TaxTMI 
TaxTMI 
2026 (6) TMI 1071
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll take ITA no. 5952/Mum/2024, A.Y. 2018-19 as lead case and the facts narrated there in. The Revenue has raised the following grounds of appeal: "1) "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in treating the annual consideration payment in the name of franchisee fee of Rs. 30,18,61,800/- by the assessee to BCCI as revenue expenditure even when the enduring benefit is involved in such type of payment made by the assessee company?" 2) "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance to Rs. 25,08,527/- from Rs. 82,23,537/- as against Airfare, Travelling and Vehicle Charges only for the limited purpose of verification of the claim of expenses whereas such disallowances were made by the assessing officer within the provisions of section 37(1) of the IT Act, 1961 on account of non-genuine payment made on airfare and travelling expenses of celebrities?" 3) "On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the disallowance of Rs. 35,74,397/- out of website expenses and directing the AO to treat the web-site expenses as revenue expenditure w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o.6675/Mum/2016 b) Recently, Mumbai ITAT in case of Indiawin Sports Pvt. Ltd. has decided this identical issue holding that annual consideration in the form of franchisee fees is in the nature of revenue expenditure: i. Α.Υ. 2016-17, 2017-18, 2018-19: ITA No. 4497/Mum/2019, 266/Mum/2021, 3884/Mum/2023 ii. Α.Υ. 2020-21: ITA No. 4576/Mum/2023 4.2 The Coordinate Bench of ITAT has held in ITAT No. 1307/Mum/2013 as under : 45. We shall first take up the core issue involved in the present appeal as to whether the Franchise fee paid by the assessee to BCCI-IPL was rightly claimed by it as a revenue expenditure, or the same being in the nature of a capital expenditure was rightly disallowed by the lower authorities. We find that the assessee had entered into a franchise agreement with BCCI IPL in April, 2008. That pursuant to the aforesaid agreement the assessee was vested with the right to operate the franchise and to be a member of the league and operate a team in the city of Kolkata and participate in the IPL tournament, which was owned and operated by BCCI-IPL. The assessee in terms of Clause 7 of the franchise agreemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respect of the Central Rights and all rights in respect of the licensing of replica uniforms for any team in the league. 46. We have perused the various clauses of the franchise agreement, as per which the franchise rights had been vested with the assessee. We have given a thoughtful consideration to the nature of the rights, and find that the payment of the Franchise fee by the assessee for a year, therein vested with him a right to participate in the tournament for the said year without guarantee that in the future years it would be eligible to participate in the tournament. We find that the payment of the Franchise fee by the assessee as per the terms contemplated in the franchise agreement enabled it to participate in the tournament for the subject year and earn revenue from the same. We further find that the payment of the Franchise fee by the assessee was in the nature of recurring annual payment which was paid to facilitate participation in the league and operating the team only for the year for which the payment pertained, with neither vesting of any right of participation in the subsequent years, nor leading to creation/ownership of an asset or generation of a ben....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gue and operating the team was restricted only to the year to which the payment pertained, therefore, it can safely be concluded that by making such payment there was neither a creation of an asset or generation of a benefit of an enduring nature in the hands of the assessee. We find that a conjoint reading of Clause 7 of the agreement contemplating the payment of the Franchise fee and Clause 1 defining the term "year", clearly reveals beyond any scope of doubt that the payment of the Franchise fee of Rs. 30,03,60,000/- by the assessee for IPL Season-1 was only for the period 10.04.2008 (i.e the date of the signing of the agreement) till 31.12.2008. That as stands gathered from the franchise agreement, the making of the aforesaid payment of Franchise fee by the assessee to BCCI-IPL for IPL Season-1 only enabled the assessee to participate in the league tournaments for IPL Season-1 and operate its team for the aforesaid period for which the payment was made. We are unable to persuade ourselves to subscribe to the view of the lower authorities that any benefit of enduring nature was generated in the hands of the assessee by making the payment of the Franchise fee of Rs. 30,03,60,000/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annual franchise fee, if the assessee fails to make the payment, then it would not be allowed to participate in IPL. Thus, the assessee has made the annual payments to earn the annual income. The nature of transaction/payment clearly demonstrates that the assessee is neither obtaining any enduring benefit by making payment of annual instalment these payments are giving rise to any assets. These payments are mere annual payments to BCCI-IPL to give a right to the assessee to participate in the matches with its team. Therefore, the anntial franchise payment was a revenue expenditure." We further find that a similar view was also taken by the ITAT, Hyderabad "B", Hyderabad in the case of DCIT Vs. M/s Deccan Chargers Sporting Ventures Ltd. (ITA No. 1043/Hyd/2013, dated 28.10.2015, wherein too the Tribunal had concluded that the Franchise fee paid by the franchisee assessee to BCCI-IPL was in the nature of a revenue expenditure. We find that the judgments of the Hon'ble Supreme Court in the case of Techno Shares & Stocks Ltd. & Ors. vs. Commissioner Of Income Tax (2010) 327 ITR 323(SC) and Jonas Woodhead And Sons (India) Ltd. Vs. Commissioner of Income-Tax (1997) 224 ITR 34....