Sponsorship fees for IPL team associate rights qualify for Section 65(105)(zzzn) exemption as sports event sponsorship

The CESTAT Ahmedabad held that sponsorship fees paid for associate sponsorship rights of an IPL team qualify for exemption under Section 65(105)(zzzn) as sponsorship of a sports event. The tribunal rejected the department's contention that the exemption applies only to sports events and not sports teams. Following the precedent in Hero Motocorp case, which was upheld by the SC, the tribunal ruled that sponsorship of an IPL team constitutes sponsorship of a sports event itself, given the extensive connotation of "sports event." The impugned order was set aside and the appeal was allowed.

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Issues Involved:
1. Whether the sponsorship fee paid by the appellant to M/s. JIPL for associate sponsorship rights of IPL team Rajasthan Royals is taxable under the category of sponsorship service.
2. Applicability of the exclusion clause under Section 65(105)(zzzn) of the Finance Act, 1994, for sponsorship of sports events.

Summary:

Issue 1: Taxability of Sponsorship Fee
The appellant, engaged in providing taxable services, entered into a memorandum of understanding with M/s. Jaipur IPL Cricket Pvt. Ltd. (JIPL) on 14.11.2009, granting them associate sponsorship rights for IPL Season 3 (2010). The department issued a Show Cause Notice dated 16.05.2013, for the period November 2009 to April 2010, proposing to demand Service tax under the category of sponsorship service along with interest and penalties. The Original Authority confirmed the demand, which was upheld by the Commissioner (Appeals). The appellant contended that the sponsorship was for a sports event, thus falling under the exclusion clause.

Issue 2: Exclusion Clause Applicability
Section 65(105)(zzzn) of the Finance Act, 1994, excludes services in relation to sponsorship of sports events from taxable services. The appellant argued that the entire demand period was prior to the amendment effective from 01.07.2010, which withdrew this exclusion. The Tribunal's decision in Hero Motorcorp Ltd. Vs. Commissioner of Service Tax, Delhi, held that sponsorship of an IPL team qualifies as sponsorship of a sports event due to the extensive connotation of "in relation to." This interpretation was upheld by the Hon'ble Supreme Court in Commissioner Vs. Hero Motorcorp Ltd.

Tribunal's Findings:
The Tribunal, after hearing both sides and reviewing the evidence, concluded that the sponsorship of the Rajasthan Royals team for IPL Season 3 falls under the exclusion clause for sports events. The Tribunal followed the precedent set in Hero Motorcorp Ltd., which was affirmed by the Supreme Court, and held that the demand for service tax was unsustainable.

Conclusion:
The impugned order was set aside, and the appeal was allowed with consequential reliefs. The Tribunal pronounced that the appellant is not liable for service tax under Section 65(105)(zzzn) for the period in question.

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