IMG MEDIA LTD, MUMBAI V. DDIT (IT) 3(1), MUMBAI

ITA 1513/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100856 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 04-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Double taxation relief; Permanent establishment
• Section: 143(3); 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I .T.A.NO. 1513/ MUM/20 14 ( / ASSESSMENT YEAR : 2010 - 11) IMG MEDIA LIMITED, 608, 1,B/2 SAI PRASAD CO.HSG, SOCIETY, WESTERN EXPRESSWAY , HIGHWAY ROAD, MUMBAI - 400051 / VS. DY. DI R ECTOR OF INCOME TAX (INTERNATIONAL TAXATION) - 3 ( 1 ), 1 36 , 1 ST FLOOR, SCINDIA HOUSE, N.M.ROAD, BALLARD PIER, MUMBAI - 400038 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AACCI4811L / APPELLANT BY S/SHRI RAVI SHARMA, RAHUL GUPTA AND MUDIT SHARMA / RSPONDENT BY SMT. VANDANA SALTAR / DATE OF HEARING : 0 2.6. 201 5 / DATE OF PRONOUNCEMENT : 26 . 8. 201 5 / O R D E R PER B.R. BASKARAN (AM) THE A SSESSEE HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER DATED 10.1.2014 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (THE ACT) IN CONFORMITY WITH THE DIRECTION ISSUED BY THE DISPUTE RES OLUTION PANEL (DRP) . THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. DRP/AO IN HOLDING THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM BOARD OF CONTROL OF CRICKET IN INDIA (BCCI) IS ASSESSABLE TO TAX AS F EE FOR TECHNICAL SERVICES AND ALTERNATIVELY AS R OYALTY ALSO. ITA NO. 1513 / MUM/20 1 4 2 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A COMPANY INCORPORATED IN UNITED KINGDOM ( UK), HENCE A TAX RESIDENT OF UK IN TERMS OF ARTICLE 4 OF THE INDIA UK DOUBLE TAXATION AVOIDANCE AGRE EMENT (DTAA). THE ASSESSE E HAS FURNISHED A COPY OF TAX RESIDENCY CERTIFICATE ALSO BEFORE THE AO IN SUPPORT OF THE SAME. THE ASSESSEE IS A WORLD LEADER IN THE FIELD OF MULTIMEDIA COVERAGE OF SPORTS EVENTS INCLUDING CRICKET . THE BCCI ENGAGED THE ASSESSEE FOR CAPTURING AND DELIVERI NG LIVE AUDIO AND VISUAL COVERAGE OF CRICKET MATCHES CONDUCTED UNDER THE BRAND NAME IPL, 2008 AND ALSO IPL, 2009. THE TAXABILITY OF THE AMOUNT RECEIVED BY THE ASSESSEE FROM BCCI IS THE ISSUE URGED BEFORE US. THE FACTS RELATING TO THE CASE ARE DESCRIBED A S UNDER BY LD CIT(A): - 3. IT HAS FURTHER BEEN SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE AND THE BOARD OF CONTROL FOR CRICKET IN INDIA ('BCCI') HAD ENTERED INTO AN AGREEMENT FOR CAPTURING AND DELIVERING OF THE LIVE AUDIO AND VISUAL COVERAGE OF THE FIRST IN DIAN PREMIER LEAG UE IPL 2 008 EVENT WHICH WAS CONDUCTED IN INDIA DURING APRIL 18, 2008 JUNE 01, 2008. THEREAFTER, THE ASSESSEE ALSO ENTERED INTO ANOTHER AGREEMENT DATED APRIL 15 , 2009 WITH BCCI FOR THE