Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5749 OF 2012 PILCOM Appellant VERSUS C.I.T. WEST BENGAL-VII Respondent WITH SPECIAL LEAVE PETITION (CIVIL) No.7315 of 2019 AND SPECIAL LEAVE PETITION(CIVIL)NO.6829 OF 2019 JUDGMENT Uday Umesh Lalit, J. Civil Appeal No.5749 OF 2012 1. This appeal by special leave challenges Judgment and Order dated 11.11.2010 passed by High Court1 dismissing Income Tax Appeal No.196 of 2000 and thereby affirming view taken by Tribunal 2 in I.T.A.Nos. 110/Cal/1999 and 402/Cal/1999 on 04.01.2000. 1 High Court of Judicature at Calcuttta 2 Income Tax Appellate Tribunal, Calcutta Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 2 2. facts leading to filing of proceedings before Tribunal were set out in Order dated 04.01.2000 as under:- 2. assesse before us is PAK-INDO-LANKA, JOINT MANAGEMENT COMMITTTEE (known in short as PILCOM) which is actually Committee formed by Cricket Control Boards/Associations of three countries viz. Pakistan, India and Sri Lanka, for purpose of conducting World Cup Cricket tournament for year 1996 in these three countries. Actually, International Cricket Council (ICC) is non-profit making organization having its Headquarters at London, which controls and conducts game of cricket in different countries of world. ICC has got nine full members and twenty associate members in special meeting of ICC held on 2.2.1993 at London, India, Pakistan and Sri Lanka were selected, on basis of competitive bids, to have privilege of jointly hosting 1996 World Cup Cricket Tournament. These three host countries were required to pay varying amounts to Cricket Control Boards/Associations of different countries as well as to ICC in connection with conducting preliminary phases of tournament and also for purpose of promotion of game in their respective countries. For purpose of conducting final phase of tournament in India, Pakistan and Sri Lanka, Committee was formed by three host members under name PILCOM. Two Bank accounts were opened by PILCOM in London to be operated jointly by representatives of Indian and Pakistan Cricket Boards, in which receipt from sponsorship, T.V. rights etc. were deposited and from which expenses were met. surplus amount remaining in said Bank account was decided to be divided equally between Cricket Boards of Pakistan and India after paying lump-sum amount to Sri Lanka Board as per mutual agreements amongst three Boards. For purpose of hosting World Cup matches in India, Board of Cricket Control of India (BCCI) appointed its own committee for discharge of its responsibilities and functions. Committee was to be known as INDICOM. Since Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 3 Convener-Secretary of INDCOM was functioning from Calcutta necessary Bank accounts were opened in Calcutta by INDCOM for receipts and expenditure relating to matches to be held in India. From said Bank accounts in London, certain amounts were transferred to three co-host countries for disbursement of fees payable to umpires and referees and also defraying administrative expenses and prize money. During course of enquiry, it came to knowledge of tie I.T.O. (TDS), Ward- 21(4), Calcutta that PILCOM had made payments to ICC as well as to Cricket Control Boards/Associations of different Member countries of ICC from its two London Bank Accounts. ITO issued notice to Office of PILCOM located at Dr. BC Roy Club House, Eden Gardens, Calcutta- 700 021 asking it to show-cause why actions under Section 20(I)/194E of I.T. Act, 1961 would not be taken against PILCOM for its failure to deduct taxes from payments made by it and as referred to above in accordance with provisions of Sec. 194E. PILCOM represented before I.T.O. that provisions of Sec. 194E would not be attracted to payments for various reasons to which we shall advert later on. It was furthermore stated that, inasmuch as, books accounts of PILCOM had not been completed by its Pakistani Treasurer, said books could not be produced before I.T.O. I.T.O. did not agree with contentions of PILCOM. He referred to provisions of Sec. 115BBA and held that taxes should have been deducted at source from payments made by PILCOM in accordance with provisions of Sec 194E. details of payments as made by PILCOM and as had been collected by ITO were supplied by him to PILCOM. Finally, ITO passed order under Sec. 20(I)/194E dated 6.5.1997, in which he held that PILCOM was liable to pay under Sec.201(I) amount it had failed to deduct from payments under consideration arid furthermore held that PILCOM was also liable to pay interest on said amount under Sec. 291(1A) from date of tax was deductible upto date of Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 4 actual payment. ITO computed total short deduction u/s. 194E to be Rs.2,18,293,00.00 3. PILCOM appealed against said order passed by ITO and CIT(A) disposed of appeal by his order dated 17.11.1997. In further appeal preferred by PILCOM before ITAT, ITAT by its order dated 25.6.1990 in ITA No. 62/Cal/1998, set aside order passed by CIT(A) and restored matter back to his file for redeciding issue after affording opportunity of being herd to PILCOM. Accordingly, appeal was re-heard by CIT(A), in which both sides were allowed opportunity to represent their respective cases and CIT(A) finally passed his appellate order on 28.12.1998, which is being challenged before us by both sides. 