Exclusive | BCCI Allocates Rs.3,494 crore For Legal, Arbitration and IT Contingencies
The ‘provision’ amount mentioned in the 2020-21 balance sheet of the BCCI is a humongous Rs.1,289.25 crore more than the previous financial year.
Desperately reeling under the onslaught of a spate of court cases, arbitration issues, and income tax matters, the Indian cricket board has allocated an unprecedented high amount of Rs.3,494.96 crore to deal with contingencies. The amount is the highest ever in the 93-year history of the Board of Control for Cricket in India (BCCI).
Significantly, this amount, mentioned under ‘provisions’ in the BCCI balance sheets, has risen quite substantially in the past six years. At the end of financial year 2015-16, this ‘provision’ was just Rs.3.72 crore (for ‘employee benefits’ only).
But with more and more litigation and income tax issues piling up, the BCCI, the world’s richest national cricket body, was forced to make a huge provision for contingencies. The BCCI’s balance sheet of financial year 2020-21 – which has not been officially disclosed so far – has revealed this and many other eyebrow-raising figures that show that the organisation is wary and thoroughly rattled from within.
The ‘provision’ amount mentioned in the 2020-21 balance sheet is a humongous Rs.1,289.25 crore more than the previous financial year. In 2019-20, the corresponding amount was Rs.2,205.71 crore – which was an all-time high figure back then.
“The Board has made provisions towards any possible liabilities that may eventually arise out of closure of those matters that are under dispute/litigation as at balance sheet date [March 31, 2021],” reads the auditor’s explanatory ‘notes to accounts’ of the 2020-21 balance sheet.
“The amounts disclosed…as under dispute are gross of this provision. This provision has not been set off against the amounts under dispute as such net disclosure of the dispute or providing any additional information of the provision would seriously prejudice the provision of the Board in the said disputes, as permitted under the accounting standards,” explains the note.
However, the present BCCI dispensation, which took control of the board in October 2019, is not responsible for the raging income tax woes. The present office-bearers inherited this legacy from their predecessors who took the issue lightly.
The present ‘provision’ of Rs.3,494.96 crore has been split into three heads – ‘contingencies’, ‘income tax’, and ‘employee benefits’. Interestingly, almost one third of the provision – a colossal Rs.2,000 crore – has been earmarked for a spate of unresolved litigation and disputes, many of which have been hanging fire for several years.
For income tax, the BCCI has set aside Rs.1,462 crore. The corresponding figure in the previous year was less than half of this amount – Rs.670 crore, a difference of Rs.792 crore. And for ‘employee benefits’, only Rs.32.96 core has been set aside.
The independent BCCI auditor explains its inability to provide further explanation on this burning issue. “Pending resolution of the matters, we are unable to state the adjustments that may be required to the amount recognised as provision for contingencies,” says the auditor in opening remarks in the 2020-21 balance sheet.
The amounts mentioned under ‘provisions’ have seen dramatic upsurge over the years. In 2015-16, this figure was just Rs.3.72 crore and was meant only for the benefit of the employees. The next year, it rose to Rs.4.72 crore and its sole objective remained the same – betterment of the BCCI employees. Then, in 2018-19, the total ‘provisions’ suddenly jumped to Rs.1,193.53 crore, with a provision for income tax (Rs.160 crore) added for the first time. The other two heads under ‘provisions’ were ‘contingencies’ (Rs.1,000 crore) and ‘employee benefits’ (Rs.33.53 crore).
In 2019-20, the financial year during which the present dispensation took over, the amount under ‘provisions’ further rose to Rs.2.205.71 crore (break-up: Rs.1,500 crore for contingencies, Rs.670 crore for income tax, and Rs.35.71 crore for employee benefit). And then the ‘provisions’ crossed the Rs.3,000 crore mark in 2020-21. And, quite interestingly, the amount earmarked for employees’ benefits in 2020-21 was reduced by Rs.2.75 crore. In 2019-20, it was Rs.35.71 crore and in 2020-21, it was Rs.32.96 crore.
