M/s Royal Challengers Sports Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 59/BANG/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7597 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR ADD L
• Assessee Lawyers: SHREYA L
• Keywords: Business expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B ENGALURU BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I TA NO. 59 / BANG/2 0 1 5 (ASSESSMENT YEAR: 2010 - 11 ) M/S.ROYAL CHALLENGER SPORTS PVT. LTD. UB TOWER, 24 , VITTAL MALLYA ROAD, BENGALURU - 560001. PAN:AADCR 9071 L VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE 2(3), BENGALURU. RESPONDENT APPELLANT BY : MS. SHREYA, L, CA. RESPONDENT BY : DR. P.V.PRADEEP KUMAR, ADD L.CIT(DR) DATE OF HEARING : 25/04/2018 DATE OF PRONOUNCEMENT : 20 /07/2018 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - VI , BENGA LURU [CIT(A)] DATED 07 / 1 0/201 4 FOR THE ASSESSMENT YEAR 201 0 - 11 . 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 59 /BANG/20 15 PAGE 2 OF 5 3. THE ASSESSEE IS A COMPANY DULY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE MAIN ACTIVITY OF THE ASSESS EE - COMPANY IS STATED TO BE ONE OF THE FRANCHISEE OF BCCI - IPL WHICH ORGANIZES T - 20 FORMAT CRICKET MATCHES. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 WAS FILED ON 01/10/2010 DECLARING LOSS OF RS.91,10,62,798/ - AND SUBSEQUENTLY REVISED L OSS AT RS. 26,55,04,799/ - . AGAINST THE SAID RETURN OF INCOME THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 22/02/2013 PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] AT TOTAL LOSS OF RS.25,58,57,798/ - . THE DISPARITY B ETWEEN THE RETURNED LOSS AND THE ASSESSED LOSS IS ON ACCOUNT OF DISALLOWANCE OF AMOUNT OF CONTRIBUTION MADE TO KARNATAKA STATE CRICKET ASSOCIATION (KSCA), BENGALURU, FOR CONSTRUCTION OF CRICKET ACADEMY OF RS.45 LAKHS AND ALSO DISALLOWANCE OF TICKETING EXPE NSES OF RS.51,47,000/ - . 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER, CONFIRMED THE ORDER OF THE AO. ITA NO . 59 /BANG/20 15 PAGE 3 OF 5 5. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US IN THE PRESENT APPEAL. 5.1 LEARNED AR OF T HE ASSESSEE SUBMITTED THAT THE CONTRIBUTION OF RS.45 LAKHS WAS MADE BY THE ASSESSEE FOR CREATION OF CRICKET ACADEMY FOR THE PURPOSE OF TRAINING AND DEVELOPMENT OF ENTHUSIASTIC CRICKETERS AND TO CREATE PLATFORM OF TALENTED CRICKETERS WHO COULD PARTICIPATE IN THE LEAGUE MATCHES WHEREIN THE ASSESSEE IS A PARTICIPANT. HE FURTHER SUBMITTED THAT CREATION OF FACILITIES IS ESSENTIAL FOR IDENTIFICATION OF TALENT IN YOUNG PLAYERS AND TO ENSURE THEM WITH A PROVISION OF ADEQUATE TRAINING AND COACHING FACILITIES. HE NCE, THIS CONTRIBUTION WAS MADE IN THE ORDINARY COURSE OF BUSINESS OF THE ASSESSEE AND SHOULD BE ALLOWED AS BUSINESS EXPENDITURE AS IT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. MALAYALAM PLANT ATION LTD. (53 ITR 140) . IT WAS FURTHER SUBMITTED THAT ON ACCOUNT OF MAKING THIS CONTRIBUTION, THE ASSESSEE HAD NOT ACQUIRED ANY ASSET OF AN ENDURING NATURE OR ENDURING BENEFIT AS THE BENE FIT TO JOIN THE TEAM STILL RESTS WITH THE CONCERNED PLAYER. THEREFORE, IT SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE IN THE LIGHT OF THE HON BLE APEX COURT DECISION IN THE CASE OF EMPIRE JUTE CO. LTD. VS. CIT (124 ITR 1). 