TMI Blog2019 (2) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... R for the assessee tried to argue the case in light of certain judicial precedents that the presence of spouse of the players and their family members helped in attracting sponsors as well as provide moral support to the players which ultimately helps the business of the assessee. But, considering the fact that the issue and is already considered by the Tribunal keeping in view the judicial discipline, we are not inclined to accept the arguments of the AR for the assessee. Therefore, we affirm the addition made by the AO towards disallowance of travelling expenses incurred on family members of players. Adhoc disallowance of 10% of hospitality expenses - AO has disallowed 10% of hospitality expenses under the head ‘hospitality expenditure’ for providing lunch and other entertainment facilities to individuals in corporate boxes, VVIP area, etc. - Held that:- We are of the considered view that the AO was erred in making adhoc disallowance of 10% of hospitality expenditure. Therefore, we direct the AO to delete addition made towards hospitality expenses. - ITA No. 5813/Mum/2016, ITA No. 6262/Mum/2016 - - - Dated:- 13-2-2019 - Shri C.N. Prasad (Judicial Member) And Shri G Manjunat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rights for the IPL team Mumbai Indians for a period of 10 years which could be extended further. The agreement further stated that the assessee needs to make fixed payment of annual subscription fees for a period of 10 years to league association and subsequent to that period, there is an arrangement of revenue sharing. The AO, considering the nature of payment and also the agreement between the parties, came to the conclusion that the annual franchise fees paid to BCCI is in the nature of capital expenditure which gives enduring benefit to the assessee. Therefore, called upon the assessee to explain as to why said expenditure shall not be disallowed. In response to notice, the assessee, vide letters dated 18-11-2013 and 27-12-2013, filed a detailed submission to argue that annual franchise fees paid to BCCI is a periodical payment which needs to be paid every year, as per the terms of agreement between the assessee and BCCI. Therefore, the same cannot be considered as capital in nature which gives enduring benefit to the assessee. The AO, after considering relevant submissions of the assessee and also by relying upon the decision of Hon ble Supreme Court in the case of Jona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on the same and accordingly, dismissed the ground taken by the assessee. Aggrieved by the order of Ld.CIT(A), the revenue is in appeal before us. 6. The Ld.AR for the assessee, at the time of hearing submitted that the issue involved in the present appeal is squarely covered in favour of the assessee by the decision of ITAT, Mumbai Bench I in assessee s own case for AYs 2009-10 and 2010-11 in ITA Nos 5290 5291/Mum/2014, where the ITAT, by following the co-ordinate bench of Hyderabad Tribunal in the case of M/s Deccan Chargers vs CIT in ITA No.1043/Hyd/2013 held that annual franchise fees paid to BCCI is revenue expenditure. 7. The Ld.DR, on the other hand, fairly accepted that the issue is covered by the decision of ITAT, Mumbai Bench I for AYs 2009-10 2010-11 in ITA Nos 5290 5291/Mum/2014, in assessee s own case, but further argued that the Ld.CIT(A) erred in deleting addition made by the AO towards annual franchise fees paid to BCCI for right to participate in Indian Premier League as revenue expenditure without appreciating the fact that the AO has brought out clear facts in light of agreement between the parties that the said expenditure is clearly in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written permission from the BCCI-IPL. Powers to terminate the agreement is mostly tilted in favour of the BCCI-IPL (clause 16 of FA). Franchisee shall also not sub-let or sub-contract the franchisee rights without prior written permission of the BCCI-IPL. Further, as per clause 10.1 of FA, the appellant does not have any right to assign or delegate the performance of any right or obligations under this agreement. The same vests with BCCI-IPLonly. Perusal of the above clauses reveal that under the terms of the agreement, appellant company never enjoys the proprietary rights. The proprietary rights continue to vest in the BCCI-IPL. Therefore, appellant cannot be regarded as having acquired either wholly or any part of proprietary rights by or under the agreement. Therefore, in view of the above facts and circumstances, franchise right cannot be treated as capital asset . 