PILCOM versus WEST BENGAL-
[2020] 6 S.C.R. 620, Supreme Court of India, 2020
Outcome: Dismissed (Dismissed)
Segment: Issues
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PILCOM
v.
C.I.T. WEST BENGAL-VII
(Civil Appeal No. 5749 of 2012)
APRIL 29, 2020
[UDAY UMESH LALIT AND VINEET SARAN, JJ.]
Income Tax Act, 1961 – s.115BBA and s.194E – Assesse-
PILCOM, a committee formed by the Cricket Control Boards/
Associations of three countries viz. Pakistan, India and Sri Lanka
for purpose of conducting the World Cup tournament, 1996 – I.T.O
found 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, consequent
to which a show cause notice was issued u/s.194E – The principal
issue is whether any income accrued or arose or was deemed to
have accrued or arisen to said Non-resident Sports Associations in
India – If the answer is in the affirmative, the next question would
be about the liability on part of the PILCOM to deduct Tax at Source
and make appropriate deposit in accordance with s.194E of the Act
– Held: The Non-Resident Sports Associations had participated in
the event, where cricket teams of these Associations had played
various matches in the country – The payments were intricately
connected with the event where various cricket teams were scheduled
to play – The source of income was in the playing of the matches in
India – The mandate u/s.115 BBA(1)(b) is also clear – The payments
made to the Non-Resident Sports Associations in the present case
represented their income which
accrued or arose or was deemed to
have accrued or arisen in India – Consequently, the PILCOM was
liable to deduct Tax at Source in terms of s.194E of the Act.
Dismissing the appeal and special leave petitions, the Court
HELD: 1. In the present case, the Non-resident Sports
Associations had participated in the event, where cricket teams
of these Associations had played various matches in the country.
Though the payments were described as Guarantee Money, they
were intricately connected with the event where various cricket
teams were scheduled to play and did participate in the event.
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The source of income, as rightly contended by the Revenue, was
in the playing of the matches in India. [Para 13][635-A-B]
2. The mandate under Section 115 BBA (1)(b) of Income
Tax Act, 1961 is also clear in that if the total income of a Non-
resident Sports Association includes the amount guaranteed to
be paid or payable to it in relation to any game or sports played in
India, the amount of income tax calculated in terms of said Section
shall become payable. The expression ‘in relation to’ emphasises
the connection between the game or sport played in India on one
hand and the Guarantee Money paid or payable to the Non-
resident Sports Association on the other.  Once the connection
is established, the liability under the provision must arise.
[Para 14][635-F-G]
3. The obligation to deduct Tax at Source under Section
194E of the Act is not affected by the DTAA and in case the
exigibility to tax is disputed by the assesse on whose account the
deduction is made, the benefit of DTAA can be pleaded and if the
case is made out, the amount in question will always be refunded
with interest.  But, that by itself, cannot absolve the liability under
Section 194E of the Act. [Para 18][640-H; 641-A-B]
4. In the premises, it must be held that the payments made
to the Non-Resident Sports Associations in the present case
represented their income which accrued or arose or was deemed
to have accrued or arisen in India. Consequently, the Appellant
was liable to deduct Tax at
Source in terms of Section 194E of
the Act. [Para 19][641-B-C]
G.E. India Technology Centre Pvt. Ltd.  v.  Commissioner
of Income Tax and Another (2010) 10 SCC 29 : [2010]
10 SCR 1142; Metallurgical and Engineering
Consultant (India) Ltd. v. Commissioner of Income Tax
(1999) 238 ITR 208 (Pat); Commissioner of Income
Tax  v.  Manjoo and Co. (2011) 335 ITR 527 (Ker) –
inapplicable.
Performing Right Society Ltd. v. CIT (1976) 4 SCC 37
: [1977] 1 SCR 171; CIT v. Eli Lilly and Co. (India)
Pvt. Ltd. (2009) 15 SCC 1 : [2009] 5 SCR 20 – referred
to.
PILCOM v. C.I.T. WEST BENGAL-VII
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Case Law Reference
[2010] 10 SCR 1142
inapplicable
Para 7
[1977] 1 SCR 171
referred to
Para 7
[2009] 5 SCR 20
referred to
Para 15
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5749
of 2012.