4. After discussing basic facts of case, Ld.CIT(A) detailed out actual payments made by PILCOM (in sterling pound) and classified same into seven distinct categories, as listed before, on basis of purposes for payments as well as difference between categories of recipients off payments. Amount ( ) i) Guarantee money paid to 17 17,00,000 countries which did not participate in World Cup matches ii) Amounts transferred from London 1,20,000 to Pakistan and Sri Lanka for disbursement of prize money in those countries iii) Payment to ICC as per Resolution 3,75,000 dated Feb. 2, 1993 iv) Payment for ICC Trophy for 2,00,000 qualifying matches between ICC Associate members held outside India v) Guarantee money paid to South 3,60,000 Africa and United Arab Emirates both of which did not play any match in India vi) Guarantee money paid to 8,85,000 Australia, England, New Zealand, Sri Lanka and Kenya with whom Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 5 double taxation avoidance agreements exist vii) Guarantee money paid to 7,10,000 Pakistan, West India, Zimbabwe and Holland 43,50,000 5. Various arguments were taken up by both sides before CIT(A), which we shall also be discussing and taking into consideration in due course. CIT (A) held that so far as payment of pound 1,20,000 being of nature of amounts transferred from London to Pakistan and Sri Lanka for disbursement of prize money in those countries for matches played there is concerned, prize money is always paid to winner and other individual players in particular match and, inasmuch as, these prizes were meant for matches outside India, same could not be brought within scope of Sec.115BBA. He thus finally decided that this amount does not fall within scope of tax deduction at source and ordered for deletion of this amount from total amount considered by ITO. As regards other six payments, CIT(A) held that provisions of Sec. 115BBA would be attracted to all those payments. By arguing that all different Cricket Control Boards/Associations would come within purview of Sec. 115BBA read with Sec. 9(I)(I), inasmuch as, income accrued or arose to way of guarantee money, etc. through playing of matches in India which constituted source of income in India, in hands those non-resident foreign Cricket Boards/Associations. Ld. CIT(A), however, found out at same time that out of 37 matches played in all in aforesaid World Cup Tournament, only 17 had been played in India. He argued that since payments made by PILCOM related to all matches played in tournament, only such proportion of guarantee money, etc. received by non-resident parties could be considered to be deemed income in India in hands of those non-resident parties, which corresponds to ratio of number of matches played in India to total number of matches. Thus, CIT(A) held that only 17/37th portion i.e. 45.94 percent of other Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 6 six types of payments could be considered to be attracted by provisions of Sec.291(I)/194. He thus directed that so far as other six categories of payments are concerned. 45.94 percent of payments covered by those categories should alone be taken into consideration for purpose of considering PILCOM as defaulter under Sec.201(I)/194B. 3. As stated above, out of payments classified in seven distinct categories, payment at serial no. (ii) amounting to .1,20,000/- was found by CIT(A) to be beyond scope of Section 115BBA of Act3, whereas, other six payments were found to be governed by said provision. However, only 17/37th portion or 45.94% of said six payments were held to be covered. Appellant as well as Revenue, being aggrieved, approached Tribunal by filing ITA Nos.11/Cal/1999 and 402/Cal/1999 respectively. 4. Tribunal in its Order dated 04.01.2000 approved view taken by CIT(A) in respect of payment at serial no.(ii) amounting to Rs.1,20,000/-. As regards payments at serial nos. (i), (iii), (iv) and (v), it was observed:- 17. It is not at all possible to hold that source of guarantee money in hands of cricket associations of those countries, which either did not play at all or did not play in India, can be games played in India. We, therefore, hold that so far as guarantee moneys paid by PILCOM to 17 countries, which did not participate in World Cup 3 Income Tax Act, 1961 Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 7 matches [(Clause (i) of detailed chart of payment as shown at page 4 above], or to South Africa and United Arab Emirates, which did not play any match in India [Clause (V) of chart as above] are concerned, it cannot be held that cricket associations of these countries earned guarantee money through any Source of income in India. 24. Clause (iii) of above chart refers to payment of 3,75,000 to ICC as per Resolution dated 2.2.1993. According to said Resolution, amount was required to be paid to ICC partly towards expenses incurred by ICC in connection with tournament and partly to be spent by it for development of cricket. Even if element of income may, therefore, be considered out of this payment, it is hardly possible to conceive any connection of such payment to income of ICC taxable in India. 