Bombay High Court quashes IT Dept communication on BCCI tax exemption status

The Bombay High Court on Tuesday quashed an order/communication issued by the Income Tax (IT) Department regarding the Board of Control for Cricket in India (BCCI)'s tax exemption status under section 12A of Income Tax Act [BCCI v Assistant Commissioner of Income Tax]..BCCI had been granted tax exemption status on 12 February 1996. It modified its Memorandum of Association on two occasions —on June 1, 2006 and August 21, 2007 — without notifying the tax authorities of these changes.This led the Director of Income-tax (Exemptions) to issue a communication on 28 December 2009, stating that the BCCI's status "does not survive from the date on which the objects were changed i.e. 01.06.2006."IT Department in the communication also said that BCCI can file fresh application for registration along with necessary documents..Considering the IT Department's stand that the communication did not amount to withdrawal of the registration granted to BCCI, a bench of Justices M S Sonak and Jitendra Jain quashed the communication.It reasoned that the Revenue could not have issued the communication, which was only an advisory or a non-statutory exercise.Further, the Court said the department, based on such advisory/non-statutory exercise, cannot proceed on the premise that the BCCI’s registration stands cancelled or that the BCCI is not entitled to any exemption."The impugned communication/order dated 28 December 2009 cannot be non-statutory or an advisory to defeat an assessee’s right of appeal. Still, 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 revenue cannot adopt such contradictory stances or blow hot and cold in the same breath" the Court said. .The Court, however, did not deal with the merits of the issue, clarifying,"The issues of the exemption or cancellation of registration on merits are left open because they will have to be decided by the prescribed statutory authorities in the manner prescribed under the statute.".The Income Tax Appellate Tribunal (ITAT) had earlier ruled that BCCI's plea was not maintainable in view of the department's stand that the communication to the BCCI was not a cancellation or withdrawal of its registration under Section 12A of the Income Tax Act.Despite this, the ITAT had examined the merits of the communication and concurred with the view taken by the department. This prompted the BCCI to move High Court. .The Bench said the ITAT, after having upheld the Revenue’s contention regarding the nature of the communication, exceeded its jurisdiction in examining the communication on its merits "and recording observations tending to uphold the impugned communication/order dated 28 December 2009 on its merits.""Therefore, the above observations/findings are without jurisdiction and cannot be relied upon by the Respondents in the proceedings connected with the assessment of the BCCI or proceedings connected with the cancellation of BCCI’s registration under Section 12Aof the IT Act, 1961," the Court said.All such issues, including the issue as to whether the BCCI, on account of modification of its objects is liable to have its registration cancelled or whether the BCCI is disentitled to benefits otherwise available to charitable institutions or trusts, should be examined by the authorities on their own merits, independently and without being influenced by the observations or findings recorded by the ITAT, the Court added..Senior Advocate P J Pardiwalla along with advocate Nitesh Joshi instructed by Atul K Jasani appeared for BCCI.Advocate P C Chhotaray along with advocate Suresh Kumar appeared IT Department..[Read Order]