Moving the second season of the Indian Premier League (IPL) to South Africa, a foreign destination, could prove to be a taxing affair for the Board of Control for Cricket in India (BCCI).

The income tax exemption that the apex cricket body enjoys for carrying out the "charitable activity" of promotion of sport in the country may not be available on the income generated from IPL-2, as it is being held outside the country, a government official, who did not wish to be named, said.

BCCI will have to take specific permission of the Central Board of Direct Taxes (CBDT) to enjoy the same tax exemption if the charitable activity is held outside India, as per the provisions of the I-T laws. And, getting an exemption on the income generated from IPL-2 is not going to be a cakewalk for the board, the official said. Its status as charitable trust itself has become questionable following an amendment to the Finance Act, 2008-09, and in an extreme case, it could end up losing the tax exemption on account of IPL.

However, BCCI itself has held onto the view in various past discussions with the tax body that it is a charitable organisation, the government official said.

BCCI is registered as a charitable trust under Section 12 (a) of the Income Tax Act to promote cricket for general public good and enjoys tax exemption under Section 11. Section 11 (1)c says: Any income derived from property held under a trust for charitable purposes to the extent to which it is applied for such purposes outside India provided that it promotes international welfare in which India is interested, provided that the board, by general or special order, has directed that it shall not be included in the total income of the charitable organisation.

The first step is to examine the provisions under the Income Tax Act as to the definition of charitable purposes, keeping in view the recent amendments and also the taxability or otherwise of the income derived by such charitable organisations for the activities carried outside India, said Vikas Vasal, executive director, KPMG.

As per the changes made in the Finance Act, 2008-09, a charitable purpose includes relief for poor, education, medical relief, and the advancement of any other object of general public utility. But, the object of general public utility cannot be treated as a charitable purpose if it involves carrying on of any activity in the nature of trade, commerce or business.

In 2007-08, BCCI earned a total income of Rs 1,000.41 crore. BCCI is the apex governing body for cricket in India that was formed in 1929.