TaxTMI 
TaxTMI 
2026 (4) TMI 1880
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.... Assessment Order, dated 21/12/2018, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'], for the Assessment Year 2016-2017. 4. The Revenue has raised following grounds of appeal : '1. Whether on the facts and circumstances of the case and in law, the CIT(A) 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 CIT(A) has failed to appreciate that the decision of Hon'ble ITAT in assessee's own case in earlier years have not been accepted by the department and appeal before the Hon'ble High court is pending on this issue .? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.39,74,636/- being 10% of the Hospitality expenses of Rs.3,97,46,368/- by holding that the same is related to assesses business? 4. 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 I....
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....d written submissions placed on record during the course of hearing. The relevant extract of the written submission reads as under: "AO has made additions based on: (Para 5 Page 2 onwards of AO) 1. From perusal of profit and loss account it is seen that assessee has paid Rs.44.76 crore to BCCI as franchise fees for IPL and the same has been claimed as revenue expenditure for the year under consideration (Para 5.1 Page 2 of AO). 2. The company has entered into franchise agreement dated 10.04.2008 with BCCI-IPL. As per this agreement company has received franchise rights for the IPL for a period of 10 years which can be extended further. 3. The term of the league itself is indefinite and the benefit is not limited to one year (Para 5.2 Page 2 of AO) 4. Perusal of agreement it is noticed that not only the right to own and operate the team but a bundle of other rights have also been given to the assessee including rights relating to corporate entertainment, premium seating right, right to retain all gate receipts of the franchisee's own home games right to sell merchandise at the stadium etc. (Para 5.3. Page 2 of AO). 5. Also....
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....19, it was noticed that the Assessee company had paid Rs.44,98,40,000/- to the BCCI as franchisee fees for IPL and the same has been claimed as revenue expenditure for the year under consideration. The company has entered into franchisee agreement dated 10.04.2008 with BCCI- IPL. As per this agreement the company has received franchisee rights for the IPL from "Mumbai Indians" for a period of 10 years which can be extended further. In the current year the Assessee has claimed Rs.44,98,40,000/- as expenditure on this account. As per the terms of franchise agreement, fixed payments are to be made for initial period of 10 years to league association and subsequent to that period, there is an arrangement of revenue sharing. The term of the league is indefinite and the benefit is not limited to one year. In light of the same it becomes important to analyses the true nature of the payment under the head 'Franchise Fees'. On going through franchise agreement between BCCI and the Assessee, it is noticed that not only the right to own and operate the team, but a bundle of other rights to be enjoyed by the franchisee in the manner it decides, have also been given to the Appe....
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....ercial Rights for the conduct of its business activity for the tournament Indian premium league (IPL) in which the assessee is a franchisee holder by the virtue of the Agreement dated 10/04/2008 with BCCI-IPL. It has been further clearly noted out by the Assessing Officer in the Assessment Order that it emerges that the assessee company has acquired a right to operate a team in IPL for profit and as a consideration the company has made the payment of franchisee fees By making these payments the company has received a right to set up individual business of operating a team in the League. It is setting up a completely new business. Even after expiry of 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 capital expenditure. Merely a condition that these payments are required to be made in annual installments or at a certain percentage of the future rights income, does not alter the character of these payments from capital to revenue. It is also important to note that the 'Franchise' itself can ....
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....T(A) is not acceptable for the reason that the expenditure incurred on account of Franchise Fees for securing right to participate in Indian Premier League as revenue expenditure instead of capital expenditure, whereas provisions of section 32(1)(ii) and that of Section 55(2)(a) of the IT Act, 1961 evidently provide that Franchise and right to carry on any business are capital in nature and also the revenue filed the appeals before the Hon'ble Bombay High Court against the order of Hon'ble ITAT dated 22.07.2016 for A.Y 2009-10 and 2010-11 vide ITXA No. 1068/2017 and ITXA No. 1318/2017. Therefore, further appeal to Hon'ble ITAT is recommended on this issue, if approved." 10. Per Contra, the Learned Authorised Representative for the Assessee relied upon the following decisions of the Tribunal in the case of the Assessee: - ITA No.5290&5291/Mum/2014 [Assessment Year 2009-10 & 2010-11, dated 22/07/2016] - ITA No.6261/Mum/2016 [Assessment Year 2011-2012, dated 28/04/2017] - ITA No.5813 & 6262/Mum/2016 [Assessment Year 2012-2013, dated 13/02/2019] - ITA No.59&60/Mum/2019, ITA No.230&231/Mum/2019 [Assessment Year 2013-2014 & 2014-2015, da....
