Rs 1 crore sought as entertainment tax from TCS World 10K Bengaluru run Procam International

Karnataka's Commercial Taxes Department has claimed entertainment tax from the organisers of the recent TCS World 10K Bengaluru run. The tax authorities have said the participation fee collected is taxable at 10% because the event was “entertainment“ in nature.

Mumbai-based end-to-end sports management company, Procam International, which promoted the event, however, has contested the tax claims.

The event branded after India's largest software exporter TCS and organised every year by Procam in Bengaluru since 2008 has grown in glamour and popularity . The number of participants doubled in eight years to about 22,000. This year's event was held in May at Kanteerava Stadium in Bengaluru under the theme 'Refresh, Reload and Run'.

Runners have to pay a registration fee. This year, they were required to pay Rs 800 for majja run. Senior citizens and champions with disability , however, were required to pay only Rs 300. The event was open for foreigners too.

According to the tax authorities, if an organiser collected a participation fee for an event, such an activity fell within the definition of entertainment under the Karnataka Entertainment Tax Act, 1958.

According to the information furnished by Procam to the tax authorities, the sports management firm has collected `10 crore in participation fee since 2008 and the taxmen are demanding about Rs 1 crore at the rate of 10% on the sum collected.

Dilip Jayaram, CEO of Procam, however, said a registration fee is collected in order to provide facilities for the marathon such as medical facilities, route, chip timing, energy stations, refreshments, recovery zones and sanitary facilities. The event, he added, did not fall within the definition of entertainment as they collected no such fee from those watching the event.

“How is running a 10 km race after training for six to eight months an entertainment?“ he said.

A tax official said they would not claim any tax if organisers of such events made an application beforehand and took an exemption from entertainment tax from the government.

A writ petition from Procam challenging the tax claim came up before the Karnataka High Court on Tuesday. The court, however, declined to intervene at this stage, and asked the petitioner to go back to the tax authorities and pursue their claims. Jayaram said: “We will pursue all due processes to establish the difference between a spectacular sport and a participative sport. Ours was just a participative sport, and hence, is not an entertainment.“

TCS has declined to comment.