Is a ticket for an Indian Premier League T-20 match the same as donating money to a trust working for the poor? That?s a Rs 1,200-crore question. And the Board of Control for Cricket in India (BCCI) thinks the answer is in the affirmative.
The government, however, begs to differ. The tax department has in this year?s Budget tweaked the compass of charitable activities to ensure that only genuine activities like ?relief to the poor? and ?education and medical relief? get tax exemptions.
Exemptions to trusts involved in activities and services that could be considered trade, commerce or business have been deleted. But at that time, the tax authorities had not scribbled into their calculations the money making potential of IPL, though the auctions had already taken place.
If the IPL loses its tax shelter, BCCI?s status as tax exempt for its other activities could also be called into question. At present, the Board receives an exemption based on a revenue department circular of 1984 that exempts from income tax activities that promote games and sports. The department has yet to figure out if BCCI?s earnings from the IPL should be considered commercial or ?charitable?.
For its part, the sport?s governing body is clear on that aspect. BCCI honorary secretary Niranjan Shah told FE: ?Whatever income we earn from IPL and other tournaments will be used to promote the game of cricket, and so we hope that it will still be exempt from tax.?
Meanwhile, BCCI and IPL have been asked by both the income tax and the service tax departments to submit their contracts for scrutiny to understand their exact tax liability. Sources said the tax department is working on all these issues, and they are likely to be sorted out by October, when the two sports organisations file their tax returns. BCCI is expected to earn nearly $1 billion over a ten-year period.