25. Another amount of 2,00,000/- being payment for ICC trophy for qualifying matches between ICC Associate Members held outside India is covered under Clause (iv) of abovementioned chart. entire payment appears to be of nature of reimbursement of expenses in connection with tournament. Again, payment does not have any connection with any match played in India. As regards amounts at serial nos. (vi) and (vii) were concerned, it was stated:- In cases of cricket associations of these countries, although guarantee money was payable by virtue of Resolution passed in meeting ICC as in cases of cricket associations of other countries, at same time again, these associations did some activities in India and can be considered to have earned guarantee money through such activity alone. We are, therefore, of opinion that so far as these countries (covered by clauses (vi) & (vii) of chart as above) are concerned, payments received by then from PILCOM have arisen directly as result of their taking part in cricket Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 8 matches. However, cricket associations of all these countries played not only in India but in Pakistan and Sri Lanka also. Hence, only that proportion of total receipt made by each such country from PILCOM, which bears same ratio as number of matches played by each such country in India to total number of matches played by each such country in tournament, should be considered to be income arising or accruing to cricket association of that particular country. We are, therefore, of opinion that PILCOM should have deducted tax at source in respect of this portion of payment made by it to that particular association and order under Sec. 201 would be considered to be valid in respect of payment to each such country in above manner. 5. Order passed by Tribunal was challenged by Appellant as well as by Revenue by filing I.T.A. Nos.196 of 2000 and 200 of 2000 respectively. After considering rival submissions, by its Judgment and Order under appeal, High Court affirmed view taken by Tribunal and dismissed I.T.A. Nos.196 of 2000 and 200 of 2000. In its judgment, High Court considered matter as under:- On perusal of said section it would appear that once income referred to in Section 115BBA is held to be payable to foreigner non-resident sportsman or non-resident sports association or institution person responsible for making payment is obliged at time of making payment or at time of credit of such income to account of payee to deduct income tax thereon at rate of 10%. It is significant that said section nowhere says whether income is chargeable to tax or not. It therefore be concluded that once income accrues deduction is matter of course. Naturally failure to deduct will have consequence under Section 201 of said Act. Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 9 Once payment is made and received by way of participation in any matches played in India said on resident assesse has to meet deduction of tax under Section 115BBA. Similarly, if any amount including guaranteed amount is paid to any non-resident sports association in relation to any match played in India, said income has to be subjected to deduction of tax at source. We are unable to accept contention of Mr. Bajoria that source of income of foreign Cricket Associations was grant of privilege for bid money and have no relation to matches, for grant of privilege for bid money is origin but it is not essential component or part for accrual of income by reason of fact hypothetically if after bid is accepted, and payment is not made question of deduction of tax at source does not and cannot arise, consequently acceptance of bid becomes redundant. Relevant factor is payment and then matches having taken place in India where participation of sports personality is in question. As regards submission regarding applicability of DTAA 4, High Court observed:- Although it is not argued but we feel that obligation to deduction under Section 194E is not affected by DTAA since such deduction is not final payment of tax nor can be said to be assessment of tax. deduction has to be made and after it is done assesse concerned gets credit of same and once it is found later on that income from which deduction is made is not eligible to tax then on application being made refund with interest is always allowed. Fundamental distinction between deduction at source by payer is one thing and obligation to pay tax is another thing. Advantage of DTAA can be pleaded and taken by real assessee on whose account deduction is made not by payer. 4 Double Taxation Avoidance Agreements Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 10 We are of view irrespective of existence of DTAA obligation under Section 195E has to be discharged once income accrues under Section 115BBA. 6. Appellant is in appeal against dismissal of ITA No.196 of 2000. Revenue has not appealed against dismissal of ITA No.200 of 2000 and as such deletion as regards amounts at serial nos. (i) to (v) has attained finality and even as regards amounts at serial nos. (vi) and (vii) liability could at best be in proportion as observed by Tribunal. As per statement of case filed by Respondent, demand in terms of Order of Tribunal would be in sum of Rs.38,88,731/-. 