XtraTime Web Desk: After almost a quarter century since the 1996 ICC Cricket World Cup was staged jointly by the Board of Control for Cricket in India (BCCI), Pakistan Cricket Board (PCB) and Sri Lanka Cricket (SLC), the Supreme Court has dismissed PILCOM’s (joint committee formed by the three cricket boards) appeal against tax liability of Rs 39 lakhs to Indian Income Tax Authority with interest from 1996. In simple words the payments made by PILCOM to the foreign boards is deemed to be treated as income accrued in India, according to the apex court. So PILCOM should have made the payments after deducting the taxes. Since, the taxes were not deducted then; BCCI needs to compensate with applicable interest for 24 years. It is estimated BCCI will get to lose an approximate amount of INR 9 crore.
PILCOM made a total payment of 43,50,000 pounds under various heads. Income tax authorities demanded tax on payments made under seven heads. Tax Tribunal curtailed these to two – guarantee money of 8,85,000 pounds paid to Australia, England, New Zealand, Sri Lanka and Kenya and guarantee money pounds of 7,10,000 paid to Pakistan, West Indies, Zimbabwe and Holland.
The tribunal held that since only 17 matches of a total 37 were played in India, the tax demand should be in that proportion, that is 17/37 or 45.94%. The Calcutta High Court upheld the Tribunal’s decision and also ruled that double taxation avoidance agreement (DTAA) would not absolve PILCOM of statutory obligation to deduct tax at source while making the payments.
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. 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 PILCOM counsel earlier 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.
The ruling was delivered by SC division bench of Justice Uday Umesh Lalit and Justice Vineet Saran.
Senior Advocate J.P.Khaitan along with Advocate Satish Kumar argued on behalf of the assessee, while Revenue was represented by Additional Solicitor General Vikramjit Banerjee along with Advocate Zoheb Hossain.