The assessee is a committee formed by cricket boards of three countries namely India, Pakistan and Sri Lanka for the purpose of hosting the World Cup cricket tournament in these countries in the\u00a0 year 1996. The\u00a0 assessee was\u00a0 required \u00a0to\u00a0 pay varying amounts to\u00a0 the cricket boards of\u00a0 different countries as\u00a0 well as to International Cricket Council (\u2018ICC\u2019) in connection with conducting the preliminary phases of the tournament and for promoting the game in their respective countries. The assessee opened two bank accounts in London which were operated jointly by the representatives of India and Pakistan Cricket Boards where the receipts from sponsorship, TV rights etc. were deposited and expenses were met. Based on a mutual agreement, the surplus amount remaining in the bank account was to be divided equally between the cricket boards of India and Pakistan after paying a lump sum amount to the Sri Lankan board. Certain amount was transferred to the three co-host countries from the London bank accounts towards paying the fees of the umpires and referees.<\/p>\n
The AO observed that the assessee had made payment to ICC as well as to the cricket control boards of different countries from its two London bank accounts without deducting tax under section 194E of\u00a0 the Act.\u00a0 Such payments would\u00a0 be taxable in India as per the provisions of section 115BBA of the Act and the assessee failed to deduct tax before making such payments. The AO passed an order under section 201(1) of the Act holding the assessee liable to pay tax on\u00a0\u00a0 such amount that it had failed to deduct tax on. The AO computed the total\u00a0 short deduction under section 194E of the Act to be Rs. 2,18,29,300. The assessee filed an appeal before the CIT(A) which was disposed off and subsequently an appeal before the tribunal was filed where the tribunal remanded the matter back to the CIT(A). In the second round of litigation, the CIT(A) detailed out the actual payments made by the assessee and classified them into seven categories. The CIT(A) held that out of the seven payment categories, six categories of payments attracted the provisions of section 115BBA of the Act. However, for the seventh category of payment being Rs. 1,20,000 transferred from London bank account to Pakistan and Sri Lanka for disbursement of prize money for matches played outside India would not fall within the scope of section115BBA of the<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
Act. Further, the CIT(A) observed that only 17 matches out of 37 matches were played in India and thus held that only 45.94% (i.e. 17\/37) of the six categories\u00a0\u00a0\u00a0\u00a0\u00a0 of payments should be considered for the purpose of default under section 201(1) of the Act.<\/p>\n
The issue before the Supreme Court was with regard to payments of two categories [namely sr. no. (vi) and (vii) comprising of guarantee money paid to Australia, England, New Zealand, Sri Lanka and Kenya\u00a0 with whom DTAA\u2019s\u00a0 exist\u00a0 of Rs. 8,85,000; and; guarantee money paid to Pakistan, West Indies, Zimbabwe\u00a0 and Holland of Rs. 7,10,000 respectively]. The Tribunal and HC held that the assessee ought to deduct tax at source in respect of the proportion of the total receipts which bears the same ratio as the number of matches played by each country in India.<\/p>\n
Further, on the issue of applicability of DTAA, though not argued, the High Court held that irrespective of the DTAA, the obligation to deduct tax under section 194E of the Act had to be discharged\u00a0 once income accrues under section 115BBA of the Act since such a deduction was not the\u00a0 final payment of\u00a0 tax\u00a0 and\u00a0 could not be said to be an assessment of tax. The deduction had to be made and the assessee from whose could get credit of the same once it is found that the income\u00a0\u00a0 \u00a0in not eligible to be taxed. Further, the HC held that the distinction between the deduction at source by the payer is one thing and an obligation to pay tax was another.<\/p>\n
\u00a0<\/p>\n
Payments being in the nature of guarantee money made to non-resident sports associations from assessee\u2019s London bank account would be liable to tax in India and whether any income accrued or\u00a0 arose or\u00a0 was deemed to\u00a0 accrue and arise \u00a0to the non-resident sports associations in India and the liability on part of the assessee to deduct tax at source under section 194E of the Act. Further,\u00a0 whether\u00a0 the HC could go into the issue of applicability of DTAA when the same was not argued before it?<\/p>\n
\u00a0<\/p>\n
