TaxTMI 
TaxTMI 
2020 (2) TMI 1763
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....ve not rendered any service to the appellant and the expenses are private expenses of individuals unrelated to the business. The appellant submits that the travelling expenses incurred on behalf of family members of players are incurred for the purpose of business and the same should be allowed as claimed." 3. The revenue in its appeal has raised 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 capital in nature and allowing depreciation on the same?" 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 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. 59,30,724/- being 10% of the Hospitality expenses of Rs. 5,93,07,239/- by holding that ....
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.... the BCCl-IPL and had got franchise rights for the Mumbai Indian team for the term of the League. In the current year, the appellant had paid Rs. 44.76 crores to the BCCl-IPL on this account, As per the terms and conditions of agreement payment was to be made annually as per the contractual obligation of the assessee to exploit the franchisee. This was an annual payment spread over the period of right granted and directly related to the earning of income each year. This annual franchisee fees was payable in 2 parts i.e. Rs. 13,42,80,000/- as League deposit on or before 2nd Jan and Rs,31,33,20,000/- on the date of the first match in the League in each year. The League deposit was refundable, if League did not take place and in that event the franchisee is not required to pay franchisee fee. The payment was an annual charge and hence the franchise fee was claimed as business expenditure. Referring to clauses 1.2 and 11 of the said agreement, the assessee has right to operate the of the IFL and has right to terminate the agreement, if the matches do not take place for two consecutive years. The agreement between the parties can be terminated by them with immediate effect by giving not....
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.... franchise fees paid to BCCI is revenue in nature which is deductible u/s 37(1) of the Income-tax Act, 1961. The relevant observations of the ITAT are as under:- "9. We had carefully gone through orders of the co-ordinate bench in case of M/s. Deccan Charges (supra) wherein exactly similar issue decided by Tribunal in assessee's favour after observing as under: "Before considering the claim of alienability of deduction, it is necessary to decide whether the aforesaid franchise right is a capital asset eligible for depreciation or it is a revenue expenditure. As per clause 3 of the FA, the impugned agreement shall come into effect upon signature and shall continue for so long as the League continues subject to termination, suspension or renewal as provided (the 'Term'). As per clause 4 of the FA, the franchisee (appellant) has acknowledged and agreed that BCCI-IPL owns the Central Rights and the BCCl has all pervasive rights to exploit present as well as future Central Rights. The Central Rights includes media rights, umpire sponsorship rights, tile sponsorship rights, official sponsorship rights, stadium advertising right, games rights etc. The franchi....
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....ise rights are treated as intangible assets, it does not mean that any or all payments made towards franchise rights would become capita! payment and such rights constitute a depreciable asset. Jt has to be determined on the basis of actual rights conferred on the assessee. Is it a rig lit of ownership or merely a right to use. The former will be capital, while the latter will be in the revenue field. Analogy can be drawn from the following instances: (i) Technical know-how is an intangible asset and entitled to depreciation u/s 32. However, if an annual fee is paid for the use of technical know how and right to use technical know how ceases on the termination of such agreement, then ihe annual payments made are revenue in character and are allowable as deductible expenditure. The Hon'ble Supreme Court in the case of CITv. LA.E.C. (Pumps) Ltd, 232 ITR 316 (sq held thai use of patents and designs for ten years with&! option to extend or renew the same was held to be a revenue. expenditure. The ratio is fully applicable to the facts of the present case Similarly, in case of other assets also which are normally treated as fixed assets entitled to depreciation, if an asses....
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....r which such rights was acquired by the appellant. Any made for obtaining a commercial right would be a capital expenditure. But payment made periodically for exploiting such rights is revenue in nature. Therefore, in the instant case, payment made at the first instance for grant of right to be franchisee can be considered as capital payment. However, the subsequent annual payments made by the assessee are clearly for exploiting the rights as a franchisee, which are for a year and which can be terminated for non-payment of the franchise fees in the subsequent year Therefore, the franchise fee paid is revenue in nature because by making such annual payment the appellant does not acquire any rights of permanent nature ". 7. In view of these judicial principles which clearly apply to the facts of the case, we do not find any reason to interfere with the order of CIT(A) who analysed the issue on the given facts. There is no merit in Revenue 's grounds and accordingly, Revenue 's appeal is dismissed. " 10. Respectfully following the decision of co-ordinate bench on the similar facts, we do not find any merit for treating the assessee's claim as capital expe....