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of products, with no embargo on the assessee to continue with the manufacturing of the products even after the expiry of the agreement, therefore, an enduring benefit got vested with the assessee, and thus the payment made by the assessee for the same was a capital expenditure. We are of the considered view that unlike the facts involved in the aforesaid case laws relied upon by the A.O, in the case before us, as no enduring benefit by making the payment of the Franchise fee got vested with the assessee, therefore, the said judicial pronouncements being distinguishable on facts would not assist the case of the revenue. We thus in the backdrop of our aforesaid observations and finding ourselves to be in agreement with the view taken by the coordinate benches of the Tribunal, therefore, are of the considered view that the payment of the Franchise fee for IPL Season-1 of Rs. 30,03,60,000/- by the assessee can safely be held to be in the nature of a revenue expenditure, which was rightly claimed by the assessee as such while computing its income for the year under consideration. We thus set aside the order of the CIT(A) and direct the A.O to delete the addition of Rs. 30,03,60,000/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t also be including expenses incurred on VIPs and celebrities. The A.O on the basis of his aforesaid conviction thus carried out an adhoc disallowance of the expenses, viz. (i). Rs. 82,25,126/ out of airfare expenses; (ii). Rs. 3,16,616/- out of travelling expenses and (ii). Rs. 10,22,390/ out of vehicle hire charges, as a result whereof a total disallowance of Rs. 95,63,132/-was made by him. We find that the assessee had claimed that during the course of the assessment proceedings documentary evidence supporting the aforesaid expenses incurred by it were furnished with the A.O. However, the CIT(A) while upholding the adhoc disallowance made by the A.O observed that the assessee had failed to produce before him any evidence, viz. air tickets, details of vehicles, name of service providers, persons utilizing the services and their nexus with the business of the assessee. We find that a perusal of the assessment order reveals that an adhoc disallowance of the aforementioned expenses was carried out by the A.O not for the reason that the assessee had failed to substantiate the genuineness and veracity of the expenses, but rather, for the reason that as per him now when the assessee ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the said disallowance and had observed that as the assessee had not produced before him any evidence, viz. air tickets, details of vehicles, name of service providers, persons utilizing these services and their nexus with the business etc., therefore, the possibility of the expenditure partly having been for non business purposes could not be ruled out. We further find that the assessee also had averred before us that it was not given an the documentary evidence and submissions of the assessee in support of its claim of the aforesaid expenses, then he though would be at a liberty to disallow the same, but however, the said disallowance shall not exceed that made by him towards the respective expenses while passing the original assessment order. The Ground of appeal No. 11 to 13 are allowed for statistical purposes in terms of our aforesaid observations. 5.3 Since the Ld. CIT(A) had already decided this issue following the decisions of the Coordinate Benches of the ITAT in the assessee's own case for AYs 2009-10, 2010-11, 2011-12, and 2012-13, and even otherwise, the Ld. DR could not place anything on record to controvert or rebut the lawful findings recorded by the Ld. CIT(A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds website design charges is not in the nature of a capital expenditure stands settled by the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Indian Visit Com. Pvt. Ltd. (2009) 176 Taxman 164 (Del) as well as the order of a coordinate bench of the ITAT, Mumbai in the case of Radial Marketing Pvt. Ltd. Vs. ITO [ITA No. 3868/Mum/2008] wherein the website design charges had been held in the aforesaid judicial pronouncements as a revenue expenditure. We further find that as averred by the ld. A.R, the CIT(A) in the assessee's own case for the subsequent years, viz. AY 2010-11 to AY 2012-13 had held the web designing charges as a revenue expenditure. We are of the considered that as claimed by the ld. A.R before us that the website design charges had been held by the CIT(A) in the subsequent years, viz. AY 2010-11 to AY 2012-13 as a revenue expenditure in the assessee's own case, therefore, in all fairness restore the matter to the file of the A.Ο to make necessary verifications as regards the factual position and readjudicate the entitlement of the assessee as regards the web designing charges, keeping in view the aforesaid judicial pronouncements....