By TIOL News Service:

MUMBAI, APRIL 08, 2016: THE issue is - whether foreign remittance received by a cricketer for rendering services as a presenter and commentator which have a direct and proximate link with the game of cricket, can be denied for deduction u/s 80PR, where such income has been derived in the exercise of his profession as a 'sportsman'. NO is the answer.

Facts of the case:

The assessee has been a cricketer of international stature and has been always playing for the country in domestic as well as international cricket tournaments. The perusal of the Income Tax Expenditure account of the assessee for the year under consideration reveals that the assessee had received income from (i) Column writing and commentary; (ii) Royalty on books; (iii) Honorarium and (iv) Foreign Remittances. The assessee had received income in the form of foreign remittances, on which deduction was claimed u/s 80RR, in pursuance to an agreement with M/s ESPN Star Sports for rendering services on an exclusive basis as a presenter, reporter and commentator and various other allied services described in the said agreement. During assessment, income from business was computed by the AO under the head income from business or profession and deduction u/s 80RR thereon was granted as was claimed by the assessee @ 60% of factual income describing the same as professional income from foreign sources. Subsequently, the AO on the ground that the assessee had wrongly been allowed deduction, proposed to reopen the assessment by issuing notice u/s 148. On appeal, the CIT(A) after examining and discussing the agreement, rejected the claim of assessee on ground that this deduction would be available to a person who is sportsman or a person belonging to any one of the categories as mentioned in the said section and the income must be derived as a result of carrying out that very activity only. Since the assessee was no more a sportsman or a cricketer and in any case since the impugned income was not earned as a result of playing cricket, the assessee was found not eligible to claim the deduction u/s 80RR. He accordingly confirmed the reassessment made by the AO.

After hearing the parties, the Tribunal had held that,

++ the foremost issue is with regard to existence of two sets of "reasons". The first set of "reasons" is undated which is approved by the Additional-DIT(IT), and was forwarded for further approval by the DIT. Accordingly, DIT(IT), Mumbai, granted sanction of the same by making detailed reasoning in his own handwriting. It is noted that while giving reasoning, the DIT had raised few new aspects which were not raised by the AO in the "reasons" recorded viz, some difference in income shown in the return and amount shown in the remittance certificate and a change in method of accounting by the assessee. It is noted that subsequent to the sanction granted by the DIT, the AO recorded another set of "reasons". But, we could not find anything in the assessment records and nothing was shown indicating any approval/sanction from the competent authority u/s 151(1) with respect to this set of "reasons". Thus, admittedly, as per records, the reopening has been done without complying with the mandatory jurisdictional condition of section 151. Thus, reopening becomes bad on this ground itself. It is not disputed that complete facts with regard to work profile and status of the assessee, nature of receipt and particulars of deductions claimed in the return were provided along with return and further supported by further information and documents submitted during the course of original assessment proceedings. The AO had examined these documents and he was aware of complete facts, and thus, apparently, an opinion was formed by the AO while granting the benefit of deduction u/s 80RR. Subsequently, at the stage of reopening, the AO has alleged in the "reasons" recorded that the deduction was wrongly granted. In our opinion, it is clearly a case of change of opinion by the AO;

++ further, it has been stated by the AO in the 'reasons' that deduction u/s 80RR is allowable in respect of professional income from foreign sources where the total income of an individual being inter-alia sportsman, includes an income derived by him in the exercise of his profession from any person not resident in India. According to AO, the assessee did not exercise any of the professions covered in definition of section 80RR, and thus the assessee had wrongly claim deduction u/s 80RR. Admitted facts on record, which are in public domain also, are that the assessee has been a cricketer of international stature and has been always playing for the country in domestic as well as international cricket tournaments. It is seen that the CBDT vide its circular no.281 dated 22nd September, 1980 has clarified that section 80RR is a beneficial provision intended to provide benefits of tax concessions to those persons who can contribute to greater understanding of our country and its culture abroad and also for augmenting our foreign exchange resources. The circular clearly lays down that aim of section 80RR is to encourage our sportsman, and athletes and persons of other categories as mentioned in the section 80RR. Since, the term sportsman has not been defined in the Act and the impugned provisions are beneficial provisions intending to provide the benefits to the public at large, therefore, it would be appropriate to analyse the expression sportsman as is used commonly by the society in generic sense. It has been no where mentioned u/s 80PR that the sportsman should be the person who is currently playing in the field or the person earning income directly from playing in the field only. Thus, it can certainly be said that the assessee was a sportsman during the year for the purpose of section 80RR;

++ what can be understood from the reading of section 80PR is that any income derived by the sportsman during the course of his profession which arise out of core activity, and also other subsidiary & allied activities which are linked to and have nexus with the core activity of the sports, should also be included in the scope of the income eligible for deduction u/s 80RR. In the facts of the case, it is noted that the assessee has derived its income as a result of his agreement with M/s ESPN Star Sports for the services provided by the assessee as a presenter and commentator and other allied activities which have been discussed in the relevant clauses of the agreement. Thus, assignment has been given to the assessee and this role has been performed by him effectively, because of his having been a cricketer of international stature and he was chosen for the skill and knowledge he possessed and the delivery he could have given because of this skill and experience. It can therefore be said that the contribution for promotion to the game of cricket is possible not only while playing in the field but also outside the field while performing various other crucial roles, like that of a coach, empire and commentator etc. The entire role of the assessee and the activity performed by him for which he was remunerated, have a direct and proximate link with the game of cricket. Thus, in our considered opinion, the facts of this suggest that the impugned income has been derived by the assessee in the exercise of his profession as a 'sportsman'. Therefore, the assessee is eligible to claim deduction u/s 80RR, and therefore no belief could have been formed for escapements of his income. The benefit of deduction claimed u/s 80RR was in accordance with law, and therefore, disallowance made by the AO in this regard is directed to be deleted.

(See 2016-TIOL-503-ITAT-MUM)