7. We heard Mr. J.P. Khaitan, learned Senior Advocate for Appellant and Mr. Vikramjit Banerjee, learned Additional Solicitor General for Respondent. Mr. Khaitan, learned Senior Advocate submitted that payments were for grant of privilege and not towards matches; that such payments were made in accordance with decision of International Cricket Council in meeting held in London; that amounts were made over in England and that basic question would be whether any income accrued Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 11 in India. He invited our attention to Sections 115BBA and 194E and other provisions of Act and relied upon decision of this Court in G.E. India Technology Centre Pvt. Ltd. Vs. Commissioner of Income Tax and Another5; decision of Patna High Court in Metallurgical and Engineering Consultant (India) Ltd. Vs. Commissioner of Income Tax 6, which, in turn, had referred to decision of this Court in Performing Right Society Ltd. Vs. CIT7; and decision of Kerala High Court in Commissioner of Income Tax Vs. Manjoo and Co.8 Mr. Banerjee, learned Additional Solicitor General pressed for acceptance of Judgment under appeal and submitted that for attracting provisions of Section 115BBA of Act, participation would not be material and what would be relevant is that payment was for matches held in India and that in present case, income was deemed to accrue or arise in India. 8. relevant provisions of Act namely Sections 2(24)(ix), 5(2), 9(1), 115BBA and 194E are to following effect:- 2(24)(ix) income includes ... (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other 5 (2010) 327 ITR (SC) = (2010) 10 SCC 29 6 (1999) 238 ITR 208 (Pat) 7 (1977) 106 ITR 11 (SC) = (1976) 4 SCC 37 : 1976 SCC (Tax) 426 8 (2011) 335 ITR 527 (Ker) Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 12 games of any sort or from gambling or betting of any form or nature whatsoever; 5. Scope of total income. (2) subject to provisions of this Act, total income of any previous year of person who is non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.- Income accruing or arising outside India shall not be deemed to be received in India within meaning of this Section by reason only of fact that it is taken into account in balance-sheet prepared in India. Explanation 2.- For removal of doubts, it is hereby declared that income which has been included in total income of person on basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on basis that it is received or deemed to be received by him in India. 9. Income Deemed to accrue or arise in India. (1) following incomes shall be deemed to accrue or arise in India (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through transfer of capital asset situate in India Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 13 Explanation.- For purposes of this clause- (a) in case of business of which all operations are not carried out in India, income of business deemed under this clause to accrue or arise in India shall be only such part of income as is reasonably attributable to operations carried out in India; (b) in case of non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to purchase of goods in India for purpose of export; (c) in case of non-resident, being person engaged in business of running news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to collection of news and views in India for transmission out of India; (d) in case of non-resident, being- (1) individual who is not citizen of India; or (2) firm which does not have any partner who is citizen of India or who is resident in India; or (3) company which does not have any shareholder who is citizen of India or who is resident in India, no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 14 which are confined to shooting of any cinematograph film in India; 115BBA. Tax on non-resident sportsmen or sports associations. (1) Where total income of assessee, (a) being sportsman (including athlete), who is not citizen of India and is non-resident, includes any income received or receivable by way of (i) participation in India in any game (other than game winnings wherefrom are taxable under section 115BB) or sport; or (ii) advertisement; or (iii) contribution of articles relating to any game or sport in India in newspapers, magazines or journals; or (b) being non-resident sports association or institution, includes any amount guaranteed to be paid or payable to such association or institution in relation to any game (other than game winnings wherefrom are taxable under section 115BB) or sport played in India, (c) being entertainer, who is not citizen of India and is non-resident, includes any income received or receivable from his performance in India, income- tax payable by assessee shall be aggregate of (i) amount of income-tax calculated on income referred to in clause (a) or clause (b) or clause (c) at rate of ten per cent; and Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 15 (ii) amount of income-tax with which assessee would have been chargeable had total income of assessee been reduced by amount of income referred to in clause (a) or clause (b): Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing income referred to in clause (a) or clause (b). (2) It shall not be necessary for assessee to furnish under sub-section (1) of section 139 return of his income if (a) his total income in respect of which he is assessable under this Act during previous year consisted only of income referred to in clause (a) or clause (b) of sub-section (1); and (b) tax deductible at source under provisions of Chapter XVII-B has been deducted from such income. 