Safiya Malik

In a significant ruling concerning the tax-exempt status of the Board of Control for Cricket in India (BCCI), the Bombay High Court has determined that an advisory letter issued by tax authorities cannot be construed as a statutory cancellation of registration under the Income Tax Act, 1961. The court clarified that the advisory communication does not hold the legal authority to affect the tax benefits granted to BCCI under Section 12A of the Act.

The case revolves around the registration of BCCI under Section 12A of the Income Tax Act, which was granted on February 12, 1996. The dispute arose when BCCI amended its Memorandum of Association on June 1, 2006, and August 21, 2007. These amendments were not communicated to the tax authorities. The Director of Income-tax (Exemptions) (DIT) issued a communication dated December 28, 2009, stating that since BCCI had modified its objects and failed to intimate the tax authorities, “it is quite clear that the registration granted to BCCI u/s.12A of the Income-tax Act, 1961 vide order dated 12.02.1996 does not survive from the date on which the objects were changed i.e. 01.06.2006.” BCCI was advised to file a fresh application for registration under Section 12AA.

BCCI challenged the communication before the Income Tax Appellate Tribunal (ITAT), arguing that it amounted to an unlawful cancellation of its tax-exempt status. ITAT, in an order dated March 30, 2012, dismissed BCCI’s appeal, holding that the advisory letter was not a statutory order of cancellation and, therefore, no appeal could be maintained. However, in the same order, ITAT went on to discuss the merits of the case and remarked that the amendments made to BCCI’s objects had implications on its tax-exempt status.

BCCI then approached the High Court through both an income tax appeal and a writ petition. The appeal challenged ITAT’s decision to dismiss its case, while the writ petition sought the quashing of the advisory letter. The Revenue contended that the communication was merely advisory and did not constitute a statutory cancellation.

The Court examined whether the advisory communication issued by DIT amounted to a formal cancellation of BCCI’s registration under Section 12A. It noted that ITAT, while dismissing BCCI’s appeal as non-maintainable, went beyond its jurisdiction by making observations on the merits of the case. The court recorded: “Once the ITAT concluded that the appeal before it was not maintainable, there was no question of the ITAT evaluating the communication on its merits or making any observations or recording any findings regarding its validity or otherwise.”

The Court observed that the advisory communication could not be the sole basis for denying BCCI its tax-exempt status. It stated: “Based upon the impugned communication, which the Revenue accepts is only an advisory or non-statutory communication, the Revenue cannot decide matters of exemption.” The court stated that any decision regarding exemption must be taken by statutory authorities following due process under the Act.

The Court also examined the reliance placed on the Allahabad High Court’s decision in Allahabad Agricultural Institute vs. Union of India, where tax exemption was denied due to a change in objects. The court distinguished that case, noting that the denial of exemption there was based on an assessment order, whereas in BCCI’s case, the Revenue relied solely on a non-statutory communication. The judgment recorded that “such a letter, without following the due process of law, cannot have the effect of canceling or invalidating the registration granted to BCCI.”

Further, the Court addressed the issue of whether amendments to BCCI’s objects required fresh registration. It observed that “granting of registration under section 12A means granting of registration based on the objects and by-laws of the society as filed by the assessee along with the application for registration.” The Court noted that if an institution amends its objects, it is required to apply for fresh registration, but failure to do so does not automatically render the previous registration invalid unless statutory cancellation procedures are followed.

The High Court issued the following key directives:

• The observations made by ITAT on the merits of the advisory letter should not influence any proceedings concerning BCCI’s tax-exempt status. The court stated: “The findings recorded by ITAT in its order dated 30 March 2012 must be ignored by the respondents when deciding the issue of the validity of the assessment order or the show cause notices issued to BCCI for withdrawal of its registration under Section 12A.”

• The advisory communication dated December 28, 2009, was quashed, as it was neither a statutory order nor an exercise of valid authority under the Income Tax Act.

• Any decision regarding BCCI’s tax exemption or registration status should be determined solely based on statutory procedures, independent of the observations made in the advisory letter.

Case Title: The Board of Control for Cricket in India v. Assistant Commissioner of Income Tax & Ors.

Case Number: ITXA-1041-2012 & WP-1898-2012

Bench:  Justice M.S. Sonak, Justice Jitendra Jain

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