Case Law Details
Board of Control for Cricket in India Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the payment of compensation to CSA (Cricket South Africa) under the Termination Agreement is also not taxable under the provisions of the India-South Africa DTAA. Since the payment is not chargeable to tax in India in the hands of CSA, therefore, there is no obligation on the assessee to deduct tax at source under section 195 of the Act.
Facts- As compensation for the termination of the CLT20 Tournament and in consideration of CSA’s obligations in the aforesaid agreement, the assessee agreed to pay CSA, net of taxes, an amount of USD 22,696,000. Although the assessee was of the view that the said payment was not taxable in India, as a measure of abundant caution, the assessee grossed up the payment by 43.26% and remitted the tax to the credit of the Revenue. The assessee filed an appeal u/s. 248 of the Act seeking a declaration that the tax was not required to be deducted on the said amount paid by it to the CSA.
CIT(A) vide impugned order held that CSA received compensation by way of annual price fees and non-compete fees from the assessee. CIT(A) also held that the assessee constitutes the Dependent Agent Permanent Establishment (DAPE) of CSA on the basis that the Governing Council of CLT20 comprises representatives from the assessee, CSA and Cricket Australia (CA) and the assessee acted as an agent not only for CA and CSA, but also for other teams which participated in CLT20 as per the terms and conditions of the agreement. Accordingly, the learned CIT(A) held that the income of the CSA accrued and arose in India. The learned CIT(A) also held that the whole edifice of separate agreements with ESPN/Star and CA and CSA and maybe with other teams also was created to avoid payment of legitimate taxes in India by CA and CSA which accrued and arose in India. The learned CIT(A) further held that CA as well as CSA rendered services in India by facilitating two teams for participation in the CLT20 Tournament from year to year. Accordingly, the learned CIT(A) held that the provisions section 9(1) of the Act are applicable and the payment is taxable as “income from business” u/s. 28(va) of the Act. Thus, the learned CIT(A) dismissed the appeal filed by the assessee and held that the provisions of section 195 of the Act are squarely attracted to the facts of the case and in law. Being aggrieved, the assessee is in appeal before us.
Conclusion- The assessee cannot be said to be DAPE of CSA in India under Article 5(5) of the India-South Africa DTAA. Thus, the payment of compensation to CSA under the Termination Agreement is also not taxable under the provisions of the India-South Africa DTAA. Since the payment is not chargeable to tax in India in the hands of CSA, therefore, there is no obligation on the assessee to deduct tax at source under section 195 of the Act. Accordingly, the impugned order passed by the learned CIT(A), on both counts, is set aside.
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