From the Judgment and Order dated 11.11.2010 of the Calcutta
High Court in Income Tax Appeal No. 196 of 2000.
With
SLP (C) No. 7315/2019 and 6829/2019.
Ms. Jayanti Prasad Khaitan, Sr. Adv., Agnibesh Sengupta, Indranil
Ghosh, Raj Kumar, Palzer Moktan, Ms. Arushi Arora, Ms. Sampurnaa
Sanyal, Ms. Swati Sinha, Ms. Taruna A. Prasad, Ms. Sukanya Basu,
M/s. Fox Mandal & Co., Satish Kumar, Advs. for the Appellant.
Vikramjit Banerjee, ASG, Ms. Niranjana Singh, Arjun Garg,
Siddhartha Sinha, Mrs. Anil Katiyar, Advs. for the Respondent.
The Judgment of the Court was delivered by
UDAY UMESH LALIT, J.
Civil Appeal No.5749 OF 2012
1. This appeal by special leave challenges the Judgment and Order
dated 11.11.2010 passed by the High Court1 dismissing Income Tax
Appeal No.196 of 2000 and thereby affirming the view taken by the
Tribunal2 in I.T.A.Nos. 110/Cal/1999 and 402/Cal/1999 on 04.01.2000.
2. The facts leading to the filing of the proceedings before the
Tribunal were set out in the Order dated 04.01.2000 as under:-
“2. The assesse before us is PAK-INDO-LANKA, JOINT
MANAGEMENT COMMITTTEE (known in short as
PILCOM) which is actually a Committee formed by the
Cricket Control Boards/Associations of three countries viz.
Pakistan, India and Sri
Lanka, for the purpose of conducting
the World Cup Cricket tournament for the year 1996 in these
1 The High Court of Judicature at Calcutta
2 Income Tax Appellate Tribunal, Calcutta
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three countries. Actually, International Cricket Council (ICC)
is a non-profit making organization having its Headquarters at
London, which controls and conducts the game of cricket in
the different countries of the world. ICC has got nine full
members and twenty associate members in a special meeting
of ICC held on 2.2.1993 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 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 by INDCOM 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 tie I.T.O. (TDS), Ward-21(4), Calcutta that
PILCOM had made payments to ICC as well as to the Cricket
Control Boards/Associations of the different Member countries
PILCOM v. C.I.T. WEST BENGAL-VII
[UDAY UMESH LALIT, J.]
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of ICC from its two London Bank Accounts. The ITO issued
a notice to the Office of PILCOM located at Dr. BC Roy
Club House, Eden Gardens, Calcutta-700 021 asking it to show-
cause why actions under Section 20(I)/194E of the I.T. Act,
1961 would not be taken against PILCOM 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. The
PILCOM represented before the I.T.O. that the provisions of
Sec. 194E would not be attracted to the payments for various
reasons to which we shall advert later on. 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 and held that
taxes should have been deducted at source from the payments
made by PILCOM in accordance with the provisions of Sec
194E. The details of the payments as made by PILCOM and
as had been collected by the ITO were supplied by him to the
PILCOM.  Finally, the ITO passed an order under Sec. 20(I)/
194E dated 6.5.1997, 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.2,18,293,00.00
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 herd to PILCOM.
Accordingly, the appeal was re-heard by the CIT(A), in which
both the sides were allowed an 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 sides.
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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 before, on the basis of the purposes for payments as
well as the difference between categories of recipients off the
payments.
Amount (£)
i)
Guarantee money paid to 17 
countries 
which 
did 
not 
participate in the World Cup 
matches 
17,00,000
ii)
Amounts transferred from London 
to Pakistan and Sri Lanka for 
disbursement of prize money in 
those countries 
1,20,000
iii)
Payment to ICC as per Resolution 
dated Feb. 2, 1993 
3,75,000
iv)
Payment for ICC Trophy for 
qualifying matches between ICC 
Associate members held outside 
India 
2,00,000
v)
Guarantee money paid to South 
Africa and United Arab Emirates 
both of which did not play any 
match in India 
3,60,000
vi)
Guarantee 
money 
paid 
to 
Australia, England, New Zealand, 
Sri Lanka and Kenya with whom 
double 
taxation 
avoidance 
agreements exist 
8,85,000
vii)
Guarantee 
money 
paid 
to 
Pakistan, West India, Zimbabwe 
and Holland 
7,10,000
43,50,000
PILCOM v. C.I.T. WEST BENGAL-VII
[UDAY UMESH LALIT, J.]
