Three IPL sponsors slapped notice

It was served for service tax default

Tax authorities have issued showcause notices to three Delhi-based companies — DLF, Religare Enterprises and Adidas — for defaulting on service tax for the first season of the Indian Premier League (IPL).

The notices, asking the reason why service tax had not been paid for 2008-09 were issued in 2009-10, before the IPL controversy broke out, said an official in the finance ministry who did not wish to be identified. The tax liability of all the sponsors of IPL runs into few crores.

The tax authorities estimated the service tax liability of DLF for IPL-I at Rs 5 crore. The company said it was not liable to pay service tax on title sponsorship of IPL as it should be paid by the Board of Control for Cricket in India. “We received the notice a few months back and are contesting it, as title sponsorship of sport activities is not liable for service tax,” said a DLF spokesperson. He added this was accepted by the revenue department, but the officials denied it. DLF has exclusive title sponsorship rights of IPL for five years. While Adidas is the sponsor of Mumbai Indians, Religare was the associate partner of Delhi Daredevils in the first IPL season. It has not sponsored any event in the recently-concluded IPL series.

Religare denied receiving any notice. “Religare Enterprises did not receive any notice for service tax payment from the revenue department in 2009-2010,” it said. Adidas did not respond to the queries sent by Business Standard. Till last year, any company sponsoring a sports event was exempt from service tax. The finance ministry said these companies sponsored the teams and not the sport, and thus, were liable to pay service tax.

In Budget 2010-11, the finance ministry amended the Finance Bill and brought sponsorship of sports under service tax, as this clause had become a bone of contention between the government and the companies sponsoring cricket.