TaxTMI 
TaxTMI 
2010 (11) TMI 45
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....urce notwithstanding the Double Taxation Avoidance Agreements with Australia, England, New Zealand, Sri Lanka, Kenya and Holland? (iii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding that the clarifications issued by the Central Board of Direct Taxes on May 17, 1996 did not have any sanctity or did not deal with the question of tax deduction from payments made to Foreign Cricket Associations or were withdrawn? (iv) Whether and in any event if two views were possible in the matter whether the appellant could be proceeded against under section 201 of the Income Tax Act, 1961 having bona fide taken a particular view of the matter which was also the view taken by the Central Board of Direct Taxes at one stage? (v) Whether on a correct interpretation of the relevant provisions of the Income Tax Act, 1961 the Tribunal was justified in law in holding that the provisions relating to tax deduction at source would have extra territorial operation and that Indian Income Tax would have to be deducted at source if the income was liable for tax in India even though the payment may be made outside India to a non-resident person? (vi) Whe....
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....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 the I.T.O.(TDS), Ward-21 (4), Calcutta the PILCOM had made payments to ICC as well as to the Cricket Control Boards/Associations of different Member countries of ICC from its two London Bank Accounts. The I.T.O. issued a notice to the Office of PILCOM located at Dr. B.C. Roy Club House, Eden Gardens, Calcutta-700021 asking it to show cause as to why actions under Section 201(1)/194E of the I.T. Act, 1961 would not be taken against PILCOM for its failure to deduct taxes from payments made by it and as referred to above in accordance with the provisions of Section 194E. The PILCOM replied to the said notice to show cause pleading that provisions of Section 194E would not be attracted to the payments for 5 various reasons pleading amongst others. The I.T.O. did not accept the explanation of PILCOM and held that PILCOM was responsible for deducting at source from the payments made by it in accordance with the provisio....
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....anka for disbursement of prize money for matches played thereat should not be brought within the purview of Section 115BBA. But the other payments namely the portion of amount of L 42,30,000, equivalent to 45.94% thereof i.e, L 19,43,263 would become assessable in India in terms of Section 115BBA. As such the PILCOM appellant was liable to deduct any tax at source at the rate of 10% from the said amount of L 19,43,262 in accordance with Section 194E. 6. Learned Senior Advocate Mr. Bajoria appearing for the appellant PILCOM submits that both the Commissioner of Income Tax (Appeal) and the learned Tribunal went wrong not accepting his client's contention that the PILCOM is notliable to deduct any tax under the law. To elaborate this plea he contends as follows:- 7. The bid amount was payable irrespective of the games being played or not. The amount to the various Foreign Cricket Associations were made by ICC through PILCOM for promotion of the game of Cricket in their countries out of the bid money much before the games were even played. Such amount are receivable by the Foreign Cricket Associations irrespective of whether any game was played or not and were not refundable an....
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....s not permissible. Hence, except the countries namely Pakistan, West Indies and Zimbabwe the exemption are provided in the DTAA is applicable. He refers to Article 22 of DTAA dated 25th July, 1991 with Australia. He further submits that if the source of income is not in India no deduction could be made as such income was not chargeable to tax in India. 12. He urges that learned Tribunal committed an error in holding under Article 17 is applicable in respect of payment made to the different Cricket Associations. The said Article is confined to the personal activities of the different individuals and income in respect of such activities and has no application to the associations. The payment to the Cricket Associations was not for or on account of players or for playing the games. 13. He further submits that all the payments were made in London the provisions of the Act relating to deduction of tax at source could not be applied as the Act cannot have any extra territorial application. There was no relation of such payments of bid money with any game being played in India or elsewhere. The amounts were not paid as consideration for playing any game in India. Since the amount was no....
