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This appeal is filed by the Revenue against the order of CIT(A)-54 Mumbai, dated 29/07/2016 arising out of order of Asst. ACIT. CC.35, Mumbai dated 31/12/2013 passed u/s 143(3) of the Income Tax Act, 1961 for the Assessment Year 2011-12.

M/s Indiawin Sport Pvt.

2. Following grounds are raised by the Department reads as under:-

1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in directing the A.O. to treat the expenditure on account of Franchise fees of Rs.44.76 Crore paid to BCCI for Rights to participate in the Indian Premier League (IPL) as revenue expenditure instead of capital expenditure for the A.Y. 2011-12 relying on the decision of the Hon'ble ITAT in assessee's own case for A.Y. 2009-10 & 2010-11?

2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in directing the A.O. in treating the expenditure on account of Franchise fees of Rs.44.76 Crore paid to BCCI for Rights to participate in the Indian Premier League (IPL) in the lights of amendment to section 55(2)(a) inserting "or right to carry on any business" as capital asset through the Finance Act 2002?

3. The short facts of the case are as under:-

The assessee is a Private Limited Company. During the year under consideration the assessee was engaged in business of owning, managing and operating the Franchisee of Indian Premier League (IPL) Tournament Organization by Board for Control of Cricket in India. During the year the assessee has paid Franchisee Fees of Rs.44.76 Crore paid in Financial Year 2010-11relevant to Assessment Year 2011-12. The Franchisee fees were disallowed.

The matter went to CIT(A) and CIT(A) has dismissed the appeal.

"Before considering the claim of allowability of deduction, it is necessary to decide whether the aforesaid franchisee right is a capital asset eligible for depreciation or it is revenue expenditure. As per clause 3 of the FA, the impugned agreement shall come into effect upon signature and shall continue for so long as the League continues subject to termination, suspension or renewal as provided (the 'Term'). As per clause 4 of the FA, the franchisee (appellant) has acknowledged and agreed that BCCI-IPL owns the Central Rights and the BCCI has all pervasive rights to exploit present as well as future Central Rights. The Central Rights includes media rights, umpire sponsorship rights, tile sponsorship rights, official sponsorship rights, stadium advertising right, games etc. The franchisee would be allowed to enjoy only those rights which BCCI-IPL would acknowledge. Another very important clause laid down in the FA [clause 7.1 (b)] is that from and including 2018 onwards, for indefinite period, an amount equal to 20 per cent of the franchisee income received in respect of such year shall be paid to BCCI-IPL by the franchisee appellant. Future, franchisee shall have no right to assign or to sub-contract or otherwise delegate the performance of any right or Obligation under the agreement without prior written permission from the BCCI-IPL (clause 16 of FA). Franchisee shall also not sub-let or sub-contract the franchisee rights without prior written permission of the BCCI-IPL. Further, as per clause 10.1 of FA, the appellant does not have any right to assign or delegate the performance of any right or obligations under this agreement. The same vests with BCCI-IPL only. Perusal of the above clauses reveal that under the terms of the agreement, appellant company never enjoys the proprietary rights. The proprietary rights continue to vest in the BCCI-IPL. Therefore, appellant cannot be regarded as having acquired either wholly or any part of proprietary rights by or under the agreement. Therefore, in view of the above facts and circumstances, franchise right cannot be treated as capital asset.