TaxTMI 
TaxTMI 
2020 (3) TMI 1503
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....oner of Income Tax CC-6(2), Mumbai (hereinafter referred to as AO) in disallowing an amount of Rs.5,35,322/- being travelling expenses incurred for accompanying family members of players, by holding that these persons have not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business and are not incurred for business purpose. 2. The appellant craves leave to add, to amend, vary or alter including by substitution any of the grounds of appeals as they or their representatives may think fit." 4. The brief facts of the case are that the assessee filed its return of income on 26.09.2013 declaring total loss to the tune of Rs.4,71,03,802/- for the A.Y. 2013-14. The return was processed u/s 143(1) of the I.T. Act, 1961. The case was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee is a company engaged in the business of owning, managing and operating the Mumbai Team (popular name "Mumbai Indians") of the Indian Premier League. The Indian Premier League (IPL) in which the assessee was a franchisee holder, was an Indian Twenty-20 cricket champ....
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....13.02.2019. The copy of order in the assessee's own case bearing ITA. No.5812/Mum/2016 dated 20.09.2017 is on the file in which relevant finding has been given in para no.4 to 5 which are hereby reproduced as under.:- "4. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 7 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 7.4 of its order and the same is reproduced below:- 7.4 Decision 7.4.1 I have considered the submissions of the appellant and perused the materials available on record. The appellant has requested to delete the impugned disallowance of Rs. 62,935/- being expenses incurred on travelling of spouses/family members of the players. obliged to incur any expenditure for the spouses or family members of the players. In absence of such contractual liability the impugned expenses under consideration incurred for the spouses/f....
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....the Ld.AR for the assessee. Therefore, we affirm the addition made by the AO towards disallowance of travelling expenses incurred on family members of players." 7. Since the issue in question is covered against the assessee in the assessee's own case for the A.y.2011-12 & 2012-13(supra), therefore, this issue is decided against the assessee and in favour of the revenue. In the result, appeal filed by the Assessee is hereby dismissed. ITA. NO.59/Mum/2019 8. The revenue has filed the present appeal against the order dated 24.10.2018 passed by the Commissioner of Income Tax (Appeals)-54, Mumbai (hereinafter referred to as the "CIT(A)") relevant to the assessment year 2013-14. 9. The revenue has raised the following grounds.:- "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.44.76 crores being franchise fees paid to BCCI to participate in the IPL by holding the same as Revenue in nature. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the decision of Hon'ble ITAT in assessee's own case in earlier years have not bee....
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....was signed between SCCI-IPL and M/s. Rathipriya Trading Pvt. Ltd. (old name of the assessee) on 10.04.2008. The assessee filed its return of income u/s. 139(1) for the A.Y. under consideration on 25.09.2009 at a loss of PS. 42.88,55,4661-. Order u1s.143(3) of the Act was passed by the A.O on 30.12.2011 at assessed loss of Rs.7,90,25,6601- after making certain additions additions/disallowances. The AO disallowed claim of deduction of Rs.44.76.00,0001- being annual franchise fees paid by the assessee to the Board of Control for Cricket in India (BCCI) holding the some to be capital in nature. 4. By the impugned order, the 01(A) confirmed the action of AO after observing that payment so made was capita) in nature. The CIT(A) further observed that the AO ought to have allowed depreciation on the cost of rights paid for the year amounting to Rs.44.76 lakhs. Against the above order of 01(A) the assessee is in further appeals before us. 5. we have considered rival contentions and gone through the orders of authorities below and also deliberated by the judicial pronouncements cited by the id. AR during the course of hearing before us. From the record we found that the ass....
