By Sujit Bhar
A recent spate of social media activity points to the fact that the massively rich Board of Control for Cricket in India (BCCI), possibly the second richest sports body in the world, pays zero tax. Whatever it has “paid” so far to the income tax department, it has done so “under protest”. This is not a new phenomenon, but the issue deserves a second glance, especially against the backdrop of the farcical and porous nature of our laws. The way loopholes in such laws have been exploited by those with evil intent is a case study in how not to formulate laws.
So why doesn’t the BCCI have to pay any tax? This is because it does that incredible job of “promoting the sport of cricket in the country,” and because the BCCI is registered as a charitable organisation. This happened in 1996. What a sham of a social service and a charity that will seem, when you realise that last year the Board auctioned the media rights for the Indian Premier League (IPL) for the 2023-27 period at a whopping Rs 48,390 crore ($6.2 billion). That sum was almost three times the Rs 16,347.5 crore that the Board had earned in the preceding rights cycle.
Let us put this amount in proper, charitable perspective. The UNICEF, which works in over 190 countries and territories to save children’s lives, to defend their rights, and to help them fulfil their potential, from early childhood through adolescence, received total contributions of $8.1 billion in 2021. Of this, $5.9 billion was contributed by the public sector, which comprised government, inter-governmental and inter-organizational partners, as well as global programme partnerships.
For the period 2023-27, the Board will be receiving more than that. Wonder how many poor children this so-called “charitable” organisation will be helping.
Of course, the Board has gone ahead and ensured match fees for women cricketers at par with the men, but that isn’t exactly a charity, it’s a sports association’s policy.
Taxes? What taxes?
Things had gone so far that the Board had been dilly dallying about agreeing to pay taxes for the One-Day International World Cup that it would be hosting on behalf of the International Cricket Council (ICC).
Tax authorities have clamped down on this, and the Board stands to lose Rs 955 crore if the ICC doesn’t get tax exemption from the government for hosting the 2023 World Cup.
Let us be frank. India’s tax rules don’t allow such exemptions. There is precedent: the Board lost close to Rs 193 crore for hosting the 2016 ICC T20 World Cup, because the government did not allow any tax surcharge exemption.
However, when it comes to the Board’s own internal activities—such as the IPL—the Board, whose operational head is its secretary Jay Shah, feels all is good, all is charity.
The legal fig leaf
What legal fig leaf is the BCCI hiding behind? This millionaire-fakir avatar of the Board was challenged before the Mumbai bench of the Income Tax Appellate Tribunal (ITAT). In November 2021, the order (ITA No. 3301/ Mum/2019) came in favour of the BCCI. It has to be pointed out, though, that it was an order that examined issues relating to granting registration to the BCCI (as a charity). The taxation issue was not examined, hence the taxability of IPL income did not figure.
It has to be pointed out that various state cricket boards—and, for that matter, various state sports bodies in other disciplines—benefit from tax reliefs on their incomes. However, that in no way reflects on the position of the BCCI. To this effect a Gujarat High Court order—in Director of Income Tax (E) vs Gujarat Cricket Association (Tax Appeal No. 268 of 2012)—of September 27, 2019, had commented: “…undoubtedly the activities of BCCI are commercial in nature”. But the devil is in the detail of the law.
A particular case has been cited by one chartered accountant, in which [case: Chandigarh Lawn Tennis Association vs ITO (Exemptions)], the Chandigarh ITAT bench had held in 2016 that income from organizing Davis Cup matches is liable to tax u/s 2(15) of the Income Tax Act, 1961.
That begs the question: What are the activities that are exempt? Judges in various cases have said that “if any organization which is engaged in advancement of any other object of general public utility, then it must pass the test prescribed u/s 2(15) of the Act, otherwise Section 13(8) of the Act will become applicable and exemption will be given on a Y-o-Y basis. Such originations can continue to hold their registration, but impact of Section 2(15) has to be considered while computing their tax-exempt income.”
While the above is in vogue, one has to keep in mind the fact that the IPL cannot, by any stretch of imagination, be termed as an “advancement of… general public utility.”
While instances of associations in other countries paying tax—such as the Football Association of Britain—have been cited, that may not apply here. One has to conform to the laws of India, and courts have to write judgments within this ambit.
Things at the Board were getting sorted out and complicated at the same time, as the Justice Lodha Committee recommendations were being sought to be put into practice. Following one such recommendation, which also had the approval of the Supreme Court (the Court was overseeing activities of the Board at the time), the BCCI made changes in its charter. Its Memorandum of Association now included the IPL and other commercial activities.
The income tax department saw a conflict of interest in this. While the IPL was earning huge amounts of money, there was no tax angle to this, simply because the BCCI was a charitable organisation, and it was “promoting the sport of cricket”.
The income tax department, anyway, placed its demand, and hence, from 2008 to 2018, the BCCI “paid” over Rs 3,500 crore as taxes. Obviously, the Board wasn’t happy in doing so, hence all that tax was paid “under protest”, which means that the Board will keep demanding a refund as per legal strictures, and if the tax department loses, it will have to pay back the amount with interest.
The irritation for the Board increased manifold, when it was denied fresh registration as a charitable trust in 2018. The income tax department’s argument, quite rightly, was that since it was now conducting business for profit, it could no longer be called a charitable trust.
To understand the Board’s plan, one has to go back to 2007, when the BCCI announced the launch of the IPL. This correspondent had asked the then chief of the IPL, Lalit Modi, how would the BCCI be handling the taxation issue, since this was definitely going to rake in a lot of moolah. Modi had said that the Board has an “ace” up its sleeve, though maybe even he was not sure then what it really was.
The Board is powerful, with influential politicians on board. Around 2018, Home Minister Amit Shah’s son Jay Shah was a member of the finance and marketing committees of the Board and was positioning himself to take over as secretary of the Board.
So, the Board appealed to the Income Tax Appellate Tribunal. The argument was as specious as it could have been: It basically said that it does not matter if the IPL was raking in huge amounts of money. It was all for the noble cause of the promotion of the sport and, hence, should not be counted as a commercial activity. These funds, said the Board, were being used to promote cricket.
The fact that the Income Tax Appellate Tribunal agreed to this completely absurd reasoning, shows how strong political influence can change the very sum and substance of any department’s demand in this country. The settlement was that whenever the receipts exceed the threshold for a charitable trust, the Board has to pay up taxes for those years. The Board’s income-expenses calculations are considered every financial year. That is a strange way of circumventing the very crux of the problem: If it does pay taxes in the future, how will it still stay a charitable trust? Will such benefits also go to other, serious organisations that actually do charitable work?
As it stands today, it is status quo, plus a small adjustment. The cricket treasury is safe and the tax department has little power over it. At the same time, BCCI’s “charity” is making millionaires out of players, organisers, broadcasters and many more. All is hunky dory.