IPL Sponsorship Exempt from Service Tax: CESTAT Delhi

Commissioner of Service Tax Vs Nokia India Pvt. Ltd. (CESTAT Delhi)

The case centers on an appeal filed by the Revenue challenging the decision of the Commissioner to drop a demand for service tax on Nokia India Pvt. Ltd. for its sponsorship of the Kolkata Knight Riders, a team in the Indian Premier League (IPL). The Revenue believed that Nokia’s payment of ₹15 crores to the team for sponsorship rights should be taxed under the category of ‘sponsorship services’ as defined in the Finance Act, 2006. However, the adjudicating authority, referencing a similar case involving Hero Motocorp Ltd., ruled that the sponsorship of IPL, a sports event, is exempt from service tax under the exclusionary clause of section 65(105)(zzzn).

The Tribunal upheld the earlier ruling, finding that sponsorship of a sports event like IPL, which involves a commercial element, qualifies for immunity from service tax. This ruling is in line with previous decisions where sponsorship services for sports events were deemed exempt from tax under the relevant provisions. The Tribunal also noted that the Revenue’s appeal had already been dismissed by the Supreme Court in similar cases, reinforcing the applicability of the exemption. Consequently, the CESTAT dismissed the Revenue’s appeal, affirming the decision to drop the service tax demand on Nokia for its IPL sponsorship.

FULL TEXT OF THE CESTAT DELHI ORDER

1. The Revenue has filed the present appeal challenging the order-in-original no.30/ST/SRB/2014 dated 19.02.2014 whereby the Commissioner dropped the demand in terms of the show cause notice dated 23.05.2011 towards service tax under the service head ^„sponsorship services‟ as defined under the section 65(99a) of the Finance Act, 2006.

2. M/s. Nokia India Pvt Ltd¹ is registered with the Service Tax Commissionerate, Delhi for the taxable services namely, Sponsorship Service, Business Support Services, Development and Supply of Content Services, Information Technology and Software Services, Consulting Engineer, Manpower Recruitment Agency, Online Information and Data access and retrieval Services, Commercial Training & Coaching, Business Auxiliary Services. Information was received that the respondent had entered into an agreement with M/s. Knight Riders Sports Pvt Ltd towards receiving the sponsorship rights of the Kolkata Knight Riders team, one of the eight teams participating in the DLF- IPL T-20 Cricket Tournament. Kolkata Knight Riders had been granted franchisee rights by the Board of Control of Cricket in India (BCCI) for forming the cricket team to represent the State of Bengal in the T-20 tournament. The respondent had paid Rs.15 crores to Kolkata Knight Riders for receiving the sponsorship rights of the said team. The Department was of the view that the said amount was taxable under the category ^„sponsorship services‟. The adjudicating authority by the impugned order considered the issue whether the noticee is liable to pay service tax under the category of sponsorship services for sponsoring a team participating in the IPL T-20 Cricket Tournament and whether the IPL T-20 Cricket Tournament can be termed as “sports event” in terms of the definition of taxable service, i.e. sponsorship services under section 65 (105) (zzzn) of the Finance Act, 1994. After referring to the various provisions of the Act and the service tax rules, the adjudicating authority noticed that the issue of levy of Service Tax Rules on sponsorship services has been considered by this Tribunal in the case of M/s. Hero Motocorp Limited. vs. Commissioner of Service Tax, Delhi² and in light thereof, dropped the proceedings observing as under:

“I find that the ratio of the above referred CESTAT decision is squarely applicable to the facts of the present case where even period involved is similar i.e. year 2008, where Hon’ble CESTAT has set aside the findings of the adjudicating authority that sponsorship of a sports event, which has a commercial element (the IPL events) is disentitled to the benefits of immunity to Service Tax as a “Sports Event”. It has been conclusively decided by Hon’ble CESTAT that “The agreement in issue (between GMR and the appellant) clearly constitutes sponsorship. That is also the admitted position, since that is the basis for initiation of proceedings leading to the assessment of the appellant’s liability to service tax under provisions of Section 65(105)(zzzn). Since the sponsorship agreement, in our considered view falls within the exclusionary clause i.e. the clause which excludes sponsorship services in relation to sports events, the appellant is clearly immune to the charge of service tax.” Following the ratio of the judgement of Hon’ble CESTAT as discussed above, I find that the present demand is also devoid of any merit and is hence liable to be set aside.”

3. The learned counsel for the appellant has also relied on the decision of the Tribunal in the case of Hero Motocorp Limited which has been affirmed by the Supreme Court whereby the appeal filed by the Revenue was dismissed on merits. The learned counsel has also referred to series of decisions passed by the Tribunal following the aforesaid decision and deciding the issue in favour of the party that the sponsorship agreement was within the exclusionary clause, which excludes sponsorship services in relation to sports events under the provisions of section 65 (105)(zzzn) of the Act. Thus, the issue is no longer res integra and the present case is squarely covered by the principle enunciated.

4. We, therefore, do not find any infirmity in the impugned order and the same is, accordingly, upheld. The present appeal filed by the Revenue is, therefore, dismissed.

(Order pronounced on 8^th November, 2024)

Notes:- 

¹the Respondent

 2. 2013 (32) S.T.R 371 (Tri-Del.)