Guaranteed amount paid to any non-resident sports association in relation to any match played in India liable to withholding tax

In brief- In a recent ruling, the Calcutta High Court (“HC”) in the case of PILCOM Vs. CIT [2010-TII-23-HC-KOL-INTL], held that if any payment in the nature of guaranteed amount was paid to any non-resident sports association in relation to any match played in India, the provisions of section 194E of the Income-tax Act, 1961 (“the Act”) would be applicable with respect to deduction of tax at source. Furthermore, the HC has held that the provisions of section 115BBA of the Act which deals with tax ability of non-resident sportsmen or sports associations, are independent from the other provisions of the Act and would override the generality of section 9(1) of the Act which deals with the accrual or assessing of income in India.

The HC while pronouncing the judgment in favor of the Revenue, has held that that the advantage of the Double Tax Avoidance Agreement (“tax treaty”) can be pleaded and taken by the assessee on whose account the withholding of taxes are made and not by the payer.

Facts

• In a meeting of the International Cricket Council (“ICC”), three member countries, India, Pakistan and Sri Lanka (“Host countries”) were selected for hosting the 1996 World Cup cricket tournament (“Tournament”) at a guarantee amount of £ 50,00,000.

•  As a part of this bid, the host countries were required to pay varying amounts to the Cricket Control Boards of different countries as well as to the ICC, for conducting the preliminary phases of the tournament and also for the purpose of promoting the game in their respective countries.

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