5.2 AS REGARDS TICKETING EX PENSES OF RS.51,47,000/ - IT IS SUBMITTED THAT ONE OF THE MAJOR SOURCES OF ASSESSEE S INCOME IS INCOME FROM SPONSORSHIP WITH UNITED SPIRITS LTD., BEING ONE OF THE CHIEF SPONSORS. AS PER THIS SPONSORSHIP AGREEMENT, THE ASSESSEE - COMPANY HAD OBLIGATION TO PRO VIDE FREE HOSPITABILITY AND PROVIDE FREE TICKETS IN LIEU OF CONSIDERATION RECEIVED F ROM ITS SPONSORS. HE FURTHER SUBMITTED THAT THE AO NEVER DOUBTED THE GENUINENESS OF THE EXPENDITURE. AS THE TICKETS WERE PURCHASED AND ISSUED IN THE BUSINESS INTEREST OF THE COMPANY THE SAME SHOULD BE ALLOWED AS DEDUCTION. THE EXPENDITURE WAS INCURRED TO MAINTAIN GOOD RELATIONS AND BY KEEPING REPRESENTATIVES OF FOREIGN COLLABORATORS IN GOOD HUMOUR AND THEREFORE, SHOULD BE ALLOWED AS A BUSINESS EXPENDITURE. ITA NO . 59 /BANG/20 15 PAGE 4 OF 5 5.3 ON THE OTHER HAND , LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE RAISED 5 GROUNDS OF APPEAL. GROUND NOS.1, 2 AND 5 ARE GENERAL IN NATUR E. GROUND NO.5 CHALLENGES THE ADDITION ON ACCOUNT OF CONTRIBUTION MADE TO CRICKET ACADEMY OF RS.45 LAKHS HOLDING IT TO BE CAPITAL EXPENDITURE. THE ASSESSEE MADE A CONTRIBUTION OF RS.45 LAKHS TO KARNATAKA STATE CRICKET ASSOCIATION (KSCA) FOR THE PURPOSE O F CREATING A CRICKET ACADEMY. THE ASSESSEE WAS ALSO A FRANCHISEE OF BCCI - IPL , WHICH OWNS ROYAL CHALLENGERS BANGALORE TEAM AND IS ALSO OWNER OF A CRICKET TEAM AND HAD COMMERCIAL INTEREST IN THE GAME OF CRICKET. THIS CONTRIBUTION WAS MADE IN TERMS OF AGREE MENT WITH KARNATAKA STATE CRICKET ASSOCIATION. THE OBJECTIVES FOR WHICH THE CRICKET ACADEMY WAS SET UP ARE AS UNDER: IT IS STATED THAT AT THE TIME OF ADMISSION OF PLAYER TO THE ACADEMY, THE (KSCA) SHALL ENSURE THAT THE PLAYER SHALL SIGN A CONTRACT GIVI NG THE APPELLANT FIRST RIGHT TO OFFER AN UNCAPPED PLAYER CONTRACT TO RECRUIT THE PLAYER TO PLAY FOR THE APPELLANT. THUS IT IS CLEAR THAT THE TERMS OF CONTRACT ARE DIRECTLY RELATED TO BUSINESS INTEREST OF THE ASSESSEE. THEREFORE, THE CONTRIBUTION MADE FOR CREATION OF CRICKET ACADEMY CAN BE HELD TO BE IN BUSINESS INTEREST AND THE SAME IS ALLOWABLE AS DEDUCTION. ACCORDINGLY, WE ALLOW THIS GROUND OF APPEAL. AS REGARDS THE TICKETING EXPENSES, THERE IS NEITHER DOUBT ABOUT GENUINENESS OF THE EXPENDITURE NOR TH AT THE EXPENDITURE INCURRED WAS FOR BUSINESS PURPOSE. UNDOUBTEDLY , THIS EXPENDITURE ITA NO . 59 /BANG/20 15 PAGE 5 OF 5 INCURRED BY THE ASSESSEE WAS TO PROMOTE GOODWILL AND ENHANCE THE BUSINESS INTEREST AND THEREFORE, THE SAME IS ALLOWABLE AS A BUSINESS DEDUCTION IN THE LIGHT OF THE DECISIO N OF THE HON BLE HIGH COURT PUNJAB & HARYANA IN THE CASE OF CIT VS. AVERY CYCLE INDS. LTD., ( 296 ITR 393 )(P&H) AND GUJARAT HIGH COURT DECISION IN THE CASE OF KARJAN CO - OPERATIVE COTTON SALES GINNING & PRESSING SOCIETY VS. CIT ( 199 ITR 17 )(GUJ.) . 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JU LY, 2018 S D/ - SD/ - ( SUNIL KUMAR YADAV ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BEN GALURU. D A T E D : 20 / 0 7 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE