IPL Not Liable to Tax, It’s Sport Promotion: ITAT Impact on Public Trusts

The Board of Control for Cricket in India (BCCI), the country’s richest sports body has won this round in a battle with the taxman.

The Income Tax Appellate Tribunal (ITAT), in an appeal filed by the BCCI, upheld the arguments of the sports body that even though it’s making money through the Indian Premier League (IPL), the object of promoting cricket remains intact and hence its income should be exempt from tax.

The decision came in a November 2 order.

BCCI had approached the Mumbai bench of the ITAT against three show-cause notices issued by the revenue department in 2016-17 to explain why the tax exemption that the BCCI enjoys under Section 12A of the Income Tax Act should not be revoked for generating income through the IPL.

“On the face of it, merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in it in more paying sponsorships and greater mobilization of resources, the basic character of activity of popularizing cricket is not lost,” said the bench of judicial member Ravish Sood and vice president Pramod Kumar, while rejecting the contention of the revenue department.

According to the BCCI, the income tax department “erred” in emphasizing the surplus generated from activities pertaining to IPL, without considering the overall activities of the appellant (cricket board) in a holistic manner and concluding that these don’t qualify as sport promotion.

“The ITAT ruling will have huge implications on the public trusts as now they will be outside the gamut of taxation if they are using the money generated for the stated purposes,” said Paras Savla, partner at KPB & Associates, a tax advisory firm. “The ruling could set a precedent for other trusts but this will not apply to private trusts, which were recently named on leaks such as Pandora leaks.”

The cricket body also argued that the revenue department was mistaken in fact and law in denying registration to it under Section 12AA of the Income Tax Act.

Under Section 12A, the trust has to inform the principal commissioner about any change in activities within 30 days. The income tax department referred to the IPL as a change in activity.

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