AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 700
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....ng ITA No.5492/Mum./2017, involving payment to Cricket South Africa is taken up as a lead case. ITA no.5492/Mum./2017 Assessee's Appeal - A.Y. 2016-17 3. In this appeal, the assessee has raised the following grounds:- "The Appellant files this appeal against the appellate order dated 31.05.2017 (received by it on 3rd July 2017) passed by the Commissioner of Income-tax(Appeals)- 55, Mumbai (the CIT(A)), under section 253 of the Income-tax Act, 1961 (the Act), on the following grounds each of which is in the alternative and without prejudice to any other: "1. The CIT(A) erred in holding that the amount of Rs.256,02,16,001 paid by the Appellant to Cricket South Africa (CSA) was chargeable to tax in the hands of CSA, and hence, it was liable to deduct tax thereon under section 195 of the Act. 2. The CIT(A) ought to have held that :- a. the amount of Rs.256,02,16,001 was not an income chargeable to tax under the Act; b. the said amount could not be regarded as accruing or arising or deemed to accrue or arise or received or deemed to be received by CSA in India; c. no part of the said amount could be charged to tax in India as the said receipt was not attributable to any o....
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.... in the year 1929 with the object of promoting and developing Cricket in India and fostering the spirit of sportsmanship. The assessee is also a member of the International Cricket Council ("ICC"), the international regulatory body for Cricket. The assessee derives substantial income from the conduct of Cricket tournaments and matches and is regularly assessed to tax in India. In the year 2008, the assessee commenced the conduct of a Cricket tournament, namely, the Champions League T20 ("CLT20"). The participants in the CLT20 Tournament included the winners and/or runners-up of the domestic 20-over leagues of India, Australia, South Africa, etc. 5. With a view to maximise the commercial success of the CLT20 Tournament and to ensure the participation of teams from South Africa in the CLT20 Tournament each year, in addition to the other teams of ICC member countries, the assessee arrived at an arrangement, inter-alia, with Cricket South Africa ("CSA"), which is the national body for Cricket in South Africa. Under the said arrangement, CSA ensured that the winning and, where appropriate, the runner-up Cricket team(s) involved in the domestic Twenty20 Cricket competition administered ....
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....ment and in consideration of CSA"s obligations in the aforesaid agreement, the assessee agreed to pay CSA, net of taxes, an amount of USD 22,696,000. Although the assessee was of the view that the said payment was not taxable in India, as a measure of abundant caution, the assessee grossed up the payment by 43.26% and remitted the tax to the credit of the Revenue. The assessee filed an appeal under section 248 of the Act seeking a declaration that the tax was not required to be deducted on the said amount paid by it to the CSA. 8. The learned CIT(A) vide impugned order held that CSA received compensation by way of annual price fees and non-compete fees from the assessee. Further, the situs of the entire cause of action arises in India as the head office of the assessee is in India; all the agreements were signed in India; cause of action for all the matches, which were primarily played or to be played was in India; and the agreement for the sale of media rights between the assessee and ESPN initially and later on cancellation agreement between the assessee and Star India Private Ltd was also signed and executed in India. The learned CIT(A) also held that the assessee constitutes t....
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....g the disputes, therefore, consideration received is in nature of capital receipt. It was further submitted that even if the payment is considered towards non-compete fees, the place where the non-compete clause would apply is outside India because if any tournament takes place in India the same would be organised by the assessee and CSA is not restrained from participating in such tournament. The learned Sr. Counsel further submitted that the payment is not attributable to any operations carried out in India for being taxable under section 9(1)(i) r/w Explanation 1(a). As regards DAPE, the learned Sr. Counsel submitted that the burden to establish the fulfilment of conditions provided under the tax treaty has not been discharged by the Revenue. It was further submitted that the assessee is neither an agent of CSA nor has the authority to conclude the contract in their name and therefore there is no question of treating the assessee as the dependent agent of CSA. Therefore, in the absence of any Permanent Establishment of CSA in India, the payment of compensation for the discontinuance of the CLT20 Tournament cannot be taxed in India. 10. The learned Departmental Representative ("....
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....enty20 Cricket competition in the CLT20 Tournament apart from other ICC member countries. In consideration of ensuring the participation of its domestic teams, the assessee paid annual participation fees to these overseas cricket associations. As per the assessee, during the continuation of the CLT20 Tournament, it had deducted the taxes under section 194E of the Act in respect of annual participation fees paid to CSA, which is not in dispute. The main income from the CLT20 Tournament arose from the sale of media rights. Accordingly, the assessee, through its sub-committee i.e. Champions League Governing Council ("Governing Council"), entered into Rights Agreement on 10/09/2008 with ESPN Star Sports for the grant of certain rights like Media Rights, Umpires Sponsorship Rights, Title Sponsorship Rights, Official Sponsorship Rights, etc. in relation to CLT20 Tournament. From the perusal of the aforesaid Rights Agreement, which forms part of the paper book from pages 8-37, we find that the assessee, through its sub-committee, which is referred to as "Newco", agreed to stage the CLT20 Tournament with at least 8 teams and 15 matches in each year during the term with the involvement of d....
