IPL qualifies as Sports Event: CESTAT exempts Nokia from Service Tax on Sponsoring Kolkata Knight Riders [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that Nokia India was exempted from paying service tax on its sponsorship of the Kolkata Knight Riders ( KKR ) citing Indian Premier League ( IPL ) qualifies as a sports event.

Nokia India Pvt. Ltd. entered into a sponsorship agreement with Knight Riders Sports Pvt. Ltd., the franchise owner of the Kolkata Knight Riders (KKR) team participating in the Indian Premier League (IPL) T-20 Cricket Tournament.

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Nokia paid Rs. 15 crores to Kolkata Knight Riders for sponsorship rights. The sponsorship agreement granted Nokia branding and promotional rights associated with the Kolkata Knight Riders team.

The Department of Service Tax claimed that the payment Nokia made for this sponsorship was taxable under "sponsorship services" as per Section 65(105)(zzzn) of the Finance Act, 1994. On appeal, the Commissioner of Service Tax ruled in favor of Nokia, dropping the demand for service tax in 2014 based on the exemption for sports event sponsorship.

Aggrieved, the department challenged the commissioner’s order arguing that the payment to Kolkata Knight Riders for sponsorship rights falls under taxable "sponsorship services," given its commercial nature.

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On the other hand, the respondent (Nokia India) counsel cited the tribunal's previous decision on Hero Motocorp Limited arguing that IPL is a sports event, and sponsorship of sports events is excluded from the definition of taxable sponsorship services under Section 65(105)(zzzn) of the Finance Act, 1994.

The two-member bench comprising Binu Tamta (Judicial Member) and Hemambika R. Priya, (Technical Member) referenced the Hero Motocorp Limited case where sponsorship of sports events with commercial elements such as the IPL was deemed non-taxable under the “sponsorship of sports events” exclusionary clause.

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The tribunal highlighted that the Supreme Court upheld this interpretation supporting that IPL sponsorships are immune from service tax obligations. Thus, the tribunal upheld the Commissioner’s original decision to drop the demand, finding no merit in the Department’s appeal. The appeal by the Revenue Department was dismissed.

To Read the full text of the Order CLICK HERE

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