The decision of GE India Technology Cen. (P.) Ltd v.\u00a0 CIT [2010] 327 ITR 456 (SC) <\/em><\/strong>held that tax deduction at source applies only to those sums which are chargeable to tax under the Act. The expression \u201cchargeable under the provisions\u00a0 of the Act\u201d in section 195(1) is of utmost importance. A person paying interest or any other sum to a non-resident\u00a0 is not liable to deduct tax at source if such some\u00a0\u00a0 is not chargeable to tax under the Act.<\/p>\n The decision of Vodafone International Holding B.V. [2012] 341 ITR 1 (SC) <\/em><\/strong>held that Section 195 casts an obligation on the payer to deduct tax at source from<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n payments made to non-residents which payments are chargeable to tax. Such payments must have an element of income embedded in it which is chargeable\u00a0\u00a0\u00a0\u00a0\u00a0 to tax in India. If the sum paid or credited by the payer is not chargeable to tax\u00a0 then no obligation to deduct the tax would arise.<\/p>\n Further, the decision of Eli Lilly & Co\u00a0 (India) (P.)\u00a0 Ltd [2009] 312 ITR 225 (SC) <\/em><\/strong>considered whether tax deducted at source provisions are in the nature of machinery provisions enabling collection and recovery of tax forming an integrated code with the charging and computation provisions which determine taxability in the hands of the assessee.<\/p>\n \u00a0<\/p>\n The Honourable Supreme Court observed that the non-resident sports associations to whom payments were made as guarantee money had participated in the event where the cricket teams of such associations played matches in India. The\u00a0 SC held that such guarantee money paid was intricately connected with the event where various cricket teams were scheduled to play and participated in the event and therefore the source of income was in India by playing matches in India. Further, the SC referred to the provisions of section 115BBA(1)(b) of the Act which stated that where the total income of a non-resident sports association includes any amount guaranteed to be paid or payable in relation to any game or sports played in India, the amount of income calculated in terms of the section would become payable. The expression \u2018in relation to\u2019 referred in section 115BBA of the Act emphasises the connection between the game or sport played in India and the guarantee money paid or payable to the non-resident sports association. Once such connection is established the liability under section 115BBA of the Act arises. The SC held that the decision of G.E. Technology Centre P. Ltd (supra) had no application to payments covered under serial number (vi) & (vii) with regard to guarantee money paid to sports associations as the payments represented amounts which could not be subject matter of charge under the Act.<\/p>\n On the issue of applicability of the DTAA, the Supreme Court observed that even though the matter was not argued before the High Court, yet it was dealt with by\u00a0 the High Court. The Supreme Court concurred with the view of the High Court\u00a0\u00a0 that the obligation to deduct tax at source under section under section 194E of the Act is not affected by the DTAA.\u00a0 However, where the liability to tax is disputed\u00a0\u00a0\u00a0 by the assessee such benefit of the DTAA can be pleaded and the amount in question would be refunded along with interest, but that by itself, would not absolve the liability under section 194E of the Act.<\/p>\n Thus, it was concluded by the Supreme Court that the payment made to the Non- resident sports associations represented their income which accrued or arose or was deemed to have accrued or arisen in India and the assessee was thus liable<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n to deduct tax at source under section 194E of the Act. (AY. 1995-96) (CA\u00a0 No 5749\u00a0 of 2012 (SLP(C) Nos. 6829& 7315 of 2019 dt. 29-4-2020)<\/p>\n Editorial: PILCOM v. CIT [2011] 355 ITR 147\/238 CTR 387\/198 Taxman 555\/10<\/em><\/strong><\/p>\n taxmann.com 234 (Cal HC) <\/em><\/strong>affirmed.<\/p>\n \u201cSee the good in people and help them.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" S. 194E : Deduction of tax at source – Non-resident \u2013 Payments to sports associations being in the nature of guarantee money were intricately connected with the event \u2013 Income accrues and arises in India and assessee was liable to deduct tax at source under section 194E – The obligation to deduct tax is not affected by the DTAA. [ S. 9(1) ,115BBA ] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13437","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3uJ","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13437","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13437"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13437\/revisions"}],"predecessor-version":[{"id":13438,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13437\/revisions\/13438"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Held<\/h3>\n