I paid a foreign body from my overseas bank account for an event partly held in India — must I deduct tax at source when the payee is protected by a treaty?
Yes. The Supreme Court held on 29 April 2020 that PILCOM, the joint committee of the Indian, Pakistani and Sri Lankan cricket boards, had to deduct tax under section 194E from guarantee money paid out of its London accounts to non-resident cricket boards and to the ICC for the 1996 World Cup. The payments represented income which accrued, arose, or was deemed to accrue or arise in India, because matches were played here. The obligation under section 194E is not affected by a double taxation avoidance agreement: if the payee says the receipt is not taxable, it claims a refund with interest, but the deductor is not absolved.
Decided by the Supreme Court (Supreme Court of India; Uday Umesh Lalit and Vineet Saran JJ, judgment delivered by Uday Umesh Lalit J) on 2020-04-29, reported as AIR 2020 SUPREME COURT 2047; AIRONLINE 2020 SC 496. It bears on section 194E, section 115BBA, section 9(1)(i), section 201(1A) of the Income Tax Act 1961, in TDS Defaults matters.
This is the leading authority on section 194E and on the relationship between a treaty and a withholding obligation. Two propositions come out of it. First, the place from which the money is paid is irrelevant: PILCOM paid from London bank accounts to foreign boards, and the tax still had to be deducted, because the source of the income — matches played in India — was here. Second, and more widely useful, a treaty does not switch off section 194E. The Court kept section 194E apart from the line of cases on section 195, where the words "sum chargeable under the provisions of this Act" limit the obligation to the taxable proportion. Anyone advising on payments to non-resident sportsmen, sports associations or entertainers should start here, and should not assume that treaty relief available to the payee travels back to the payer.
Binding on every court and authority in India.
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PILCOM was a committee formed by the cricket boards of Pakistan, India and Sri Lanka to conduct the 1996 World Cup, which the three had won the right to host jointly at an ICC meeting in February 1993. It opened two bank accounts in London, operated jointly by the Indian and Pakistani boards, into which sponsorship and television rights money went and out of which expenses were met. From those accounts PILCOM paid the ICC and the cricket boards of member countries a total of about GBP 43,50,000, which the Commissioner (Appeals) classified into seven heads: guarantee money to 17 non-participating countries, transfers to Pakistan and Sri Lanka for prize money, payments to the ICC, payment for the ICC Trophy qualifying matches held outside India, guarantee money to South Africa and the UAE which played no match in India, guarantee money to five countries with which India has treaties, and guarantee money to four others. The Income Tax Officer (TDS), Calcutta held PILCOM in default under section 201 for not deducting under section 194E, computing the short deduction at about Rs.2.18 crore. Of 37 matches in the tournament, 17 were played in India.
The appeal was dismissed with no costs, and the two connected special leave petitions filed by the Board of Control for Cricket in Sri Lanka through PILCOM against the consequential assessments were dismissed as well. The payments made to the non-resident sports associations represented their income which accrued or arose, or was deemed to accrue or arise, in India, and PILCOM was liable to deduct tax at source under section 194E. The obligation under section 194E is not affected by a double taxation avoidance agreement; if the payee disputes chargeability it may plead the treaty and, if it makes out its case, the amount will be refunded with interest, but that does not absolve the deductor. The reasoning in G.E. India Technology Centre on the proportion of a composite payment was held inapplicable to the payments at heads (vi) and (vii), the appropriate benefit having already been given.
The connecting factor is the source. Guarantee money was paid to the boards because their teams took part in a tournament of which a substantial part was played in India, so the income had its source here and fell within the deeming provisions, whatever the currency, the bank or the country from which the cheque was drawn. On that footing the Commissioner (Appeals) had already given PILCOM the benefit of apportionment, treating only 45.94 per cent — 17 of the 37 matches — as referable to India, and had deleted the prize money transferred for matches played abroad. The Court then dealt with the authorities pressed on it. Eli Lilly and G.E. India Technology Centre establish that the deduction provisions of Chapter XVII and the charging provisions are one integrated code, so that the section 195 obligation reaches only the appropriate proportion of income chargeable under the Act; but that limitation flows from the words "chargeable under the provisions of the Act" in section 195(1), and the Court held the reasoning inapplicable to the payments in question, the benefit of exclusion having already been extended. Metallurgical and Engineering Consultants was distinguished: there the payment was for on-the-job training abroad, with no connection to India, whereas here the connection is very much evident. Manjoo and Co. was held to have no application. Finally, on the treaties, the Court agreed with the High Court that the section 194E obligation stands independently: the treaty operates on the assessment of the payee, and the remedy for an over-deduction is a refund with interest, not a defence for the payer.
