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TMI Blog2007 (2) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... ls were together, we are disposing of all the appeals by way of this consolidated order. 2. The factual matrix giving rise to this litigation before us is as follows. So far as the assessment years 1993-94, 1995-96 and 1996-97 are concerned, a common order was passed by the Assessing Officer on 19th January, 2001. We will, therefore, first take up facts relating to these three years. During the course of scrutiny of the relevant tax deduction at source returns filed by the assessee, the Assessing Officer noticed that the assessee did not deduct tax at source from following payments : Recipient Amount 1. England & Wales Cricket Board, United Kingdom Rs. 1,01,80,122 2. New Zealand Cricket Inc., New Zealand Rs. 31,52,000 3. New Zealand Cricket Inc., New Zealand Rs. 94,74,255 3. The Assessing Officer was of the view that under the provisions of section 194E read with section 115BBA, tax is deductible from the above payments. He, therefore, required the assessee to show cause as to why an order under section 201(1) and under section 201(1A) of the Income-tax Act, 1961 ('the Act' in short) not be passing against the assessee calling upon to the assessee to pay such shortfall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned under Article 7 of the relevant tax treaties, dealing with business profits, and since none of these cricketing bodies have a permanent establishment in India, which is sine qua non for taxability of business profits, the taxability in India cannot arise. The assessee also took note of Assessing Officer's reliance on the provisions of Article 22 of the tax treaties, as was indicated during the course of the scrutiny proceedings, but repudiated applicability of the said provision on the facts of these cases. The assessee then referred to clarification dated 17th May, 1996 issued by the Central Board of Direct Taxes ('CBDT' in short) to the effect so far as the payments to cricketing bodies of the countries, with which India has entered into tax treaties, are concerned, no tax withholding liability arises as no part of income of such bodies is taxable in India. It was submitted that on the basis of this clarification issued by the CBDT, the assessee acted, and; accordingly, deducted withholding taxes from payments made only to cricketing bodies of the countries with which no tax treaties were entered into, such as West Indies and Zimbabwe. The assessee also made submissions on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racter of compensatory payment which is necessarily liable to tax" and that "the provisions of section 115BBA, in fact, takes into its ambit the whole of the amount and does not even allow any deduction towards expenses". The Assessing Officer also noted that the assessee himself has accepted this position by deducting tax at source from payments to cricketing bodies in the countries with which India has not entered into the tax treaties. The argument that payments are not in the income nature was also, therefore, rejected by the Assessing Officer. The next thing that the Assessing Officer discussed in this order was taxability of these payments in the hands of the relevant overseas cricket bodies in the light of the provisions of the applicable tax treaties. He pointed out in terms of the provisions of Article 22(3) of the India UK tax treaty and in terms of the provisions of Article 23 of the India New Zealand tax treaty which are similar in effect, any income, which is not expressly dealt with in the respective tax treaties, is to be taxed in the country in which it arises. The Assessing Officer also rejected assessee's plea that the taxability of the overseas cricket bodies is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Cricket Board. It was a case in which the assessee had approached the Assessing Officer to make the aforesaid payment without any deduction of tax at source, this request was granted by the Assessing Officer by issuing the necessary certificate, but the said certificate authorising the assessee to make the remittance without deduction of tax at source was later subjected to being rescinded by the Commissioner in exercise of his revision powers under section 263. The impugned order was passed by the Assessing Officer admittedly as a 'natural sequel' to this development and by holding that 'therefore, the assessee cannot escape the liability under section 201(1) and under section 201(1A)'. The Assessing Officer took the stand that the provisions of the India Australia tax treaty were pari materia with the provisions of the India UK tax treaty analyzed by him in his order for the earlier years, and that the assessee did not, therefore, derive any advantage from India Australia tax treaty. The Assessing Officer also declined to stay the proceedings under section 201 till the time the Income-tax Appellate Tribunal disposes of assessee's appeal against the revision order so passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7th May, 1996 by the CBDT is only an internal correspondence" and that "it (the said CBDT letter) is an instruction of the CBDT issued in response to a detailed representation made by the (assessee) appellant." The CIT(A) also referred to the Hon'ble Supreme Court's judgment in the case of UCO Bank v. CIT [1999] 237 ITR 8891 and held these instructions to be binding on the Assessing Officer. The order dated 22nd April, 2002, for the assessment year 1999-2000, simply followed the earlier consolidated order dated 28th February, 2001, without assigning any additional or further reasons. In this view of the matter, the CIT(A) cancelled all the demands raised by the Assessing Officer, under section 201(1) read with section 194E and under section 201(1A) read with section 194E for non-deduction of tax at source from payments of guarantee money paid by the assessee to cricket bodies in UK, New Zealand, Australia, Sri Lanka and Kenya. 