2018 (9) TMI 1702 - HC - Income Tax

Assessment in the hands of representative assessee - Validity of reopening of assessment - income made by the nonresident Cricket Boards arise in India - Income deemed to have arisen to the non-resident in this country - Held that - Section 9 merely tries to classify the income which is deemed to accrue or arise in India by saying that it should inter alia arise from business connection of the non-resident with India. Section 160 makes it abundantly plain that a representative assessee would represent the assessee in respect of a non-resident in respect of his income specified in Section 9. This simply means that a representative assessee would represent all income accruing or arising in India and not in a foreign country directly or indirectly from any business connection in India. It goes without saying that the representative assessee not only represents an income which has directly arisen or accrued in India but also that which has indirectly arisen or accrued in this country, through a business connection. Tribunal has made a complete misunderstanding of the law in entertaining the opinion that since the income made by the nonresident Cricket Boards were held to have directly arisen in India, this income could not be deemed to have arisen or accrued to the non-resident in India and the responsibility of the representative assessee was confined to accounting for income which had directly arisen or accrued in India. Furthermore, if the department chooses to make an assessment of the person resident outside India directly, there is no question of assessment of his agent or a representative assessee. Section 166 of the Income Tax Act, 1961 very clearly lays down that nothing in the foregoing sections relating to representative assessee shall prevent either the direct assessment of the person for whom the money is receivable. The Tribunal, in our opinion, made a clear mistake in believing that since it was held in an earlier proceeding that the income in question arose in India, a representative assessee could not be liable because it was only liable according to it in respect of the income which was deemed to have arisen in India - Decided in favour of revenue

Summary

Issues: Tax liability of a cricket association, assessment under the Income Tax Act, 1961, interpretation of Sections 5, 9, 160, and 163, representative assessee's liability, appeal under Section 260A.

Analysis:
1. Tax Liability of Cricket Association: The case involved a dispute regarding the tax liability of a cricket association, PILCOM, arising from the Cricket World Cup tournament held in 1996. The Income Tax Officer demanded tax against PILCOM for not deducting tax at source. The tribunal earlier held that only a portion of the funds received should be considered as income accruing to the cricket association of a particular country, based on the matches played. Both PILCOM and the revenue appealed against this decision.

2. Assessment under Income Tax Act: The assessing officer issued notices and made assessments under Section 147 for the cricket boards involved. Appeals were made to the Commissioner of Income Tax (Appeals) and subsequently to the Income Tax Appellate Tribunal. The tribunal, based on a previous order, held that the income accrued in India and thus PILCOM couldn't be considered liable as an agent under Section 163 of the Income Tax Act, leading to the current appeal under Section 260A.

3. Interpretation of Relevant Sections: The judgment delves into the interpretation of key sections of the Income Tax Act, 1961. Section 5 defines total income for residents and non-residents, while Section 9 specifies income deemed to accrue or arise in India. Section 163 defines an agent in relation to a non-resident, and Section 160 designates a representative assessee for a non-resident's income. The court analyzed these sections to determine the liability of PILCOM as an agent for the cricket boards.

4. Representative Assessee's Liability: The court emphasized that a representative assessee is responsible for all income accruing or arising in India for a non-resident, whether directly or indirectly through a business connection. The tribunal's misinterpretation that only directly accrued income in India was relevant led to errors in their decision-making process.

5. Judicial Precedents: The judgment referenced legal precedents to support its interpretation, including the cases of Jyotendrasinhji Vs. S.I. Tripathi and British Sugar Manufacturers, Ltd. Vs. Harris. These cases highlighted the principles of direct assessment and the responsibilities of a representative assessee.

6. Final Decision: The court set aside the tribunal's order, affirming the Assessing Officer and the Commissioner of Income Tax (Appeals). The court ruled in favor of the Revenue, stating that the representative assessee (PILCOM) should be held liable for the income arising in India for the foreign cricket boards. The tribunal was instructed to address any remaining points in accordance with the law.

In conclusion, the judgment clarified the tax liability of a cricket association, analyzed relevant sections of the Income Tax Act, emphasized the responsibilities of a representative assessee, and overturned the tribunal's decision to hold PILCOM not liable.