Tax Department slams BCCI, says its activities are commercial

The Board of Control for Cricket in India (BCCI) has become
totally commercial and all its activities are being carried on commercial lines.
Cricket is only incidental to its scheme of things. It is more into prize money
for every run or wicket, which is nothing short of a gimmick.

This is what the income-tax department has to say about the
BCCI in its assessment order dated December 30 last year, while disallowing tax
exemptions for the BCCI. The exemptions were earlier being granted on the
grounds that promoting cricket was a charitable activity.

The BCCI’s net income for 2006-07 was Rs 274.86 crores. The
I-T assessment order means that the body will have to pay Rs 120 crores as tax
plus the yet-to-be-quantified penalty amount.

The exemption for BCCI from being taxed was there till
2006-2007 and was withdrawn after the cricket body amended its memorandum and
rules twice. The added objectives included establishing coaching academies and
holding 20-over matches. Income-tax norms stipulate that the changed objectives
should be brought to its notice; this, say I-T officials, was not done by the
BCCI.

The order further says: The conduct of certain activities and
receipt of income from these activities clearly show that these activities are
totally commercial and there is no element of charity in the conduct of the BCCI.
It is evident that the major income arises not from the game of cricket but from
the business of cricket. The order adds: The characteristics of volume,
frequency and regularity of the activities accompanied by profit motive on the
part of the assessee have been held to indicate an intention to continue the
activity as business. The I-T order also says that BCCI’s rules are very
stringent and that it imposes a blanket ban on unapproved tournaments. The BCCI
is exercising complete control over the revenue of tournaments and is not
interested in the promotion of cricket, the order says. The money recovered by
way of media rights and sponsorship is not only to meet the expenses of
organising tournaments but is bound to create a huge surplus. And the surplus
generated by the BCCI is shared with players instead of being used for promoting
the game, the order says, adding that only 8% is spent on promotion of sports.
The BCCI has not developed any infrastructure nor has it built any stadium or
other amenities. Referring to the IPL, a BCCI wing that organises the hugely
popular T-20, the assessment order says: Acts indicate the intention.

Referring to an agreement between the BCCI and Nimbus
Communications for coverage of its events from March 1, 2006 to March 31, 2010,
where the BCCI intended to generate revenue through mobile rights, official film
rights, fixed media rights and public exhibition rights, the I-T department has
said: The very foundation of the agreement is based on commercial exploitation
and benefit which explains the colossal amount of media rights fees of Rs
2,724.2 crore paid by Nimbus. In its sponsorship agreement with Nike, the BCCI
was entitled to Rs 45 lakhs and Rs 58 lakhs as compensation for every
international one-day and test match respectively. Besides this, the BCCI was
paid minimum guarantee royalty of Rs 13.5 crores for 2007 and performance
bonuses which came to Rs 1 crore.

The investments of the BCCI (fixed deposits with banks) have
also witnessed a jump of 36.74% in the last two years (from Rs 545 crores to Rs
745 crores). In the same period, the fixed assets have seen a rise of 179 per
cent (from Rs 3.3 crores to Rs 9.4 crores). According to the income and
expenditure account for the year 2008-2009, BCCI’s income was Rs 726 crores,
down from Rs 1,000 crores in 2007-2008; but this will be audited only in
December 2010.