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5. Various arguments were taken up by both the sides before
the CIT(A), which we shall also be discussing and taking into
consideration in due course. The CIT (A) held that so far as
the payment of pound 1,20,000 being of the nature of amounts
transferred from London to Pakistan and Sri Lanka for
disbursement of prize money in those countries for matches
played there is concerned, the prize money is always paid to
the winner and other individual players in a particular match
and, inasmuch as, these prizes were meant for matches outside
India, the same could not be brought within the scope of
Sec.115BBA. He thus finally decided that this amount does
not fall within the scope of tax deduction at source and ordered
for deletion of this amount from the total amount considered
by the ITO.  As regards the other six payments, the CIT(A)
held that the provisions of Sec. 115BBA would be attracted to
all those payments. By arguing that all the different Cricket
Control Boards/Associations would come within the purview
of Sec. 115BBA read with Sec. 9(I)(I), inasmuch as, income
accrued or arose to the way of guarantee money, etc. through
the playing of the matches in India which constituted the source
of income in India, in the hands 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 non-
resident 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 i.e. 45.94 percent of the other six types
of payments could be considered to be attracted by the
provisions of Sec.291(I)/194.  He thus directed that so far as
other six categories of payments are concerned.  45.94 percent
of the payments covered by those categories should alone be
taken into consideration for the purpose of considering
PILCOM as defaulter under Sec.201(I)/194B. …”
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3. As stated above, out of the payments classified in seven distinct
categories, the payment at serial no.(ii) amounting to £.1,20,000/- was
found by the CIT(A) to be beyond the scope of Section 115BBA of the
Act3, whereas, the other six payments were found to be governed by
said provision. However, only 17/37th portion or 45.94% of said six
payments were held to be covered. The Appellant as well as the Revenue,
being aggrieved, approached the Tribunal by filing ITA Nos.11/Cal/1999
and 402/Cal/1999 respectively.
4. The Tribunal in its Order dated 04.01.2000 approved the view
taken by the CIT(A) in respect of payment at serial no.(ii) amounting to
Rs.1,20,000/-.  As regards payments at serial nos.(i), (iii), (iv) and (v), it
was observed:-
“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. … … We, therefore, hold that so far as
the guarantee moneys paid by PILCOM to the 17 countries, which
did not participate in World Cup matches [(Clause (i) of the detailed
chart of payment as shown at page 4 above], or to South Africa
and United Arab Emirates, which did not play any match in India
[Clause (V) of the chart as above] are concerned, it cannot be
held that the cricket associations of these countries earned the
guarantee money through any Source of income in India.  …
…     …     …
24.  Clause (iii) of the above chart refers to a payment of £3,75,000
to ICC as per Resolution dated 2.2.1993. According to the said
Resolution, the amount was required to be paid to ICC partly
towards expenses incurred by ICC in connection with the
tournament and partly to be spent by it for development of cricket.
Even if an element of income may, therefore, be considered out
of this payment, it is hardly possible to conceive any connection
of such payment to income of ICC taxable in India.  … …
25. Another amount of £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
3 The Income Tax Act, 1961
PILCOM v. C.I.T. WEST BENGAL-VII
[UDAY UMESH LALIT, J.]
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reimbursement of expenses in connection with the tournament.
Again, the payment does not have any connection with any match
played in India. … …”
As regards amounts at serial nos. (vi) and (vii) were concerned, it
was stated:-
“… …In the cases of the cricket associations of these countries,
although the guarantee money was payable by virtue of the
Resolution passed in the meeting ICC as in the cases of the cricket
associations of other countries, at the same time again, these
associations did some activities in India and can be considered to
have earned the guarantee money through such activity alone.
