The Hindu Business Line : CBDT sees IPL as a money spinner

New Delhi, July 10 The Central Board of Direct Taxes (CBDT) sees the multi-million dollar DLF Indian Premier League (IPL) as a money-spinner for the tax department in the coming days.

But a lot depends on whether the IPL activities would be treated as a purely commercial venture or a charitable activity of the Board of Control for Cricket in India (BCCI) that could be tax exempt. A committee appointed by the CBDT was looking into this issue in respect of the taxability of BCCI.

With a wide gamut of transactions of franchises falling under the Tax Deduction at Source (TDS) net, the CBDT expects to mop-up anywhere between Rs 160 crore and Rs 200 crore this fiscal through the TDS route alone.

However, there was uncertainty on how much of TDS collected would end up as permanent tax collections.

This was because some of the TDS on franchisee payments made to BCCI may end up as refunds if surplus arising from IPL were to be eventually treated as tax exempt.

Up to March 31, 2008, the department had collected about Rs 60 crore as TDS from various stakeholders of IPL. “We see IPL as a money spinner for the department in the sense that it is not only TDS, but also later the income that would be assessed to tax at the hands of various stakeholders,” Ms Saroj Bala, Member (Revenue), CBDT, said.

Ms Bala also noted that in some cases the applied TDS rates were lower as transactions were categorised as payments made to contractors instead of treating them as professional services.

“We think they should be deducting tax at 11.33 per cent instead of 2.2 per cent or so as they are in the nature of professional services. One needs special professional skills to be a cricket player or an umpire in these matches,” she said.

On the issue of taxability of tradability of players by team owners under this format, Ms Bala said that the CBDT constituted committee was examining whether players under this format should be considered as “assets” or “stock-in-trade” for the tax perspective.

It is still not clear if a team owner would be subjected to capital gains tax if he decides to transfer an ‘icon player’ to some other team.

Under the IPL, the franchisee owns the right to the use of the players for playing in Twenty20 cricket matches. If that right was treated as a capital asset, then any sale of such a right could be taxed as capital gains, which attracts a lower tax rate than the one for business income. The categorisation as an "asset" or "stock-in-trade" was important in view of the big difference in tax rates applicable for long-term capital gain and business incomes.

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