6. We agree wiih the above order of the Ld. CIT(A) as the. amount was no! for acquiring capita! rights- It is for conducting the matches on yearly basis. If assessee has not paid the amount, it loses the right to conduct the matches. Accordingly, Ld. CIT(A) has come to correct conclusion that the right a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in CJT v. Madras Auto Services Pvt. Ltd, 233 ITR 468 (sq, has held that upfront payment of future rent for 41 years would still be revenue expenditure. In the case of lease of immovable property, the Supreme Court has held that any premium paid for acquisition of the right to lease would constitute capital payment bin no! a periodic payment for the actual use of the property[CIT v. Panbari Tea Co. Ltd. 57 ITR 422 (SC)]. While tenancy right per sc is considered as a capital asset [5.5 (2)], payment for the usage of such tenancy right is always revenue expenditure. (iv) The Karnataka High Court in the case of CIT v. HMT Ltd. 203 ITR 820 has held that even though lump sum amount paid as premium in connection with lease of property as long as if is towards rent for the use of the property, it is allowable as revenue expenditure. (v) The Supreme Court in the case of Empire Jute Manufacturing Co, [124 ITR I (SC)] has held that even if the payment gives benefits for a period of time it will be in the revenue field only, if it is incurred in connection with day to day operation and does not affect the capital structure of the assessee. (vi) Expenditure on technical kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso supported by the decision of co-ordinate bench in case of India Cements Limited, India Cements Limited order dated 01.01.2016. 12. Facts remain unchanged. The revenue fails to bring on record any new facts contrary to the facts recorded by the ITAT in the light of certain judicial precedents. The revenue also failed to bring on record any contrary decision in its favour. Therefore, consistent with the view taken by the co-ordinate bench in assessee s own case for earlier years, we are of the considered view that there is no error in the findings recorded by the Ld.CIT(A) while deleting addition made by the AO towards annual franchise fees paid to BCCI. Hence, we are inclined to uphold the order of Ld.CIT(A) and dismiss appeal filed by the revenue. 13. Assessee s appeal : ITA No.5813/Mum/2016 14. The assessee has raised the following grounds of appeal:- 1. The learned Commissioner of Income-tax - {Appeals - 54) {hereinafter referred to as CIT(A)} erred in confirming the action of the Asstt. Commissioner of Income-Tax CC-35, Mumbai (hereinafter referred to as AO) IN disallowing an amount of ₹ 20,64,019/- being travelling expenses incurred on behalf of family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Sons Ltd vs CIT 18 ITR 469 (Bom). 17. The Ld.DR, on the other hand, strongly supported the order of the Ld.CIT(A). 18. We have heard both the parties and perused the materials available on record. Admittedly, the issue involved in the present appeal, i.e. whether travelling expenses incurred on family members of players is incurred wholly and exclusively for the purpose of business and which is related to the business of the assessee was a subject matter of deliberations by the ITAT, Mumbai Bench H in assessee s own case for AY 2011-12 where the Tribunal held that the assessee failed to make out a case for necessity of incurring expenditure on the family members of the players. The relevant observations of the Tribunal are as under:- 5. We have considered rival contentions and gone through the orders of authorities below and also deliberated by the judicial pronouncements cited by the Id. AR during the course of hearing before us. From the record we found that the assessee had debited ₹ 44.76 crores paid to the BCCI-IPL as franchisee fees for the IPL and claimed the same as revenue expenditure for the AYs under consideration. It was observed that the appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Therefore, we affirm the addition made by the AO towards disallowance of travelling expenses incurred on family members of players. 20. The next issue that came up for our consideration from assessee s appeal is adhoc disallowance of 10% of hospitality expenses. The AO has disallowed 10% of hospitality expenses of ₹ 31,47,064 under the head, hospitality expenditure for providing lunch and other entertainment facilities to individuals in corporate boxes, VVIP area, etc. The said expenditure has been clearly incurred for persons other than the cricket team of the assessee and its staff and has element of personal use embedded in it. Therefore, made adhoc disallowance of 10% of such expenditure. On appeal, the Ld.CIT(A) has confirmed the finding of the AO. 21. At the time of hearing, the Ld.AR for the assessee submitted that this issue is covered in favour of the assessee by the decision of ITAT, Mumbai Bench I in ITA No.5291/Mum/2014 for AY 2010-11 where in miscellaneous application No.3131/Mum/2016, the ITAT has deleted addition made by the AO towards 10% adhoc disallowance of hospitality expenses. 22. Having considered the arguments of both the side ..... X X X X Extracts X X X X X X X X Extracts X X X X
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