2018 (10) TMI 1163 - AT - Income Tax

Disallowing expenditure on account of contribution to cricket academy by holding it as capital expenditure - nature of expenditure - allowable business expenditure - Held that - It is stated that at the time of admission of player to the Academy the (KSCA) shall ensure that the player shall sign a contract giving the appellant first right to offer an uncapped player contract to recruit the player to play for the appellant. Thus it is clear that the terms of contract are directly related to business interest of the assessee. Therefore the contribution made for creation of Cricket Academy can be held to be in business interest and the same is allowable as deduction. Accordingly we allow this ground of appeal. Ticketing expenses allowance - Held that - There is neither doubt about genuineness of the expenditure nor that the expenditure incurred was for business purpose. Undoubtedly this expenditure incurred by the assessee was to promote goodwill and enhance the business interest and therefore the same is allowable as a business deduction in the light of the decision of CIT vs. Avery Cycle Inds. Ltd. 2006 (9) TMI 96 - PUNJAB AND HARYANA HIGH COURT and Karjan Co-operative Cotton Sales Ginning & Pressing Society vs. CIT 1992 (1) TMI 39 - GUJARAT HIGH COURT - Assessee appeal allowed.

Summary

Issues:
1. Disallowance of expenditure on contribution to cricket academy as capital expenditure.
2. Disallowance of ticketing expenses.

Analysis:

Issue 1: Disallowance of expenditure on contribution to cricket academy as capital expenditure
The assessee, a company involved in the franchise of BCCI-IPL, filed an appeal against the disallowance of a contribution of ?45 lakhs made to Karnataka State Cricket Association (KSCA) for the construction of a Cricket Academy. The assessee argued that the contribution was made for training and development of cricketers and was essential for talent identification. The assessee contended that the contribution was a business expense and not capital expenditure as it did not result in acquiring an enduring asset. The tribunal held that the contribution was directly related to the business interest of the assessee as it secured the first right to offer a player contract to recruit players for the team. Therefore, the tribunal allowed the deduction of the contribution as a business expense.

Issue 2: Disallowance of ticketing expenses
The assessee also challenged the disallowance of ticketing expenses amounting to ?51,47,000. The assessee's main source of income was sponsorship with United Spirits Ltd., which required providing free hospitality and tickets to sponsors. The tribunal noted that the expenditure on ticketing was genuine and incurred for business purposes to maintain good relations with sponsors and foreign collaborators. Citing precedents, the tribunal allowed the ticketing expenses as a business deduction to promote goodwill and enhance business interests. Consequently, the tribunal allowed the appeal filed by the assessee, ruling in favor of the deduction of both the contribution to the cricket academy and the ticketing expenses as legitimate business expenditures.