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2013 (6) TMI 447 - AT - Service TaxSponsorship of cricket match - T-20 matches under the IPL banner - sports event - Held that - In our considered view the reasons recorded by the adjudicating authority are misconceived and unsustainable. Under the agreement with GMR the appellant had sponsored (for the relevant period) the Delhi Daredevils team which was owned by GMR (under a franchise agreement with BCCI/IPL Delhi Daredevils team was sponsored in the context of the participation of this team in the T-20 league matches. The several rights accruing to the appellant under the sponsorship agreement (adverted to above) clearly indicate that sponsorship was neither of BCCI - IPL; nor GMR, the sponsorship was clearly of the GMR owned Delhi Daredevils team in relation to participation of such team in the IPL T-20 cricket tournament. The enumerated bouquet of benefits accruing to the appellant under the agreement such as printing; player s appearances; motorcycle display; merchandise; motorcycle for promotion; and participative rights in prize presentation; championship tournaments; celebrity events; website/blog entitlement; and marketing plans by GMR, clearly establish that the sponsorship is of the GMR owned Delhi Daredevils team in relation to its participation in the T-20 tournament. The sponsorship agreement is in our considered view a clear commercial transaction, the underlying purpose being the assumption that since BCCI-IPL-T-20 matches generate huge public viewership, either directly at the venues or through audio visual and print media as well, the appellant s association with the T-20 sports event through Delhi Daredevils team would show case the appellant s presence in its core business as a manufacturer of two wheeler motorbikes. The conclusion recorded by the adjudicating authority, is in our considered view based on a fundamental misconception of the purpose of the sponsorship agreement. The conclusion that under the agreement appellant sponsored GMR, by predicating this inference on the singular circumstance that GMR was other party to the agreement, overlooking the terms and conditions of the agreement, constitutes a fatal infirmity of analysis, which invalidates the adjudication order. The appellant is immune to levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994. - Decided in favor of assessee.
Issues:
1. Interpretation of exclusionary clause in Section 65(105)(zzzn) of the Finance Act, 1994 regarding service tax liability on sponsorship services. 2. Determination of whether sponsorship of a team in a cricket tournament constitutes sponsorship of a sports event. 3. Analysis of the nature of the sponsorship agreement between the parties and its relation to the T-20 cricket tournament. Analysis: Issue 1: Interpretation of exclusionary clause in Section 65(105)(zzzn) The case involved a dispute over the interpretation of the exclusionary clause in Section 65(105)(zzzn) of the Finance Act, 1994, regarding service tax liability on sponsorship services. The appellant contended that the sponsorship agreement with GMR for the Delhi Daredevils team in the IPL T-20 tournament fell within the exclusionary clause, thus exempting them from service tax liability. The Tribunal analyzed the language of the exclusionary clause and emphasized the expansive intention behind the phrase "in relation to," citing legal precedents to support their interpretation. Issue 2: Sponsorship of a team vs. sports event The Tribunal examined whether sponsorship of a team in a cricket tournament could be equated to sponsorship of a sports event. The adjudicating authority had argued that sponsoring a team did not qualify as sponsoring a sports event, leading to the imposition of service tax. However, the Tribunal disagreed, emphasizing that the sponsorship of the Delhi Daredevils team was directly related to their participation in the T-20 tournament, constituting sponsorship of a sports event under the exclusionary clause. Issue 3: Nature of the sponsorship agreement The Tribunal scrutinized the nature of the sponsorship agreement between the parties and its connection to the T-20 cricket tournament. They highlighted the commercial purpose behind the agreement, focusing on the visibility and promotional benefits derived by the appellant through association with the Delhi Daredevils team in the IPL. The Tribunal rejected the adjudicating authority's conclusion that the sponsorship was of GMR, emphasizing that the primary focus was on sponsoring the T-20 sports event through the team. In conclusion, the Tribunal ruled in favor of the appellant, quashing the impugned adjudication order dated 30.06.2011. They held that the appellant was immune to the levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994, based on the interpretation of the exclusionary clause. The appeals were allowed, and no costs were awarded in the matter.
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