By TIOL News Service

HYDERABAD, FEB 21, 2014: THE issues before the Bench are - Whether the awards received by the assessee are exempt from income tax as he is not a professional cricketer but playing under the aegis of BCCI which decides the payments to be made to the players; Whether assessee is entitled for expenditure incurred by him for sports accessories, dress, equipment, coaching, training, travel & stay and Whether the assessee is entitled for deduction u/s 80RR considering that even though he is a cricketer, the income for acting in T.V. / print media is received by him as a professional actor. And the verdict partly goes in favour of the assessee.

Facts of the case

A) The assessee was working as officer in SBI and was a cricket player who played for the Country. The assessee claimed certain amount received from various cricket tournaments, awards and gifts and man of match awards as exempt in view of Board circular No.447/199/1/86IT(A1) dated 22.01.1986. AO disallowed the claim observing that in case of sportsman who is a professional, awards received by him shall be in the nature of benefit in exercise of his profession and therefore, liable to tax under the Income Tax Act. Assessee contended that he was not a professional cricketer and he was playing for the country under the aegis of BCCI which decided payments to be made to the players by way of fees, logo amount, share of prize money etc., and he had no control over the matches played and amounts received. CIT (A) allowed the claim of assessee stating that he was not a professional. The appeal was only made in respect of man of match award of Rs. 3 lacs.

B) Assessee claimed expenditure against the income from logo. The logo was the money collected and paid by the BCCI to all the players. The dress, bats and other equipment show logo of the sponsor and supplied by the sponsor. Senior players like the assessee have their own equipment specially made for and they pay for it. Most of the occasions, the gloves, pads, dress material and other equipment are taken away by staff, grounds men, fans, etc and the assessee was in no position to control them. Therefore, these have to replaced at their own cost. AO disallowed the expenses on the ground that assessee failed to explain as to how this is an allowable expenditure against Logo income. CIT (A) observed that part of the expenses was incurred by cheque and balance was made in cash. CIT (A) noticing that the claim of expenditure is not amenable to verification, restricted the disallowance to 20%.

C) Assessee claimed expenditure incurred towards cost of cricketing gear and incidental expenses for practicing and participating in various tournaments. AO disallowed the claim of expenditure by saying that all the requirements of the cricketers such as dress, equipment, coaching, training, travel, stay etc., were looked after by the BCCI which is the supreme body for cricket control in India. The senior cricketers get their choice of wear and equipment. Hence, it is difficult to believe that the Assessee would have incurred any expenditure for playing cricket under the aegis of BCCI for the country. CIT (A) partly allowed the claim of the assessee observing that before participating in the national and international test matches the player has to do a lot of practice in which he has to incur some expenditure on travelling and buying play equipment like bats, gloves, pads, shoes etc., Keeping in view the fact that major payments have been made in cash which are not supported by bills/vouchers, 50 % of the expenses claimed were disallowed.

D) Assessee received income towards advertisement for acting in ad-movies from different commercial entities promoting soft drinks, sports-wear, tyres etc. The amount included income received by way of convertible foreign exchange. Assessee claimed that he was entitled to deduction u/s 80RR as a professional actor in ad-films and not as a sportsman. As a cricketer for the country the assessee gained popularity with the masses and, therefore, decided to act in movies, in particular ad-films. He has taken crash courses in acting to position himself in the ad-films market by improving acting skills and talent and enhance star value. AO did not accept the claim of assessee on the ground that being a popular cricket player he received offer for acting in ad-films for promoting goods. The assessee being an employee of SBI cannot pursue another profession. Hence, acting in ad-films by the assessee cannot be considered as profession so as to entitle him to claim deduction u/s 80RR. Therefore AO treated the receipts from ad-movies as 'Income from other sources' and has denied the claim made u/s 80RR;

The CIT (A) confirmed the order of AO. Before ITAT it was submitted by the assessee that assessee has to appear in advertisements for which he has entered in to various contracts and has to face camera. Assessee has undergone special training and he has to bring his creative talent for the product/company engaged him. No doubt, being a successful cricketer it has added to his brand value as a model but the fact is that assessee had to use his own skills and creativity while earning the income as a professional model. The restriction on Conduct Rules of the Bank is only with reference to the playing cricket and not for appearing in advertisements or as a model.

After hearing both the parties, the ITAT held that,

A) ++ even though the incomes are offered under the head 'income from business or profession', that does not mean that assessee is a professional player. CIT (A) has rightly held that assessee is playing for the country under the aegis of BCCI and he has no individual professional involvement to play in any match as he wishes. Therefore, the order of CIT (A) is upheld;

B) ++ there is no reason to interfere with the order of CIT(A). There is no dispute with reference to the Circular of Board which in principle accepted that players have to incur expenditure. Even though the allowance at 75% of receipt by the Circular was withdrawn during the year, considering that assessee has paid about 45% of the amount by way of cheque, the disallowance out of cash expenditure would work out almost 40% of the amount paid in cash. Therefore, order of CIT (A) is confirmed;

C) ++ CIT (A) has erred in restricting the disallowance to 50% of the claim. In the earlier year, he has examined the expenditure incurred by the assessee and considered 20% of the amount only to be disallowed, which have been confirmed by ITAT. Since, assessee has accepted such disallowance in earlier year, we are of the opinion that it is reasonable to restrict the disallowance to 20% of the claim as in earlier year to be consistent with the facts of the case;

D) ++ even though assessee may be reputed cricketer, for acting in T.V. / print media, it requires special talent. Even though he may not be professional cricketer, he can pursue modelling as a professional. In the case of Sachin Tendulkar, ITAT observed that the assessee while appearing in advertisements and commercials, had to face the lights and camera. As a model, the assessee brought to his work a degree of imagination, creativity and skill to arrange elements in a manner that would affect human senses and emotions and to have an aesthetic value. Every person or for that matter every sportsman does not possess that degree of talent or skill or creativity and face the lights and camera etc. Thus, it was held that the assessee amounted to income derived by the assessee in the exercise of his profession as an artist and, therefore, entitled to deduction under section 80RR. Following the said decision, deduction u/s 80RR is allowed.

(See 2014-TIOL-101-ITAT-HYD)