The obligation to deduct Tax at Source under Section 194E of the Act is not affected by the DTAA.
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Handle my notice → Ask a CA on WhatsAppYes. The Supreme Court held on 29 April 2020 that PILCOM, the joint committee of the Indian, Pakistani and Sri Lankan cricket boards, had to deduct tax under section 194E from guarantee money paid out of its London accounts to non-resident cricket boards and to the ICC for the 1996 World Cup. The payments represented income which accrued, arose, or was deemed to accrue or arise in India, because matches were played here. The obligation under section 194E is not affected by a double taxation avoidance agreement: if the payee says the receipt is not taxable, it claims a refund with interest, but the deductor is not absolved. This was decided by the Supreme Court (Supreme Court of India; Uday Umesh Lalit and Vineet Saran JJ, judgment delivered by Uday Umesh Lalit J) and bears on section 194E, section 115BBA, section 9(1)(i), section 201(1A) of the Income Tax Act 1961. It is reported as AIR 2020 SUPREME COURT 2047; AIRONLINE 2020 SC 496. This is the leading authority on section 194E and on the relationship between a treaty and a withholding obligation. Two propositions come out of it. First, the place from which the money is paid is irrelevant: PILCOM paid from London bank accounts to foreign boards, and the tax still had to be deducted, because the source of the income — matches played in India — was here. Second, and more widely useful, a treaty does not switch off section 194E. The Court kept section 194E apart from the line of cases on section 195, where the words "sum chargeable under the provisions of this Act" limit the obligation to the taxable proportion. Anyone advising on payments to non-resident sportsmen, sports associations or entertainers should start here, and should not assume that treaty relief available to the payee travels back to the payer. If it applies to you, the first step is this: When paying a non-resident sports association or sportsman for an event with an Indian leg, deduct under section 194E first and argue about chargeability afterwards; the treaty is the payee's remedy, not yours.
PILCOM was a committee formed by the cricket boards of Pakistan, India and Sri Lanka to conduct the 1996 World Cup, which the three had won the right to host jointly at an ICC meeting in February 1993. It opened two bank accounts in London, operated jointly by the Indian and Pakistani boards, into which sponsorship and television rights money went and out of which expenses were met. From those accounts PILCOM paid the ICC and the cricket boards of member countries a total of about GBP 43,50,000, which the Commissioner (Appeals) classified into seven heads: guarantee money to 17 non-participating countries, transfers to Pakistan and Sri Lanka for prize money, payments to the ICC, payment for the ICC Trophy qualifying matches held outside India, guarantee money to South Africa and the UAE which played no match in India, guarantee money to five countries with which India has treaties, and guarantee money to four others. The Income Tax Officer (TDS), Calcutta held PILCOM in default under section 201 for not deducting under section 194E, computing the short deduction at about Rs.2.18 crore. Of 37 matches in the tournament, 17 were played in India. The matter was decided on 2020-04-29 by the Supreme Court (Supreme Court of India; Uday Umesh Lalit and Vineet Saran JJ, judgment delivered by Uday Umesh Lalit J). On those facts the Supreme Court held as follows. The appeal was dismissed with no costs, and the two connected special leave petitions filed by the Board of Control for Cricket in Sri Lanka through PILCOM against the consequential assessments were dismissed as well. The payments made to the non-resident sports associations represented their income which accrued or arose, or was deemed to accrue or arise, in India, and PILCOM was liable to deduct tax at source under section 194E. The obligation under section 194E is not affected by a double taxation avoidance agreement; if the payee disputes chargeability it may plead the treaty and, if it makes out its case, the amount will be refunded with interest, but that does not absolve the deductor. The reasoning in G.E. India Technology Centre on the proportion of a composite payment was held inapplicable to the payments at heads (vi) and (vii), the appropriate benefit having already been given.
The connecting factor is the source. Guarantee money was paid to the boards because their teams took part in a tournament of which a substantial part was played in India, so the income had its source here and fell within the deeming provisions, whatever the currency, the bank or the country from which the cheque was drawn. On that footing the Commissioner (Appeals) had already given PILCOM the benefit of apportionment, treating only 45.94 per cent — 17 of the 37 matches — as referable to India, and had deleted the prize money transferred for matches played abroad. The Court then dealt with the authorities pressed on it. Eli Lilly and G.E. India Technology Centre establish that the deduction provisions of Chapter XVII and the charging provisions are one integrated code, so that the section 195 obligation reaches only the appropriate proportion of income chargeable under the Act; but that limitation flows from the words "chargeable under the provisions of the Act" in section 195(1), and the Court held the reasoning inapplicable to the payments in question, the benefit of exclusion having already been extended. Metallurgical and Engineering Consultants was distinguished: there the payment was for on-the-job training abroad, with no connection to India, whereas here the connection is very much evident. Manjoo and Co. was held to have no application. Finally, on the treaties, the Court agreed with the High Court that the section 194E obligation stands independently: the treaty operates on the assessment of the payee, and the remedy for an over-deduction is a refund with interest, not a defence for the payer. In the words reproduced by the source cited on this page: "The obligation to deduct Tax at Source under Section 194E of the Act is not affected by the DTAA."