LIVE AUDIO AND VISUAL COVERAGE OF THE MATCHES FOR THE SECOND IPL 2009 EVENT. THE ASSESSEE FURTHER SUBMITTED THAT FOR IPL 2008 EVENT, FEW PERSONNEL OF THE ASSESSEE HAD VISITED INDIA FOR THE LIVE COVERAGE OF THE MATCHES AND ALSO FOR THE PURPOSES OF RECCE/ INSPECTION ACTIVITIES BEFORE THE COMMENCEMENT OF THE EVENT IPL 2009 EVENT WAS INITIALLY SUPPOSED TO BE HELD IN INDIA; ACCORDINGLY COUPLE OF PERSONNEL OF THE ASSESSEE WAS PRESENT IN FEBRUARY/MARCH 2009 FOR THE PURPOSE OF RECCE / INSPECTION ACTIVITIES BEFORE THE COMMENCEMENT OF MATCHES OF IPL 2009. HOWEVER, THE SECOND IPL 2009 EVENT COINCIDED WITH INDIAN ELECTIONS AND THEREFORE, THE INDIAN GOVERNMENT REFUSED TO COMMIT SECURITY BY INDIAN PARAMILITARY FORCES. AS A RESULT, BCCI DECIDED TO HOST THE SECOND SEASON OF T HE LEAGUE OUTSIDE INDIA. ON 24 MARCH 2009, T HE BCCI OFFICIALLY ANNOUNCED THAT THE SECOND SEASON OF THE IPL WILL BE HELD IN SOUTH AFRICA . IT WAS ALSO ARGUED BY THE ASSESSEE THAT SINCE, THE CUMULATIVE PERIOD OF STAY OF THE ASSESSEE'S PERSONNEL IN INDIA EXCEEDED THE THRESHOLD LIMIT OF 90 DAYS IN TH E 12 MONTH PERIOD, BEGINNING FROM MARCH 22, 2008 TO MARCH 21, 2009, A SERVICE PERMANENT ESTABLISHMENT ('PE'') OF THE ASSESSEE WAS CONSTITUTED IN INDIA UNDER ARTICLE 5(2)(K) OF 'INDIA - UK DTAA AND THE INCOME ATTRIBUTABLE WAS ITA NO. 1513 / MUM/20 1 4 3 COMPUTED ON THE BASIS OF TRAN SACTI ONAL NET MARGIN METHOD ('TNMM') PRESCRIBED UNDER THE INDIAN TRANSFER PRICING REGULATIONS. THE ASSESSEE FURTHER SUBMITTED THE SUMMARY OF RETURNED INCOME AND PROPOSED ADDITION MADE BY THE AO AS UNDER : RETURNED INCOME - RS.(I NR) 18,57,748/ - (TAXABLE @42.23%) INCOME AS PER DRAFT ASSESSMENT ORDER BY HOLDING THE SAME AS FTS OR ALTERNATIVELY ROYALTY - RS.(INR) 20,23,11,392/ - (TAXABLE @10.5575%) ACCORDING TO THE ASSESSEE, I T HAS CARRIED OUT ITS BUSINESS ACTIVITIES IN CONNECTION WITH THE CAPTURE AND DELIVERY OF LIVE AUDIO & VISUAL COVERAGE OF IPL 2008 AND IPL 2009 MATCHES. ACCORDINGLY, THE ASSESSEE HAS CONTENDED THAT THERE EXISTED A SERVICE PE AND INCOME ATTRIBUTABLE TO THE INDIAN OPERATIONS WAS COMPUTED UNDER TNMM METHOD. HOWEVER, THE ASSESSING OFFICER HAS TAKEN THE VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND ALSO IN THE NATURE OF ROYA L TY AND ACCORDINGLY ASSESSED THE ENTIRE AMOUNT OF GROSS RECEIPTS. 