IPL Sponsorship expenses allowable as Revenue Expenditure

1.The FAA after considering the elaborate submissions of the assessee,held that it had entered into an agreement with the sports company namely India-Win in the month of March, 2010,that the assessee-group became cosponsor of Mumbai Indian IPL cricket team as an associate partner, that as per the agreement the ground logo of the assessee group was displayed permanently in the cricket stadium is also on the playing gear of the players,that in the terms of the agreement and amount of Rs.4.50 crores was paid towards sponsorship fees during the year under consideration, that the sponsorship fees for different years had been apportioned and allocated to 3 entities of the assessee group which were using the brand logo in the ratio of their respective turnovers during the year, that out of the expenditure of Rs. 2.50 crores and amount of Rs. 21.61 lakhs was allocated to the assessee, that the expenditure incurred on IPL sponsorship did not provide it any benefit of enduring nature,that the expenditure had been incurred year after year by the assessee group with a view to get visibility, that it was in nature of some kind of advertisement expendi – ture,that same should be allowed as revenue expenditure. Referring to the case of Delhi Cloth and General Mills Co.Ltd.(1 15 ITR 659) of the honorable Delhi High Court,the FAA allowed the appeal filed by the assessee.

1.a.With regard to management fee,the FAA observed that there was no doubt about the genuineness of expenditure,that the expenditure was incurred for availing infrastructure facilities administrative support,like manpower recruitment, HR services, uses of computer, telephone, photo copiers,infrastructure set up etc. in order to carryout business operations smoothly, that the parent company had allocated a certain amount to the account of the assessee in the ratio of its turnover. He finally held that expenditure had to be allowed as revenue expenditure.

2.Before us,the DR supported the order of the AO and the AR relied upon the order of the FAA. We find that the assessee group had entered into an agreement with India Win,that it was a co-sponsor of Mumbai Indian IPL team, that it had incurred similar expenditure in the subsequent two years,that out of the total expenditure the assessee had claimed a very small proportion under the head sponsorship expenses. Such an expenditure is for advertising the brand name of the Group.Being a recurring expenditure,it had to be allowed as revenue expenditure.We find that in the case of Delhi Cloth and General Mills Co.Ltd.(supra)the Hon’ble Court had held that expenditure incurred for organizing sports events are allowable items of revenue expenditure as such events publicise the names of the sponsor.The AO was not justified in capitalising the expenses.The entire expenditure was rightly allowed by the FAA as revenue expenditure.

After going through the details of expenditure incurred by assessee under the head managerial expenses, we are of the opinion that it had not got any enduring benefit from the expenditure incurred nor did the expenditure create any capital asset.Therefore, we do not want to interfere with the order of the FAA.Considering the above,we decide second ground of appeal against the AO.