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....ibunal did not answer Question No.1 pertaining to the nature of `franchise payment'. 13. It is admitted position that in the case of the Assessee the Co-ordinate Bench of the Tribunal has held that the Assessee would be entitled to claim deduction for amount actually paid to BCCI during the relevant previous year for participating in IPL holding the same to be revenue in nature. Since there is no change in the factual or legal position, the decisions of the Co-ordinate Benches of the Tribunal in the case of the Assessee continue to hold the field. The Revenue has not accepted the aforesaid decisions of the Tribunal and is in appeal before the Hon'ble Bombay High Court. It has been stated that ITXA No.1068/2017 and ITXA No.1318/2017 preferred by the Revenue for the Assessment Year 2009-2010 and 2010-2011, respectively, are pending adjudications before the Hon'ble Bombay High Court. 14. We have perused the recent decision of the Tribunal in the case of the Assessee [ITA No.4576/Mum/2023, Assessment Year 2020-2021, dated 27/03/2026] placed on record by the Learned Authorized Representative for the Assessee, the relevant extract of which reads as under: "5. T....
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....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 decision of the Co- ordinate Bench of the Tribunal in earlier years deleted the addition observing as under: "5.2 The submissions of the appellant have been carefully considered. The issue under dispute pertains to the treatment of franchisee fees paid by the assessee as capital expenditure by the AO. This is a recurring issue in the appellant's own case for AY 2009-10 onwards. My predecessor CIT(A) had deleted similar addition for AY 2016-17 and 2017-18 replying on the binding judgement of the Hon'ble ITAT, Mumbai, in the appellant's own case for earlier years AYs. 2009-10 and 2010-11 in ITA No.5290&5291 dated 22.07.2016 wherein the Hon'ble ITAT, Mumbai, had held that as this franchisee fees is in the nature of revenue expenditure, the same has to be allow....
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....iture 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 relevant materials on record. It is an undisputed position that the issue stands squarely covered by the decisions of the Tribunal in the assessee's own case for preceding assessment years on identical facts. The Revenue has not brought on record any distinguishing feature, nor has it been shown that the earlier decisions have been reversed or stayed by any higher forum. The Ld. CIT(A), in allowing the Assessee's claim adhered to the principle of judicial discipline by following the binding precedents set by this Tribunal in the Assessee's own case for AYs 2009-10 through 2018-19. The Tribunal has consistently held that such franchise fees are revenue in nature. 5.8. While the Revenue contends that the matter is pending before the Hon'ble High Court, it is ....
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....78/Mum/2018 [Assessment Year 2015-2016, dated 19/02/2020] 18. We have perused the above decision of the Tribunal and note that in identical facts and circumstances, the Co-ordinate Benches of the Tribunal has deleted the disallowance of 10% of hospitality expenses made by the Assessing Officer on the ground that the same were not related to the business of the Assessee. The Tribunal accepted the contention of the Assessee that the hospitality expenses were related to the business of the Assessee and held that ad-hoc disallowance made by the assessing officer could not be sustained. The Revenue has failed to distinguish the above decisions of the Tribunal either on facts or in law. Further, for the Assessment Year 2017-2018, the Revenue has not challenged the order of CIT(A) deleting the disallowance of hospitality expenses, and for the Assessment Year 2018-2019, the claim for hospitality expenses was allowed in the assessment proceedings. 19. In view of the above we do not find any infirmity in the order of the Learned CIT(A) deleting the ad-hoc disallowance of Hospitality Expenses, and therefore, Ground No.3 raised by the Revenue is dismissed. Ground No. 4 20. Since we....
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.... Assessment Order, dated 02/04/2021, passed under Section 143(3) of the Act for the Assessment Year 2018-2019. 26. The Revenue has raised the following grounds of appeal: "i. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the expenditure incurred on account of Franchise Fees for securing right to participate in Indian Premier League as revenue expenditure instead of capital expenditure, whereas provisions of section 32(1)(ii) and that of Section 55(2)(a) of the IT Act, 1961 evidently provide that Franchise and right to carry on any business are capital in nature? ii. Whether on the facts and circumstances 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 ie. 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? iii. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred deleting the disallowance made by the AO of the Franchisee payments done by the assessee company as a revenue expenditure ....