The Central Board of Direct Taxes has examined the taxation issues concerning National or International events or shows for entertainment, sports etc. Such shows are often characterized by substantial incomes being earned by organizers, sponsors, players, athletes and artists during very short periods of time. In many cases the performers leave the country within a few hours of the show or event. The events or shows normally involve an event manager, artists management or intermediate company. The receipts may be of the following nature :-

Sponsorship money
Gate money
Advertisement revenue
Sale of broadcasting or telecasting rights
Rent from hiring out of space
Rents from caterers

In turn the event manager etc. may inter alia incur expenditure on guarantee money, prize money, rental for premises or equipment, payments to labour contractor, for decoration, salaries, royalties, fees for echnical services, insurance premium for the event etc.

Such receipts and payments may be liable to deduction of tax at source under various provisions of the Income-tax Act, 1961. In the case of residents the applicability of the provisions of Sections 194-C, 194-J and 194-I and in addition in the case of non-residents, the applicability of Section 194-E and Section 195 should be examined.

In the case of non-residents, in addition to the provisions of the Income-tax Act, 1961, the applicability of Double Taxation Avoidance Agreement (DTAA) should be examined. The Income-tax Act, 1961, provides that in case of sportsmen or artists participating in such events or shows, all income accruing or arising or deemed to be accruing or arising, received or deemed to be received in India is taxable in India.

Under the DTAAs, usually there is a separate Article on "Artistes and Sportsmen", which provides for taxation in India of the income from the personal activities of the sportsman or artist in India. Even where the income from personal activities accrues to another person and not directly to the artist or sportsman, it is still taxable in India in accordance with this Article in the DTAAs. The advertising or sponsorship income etc., of the sportsman or artist, which is related directly or indirectly to performance or appearance in India would also be covered under the said DTAA Article on "Artists and Sportsmen". Where, under the same contract or under a separate one, the performance is recorded and royalties are stipulated to be paid, the same would be covered under the Article on "Royalties" in the DTAA.

The income earned by non-resident sportsmen, who are not citizens of India or the income earned by non-resident sports associations or institutions is required to be determined in accordance with the provisions of section 115BBA of the Income-tax Act, 1961. In the case of sportsmen, this would include income by way of participation in India in any game or sport, from advertisement or contribution to any newspapers, magazines or journals of any articles relating to sport or game in India. The tax should be deducted at source under section 194 E from such payments. The provisions of section 115 BBA would be applicable to the guarantee money receivable by the non-resident sport associations needs to be considered in terms of the Article on "Other Income" or on "Income not expressly mentioned" of the relevant DTAA.

The position of taxation of such guarantee money under this Article in some of the DTAAs is as under :-

U.K. Taxable in India, as per Article 23.3.
USA Taxable in India, as per Article 23.3.
Japan Taxable in India, as per Article 22.3.
Australia Taxable in India, as per Article XXII(2)
New Zealand Taxable in India, as per Article 22
Sri Lanka Taxable where the sports association/institution is resident, as per Article 22.
France Taxable in India, as per Article 23.3.

Similarly, in the case of other countries, the Article on "Other Income" etc., in the relevant DTA. as would be applicable. In cases where such guarantee money is taxable in India under the DTAA, income would be determined in accordance with section 115 BBA of the I T Act and the tax deducted at source under section 194 E of the I T Act.

In connection with the taxability of income of the non-resident artist or performer in India, the facts & circumstances of each event need to be considered. A few situations are illustrated below :

1.If an artist performs in India gratuitously without any consideration, there would be no income and consequently no tax;

2.Where the artist performs in India to promote sale of his records and no consideration is paid for this performance by the record company or anyone else; there will be no tax as he does not receive any income for performance in India;

3.Any consideration received by artist or performer for the live performance or simultaneous live telecast or broadcast (on radio, television, internet etc.) In India would qualify as income and consequently should be taxable. Even if separate consideration is received for simultaneous live telecast etc. Of performance, the same shall be taxable in India and is to be treated under the Article on "Artistes and Sportsmen" in the DTAA;

4.The consideration paid to the artist to acquire the copyrights of performance in India for subsequent sale abroad (of records, CDs etc.) Or the consideration paid to the artist for acquiring the license for broadcast or telecast overseas is not taxable in India due to exclusions provided in section 9(1)(vi) of the Income-tax Act;

5.The consideration paid to the artist to acquire the copyrights of performance in India for subsequent sale in India (as records, CDs etc.) Or the consideration paid to the artist for acquiring the license for broadcast or telecast in India is taxable in India as per section 9(1)(vi) of the Income-tax Act as royalties. Under the DTAA also, this would fall under the "Royalties" Article;

6.The portion of endorsement fees (for launch or promotion of products etc.), which relates to artist's performance in India shall be taxable in India in accordance with the provisions of section 5 of the Income-tax Act. Under the DTAA, this would fall under the Article on "Artists and Sportsmen".

In view of above, the contracts of the artists or performers with event managers, sponsors etc., are of vital importance in deciding the taxability of their income in India. It It is therefore necessary to obtain and examine the contracts of the artists or performers relating to the event. The apportionment of income attributable to India would have to be done by the Assessing Officer. The situations cited above are for the purpose of illustration and do not cover all possible cases.