The income-tax department has served service tax notices on IPL sponsors DLF, Adidas and Religare. Sources said the tax demand on DLF, the title sponsor which is supposed to pay Rs 40 crore a year as sponsorship fee for five years, was Rs 4.8 crore for the league’s first edition in 2008. Adidas and Religare sponsored teams.
However, DLF officials said they had contested the notice and argued that sports sponsorship was not subject to service tax.
The service tax paid was Rs 64 crore for IPL I but only Rs 29 crore for IPL II in 2009. Although the league says the dip was because last year’s event was held in South Africa, the Central Board of Excise and Customs (CBEC), which deals with the tax, is not convinced.
It has pointed out that most of the tax-paying parties — the franchisor, the franchisee and most of the service providers — were the same for IPL I and II.
The franchisor is the BCCI (cricket board) /IPL, while the franchisees are the team owners. The tax is collected from sponsorship, media space sales and services such as catering, sports management, publicity and security given to teams and to IPL itself.
Notices demanding service tax have also been sent to the teams, including Rajasthan Royals and Kings XI Punjab.
In the notice sent to KPH Dream Cricket Pvt Ltd, which owns Kings XI Punjab, recently, the central excise commissioner, Chandigarh, had demanded nearly Rs 5 crore as service tax for the matches the team played in Mohali during IPL I.
The sum includes interest and penalties.
The notice says KPH Dream Cricket is liable to pay Rs 3.9 crore on the Rs 30 crore that it had received as aid from the BCCI-IPL.
According to sources, another Rs 37 lakh is payable on the gate (ticket) receipts of Rs 4.7 crore. Over Rs 9 lakh as service tax was due from the Dream Cricket for the commission/brokerag e — of nearly Rs 75 lakh — paid by it to companies in Australia and Sri Lanka.
BCCI officials have admitted to the tax authorities that service tax dues had been delayed, the sources said.
