The Indian Premier League (IPL) has transformed the landscape of cricket in India and emerged as one of the world’s most lucrative sporting events. Apart from its on-field excitement and star-studded teams, the IPL has also brought about significant economic benefits to the nation including advertisement revenue, payments from broadcast rights and even merchandise sales.
The IPL is unlike any other game of cricket; it is a captivating blend of skill, passion, and pure entertainment. From the breathtaking sixes soaring into the night sky to the nail-biting finishes, the IPL evokes a whirlwind of emotions that unite fans and create an uncontainable enthusiasm.
As finance enthusiasts, a crucial aspect of this mega sporting extravaganza that you cannot miss to notice is taxation. In this article, we delve into the intricacies of IPL taxation, exploring the various levies and their implications for teams, players, and the league as a whole. We also take a quick look through some of the major Cricket and especially IPL related Judgements, Rulings and Orders reported at taxscan.in.
Income Tax and Goods and Services Tax aside, there are many more aspects of Cricket that fall within the realm of taxation.
Here are some of the major judicial interpretations and news reports with an impact on the tax implications of Indian Premier League (IPL) and Cricket in general â
Relief to Anil Kumble: CESTAT quashes Service Tax Demand for Promotion of IPL Team
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore bench has held that the promotional activities provided by former Indian skipper Anil Kumble in carrying advertising, promotional activity, team endorsement provided by M/s. RCSPL/franchisee/co-sponsors shall not be treated as âBusiness Auxiliary Servicesâ and that no service tax can be imposed on the same.
The decision of the Honâble Bombay High Court in the case of Indian National Shipownersâ Association Vs. Union of India was relied upon by the CESTAT bench wherein it has 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.
A single Judge bench of Calcutta High Court nullified the Show Cause Notice issued against the Former Cricketer Sourav Ganguly. While invalidating the said SCN it was held that remuneration received for writing articles, Anchoring TV shows, playing IPL would not attract Service Tax under the head under of âBusiness Auxiliary Serviceâ, is also not legally tenable.
The remuneration received by the petitioner for anchoring TV shows cannot be brought within the service tax net. Television shows are meant for entertainment of the viewers. In the contemporary world, watching television is a primary form of recreation. It would be absurd to say that anchoring TV shows amounts to rendering business auxiliary service or business support service, the High Court Bench observed.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) ruled that Income Tax Exemption cannot be denied to the Board of Control for Cricket in India (BCCI) merely because IPL is structured in a more profitable manner.
âImprovising the rules of the game, adding entertainment value to it, and making it economically attractive may be a puristâs nightmare but the same factors can also be viewed as radical and innovative ideas to popularize a gameâthe very raison dâetre of an institution,â the tribunal said.
The Income Tax Appellate Tribunal (ITAT), Hyderabad bench held that the distribution of IPL tickets to the long-standing customers to improve business relations and goodwill would amount to business expenditure for the purpose of tax deduction under Section 37 of the Income Tax Act.
While granting relief to the assessee, the Tribunal noted that the assesseeâs submissions in support of its claim under section 37 of the Act are that it has purchased the IPL cricket match tickets to distribute them amongst its long standing customers to garner their goodwill and improve its business relations and therefore, it is business expenditure.
Free Tickets for IPL Matches subject to GST: AAR
The Authority for Advance Ruling (AAR), Punjab has ruled that GST is payable on providing complimentary/ free tickets as the said activity would constitute a âserviceâ as defined by the Central GST Act and is subject to tax.
The Authority bench observed that, âthe activity of the applicant of providing complimentary tickets free of charge to some persons for enjoying cricket matches would also be covered under the scope of supply as per Section 7(1)(d) (of the Central Goods and Services Tax Act).â
While granting relief to famous cricket player Karn Sharma, the Ahmedabad bench of the CESTAT held that no service tax liability can be attributed to the cricket players for promotional activities provided by them during the Indian Premier League (IPL) prior to 01.07.2010.