194-E. Payments to non-resident sportsmen or sports associations. Where any income referred to in Section 115-BBA is payable to non-resident sportsman (including athlete) who is not citizen of India or non-resident sports association or institution, person responsible for making payment shall, at time of credit of such income to account of payee or at time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at rate of ten percent9. 9 By Finance Act, 2012; for ten per cent , expression twenty per cent stands substituted. Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 16 9. Amounts at serial numbers (vi) and (vii) are in nature of Guarantee Money paid to Non-resident Sports Associations. payments were not made by Appellant in India but were made by Appellant through its Bank accounts at London or elsewhere. principal issue to be considered is whether any income accrued or arose or was deemed to have accrued or arisen to said Non-resident Sports Association in India. If answer is in affirmative, next question would be about liability on part of Appellant to deduct Tax at Source and make appropriate deposit in accordance with Section 194E of Act. 10. In terms of Sub-Section (2) of Section 5 of Act, total income of non-resident may include income from whatever source which is received or deemed to be received in India or accrues or arises or is deemed to accrue or arise to such non-resident in India. According to Section 9(1), income shall be deemed to accrue or arise in India if income accrues or arises, whether directly or indirectly under any of following postulates:- through or from any business connection in India; or through or from any property in India; or through or from any asset or source of income in India; or through transfer of capital asset situate in India Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 17 11. According to Respondent, income in question had arisen from source of income in India, which was playing of cricket matches in India and as such requirement of law was fully satisfied. On other hand, according to Appellant, payment was towards grant of privilege and had nothing to do with matches that were played in India. 12. In Performing Right Society Ltd.7, under agreement, appellant Society had granted to All India Radio, authority to broadcast from all its stations, musical works included in repertoire of Society, in respect of which payments at rate of 2 per hour of broadcasting were payable to Society. Society, non-resident company, contended that agreement was executed in England, payments were made in England and source of income was agreement that was entered into in England. contention was rejected by High Court. conclusion that income derived from broadcast of copyright music from stations of All India Radio arose in India was affirmed by this Court. 13. In present case, Non-resident Sports Associations had participated in event, where cricket teams of these Associations had played various matches in country. Though payments were Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 18 described as Guarantee Money, they were intricately connected with event where various cricket teams were scheduled to play and did participate in event. source of income, as rightly contended by Revenue, was in playing of matches in India. 14. mandate under Section 115 BBA (1)(b) is also clear in that if total income of Non-resident Sports Association includes amount guaranteed to be paid or payable to it in relation to any game or sports played in India, amount of income tax calculated in terms of said Section shall become payable. expression in relation to emphasises connection between game or sport played in India on one hand and Guarantee Money paid or payable to Non-resident Sports Association on other. Once connection is established, liability under provision must arise. 15. In CIT vs. Eli Lilly and Co. (India) Pvt. Ltd. 10, this Court was called upon to consider following issue:- 56. Whether TDS provisions which are in nature of machinery provisions enabling collection and recovery of tax are independent of charging provision which determines assessability in hands of assessee employee (recipient)? In other words, whether TDS provisions under Income Tax Act, 1961 are applicable to payments made abroad by 10 (2009) 15 SCC 1 Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 19 foreign company, which payments are for income chargeable under head salaries and which are made to expatriates who had rendered services in India? After considering entirety of matter and rival submissions, issue was answered as under:- 97. For reasons stated hereinabove, we hold that TDS provisions in Chapter XVII-B relating to payment of income chargeable under head Salaries , which are in nature of machinery provisions to enable collection and recovery of tax form integrated code with charging and computation provisions under 1961 Act, which determine assessability/taxability of salaries in hands of assesse employee. Consequently, Section 192(1) has to be read with Section 9(1)(ii) read with Explanation thereto. Therefore, if any payment of income chargeable under head salaries falls within Section 9(1)(ii) then TDS provisions would stand attracted. 