Payment of Franchise Fee by Kolkata Knight Riders to the Board of Control for Cricket in India (BCCI) would constitute revenue expenditure for the purpose of allowing Income tax deduction, said Mumbai ITAT.
In the instant case, the AO denied the claim for deduction to the assessee by holding that the Franchise fee of Rs.30,03,60,000/- was a part of the consideration which was paid by them for owning the IPL team and not as a fee for playing the IPL matches vested an enduring benefit with the assessee. He was of the view that the same amount to capital expenditure for which, deduction cannot be allowed.
After perusing the franchise agreement, the division bench of the Tribunal found 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 have given a thoughtful consideration to the issue before us and are of the considered view that the payment of the Franchise fee by the assessee to BCCI-IPL only facilitated participation in the league and operating the team for the year for which the payment pertained, with no vested right to participate in the events for the subsequent year/years. We are of the considered view that as the aforesaid payment of Franchise fee which facilitated the participation in the league 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.”
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