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....riting amongst the parties. As per clause 6 of the agreement, it was also agreed that CSA shall not, directly or indirectly, manage, operate, stage, involve itself and/or any teams from South Africa and/or otherwise participate in any tournament which is anyway similar to CLT20 Tournament. As compensation for the termination of the CLT20 Tournament and CSA"s obligation, the assessee agreed to pay CSA, net of taxes, an amount of USD 22,696,000. The dispute, in the present appeal, is pertaining to the taxability of this amount paid by the assessee to CSA. 15. Thus, from the perusal of the aforesaid agreement, we find that the payment made to CSA by the assessee under the Termination Agreement dated 25/06/2015 was not only for the premature termination of the arrangement amongst them, whereby CSA was required to ensure the participation of teams from South Africa in the CLT20 Tournament each year, but the compensation was also for the non-compete clause as provided in clause 6 of the agreement. However, there is no clause in the agreement that supports the submission of the assessee that the compensation was for the purpose of avoiding any litigation and settling the disputes, theref....
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....ia shall be deemed to accrue or arise in India for the purpose of taxation under the Act. In the present case, it is evident from the record that the arrangement which existed between CSA and the assessee, whereby CSA was under obligation to ensure the participation of two domestic teams from the T20 league, was terminated vide Termination Agreement dated 25/06/2015, and no Cricket match of the CLT20 Tournament was played anywhere in the world, least in India, in the year consideration. Thus, in the year under consideration no services, as alleged by the Revenue, by facilitating two domestic teams for participation in the CLT20 Tournament were rendered. As regards the compensation being in the nature of non-compete fees is concerned, we agree with the submissions of the assessee that the place where the non-compete clause would apply is outside India because if any tournament takes place in India the same would be organised by the assessee, being the national body for cricket in India, and CSA is not restrained from participating in such tournament, by virtue of clause 5 of the Termination Agreement. Therefore, in the present case, we are of the considered view that the payment to ....
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....y be taxed in the other state only so much as is attributable to that Permanent Establishment. As per the Revenue, since CSA had a dependent agent in the form of the assessee in India, therefore, the receipt of compensation under the Termination Agreement is taxable in India even under the provisions of DTAA. In order to decide the issue of whether the CSA had a DAPE in India under the provisions of the India-South Africa DTAA, it is relevant to analyse the provisions of Article 5(5) of the DTAA, which reads as under:- "5. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 6 applies - is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishm....
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....se or for the provision of services by these other enterprises....." 21. In the present case, it is pertinent to note that the entire CLT20 Tournament was conducted by the assessee, and all the agreements, including the media/broadcasting Rights Agreement, in this regard were entered into by the assessee. As noted in the Termination Agreement, in order to maximise the commercial success of the CLT20 Tournament and to ensure the participation of teams from South Africa and Australia in addition to the other teams of ICC member countries, the assessee, inter-alia, entered into an arrangement with CSA to ensure that its winning/runner-up teams involved in domestic Twenty20 Cricket competition administered by CSA participate in the CLT20 Tournament organised by the assessee each year. Further, the assessee also paid annual participation fees to CSA in this regard, and on same TDS under section 194E was also deducted. Therefore, in view of the above, the assessee cannot be said to be DAPE of CSA in India under Article 5(5) of the India-South Africa DTAA. Thus, the payment of compensation to CSA under the Termination Agreement is also not taxable under the provisions of the India-South ....
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....um./2017 Assessee's Appeal - A.Y. 2016-17 25. In this appeal, the assessee has raised the following grounds:- "The Appellant files this appeal against the appellate order dated 31.05.2017 (received by it on 3rd July 2017) passed by the Commissioner of Income-tax (Appeals)- 55, Mumbai (the CIT(A)), under section 253 of the Income-tax Act, 1961 (the Act), on the following grounds each of which is in the alternative and without prejudice to any other: 1. The CIT(A) erred in holding that the amount of Rs.576,00,00,000 paid by the Appellant to Cricket Australia (CA) was chargeable to tax in the hands of CA, and hence, it was liable to deduct tax thereon under section 195 of the Act. 2. The CIT(A) ought to have held that:- a. the amount of Rs.576,00,00,000 was not an income chargeable to tax under the Act; b. the said amount could not be regarded as accruing or arising or deemed to accrue or arise or received or deemed to be received by CA in India; c. no part of the said amount could be charged to tax in India as the said receipt was not attributable to any operation carried out by CA in India; and d. the said amount which is in the nature of business income would be out....