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After I-T probe, BCCI comes under service tax scanner

April, 29th 2010
As if coming under the income tax departments scanner was not trouble enough for the Board of Control for Cricket in India (BCCI), the sports body is now being nettled by the service tax department. A service tax official said the department is looking to levy a 10.3% tax on the income the BCCI earns by awarding exclusive rights to companies such as PepsiCo Inc to sell their products inside the stadium during matches. Whether such rights are part of the sponsorship agreement is not known, but the official said this has been the BCCIs practice for years though the income was never taxed since the sports body is a charitable institution by law. Sponsorship services in sports are exempt from service tax, but we feel allowing a company exclusive rights to sell products is akin to selling radio or television airtime. Such agreements have nothing to do with sports promotion. We are therefore looking at the possibility of levying tax, the official said. The department is also toying with the idea of taxing franchisee share transfer fees. The idea follows a scrutiny of the BCCIs 2008-2009 accounts, which showed it seeking a 5% transaction fee for share transfer by IPL Rajasthan Royals (RR) franchisees. Bollywood actor Shilpa Shetty and her husband Raj Kundra were sold 12.5% RR stake by the original owners Emerging Media, a UK-based company owned by Lalit Modis friend Manoj Badale. Last year, the department issued a show cause notice to the BCCI in October for granting Rs36.52-crore worth media rights under franchise services. The BCCI has objected to the notice saying the broadcast rights are for the promotion of sports and thus not taxable. Another notice has been issued to RR owners Jaipur IPL Cricket Pvt Ltd for not paying service tax of Rs62.17 lakh on income through sponsorship services. Till date, the BCCI has paid service tax of Rs8,815.24 lakh and interest of Rs67.84 lakh; Knight Riders Sports Pvt Ltd Rs522.35 lakh service tax and Rs14.97 lakh interest; Reliance Industrial Investments and Holdings-owned Indiawin Sports Rs371.42 lakh service tax; and Jaipur IPL Cricket Pvt Ltd Rs198.04 lakh service tax.