It was decided by the Supreme Court on 2020-04-29 and is reported as AIR 2020 SUPREME COURT 2047; AIRONLINE 2020 SC 496. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 194E, section 115BBA, section 9(1)(i), section 201(1A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed with no costs, and the two connected special leave petitions filed by the Board of Control for Cricket in Sri Lanka through PILCOM against the consequential assessments were dismissed as well. The payments made to the non-resident sports associations represented their income which accrued or arose, or was deemed to accrue or arise, in India, and PILCOM was liable to deduct tax at source under section 194E. The obligation under section 194E is not affected by a double taxation avoidance agreement; if the payee disputes chargeability it may plead the treaty and, if it makes out its case, the amount will be refunded with interest, but that does not absolve the deductor. The reasoning in G.E. India Technology Centre on the proportion of a composite payment was held inapplicable to the payments at heads (vi) and (vii), the appropriate benefit having already been given. It arises in TDS Defaults matters, on section 194E, section 115BBA, section 9(1)(i), section 201(1A) of the Income Tax Act 1961, and was decided by Supreme Court of India; Uday Umesh Lalit and Vineet Saran JJ, judgment delivered by Uday Umesh Lalit J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not rely on the payment being made abroad from a foreign bank account — the source of the income, not the place of payment, decides. Where an event runs across countries, work out and document the Indian proportion; here the apportionment was the ratio of matches played in India to total matches, 17 of 37. Do not carry the section 195 reasoning in G.E. India Technology Centre across to section 194E; the Court held it does not apply, because section 194E is not qualified by the words "chargeable under the provisions of the Act".
Searched for later treatment; none was found. That is not the same as a source affirming it. A citator search returns 12 later decisions citing the judgment, the most recent a Mumbai Tribunal order of 5 March 2026. It is applied on the section 194E point: the Mumbai Tribunal in Sharangpani Dinkar Pant v International Tax Ward 3(3)(1) (26 February 2024) held that 'The obligation to deduct Tax at Source under Section 194E of the Act is not affected by the DTAA', and in Lloyds Register Asia (India Branch) v DCIT (30 September 2021) applied it as the Supreme Court's statement on section 194E; the Delhi High Court cites it in Zscaler Inc v DCIT (23 December 2025) and the Karnataka High Court in DIT v M/s Sasken Communication Technologies (10 June 2020). Nothing overruling or doubting it was found, but its reach is confined: see the adverse entry. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is clipped: about 8,848 characters from the middle are missing, which carried the text of sections 115BBA and 194E and the first part of the Court's analysis. The facts, the classification of the seven heads of payment, the treatment of the authorities, the treaty point and the operative order are all present. The source page reproduces the Tribunal's order with evident transcription errors in the section numbers — "Sec. 20(I)/194E", "Sec. 291(1A)" and "Sec.201(I)/194B" plainly stand for sections 201(1), 194E and 201(1A) — so those references have been given above in their corrected form and should be checked against the official text. The Court did not disturb the apportionment of 45.94 per cent, but neither did it discuss the basis of that apportionment, so its status as a general method is not settled by this judgment. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed with no costs, and the two connected special leave petitions filed by the Board of Control for Cricket in Sri Lanka through PILCOM against the consequential assessments were dismissed as well. The payments made to the non-resident sports associations represented their income which accrued or arose, or was deemed to accrue or arise, in India, and PILCOM was liable to deduct tax at source under section 194E. The obligation under section 194E is not affected by a double taxation avoidance agreement; if the payee disputes chargeability it may plead the treaty and, if it makes out its case, the amount will be refunded with interest, but that does not absolve the deductor. The reasoning in G.E. India Technology Centre on the proportion of a composite payment was held inapplicable to the payments at heads (vi) and (vii), the appropriate benefit having already been given.
TaxSphere, “PILCOM v CIT”, https://taxnotice.vittsphere.com/caselaw/case/pilcom-v-cit/ (validity last checked 2026-08-29)
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We paid foreign umpires and match referees for a cricket tournament and did not withhold. The department has treated us as in default under s.194E. Are umpires within that section?
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