Bombay High Court
Case BriefsHigh Courts

Bombay High Court: Bharati Dangre, J. dismissed an appeal which was filed by Board of Control for Cricket of India (‘BCCI’), being aggrieved by the impugned judgment and order passed by the Employees Insurance Court at Bombay (ESI Court) dated 09-09-2021 where BCCI was held to be under the ambit of Employees’ State Insurance Act, 1948.

In the month of April-May 2011, the Board office was surveyed by the Insurance Inspector and it was communicated that the BCCI is covered under the provisions of ESI Act with effect from 01-01-2007 and it was allotted a Code number, indicating applicability of the provisions of ESI Act, 1948 to the Board. Subsequently, a notice was sent in proforma C-18 dated 01-07-2014, claiming contribution amount to the tune of Rs 5,04,075 as Employees State Insurance Contribution for the period commencing from May 2007 to March 2014.

BCCI, a society registered under the provisions of Tamil Nadu Societies Registration Act, 1975 in Central Chennai claims to be a National Government Body for Cricketand that since it is a governing body for cricket in India and its primary object is to administer, promote and control the game of cricket throughout the country, including women’s cricket and to encourage formation of State, regional and other cricket associations and therefore, it is not covered or registered as ‘shop’ under the provisions of Mumbai Shop and Establishment Act, 1948. It was the claim of the appellant that it is not primarily engaged or involved in any trading or commercial activities and therefore, by no stretch of imagination, can it be covered within the meaning of Section 1(5) of the ESI Act, 1948.

The Court perused the ESI Act, 1948 and explained that it seeks to attain maintenance of health of an insured workman, recognizing the right to medical benefit as a fundamental right under the Constitution and confer certain benefits upon the employee in case of sickness, maternity and employment injury and to make provision for certain other benefits. Thus, the enactment is intended to operate as a beneficial piece of legislation to attain general welfare of the employees.

The Court opined that the nature of the Board can be very well discerned from its Memorandum of Association and Rules and Regulations. The Court noted that a specific admission had come on record from the witness that the Board is receiving income from the IPL matches and IPL franchise team is also making payment of fixed percentage/share of their respective income to the Board.

The Court applied the analogy that was used in the case of Bangalore Turf Club Ltd. v. ESI Corpn., (2014) 9 SCC 657 where judicial meaning was assigned to the term ‘shop’ and held that on ascertaining BCCI’s nature, functioning and object, it can be seen that the appellant is carrying out a business/commercial activity and earn money out of the said activity.

Though the Memorandum of Association prescribe that the income, funds and properties of the BCCI shall be utilized and applied solely for promotion of objects of BCCI, to aid and assist financially, or otherwise to promote, encourage, advance and develop the game of cricket, the fact that the Board engages itself in it’s various activities as indicated above, being purely commercial in nature, there is no reason why the test as laid down by the Hon’ble Apex Court in case of Bangalore Turf Club Ltd (supra), shall not be applied to it since the matches arranged and supervised by the Board enjoy future viewership of entertainment and that too, for a consideration, i.e. on purchase of the tickets.

The Court dismissed the appeal and held that the nature of activities conducted by the Board are commercial in nature and hence, covered under the term ‘shop’ for the purpose of ESI Act and notification issued thereunder. The Court upheld the decision of the ESI court to hold that BCCI falls under the ambit of ESI Act.

[Board of Control for Cricket  v. Employees State Insurance Corpn., 2022 SCC OnLine Bom 1368, decided on 24-06-2022]

Advocates who appeared in this case :

Mr Aditya Thakkar with Mr Ranjit Shetty and Mr Rahul Dev (Argus Partners), Advocate, for the Applicant;

Mr Shailesh Pathak a/w Mr Jay Vora, Advocate, for the Respondents.

*Suchita Shukla, Editorial Assistant has reported this brief.

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Customs, Excise and Services Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Division Coram of P. Anjani Kumar (Technical Member) and P. Dinesha (Judicial Member) allowed appeals against the order of First Appellate Authority which upheld the demand of service tax by the adjudicating authority.