3. THE LD DISPUTE RESOLUTION PANEL (DRP) HELD THAT THE CONCEPT OF SERVICE PE DOES NOT HAVE APPLICATION, ONCE IT IS HELD THAT THE GROSS RECEIPTS ARE TAXABLE AS FEE FOR TECHNICAL SERVICES OR AS ROYALTY. HENCE THE LD DRP PROC EEDED TO EXAMINE THE NATURE OF A MOUNT RECEIVED BY THE ASSESSEE FROM BCCI. THE RELEVANT DISCUSSIONS MADE BY LD DRP IN ORDER TO HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS IN THE NATURE OF FEE FOR TECHNICAL SERVICES ARE EXTRACTED BELOW: - 5.4.1 FOR CLARITY SAKE, ARTICLE 13(4)(C) OF THE DTAA IS REPRODUCED AS UNDER: 4. FOR THE PURPOSE OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5 OF THE ARTICLE, THE TERMS FEES FOR TECHNICAL SERVICES MEANS PAYMENTS OF ANY KIND OF ANY PERSON ITA NO. 1513 / MUM/20 1 4 4 IN CONSIDERATION FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) WHICH : A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, P ROPERTY OR INFORMATION F OR ' WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED: OR B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH A PAYM ENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR C) MAKE AVAILABLE TECHNICAL KN OWLEDGE, EXPERIENCE, SKILL KNOW HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN THUS THE ASSESSEE IS CLAIMING THAT HIS CASE IS COVERED BY THE MAKE AVAILABLE CLAUSE OF FTS AND HENCE WONT BE TAXABLE. IN THIS BACKGROUND, LET US EXAMINE THE FACT OF THIS CASE TO SEE IF THE ASSESSEES CASE FALLS UNDER THE RESTRICTIVE DEFINITION OF FTS OR NOT? 5.4.2 THE RELEVANT CLAUSES OF THE AGREEMENT ENTERED INTO ON 15 TH APRIL, 2009 FOR IPL 2009 ARE REPRODUCED AS UNDER : BCCI H A S COMMISSIONED IMG TO PRODUCE AND IMG HAS AGREED TO PRODUCE AND DELIVER THE WORLD FEED OF THE LIVE AUDIO - VISUAL COVERAGE OF THE MATCHES IN THE INDIAN PREMIER LEAGUE (IPL) 2009 SEASON SCHEDULED FROM 18 TH APRIL TO 24TH MAY 2009 AND TO PROV ID E CERT AIN OTHER PRODUCTION SERVICES IN RESPECT OF THE IPL 2009 SEASON ON THE TERMS AND CONDITIONS AS SET OUT HEREIN. THE PARTIES HEREBY AGREE AS FOLLOWS: 1. ENGAGEMENT 1.1 THE BCCI HEREBY ENGAGES IMG TO PRO VI DE THE SERVICES SET OUT BELOW AND, IN CONSIDERATION FOR PAYMENT BY THE BCCI OF THE COSTS OF PROVIDING THOSE SERVICES IN ACCORDANCE WITH CLAUSE 3 BELOW, IMG ACCEPTS SUCH ENGAGEMENT: A) PRODUCTION AND PROVISION TO THE LICENSEES (MEANING MSM SATELLITE (SINGAPORE) PTE LTD, WORLD SPORT GROUP (MAURITIUS) LIMI TED AND LIVE CURRENT MEDIA INC. ) OF THE HIGH DEFINITION WORLD FEED OF THE LIVE AUDIO - VISUAL COVERAGE (THE FEED) FOR ITA NO. 1513 / MUM/20 1 4 5 (I) ALL MATCHES IN THE IPL SEASON 2009 AS SET OUT IN SCHEDULE 1 (THE 'EVENT' AND EACH MATCH SHALL BE REFERRED TO AS A 'MATCH') IN A CCORDANCE WITH THE SPECIFICATION SET OUT AT SCHEDULE 2 HERETO; AND (II) THE OPENING AND CLOSING CEREMONY FOR THE IPL SEASON 2009, AS PER THE 2008 PRODUCTION BRIEF UNLESS OTHERWISE AGREED; AND (B) PRODUCTION LIAISON AND ADMINISTRATION OF ARRANGEMENTS W ITH THE LICENSEES FOR THE EVENT AS SET OUT AT SCHEDULE 3 HERETO 1.2 IMG WILL NOT PRODUCE ANY FEED OF THE MATCHES OTHER THAN THE FEED PRODUCED FOR BCCI HEREUNDER. 