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TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 962
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.... of the case, the Ld. CIT(A) erred in not appreciating the fact that the benefits arising out of entering into the Franchisee agreement with BCCI i.e., the share in central rights income, are of enduring nature which will provide long term benefits to the assessee and hence, ought to be treated as a capital expenditure?" 3) "Whether, on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance made by the AO of the Franchisee payments done by the assessee company as a revenue expenditure and treating the same as capital expenditure & allowing the due depreciation on the same for the year under consideration?" 4) "Whether, on the facts and circumstances of the case, the Ld. (IT(A) erred in deleting the disallowance made under section 40(a)(i) of the Act in respect of payments made to Mr. John Wright?" 2. Briefly stated, facts of the case are that the assessee company is engaged in the business of owning, managing and operating the Mumbai Team of the Indian Premier League (IPL) popular name as "Mumbai Indians". The assessee filed return of income for the assessment year under consideration on 10.02.2021 declaring total income at R....
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....f the period of the League there is no embargo on the company to continue to run the business. Thus entire franchisee payment made for setting up such business represents capital expenditure. Merely a condition that these payments are required to be made in annual instalments or at a certain percentage of the future rights income, does not alter the character of these payments from capital to revenue. 5.2 Further, the Assessing Officer noted that the 'franchise' itself can be sold, subject to terms and conditions in the agreement, by the franchisee and thus right acquired by the assessee is transferable right and the payment made by the franchisee to BCCI to obtain and enjoy the rights and therefore, in the nature of capital expenditure. 5.3 The Assessing Officer further noted that similar issue was there in earlier years where the Ld. CIT(A) and the ITAT has deleted the addition but to keep the issue alive and said decision were not accepted by the Department and the matter was pending before the Hon'ble High Court. Therefore, to keep the issue alive, disallowance of franchisee fee may hold to be capital expenditure.. 5.4 On further appeal, the Ld. CIT(A) following the de....
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....ed by the AO. 6.2 The appellant submitted the written submissions in respect of grounds no. 2, 3 and 4 as under:- This ground that the depreciation should be allowed on the total accumulated cost of asset of Rs. 639.44 croresis an alternate ground and without prejudice to Appellant's contention in paragraph 1 above regarding the Appellants claim for deduction of the said payment as an allowable revenue expenditure. In order of Hon'ble Commissioner of Income-tax (Appeals) for AY 2011- 12, AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17, while deciding similar ground on same set of facts, it was held that the alternate ground need not be adjudicated since the Franchisee fees have been held as revenue in nature. 6.3 Since the expenditure towards franchise fee payments has been held as revenue in nature, there is no question of allowing depreciation on revenue expenditure and so these grounds regarding the claim of depreciation and method of calculation of depreciation become academic in nature and hence infructuous. These grounds are accordingly dismissed." 5.7 We have heard rival submissions of the parties and perused the r....
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....o deduct TDS as per the provisions of section 195 of the Act and accordingly the relevant amount of Rs. 70,29,018/- was disallowed by the Assessing Officer invoking section 40(a)(i) of the Act. 6.2 Before the Ld. CIT(A), the assessee argued that services provided by Mr. John Wright were in the nature of Independent Personal Services (IPS) and fall under the purview of Article 14 of the India-New Zealand DTAA. Since Mr. John Wright was a tax resident of New Zealand, the relevant payments made to him were not liable for TDS. According to the assessee, the services were provided by Mr. Wright in his independent capacity involving professional skills. The agreement with Mr. John Wright did not dictate as to how to provide the scouting services and the non- compete clause in the agreement was only to avoid the situation of any conflict of interest and to ensure complete dedication of Mr. Wright towards team building. The assessee also argued that the comparison with the TDS done in the case of Mr. Mahela Jayawardene was also not correct as Mr. Mahale Jayawardene was not able to produce the Tax Residency Certificate in his case and so the benefit of DTAA was not extended to him. There....
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....It is common knowledge that such non-compete clauses do feature routinely in contractual agreements and their existence in the agreement would not, per se, change the nature of the services offered form "independent" to "dependent". Also, the comparison made by the AO with the case of Mr. Mahela Jayawardene cannot be accepted as it is clear that in the case of Mr. Jayawardene, the DTAA benefits were not extended in the absence of the tax residency certificate. 8.6.2 The fact remains that Mr. John Wright, a tax resident of NewZealand, was appointed as a talent scout for identifying potential good quality players for the Mumbai Indians IPL team. He was appointed on the basis of his knowledge, expertise and skills as a professional international ex-cricketer and coach. While his agreement specified "what" to do, it did not specify "how" to do it. Hence no control was exercised over Mr. Wright as to how to scout the new talent. The services rendered were indeed professional services or, alternatively, activities of independent character. No inference can be drawn that there was any employer-employee relation neither has any such assertion been made by the AO. Reliance is place....
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....nsideration for services of a managerial, technical or consultancy nature, including the provision of services of technical or other personnel". 8.6.4 Thus, once it is established that income is derived by a tax resident of New Zealand from any professional service or any other activity of an independent character, such income will be taxable in New Zealand only. This becomes very clear from the plain reading of Article 12 and Article 14 of the DTAA. Since, such income would not be taxable in India, the liability for withholding taxes or doing TDS will not arise in India. Therefore, it is clear the payment of Rs. 70,29,018/- made to Mr. John Wright was payment for independent personal services not liable for TDS as per Article 14 of the DTAA and hence the disallowance made u/s 40(a)(i) of the Act cannot be sustained. Hence, these grounds of appeal are allowed." 6.3 We have heard rival submissions of the parties and perused the relevant materials on record. Before us, the Ld. counsel for the assessee has referred to Article 14 of the DTAA. For ready reference said Article is reproduced as under: "INDEPENDENT PERSONAL SERVICES 1. Income derived by an individua....