We are, therefore, of the opinion that so far as these countries
(covered by clauses (vi) & (vii) of the chart as above) are
concerned, the payments received by then from PILCOM have
arisen directly as a result of their taking part in the cricket matches.
However, the cricket associations of all these countries 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 Sec. 201 would be considered to
be valid in respect of the payment to each such country in the
above manner.”
5. The Order passed by the Tribunal was challenged by the
Appellant as well as by the Revenue by filing I.T.A.Nos.196 of 2000
and 200 of 2000 respectively. After considering rival submissions, by its
Judgment and Order under appeal, the High Court affirmed the view
taken by the Tribunal and dismissed I.T.A.Nos.196 of 2000 and 200 of
2000.  In its judgment, the High Court considered the matter as under:-
“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
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institution the person responsible for making payment is obliged at
the time of making payment or at the time of credit of such income
to the account of the payee to deduct income tax thereon at the
rate of 10%. It is significant that said section nowhere says whether
the income is chargeable to tax or not. It therefore be concluded
that once the income accrues deduction is a matter of course.
Naturally failure to deduct will have a consequence under Section
201 of the said Act. … … Once the payment is made and received
by way of a participation in any matches played in India the said
on resident assesse 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. … … 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
deduction of tax at source does not and cannot arise, consequently
acceptance of bid becomes redundant. Relevant factor is the
payment and then matches having taken place in
India where
participation of the sports personality is in question. … …”
As regards the submission regarding applicability of DTAA4, the
High Court observed:-
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 assesse concerned gets the credit of the same and once
it is found later on that income from which the deduction is made
is not eligible 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.
4 Double Taxation Avoidance Agreements
PILCOM v. C.I.T. WEST BENGAL-VII
[UDAY UMESH LALIT, J.]
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Advantage of the DTAA can be pleaded and taken by the real
assessee on whose account the deduction is made not by the
payer.
We are of the view irrespective of the existence of DTAA the
obligation under Section 195E has to be discharged once the income
accrues under Section 115BBA.”
6. The Appellant is in appeal against the dismissal of ITA No.196
of 2000. The Revenue has not appealed against the dismissal of
ITANo.200 of 2000 and as such the deletion as regards amounts at
serial nos. (i) to (v) has attained finality and even as regards amounts at
serial nos. (vi) and (vii) the liability could at best be in the proportion as
observed by the Tribunal. As per the statement of case filed by the
Respondent, the demand in terms of the Order of the Tribunal would be
in the sum of Rs.38,88,731/-.
7. We heard Mr. J.P. Khaitan, learned Senior Advocate for the
Appellant and Mr.Vikramjit Banerjee, learned Additional Solicitor General
for the Respondent.
Mr. Khaitan, learned Senior Advocate 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 International Cricket
Council in a meeting held in London; that the amounts were made over
in England and that the basic question would be whether any income
accrued in India.  He invited our attention to Sections 115BBA and 194E
and other provisions of the Act and relied upon the decision of this
Court
in G.E. India Technology Centre Pvt. Ltd.  Vs. Commissioner of
Income Tax and Another5; the decision of the Patna High Court in
Metallurgical and Engineering Consultant (India) Ltd. Vs.
Commissioner of Income Tax6, which, in turn, had referred to the
decision of this Court in Performing Right Society Ltd.  Vs.  CIT7; and
the decision of the Kerala High Court in Commissioner of Income Tax
Vs. Manjoo and Co.8
Mr. Banerjee, learned Additional Solicitor General pressed for
acceptance of the Judgment under appeal and submitted that for attracting
the provisions of Section 115BBA of the Act, participation would not be
5 (2010) 327 ITR (SC) = (2010) 10 SCC 29
6 (1999) 238 ITR 208 (Pat)
7 (1977) 106 ITR 11 (SC) = (1976) 4 SCC 37 :  1976 SCC (Tax) 426
8 (2011) 335 ITR 527 (Ker)
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material and what would be relevant is that the payment was for the
matches held in India and that in the present case, the income was
deemed to accrue or arise in India.
