Twenty-four years after the end of the 1996 Cricket World Cup jointly organized by India, Pakistan and Sri Lanka, India’s highest court decided that payments made to cricket associations for matches played in India would be taxable. The tax authorities have raised a request for Rs 38.88 lakh payable by a joint consortium formed by the host countries based in India.
After the World Cup ended, Indian tax authorities discovered that a consortium called PILCOM (Pak-Indo-Lanka Joint Management Committee) had transferred payments outside India to the cricket councils of the member countries of the International Cricket Council, based in London (ICC). The CIC has nine full members and 20 associate members. PILCOM has opened two bank accounts in London into which money has been transferred.
A justification notice has been served on PILCOM for the non-filing of tax payable on these payments, as these were considered income accrued in India under sections 201 (1) and 194E of the Law of l ‘income tax. On the initial calculations, the amount likely to be deposited came to Rs 2.18 crore. However, PILCOM challenged this assessment before the Income Tax Appeal Tribunal, which ordered a reassessment in 1997.
A second assessment order was issued on December 28, 1998. PILCOM appealed to the Tribunal but lost. The case went to the Calcutta High Court, which partially upheld the tax claim on November 11, 2010. It was an appeal against the order, which was finally settled by the Supreme Court on Thursday.
PILCOM argued that the payment to the cricket associations was for “the granting of privileges” and had nothing to do with the matches played in India. The amount was called “guarantee money”. The tax service argued that the income in question came from a source of income in India, namely playing cricket matches, fully meeting the statutory mandate.
On Thursday, a bench of judges UU Lalit and Vineet Saran said: “The payments made to the non-resident sports associations in this case represented their income which had been accumulated or collected or was deemed to have been accumulated or occurred in India …… Although the payments were described as guarantee money, they were closely linked to the event where various cricket teams were to play and participated in the event. The source of income, as Revenue rightly argues, was the game of matches in India. “
The court took note of the provision of section 115 BBA (1) (b) of the Income Tax Law which talks about the income generated by a non-resident sports association in India and considered that this income also included warranty money. PILCOM also requested tax exemption under the Double Taxation Agreement (DTAA) signed with Australia, England, New Zealand, Sri Lanka, Kenya and the Netherlands. The judges ruled: “The obligation to deduct source tax under article 194E of the IT law is not affected by the DTAA …”
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