IPL Players
This query is : Resolved
30 December 2010
IPL players will be considered as Stock in Trade or Capital Asset?????
30 December 2010
Non of both.
31 December 2010
1. IPL & Accounting Aspect – Player’s (Right to Play) — Players are treated as Intangible Assets for franchisee’s - When a franchisee bids for certain player, he wins a ‘right to play’ of such player during the tournament — Issue arises- How to recognize in the books of account? Accounting Standard 26 (Accounting of Intangible Asset) Income Tax Act, 1961 Section 32 (Depreciation) Baklilwal Corporate’s Services (P.) Ltd. Vs. ITO 302 ITR (AT 110) Commercial Assets Vs. Stock in Trade
2. — Definition – ‘‘ An identifiable non-monetary asset without Accounting physical substance held for use in the production or supply of goods Standard 26 or services, for rental to others , or for administrative purpose.’’
3. AS- 26: Intangible Assets — As per para 63 of Accounting standard, ‘‘the depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful ..’’ — Amortisation : Allocation of an amount to be charged off over the useful life of Intangible asset. Basis of Amortisation : • Consumption of future economic benefits • If model cannot be determined reliably then straight Line method is to be used — Franchisee’s agreement is treated as Contract based intangible asset & all the accounting & valuation rules are applicable to the team owners
4. Treatment Accounting Taxation — Players are recorded on the basis — Under section 32 of Income of Acquisition Cost & then Tax Act, 1961 depreciation amortized year by year according is allowed on Intangible to performance Assets (Right to Play) @ 25% — In case of IPL, the right of — Baklilwal Corporate’s these players is a commercial Services (P.) Ltd. Vs. ITO right that the Franchisee 302 ITR (AT 110) possesses . Hence depreciation is applicable on franchisee agreement on basis of Straight Line Method based on the year of agreements
5. Baklilwal Corporate’s Services (P.) Ltd. Vs. ITO 302 ITR (AT 110) — Depreciation is allowed @ 25% if all following conditions fulfilled – i. Owned, wholly or partly, by the Assessee ii. Intangible assets must acquired on or after the first day of April, 1998 iii.Asset must be used for business purpose or profession & not Personal iv.Asset must be shown to be capable of diminishing value
6. Capital Assets & Not stock-in-Trade — Capital Asset Sec 2(14): ‘‘ as property of any kind held, excluding stock in trade and personal effects…’’ — Franchisee owns the right of players which are corporeal (bodily/physical) property — Not stock-in-Trade: ‘‘…as not for resale purpose.’’ They are only available to provide services Players would fall under category of Capital Asset for their team owners and transfer would be subject to Capital Gains tax liability.
7. IPL & Taxation Aspects a) Service Tax : for providing service to sponsors to put advertisement on the clothes of the players a) Entertainment Tax: Rather than sport event it entertainment event. Tax payable to local government b) Capital Gain: (Trf. Value - Acq. Value)on transfer of Capital Assets (Players) a) TDS: As it comes in nature of Professional Services @ 11.33% as per Section 194E. Collection from IPL amounted to Rs. 60 crore as TDS to Income Tax Department upto 31st March, 2009
8. IPL & Taxation Aspects e) Income Tax : ü Tax sweetener for foreign players ü Section 115BBA : Income earned by non-resident sportsmen by participating in India in any game or sports and advertisements would be subject to tax in India. Kevin Pietersen & Andrew Flintoff ü Foreign Players & commentator has to pay tax @ 10% as per Section 115BBA of the Income-Tax Act ü India has signed Double Tax Avoidance Agreements (DTAAs) with New Zealand, Australia, South Africa & not Pakistan . The tax treaties executed by India contain an Article dealing with taxation of quot;entertainers and athletes/sportspersons
9. Taxation of Players DOMESTIC PLAYERS — Taxable under section — Income 28 Cost of Acquisition yyy (Profit from + Match fees yyy Profession) + And other yyy — Taxable as per Slab -Expenses Incurred for same Rates applicable (yyy) Total Income yyyy
10. Taxation of Players Foreign Players — Income ( after TDS ) — Taxable under section 115 Cost of Acquisition xxx BBA + Match Fees xxx — Taxable @ 1o% Flat + Income from Article xxx sec.115BBA on (a) not need to writing in newspaper, file return u/s 139 Magazine relating Cricket — Any other Income + Advertisements xxx Ex. If Andrew Flintoff sings Total Income (a) xxxx song and earns Rs. 10 Lakhs — No Expenses allowed 1. File separate return 2. Taxable as per slab rates 3. Provision of Sec 115BBA will not apply
11. — Foreign cricketers, who might have received a lower bid than most of the Indian players would go home happy as their net fee would still be more, as the domestic players have to pay 30 per cent tax — Foreign players has to pay only 10 per cent (plus applicable surcharge and cess) And not to be taxed in their home country because of ‘‘double taxation avoidance agreement’’
2. — Definition – ‘‘ An identifiable non-monetary asset without Accounting physical substance held for use in the production or supply of goods Standard 26 or services, for rental to others , or for administrative purpose.’’