16. In G.E. India Technology Centre Pvt. Ltd.5, question that arose was whether appellant was liable to deduct Tax at Source in respect of payments made to certain foreign software suppliers. According to appellant, payments were for purchase of software whereas according to Revenue, payments also included payments towards royalty. Tribunal, while accepting case of appellant had held that amount paid by appellant to foreign software suppliers was not royalty and same did not give rise to any income taxable in India. High Court had reversed decision of Tribunal and held that unless Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 20 payer had obtained appropriate permission under Section 195(2) of Act, payer was obliged to deduct Tax at Source. In this context matter was considered by this Court. While dealing with scope of Section 195(1) of Act, it was stated:- 8. most important expression in Section 195(1) consists of words chargeable under provisions of Act. person paying interest or any other sum to non-resident is not liable to deduct tax if such sum is not chargeable to tax under IT Act. For instance, where there is no obligation on part of payer and no right to receive sum by recipient and that payment does not arise out of any contract or obligation between payer and recipient but is made voluntarily, such payments cannot be regarded as income under IT Act. 9. It may be noted that Section 195 contemplates not merely amounts, whole of which are pure income payments, it also covers composite payments which have element of income embedded or incorporated in them. Thus, where amount is payable to non- resident, payer is under obligation to deduct TAS in respect of such composite payments. obligation to deduct TAS is, however, limited to appropriate proportion of income chargeable under Act forming part of gross sum of money payable to non-resident. This obligation being limited to appropriate proportion of income flows from words used in Section 195(1), namely, chargeable under provisions of Act . It is for this reason that vide Circular No. 728 dated 30-10- 1995 CBDT has clarified that tax deductor can take into consideration effect of DTAA in respect of payment of royalties and technical fees while deducting TAS. It may also be noted that Section 195(1) is in identical terms with Section 18(3-B) of 1922 Act. Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 21 16. fact that Revenue has not obtained any information per se cannot be ground to construe Section 195 widely so as to require deduction of TAS even in case where amount paid is not chargeable to tax in India at all. We cannot read Section 195, as suggested by Department, namely, that moment there is remittance obligation to deduct TAS arises. If we were to accept such contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if contention of Department was accepted it would mean obliteration of expression sum chargeable under provisions of Act from Section 195(1). While interpreting section one has to give weightage to every word used in that section. While interpreting provisions of Income Tax Act one cannot read charging sections of that Act dehors machinery sections. Act is to be read as integrated code. 17. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in CIT v. Eli Lilly & Co. (India) (P) Ltd. [(2009) 15 SCC 1 : (2009) 312 ITR 225] provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and charging provisions of IT Act form one single integral, inseparable code and, therefore, provisions relating to TDS applies only to those sums which are chargeable to tax under IT Act. It is true that judgment in Eli Lilly[(2009) 15 SCC 1 : (2009) 312 ITR 225] was confined to Section 192 of IT Act. However, there is some similarity between two. If one looks at Section 192 one finds that it imposes statutory obligation on payer to deduct TAS when he pays any income chargeable under head Salaries . Similarly, Section 195 imposes statutory obligation on any person responsible for paying to non-resident any sum chargeable under provisions of Act , which expression, as stated above, does not find place in other sections of Chapter XVII. It is in this sense that we hold that IT Act constitutes one single integral inseparable code. Hence, provisions relating to Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 22 TDS applies only to those sums which are chargeable to tax under IT Act. 16.1 submission that unless permission was obtained under Section 195(2) of Act, liability to deduct Tax at Source must be with respect to entire payment, was not accepted. Relying on expression chargeable under provisions of Act occurring in Section 195(1) of Act, it was held obligation to deduct TAS, is however, limited to appropriate proportion of income chargeable under Act forming part of gross sum of money payable to non-resident . 16.2 This decision, in our view, has no application insofar as payments at serial nos. (vi) and (vii) are concerned. To extent payments represented amounts which could not be subject matter of charge under provisions of Act, appropriate benefit already stands extended to Appellant. 