IMPORTANT POINTS
(1) Obligation to deduct Tax at Source under Section 194E of Income Tax Act, 1961 is not affected by Double Taxation Avoidance Agreements and in case exigibility to tax is disputed by assessee on whose account deduction is made, benefit of Double Taxation Avoidance Agreements can be pleaded and if case is made out, amount in question will always be refunded with interest.
(2) Once connection is established, liability under provision must arise.

JUDGMENT :

UDAY UMESH LALIT, J.

Civil Appeal No.5749 OF 2012

1. This appeal by special leave challenges the Judgment and Order dated 11.11.2010 passed by the High Court(The High Court of Judicature at Calcuttta) dismissing Income Tax Appeal No.196 of 2000 and thereby affirming the view taken by the Tribunal(Income Tax Appellate Tribunal, Calcutta) in I.T.A. Nos. 110/Cal/1999 and 402/Cal/1999 on 04.01.2000.

2. The facts leading to the filing of the proceedings before the Tribunal were set out in the Order dated 04.01.2000 as under:-

“2. The assesse before us is PAK-INDO-LANKA, JOINT MANAGEMENT COMMITTTEE (known in short as PILCOM) which is actually a Committee formed by the Cricket Control Boards/Associations of three countries viz. Pakistan, India and Sri Lanka, for the purpose of conducting the World Cup Cricket tournament for the year 1996 in these three countries. Actually, International Cricket Council (ICC) is a non-profit making organization having its Headquarters at London, which controls and conducts the game of cricket in the different countries of the world. ICC has got nine full members and twenty associate members in a special meeting of ICC held on 2.2.1993 at London, India, Pakistan and Sri Lanka were selected, on the basis of competitive bids, to have the privilege of jointly hosting the 1996 World Cup Cricket Tournament. These three host countries were required to pay varying amounts to the Cricket Control Boards/Associations of different countries as well as to ICC in connection with conducting the preliminary phases of the tournament and also for the purpose of promotion of the game in their respective countries. For the purpose of conducting the final phase of the tournament in India, Pakistan and Sri Lanka, a Committee was formed by the three host members under the name PILCOM. Two Bank accounts were opened by PILCOM in London to be operated jointly by the representatives of Indian and Pakistan Cricket Boards, in which the receipt from sponsorship, T.V. rights etc. were deposited and from which the expenses were met. The surplus amount remaining in the said Bank account was decided to be divided equally between the Cricket Boards of Pakistan and India after paying a lump-sum amount to Sri Lanka Board as per mutual agreements amongst the three Boards. For the purpose of hosting the World Cup matches in India, the Board of Cricket Control of India (BCCI) appointed its own committee for discharge of its responsibilities and functions. The Committee was to be known as INDICOM. Since the Convener-Secretary of INDCOM was functioning from Calcutta necessary Bank accounts were opened in Calcutta by INDCOM for receipts and expenditure relating to matches to be held in India. From the said Bank accounts in London, certain amounts were transferred to the three co-host countries for disbursement of fees payable to the umpires and referees and also defraying administrative expenses and prize money. During the course of enquiry, it came to the knowledge of tie I.T.O. (TDS), Ward-21(4), Calcutta that PILCOM had made payments to ICC as well as to the Cricket Control Boards/Associations of the different Member countries of ICC from its two London Bank Accounts. The ITO issued a notice to the Office of PILCOM located at Dr. BC Roy Club House, Eden Gardens, Calcutta-700 021 asking it to show-cause why actions under Section 20(I)/194E of the I.T. Act, 1961 would not be taken against PILCOM for its failure to deduct taxes from the payments made by it and as referred to above in accordance with the provisions of Sec. 194E. The PILCOM represented before the I.T.O. that the provisions of Sec. 194E would not be attracted to the payments for various reasons to which we shall advert later on. It was furthermore stated that, inasmuch as, the books accounts of PILCOM had not been completed by its Pakistani Treasurer, the said books coul