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....ble in cosh or kind of for value to be received" in the audited financial statement of F.Y. 2007-08. During the AY. under consideration, the assessee has paid Rs.24,76,00,000 (net of service tax) on 05.05.2008 (in terms of clause 7.2 of franchise agreement) and debited the aggregate amount of Rs.44,76.00,000/- (i.e. Rs. 20,00,00,000 + Rs. 24,76,00,000/-) under the head "Franchise Fees" in its Profit & Loss account. For the matches to be held in April, 2009, the assessee is said to have paid Rs. 13,37,82.643/- as deposit and grouped the some under the head "Prepaid Expenses" in the Balance Sheet for the year ended 31.03.2009. The expenditure of Rs.44,76,00,000/- incurred by it for making payment of the first instalment to the BCCI-IPL in terms of clause 7 of the agreement was not for the purpose of acquisition of any asset but for on annual right to manage the franchise. The purpose of the expenditure to be incurred under the agreement by the assessee has been stated in clause 6 of the agreement as consideration for the right to operate the Franchise and to be a member of the League. The total expenditure of Rs.44,76.00,000/- payable in yearly instalments of Rs. 44,76,00,000/, for t....
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....ement) and debited the aggregate amount of Rs.44,76,00,000/- (i.e. Rs. 20,00,00,000 + Rs. 24,76,00,000F) under the head "Franchise Fees" in its Profit & Loss account. For the matches to be held in April, 2009, the assessee is said to have paid Rs. 13,37,82,6431- as deposit and grouped the same under the head "Prepaid Expenses- in the Balance Sheet for the year ended 3).03.2009. The expenditure of Rs.44,76,00,000/- incurred by it for making payment of the first instalment to the BCCI-IPL in terms of clause 7 of the agreement was not for the purpose of acquisition of any asset but for an annual right to manage the franchise. The purpose of the expenditure to be incurred under the agreement by the assessee has been stated in clause 6 of the agreement as consideration for the right to operate the Franchise and to be a member of the League. The total expenditure of Rs.44,76,00,000/- payable in yearly instalments of Rs. 44,76,00,000/, for ten years was clearly for the purpose of securing franchise right from BCC. Thus payments made by the assessee - were for the annual benefits only not extending beyond one year. its right to operate and manage the team is subject to prior payment of ann....
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....c. The franchisee would be allowed to enjoy only those rights which BCCIIPL would acknowledge. Another very important clause laid down in the FA (clause 7.1 (b)j is that from and including 2018 onwards, for indefinite period, an amount equal to 20 per cent of the franchisee income received in respect of such year shall be paid to BCCHPL by the franchisee appellant. Further, franchisee shall have no right to assign or to sub-contract or otherwise delegate the performance of any right or Obligation under the agreement without prior written permission from the BCCI-IPL. Powers to terminate the agreement is mostly tilted in favour of the BCCI-IPL (clause 16 of FA). Franchisee shalt also not sub-let or sub-contract the franchisee rights without prior written permission of the 8CCI-IPL. Further, as per clause 10.1 of FA, the appellant does not have any right to assign or delegate The performance of any right or obligations under this agreement The same vests with BCCI-IPL only. Perusal of the above clauses reveal that under the terms of the agreement, appellant company never enjoys the proprietary rights. The proprietary rights continue to vest in the BCC/-/PL. Therefore, appellant canno....
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....ssessee takes these assets on lease or hire, the payments made annually for the right to use these assets are revenue expenditure. They would not be treated as capital assets entitled to depreciation on the annual lease payments. Rental payment in respect of buildings, which are fixed assets, token on lease would constitute revenue expenditure. Whatever may be the period of lease, the annual payment will be only revenue in nature. In fact the Madras High Court in the case of CIT v. Gemini Arts (P) Ltd. 254 IT!? 201. following the Apex Court in CIT v. Madras Auto Services Pvt. Ltd, 233 IT!? 468 (sq, has held that upfront payment of future rent for 47 years would still be revenue expenditure. (iii) In the case of lease of immovable property, the Supreme Court has held that any premium paid for acquisition of the right to lease would constitute capital payment but not a periodic payment for the actual use of the property (CIT v. Panbari Tea Co. Ltd, 57 IT!? 422 (SC)). While tenancy right per se is considered as a capital asset (5.5 (2)), payment for the usage of such tenancy right is always revenue expenditure. (iv) The Karnataka High Court in the case of CIT v. HMT ....