8. The relevant provisions of the Act namely Sections 2(24)(ix),
5(2), 9(1), 115BBA and 194E are to the following effect:-
“2(24)(ix)”income” includes –
... … …
(ix) any winnings from lotteries, crossword puzzles, races including
horse races, card games and other games of any sort or from
gambling or betting of any form or nature whatsoever;
…     …     …
5.  Scope of total income. –
…     …     …
(2) subject to the provisions of this Act, the total income of any
previous  year of a person who is a non-resident includes all income
from whatever source derived which-
(a) is received or is deemed to be received in India in such
year by or on behalf of such person; or
(b) accrues or arises or is deemed to accrue or arise to him in
India during such year.
Explanation 1.- Income accruing or arising outside India shall
not be deemed to be received in India within the meaning of this
Section by reason only of the fact that it is taken into account in a
balance-sheet prepared in India.
Explanation 2.- For the removal of doubts, it is hereby declared
that income which has been included in the total income of a
person on the basis that it has accrued or arisen or is deemed to
have accrued or arisen to him shall not again be so included on
the basis that it is received or deemed to be received by
him in
India.
…    …     …
9. Income Deemed to accrue or arise in India. – (1) The
following incomes shall be deemed to accrue or arise in India –
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(i) 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
Explanation.- For the purposes of this clause-
(a) in the case of a business of which all the operations are not
carried out in India, the income of the business deemed under this
clause to accrue or arise in India shall be only such part of the
income as is reasonably attributable to the operations carried out
in India;
(b) in the case of a non-resident, no income shall be deemed to
accrue or arise in India to him through or from operations which
are confined to the purchase of goods in India for the purpose of
export;
(c) in the case of a non-resident, being a person engaged in the
business of running a news agency or of publishing newspapers,
magazines or journals, no income shall be deemed to accrue or
arise in India to him through or from activities which are confined
to the collection of news and views in India for transmission out
of India;
(d) in the case of a non-resident, being-
(1) an individual who is not a citizen of India; or
(2) a firm which does not have any partner who is a citizen of
India or who is resident in India; or
(3) a company which does not have any shareholder who is a
citizen of India or who is resident in India, no
income shall
be deemed to accrue or arise in India to such individual,
firm or company through or from operations which are
confined to the shooting of any cinematograph film in India;
…     …     …
115BBA. Tax on non-resident sportsmen or sports
associations. (1) Where the total income of an assessee,—
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(a) being a sportsman (including an athlete), who is not a citizen
of India and is a non-resident, includes any income received or
receivable by way of—
(i)
participation in India in any game (other than a game the
winnings wherefrom are taxable under section 115BB) or
sport; or
(ii) advertisement; or
(iii) contribution of articles relating to any game or sport in India
in newspapers, magazines or journals; or
(b) being a non-resident 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 115BB) or sport
played in India,
(c) being an entertainer, who is not a citizen of India and is a non-
resident, includes any income received or receivable from his
performance 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) or clause (c) 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
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(b) the tax deductible at source under the provisions of Chapter
XVII-B has been deducted from such income.
…     …     …
194-E. Payments to non-resident sportsmen or sports
associations. – Where any income referred to in Section 115-
BBA 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 percent9.”
9. Amounts at serial numbers (vi) and (vii) are in the nature of
Guarantee Money paid to Non-resident Sports Associations. The
payments were not made by the Appellant in India but were made by
the Appellant 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.
10. In terms of Sub-Section (2) of Section 5 of the Act, the total
income of a non-resident may include income from whatever source
which is received or deemed to be received in India or accrues or arises
or is deemed to accrue or arise to such non-resident in India. According
to Section 9(1), the income shall be deemed to accrue or arise in India if
“the income accrues or arises, whether directly or indirectly” under
any of the following postulates:-
• 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
9 By Finance Act, 2012; for “ten per cent”, the expression “twenty per cent” stands
substituted.
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11. According to the Respondent, 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. On the
other hand, according to the Appellant, the payment was towards grant
of privilege and had nothing to do with matches that were played in
India.
