointed out by the assessee, the Revenue does not question the objects of the association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under s. 2(15) of the Act.

53. On going through the materials, the Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of s. 12AA(3) were satisfied. The Tribunal agreed with the Director of IT (Exemption) that the expression 'subsidy from BCCI' was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast rights. The surplus from IPL Season-I worked out to 8.5 per cent of the total receipts. It further held that 78 per cent of the total receipt came out of advertisement revenue.

54. The Tribunal pointed out that the physical aspect of the game was one in accordance with the objects of the assessee and the activities are genuine. However, the matches held were not in advancement of any specific object of general public utility. The pattern of receipt is commercial in character and the matches conducted are not in accordance with the objects of the association. Thus, it rejected the assessee's case and held that both the conditions under s. 12AA(3) of the Act stood attracted.

55. As seen from the observation of the Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by s. 2(15) proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the CIT had satisfied himself about the objects of the trust and the genuineness of the activities as falling within the meaning of 'charitable purpose', as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it were in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility.

56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket associations which organise the matches in their stadia. The franchisees conduct matches in the stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70 per cent of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking s. 12AA r/w s. 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Tribunal's view that it is an entertainment and hence offended s. 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the association. We can only say that the Tribunal rested its decision on considerations which are not relevant for considering the test specified under s. 12AA(3) to impose commercial character to the activity of the association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under s. 12AA(3) of the Act.

57. As regards the observation of the Tribunal that IPL matches and Celebrity Cricket Matches are also being held by the association and hence it is an entertainment industry, we need not go into these aspects, for, the order of the Director of IT (Exemption) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the AO to take note of all facts, while considering the same under s. 11 of the IT Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above-said circumstances, we set aside the order of the Tribunal.

58. In the result, the tax case (appeal) stands allowed. No costs. Consequently, connected MP is closed. (Emphasis, italicized in print, ours)."

10.3 The activities of the assessee, on facts, are similar to the activities of Tamil Nadu Cricket Association and hence the case law applies on all fours.

10.4 From a reading of the above case law, the following propositions emerge :

10.5 Applying these propositions to the facts of this case, we observe that :

(a)

the Director of IT (Exemption) at para 9 of his order agrees that the assessee is carrying on activity of "general public utility", which means that the charitable nature of assessee's activity is not disputed by the Revenue. Thus the Director of IT (Exemption) has contradicted himself by holding on one hand, that the assessee is a charitable institution carrying out charitable activity and on another hand, coming to a conclusion that the assessee is doing business. It is also not the case of the Director of IT (Exemption) that, the assessee is not carrying on its activities in accordance with the objects for which it is founded. No such finding is recorded in the order. Thus, the twin conditions mandatorily required for invoking the jurisdiction under s. 12AA(3) by the learned Director of IT (Exemption), to cancel the registration granted under s. 12AA i.e., the satisfaction of the Director of IT (Exemption) that (a) the activities of the trust or institution are not genuine, or (b) that the activities of trust or institution are not being carried out in accordance with the objects of the trust or institution are not existing in this order.

10.6 Thus applying the principles laid down in the judgement of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), the impugned order cancelling the registration under s. 12A is quashed.

10.7 Even otherwise the main and predominant object and activity of the assessee is to promote, regulate and control the game of cricket in and around Delhi. The undisputed fact is that over the years this activity has been recognized by the IT Department as a charitable activity and registration under s. 12A was granted to the assessee. A number of assessment orders under s. 143(3) were passed wherein the assessee was held as eligible for exemption under s. 11/12 of the Act. Hence, this fact of the assessee being a charitable institution is not in dispute.

10.8 The core activity of the assessee is undisputedly, charitable in nature. Hence, it is not the case of the Revenue that the assessee is carrying on "trade, commerce or business" under the. garb of the activity being "general public utility". As regards the various receipts of the assessee, we find that in the case of Tamil Nadu Cricket Association (supra), the receipts were from :—

Such receipts of money by the Tamil Nadu Cricket Association were not considered by the Hon'ble Madras High Court, as activities in the nature of "trade, commerce or business". There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee.

