Summary
Guarantee money attributable to foreign cricket associations’ participation in matches played in India was income arising or deemed to arise in India, requiring deduction under Section 194E. Payment abroad under an overseas resolution did not remove its connection with the Indian matches. The payer’s Section 194E obligation was unaffected by treaty relief that the recipient might establish and recover through refund. Unappealed exclusions and the Tribunal’s proportionate limitation remained final.
Issues
- Whether the guarantee payments had an Indian income source despite payment abroad.
- Whether Section 194E required deduction on the amounts remaining in dispute.
- Whether double-taxation treaty benefits absolved the payer’s deduction obligation.
- What limits followed from the Revenue’s failure to appeal.
Provisions considered
- Sections 5(2), 9(1)(i) and 115BBA(1)(b), Income Tax Act, 1961Located the income source in matches played in India and the guarantee payments’ connection with those matches. (¶¶ 8, 9, 10, 11, 12, 13, 14, 19)
- Section 194E, Income Tax Act, 1961Required deduction on the disputed income payments to non-resident sports associations notwithstanding a possible treaty claim by the recipients. (¶¶ 8, 16.1, 16.2, 18, 19)
Held
- The guarantee money was intricately connected with the event in which the foreign associations’ teams played matches in India. The relevant source was the playing of those matches, not merely the overseas resolution or place of payment. The statutory words “in relation to” established the required connection. (¶¶ 12, 13, 14, 19)
- The Revenue had not appealed against deletion of categories (i) to (v). Those exclusions were final, and liability on categories (vi) and (vii) could extend only to the country-specific proportion fixed by the Tribunal. The ruling did not reopen those settled limits. (¶¶ 4, 5, 6, 16.2)
- The Section 195 decision in G.E. India Technology did not assist on the payments remaining in dispute; appropriate benefit for amounts outside the charge had already been given. The disputed income attracted Section 194E. (¶¶ 16, 16.1, 16.2, 19)
- The payer’s duty under Section 194E is not displaced by a double-taxation avoidance agreement. The recipient may establish treaty relief and obtain refund with interest, but that possibility does not absolve the payer from the deduction obligation under this provision. (¶ 18)
Result
Civil appeal dismissed without costs. The two connected special leave petitions concerning consequential assessments were also dismissed.