The world’s richest cricketing body, BCCI, is finding new loopholes to remain a charitable organisation and pay no taxes. Sources confirm that it has shifted its headquarters from Mumbai to Chennai
The Board of Control for Cricket in India (BCCI), the richest cricketing body in the world, has come up with a new trick to evade the tough stand of the Income-Tax (I-T) authorities in Mumbai. According to informed sources, BCCI has shifted its headquarters (or corporate office) to Chennai in order to make a case for moving its tax assessment to that city and has already started the process in that direction. This means that the investigation launched by the I-T officials from Mumbai will have to be transferred to Chennai. BCCI and its politically powerful patrons have already been exerting tremendous pressure on the Mumbai I-T officials in connection with their finding and the cancellation of its tax-exempt status as a "charitable organisation".
Reliable sources tell us that the shift to Chennai occurred just around 15 days ago. This could well mean that the BCCI would seek a re-evaluation of the cancellation of its tax exemptions through I-T officials in Chennai. Our sources, who have knowledge about BCCI's actions, say that it has an income of over Rs400 crore last year but cannot show a single charitable activity, whether it is to discover new talent or hold free cricket-training camps. All its activities are focussed on maximising its revenues.
According to an expert, the Income-Tax Act permits an organisation or an entity to be assessed for tax in another State (by the tax authorities). However, if the entity being assessed can prove that daily operations or board meetings have occurred in another State, then the assessee can request the I-T department for a change in assessment circle.
Interestingly, a little-known fact is that the BCCI was originally registered as a charitable organisation under the Tamil Nadu Societies Registration Act. This probably made it so easy for it to request a change in assessment circle without attracting any publicity or media scrutiny so far. In addition, the BCCI's powerful honorary secretary, N Srinivasan, probably has the clout to ensure this transfer, especially when the Mumbai tax hierarchy is not in a mood to be soft on the cricket body.
Moneylife contacted BCCI's chief administrator officer (CAO) Ratnakar Shetty, but he refused to comment and abruptly disconnected the call saying we should check with the I-T department. Former BCCI president Jagmohan Dalmiya and former chief selector Kiran More say that they have no knowledge of these developments. The entity's vice-president, Rajiv Shukla wasn't available for comments. However, BCCI's press relation officer, Devendra Prabhudesai stuck to the stance that the sports entity was headquartered in Mumbai.
In late April 2010, all the eight original Indian Premier League (IPL) franchisees-Chennai Super Kings, Deccan Chargers, Delhi Daredevils, Kings XI Punjab, Kolkata Knight Riders, Mumbai Indians, Rajasthan Royals and Royal Challengers Bangalore-each owned either by big corporate houses or Bollywood superstars, came under I-T scrutiny.
The I-T Department wants from BCCI bidding documents, contract agreements for the eight IPL franchisees, disclosure of documents supporting ownership, shareholding, details of players' auction, payments made, deposits made to IPL, BCCI and franchisees, details of income, capital payments made to franchisees and balance sheets, and other receipts related to the IPL.
Suspended IPL commissioner Lalit Modi had recently agreed to give up all documents relating to franchise bids and media rights of the IPL which the BCCI had asked for. After receiving a letter from N Srinivasan, BCCI secretary, Mr Modi agreed to return the missing documents to Mr Shetty, a television channel claimed. This proves that the I-T Department would not have been able to assess the documents earlier as they were still with Mr Modi.
The I-T Act which was amended in 2008 states that an organisation cannot be called a 'charitable' one if it carries on trade, commerce or business. In March 2009, its then chairman, Mr Modi, only made the case stronger for the taxmen by bragging about IPL riches and its ability of crossing the billion dollar mark. At the time, BCCI had made over Rs1,000 crore in 2007-2008. The IPL alone has showed tax deducted at source of Rs91 crore.
One must keep note, when Mr Dalmiya was BCCI's president in 2001 to 2004, he shifted its headquarters from Kolkata to Mumbai and when Union minister of agriculture Sharad Pawar took over, he again shifted it back to Mumbai.