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....sion of Section 9 and the annual Finance Act. According to him, the provision of Section 194E of the Act is peremptory in nature to the effect that tax has to be deducted from any source of income referred to Section 115BBA of the Act. There are certain other provisions regarding deductibility of tax from the payments made to non-residents. In those cases the payer can approach the Assessing Officer to determine the appropriate tax deductible. Under Section 194C, if no such application is filed before the Income Tax Officer, it would be statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment. There is no such contingency with regard to the payments to the non-resident sportsmen and sports associations under Section 115BBA. There is no discretion or option left for anybody to get away from the provisions of the rate of tax of 10% under Section 194E. The language of the said Section is clear and unambiguous. 17. He further contends as regards applicability of the Double Taxation Avoidance Agreements (DTAA) that the said provision of the said agreement would not be applicable as they postulate tax in both countries and there is n....
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.... order to decide both the appeals we feel that two questions are involved and the decision on those two questions will address all the grounds on which both the appeals were admitted. The said points are as follows:- (i) Whether the PILCOM can be legally described to be a person within the meaning of Section 194E of the Income Tax Act, 1961? (ii) Whether payments made by PILCOM to various sports associations or institutions or personalities are attracted for deduction of tax under Section 115BBA on the facts and circumstances of this case? 24. From the record the following admitted facts emerge:- (i) ICC being the non-resident sports association has allowed on acceptance of bid, cricket bodies of three countries namely India, Pakistan and Sri Lanka to host 1996 World Cup Cricket matches in three countries at a guarantee amount of L 50,00,000 at a meeting held in London. (ii) All the payments were made either to ICC or to other personality or institution from London. 25. Admittedly, again PILCOM therefore, opened account both in Calcutta and also in London 26. It appears to us Section 115BBA has provided for payment of Income tax by the non-resident sportsmen or sports associ....
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....d if any amount is paid including any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than a game the winnings wherefrom are taxable under Section 115BBA) or sport played in India. The rate of income tax is a flat one unlike citizen of this country. 29. Thus it is clear that from the said section the sports personality can be subjected to tax only on receipt of the amount in respect of the transaction mentioned therein namely participation in India in any game or sport, income received or receivable by way of advertisement and income received or receivable by way of contribution of articles relating to any game or sport in India Newspapers, Magazines and Journals. 30. In this case, the income from advertisement or contribution are not examined, the income by way of participation in India in any game or sport is relevant factor. 31. However, in case of non-resident sports association participation in game is not the criteria, relevant factor is payment of guarantee amount in relation to any game or sport played in India. 32. The definition of the Assessee is to be found from Section 2(7) which reads as follows:- "2(7) "a....
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....BBA. According to us Section 115BBA is completely independent from other section and it has got nothing to do with the accrual or assessing of income in India as mentioned in Section 9. 37. Once it is established the aforesaid income of a non-resident assessee has accrued on condition as mentioned in Section 115BBA are fulfilled then the statutory obligation of the payer under Section 194E come into play. In order to appreciate this provision we set out Section 194E. "194E. Where any income referred to in section 115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India or a non-resident sports association or institution, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent." 38. On perusal of the said section it would appear that once income referred to in Section 115BBA is held to be payable to foreigner non-resident sportsman or non-resident sports association or institution the person responsible for ....
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....ommissioner of Income Tax (Appeal) and Tribunal have rightly held so. It is rightly argued that the DTAA in the transaction has no connection at all for the reason firstly both the tax authorities factually found that neither of the Article of the agreement concerned does help to claim exemption from payment of tax under Section 115BBA nor relieves PILCOM from the obligation of deducting tax from the payment made under Section 194E. According to the contention of the Department that irrespective of place of game being held once the payment is made through the source of India the entire amount is taxable has no force at all. 42. Although it is not argued but we feel that obligation to deduction under Section 194E is not affected by the DTAA since such a deduction is not the final payment of tax nor can be said to be an assessment of tax. The deduction has to be made and after it is done the assessee concerned gets the credit of the same and once it is found later on that income from which the deduction is made is not exigible to tax then on application being made refund with interest is always allowed. Fundamental distinction between the deduction at source by the payer is one thin....