"It has severely affected our cash flow," AIFF general secretary Kushal Das told HT from New Delhi. Das said the Commissioner of Income Tax (Appeals) has already been approached and two hearings held.
The AIFF hasn't yet been able to pay East Bengal their prize money of Rs. 25 lakh for winning the Federation Cup last October and prize purse for the first six teams in I-League 6 which ended last May.
"With Fifa, we have made a four-year strategic plan to be implemented from 2013. The plan focuses on youth development, improving operational efficiency and putting in place a player registration system. But money is proving a big deterrent," said Das (see box).
Effective April 1, 2009, the Finance Act, 2008 amended the definition of "charitable purpose". This has led to the AIFF being hit by a massive tax demand because it's being deemed to be carrying out commercial activity, said Das.
The AIFF is contesting the tax department's claim citing a circular issued by the Central Board of Direct Taxes on December 19, 2008 which mentions organisations involved in genuine development activities won't be taxed.
Das didn't wish to comment but an official, speaking on condition of anonymity because he wasn't authorised to talk about this, said the AIFF ended the last fiscal with a deficit of around Rs. 7 crore.