17. We now deal with two other decisions relied upon by Appellant:- A) In Metallurgical and Engineering Consultant (India) Ltd.6, under agreement appellant was to acquire technical know-how and then use acquired know-how in design of contract articles. In terms of paragraph (a) of article-II of agreement, personnel of appellant Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 23 were to acquire know-how and necessary skills by on job placement at place of foreign company, in respect of which, certain amounts were paid to foreign company. Said payment was not found by High Court to have accrued or arisen in India and matter was dealt with as under:- main question is whether payment under article III(a) was in nature of income to U.S. company accruing or arising in India? In this connection, Tribunal has solely relied upon Supreme Court decision in case of Performing Right Society Ltd. [1977] 106 ITR 11. facts of that case were that society was association of composers, authors and publishers of copyright musical works established to grant permission for performing right in such works. society collected royalties for issue of licences granting such permission and distributed royalties to members of society who were composers, authors, music publishers and other persons having interest in copyright, in proportion to extent to which member's work was publicly performed or broadcast after pro-rata deduction of expenses. society entered into agreement with resident of India granting licence to broadcast from licensee's sound broadcasting stations in India all musical works included in repertoire of society. Under agreement, for rights granted to it, licensee was to pay to society annually sum calculated at two pounds per hour of broadcasting western music from each of licensee's broadcasting stations and annual payment was to be made to society in London. On those facts, Supreme Court held that though it received income out of agreement executed not in India but in England, income undoubtedly accrued or arose in India. I am unable to see how decision in Performing Right Society Ltd.'s case [1977] 106 ITR 11 (SC), can be of any help to Revenue in this case. To my Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 24 mind facts of two cases are not quite similar; acquisition of technical know-how and use of acquired know-how in design of machines and accessories and their manufacture in India does not seem to me to be comparable to playing and broadcasting of copyright musical compositions in India on basis of licence granted under agreement. To my mind facts of case in hand would be comparable to situation where some people went to England to learn western music from members of society, on payment of some specified fee and on coming back used acquired skill to write musical compositions that were played and broadcast in this country. decision in Performing Right Society Ltd.'s case [1977] 106 ITR 11 (SC), would surely not apply to such case. It was thus held that income mentioned in article III (a) of agreement did not accrue or arise in India. No connection was found as regards payment for on job placement in foreign country to acquire necessary skills, whereas in instant case connection is very much evident. This case, thus, has no application. B) In Manjoo and Co.8, wholesale distributor of lotteries organised by State was obliged under distribution agreement to bear loss in case lottery tickets were not sold before draw date . Some of unsold tickets emerged as prize winning tickets. submission that prize won from lottery in such case be treated as receipt of income in profit and loss account and not as winnings from lottery resulting in Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 25 assessment at special rate provided under Section 115BB of Act, was not accepted by High Court. It was observed:- Therefore, assuming for argument s sake contention of respondent that winnings from lotteries are received by him in course of his business and are incidental to business and as such they are his business income is right, still, we feel in view of specific provision contained in Section 115BB, special rate of tax is applicable for all winnings from lottery. This decision has no application insofar as present controversy is concerned. 18. We now come to issue of applicability of DTAA. As observed by High Court, matter was not argued before it in that behalf, yet issue was dealt with by High Court. In our view, reasoning that weighed with High Court is quite correct. obligation to deduct Tax at Source under Section 194E of Act is not affected by DTAA and in case exigibility to tax is disputed by assesse on whose account deduction is made, benefit of DTAA can be pleaded and if case is made out, amount in question will always be refunded with interest. But, that by itself, cannot absolve liability under Section 194E of Act. Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 26 19. In premises, it must be held that payments made to Non- Resident Sports Associations in present case represented their income which accrued or arose or was deemed to have accrued or arisen in India. Consequently, Appellant was liable to deduct Tax at Source in terms of Section 194E of Act. 20. This appeal, therefore, must be dismissed. 21. Ordered accordingly. No costs. Special Leave Petition(Civil)Nos.6829 of 2019 and 7315 of 2019 22. Both these petitions are filed by Board of Control for Cricket in Sri Lanka through PILCOM (the Appellant in lead matter) challenging common Judgment and Order dated 25.09.2018 passed by High Court allowing I.T.A. Nos. 242 of 2008 and 279 of 2008. These matters arise from consequential assessment orders passed by Department pursuant to Judgment and Order under appeal in lead matter. 23. Notice was issued in these petitions because of pendency of lead matter. 24. Since lead matter is dismissed, we dismiss these Special Leave Petitions as well. Civil Appeal No. 5749 of 2012 etc. PILCOM vs. C.I.T. West Bengal-VII 27 .J. [Uday Umesh Lalit] .J. [Vineet Saran] New Delhi; April 29, 2020. PILCOM v. C.I.T. West Bengal-VII