The income tax issue took a turn for the worse in June 2006, when the BCCI, headed by Sharad Pawar, changed its objects without informing the tax authorities. And the advent of the Indian Premier League (IPL) in 2008 made the tax authorities scrutinise the income of the BCCI more carefully, as they treated it as “commercial” in nature.
“In the past, tax exemptions were granted to the BCCI on the ground that promoting cricket was a ‘charitable activity’. However, the BCCI amended its objects in 2006 to enable it to award sponsorship to sportspersons in games other than cricket and for contribution to other sports institutions such as National Sports Development Fund (NSDF) etc. Exemption to the BCCI was being provided under Section 11 of the Income Tax Act since promotion of sports was being treated as a charitable activity under Section 2 (15) of the Income Tax Act,” said a report of the Standing Committee on Finance (2020-11) of the 15th Lok Sabha.
The 68-page report, titled ‘Tax Assessment/Exemptions and Related Matters Concerning IPL/BCCI’ and published in August 2011, was prepared by the committee of Members of Parliament and headed by former finance minister Yashwant Sinha. The report noted that after changing its objects – on June 1, 2006, and August 21, 2007 -- the BCCI did not inform the relevant authorities on both occasions.
“These changes were detected during the course of assessment proceedings for AY 2007-2008 which were finalised in December 2009,” reads the report. The income tax authorities eventually withdrew the exemption on December 28, 2009, with retrospective effect from assessment year 2007-08.
“On 28-12-2009, the department came to the conclusion that the registration granted to the BCCI under section 12 of the Income Tax Act 1961 did not survive from the date on which the objects were changed, i.e. 1-6-2006,” says the Lok Sabha report.
Another Lok Sabha report, also titled ‘Tax Assessment/Exemptions and Related Matters Concerning IPL/BCCI’ and presented in Parliament in December 2014, came down heavily on the IPL which, it says, was on “purely commercial lines patterned on the English/European football leagues/clubs”. This report noted that the Income Tax Department had been “very lenient on the BCCI, allowing them to enrich their coffers at the expense of the exchequer”.
The Sharad Pawar-headed BCCI’s woes vis-à-vis income tax started with the contentious donation of Rs.50 crore to the NSDF in 2008 for training of the Olympic medal aspirants. Since then it has made several donations. In 2004, the BCCI had donated Rs.1 crore to the Prime Minister’s Relief Fund for the tsunami victims.
The most bizarre of these donations was made in 2008 when Pawar as BCCI chief sanctioned Rs.1.5 crore for building/extending a gymnasium at the Constitution Club in New Delhi that is exclusively available to the Members of Parliament.
In March 2020, the BCCI and its state affiliates announced that they would donate Rs.51 crore to the PM CARES Fund. Last year, the Board donated Rs.10 crore to the Indian Olympic Association to the Tokyo Olympic Games-bound Indian athletes, besides announcing that it would donate 2000 pieces of 10-litre oxygen concentrators for Covid-19 patients.
Towards the end of last year, the BCCI received some good news. The Income Tax Appellate Tribunal (ITAT), Mumbai ‘B’ Bench, quashed an order of the Principal Commissioner of Income Tax with whom the BCCI filed an application for compliance of provisions of Section 12A(1)(ab) of Income Tax Act 1961, following the registration of its new constitution approved by the Supreme Court.
The ITAT order of November 2 said that the BCCI was entitled to continuance of its registration under Section 12A dated February 12, 1996. However, the Principal Commissioner of Income Tax has 120 days to appeal against the ITAT order in the High Court. “Accordingly, the [BCCI] management has, on a prudent basis, continued to recognise provision for income tax with effect from 21st August 2018 (date of approval of the new constitution of the BCCI) until final disposal of the matter,” says the BCCI auditor in the notes to accounts, 2020-21.
(The author is a cricket reporter based in New Delhi who has covered the sport for over three decades)
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