Show cause notices were issued based on the agreement between players and franchisee and MOU between M/s. United Breweries Limited (UBL for short) and M/s. Royal Challengers Sports Private Limited (RCSPL for short), alleging thereby that the appellant had provided the services of promotion or marketing of goods/services by engaging himself in carrying advertising, promotional activity, team endorsement provided by M/s. RCSPL/franchisee/co-sponsors and hence, the same was taxable in terms of Section 65(105)(zzb) of the Finance Act, 1994. It was further proposed that the appellant had also provided the services under the category of “Business Auxiliary Service” as the services provided by the appellant were covered under (i) and (ii) to Section 65(19) of the 1994 Act. Thus, service tax was demanded for the period 2009-10 and 2008-09, apart from interest under Section 75 and penalties under Sections 76 and 77.

In the reply the appellant had denied of any liability however, the adjudicating authority chose to confirm the demand of service tax as well as interest and penalties. Appeal was made to the first appellate authority wherein the order of the adjudicating authority was upheld, thus the instant appeal was filed.

The Tribunal agreed with the contention of the senior advocate for the appellant that the issue was no more res integra as the very same issue was considered by the Kolkata Bench of the CESTAT in Sourav Ganguly v. Commissioner of Central Goods & Service Tax, Kolkata, 2020 SCC OnLine CESTAT 378 wherein, the issue has been decided in favour of a similarly placed taxpayer. The Kolkata Bench had taken into account the decision of Bombay High Court in the case of Indian National Shipowners’ Association v. Union of India, 2008 SCC Online Bom 1187 wherein it had been held that the activity of the appellant therein could not be subjected to levy of service tax under Business Auxiliary Service prior to July 1st, 2010.

The Tribunal finally relying on the order of the Kolkata Bench decision allowed the appeal and held that there is no liability on the appellant and hence, demands raised for both the periods cannot sustain.[Anil Kumble v. Commr. of Central Excise, Customs & Service Tax, 2022 SCC OnLine CESTAT 105, decided on 31-03-2022]

Mr. V. Raghuraman, Senior Advocate For the Appellants

Mr. P. Gopakumar, Additional Commissioner (AR)

Suchita Shukla, Editorial Assistant has reported this brief.

Income Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal (ITAT), Mumbai: A two-Member Bench of Pramod Kumar (Vice President) and Ravish Sood (Judicial Member) allowed the Board of Control for Cricket in India (“BCCI”) to continue with its registration under Section 12-A of the Income Tax Act, 1961 making it eligible for income tax exemption benefits. The main controversy arose regarding the commercial nature of the Indian Premier League (“IPL”) organised by BCCI, however, there is significant discussion on substantive law in the decision of the Appellate Tribunal.

Factual Matrix

BBCI challenged correctness of the order passed by the Principal Commissioner of Income Tax, Mumbai (“CIT”), rejecting its application for registration under Section 12-A(1)(ab) read with Section 12-AA of the Income Tax Act, 1961.

Notably, BCCI was duly granted registration under Section 12-A in 1996, which is yet to be cancelled or withdrawn. However, BCCI applied for fresh registration in wake of the amendment in its ‘memorandum of association, and rules and regulations’, to implement the recommendations of Justice R.M. Lodha Committee.

While rejecting BCCI’s application, the CIT took note of the amended Memorandum of Association (“MoA”) and inter alia noted that a specific clause was inserted for conducting Indian Premier League (“IPL”) matches, and concluded that “it can be easily concluded that activities of the applicant specially in relation to the IPL are in the nature of trade, commerce or business, and therefore, the applicant is squarely covered by proviso to Section 2(15) and hence applicant’s claim of being covered by the last limb, i.e. advancement of any other object of general public utility cannot be held to be charitable purpose”.

BCCI on the other hand contented that its activities are wholly charitable and genuine, and the element of profit in organising the IPL event does not vitiate its predominant character.  It was submitted that BCCI was in fact under no obligation to approach the CIT for fresh registration as the amendments did not even remotely affect its basic objects for which the registration was earlier granted; nevertheless it approached the CIT in deference  to the observations made by another Bench of the Appellate Tribunal to the effect that “the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law”.

Law, Analysis and Decision

Application of S. 12-A(1)(ab)

Referring first to Section 12-A(1)(ab), the Appellate Tribunal noted that the true trigger for an application under that section has to be the modification of objects “which do not conform to the conditions of the registration”. Therefore, unless such modifications are demonstrated, there is no occasion for CIT to assume jurisdiction. The registration granted to BCCI in 1996 was on the basis of MoA, 1940. Unless, therefore, there were significant amendments in that Memorandum of Association, the provisions of Section 12-A(1)(ab) will not come into play inasmuch these provisions come into play only when the assessee “has adopted or undertaken modifications of the objects which do not conform to the conditions of registration”.