12. In Performing Right Society Ltd.7, under an agreement, the
appellant Society had granted to All India Radio, the authority to broadcast
from all its stations, the musical works included in the repertoire of the
Society, in respect of which payments at the rate of £2 per hour of
broadcasting were payable to the Society. The Society, a non-resident
company, contended that the agreement was executed in England,
payments were made in England and the “source of income” was the
agreement that was entered into in England. The contention was rejected
by the High Court. The conclusion that “the income derived from broadcast
of copyright music from the stations of All India Radio arose in India”
was affirmed by this Court.
13. In the present case, the Non-resident Sports Associations had
participated in the event, where cricket teams of these Associations had
played various matches in the country. Though the payments were
described as Guarantee Money, they were intricately connected with
the event where various cricket teams were scheduled to play and did
participate in the event. The source of income, as rightly
contended by
the Revenue, was in the playing of the matches in India.
14. The mandate under Section 115 BBA (1)(b) is also clear in
that if the total income of a Non-resident Sports Association includes the
amount guaranteed to be paid or payable to it in relation to any game or
sports played in India, the amount of income tax calculated in terms of
said Section shall become payable. The expression ‘in relation
to’emphasises the connection between the game or sport played in India
on one hand and the Guarantee Money paid or payable to the Non-
resident Sports Association on the other. Once the connection is
established, the liability under the provision must arise.
15. In CIT vs. Eli Lilly and Co. (India) Pvt. Ltd.10, this Court
was called upon to consider the following issue:-
10 (2009) 15 SCC 1
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“56.  Whether TDS provisions which are in the nature of machinery
provisions enabling collection and recovery of tax are independent
of the charging provision which determines the assessability in
the hands of the assessee employee (recipient)? In other words,
whether TDS provisions under the Income Tax Act, 1961 are
applicable to payments made abroad by the foreign company,
which payments are for income chargeable under the head
“salaries” and which are made to expatriates who had rendered
services in India?”
After considering the entirety of the matter and rival submissions,
the issue was answered as under:-
“97. For the reasons stated hereinabove, we hold that the TDS
provisions in Chapter XVII-B relating to payment of income
chargeable under the head “Salaries”, which are in the nature of
machinery provisions to enable collection and recovery of tax form
an integrated code with the charging and computation provisions
under the 1961 Act, which determine the assessability/taxability
of “salaries” in the hands of the assesse employee. Consequently,
Section 192(1) has to be read with Section 9(1)(ii) read with the
Explanation thereto. Therefore, if any payment of income
chargeable under the head “salaries” falls within Section 9(1)(ii)
then TDS provisions would stand attracted.”
16. In G.E. India Technology Centre Pvt. Ltd.5, the question
that arose was whether the appellant was liable to deduct Tax at Source
in
respect of payments made to certain foreign software suppliers.
According to the appellant, the payments were for purchase of software
whereas according to the Revenue, the payments also included payments
towards royalty. The Tribunal, while accepting the case of the appellant
had held that the amount paid by the appellant to foreign software suppliers
was not royalty and the same did not give rise to any income taxable in
India. The High Court had reversed the decision of the Tribunal and held
that unless the payer had obtained appropriate permission under Section
195(2) of the Act, the payer was obliged to deduct Tax at Source. In this
context the matter was considered by this Court.  While dealing with
scope of Section 195(1) of the Act, it was stated:-
“8. The most important expression in Section 195(1) consists of
the words chargeable under the provisions of the Act. A person
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paying interest or any other sum to a non-resident is not liable to
deduct tax if such sum is not chargeable to tax under the IT Act.
For instance, where there is no obligation on the part of the payer
and no right to receive the sum by the recipient and that the
payment does not arise out of any contract or obligation between
the payer and the recipient but is made voluntarily, such payments
cannot be regarded as income under the IT Act.
9. It may be noted that Section 195 contemplates not merely
amounts, the whole of which are pure income payments, it also
covers composite payments which have an element of income
embedded or incorporated in them. Thus, where an amount is
payable to a non-resident, the payer is under an obligation to deduct
TAS in respect of such composite payments. The obligation to
deduct TAS is, however, limited to the appropriate proportion of
income chargeable under the Act forming part of the gross sum
of money payable to the non-resident. This obligation being limited
to the appropriate proportion of income flows from the words
used in Section 195(1), namely, “chargeable under the provisions
of the Act”. It is for this reason that vide Circular No. 728 dated
30-10-1995 CBDT has clarified that the tax deductor can take
into consideration the effect of DTAA in respect of payment of
royalties and technical fees while deducting TAS. It may also be
noted that Section 195(1) is in identical terms with Section 18(3-
B) of the 1922 Act.
