Payment Of Compensation To CSA Under Termination Agreement Is Not Taxable Under India-South Africa DTAA, BCCI Not Liable To Deduct TDS: ITAT

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that payment of compensation to Cricket South Africa (CSA) under the Termination Agreement is not taxable under the provisions of the India-South Africa DTAA.

The bench of G.S. Pannu (President) and Sandeep Singh Karhail (Judicial Member) has observed that since the payment is not chargeable to tax in India in the hands of CSA, there is no obligation on the assessee to deduct tax at source under Section 195.

The assessee/appellant, BCCI, is the national body for cricket in India and is a society registered under the Tamil Nadu Societies Registration Act. The assessee was founded in 1929 with the object of promoting and developing cricket in India and fostering the spirit of sportsmanship. The assessee is also a member of the International Cricket Council (ICC), the international regulatory body for cricket.

The assessee derives substantial income from the conduct of cricket tournaments and matches and is regularly assessed tax in India. In the year 2008, the assessee commenced the conduct of a cricket tournament, namely, the Champions League T20 (CLT20). The participants in the CLT20 Tournament included the winners and/or runners-up of the domestic 20-over leagues in India, Australia, South Africa, etc.

The entire CLT20 Tournament was conducted by the assessee, and all the agreements, including the media/broadcasting rights agreement, in this regard were entered into by the assessee.

As per the Termination Agreement, in order to maximize the commercial success of the CLT20 Tournament and to ensure the participation of teams from South Africa and Australia in addition to the other teams of ICC member countries, the assessee entered into an arrangement with CSA to ensure that its winning or runner-up teams involved in domestic Twenty-20 Cricket competition administered by CSA participate in the CLT20 Tournament organized by the assessee each year. The assessee paid annual participation fees to CSA and deducted the TDS.

The tribunal held that the assessee cannot be said to be a Dependent Agent Permanent Establishment (DAPE) of CSA in India under Article 5(5) of the India-South Africa DTAA. Thus, the payment of compensation to CSA under the Termination Agreement is also not taxable under the provisions of the India-South Africa DTAA.

The tribunal held that the payment of compensation to CSA is for the termination of the arrangement, which was a profit-making apparatus, and thus is in the nature of a capital receipt and hence not taxable.

Case Title: The Board of Control for Cricket in India Versus Dy. Commissioner of Income Tax

Case No.: ITA no.5492/Mum./2017

Date: 11/05/2023

Counsel For Appellant: P.J. Pardiwala

Counsel For Respondent: Surabhi Sharma

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