TMI Blog2010 (11) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... de under Section 194E 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 thing and obligation to pay tax is another thing. – CIT v. Eli Lilly and Co. (India) P. Ltd. (2009 -TMI - 32752 - SUPREME COURT) - Order of tribunal upheld – decided in favor of revenue - 196 of 2000,200 of 2000 - - - Dated:- 11-11-2010 - KALYAN JYOTI SENGUPTA,KALIDAS MUKHERJEE,JJ. K.J. Sengupta, J .:- 1. Both these appeals preferred by the aforesaid respective appellants are directed against the judgment and order dated 4th January 2000 of the Income Tax Appellate Tribunal, Kolkata (hereinafter referred to as learned Tribunal). The PILCOM's appeal was admitted on the following substantial questions of law:- "(i) Whether in view of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 9(1)(i) of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in holding that the provisions of sections 194E and 115BBA of the Income-tax Act, 1961, were applicable in respect of guarantee money paid to only nine countries participating in the cricket matches hosted by PILCOM in the Wills World Cup, 1996?" 3. The International Cricket Council (in short 'ICC') is a London based non profit making organization. This body controls and conduct the game of cricket in the different countries of the world. ICC has got 9 full members and 20 associate members. In its special meeting of ICC held on 2nd February 1993 at London, India, Pakistan and Sri Lanka were selected for hosting 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 4 ICC in connection with conducting the preliminary phases of the tournament and also for the purpose of promoting of the game in their respective countries. For the purpose of conducting final phase of the tournament in India, Pakistan, Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) and remanded the matter back for fresh decision on the issues involved therein after affording opportunity of being heard to PILCOM. Accordingly, the appeal was re-heard by the Commissioner of Income Tax (Appeal) and passed a final order on 28th December, 1998. Both the PILCOM and the Department filed two separate appeals being ITA No.11/Cal/1999 and ITA No.402/Cal/1999. By the impugned judgment and order the aforesaid two appeals were disposed of. 4. Learned Tribunal after re-hearing and considering the contention of both the parties came to conclusion:- that the payment made to ICC by PILCOM as per resolution dated 2nd February, 1993 amounting to L 3,75,000:- (a) Payment made to ICC as per resolution is exigible to tax hence 10 per cent thereof should have been deducted, (b) A portion of guarantee money corresponding to the ratio of principal of matches played, to Australia, New Zealand, Sri Lanka and Kenya out of L 8, 85,000, notwithstanding existence of Double Taxation Avoidance Agreement. (c) A portion of the guarantee money corresponding to the ration of the principal of matches played in India by countries namely Pakistan, West Indies, Zimbabwe, Holland out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anka. Even the amount received in India from I.T.C. limited was not utilized for such payment to Foreign Cricket Associations. 90% of such sum was appropriated by the Cricket Boards of India and Pakistan and only 10% of such amount namely L 7,20,000 was sent to London account for meeting the expenses. Payments were made to Foreign Cricket Associations from funds received in London from Coca Cola Company and from T.V. rights etc. The bid amount was payable irrespective of whether any game was at all played or not. The source of income of the Foreign Cricket Associations was the grant of the privilege for the bid money and had no relation to the matches. 9. According to him, therefore, no amount at all can be subjected to deduction of tax under Section 115BBA of the Act. 10. Without prejudice to the aforesaid contention Mr. Bajoria, learned Senior Counsel submits that even if it is taken that the amounts were to be paid for playing the game, it cannot be disputed that all the participating countries did not play in India and those that did also played outside. Hence, the departmental appeals is to be dismissed, and Tribunal's order holding that no tax was required to be deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 115BBA. It must form part of total income under the charging provisions of the Act. Then only provision of Section 115BBA can apply to income referred to therein. It is now well settled if the DTAA provides that certain income is not be assessed under the Act in India then such income cannot form part of the total income and hence Section 115BBA would not have no relevance or application with reference thereto. 14. Learned counsel for the respondent while countering the submission of Mr. Bajoria and highlighting the contention in support of the Revenue appeal made elaborate submission which we think are not wholly relevant and relevant portion of which is recorded as follows:- 15. The primary function of Section 115BBA is to lay down taxability of the guarantee money paid to non-resident sports Associations in relation to any game or sport played in India. The circumstance that Section 115BBA has provided for a concessional rate of tax at the rate of 10% for the convenience of the payee cannot detract from the fact that the section determines the taxability of the income by way of guarantee money receivable by the non-resident sports Associations pertainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by resident of one of the contracting States from sources in the other contracting State may also be taxed in that other State. Income or a resident of one of the contracting States which are not expressly mentioned in the Articles of Agreement shall be taxable and in that State as per sub Article 1. A combined reading of sub Articles 1 and 2 of Article 22 leaves no doubt that, there being no provision in the DTAA with the six countries regarding taxability of guarantee money from the games and sports, apart from Article 17, the provisions of the Income Tax Act contained in sections 194E and 115BBA would stand undisturbed by the provision of the said agreement. 19. Learned counsel for the respondent has also cited following decisions on various aspects:-(i) J.K.Trust v. CIT (1957) 32 ITR 535 (SC), (ii) A.J.Patel v CIT (1974) 97 ITR 683 (Bombay), and (iii) CIT v. Hyderabad Race Club Charitable Trust (2003) 262 ITR 294 (AP). 20. . Those decisions were cited on the concept that right to conduct Cricket matches and interest and right conferred on non-resident associations to receive guarantee money would constitute property coming within the ambit of Section 9(I)(i) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent sports association or institution, includes 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 income-tax payable by the assessee shall be the aggregate of - (i) the amount of income-tax calculated on income referred to clause (a) or clause (b) at the rate of ten per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income referred to in clause (a) or clause (b): Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income referred to in clause (a) or clause (b). (2) It shall not be necessary for the assessee to furnish under sub-section (1) of section 139 a return of his income if - (a) his total income in respect of which he is assessable under this Act during the previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and (b) the tax deductible at source under the provisions of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be an assessee in default under any provision of this Act. " 33 . The definition of person is mentioned in Section 2(31):- "2(31) . (v) an association of persons or a body of individuals, whether incorporated or not, .. " 34. Hence going by the definition of the person and the assessee in the said Act, the PILCOM is no doubt is an assessee as association of persons and further body of individuals. Similarly the ICC and other Cricket Institutions or Associations whether residents or non-residents are also assessee. 35. On reading of the said Section 115BBA it transpires to us non-resident assessee in case of individual has to pay the tax the moment participation in India in any game or sport is established and for the purpose of the deduction at source from payment the moment income is received or receivable by way of a participation in India in any game. In case of the non-resident sports association or institution (not being individual sports personality) once the payment is made or the same becomes payable in relation to any game or sports played in India. Therefore pre-condition is that first payment, second the game or sports must be played in India i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is payable then deduction is a matter of course. 39. From the facts recorded by all the authorities it appears that PILCOM has made payment to the foreign sports association. Once the payment is made and received by way of a participation in any matches played in India the said onresident assessee has to meet deduction of tax under Section 115BBA. Similarly, if any amount including the guaranteed amount is paid to any non-resident sports association in relation to any match played in India the said income has to be subjected to deduction of tax at source. As we have already held that Section 115BBA is absolutely independent from other section, the same is to be applied irrespective place of making payment once the aforesaid two criterias are satisfied. We are unable to accept the contention of Mr. Bajoria that the source of income of the foreign Cricket Associations was the grant of the privilege for the bid money and have no relation to the matches, for grant of privilege for the bid money is the origin but it is not essential component or part for accrual of income by reason of the fact hypothetically if after bid is accepted, and payment is not made question of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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