Taxmen have put the Board of Control for Cricket in India (BCCI) under the tax scanner. The Central Board of Direct Taxes (CBDT), under the ministry of finance, has formed a committee to look into the taxability of BCCI income generated from the Indian Premier League (IPL) tournament.
BCCI, which is registered as a society, enjoys tax exemption. But, taxmen are keen on bringing it under the tax net since with the IPL tournament, its activity has become commercial rather than a public utility. It may, therefore, have to pay tax on the income from the IPL tournament.
The revenue department got Rs 60 in the form of tax deducted at source (TDS) from IPL during 2007-08. The tax was only for a small portion of transactions relating to IPL that took place during the last financial year.
Besides taxability, the committee would also go into the tax treatment of income generated by the franchisees on transfer of players. Franchisees are owners of eight IPL teams.
The committee has been asked to submit its report soon, said the official. The official said there are two main issues with regard to taxing IPL-related income. It involved examining tax being deducted in transaction involved in the entire IPL tournament and also taxability of entities involved, which include franchisees, players and the BCCI itself.
The official said three franchisees paid tax at a lower rate than what was applicable but that was more out of ignorance. The remaining five franchisees paid at the applicable rate.
There are different tax rates applicable on individual Indian and foreign players and on contracts and BCCI. Since players are not playing for the country but for the leagues, they are liable to pay tax.
The franchise model adopted for the tournament involves that a sponsor owning a team pays a stipulated fee to the BCCI to get the ownership. The franchisees pay 10 per cent of the bid amount as franchisee fee every year to the board. The BCCI garnered $ 723.59 million through the IPL auction, which roughly translates into $ 72.36 million per year.
Broadcasting rights to Sony Entertainment Television and Singapore-based World Sports Group for 10 years for over $ 1 billion and advertisement slots would attract service tax under the broadcasting service.