ADIT vs. Neo Sports Broadcast Pvt Ltd (ITAT Mumbai)
S. 9: Payment for "live telecast" of event is not "royalty" nor arising from
"business connection"
The assessee entered into an agreement with Nimbus, a Singapore entity, for
receiving and broadcasting matches that were to be played in Bangladesh. The
signals to be broadcast were on account of live matches as well as recorded
matches. The assessee applied for a certificate u/s 195 in which it accepted
that the payment on account of recorded matches was in the nature of "royalty"
but claimed that the payment towards live matches was not "royalty". The AO held
that there was no distinction between the payment for live matches and that for
recorded matches and both were assessable as "royalty". He also held that as the
matches were to be broadcast in Indian Territory and the income by way of
advertisements and subscription was to be received by the assessee, there was a
"business connection" between Nimbus and receipt in India. On appeal, the CIT
(A) upheld the AO's finding on "business connection" though he reversed the
finding that the payment for live matches was "royalty". On further appeal, HELD
deciding both issues in favour of the assessee:
(i) Expl 2 to 9(1)(vi) defines "royalty" to mean consideration for "(v) the
transfer of all or any rights in respect of any copyright." Under the Copyright
Act, the term "copyright" means the exclusive right to use the "work" in the
nature of cinematography. The question of granting exclusive right to do any
work can arise only when such "work" has come into existence. The existence of
"work" is a precondition and must precede the granting of exclusive right for
doing of such work. Unless the work itself is created, there is no question of a
copyright of such work. The result is that there is no copyright in live events
and depicting the same does not infringe any copyright. Accordingly, the amount
paid for broadcast of live matches is not assessable as "royalty" (clause 314
(220) of the Direct Tax Code Bill, 2010 referred to which proposes to define
"royalty" to include "live coverage of any event");
(ii) The department's argument that because the matches will be broadcast in
India and the assessee will earn advertisement & subscription income, Nimbus has
a "business connection" in India is not correct because Nimbus has merely given
a license for the live broadcast of the matches and continues to retain the
rights in such broadcast. The mere act of allowing the assessee broadcast the
matches for consideration does not constitute a "business connection" in India.
In order to constitute a "business connection", it is necessary that some sort
of business activity must be done by the non-resident in the taxable territory
of India (CIT vs. R.D. Agarwal 56 ITR 20 (SC) referred).
For more on "Royalty" see Royalties and Fees for Technical Services in
International Trade. For more on "business connection" see ADIT vs. Star Cruise
India Travel Services (ITAT Mumbai)
Related Judgements
ADIT vs. TII Team Telecom International Pvt Ltd (ITAT Mumbai) Under Article 12
(3) of the India-Israel DTAA, royalty is defined inter alia to mean payments for
the "use of" a "copyright" or a "process". There is a distinction between "use
of copyright" and "use of a copyrighted article". In order to constitute "use of
a copyright", the…
Kansai Nerolac Paints vs. ADIT (ITAT Mumbai) The effect of the judgements in
Tata Consultancy Services vs. State of AP 271 ITR 401 (SC), Samsung Electronics
Co 94 ITD 91 (Bang), Motorola Inc 95 ITD 269 (SB) & Dassault Systems 229 CTR 105
(AAR) is that the primary condition for coming within the definition of
`royalty'…
DDIT vs. SET Satellite (Singapore) (ITAT Mumbai) Assuming the payment for
obtaining cricket telecast rights is "royalty", under the first limb of Article
12(7) of the DTAA, royalties can be said to have arisen in India only if the
payer is a resident of India. This condition is not fulfilled as the assessee
was a non-resident….
S. 9: Payment for "live telecast" of event is not "royalty" nor arising from
"business connection"
The assessee entered into an agreement with Nimbus, a Singapore entity, for
receiving and broadcasting matches that were to be played in Bangladesh. The
signals to be broadcast were on account of live matches as well as recorded
matches. The assessee applied for a certificate u/s 195 in which it accepted
that the payment on account of recorded matches was in the nature of "royalty"
but claimed that the payment towards live matches was not "royalty". The AO held
that there was no distinction between the payment for live matches and that for
recorded matches and both were assessable as "royalty". He also held that as the
matches were to be broadcast in Indian Territory and the income by way of
advertisements and subscription was to be received by the assessee, there was a
"business connection" between Nimbus and receipt in India. On appeal, the CIT
(A) upheld the AO's finding on "business connection" though he reversed the
finding that the payment for live matches was "royalty". On further appeal, HELD
deciding both issues in favour of the assessee:
(i) Expl 2 to 9(1)(vi) defines "royalty" to mean consideration for "(v) the
transfer of all or any rights in respect of any copyright." Under the Copyright
Act, the term "copyright" means the exclusive right to use the "work" in the
nature of cinematography. The question of granting exclusive right to do any
work can arise only when such "work" has come into existence. The existence of
"work" is a precondition and must precede the granting of exclusive right for
doing of such work. Unless the work itself is created, there is no question of a
copyright of such work. The result is that there is no copyright in live events
and depicting the same does not infringe any copyright. Accordingly, the amount
paid for broadcast of live matches is not assessable as "royalty" (clause 314
(220) of the Direct Tax Code Bill, 2010 referred to which proposes to define
"royalty" to include "live coverage of any event");
(ii) The department's argument that because the matches will be broadcast in
India and the assessee will earn advertisement & subscription income, Nimbus has
a "business connection" in India is not correct because Nimbus has merely given
a license for the live broadcast of the matches and continues to retain the
rights in such broadcast. The mere act of allowing the assessee broadcast the
matches for consideration does not constitute a "business connection" in India.
In order to constitute a "business connection", it is necessary that some sort
of business activity must be done by the non-resident in the taxable territory
of India (CIT vs. R.D. Agarwal 56 ITR 20 (SC) referred).
For more on "Royalty" see Royalties and Fees for Technical Services in
International Trade. For more on "business connection" see ADIT vs. Star Cruise
India Travel Services (ITAT Mumbai)
Related Judgements
ADIT vs. TII Team Telecom International Pvt Ltd (ITAT Mumbai) Under Article 12
(3) of the India-Israel DTAA, royalty is defined inter alia to mean payments for
the "use of" a "copyright" or a "process". There is a distinction between "use
of copyright" and "use of a copyrighted article". In order to constitute "use of
a copyright", the…
Kansai Nerolac Paints vs. ADIT (ITAT Mumbai) The effect of the judgements in
Tata Consultancy Services vs. State of AP 271 ITR 401 (SC), Samsung Electronics
Co 94 ITD 91 (Bang), Motorola Inc 95 ITD 269 (SB) & Dassault Systems 229 CTR 105
(AAR) is that the primary condition for coming within the definition of
`royalty'…
DDIT vs. SET Satellite (Singapore) (ITAT Mumbai) Assuming the payment for
obtaining cricket telecast rights is "royalty", under the first limb of Article
12(7) of the DTAA, royalties can be said to have arisen in India only if the
payer is a resident of India. This condition is not fulfilled as the assessee
was a non-resident….
No comments:
Post a Comment