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Kolkata included various relatives of directors, VIPs and celebrities, which thus could not be held as a business expenditure. The A.O further holding a conviction that the room booking charges of Rs. 96,26,375/ incurred by the assessee for rooms taken on hire at ITC, sonar, Kolkata were also to some extent incurred by the assessee for the stay of relatives of directors, VIPs and celebrities, therefore, on the said count had on an estimate basis disallowed 33% of such expenses and made an addition of Rs. 31,76,705/-. That as regards the balance expenditure of Rs. 1,13,24,264/- (i.e. excluding expenditure incurred at ITC, sonar, Kolkata), the A.O had on a similar analogy carried out an estimated disallowance of 33% of the said expenses and made a further addition of Rs. 37,37,007/-. We thus find that on the basis of his aforesaid observations the A.O had carried out an aggregate disallowance of Rs. 1,08,33,592/- out of the food and nutrition and boarding and lodging expenses claimed by the assessee. 55. We have deliberated on the observations of the lower authorities, and find that the primary reason which had weighed in the mind of the A.O while making the disallowance o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hes, the same leads to substantial push to ticketing sales and higher sponsorship receipts. We are of the considered view that the visits of the actors, celebrities, VIP's etc. at the matches staged is strategically planned by the franchisees, which carries with it the obligation and responsibility of providing boarding, lodging, food etc. to the level of their standard. We are further of the view that the marking of presence by the actors, celebrities, VIPs etc. at the matches is strategically planned and is guided by the business prudence of the franchisee, knowing well that the same would both boost the sales of tickets as more of viewers would be attracted for such matches, as well as give a substantial push to the sponsorship receipts from the business houses. We would not hesitate to observe that keeping in view the commercialization of the game of cricket, it would not be wrong to conclude that even if the assessee would have arranged paid visits of the actors, celebrities, VIPs for the matches, being well conversant with the fact that the same would substantially give a boost to his revenue collections from staging of matches, even the said payments would safely fall wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Sec. 37(1) of the Act. We may herein observe that neither before the lower authorities nor before us it has been established by the revenue that either the expenses claimed by the assessee in respect of the aforesaid persons is found to be bogus, or the said expenditure so incurred on them were not in context of the business of the assessee. We are of the considered view that the aforesaid expenditure incurred by the assessee by hosting dinners on the days on which the matches were played at the home ground, which amongst others were attended by the aforesaid actors, celebrities etc, and arranging for their stay at the hotels of repute, can safely be held as an expenditure incurred by the assessee wholly and exclusively for the purpose of its business. We thus being of the considered view that as the expenditure incurred by the assessee on food and nutrition and boarding and lodging for the members of the team (including visiting teams), support staff, directors and the invited guests, which amongst others included actors, celebrities, VIPs, being in the nature of expenditure incurred by the assessee in the very interest of its business, therefore, in the absence of any irrefutab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to relate the aforesaid bills pertaining to hosting of dinners, tea parties etc., with the purpose for which the same had been incurred, or the same suffered from certain discrepancies as regards the amounts mentioned therein in comparison to those stated by the assessee during the course of the proceedings and had not been reconciled, therefore, in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills, viz. (i), bill of Rs. 5,31,573/-, dated 30.04.2008; (ii) bill of Rs. 5,31,893/-, dated 08.05,2008; (iii). bill of Rs. 5,31,893/-, dated 13.05.2008; (iv). bill of Rs. 5,31,894/-, dated 20,05.2008; (v). bill of Rs. 4,51,900/-;and (vi) and bill of Rs. 5,31,893/-, dated 25.05.2008 pertained to expenses incurred by the assessee in the course of its business, or not. We may however clarify that the A.O shall while re-adjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications in respect of the limited issue for which the matter had been restored to his file. Needless to say, the A.O shall w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the Hon'ble Gujarat High Court, and even otherwise, the Ld. DR could not place anything on record to controvert or rebut the lawful findings recorded by the Ld. CIT(A), therefore, we dismiss the ground raised by the Revenue and uphold the order of the Ld. CIT(A). 9.1 Ground No. 6 (AY 2018-19) raised by the Revenue relates to challenging the order of Ld. CIT(A) in deleting the disallowance towards employee staff expenses and bonus payable to employees. 9.2 In this regard, we have heard counsel for both the parties and found that the provision of Rs. 35,86,713 is in connection with the salary payable to employees for the month of March and is accounted for in the books of account, as the assessee follows the mercantile system of accounting. The provision of Rs. 1,28,05,137 is also in connection with the bonus payable to employees for the year under consideration, which was paid by the assessee before the due date for filing the return of income as per section 43B of the Act. 9.3 The Ld. CIT(A) has categorically held that the assessee had deducted tax at source on the aforesaid amounts, and proof of the same was also submitted by the assessee vide letters dated 26.12.2020 ....