Obligation to deduct TDS on Income accrued in India to non-resident sports association is not affected by DTAA: SC
- 23:30The SC on April 29, 2020 {PILCOM v. C.I.T. WEST BENGAL-VII} held that the obligation to deduct Tax at Source under Section 194E of the Income Tax Act, 1961 ('in short' 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. It was held, but, that by itself, cannot absolve the liability under Section 194E of the Act.
The SC Bench, comprising of Justice U U Lalit & Justice Vineet Saran, observed that 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. It was held 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 Court held that source of income, as rightly contended by the Revenue, was in the playing of the matches in India.
The principal issue to be considered in present lis by the SC was whether any income accrued or arose or was deemed to have accrued or arisen to 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.
It was held by the SC that 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. It was held that 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. It was held that once the connection is established, the liability under the provision must arise.
The Court held, in view of the aforesaid, 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, it was held that the Appellant was liable to deduct Tax at Source in terms of Section 194E of the Act.
The appeal was dismissed by the SC, by answering the questions in favour of Revenue and against the appellant-assessee, that is, it was liable to deduct TDS as Income accrued to Non-Resident Sports Associations in India.