| The Tax Publishers2020 TaxPub(DT) 2898 (Mum-Trib) INCOME TAX ACT, 1961
Section 37(1)
Where assessee paid franchise fee to BCCI as IPL team then assessee was neither obtaining any enduring benefit by making payment of annual installment nor these payments were giving rise to any assets. Therefore since then payments were mere annual payments to BCCI-IPL to give a right to assessee to participate in the matches with its team and hence annual was revenue in nature.
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Capital or revenue expenditure - Franchise fee paid to BCCI - No enduring benefit -
Assessee was a 100% subsidiary of Red Chillies Entertainment (P) Ltd. The objects of assessee company amongst others, included setting up, buying, selling, acquiring, managing, running, operating on outright or in joint-venture or under franchisee or in partnership or under any kind of contract or arrangement for sharing of profits of sports team and sport players, setting up, managing and operating sports academy, promoting developing and managing sports talent, etc. As a part of business, assessee entered into Franchisee Agreement with BCCI to operate Kolkata Knight Riders (KKR) of BCCI in Indian Premier League (IPL) paid annual Franchisee Fee claimed as revenue expenditure. AO held that rights acquired by assessee on payment of Franchisee Fee were akin to 'licence' or 'Franchise', unders ection 32(1)(ii) and was thus an intangible asset eligible for depreciation @25%.Held: While for the 'central rights' were retained by BCCI, 'Franchisee rights' remained with assessee. Though by making payment of Franchise fee, assessee got a right to participate in the league and operate its home team for the year for which payment was made, but however, non-staging of league by BCCI-IPL (in whole or part) would not constitute a breach of the agreement, and the assessee was neither vested with any right to enforce the playing of such matches by BCCI nor had any right to take any legal action for said failure on part of BCCI to stage matches. Further, franchise rights as per Clause 16 of franchise agreement were personal to franchisee and it had no right to either assign agreement or to sub-contract or otherwise delegate franchisees obligations under it without the BCCI-IPLs written consent. Thus assessee was neither obtaining any enduring benefit by making payment of annual instalment nor these payments were giving rise to any assets. These payments were mere annual payments to BCCI-IPL to give a right to assessee to participate in the matches with its team. Therefore, annual franchise payment was a revenue expenditure.
Relied:India Win Sports (P) Ltd. v. ACIT (ITA No. 5290 & 5291/Mum/2014, dated 22-7-2016, DCIT v. M/s. Deccan Chargers Sporting Ventures Ltd. (ITA No. 1043/Hyd/2013, dated 28-10-2015
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
INCOME TAX ACT, 1961
Section 37(1)
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