What the courts have decided on section 194E, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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PILCOM v CIT
Supreme CourtHelps departmentNo later treatment found
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.
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Indcom v Commissioner of Income-Tax (TDS)
High CourtCuts both ways
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?
They are not. The Calcutta High Court held that umpires and match referees are neither sportsmen (including athletes) nor a non-resident sports association or institution, so s.115BBA does not reach their income and the liability to deduct under s.194E never accrued on payments to them. On the other half of the case the assessee lost: the double taxation avoidance agreements relied on did not exclude the operation of s.115BBA or s.194E, so the duty to deduct on payments of prize money and administrative expenses to the foreign teams stood.
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Statutory position — s.194E with s.115BBA: withholding on payments to a non-resident sportsman, sports association or entertainer
CBDT Circulars & InstructionsCuts both ways
We are paying a foreign player, a foreign federation and a foreign performer for an event in India. Who is caught by s.194E, at what rate, and does the treaty stop the deduction?
Section 194E as printed on the live departmental page requires the payer to deduct twenty per cent where any income referred to in s.115BBA is payable to a non-resident sportsman (including an athlete) who is not a citizen of India, to an entertainer who is not a citizen of India, or to a non-resident sports association or institution — at credit or payment, whichever is earlier. The section is entirely parasitic on s.115BBA: if the income is not income referred to in that section, there is no s.194E duty at all, which is how payments to umpires and match referees were held to fall outside it.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
