The Supreme Court on Wednesday said the Pak-Indo-Lanka joint management Committee (PILCOM), which was a committee formed by the cricket control boards of these countries for the purpose of conducting 1996 cricket world cup jointly hosted by the countries, was liable to deduct tax at source for the payments made to non-resident sports associations for the tournament.
A bench comprising Justices U.U. Lalit and Vineet Saran said: “In the premises, it must be held that the payments made to the Non Resident Sport 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”.
Section 194E of the Income Tax Act deals with payments to non-resident sportsmen or sports associations.
The bench gave its verdict on the appeal filed by PILCOM challenging the November 2010 Calcutta High Court order. The top court observed that out of total 37 matches, 17 matches in the World Cup tournament were played in India.
The PILCOM counsel submitted that the payments were for grant of a privilege and not towards matches, and such payments were made in accordance with the decision of International Cricket Council (ICC) in a meeting held in London; that the amounts were made in England and that the basic question would be whether any income accrued in India.
PILCOM opened two bank accounts in London, which were jointly operated by the representatives of Indian and Pakistan cricket boards, in which receipts from sponsorship, TV rights and others were deposited and from which the expenses were met.
The court observed that these three host countries were required to pay varying amounts to cricket boards or associations of different countries as well as to ICC — for conducting preliminary phases and the promotion of the tournament in their respective countries.
The BCCI appointed its committee to host the world cup matches in India, and its convener-secretary was functioning from Calcutta. Bank accounts were opened there for the expenditure for matches played in India.
“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”, said the court.
From London, the money was transferred to bank accounts of these countries for paying fees to umpires and also defraying administrative expenses and prize money. The IT department observed PILCOM had made payments to ICC as well as to cricket control boards of different member countries of ICC from its two London bank accounts.
The IT department issued a notice to the PILCOM office in Kolkata asking it to show-cause why actions under Section 20(I)/194E of the ITAAct 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.