Compensation Paid by BCCI to Cricket SA on Termination of Champions League Twenty20 not Taxable in India: ITAT

Case details: Board of Control for Cricket in India v. Dy. Commissioner of Income Tax - [2023] 150 taxmann.com 246

Judiciary and Counsel Details

• • G. S. Pannu, President and Sandeep Singh Karhail, Judicial Member.
  • P.J. Pardiwala, Nitesh Joshi and Anil Sathe for the Appellant. 
  • Ms. Surabhi Sharma for the Respondent.

Facts of the Case

The assessee-BCCI was the national body for Cricket in India, and deriving substantial income from Cricket tournaments & matches. In 2008, the assessee commenced conducting a Cricket tournament, namely, the Champions League T20 (“CLT20”).

To maximise the commercial success of the CLT20, the assessee arrived at an arrangement with Cricket South Africa (“CSA”) that the assessee paid a quantified participation fee to CSA each year towards the participation of teams from its jurisdiction for the duration of the CLT20 term and deducted tax thereon. After a certain period, the agreement was discontinued, and BCCI made payment to the CSA on the termination of such agreement in the nature of non-compete fees.

Assessee filed an appeal under section 248 seeking a declaration that the tax was not required to be deducted from the amount it paid to the CSA. However, CIT(A) dismissed the appeal and held that said payment is taxable as ‘Income from business’ under section 28(va).

Aggrieved-assessee challenged the order of CIT(A) before the Mumbai Tribunal.

ITAT Held

The Tribunal held that as per the provision of the Explanation 1(a) to section 9(1)(i), only the portion of the income which is “reasonably attributable” to the operations carried out in India shall be deemed to accrue or arise in India for taxation.

In the present case, it was evident that the assessee and CSA agreed to cease in full all arrangements amongst them. Accordingly, CSA was not obligated to ensure the participation of any domestic team in the CLT20 Tournament. Further, it was not involved in directly or indirectly managing, operating, staging, involving itself and/or any teams from South Africa and/or otherwise participating in any tournament similar to CLT20 Tournament. Thus, in the year under consideration, no services were rendered by facilitating two domestic teams for participation in the CLT20 Tournament.

As regards the compensation being in the nature of non-compete fees, the non-compete clause would also apply outside India because if any tournament takes place in India, the same would be organised by the assessee, being the national body for cricket in India. CSA was not restrained from participating in such tournament, by virtue of the Termination Agreement.

Therefore, the payment to CSA was not arising from any operations carried out in India in the year under consideration. Thus the same was not taxable under section 9(1).