The bench further relied on the decision in the case of Sourav Ganguly Vs. UOI wherein the Calcutta High Court held that the services of brand promotion before 01.07.2010 are not taxable. Relying on the above decision, the CESTAT quashed the order against Karn Sharma and held that no service was provided nor required to discharge any service tax.
In the same time period, while allowing relief to former Rajasthan Royal player, Swapnil Asnodkar, the Mumbai CESTAT also took a similar view and held that no service tax is leviable on Brand Promotion Fee.
A two-judge bench of the Bombay High Court has quashed the proceedings under Foreign Exchange Management Act (FEMA) against former IPL Chairman Lalit Modi.
The division bench comprising of Justice S.C Dharmadhikari and Justice Bharati H. Dangre has observed that cross-examination of witnesses cannot be denied where their statements are exclusively relied upon by the Adjudicating Authority when issuing a Show Cause Notice to the person against whom such evidence is sought to be used.
Expenditure Incurred on IPL Sponsorship should be allowed as âRevenue Expenditureâ: ITAT Mumbai
In a significant ruling, the Income Tax Appellate Tribunal, Mumbai held that the expenditure incurred on Indian Premier League (IPL) should be allowed as ârevenue expenditureâ under the provisions of the Income Tax Act.
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 Hyderabad bench of the Income Tax Appellate Tribunal, has overruled the order withdrawing the registration granted to the Hyderabad Cricket Association under section 12AA of the Income Tax Act, 1961.
The tribunal noted that after the insertion of Section 2(15) of the Income Tax Act, the definition of the term âcharitable activityâ has undergone a major change. Now the position is that if the assessee carries on commercial activities for the advancement of any other object of general public utility and its turnover is less than the prescribed limit, it does not lose its charitable nature.
Service Tax on IPL; Delhi HC asks GMR Sports to continue deposit Service Tax till final order
A Delhi High Court bench comprising Justice S Muralidhar and Justice Vibhu Bakhru refused to give interim relief of Service Tax on sporting events like the IPL.
The levy of Service Tax on the sale of tickets for the Indian Premier League (IPL) Cricket Tournament, by virtue of the amendments to the Finance Act, 1994 by the 2015 came into effect from 1 st June, 2015 together with the Service Tax Notification No.06/2015 dated 1st March, 2015 and the Circular No. 334/5/2015-TRU dated 28th February, 2015, the bench noted.
UP CM Akhilesh Yadav announces âMS Dhoni: The Untold Storyâ Tax Free in the state
Uttar Pradesh Chief Minister Akhilesh Yadav had made the release of the Movie âMS Dhoni: The Untold Storyâ tax free, across the state of Uttar Pradesh.
M.S. Dhoni: The Untold Story is an Indian biographical film directed by Neeraj Pandey, based on the life of Indian cricketer and former captain of the Indian national cricket team, Mahendra Singh Dhoni.
The Mumbai bench of Income Tax Appellate Tribunal (ITAT) yesterday dismissed the Departmentâs appeal against the former Cricketer Sachin Tendulkar and held that income from sale-purchase of shares cannot be treated as âBusiness âIncomeâ merely because the assessee has availed the service of Portfolio Manager.
The bench further relied upon the CBDT circular dated 15-06-2007 wherein it was clarified that an assessee can have two portfolios, i.e. one for investment purposes and the other for business purposes. The amount held in the investment portfolio would be assessable as income under the head âCapital gainsâ.
While disposing of the appeal filed by the Revenue against the order of the CIT(A), who allowed the appeal of the Cricket player Partiv Patel, the Ahmedabad ITAT confirmed that income from playing cricket is taxable under the head âP & G from Business and Professionâ.
However, the Tribunal remitted the matter back to the Assessing Officer by observing that both the authorities have failed to establish the nexus between each head of expenditure claimed by the assessee against his declared taxable income.