1.3 IMG SHALL BE RESPONSIBLE FOR ENSURING THAT EQUIPMENT THAT IT INTRODUCE INTO THE MAT CH VENUES COMPLIES WITH INTERNATIONAL STANDARDS OF HEALTH AND SAFETY, IT BEING ACKNOWLEDGED AND AGREED THAT IMG SHALL NOT BE RESPONSIBLE FOR THE COMPLIANCE OF THE MATCH VENUES AND THEIR INFRASTRUCTURE WITH SUCH INTERNATIONAL STANDARDS OF HEALTH AND SAFETY . 6. PRODUCER CREDIT BCCI AGREES THAT ON EACH OCCASION THAT THE COVERAGE OF THE IPL IS BROADCAST, THERE SHALL APPEAR AT THE END OF EACH SUCH BROADC A ST, A CREDIT STATING PRODUCED BY IMG SPORTS MEDIA, OR SUCH OTHER CREDIT AGREED BETWEEN THE BCCI AND IMG. 7. DELIVERY THE FEED WILL BE MADE AVAILABLE BY IMG IN THE PRODUCTION CONTROL ROOM OR EQUIVALENT FACILITY OF THE MATCH VENUES SCHEDULE - 3 1. IMG SHALL MAKE AVAILABLE THE FEED TO THE LICENSEES AT THE PRODUCTION CONTROL ROOM OR EQUIVALENT FACILITY OF THE VENUE OF THE RELEVANT MATCH AT NO COST TO THE LICENSEES. 1. IMG SHALL LIAISE WITH THE LICENSEES PRIOR TO THE EVENT AND ON A DAILY BASIS DURING THE EVENT AS REQUIRED, INCLUDING PROVIDING PERSONNEL (INCLUDING A PRODUCTION MANAGER) FOR DAILY MEETINGS WITH THE LICENSEES AS REQUIRED. 3. THE LICENSEES WILL, SUBJECT TO SPACE AND THE FACILITIES AT THE RELEVANT VENUE AND SUBJECT TO LICENSEE GIVING IMG AND/OR BCCI REASONABLE NOTICE, HAVE A RIGHT TO REQUEST ON - SITE FACILITIES, AND SUBJECT IMG SHALL COORDINATE AND ADMINISTER ALL SUCH REQUESTS, ITA NO. 1513 / MUM/20 1 4 6 RATE CARD FOR ALL SUCH ADDITIONAL FACILITIES AND PRODUCTION SERVICES AS REQUIRED. (SCHEDULE 2 IS NOT BEING PRODUCED FOR THE SAKE OF BREVITY AS SOME PART HAS BEEN QUOTED BY THE AO IN HIS ORDER.) 5.4.3 WE FIND FROM A PLAIN R EADING THE AGREEMENT THAT THE ASSESSEE IS A WORLD LEADER IN THE FIELD OF MULTIMEDIA COVERAGE OF SPORTS EVENTS, INCLUDING CRICKET. THE BRIEF FACTS OF THE CASE AS EXPLAINED BY THE ASSESSEE ARE THAT BCCI HAS ENGAGED IMG MEDIA TO CAPTURE THE LIVE AUD IO AND VIDEO COVERAGE OF IPL EVENT. FOR THE PURPOSE OF CAPTURING THE IPL EVENT, PERSONAL OF IMG MEDIA WOULD BE BASED AT THE GROUNDS WHERE MATCHES ARE PLAYED CAPTURING THE AUDIO AND VIDEO FEEDS USING DIFFERENT CAMERAS AND AUDIO EQUIPMENT LOCATED AT DIFFEREN T PLACES IN THE STADIUM AND SEVERA L P ERSONNEL WOULD BE BASED IN THE TEMPORARY CONTROL ROOM LOCATED IN OR AROUND THE STADIUM . THE PERSONNEL BASED IN THE TEMPORARY CONTROL ROOM ARE CONNECTED TO THE PERSONNEL BASED IN THE STADIUM WHO WOULD CAPTURE THE EVENT U SING CAMERAS AND MICROPHONES I.E. EQUIPMENT WHICH IS PROVIDED BY BCC I. THE PERSONNEL IN CONTROL ROOM ARE ALSO CONNECTED TO THE COMMENTATORS WHO ARE HIRED BY THE ASSE S SEE ITSELF. TYPICALLY AROUND 50 PERSONNEL ARE REQUIRED FOR THE LIVE AUDIO AN D VIDEO