In a significant ruling, the Income Tax Appellate Tribunal, Mumbai held that the expenditure incurred on Indian Premier League (IPL) should be allowed as “revenue expenditure” under the provisions of the Income Tax Act.
Assessee entered into an agreement with the sports company, India-Win and became co-sponsor of Mumbai Indian IPL cricket team as an associate partner. As per the agreement the ground logo of the assessee group was displayed permanently in the cricket stadium and also on the playing gear of the players. Assessee paid Rs. 4.50 crores towards sponsorship fees as per the agreement during the year under consideration. The assessing authority denied the claim for expenditure by the assessee.
On first appeal, the CIT(A) allowed the plea of the assessee and held that the expenditure incurred on IPL sponsorship was in nature of some kind of advertisement expenditure and the same should be allowed as revenue expenditure. The order was challenged by the Revenue before the Appellate Tribunal.
Aligning with the findings of the first appellate authority, the Tribunal bench observed that expenditure is allowable on the said payment.
The bench also observed that the assessee was a co-sponsor of Mumbai Indian IPL team and it had incurred similar expenditure in the subsequent two years. it was noted that out of the total expenditure, the assessee had claimed a very small proportion under the head sponsorship expenses.
The bench also said that, “Such an expenditure is for advertising the brand name of the Group. Being a recurring expendiuture, it had to be allowed as revenue expenditure. We find that in the case of Delhi Cloth and General Mills Co.Ltd.(supra)the Hon’ble Court had held that expenditure incurred for organizing sports events are allowable items of revenue expenditure as such events publicise the names of the sponsor. The AO was not justified in capitalising the expenses.”
Read the full text of the Order below.
