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BCCI, Sony, Nimbus under the scanner

BCCI, Sony, Nimbus under the scanner
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First Published: Sun, May 24 2009. 11 55 PM IST

Updated: Sun, May 24 2009. 11 55 PM IST
Mumbai: The Directorate General of Central Excise Intelligence (DGCEI), the agency responsible for detecting excise and service tax evasion, is investigating whether the Board of Control for Cricket in India (BCCI) has withheld any service tax due from revenue earned over the past five years, according to two officials in the department.
The two officials did not want to be named because they are not the official spokespersons for DGCEI.
In a related case, the finance ministry wing is also assessing the service tax liability of programme producers such as Nimbus Communications Ltd, Multi Screen Media Pvt. Ltd and its broadcasting unit Sony Entertainment Television.
A service tax of 10.2% is levied on specified services notified by the finance ministry. Broadcasting, event management and advertising, among others, attract service tax.
BCCI, the country’s top cricket body, organizes international matches in India and also owns the Indian Premier League (IPL), a domestic city-based Twenty20 franchise.
Also See Rules of the Game (PDF)
Its revenue streams include the sale of media rights to the tournaments it organizes, sponsorship rights and guarantee money from the cricket boards of countries where the Indian cricket team tours.
In the last five calendar years, the Indian team has played 57 tests, 155 one-day internationals and 10 Twenty20 matches, according to ESPN Cricinfo’s Statsguru database. Roughly one-third of these matches were hosted in India.
Propelled by a billion-plus population, the largest audience for cricket on television, BCCI is the world’s wealthiest national cricketing body.
According to media reports, it had revenues of Rs1,001 crore in 2007-08. Mint couldn’t independently verify the figure.
Programme producers generate content—mostly filming cricket matches and associated shows—and also typically have media rights to broadcast the show.
DGCEI officials declined to disclose the amount of tax that BCCI and its programme producers may have to pay, if indeed the investigation concludes that the entire amount of service tax has not been paid.
According to DGCEI officials, investigation has not yet reached the final stage and may take at least two months to conclude. “Once it is over, we may be able to issue show-cause notices to the parties if we find any tax liability,” said one of the officials.
A show-cause notice, not necessarily an indictment, requires the entity that receives it to explain its side of the story.
Multi Screen Media’s chief operating officer N.P. Singh declined to comment on the issue, saying that the company had no information about such an investigation.
BCCI vice-president Rajeev Shukla, too, declined to comment, and his office directed Mint to M.P Pandove, the treasurer of the cricket body.
Pandove said that since state associations hold BCCI matches, they are liable to pay service tax, not BCCI.
Money-spinner: Royal Challengers Bangalore players celebrate the dismissal of Deccan Chargers captain Adam Gilchrist (right), bowled out by Anil Kumble during Sunday’s final. BCCI had earned an estimated Rs9,000 crore from IPL last year, though this money will flow into its coffers only over a period of time. Siphiwe Sibeko / Reuters
He added that BCCI has not received any official intimation from the service tax department.
BCCI is a private body and 30 state associations are affiliated to it.
“There is no claim from the service tax department to Nimbus in relation to any of our business with the BCCI. So the question of dues from Nimbus does not arise,” said a Nimbus spokesperson. “Rights of BCCI properties assigned by BCCI to Nimbus are not service taxable.”
BCCI had earned an estimated Rs9,000 crore from IPL last year, though this money would flow into its coffers only over a period of time. This included some Rs4,000 crore from the sale of 10-year broadcast rights to Multi Screen Media and franchise rights to some of the biggest names in Indian business and entertainment such as Mukesh Ambani, chairman of Reliance Industries Ltd, and Bollywood actor Shah Rukh Khan.
It had paid around Rs34 crore as service tax from revenue earned from the first edition of IPL in 2008 after DGCEI started investigations, said one of the officials mentioned earlier.
Service tax experts are unsure about the interpretation of the law.
“It is a very grey area,” said J.K. Mittal, who heads the indirect tax committee of the Associated Chambers of Commerce and Industry of India, or Assocham, an industry lobby.
According to him, sale of media rights comes under a category called a deemed sale. This includes both tangible and intangible goods. The state government has the right to levy VAT, or value-added tax, on these sales and they cannot be taxed twice. “It’s still to be resolved,” Mittal said.
Indeed, in the list of taxable services on the government’s website for service tax, there is no such category as “media rights”.
However, the list includes video-tape production, broadcasting, franchise services, intellectual property services, event management and television or radio programme services—all of which are associated with the business of cricket.
“All commercial airtime is in any case under the service tax net. Then why should a broadcaster such as Sony again give service tax to the BCCI (to be passed on to the government) over media rights to a sports property?” argued an executive with a media agency, which sells airtime for sports and entertainment programmes. He did not want to be named.
The same executive added that there was similar ambiguity in the service tax that was supposed to be paid by team franchises in IPL last year, which resulted in certain franchises paying the tax, while others didn’t. He wouldn’t say which franchises paid the tax.
According to one DGCEI official, the Kolkata Knight Riders team owned by Shah Rukh Khan had paid Rs3 crore service tax, but this could not be independently verified.
This is not the first time that BCCI is involved in a service tax case. In June 2007, the service tax tribunal ruled that the tax department had wrongly levied service tax on BCCI under the category of advertising agency.
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First Published: Sun, May 24 2009. 11 55 PM IST
More Topics: IPL news | BCCI | Sony | Nimbus | DGCEI |