COVERA GE OF A CRICKET MATCH . THE PERSONNEL BASED IN THE TEMPORARY CONTROL ROOM SELECT THE AUDIO AND VIDEO IMAGES OF THE STADIUM AND COMMENTATORS AND MIX THEM USING TECHNICAL DESK CLAIMED TO BE (STANDARD EQUIPMENT) AND THEREAFTER CONVERT THE SAME INTO THE STAND ARD DIGITALIZED SIGNALS AND DELIVER THE SAME TO BCCI FOR THE PURPOSE OF TELECASTING AND BROADCASTING. THIS COMPLETES THE SERVICE BY IMG. THE MOST IMPORTANT PART IN THIS SERVICE IS THE PART REGARDING SELECTION OF THE AUDIO AND VIDEO IMAGES WHICH ARE CAPTU RED LIVE AND MIXING OF THESE IMAGES. A RECORDED COPY OF THE LIVE AUDIO AND VIDEO COVERAGE IS ALSO TO BE GIVEN TO BCCI PRODUCTION IS DONE BY IMG MEDIA ON BEHALF OF BCCI . BCCI HIRES IMG OR OTHER COMPETITIVE COMPANIES TO CAPTURE THE EVENT AND DOES NOT DO THE SAME ON THEIR OWN. FOR THE PURPOSE OF THE LIVE AUDIO AND VIDEO COVERAGE OF THE MATCH, IMG GIVES CERTAIN SPECIFICATIONS OF EQUIPMENTS TO BCCI WHICH IS REQUIRED FOR QUALITY AUDIO AND VIDEO COVERAGE OF THE EVENT. SUCH SPECIFICATIONS TYPICALLY INCLUDE: (I) A NU MBER OF CAMERAS REQUIRED AROUND TH E STADIUM F OR QUALITY COVERAGE (II) THE PLACEMENT OF CAMERAS AND MICRO PHONES I N AND AROUND THE ITA NO. 1513 / MUM/20 1 4 7 STADIUM ( III ) RECOMMENDATION REGARDING NEW TECHNOLOGY S UCH AS HAWK EYE (IV ) RECOMMENDATION FOR SCORING GRAPHICS (V) RECOMMEN D A TION FOR HIRING COMMENTATORS IF IMG GIVEN RECOMMENDATION ONLY WHY HAVE YOU SAID BEFORE THAT COMMENTATORS ARE HIRED BY IMG (SIC.) . (VI) RECOMMENDATION FOR HIRING EQUIPMENT SUPPLIERS IT IS FURTHER SEEN THAT THE SPECIFICATION ARE MENTIO NED IN THE AGREEMENT , WHEREAS SOME ARE DISCUSSED WITH BCCI ORALLY. THESE SPECIFICATIONS ARE AGREED BY BCCI. THE OUTPUT OF THE SERVICES I.E. FINAL LIVE AUDIO AND VIDEO COVERAGE IS CONVERTED INTO A DIGITALIZED SIGNAL AND THE SAME IS GIVEN TO BCCI FOR THE P URPOSE OF TELECASTING AND BROADCASTING. THE SERVICES RENDERED BY THE ASSESSEE IS TO DELIVER PROGRAMMED CONTENT I.E. THE MIX OF LIVE AUDIO AND VIDEO COVERAGE WHICH CAN BE USED FREELY IN ANY MANNER WHATSOEVER FOR ITS PURPOSES. THE PRODUCTION AGREE ME NT FOR IPL HAS BEEN PERUSED, SPECIFICALLY , THE SERVICES TO BE PROVIDE BY IMG. THE CHIEF ENGAGEMENT OF IMG IS FOR PRODUCTION AND PROVISIONS OF IMPROVED CONTENTS TO THE LICENSEES I.E. BROADCASTERS, IN THIS CASE, VIZ MSM SATELLIE SINGAPORE PTE LTD, WORLD SPORT G ROUP (M) LTD AND LIVE CURRENT MEDIA MATCHES AND PRODUCTION L I AISONING AND ADMINISTRATION OF ARRANGEMENT S WITH THE LICENSEES FOR THE EVENT AS SET OUT IN SCHEDULE 3 (SERVICES). THESE ARE PARTIES IN AGREEMENT WITH BCCI FOR BROADCASTING. FURTHER, A LOOK A T SCHEDULE 2 OF THE SAID AGREEMENT SHOWS THE MINIMUM FEED TECHNICAL SPECIFICATION