The I-T department officials from Mumbai may have given the BCCI a rough time with their tax scrutiny, particularly with the charitable tax exclusions, but what remains to be seen is how much will the Chennai I-T department officials manage.
The Sensex will hover around 17,600 before the next move
The market witnessed a subdued closing today, as traders rolled over their position in the derivatives segment from the near-month June contracts to July contracts ahead of the expiry of the near-month June derivatives contracts on Thursday (24th June). The Sensex settled lower at 17,749, down 126 points (0.7%) and the Nifty ended at 5,316, down 36 points (0.7%). The indices started the day on a negative note, taking cues from the Asian markets. Trading was range-bound till mid-morning. The market recovered from there and gained till early afternoon. However, it slid from there to shut in the red.
Asian stocks were down on Tuesday on concerns over Europe's economic crisis after Fitch Ratings cut its debt rating on French bank BNP Paribas SA. Fitch reduced BNP's long-term rating to AA-minus, the fourth-highest investment grade, from AA on deteriorating asset quality. Key benchmark indices in Japan, South Korea, Singapore, Indonesia, Hong Kong and Taiwan fell by 0.2% to 1.2%.
US indices closed lower on Monday. The Dow was down 8.2 points (0.08%) at 10,442. The S&P 500 was down 4.3 points (0.3%) at 1,113. The Nasdaq was down 20.7 points (0.9%) at 2,289.
Japan has set an ambitious target to control its fiscal deficit. The government pledged to do its utmost to keep new debt issuance in the year to next March at or below about 44 trillion yen ($483 billion) that has been earmarked for this year, while aiming to steadily reduce bond issuance thereafter.
Back home, a bumper harvest prospect because of a good monsoon has livened up the possibility that India should lift the export ban on non-basmati rice. India is the world's second-largest exporter of rice. Thailand banned exports of non-basmati rice in 2008, as high prices of the grain put pressure on domestic supply.
The government will decide on the fuel price hike on Friday. Earlier this month, the government deferred a decision on raising fuel prices, the second time in a year, which is a politically-sensitive reform measure.
Foreign institutional investors were net buyers of equities worth Rs1,564 crore on Monday. Domestic institutional investors were net sellers of Rs 561 crore.
Hindustan Dorr-Oliver (up 0.5%) has joined hands with Bronswerk Heat Transfer BV, Netherlands, a technology and manufacturing company that supplies air-cooled heat exchangers and high-pressure heat exchangers to various process plants, process license holders, plant construction companies and leading global consultants.
L&T (down 0.8%) thermal power plant construction business unit has secured two orders aggregating Rs827 crore from GVK Power for the latter's Gautami Combined Cycle Power Plant Expansion and from SEPCO-I for the Talwandi Sabo Power Plant in Punjab.
JIK Industries (down 2.9%) has successfully commenced its showroom in south Mumbai and is planning expansion in the form of own retail stores, franchise stores, shop-in shop, etc. The company will be focusing on development of new designs and increase of profits in this segment. There is no significant competition in its product profile. The company is considering floating a subsidiary abroad and increase its focus and capabilities in the high-end luxury product segment and export to Europe and the Middle-East.
Price band fixed at Rs230-Rs240
The initial public offer (IPO) of Technofab Engineering Ltd, an engineering, procurement & construction (EPC) company, will open on 29th June and close on 2nd July. The shares will be offered at a price band of Rs230 to Rs240.
The company will mop up Rs68.77-Rs71.76 crore, depending on the final issue price.
Between FY07-08 and FY09-10, Technofab\'s sales increased at a compounded annual growth rate (CAGR) of 48% and profit after tax (PAT) increased at a CAGR of 189%. Its order book stands at Rs533.74 crore as on 31 March 2010.
The company said it has placed bids for around 41 projects, worth Rs2,200 crore, in power, oil & gas and steel sectors. It expects to be the lowest bidder for around five projects worth Rs400 crore, all in the power sector.
Technofab has a presence in power, industrial infrastructure, water and oil & gas sectors and is planning to enter the railways and transport segments.
The company has operations in India, Kenya, Ethiopia, Ghana and Fiji. It plans to look for opportunities mainly in countries with projects funded by the World Bank or similar organisations.