The Appellate Tribunal then compared MoA, 1940 and the amended MoA, 2018, and found that the amended MoA does not show any change which is contrary to the corresponding clause in the earlier MoA. It was noted that there was nothing in the impugned order to even indicate that the modifications in the objects of the amended deed do not conform to the objects in the memorandum of association based on which the registration was granted. The Appellate Tribunal observed:

“It is also important to bear in mind the fact that Section 12-A(1)(ab) specifically refers to ‘objects’ of the assessee trust or institution, and, it cannot, therefore, be open to the Principal Commissioner to go beyond the ‘objects’ so far as jurisdiction under this Section 12-A(1)(ab) is concerned. It is only when there is such a modification in the object clause that it does not conform to the conditions of registration, i.e. objects clause in the documents based on which registration was granted – only the memorandum of association in this case, that Section 12-A(1)(ab) can come into play.”

It was also noted that any changes to bring out reforms in the functioning of BCCI and specifically approved by the Supreme Court to be for that purpose (by its order dated 9-8-2018), cannot be termed to be the changes that dilute the fundamental objective of promoting the game of cricket, or said to be “not in conformity” with the objects of promoting the game of cricket all along espoused by BCCI and as set out in the pre-amendment MoA. In this view of the matter also, the condition precedent for invoking Section 12-A(1)(ab), was not fulfilled.

Referring to the view of another Bench that the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law, the Appellate Tribunal observed:

“[T]his requirement, in our humble understanding, does not necessarily extend to the filing of the fresh application of registration under Section 12-A(1)(ab) unless the amendments are such as not in conformity with the documents based on which registration was originally granted. There is a difference in these two situations, i.e. between keeping the registration authority [informed] about the changes in the memorandum of association etc., and between making an application for fresh registration which comes into play only when the amendments in question do not conform to the objectives in respect of which registration was granted or obtained. Unless that condition is satisfied, Section 12-A(1)(ab) [does not] come into play.”

It was observed that there is a vital distinction between “object” and “power”. It could not even be in dispute that the object of BCCI is the promotion of cricket game, and, at best, it has powers to hold IPL for achieving this object. Whether this power of conducting IPL is exercised with predominantly pecuniary gains in mind or not is a different aspect, but then this is a “power” not an “object”. The Appellate Tribunal was of the opinion that:

“So far as the provisions of Section 12-A(1)(ab) are concerned, the Principal Commissioner was only required to examine the objects of the institution and not to extend her considerations to the powers vested in the institution. Unless the bridge of finding variations in objects of pre-amendment or post-amendment objects is crossed, there is no occasion to examine anything else. “

Application of proviso to S. 2(15)

Next, it was noted that the entire basis of declining registration by CIT was invoking the proviso to Section 2(15) on the ground that IPL activities are in the nature of commercial activities and cross the threshold limit specified in exceptions to the proviso to Section 2(15). On this point, the Appellate Tribunal observed:

“It is, however, well-settled in law that so far as registration under section 12-AA is concerned, Section 2(15) has no application in the matter.”

Relying on its earlier decision in Kapurthala Improvement Trust v. CIT, 2015 SCC OnLine ITAT 8111, the Appellate Tribunal concluded that the remedy to the proviso to Section 2(15) coming into play is not denial of registration under section 12-A or 12-AA but denial of benefits of exemption under Section 11, under Section 13(8). That is the reason that along with the insertion of proviso to Section 2(15), effective from the same date, sub-section 13(8) was also inserted and these two provisions are thus clearly complementary in nature.

