INCOME TAX ACT, 1961

Section 9(1)(vi)

Income deemed to accrual or arise in India - Under section 9(1)(vi) - Royalty - Money received for rights to telecast live feeds

Assessee, based at Singapore, entered into a tripartite agreement (Novation Agreement) with ESS Singapore (ESS) and Star India (P) Ltd. (SIPL by way of various existing agreements, which included agreement for distribution of channels, advertisement sales, various licence agreements, etc., between SIPL and ESS, which were novated to assessee. It received licence fee from SIPL under the MRA. AO required assessee to explain as to why out of total license fee, only some lesser amount had been offered to tax as 'royalty'. Assessee submitted that it had received gross consideration amounting to Rs. 1181 crores under MRA on account of sub-licensing of sports broadcasting rights in relation to 'Live' as well as 'Non-Live' Feeds to SIPL only income arising from sub-licensing of 'Non-Live' feeds was taxable as 'royalty' under provisions of Act as well as under Article 12 of India-Singapore DTAA. With respect to the remaining amount of Rs. 1115 crores, it was in relation to 'Live' feeds for which assessee's explanation was that consideration received on account of 'Live' feeds was not liable for tax in India, because it neither falls within the ambit of 'royalty' as defined under the Act nor under the tax treaty. Held: Right had been granted by the assessee to SIPL which was mere a transfer of live feed of events through satellite, the entire transmission otherwise was done by SIPL. In fact, neither there was a recording by way of cinematographic film nor by way of sound recording was involved in live broadcast, Further there was no artistic work which was being created when the events were captured on cameras for the live transmission because the right granted by assessee was only to broadcast the event. Further; no film or tape/CDs/or any right therein has been given by assessee to SIPL for live broadcast of events. The nature of right acquired was purely in respect of live feeds (in so far as 95% of licence fee/commercial right fee was concerned). Further, live feed was ephemeral in nature that it did not have any lasting time as it was not a film which could constitute a 'work' in which a copyright could be given. A live feed (transmission) cannot constitute a 'work' in which copyright can subsist. There cannot be copyright on broadcast covering live events of sports. Here the 95% fee was for live transmission which was ephemeral and not for any recording of any event, visual or sound. Live broadcasting of sporting events did not emanate from any pre-recording of images or sound, so there could not be any 'work' which comes into existence in a live feed or event and hence no right to use can be transferred. Recording for re-telccast or replays was not part of this live transmission fees nor any such event of commentary, etc., as assessee had not granted any such licence to conduct such activity, at least nothing is borne out that live transmission fees consist of such activity also. There was no copyright on live events, and therefore, fee received towards live transmission could not be taxed as 'royalty' in terms of section 9(1)(vi).

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