…
…     …
16. The fact that the Revenue has not obtained any information
per se cannot be a ground to construe Section 195 widely so as to
require deduction of TAS even in a case where an amount paid is
not chargeable to tax in India at all. We cannot read Section 195,
as suggested by the Department, namely, that the moment there
is remittance the obligation to deduct TAS arises. If we were to
accept such a contention it would mean that on mere payment
income would be said to arise or accrue in India. Therefore, as
stated earlier, if the contention of the Department was accepted it
would mean obliteration of the expression “sum chargeable under
the provisions of the Act” from Section 195(1). While interpreting
a section one has to give weightage to every word used in that
section. While interpreting the provisions of the Income Tax Act
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one cannot read the charging sections of that Act dehors the
machinery sections. The Act is to be read as an integrated code.
17. Section 195 appears in Chapter XVII which deals with
collection and recovery. As held in CIT v. Eli Lilly & Co. (India)
(P) Ltd. [(2009) 15 SCC 1 : (2009) 312 ITR 225] the provisions
for deduction of TAS which is in Chapter XVII dealing with
collection of taxes and the charging provisions of the IT Act form
one single integral, inseparable code and, therefore, the provisions
relating to TDS applies only to those sums which are “chargeable
to tax” under the IT Act. It is true that the judgment in Eli
Lilly[(2009) 15 SCC 1 : (2009) 312 ITR 225] was confined to
Section 192 of the IT Act. However, there is some similarity
between the two. If one looks at Section 192 one finds that it
imposes statutory obligation on the payer to deduct TAS when he
pays any income “chargeable under the head ‘Salaries’”. Similarly,
Section 195 imposes a statutory obligation on any person
responsible for paying to a non-resident any sum “chargeable under
the provisions of the Act”, which expression, as stated above,
does not find place in other sections of Chapter XVII. It is in this
sense that we hold that the IT Act constitutes one single integral
inseparable code. Hence, the provisions relating to TDS applies
only to those sums which are chargeable to tax under the IT Act.”
16.1 The submission that unless
permission was obtained under
Section 195(2) of the Act, the liability to deduct Tax at Source must be
with respect to the entire payment, was not accepted.  Relying on the
expression “chargeable under the provisions of the Act” occurring in
Section 195(1) of the Act, it was held “the obligation to deduct TAS, is
however, limited to the appropriate proportion of the income chargeable
under the Act forming part of the gross sum of money payable to the
non-resident”.
16.2 This decision, in our view, has no application insofar as
payments at serial nos.(vi) and (vii) are concerned. To the extent the
payments represented amounts which could not be subject matter of
charge under the provisions of the Act, appropriate benefit already stands
extended to the Appellant.
17. We now deal with two other decisions relied upon by the
Appellant:-
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A) In Metallurgical and Engineering Consultant (India) Ltd.6,
under an agreement the appellant was to acquire technical “know-how”
and then use the acquired “know-how” in the design of contract articles.
In terms of paragraph (a) of article-II of the agreement, the personnel
of the appellant were to acquire “know-how” and necessary skills by on
the job placement at the place of the foreign company, in respect of
which, certain amounts were paid to the foreign company.  Said payment
was not found by the High Court to have accrued or arisen in India and
the matter was dealt with as under:-
“The main question is whether the payment under article III(a)
was in the nature of income to the U.S. company accruing or
arising in India? In this connection, the Tribunal has solely relied
upon a Supreme Court decision in the case of Performing Right
Society Ltd. [1977] 106 ITR 11. The facts of that case were that
the society was an association of composers, authors and publishers
of copyright musical works established to grant permission for
the performing right in such works. The society collected royalties
for the issue of licences granting such permission and distributed
the royalties to the members of the society who were composers,
authors, music publishers and other persons having an interest in
the copyright, in proportion to the extent to which a member’s
work was publicly performed or broadcast after a pro-rata
deduction of the expenses. The society entered
into an agreement
with the resident of India granting licence to broadcast from the
licensee’s sound broadcasting stations in India all musical works
included in the repertoire of the society. Under the agreement, for
the rights granted to it, the licensee was to pay to the society
annually a sum calculated at two pounds per hour of broadcasting
western music from each of the licensee’s broadcasting stations
and the annual payment was to be made to the society in London.
