IPL franchise wins appeal as tribunal rules BCCI revenue sharing not taxable business support services

CESTAT Chennai allowed the appeal and set aside service tax demands against an IPL franchise. The tribunal held that income from BCCI-IPL central rights constituted revenue sharing, not taxable business support services, as BCCI is not a commercial organization. Service tax on sponsorship agreements was not applicable for the pre-2010 period. CENVAT credit reversal was improper as ticket sales were not exempted services. No service tax was payable under reverse charge mechanism on foreign player payments. The tribunal followed precedents from similar IPL cases and set aside all demands, interest, and penalties.

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Issues Involved:
1. Taxability of income received from BCCI-IPL under 'Business Support Services' (BSS).
2. Taxability of sponsorship agreements under 'sale of space or time for advertisement'.
3. Reversal of CENVAT Credit under Rule 6(3) for providing taxable and exempted services.
4. Taxability of payments made to foreign players under reverse charge mechanism.

Summary:

1. Taxability of Income from BCCI-IPL under BSS:
The Tribunal examined whether the income received by the appellant from BCCI-IPL for Central rights could be classified as 'Business Support Services'. The Tribunal referenced the case of KPH Dream Cricket Pvt. Ltd. and concluded that the income was a revenue-sharing arrangement rather than consideration for services provided. The Tribunal emphasized that BCCI-IPL is not a business or commercial organization but is registered for the promotion of sports. Consequently, the demand for service tax under this head was set aside.

2. Taxability of Sponsorship Agreements:
The appellant argued that the sponsorship agreements should not be classified under 'sale of space or time for advertisement' but rather as sponsorship services, which were exempt from service tax for sports events before 01.07.2010. The Tribunal agreed, citing previous decisions in Hero Motocorp Ltd. and Hero Honda Motors Ltd., which established that sponsorship of sports events was not taxable. Therefore, the demand under this category was also set aside.

3. Reversal of CENVAT Credit:
The Department alleged that the appellant was providing exempted services by selling tickets and thus required to reverse CENVAT Credit under Rule 6(3). The Tribunal, following the decision in KPH Dream Cricket Pvt. Ltd., held that the sale of tickets is not a service and therefore, no reversal of CENVAT Credit is required. The demand on this ground was set aside.

4. Taxability of Payments to Foreign Players:
The Department claimed that payments made to foreign players constituted 'Business Support Services' under reverse charge mechanism. The Tribunal, referencing the case of KPH Dream Cricket Pvt. Ltd., held that the players were primarily engaged in playing cricket, and any promotional activities were ancillary. The players were considered employees rather than independent entities providing business support services. Hence, the demand under this category was set aside.

Conclusion:
The Tribunal set aside the demands, interest, and penalties under all four issues, allowing the appeals with consequential relief.

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