SRK gets Tax Deduction for Securing KKR Sponsorship for Star India: ITAT Mumbai allows Appeal
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai allowed tax deduction of 10 crores to the famous actor Shah Rukh Khan for securing KKR sponsorship for Star India Pvt Ltd.
The bench comprising of Accountant Member G.S.Pannu, and Judicial Member, Amit Shukla held that he had a long-standing professional relationship with Star India and had entered into an arrangement with the Channel on a mutually agreed basis whereby loss suffered by the channel was sought to be recouped with earnings from sponsorship of assesseeâs Cricket Team Kolkata Knight Riders and assessee incurred Rs. 10 crores on this behalf, since there is a nexus between impugned expenditure and purpose of business, the actor is eligible for deduction.
The division bench of the Mumbai Income Tax Appellate Tribunal (ITAT), in MIG Cricket Club v. DIT (E), held that the activities of banquet Hall Hiring, Hospitality and Permit Room are in the nature of trade, commerce and business and therefore are hit by section 2(15) of the Income Tax Act.
In a recent ruling, the division bench of the Chennai ITAT dismissed the departmental appeal and held that the activities of the Tamil Nadu Cricket Association are not âCommercialâ in nature. The Tribunal therefore, reversed the order denying exemption under Section 11 of the Income Tax Act to the assessee.
It was noticed that in an earlier case, the Tribunal found that the activity of the assessee cannot be considered to be business activity with a specific finding that it is not providing any services to any trade or commerce or industry.
Andhra Cricket Association is Eligible for Tax Exemption u/s 11: ITAT
Vishakapatanam bench of the Income Tax Appellate Tribunal (ITAT) has declared that the activities of Andhra Cricket Association are eligible for tax exemption under Section 11 of the Income Tax Act, 1961.
In the instant case the assessee is a cricket association and registered under Section 12A of the Income Tax Act, 1961 and also obtained grant of approval under Section 10(23C)(iv) of the Income Tax Act.
Hyderabad Cricket Association Gets relief from ITAT
Hyderabad Cricket Association is not engaged in activities in nature of trade and commerce or business and therefore, eligible to enjoy the benefit of section 11 of the Income Tax Act, 1961, the Income Tax Appellate Tribunal, Hyderabad bench said last week while disposing appeals filed by both HCA and the department. In the instant case, registration under section 12AA of the Income Tax Act, 1961 was granted to assessee.
Consequent to a survey was conducted in the premises of the assessee, The department noted that the cricket association was deriving income from various sources like receipts from league fees, sale of tickets of various matches, advertisement charges, sponsorship fees from various companies etc. which are not charitable in nature. The department took a view that it is carrying activities on a commercial basis and therefore, withdrawn the registration granted earlier. Assessee contested the same before the appellate authorities.
CCI Imposes Rs. 52.24 cr Penalty on BCCI for the Anti-Competitive Conduct
The Competition Commission of India (CCI) has found Board of Control for Cricket in India (BCCI) to be in contravention of the provisions of Section 4(1) read with Section 4(2)(c) of the Competition Act, 2002 (Act) for its assurance to the broadcasters of Indian Premier League (IPL) that BCCI shall not organize, sanction, recognize, or support another professional domestic Indian T20 competition that is competitive to IPL, for a sustained period of ten years.
Franchise Fee paid by Kolkata Knight Riders to BCCI is Revenue Expenditure: ITAT Allows Deduction
Payment of Franchise Fee by Kolkata Knight Riders to the Board of Control for Cricket in India (BCCI) would constitute revenue expenditure for the purpose of allowing Income tax deduction, said Mumbai ITAT.
While allowing relief to former Rajasthan Royalâs player, Swapnil Asnodkar, the Mumbai CESTAT held that no service tax is leviable on Brand Promotion Fee.
âIt is not appearing from the show cause notice as to what goods or services the Respondent have promoted or helped to promote,â the bench said.
In Mumbai Police vs. Commissioner of Service Tax, the West Zonal Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that Service Tax Demand on the charges recovered by Police for providing security services were unsustainable.
Mumbai Police, the appellants provide security service to banks, individuals, security for cricket matches and other functions. They recover charges for the service they provide to the beneficiaries of such service.
CSK Players not liable to pay Service Tax on Remuneration paid by Franchisee: CESTAT
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai bench has granted relief to the cricket players L Balaji, Ashwin R, Murali Karthik, Dinesh Karthik, S Badrinath, Vidyut Sivaramakrishnan, Aniruda Srikkanth, Suresh Kumar, Yo Mahesh, Hemang Badani, C. Ganapathy, Arun Karthik K B, Kaushik Gandhi and Palani Amarnath by holding that these players are not liable to pay service tax on the amount received from the franchise.
The Tribunal observed that the categorization of the same set of activities under two different services for two different periods is not permissible.
Relief to Cricketers: ITAT says Proceeds to Sameer Dighe from Benefit Match not Taxable
The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) granted tax relief to Indiaâs former wicket-keeper, Sameer Dighe by holding that the proceeds from a benefit match of around Rs 50 lakh cannot be taxed in the hands of the cricketer.
While answering the dispute in favour of the assessee, the Tribunal held that Dighe played cricket for India as his passion. Proceeds arising out of the benefit match were in the nature of an award and were not an income, thus the section invoked by the Income Tax official would not apply.
Bombay HC quashes Service Tax Proceedings against Cricketer Cheteshwar Pujara
In a major relief to cricketer Cheteshwar Pujara, a division bench of the Bombay High Court has quashed an order relating to Service Tax collection against him.
The bench comprising Justice S C Dharmadhikari and Justice Prakash Naik said, âWe are of the view that rights and equities can be balanced by the petitioner (Pujara) being called upon to meet 50% of the demand in the show cause notice. He should deposit a further sum of Rs.5 lakhs within a period of four weeks with the Service Tax Commissionerate.â
In a major relief to the IPL cricket team, Royal Challengers, Bangalore, the Income Tax Appellate Tribunal (ITAT) has held that the expenses incurred by the Company, for construction of Cricket Academy is deductible as the business expenditure from their total income as the same was incurred was for business purpose.
Allowing the contentions, the bench noted that the terms of the contract are directly related to business interest of the assessee. âTherefore, the contribution made for the creation of Cricket Academy can be held to be in business interest and the same is allowable as deduction. Accordingly, we allow this ground of appeal,â the bench said.
GST on Free Tickets: Madhya Pradesh HC dismisses PIL based on News Reports
A division bench of the Madhya Pradesh High Court refused to allow a Public Interest Litigation relating to levy of Goods and Services Tax (GST) on free tickets on the ground that the petition was based on newspaper reports.
The bench comprising Justice Vivek Rusia and Justice Ashok Kumar Joshi noted that the entire petition is based on the newspaper published in the local newspaper about distribution of free passes worth Rs.60.00 lakhs to the Collector. No other material has been produced in the present petition in support of the allegations.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench has allowed a relief to the well- known cricketer Sachin Tendulkar and held that he is eligible for vacancy allowances under Section 23 of the Income Tax Act as he was not able to find a tenant for his vacant flat at Sapphire Park.
The Tribunal bench accepted the argument that the assessee had made reasonable effort by requesting the builder to identify the tenants for the concerned flat. Since an appropriate tenant could not be found out, the flat remained vacant.
ITAT upholds Re-Assessment Proceedings against Former Indian Cricket Team Captain
The Income Tax Appellate Tribunal (ITAT), has upheld the proceedings for re-opening of the assessment by the income tax department against former Indian Cricket Team Captain Krishnamachari Srikanth.
Concluding the 85-page order, the Tribunal upheld the re-assessment proceedings and held that the payments made to Indian Bank by the assessee to the tune of Rs. 4.25 crores was merely an application of income.
