1. Dispute regarding liability to deduct tax at source under Section 194E of the Income Tax Act concerning guarantee money paid to non-resident sports associations. (Para 1 , 2 )
Back
Next 
2020 Supreme(SC) 352
SUPREME COURT OF INDIA
UDAY UMESH LALIT, VINEET SARAN, JJ.
Pilcom – Appellant
Versus
C.I.T. West Bengal-VII – Respondent
Civil Appeal No. 5749 of 2012 With Special Leave Petition (Civil) No.7315, 6829 of 2019
Decided On : 29-04-2020
Important Points
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.
(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.
Subject
Income Tax - DEDUCTION OF TAX AT SOURCE
Act Referred
Headnote
Income Tax Act, 1961 – Section 194E – TDS – Deduction of tax from payments – Payments were not made by Appellant in India but were made by Appellant through its Bank accounts at London or elsewhere – Non-resident Sports Associations had participated in the event, where cricket teams of these Associations had played various matches in the country – Though payments were described as Guarantee Money, they were intricately connected with the event where various cricket teams were scheduled to play and did participate in the event – Source of income was in playing of matches in India – Mandate under Section 115 BBA (1)(b) is also clear in that if total income of a Non-resident Sports Association includes amount guaranteed to be paid or payable to it in relation to any game or sports played in India, amount of income tax calculated in terms of said Section shall become payable – Expression ‘in relation to’ emphasises connection between game or sport played in India on one hand and Guarantee Money paid or payable to Non-resident Sports Association on other – Once connection is established, liability under provision must arise – Obligation to deduct Tax at Source under Section 194E of Act 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 – But, that by itself, cannot absolve liability under Section 194E of Act – Payments made to Non-Resident Sports Associations in present case represented their income which accrued or arose or was deemed to have accrued or arisen in India – Consequently, Appellant was liable to deduct Tax at Source in terms of Section 194E of Act – Appeal dismissed. (Paras 9, 13, 14, 18, 19 and 20)
Facts of the Case:
Present appeal by special leave challenges the Judgment and Order dated 11.11.2010 passed by High Court1 dismissing Income Tax Appeal No.196 of 2000 and thereby affirming the view taken by the Tribunal2 in I.T.A. Nos. 110/Cal/1999 and 402/Cal/1999 on 04.01.2000.
Findings of the Court:
Payments made to the Non- Resident Sports Associations in the present case represented their income which accrued or arose or was deemed to have accrued or arisen in India. Consequently, the Appellant was liable to deduct Tax at Source in terms of Section 194E of the Act.
Result : Appeal dismissed.
Legal Category Hierarchy
Advocates Appeared:
For the Appellant(s) :Satish Kumar, M/S. Fox Mandal & Co., Advocates
For the Respondent(s):Zoheb Hussain, Anil Katiyar, Advocates
For the Appellant(s) :Satish Kumar, M/S. Fox Mandal & Co., Advocates
For the Respondent(s):Zoheb Hussain, Anil Katiyar, Advocates
Table of Contents
2. Whether payments were for grant of privilege made outside India or constituted income accruing in India due to matches played within the country. (Para 7 , 11 )
3. Payments were intricately connected to matches played in India, establishing a source of income in India and triggering liability under Section 115BBA and Section 194E. (Para 13 , 14 , 15 , 16 , 17 )
4. TDS obligations under Section 194E arise if income is deemed to accrue in India under Section 115BBA, regardless of payment location or DTAA existence. (Para 14 , 18 , 19 )
5. Appeal dismissed; liability to deduct tax at source affirmed for payments representing income accruing or arising in India. (Para 20 , 21 , 24 )
6. When is guarantee money paid to a non-resident sports association considered income accruing in India?
When the payment is in relation to games or sports played in India, the playing of such matches constitutes the source of income in India, making the amount taxable under Section 115BBA. (Para 13 , 14 )
7. Are TDS provisions independent of the charging provisions that determine tax assessability?
No, TDS provisions are machinery provisions that form an integrated, inseparable code with the charging and computation provisions; therefore, TDS applies only to sums chargeable to tax under the Act. (Para 15 , 16 )
8. Does a Double Taxation Avoidance Agreement (DTAA) exempt a payer from the obligation to deduct tax at source?
No, the obligation to deduct tax at source under Section 194E is not affected by DTAA. The actual assessee may later plead DTAA benefits to seek a refund with interest. (Para 18 )
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 could not be produced before the I.T.O.
The I.T.O. did not agree with the contentions of PILCOM. He referre
