The Board of Control for Cricket in India (BCCI) may have to stump up more than Rs 500 crore in taxes, with tax authorities not in favour of granting exemption requests sought by the board for the past two tax years. The board, widely regarded as one of the richest sporting bodies on the planet, has claimed exemption of Rs 421 crore and Rs 145 crore for assessment years 2008-09 and 2009-10 , respectively, under Section 11 of the Income-Tax Act.
This Section exempts taxation on charitable activities and promotion of sports has historically been covered under such activities.
But this benefit was withdrawn from the tax assessment year 2007-08 following changes made in the objectives of BCCI in 2007.
The changed objectives included establishing coaching academies and holding 20-over matches , immortalised as the Indian Premier League, a hugely successful BCCI property that successfully completed its third season this year.Online GST Certification Course by TaxGuru & MSME- Click here to Join
But BCCI’s arguments have failed to cut much ice with the tax authorities, who say its activities are commercial and there is no element of charity.
Budget weakened BCCI’s case
The income-tax department slapped a Rs 118-crore demand for 2007-08 on the board and one official said it has already recovered Rs 92 crore. This effectively means the board will have little choice but to pay up the bulk of the more than Rs 500 crore in taxes demand for 2008-09 and 2009-10 , the tax department official added.
The I-T department’s claims include tax on income BCCI earned from IPL during the period. BCCI is contesting the decision of the tax authorities. For three years before the exemption was withdrawn, BCCI was granted a total tax exemption of Rs 215 crore.
But the board’s case has also weakened after the 2009-10 budget made changes in the definition of ‘charitable purpose’ to ensure that entities operating on commercial lines did not claim income-tax exemption. Tax rules now define ‘charitable purpose’ to include relief for poor, education, medical relief, and the advancement of any other object of general public utility.
The income-tax department is also unlikely to treat BCCI and IPL separately and provide exemption to the board, reasoning that IPL was a part of BCCI and not a separate legal entity.