10.9 Thus respectfully following the decision of Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra), we have to hold that the amounts received by the assessee from (a) ground booking charges, (b) health club charges, (c) income from corporate boxes, (d) lawn booking income, (e) sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in the assessee being held as undertaking activities in the nature of "trade, commerce or business". These receipts are intrinsically related, interconnected and interwoven with the charitable activity and cannot be viewed separately. The activities resulting in the said receipts are also charitable activities and not "trade, commerce or business" activities.

11. We now take up each of the issues raised by the learned Director of IT (Exemption) in his order.

11.1 On the issue of sponsorship income from M/s Twenty First Century Media (P) Ltd. (TFCM), it was explained that despite the receipt of sponsorship money during the year of Rs. 31,01,038 and receiving a sum of Rs. 14,20,000 from BCCI as subsidy, there was a shortfall of Rs. 29,84,835, which was met by the assessee. It was specifically argued by the learned Departmental Representative that the agreement with "M/s Twenty First Century Media (P) Ltd." is commercial in nature. The reply of the assessee is that it should be appreciated that for any organization to run and survive it is essential that it should augment some funds to meet the cost/expenditure, as required to be incurred, to carry out the activities meant to achieve its object. We agree with the submissions of the assessee.

11.2 The assessee has to perform many activities and for this purpose it has to enter into transactions with various types of persons. These persons can be commercial or non-commercial organizations, professionals, vendors of goods, vendors of services and so forth and so on. Merely entering into such agreement does not tantamount to the assessee being a business entity. The question is whether the activity done by assessee, would tantamount to business activity or not. This has to be viewed, from view-point of the assessee. The other person with whom the assessee has an agreement, may have its own object and reason for doing transaction and accordingly, the nature of transaction and the resultant activity would be determined in the other person's hands. However, that by itself, should not have any bearing at all on the nature of the transaction, as well as resultant activity in the hands of assessee. To carry out a transaction in an organized manner and to ensure that the transaction would help the assessee in achieving its charitable object, it is imperative that the terms and conditions of the transactions are clearly defined, to avoid any confusion or chaos. It will be further good, if these terms and conditions are reproduced in writing, in the form of an agreement. Merely because an activity is performed in an organized manner, that alone will not make these activities as business/commercial activity. Profit motive is one essential ingredient, which is apparently missing in this case. In carrying out an activity, one may earn profit, or one may incur loss. But for making it as business activity, the presence of profit motive is a sin qua non i.e. condition precedent at the time of entering into transaction. In this case the facts demonstrate that despite the receipt of amount from sponsorship and subsidy from BCCI, there was deficit, which was met by the assessee. Thus this adjustment resulted in subsidizing the cost of the assessee and hence there is no profit motto. This cannot be termed as business activity. Similar is the view of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association (supra).

11.3 On the issue of sale of liquor, it was submitted that initially DDCA was formed as a club to take over the assets and liabilities of the association called, "Delhi Cricket Association". He referred to the objects and submitted as follows :

"One of the objects as given in the MOA of DDCA is to lay ground for playing game of cricket and to provide pavilion, refreshment rooms and other facilities in connection therewith. Therefore, an eatery was established which was eventually shaped as a canteen for the benefit of the members as well as few other persons associated with DDA e.g. players, coaches, staff, other guests, etc."

11.4 In our view, for the purpose of making this canteen self-sustainable. It has to follow global standards and international protocols, since cricket is played at international level. Canteen keeps various items as per menu. Liquor is just part of this menu. It is not sold independently as trading item. The eatery is available for the use only of members, players, staff, other guests of DDCA. It is not open for public. A walk-in customer/guest cannot enjoy the facility of this eatery. The basic fact is that this canteen has direct and inextricable link with one of the core activities of DDCA i.e., maintaining such a huge cricket stadium and promoting the game of cricket. The Revenue, in this case is trying to project that the assessee is a liquor dealer. This is not correct. Internationally, when facilities are provided to players, liquor is part of the menu. This is just incidental to providing food and beverages. When the learned DIT(E) does not find anything wrong in the assessee supplying food and beverages in the canteen to the members, we cannot find fault with liquor being part of the menu card and being served as per international customs and requirements.