On those facts, the Supreme Court held that though it received
the income out of the agreement executed not in India but in
England, the income undoubtedly accrued or arose in India.
I am unable to see how the decision in Performing Right Society
Ltd.’s case [1977] 106 ITR 11 (SC), can be of any help to the
Revenue in this case. To my mind the facts of the two cases are
not quite similar; the acquisition of technical know-how and the
use of the acquired know-how in the design of machines and
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accessories and their manufacture in India does not seem to me
to be comparable to the playing and broadcasting of copyright
musical compositions in India on the basis of the licence granted
under an agreement. To my mind the facts of the case in hand
would be comparable to a situation where some people went to
England to learn western music from the members of the society,
on payment of some specified fee and on coming back used the
acquired skill to write musical compositions that were played and
broadcast in this country. The decision in Performing Right
Society Ltd.’s case [1977] 106 ITR 11 (SC), would surely not
apply to such a case.”
It was thus held that the income mentioned in article III (a) of the
agreement did not accrue or arise in India. No connection was found as
regards the payment for on the job placement in a foreign country to
acquire necessary skills, whereas in the instant case the connection is
very much evident. This case, thus, has no application.
B) In Manjoo and Co.8, a wholesale distributor of lotteries
organised by the State was obliged under the distribution agreement to
bear the loss in case lottery tickets were not sold before the “draw
date”. Some of the unsold tickets emerged as prize winning tickets.  The
submission that prize won from lottery in such case be treated as receipt
of income in the profit and loss account and not as “winnings from lottery”
resulting in assessment at the
special rate provided under Section 115BB
of the Act, was not accepted by the High Court.  It was observed:-
“… …Therefore, assuming for argument’s sake the contention
of the respondent that winnings from lotteries are received by
him in the course of his business and are incidental to the business
and as such they are his business income is right, still, we feel in
view of the specific provision contained in Section 115BB, the
special rate of tax is applicable for all winnings from lottery. …
…”
This decision has no application insofar as the present controversy
is concerned.
18. We now come to the issue of applicability of DTAA. As
observed by the High Court, the matter was not argued before it in that
behalf, yet the issue was dealt with by the High Court. In our view, the
reasoning that weighed with the High Court is quite correct. The
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obligation to deduct Tax at Source under Section 194E of the Act is not
affected by the DTAA and in case the exigibility to tax is disputed by the
assesse on whose account the deduction is made, the benefit of DTAA
can be pleaded and if the case is made out, the amount in question will
always be refunded with interest.  But, that by itself, cannot absolve the
liability under Section 194E of the Act.
19. In the premises, it must be held that the payments made to the
Non-Resident Sports Associations in the present case represented their
income which accrued or arose or was deemed to have accrued or
arisen in India.  Consequently, the Appellant was liable to deduct Tax at
Source in terms of Section 194E of the Act.
20. This appeal, therefore, must be dismissed.
21. Ordered accordingly. No costs.
Special Leave Petition(Civil)Nos.6829 of 2019 and 7315 of 2019
22. Both these petitions are filed by Board of Control for Cricket
in Sri Lanka through PILCOM (the Appellant in the lead matter)
challenging the common Judgment and Order dated 25.09.2018 passed
by the High Court allowing I.T.A.Nos. 242 of 2008 and 279 of 2008.
These matters arise from the consequential assessment orders passed
by the Department pursuant to the Judgment and Order under appeal in
the lead matter.
23. Notice was issued in these petitions because of the pendency
of the lead matter.
24. Since the lead matter is dismissed, we dismiss these Special
Leave Petitions as well.
Ankit Gyan
Appeal
and SLPs dismissed.
PILCOM v. C.I.T. WEST BENGAL-VII
[UDAY UMESH LALIT, J.]