Cricket is more than a mere sport in India. It moves across the length and breadth of the country penetrating different stratas of society without any discrimination, whatsoever. In 2008, then Vice President Lalit Modi introduced the concept of Franchise Cricket inspired by the success of the European Premier League in India. In a country like India, it did not take much time and effort to make IPL one the most successful franchise league in the world. The success of IPL can be seen in pure financial numbers. In 2008, the title sponsor of IPL, DLF paid 200 crore rupees for five seasons, making it 40 crores per season. In 2022, after the edition of two more teams, Tata is paying almost 500 crores for a season. Over the years, the popularity of IPL has attracted investors from all over the globe and companies fight tooth and nail to get the title rights.
Apart from title rights, there are media rights, revenue from advertisements, and sponsorships to name a few channels of incoming funds for the BCCI. It is difficult to get actual numbers of valuation of the IPL but as per a recent report from Brand Finance in 2017, IPL had already crossed the $5 billion mark. The valuation of Mumbai Indians, the most successful franchise, is close to 3000 crore rupees as of today. The rest of it can be calculated in our heads easily.
After all the revenue generated, the most interesting aspect of this league is that its parent body BCCI does not pay any tax from all the income generated from IPL. In this article, let us have a look into this arrangement of the BCCI.
BCCI is an autonomous organization registered under Societies Registration Act. It does not receive any funding from the Sports Ministry for its day-to-day functioning. It is basically a body for the promotion of Indian Cricket, within and outside India. In terms of sheer valuation, BCCI is the richest cricket board in the world and also part of the “Big Three” along with Australia and England. BCCI started IPL for the promotion of Cricket in India in 2008 and over the years has generated considerable revenues from it as well.
In 2016-17, the revenue department sent a notice to BCCI asking them to explain why their income generated from IPL should be exempted under Section 12A of the Income Tax Act. BCCI filed an appeal in the Income Tax Appellate Tribunal for the extension of exemption on the grounds that it is still a sports promotional body.
In an order dated 2 November 2021, ITAT exempted BCCI from paying any tax for the income generated from IPL. The bench releasing the said order had Ravish Sood as Judicial Member and Pramod Kumar, Vice President. The bench while expressing their opinion about an exemption to pay Tax expressed “On the face of it, merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in it in more paying sponsorships and greater mobilization of resources, the basic character of activity of popularising cricket is not lost,”
It is true that the BCCI started the franchise cricket for the promotion of Cricket in India. However, as the ITAT bench expressed, just because the model of promotion is planned in such a way that it generates revenue, does not mean it has to pay tax. As per BCCI, the Revenue department had erred in asking them to pay tax.
It is worth noting that only the BCCI is exempted from paying taxes but players participating in IPL are supposed to pay the taxes. The income generated by players and their respective franchises is profit/income which is taxable as per the rules.