10. The Assessing Officer is not satisfied with the stand so taken by the Commissioner (Appeals) and he is in appeal before us on the following grounds : 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cricket bodies of Australia, New Zealand, United Kingdom, Sri Lanka and Kenya is clearly taxable in India as it is paid in consideration of cricket played by their teams in India, and, therefore, the same accrues and arises in India. Learned Departmental Representative vehemently disputes factual contentions embedded in assessee's submissions about the true nature of 'guarantee fees' and submitted that all these innovative descriptions about the nature of 'guarantee fees' are basically manoeuvres to avoid taxability of these payments in India by giving misleading description of the nature of payment. The payment was, according to the learned Departmental Representative, simply a payment for playing cricket in India. There is no other consideration involved. Our attention was also invited to a recent decision of another co-ordinate Bench of the Tribunal in the case of Board of Control for Cricket in India (BCCI) v. DIT (Exemption) [2005] 96 ITD 263 (Mum.). It was pointed out that in the said decision, the Tribunal has held that the no objection certificates issued by the Assessing Officer for making payments of guarantee money to the Australian Cricket Board were issued in a ster ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) has no bearing on the issue in appeal before us because PILCOM was a different assessee and the nature of its payments, though with same nomenclature, have different purposes and considerations. It was also pointed out that the decision so rendered by the Tribunal was vitiated by several fundamental errors and it does not, therefore, have any precedence value. Learned counsel invited our attention to several decisions of the Hon'ble High Courts and Hon'ble Supreme Court in which the intra department correspondence and instructions are held to have binding force under section 119 of the Act. It is pointed out that in PILCOM's case (supra) only one of the treaty clauses is discussed and this discussion proceeds on the erroneous generalisation that the provisions of all the tax treaties that India has entered into with various cricket playing countries are in materially identical. Learned counsel took us through tax treaties with UK, Australia, New Zealand, Sri Lanka and Kenya and highlighted the material differences in these treaties. It was then submitted that a judicial precedent, which has its foundation as such erroneous assumptions cannot have any binding force of prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. Learned counsel then took us through the provisions of section 115BBA and submitted that these provisions are applicable only for determination of tax in special cases and, therefore, they cannot have any application in the matter of deciding what is income in the first place. Learned counsel submits that unless a receipt is in the nature of income, section 115BBA cannot have any application in the matter. He further contends that there is no finding in the impugned order passed by the Assessing Officer to the effect that guarantee money is in the nature of income, save and except for, directly or indirectly, relying upon section 115BBA itself in support of the contention that 'guarantee fee' is of income nature. Learned counsel suggests that the provisions of section 115BBA cannot expand the scope of expression 'income'. It is thus submitted that unless there are specific independent and legally sustainable findings to the effect that 'guarantee money' is includible in the respective cricket's board's income in India, section 115BBA cannot be pressed into service. However, the Assessing Officer has proceeded on the basis that since section 115BBA covers guarantee money paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas cricket bodies as covered by Article 7. It is then argued that since these overseas cricket bodies had no permanent establishment in India, the business profits of these overseas cricket bodies cannot be taxed in India at all. Therefore, according to the learned counsel, the recipients of the guarantee fees did not have any tax liability in India. Since there was no tax liability at all, there cannot be any reasons for deducting tax at source under section 195. Learned counsel submits that in view of the no objection certificates issued by the Assessing Officer from time to time, the assessee had reasonable belief that no tax is deductible from the remittances in question. For this reason also, according to the learned counsel, the assessee cannot now be saddled with the demands under sections 201(1) and 201(1A) read with section 194E. Learned counsel submits that, in any event, the CIT(A) was justified in holding that as a benevolent concession of the CBDT, the instructions issued by the CBDT, by way of letter dated 17th May, 1996, are binding in nature. On the strength of all these arguments, learned counsel urges us to confirm and approve conclusions arrived at by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That takes us to the question whether, on the merits of the case, the guarantee fees received by the overseas cricket boards was taxable in India. This is relevant because the tax withholding liability is essentially a vicarious liability and unless the principal liability to pay tax in India exists, vicarious liability under section 195 cannot be invoked at all. 16. The guarantee fees paid by the assessee so far as the issues in the present appeals before us are concerned, is to be cricket bodies of the countries with which India has entered into tax treaties. It is settled legal position that in view of the provisions of section 90(2) of the Indian Income-tax Act, 1961 the provisions of the tax treaty prevail over that of the domestic law unless the domestic law is more beneficial to the assessee. Therefore, in case we come to the conclusion that the payment in question is not taxable in terms of the provisions of the applicable tax treaty, there is no need to address ourselves to the scope of provisions of the domestic law. These tax treaties primarily provide for allocation of rights over the tax subjects when an activity is spread over more than one tax jurisdiction and when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for certain types of income. Merely because a rate is prescribed for 'guarantee fee' cannot be viewed as an authority to conclude that it is taxable in the first place. That would be putting cart before the horse. There may be categories of guarantee fees which are of income nature and it is only for such categories of guarantee fees that the special rate under section 115BBA would come into play. The intent of Legislature cannot be pressed into service to hold taxability of an item. The taxability of an income has to be supported by plain words of the statute; there is no scope of reading the intent of drawing the inferences for this purpose. 19. On the other extreme, we have the assessee who is not parting with any material or evidence to establish the facts embedded in his contention to the effect that 'guarantee fees' is not of income nature. Mere bland statements to the effect that these payments are not in consideration of playing cricket in India, but in consideration of performing reciprocal obligations when Indian teams visit those countries, cannot suffice. The assessee has to give complete details about the nature of these payments and produce the minutes, corresponde ..... 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