Indian Premier League

Interestingly, as to the question whether IPL can indeed be said to be commercial in nature in the sense that the entire orientation of these matches is aimed at making money in the garb of promotion of cricket, the Appellate Tribunal was of the view that it was not necessary to go into that aspect in the instant case. It however added:

“[O]n the face of it merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in more paying sponsorships and greater mobilisation of resources, the basic character of the activity of popularising cricket is not lost. It is indeed possible that the predominant object remains the promotion of cricket but that activity is done in a more effective and financially optimal manner, and that there is no conflict in the cricket becoming more popular and the cricket becoming more entertaining. It results in providing significant economic opportunities to those associated with the holding of the IPL tournament and, in the process, enriching the resources of the assessee trust. As long as the object of promoting cricket remains intact, and that continues to be the predominant object, the assessee cannot be said to be not following the object of promoting cricket, just because the operational model of a cricket tournament, whether IPL or any other tournament, is more entertaining, more economically viable, provides greater economic opportunities to all those associated with that tournament, and mobilises greater financial resources for popularising cricket. The purpose for which all the funds at the disposal of the assessee trust, including the additional funds generated by holding the IPL tournament, are employed is certainly for promoting cricket, and that is what really matters. 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’être of an institution like this assessee, and that is how we view it.”

In such view of the matter, the Appellate Tribunal held that BCCI was entitled to continuance of its registration under Section 12-A dated 12-2-1996. Accordingly, the impugned order passed by the CIT was quashed. [BCCI v. CIT, ITA No. 3301/Mum/2019, dated 2-11-2021]

Hot Off The PressNews

Supreme Court:  Refusing to hear the mentioning, Court has asked lawyer-cum-petitioner Mohan Babu Agrawal to approach the regular bench of the Supreme court to mention his matter related to the postponement of Indian Premier League cricket tournament on the ground of the spread of coronavirus.

The vacation bench of Uday Umesh Lalit and Aniruddha Bose, JJ asked Agrawal stated that it was a vacation bench and will hear urgent matters only.

Agrawal mentioned before the apex court today that the IPL is set to begin on March 29, with the lung opener set to be played at the Wankhede Stadium in Mumbai, between defending champions Mumbai Indians and Chennai Super Kings. But as coronavirus is spreading, there should be postponement of the IPL tournament in India. Agrawal also mentioned before the top court that people come from abroad for IPL , adding that 30,000 to 50,000 people may attend the IPL matches, and every state is affected by coronavirus.

(Source: ANI)

Supreme Court

Supreme Court: In a breakthrough decision by the Court in the notorious ‘IPL Betting and Spot-fixing Scam’ where the Court framed major issues on whether the BCCI falls within the ambit of ‘State’ as under Article 12 of the Constitution and whether the BCCI is amenable under the writ jurisdiction of the High Court under Article 226 along with questions on the capacity of Raj Kundra and Gurunath Meiyappan in their respective IPL teams and the allegations against N. Srinivasan whether they stand proved or not. Perusing the issues, the Court observed that the BCCI even though not a ‘state’ under Art. 12 does perform certain public functions like selection of the team to represent the country in international arena and has a complete sway on the game of cricket which make it amenable to the Writ Jurisdiction of the High Court under Article 226.

With regard to Raj Kundra and Gurunath Meyiappan that whether they are ‘team officials’ for the purposes of disciplinary actions, the Court agreed with the findings of the probe committee and held them to be guilty of betting. As for N. Srinivasan, who was accused of covering up Gurunath Meyiappan’s involvement in the scam using his influence as the BCCI Chief, the Court observed that this allegation was merely based on suspicion which cannot be taken as a proof to hold him guilty therefore the allegation cannot be said to be proved with certainty.

In its other observation, the Court on amendment of Regulation 6.2.4, which states that except Indian Premier League and Champions League Twenty20, no administrator, officer, player or umpire shall have any direct or indirect commercial interest in the matches or events conducted by the board, observed that amendment negates the resolves of the BCCI by permitting situations in which conflict of interest would grossly erode the confidence of the people in the authenticity, purity and integrity of the game. An amendment which strikes at the very essence of the game as stated in the Anti Corruption Code cannot obviously co-exist with the fundamental imperatives. The Court also stated that the conflict of interest issue has the led the public to doubt the manner of working of the BCCI. The Court further directed to form an independent committee comprising of former C.J.I and 2 former Supreme Court judges on behalf of BCCI to look into the matter of imposing punishments on Meyiappan and Kundra and examine the role played by Sundar Raman in the betting scam along with amendments in the Memorandum of Association of the BCCI; amendment of Rule 6.2.4 and other recommendations of the Mudgal Committee.

In the present case Radha Rangaswamy and Gagan Gupta argued for the appellants and the respondents respectively, along with noted counsels like Siddharth Luthra and Kapil Sibal. Board of Cricket Control for Cricket in India v. Cricket Association of Bihar2015 SCC OnLine SC 60, decided on 22.01.2015