The Hindu Business Line : Why cricket match is like a celebrity marriage

"Coverage of marriage rites between celebrity couple Arun Nair and Elizabeth Hurley are reported to be exclusively sold to Hello magazine and similarly there are rumours of sale of `marriage function' of leading movie actor Abhishek Bachhan with Aishwarya Rai to a particular channel for broadcasting. Will such sale of performance rights coverage convert the seller into an advertising agency?"

That was the question posed by the Mumbai Tribunal recently when deciding the BCCI (Board of Control for Cricket in India) case. "The answer is emphatic `No'," said the Tribunal, ruling that sale of television rights would not be an advertisement service. By the same token, the sale of telecast rights of cricket matches conducted by BCCI does not become service relatable to advertisement, observed the Tribunal.

"There is no advertisement when the performance rights of the match vested in BCCI is being sold for viewership of millions of people and there is no client to which such service in relation to advertisement is being provided. BCCI and TV channel, at best, can be termed as seller and buyer of rights."

A prize catch, for the taxman, off what turned out to be a no ball!

* * *?

Taxman in betting shop

Cheshire Racing Ltd had to race its wits against the UK Revenue on the admissibility of expenses incurred on satellite information service screens used in bookmaking, as there was a direct and immediate link between the costs incurred and the making of taxable supplies.

From the text of the verdict dated August 6, available on www.bailii.org, you can learn how 1985 was `the defining year' for the betting industry. "Thenceforth betting shops were allowed to introduce live racing and market information via satellite. The Satellite Information Service (SIS) has a monopoly for the supply of information to the betting industry. The equipment is leased from them for the various shops. The National and Irish Lotteries could then be sold through the shops and in 1996 `amusement with prizes' (slot machines AWPs) were introduced."

When, in 2001, some of the regulations affecting the industry were removed, the turnover rose by between 30 per cent and 50 per cent. Then came the FOBTs (Fixed Odds Betting Terminals) in 2003. "These are electronic number machines which allow a selection of number games to be played - 49s; virtual racing; keno; football, etc."

The assessee explained to the Tribunal how the television screens formed an integral backdrop in the shops, and advised customers "not only about horse and dog racing but also show football, cricket, and golf games which facilitates their ability to make choices and bet on various outcomes. Where there is an appropriate break in the information service, commentators discuss the gaming machines and news items are shown advising on other events."

The decision went in favour of Cheshire.

* * *?

Does it `ad' up?

The dispute that the taxman had with the Kerala Publicity Bureau and Manik Advertisers was about the incentives these advertising agencies had received from Malayala Manorama. The Department wanted to tax the incentives as extra commission subject to service tax levy.

However, following earlier decisions in cases such as of Euro RSCG Advertising Ltd and Marketing Consultants & Agencies Ltd, the Bangalore Tribunal ruled that since the amounts in question had not been received from the clients of the service provider (the appellants) there was no liability of service tax on these amounts.

That should incense the taxman.

* * *?

Bakshish chase

Does bakshish payment qualify as business expenditure? This was one of the questions before the Bombay High Court in the Samarth Sahakari Sakhar Karkhana Ltd case, a few months ago. Predictably, the Department argued against the deductibility of the expenditure, saying that bakshish paid by the company to the H&T (harvesting and transport) labourers was out of the commercial expediency, and purely voluntary, `based on sweet will.being over and above the agreed price under contract'.

Bakshish or baksheesh, for starters, is a Persian word meaning `gift'. Wikipedia informs that in Egypt "it is expected that baksheesh will be paid on top of fares to taxi drivers and on top of `service charges' to waiters, as well as to doormen, shopkeepers, garage attendants and everyone else employed in service sector jobs."

In the case on hand, the company submitted that giving bakshish to the employees of the H&T contractors has been the general practice prevailing in the State of Maharashtra for several decades and such expenditure has been consistently allowed as business expenditure in the case of several other sugar factories.

"As the labourers employed by H&T contractors are required to do the harvesting and transportation work during adverse climatic conditions, bakshish is given to them in the sum of Rs 200 to Rs 250 per head as incentives to continue with the work."

The Revenue argued that if the bakshish claim of the assessee were allowed, the sugar factories might divert the entire profits by way of bakshish. But the court was not impressed with such a contention. "Wherever it is found that the amounts paid as bakshish are exorbitant and unreasonable or wholly unconnected to the business, then, in such cases, it will be open to the assessing officer to disallow the claim," said the court. Accordingly, it said that bakshish expenditure in the Samarth case was allowable as business expenditure.

* * *?

Electronic or electric

Are `capacitors' an item of `electronic goods'? This engaged the apex court in the Concap Capacitors, Balanagar, Hyderabad case not long ago. The Tribunal had earlier decided against the company, and ruled that capacitors did not operate on electronic principle and, therefore, could not be considered as `electronic' goods or component for the purpose of concessional rate of tax. Capacitors did not operate as `electronic goods' but as `electric goods', it said.

But the Andhra Pradesh High Court quashed the Tribunal's ruling and said that `capacitors' fell under the category of `electronic goods'. So, it was an aggrieved taxman who was at the portal of the Supreme Court, with the prayer that capacitors be seen not as electronic goods.

What is a capacitor? "A little like a battery," educates http://electronics.howstuffworks.com. "Inside the capacitor, the terminals connect to two metal plates separated by a non-conducting substance, or dielectric. You can easily make a capacitor from two pieces of aluminium foil and a piece of paper. It won't be a particularly good capacitor in terms of its storage capacity, but it will work."

Capacitors can be manufactured to serve any purpose, from the smallest plastic capacitor in your calculator, to an ultra capacitor that can power a commuter bus, it explains. "NASA uses glass capacitors to help wake up the space shuttle's circuitry and help deploy space probes."

To Concap what came as help in the case was `a list of electronic items prepared by the Electronic Commission', which had `plastic film capacitors' as one of the items under `electronic components'.

While the case is an example of the litigating capacity of the Department, even when on a weak wicket, the avid may like to read up more about capacitors on Howstuffworks. "One way to visualise the action of a capacitor is to imagine it as a water tower hooked to a pipe," it describes.

"A water tower `stores' water pressure - when the water system pumps produce more water than a town needs, the excess is stored in the water tower. Then, at times of high demand, the excess water flows out of the tower to keep the pressure up. A capacitor stores electrons in the same way and can then release them later."

Tailpiece

"Is it true that the Revenue is for white money and."

"For black money?"

"It's the Ravenue, perhaps?"

D. MURALI

More Stories on : Taxation | Detaxfication | Sports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
The underbelly shows

Dividend versus deemed dividend

The travails of commission agents

Why cricket match is like a celebrity marriage

Liquidation proceeds — No priority for tax dues

The ‘Force of Attraction’ rule

Don’t quit, just stay put!

The IMF’s new mandate

I-T ombudsman

Occupational health