3. AS- 26: Intangible Assets — As per para 63 of Accounting standard, ‘‘the depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful ..’’ — Amortisation : Allocation of an amount to be charged off over the useful life of Intangible asset. Basis of Amortisation : • Consumption of future economic benefits • If model cannot be determined reliably then straight Line method is to be used — Franchisee’s agreement is treated as Contract based intangible asset & all the accounting & valuation rules are applicable to the team owners
4. Treatment Accounting Taxation — Players are recorded on the basis — Under section 32 of Income of Acquisition Cost & then Tax Act, 1961 depreciation amortized year by year according is allowed on Intangible to performance Assets (Right to Play) @ 25% — In case of IPL, the right of — Baklilwal Corporate’s these players is a commercial Services (P.) Ltd. Vs. ITO right that the Franchisee 302 ITR (AT 110) possesses . Hence depreciation is applicable on franchisee agreement on basis of Straight Line Method based on the year of agreements
5. Baklilwal Corporate’s Services (P.) Ltd. Vs. ITO 302 ITR (AT 110) — Depreciation is allowed @ 25% if all following conditions fulfilled – i. Owned, wholly or partly, by the Assessee ii. Intangible assets must acquired on or after the first day of April, 1998 iii.Asset must be used for business purpose or profession & not Personal iv.Asset must be shown to be capable of diminishing value
6. Capital Assets & Not stock-in-Trade — Capital Asset Sec 2(14): ‘‘ as property of any kind held, excluding stock in trade and personal effects…’’ — Franchisee owns the right of players which are corporeal (bodily/physical) property — Not stock-in-Trade: ‘‘…as not for resale purpose.’’ They are only available to provide services Players would fall under category of Capital Asset for their team owners and transfer would be subject to Capital Gains tax liability.
7. IPL & Taxation Aspects a) Service Tax : for providing service to sponsors to put advertisement on the clothes of the players a) Entertainment Tax: Rather than sport event it entertainment event. Tax payable to local government b) Capital Gain: (Trf. Value - Acq. Value)on transfer of Capital Assets (Players) a) TDS: As it comes in nature of Professional Services @ 11.33% as per Section 194E. Collection from IPL amounted to Rs. 60 crore as TDS to Income Tax Department upto 31st March, 2009
8. IPL & Taxation Aspects e) Income Tax : ü Tax sweetener for foreign players ü Section 115BBA : Income earned by non-resident sportsmen by participating in India in any game or sports and advertisements would be subject to tax in India. Kevin Pietersen & Andrew Flintoff ü Foreign Players & commentator has to pay tax @ 10% as per Section 115BBA of the Income-Tax Act ü India has signed Double Tax Avoidance Agreements (DTAAs) with New Zealand, Australia, South Africa & not Pakistan . The tax treaties executed by India contain an Article dealing with taxation of quot;entertainers and athletes/sportspersons
9. Taxation of Players DOMESTIC PLAYERS — Taxable under section — Income 28 Cost of Acquisition yyy (Profit from + Match fees yyy Profession) + And other yyy — Taxable as per Slab -Expenses Incurred for same Rates applicable (yyy) Total Income yyyy
10. Taxation of Players Foreign Players — Income ( after TDS ) — Taxable under section 115 Cost of Acquisition xxx BBA + Match Fees xxx — Taxable @ 1o% Flat + Income from Article xxx sec.115BBA on (a) not need to writing in newspaper, file return u/s 139 Magazine relating Cricket — Any other Income + Advertisements xxx Ex. If Andrew Flintoff sings Total Income (a) xxxx song and earns Rs. 10 Lakhs — No Expenses allowed 1. File separate return 2. Taxable as per slab rates 3. Provision of Sec 115BBA will not apply
11. — Foreign cricketers, who might have received a lower bid than most of the Indian players would go home happy as their net fee would still be more, as the domestic players have to pay 30 per cent tax — Foreign players has to pay only 10 per cent (plus applicable surcharge and cess) And not to be taxed in their home country because of ‘‘double taxation avoidance agreement’’
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