Payments To Non-Residents For Income Accrued In India Liable To TDS : SC Upholds Liability Of 96 Cricket WC Governing Body

The Supreme Court on Wednesday held that the Pak-Indo-Lanka joint management Committee (PILCOM), set up for the purpose of conducting the 1996 cricket world cup, was liable to deduct tax at source for payments made to non-resident sports associations for the tournament. In a special meeting of the International Cricket Council, held in February, 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. The concern of the top court was with regards amounts which are in the nature of Guarantee Money paid to Non-resident Sports Associations. The payments were not made by the Appellant PILCOM in India but were made through its Bank accounts at London or elsewhere. The principal issue to be considered is whether any income accrued or arose or was deemed to have accrued or arisen to said Non-resident Sports Association in India. If the answer is in the affirmative, the next question would be about the liability on part of the Appellant to deduct Tax at Source and make appropriate deposit in accordance with Section 194E of the Act. Before the top court, Senior Advocate J. P. Khaitan for appellant-Management Committee, submitted that the payments were for grant of a privilege and not towards matches; that such payments were made in accordance with the decision of the ICC in London; that the amounts were made over in England and that the basic question would be whether any income accrued in India. According to the IT authorities, the income in question had arisen from a source of income in India, which was playing of cricket matches in India and as such the requirement of law was fully satisfied. Facts The 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 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 an I.T.O., 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, asking it to show-cause why actions under Section 20(I)/194E of the I.T. Act, 1961 would not be taken against it 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 (Payments to non-resident sportsmen or sports associations). The PILCOM represented before the I.T.O. that the provisions of Sec. 194E would not be attracted to the payments for various reasons. 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 referred to the provisions of Sec. 115BBA (Tax on non-resident sportsmen or sports associations) and held that taxes should have been deducted at source from the payments made by PILCOM in accordance with the provisions of Sec 194E. Finally, the ITO passed an order in May, 1997, in which he held that the PILCOM was liable to pay under Sec.201(I) the amount it had failed to deduct from the payments under consideration arid furthermore held that the PILCOM was also liable to pay interest on the said amount under Sec. 291(1A) from the date of tax was deductible upto the date of actual payment. The ITO computed the total short deduction u/s. 194E to be Rs.2,18,293,00. ...

Payments To Non-Residents For Income Accrued In India Liable To TDS : SC Upholds Liability Of 96 Cricket WC Governing Body

Mehal Jain

The SC held that payments made by PILCOM to foreign cricket associations were liable to tax deduction at source

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