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....tal expenditure, which is essentially revenue in nature. Accordingly, we set aside the order of lower authorities and direct the AO to allow assessee's claim of revenue expenditure. As we have already decided ground no.! in assessee's favour by holding that annual payment of Rs.447.60 crores being franchise fees paid to BCCI to participate in IPL was revenue in nature, therefore, allowable during the year under consideration, we are not going to assessee's alternate claim of allowing depreciation on the entire value of intangible rights, which is also supported by the decision of co-ordinate bench in case of India Cements Limited, India Cements Limited order dated 01.01.2016. 7. In the result, both the appeals of assessee are allowed." The facts are identical for the relevant assessment year, i.e.. AY. 2013-14. The appellant has paid Rs.44.76 crores to BCCI which is the annual fee payable in two instalments. The appellant, as per the agreement has to pay the franchisee fees in ten instalments spread over ten years. The amount of Rs.44.76 crores is the franchisee fees for AY. 2013-14. As the Hon'ble ITAT, Mumbai, had held that this franchisee fees i....
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....performance of any right or Obligation under the agreement without prior written permission from the BCCI-IPL. Powers to terminate the agreement is mostly tilted in favour of the BCCI-IPL (clause 16 of FA). Franchisee shall also not sub-let or sub-contract the franchisee rights without prior written permission of the BCCI-IPL. Further, as per clause 10.1 of FA, the appellant does not have any right to assign or delegate the performance of any right or obligations under this agreement. The same vests with BCCI-IPLonly. Perusal of the above clauses reveal that under the terms of the agreement, appellant company never enjoys the proprietary rights. The proprietary rights continue to vest in the BCCI-IPL. Therefore, appellant cannot be regarded as having acquired either wholly or any part of proprietary rights by or under the agreement. Therefore, in view of the above facts and circumstances, franchise right cannot be treated as capital asset". 6. We agree with the above order of the Ld. CIT(A) as the amount was not for acquiring capital rights. It is for conducting the matches on yearly basis. If assessee has not paid the amount, it loses the right to conduct the matches. Acc....
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....rt in the case of CIT v. Gemini Arts (P) Ltd, 254 ITR 201, following the Apex Court in CIT v. Madras Auto Services Pvt. Ltd, 233 ITR 468 (sq, has held that upfront payment of future rent for 47 years would still be revenue expenditure. (iii) In the case of lease of immovable property, the Supreme Court has held that any premium paid for acquisition of the right to lease would constitute capital payment but not a periodic payment for the actual use of the property [CIT v. Panbari Tea Co. Ltd, 57 ITR 422 (SC)]. While tenancy right per se is considered as a capital asset [5.5 (2)], payment for the usage of such tenancy right is always revenue expenditure. (iv) The Karnataka High Court in the case of CIT v. HMT Ltd. 203 ITR 820 has held that even though lump sum amount paid as premium in connection with lease of property as long as it is towards rent for the use of the property, it is allowable as revenue expenditure. (v) The Supreme Court in the case of Empire Jute Manufacturing Co, [124 ITR 1 (SC)] has held that even if the payment gives benefits for a period of time it will be in the revenue field only, if it is incurred in connection with day to day opera....
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....lternate claim of allowing depreciation on the entire value of intangible rights, which is also supported by the decision of co-ordinate bench in case of India Cements Limited, India Cements Limited order dated 01.01.2016." 13. Since the issue is squarely covered by the decision of the Hon'ble ITAT in the assessee's own case for the A.Y.2009-10 & 2010-11 dated 22.07.2016 (supra) and finding no distinguishable material available on record, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, issues nos. 1 & 2 are decided in favour of the assessee against the revenue. ISSUE Nos. 3 & 4 14. Under these issues the revenue has challenged the deletion of disallowance of Rs.50,06,281/- being 10% of the Hospitality Expenses of Rs.5,00,62,814/-. The Ld. Representative of the assessee has argued that this issue is also covered in the assessee's own case for the A.Y.2010-11 & 2011-12 bearing ITA. Nos. 5290/Mum/2014 & 5291/Mum/2014 dated 22.07.2016. However, the issue is decided in M.A. No.313/Mum/2016 dated 23.08.2017. Before going further, we deem it necessary ....