Several IPL franchises are presently under government scrutiny for alleged money laundering. Some team owners, who have shelled out huge amounts to win these franchises, are also embroiled in tax disputes, running into hundreds of crores, with the department of revenue, says a Times of India report.
Initial findings of the finance ministry's department of revenue — which has under its arm investigative agencies such as Income Tax Investigation, Enforcement Directorate and Directorate of Revenue Intelligence — revealed that some IPL franchises had allegedly routed their money through tax havens.
Sources in the income tax department said entities were created in Mauritius to route investments to Indian companies that owned some of these IPL franchises.
Links of a few franchises have been found with entities in tax havens of British Virgin Isles, Bahamas and Hong Kong.
The latest controversy involving MoS, external affairs, Shashi Tharoor, and IPL commissioner Lalit Modi with the latter revealing names of shareholders in the IPL's Kochi franchise has led to counter-accusations of breach of trust.
So, what is so secret about who owns a pie in the IPL? The agencies probing the deals had come across a web of transactions in scores of companies spread across continents that was allegedly intended to confuse the identity of the stakeholders so that they may escape scrutiny when being asked to account for the source of capital investment and the gains made.
Ascertaining the actual owners of the franchises can help the government verify the genuineness of the source of funds and that no unfavourable tax treatment had been claimed by the franchises.
Last year, in September 2009, an important franchise was found seeking FDI. The government had deferred the decision after it found that the franchise concerned was engaged in a web of transactions across many tax havens that confused the shareholding pattern in the holding company. The controversial shareholding pattern in the Kochi franchise is not the first case.
In the deferred FDI case, it was found that the franchise was awarded the rights of the IPL team even when it was not a registered entity in India.
The award went out to a firm based in UK. The UK firm “participated in the IPL auction with an understanding that on the successful award of the bid, the joint venture partners would incorporate a joint venture company in Mauritius which then would incorporate a 100% owned Indian company to operate the IPL franchise cricket team in India”.
The initial auction for the IPL franchises was organized by the Board of Control for Cricket in India (BCCI) in December 2007 after which the first version of the Twenty-20 game was held in India in April 2008.
The second version of IPL was shifted to South Africa as the dates clashed with the general elections as well as for security reasons.
The ongoing third IPL season is again being held in the country and has resulted in a big tax bonanza for the government.
As claimed by Modi, IPL-3 is likely to generate close to Rs 4,500 crore. The government is expected to earn close to Rs 300 crore from the six-week sporting extravaganza through direct and indirect taxes on the sport and its related activities.