11.5 Hence, to meet global standards these facilities are required and these are not independent of the activity of providing food and refreshments to members and associated persons. Running of a canteen is an incidental and necessary activity as is in every organization. This cannot be termed as business activity. It is part and parcel of the charitable activity and the receipt in question cannot be termed as exempt (sic-arising) from activity which is in the nature of "trade, commerce or business".

11.6 On advertising and contractual receipts the same explanation as was given by the assessee, as in the case of sponsorship money. Consistent with the view expressed by us, when we were dealing with sponsorship money, we hold that these contractual receipts go to reduce part of the cost incurred by the assessee for its charitable activity and hence, cannot be termed as business or that the assessee has undertaken activity in the nature of "trade, commerce or business".

11.7 On receipts from IPL an elaborate Explanation was given, the pith and substance is that expenditure has to be incurred by the DDCA on various items, as co-ordination has to be done and the aggregate of expenditure incurred for the same is Rs. 238 lakhs. It was submitted that the DDCA initially meets this expenditure out of its own sources and thereafter the BCCI and legal franchisee contribute and compensate part of this expenses. The same arguments as were advanced by the assessee in the cases where sponsorship money received, were made here also. The summary of the submissions are as follows :

"Our respectful submission is that, as we have given detailed submission in earlier part of our submissions wherein we have made analysis of receipts as well as of the expenses incurred by the assessee. The analysis of expenses has revealed that the expenses have been incurred on the promotion of the game of cricket. These expenses have been incurred either for the development of game of cricket or the development of players. There is no other cause or item for which any amount has been spent by the assessee.

Similarly, when we analyse the receipt side, we would find that the receipts are directly or inextricably linked with the organizing of matches and tournaments or for promotion of game of cricket in any other manner or for maintenance or building up the infrastructure meant for the promotion of the game of cricket. Thus, it can be safely said that the DDCA exists for cricket and cricket only.

The CBDT has already clarified that sports is a matter of general public utility. Therefore DDCA satisfies the condition of having a charitable object as mentioned in s. 2(15) of the IT Act, 1961. It does not violate any condition as mentioned in proviso to s. 2(15).

The apprehension that certain income received by the assessee during the year partakes the character of business income, is ill-founded. In this regard we have submitted in detail that this apprehension is misplaced on account of various submissions as per details given below :

11.8 In view of our decision of sponsorship and such other receipts, we agree with the arguments made by the assessee. Regarding sale of tickets, the assessee explained that no tickets are sold for Ranji Trophy and only in case of international matches, Rs. 200 per ticket are levied, with a sole intention to control the crowds and that the cost incurred per ticket is much more than the amount which is charged for ticket. Under these circumstances, the sale of tickets cannot be considered as an activity of "trade, commerce or business". We agree with the submissions of the assessee.

11.9 Regarding playing cards, it is an incidental recreation activity undertaken in most clubs and what is charged by the assessee goes to recover the costs for providing such recreation facility to its members. The receipts are miniscule and hence, negligible.

11.10 Similarly as far as receipt from health club is concerned, we find that only a part of the expenditure incurred on health club is recovered by way of charges from members who are using the health club facility. These are all, at best be called user charges. In our view these receipts cannot be termed as an activity in the nature of "trade, commerce or business". In fact, health club facility is recognized to promote the game of cricket.

11.11 All the receipts of the assessee are intrinsically linked with the activity of organizing matches and tournaments for the promotion of cricket. User charges are required for maintaining the facilities that are provided as part of the infrastructure for conducting the activities of the assessee.

11.12 On consideration of all the facts and circumstances of the case and when viewed in totality, we have to come to a conclusion that the assessee is not carrying on the activities with any profit motive or with any self-interest. The contributions received by way of sponsorship, advertisement, sale of tickets, etc. and user charges on the facts of this case, do not convert the charitable activity into "trade, commerce or business" activity.

11.13 In view of the above discussion and in view of the binding judgements cited above, we have to necessarily quash the impugned order passed by the Director of IT (Exemption) under s. 12AA(3) r/w s. 12A of the Act, as it is bad in law.

12. In the result the appeal of the assessee is allowed.

rahul