TMI Blog2000 (1) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 receipts 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,29,300.00. 3. The PILCOM appealed against the said order passed by the ITO and the CIT(A) disposed of the appeal by his order dated 17-11-1997. In further appeal preferred by PILCOM before the ITAT, the ITAT, by its order dated 25-6-1990 in ITA No. 62 /Cal./ 1998, set aside the order passed by the CIT(A) and restored the matter back to his file for redeciding the issue after affording opportunity of being heard to PILCOM. Accordingly, the appeal was re-heard by the CIT(A), in which both the sides were allowed ample opportunity to represent their respective cases and the CIT(A) finally passed his appellate order on 28-12-1998, which is being challenged before us by both the sides. 4. After discussing the basic facts of the case, the ld. CIT(A) detailed out the actual payments made by PILCOM (in sterling pound) and classified the same into seven distinct categories, as listed below, on the basis of the purposes for payments as well as the differences between categories of recipients of the payments. Amount (i) Guarantee money paid to 17 countries which did not participate in the World Cup ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antee money, etc. through the playing of the matches in India which constituted the source of income in India, in the hands of those non-resident foreign Cricket Boards /Associations. The ld. CIT(A), however, found out at the same time that out of 37 matches played in all in the aforesaid World Cup tournament, only 17 had been played in India. He argued that since the payments made by PILCOM related to all the matches played in the tournament, only such proportion of the guarantee money, etc. received by the nonresident parties could be considered to be deemed income in India in the hands of those non-resident parties, which corresponds to the ratio of the number of matches played in India to the total number of matches. Thus, the CIT(A) held that only 17/37th portion ie., 45.94 percentage of the other six types of payments could be considered to be attracted by the provisions of section 201(1)/194E. He thus directed that so far as other six categories of payments are concerned, 45.94 per cent of the payments covered by those categories should alone be taken into consideration for the purpose of considering PILCOM as defaulter under section 201(1)/ 194E. The Department challenges t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against admission of this fresh ground by arguing that because of latches, the Department has lost its right to raise the ground. In this connection, reliance has been placed by the ld. counsel for the assessee on the judgment of the Supreme Court in the case of State of Punjab v. Gurdev Singh and Asoke Kumar AIR 1992 SC 111, in which case it has been held that a void order has de facto operation unless and until it is declared to be void or nullity by a competent body or Court. 8. With regard to this preliminary objection taken up by the assessee against admission of the additional ground, we are of the opinion that an additional ground on a legal issue can be taken up by either party at any stage of the appellate proceeding provided it does not require production of new materials or evidences. The judgment of the Supreme Court as tried to be relied upon by the assessee's side does not exactly militate against the power of the Deptt. to raise the additional ground on legal issue, as has been held by the Supreme Court in the case of National Thermal Power Co. Ltd. Hence, we admit this additional ground and proceed to decide the same on merits. 9. However, this particular appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 56), which provided that an appeal would lie before the CIT(A) against an order in respect of an assessee being a person other than a company, where the assessee denies his liability to be assessed or any order of assessment where the assessee objects to the amount of income assessed which again exceeds 1,00,000 rupees. The said Notification also provides power of the CIT(A) to hear an appeal against an order specified in Clauses (d) to (o) (both inclusive) of Sub-Section (1) of Section 246 in the case of persons or classes of persons as referred to in the earlier clause. It is thus contended that, inasmuch as, the total income of the assessee was considered by the Department to be far exceeding Rs. 1,00,000, and clause (1) of Sec. 246(1) fell within the ambit of this Notification, the CIT(A) was perfectly entitled to hear the appeal filed by the assessee against an order under Sec. 201(1), although the assessee was not a company. Sec. 246 was substituted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989. It is contended by the assessee that there was no material change in the amended provisions, in so far as the same are relevant for the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, an appellate power should come out of the statute itself, there cannot be any doubt that any order passed by the Assessing Officer which harms the assessee should be capable of being taken up in appeal before a higher appellate authority. This will be especially so when Notifications have been issued by the Government allowing the CIT(A) to hear the appeal. In any case, the CIT(A) himself is a Departmental Authority and if he felt that he did not have the power to deal with the appeal, he should have sent it to the DC(A) at the stage of the original appeal before him itself, for deciding the appeal. At the present moment, the post of DC(A) has been abolished, although the appeal clearly lay at least before the DCIT(A) when it was taken up by the assessee. The Department cannot be allowed to misdirect the assessee to file the appeal before a wrong authority, if that be the case at all, and thereafter to take up a plea that at the present moment, there is no course left open to the assessee for challenging the highly damaging order of the ITO, inasmuch as, the institution of DC(A) itself stands abolished now. Such a stand taken up by the Department would tantamount to inviting tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from are taxable under Sec. 115BB) 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 in 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)." 