While granting relief to Actor Shilpa Shetty, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the brand promotion by âShilpa Shetty â would not constitute an international transaction in the absence of a pre-requisite agreement
The first appellate authority denied relief to the assessee by applying section 92B(2) and held that there was a deemed âinternational transactionâ between assessee and JICPL due to prior agreement, i.e. SPA and made adjustment to assesseeâs income on basis of ALP.
A two-judge bench of the Calcutta High Court has held that the PAK-INDO-LANKA joint management committee (PILCOM) can be treated as an agent of Non-Resident Boards and players for imposing the Income Tax on the Cricket boards of Sri Lanka and Pakistan on conducting the World Cup Tournament in 1996.
The Supreme Court has held that the payment made to the Non-Resident Sports Association is deemed to accrued or arisen in India so was liable to deduct Tax at Source in terms of Section 194E of the Income Tax Act, 1961.
The Apex Court Division Bench consisting of Justice Uday Umesh Lalit and Justice Vineet Saran held that the payments made to the Non- Resident Sports Associations in the present case represented their income which accrued or arose or was deemed to have accrued or arisen in India. Consequently, the Appellant was liable to deduct Tax at Source in terms of Section 194E of the Act.
The Income Tax Appellate Tribunal (ITAT), Mumbai, while granting relief to the Board of Control for Cricket In India ( BCCI ) held that the penalty cannot be levied since the delay in filing TDS returns was due to glitches in the initial years of the switchover from the manual system to e-filing of quarterly TDS returns.
In the instant case, the Assessing Officer imposed a penalty under section 272A(2)(k) of the Income-tax Act, 1961 against the Board for not filing TDS returns within the stipulated time. The Tribunal noted that it was for the Revenue to have allowed smooth switchover from manual to e-filing system of filing TDS returns.
BCCI liable to pay Service Tax on Sale of Media Rights of IPL Matches: CESTAT
The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax shall be remitted by the Board of Control for Cricket in India ( BCCI ) on selling of media rights of the IPL Matches to a Singapore Company.
The CESTAT observed that the appellants have provided the program feed to the M/s MSM Singapore at the venue of the match which is in India and not outside. The programmed feed as provided by the appellant is encrypted and then uplinked by the said M/s MSM/ WSG to the designated transponder in the designated satellite.
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Gujarat Cricket Assn. v. J.CIT held that assessee engaged in promoting and developing the game of cricket is engaged in carrying out âcharitable activityâ within the meaning of Section 2(15) and is not entitled to relief under Section 11.
Penalty canât be levied on Retrospective Amendment: ITAT
The Ahmedabad bench of the ITAT has held that the assessee cannot be penalized on ground of a retrospective amendment under the Income Tax Act, 1961.
The Tribunal held that âin the instant case, section 13(8) of the Act has been enacted by Finance Act, 2012 with retrospective effect from 01/04/2009. As per aforesaid enactment, benefit of section 11 & 12 will not be available to the assessee where such assessee is in receipt of income which falls under proviso to clause (15) of section 2 of the Act. Admittedly, the aforesaid amendment seeking to deny benefit of s.11 to the assessee was not in existence at the time of filing of return of income.â
The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has recently ruled in favour of cricketer Ajitesh Argal, a former under-19 Indian Team player, that he is not liable to pay service tax on brand promotion payments received from Nike India during IPL.
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal observed that service Tax cannot be Demanded against Tamil Nadu Cricket Association (TNCA) for Providing Chepauk Stadium to conduct Indian Premier League (IPL) Matches.
The Coram consisting of CS Sulekha Beevi, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that â After appreciating the facts and following the decisions placed before us, we have no hesitation to conclude that the Department has failed to establish that the appellant has rendered a service falling within the definition of âSupport Services of Business or Commerceâ.â
The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand against famous cricketers and brothers, Irfan Pathan and Yusuf Pathan holding that they are not liable to service tax under the âBusiness Support Serviceâ for brand endorsement during IPL.
Notably, the Revenue was not favoured in most of the cases before the tribunals and High Courts, leaving the sports of cricket unharmed by the forks of taxation imposed by the government.
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