BCCI to distance itself from IPL to limit fallout

The Board of Control for Cricket in India (BCCI), the country's apex governing body for the sport, is exploring the possibility of converting the Indian Premier League (IPL) into a wholly-owned subsidiary. IPL, one of the world's most lucrative and controversial sports leagues, is at present a unit of BCCI.

The move aims to protect the non-IPL divisions of BCCI from any liabilities attached to the league.

“Under the current structure, BCCI gets directly involved in any controversy that rocks IPL,” a BCCI source told Business Standard.”Even the BCCI accounts will come under scrutiny of the Income Tax department. With IPL becoming a subsidiary, there will be separate accounts of BCCI and IPL. All assets will be shifted to the subsidiary. This is basically to ring-fence the liability.”

IPL could be made a subsidiary under Section 25 of the Companies Act, under which a non-profit organisation is registered.

“BCCI can legally form a subsidiary. The present assets of IPL will automatically get transferred to the subsidiary company,” said a Mumbai-based tax consultant requesting anonymity.

“One of the key reasons for BCCI to consider hiving off IPL into a separate entity could be to ring fence the other non-IPL businesses of BCCI from liabilities attached to the IPL business,” said Nishchal Joshipura, Head of M&A Practice at law firm Nishith Desai Associates. “Also, from a tax perspective, to continue getting tax exemptions by maintaining its status as a charitable institution promoting sports, it might be prudent for BCCI to hive off IPL business, which is more of a commercial venture than a charitable activity.”

After a demerger, IPL and BCCI would have separate accounts. “There will be no scope for any complications like the one we are facing now,” a BCCI source said. According to him, BCCI president Shashank Manohar, who is tipped to replace IPL Commissioner Lalit Modi, would be able to clear the present mess.