13. Two essential elements of the abovementioned Section are required to be taken into consideration in this regard. Firstly, the Section starts with the statement "where the total income of an assessee" (meaning presumably thereby the non-resident sports associations, as in the instant case) includes any amount guaranteed to be paid or payable ...... etc. By "total income", we must mean here the "total income", which will ultimately be subjected to tax in India, inasmuch as, the Indian Income Tax Act does not have any jurisdiction over the other incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, therefore, required of us to examine whether any income can be considered to have accrued or arisen or is deemed to accrue or arise to the non-resident concerns in India. So far as the deeming provisions relating to accrual or arisal of income in India is concerned, clause (i) of Section 9(1) is relevant, which states that .all income accruing or arising whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India, shall be deemed to accrue or arise in India". There is no doubt about the fact that none of the non-resident cricket associations of different countries nor even ICC had any business connection in India or any property or asset in India or that there was also no transfer of a capital asset belonging to them, situated in India. The only limb of this particular clause, which may be taken into consideration in this connection is whether any income arose to the non-resident concerns through any source of income in India or not. The CIT(A), in unequivocal terms, has held that the source of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the payees viz, ICC, and non-resident cricket associations of different countries. The ld. counsel for the assessee has placed reliance, in support of the proposition, that the nature of income may be completely different in the hands of the payee from that in the hands of the payer, on the following two judgments :--- (i) Mrs. Bacha F. Guzdarv. CIT[1955] 27 ITR 1 (SC); (ii) ClT v. Kunwar Trivikram Narain Singh AIR 1965 SC 1836. 17. It is not at all possible to hold that the source of guarantee money in the hands of the cricket associations of those countries, which either did not play at all or did not play in India, can be the games played in India. The playing of matches in India and elsewhere might have been a necessary condition for receipt of guarantee amounts by those associations, but certainly the same cannot be considered to be the source of the guarantee money in their hands. On the other hand, the source of money should be traced back to the Resolution passed in the meeting of the ICC, in which the responsibility towards conducting the tournament was allotted in favour of the three countries, which later on constituted PILCOM and also the contractual obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries played not only in India but in Pakistan and Sri Lanka also. Hence, only that proportion of the total receipt made by each such country from PILCOM, which bears the same ratio as the number of matches played by each such country in India to the total number of matches played by each such country in the tournament, should be considered to be income arising or accruing to the cricket association of that particular country. We are, therefore, of the opinion that PILCOM should have deducted tax at source in respect of this portion of the payment made by it to that particular association and the order under Section 201 would be considered to be valid in respect of the payment to each such country in the above manner. 19. Objections are being raised to the order passed by the ITO treating PILCOM to be an assessee in default, from three different angles. Firstly, the assessee refers to letter F. No. 484/l/96-FTD dated 17-5-1996 addressed by the CBDT to the Chief Commissioner of Income Tax, Calcutta on the matter of taxability of BCCI and PILCOM and other tax related matters with regard to World Cup, 1996. The Department contends that the said letter was later on withdrawn by a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be any doubt that the provisions of Sec. 194-I would certainly not be attracted, even though the total payment made during a year, in terms of Indian currency exceeds Rs. 1,20,000. The legal principle involved herein is so simple that nobody would argue that even in these types of cases also, it would be required for the resident-assessee to deduct tax at source in respect of payments made in foreign countries. However, there may be a second category of cases where, the payment made by the resident-assessee generates income taxable in India in the hands of the non-resident person. In such cases, although the payment may be made actually in a foreign country, but if the same is made out of remittances from India or even out of the funds available with the resident-assessee in the foreign country, there would be a strong case for deduction of tax at source from the payment,, inasmuch as, Indian Tax Laws would be attracted to such payments. We, therefore, feel that the crux of the issue as to whether payments made outside India would attract the provisions of deduction of tax at source or not, depends solely on the factor as to whether the payment generates taxable income in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more that the DTAA's with countries other than Australia also are exactly in the same line. In this connection, we have to state that although the income considered herein is not specifically mentioned in any of the other Articles, yet the same may be considered to be covered by Article 17, the first sub-Article of which is being reproduced as below :--- "Article 17:-Entertainers (1) notwithstanding the provisions of Articles 14 15, income derived by residents of one of the Contracting States as entertainers, such as theatre, motion picture, radio, or television, artistes, musicians and athletes from their personal activities as such exercise in the other Contracting States, may be taxed in the other State." We have discussed above that in respect of cricket associations of different countries participating in matches in India, the income in India has got to be considered as accruing or arising solely from such participation in the matches in India. As such, the provisions of Article 17, as mentioned above, can be considered to cover this type of income. Sub-Article (1) of this Article clearly states that the income derived by residents of foreign countries as entertainers fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that the question of deducting tax at source from this payment would not arise, inasmuch as, the payment does not relate to any income arising or accruing to ICC in India. Hence, we reverse the direction of the CIT(A) and hold that the entire amount of Pound 3,75,000 should be deleted from the purview of Section 201(1) as considered by the ITO. 25. Another amount of Pound 2,00,000 being payment for ICC Trophy for qualifying matches between ICC Associate Members held outside India is covered under Clause (iv) of the abovementioned chart. The entire payment appears to be of the nature of reimbursement of expenses in connection with the tournament. Again, the payment does not have any connection with any match played in India. Hence, in view of these considerations and also the generalised discussions made by us above, we delete this amount also from the order of the ITO considered under Section 201 (1). 26. Lastly, our findings with regard to the seven items of payments as enumerated by us at page 4 of our order, are being summarised as below : ---------------------------------------------------------------------------------------------- Item No. Descri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total number of matches played by that country in the entire tournament is to be taken into consideration for the purpose of section 201(1). 7. Guarantee money paid to Pakistan 7,10,000 Payment to the Cricket West Indies, Zimbabwe and Holland Association of each (with which countries no DTAA exist) country is to be considered separately. Only a portion of such payment corres- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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