Shshank Saurav
The issue of taxing the income of BCCI needs to be re-examined even though it is registered as a charitable body
Cricket fever has gripped the nation and BCCI has decided to renew the media rights of Indian Premier League (IPL) in June 2022. Floor price for the auction has been kept at Rs 32,890 crore for a five-year period of 2023 to 2027 and the auction is expected to fetch more than Rs 35,000 crore. In the previous year, BCCI added two new franchises in IPL for a whooping sum of Rs 12,715 crore. Anyway, BCCI is world's richest cricket association and as per media reports, its net worth at March 2021 was more than Rs 18,000 crore.
IPL has taken the commercialization of cricket to a new height and revenue authorities also noted this phenomenon. BCCI is registered as a charitable organization and its income is exempt from tax, subject to fulfilment of conditions imposed under the Income Tax Act, 1961. Issue of taxing the income of BCCI was taken up by the tax department and it sought to revoke the exemption granted to BCCI. This was challenged before the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) and the November 2021 order [ITA No. 3301/ Mum/2019] came in favour of BCCI. However, even the ITAT carved out in its order that the pertinent issue examined by the tribunal is related only to granting the registration to BCCI and it has not examined the issue of taxability of IPL income.
Various state cricket boards have got tax reliefs on their income but this doesnot settle the matter for BCCI. In fact, the Gujarat High Court in the matter of Director of Income Tax (E) Vs Gujarat Cricket Association [Tax Appeal No. 268 of 2012 which was decided on 27 September 2019] had categorically said that ‘undoubtedly the activities of BCCI are commercial in nature'. Para 163 of the said order grants relief to Gujarat Cricket Association on the ground that activities of BCCI (which are of commercial in nature) are different from the assessee and the assessee has merely received donation from BCCI. In a similar issue related to Chandigarh Lawn Tennis Association Vs ITO (Exemptions), the Chandigarh ITAT bench [ITA No. 1382/CHD/2016] held that income from organizing Davis Cup matches is liable to tax u/s 2(15) of the Income Tax Act, 1961. There are various other judgements also where it has been affirmed that if any organization which is engaged in advancement of any other object of general public utility, then it must pass the test prescribed u/s 2(15) of the Act otherwise section 13(8) of the Act will become applicable and exemption will be given on a Y-o-Y basis. Such originations can continue to hold their registration but impact of section 2(15) has to be considered while computing their tax-exempt income.
The Football Association of Britain is also registered as a non-profit corporation but in the previous FY it has paid around 20 million GBP as tax and a further provision of 4.8 million GBP is made towards deferred tax (a future tax liability). IPL also runs on similar model of British football clubs and therefore an inference can be drawn.
There was a time when Supreme Court had to intervene into the affairs of the BCCI and former C&AG Vindo Rai was appointed as interim president on the direction of the court. The apex court approved the memorandum of association and rules & regulations of BCCI in August 2018 and it was expected that the revised framework will provide much needed transparency. Chapter 8 of the Supreme Court approved rules & regulations is dedicated to transparency and it mandates BCCI to upload details of financial outlay etc. on its website. Annual accounts, financial and compliance reports etc. are also to be updated on the official website (www.bcci.tv) but surprisingly, annual reports after FY 2016-17 are not available. Elaborate rules have been made to avoid the conflict of interest in the conduct of BCCI and all such instances are also to be disclosed on the website. Its high time when the apex court asks the cricketing body to submit a compliance status report on all the recommendations. In fact, rules and regulations are bye-laws of the entity and they must be complied in letter and spirit.
A rich sporting body like BCCI which is managed by politicians, (both from UPA and NDA) and optics are very much important in politics. A lavish manner of conducting the tournaments and resisting the tax payment, conducting the affairs in an opaque manner, etc., are not giving a good perception about the apex cricketing body.
(The writer is a Chartered Accountant, author and public policy analyst. The views expressed are personal.)