AND REQUIREMENTS. THERE ARE EXHAUSTIVE LISTS OF QUALITY OF SPECIFICATION OF VIDEO SIGNAL, WHICH SHALL, AT THE LEAST, MATCH THE INTERNATIONAL BROADCASTING STANDARDS. THE DETA ILS AND THE FINER ASPECTS OF CAPTURE OF VIDEO SIGNAL IS SO CONSPICUOUSLY LAID DOWN THAT THERE NEEDS TO BE A TOTAL EXCHANGE OF TECHNICAL PLANS AND DESIGNS BETWEEN THE IMG AND THE BROADCASTERS . IT IS NATURAL TO THE EXTENT THAT WITHOUT SATISFYING THE REQUIR EMENTS OF THE BROADCASTERS , THE PRODUCTION OF AUDIO VIDEO SIGNAL BY IMG IS OF NO COMMERCIAL SUBSTANCE. IN SIMPLE WORDS , IT MEANS THAT UNLESS IMG SHARES AND MAKES AVAILABLE ITS TECHNICAL PLAN, DESIGN, THE BROADCASTERS CANNOT SEAMLESSLY FUNCTION AND CONSEQU ENTLY THE ULTIMATE OBJECTIVE OF HD VIDEO FEED TO BE BROADCASTERS LIVE WORLDWIDE CANNOT BE ACHIEVED . ITA NO. 1513 / MUM/20 1 4 8 MOREOVER, EACH BROADCASTER BREAKS SUCH LIVE PROGRAMMING ALSO FOR INSERTION OF ADVERTISEMENTS AND OTHER BREAKS. THIS LIVE PROGRAMMING WITH BREAKS INCORPORAT ED IN IT BY THE BROADCASTER IS BROADCAST CONTENTS WHICH ITSELF IS A COPY RIGHTED PRODUCT. WHAT IS TREMENDOUSLY IMPORTANT, THEREFORE, IS THAT THE LIVE FEED (OR DELAYED LIVE FEED AS IN THIS CASE) CAN BE BROKEN AND TAKEN UP SEAMLESSLY BY THE BROADCASTER, W HICH EVIDENCES THE MAKE AVAILABLE NATURE OF FTS RENDERED. IN THIS BACKDROP , IT IS EVIDENT THAT SERVICES OF PRODUCTION AND GENERATION OF LIVE VIDEO SIGNAL RENDERED BY THE ASSESSEE IN TERMS OF AGREEMENT WERE IN THE NATURE OF TECHNICAL SERVICES. ASSESSEE MADE AVAILABLE TO ITS BROADCASTERS THE SERVICE WHICH IS BASED ON TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW AND PROCESSES WHICH ALSO CONSISTED OF DEVELOPMENT AND TRANSFER TO ITS BROADCASTERS OF TECHNICAL PLAN AND DESIGN RELATING TO PRODUCTION AND GEN ERATION OF LIVE TELEVISION SIGNAL. FURTHER, SCHEDULE 3, OF THE SAID AGREEMENT MANDATES THAT IMG SHALL MAKE AVAILABLE FEED TO THE BROADCASTERS AT THE PRODUCTION CONTROL ROOM OR THE EQUIVALENT FACILITY OF THE VENUE OF THE MATCH. IT SHALL ALSO LIAISE ACTIVI TIES AIMS AT SEAMLESS PRODUCTION AND TRANSMISSION OF VIDEO SIGNAL FOR WORLDWIDE BROADCAST IN A REAL TIME. 5.4.4 HENCE IT IS HELD THAT THESE SERVICES ARE NOTHING BUT TECHNICAL SERVICES AS PER SECTION 9(I)(VII) OF THE ACT AS WELL AS ARTICLE 13 OF THE DTAA BETWEEN INDIA AND UK WHICH MAKES AVAILABLE TECHNICAL KNOWLEDGE TO THE PAYER. 4. WE HEARD THE PARTIES ON THIS ISSUE. ON A CAREFUL PERUSAL OF THE FACTS BROUGHT OUT BY THE TAX AUTHORITIES , WE NOTICE THAT THE ASSESSEE POSSESSES REQUIRED EXPERTISE IN LI VE AUDIO - VISUAL COVERAGE OF MATCHES (CALLED FEED) AND HENCE, THE BCCI HAS ENGAGED THE ASSESSEE TO PRODUCE AND DELIVER LIVE AUDIO - VISUAL COVERAGE OF THE IPL - 2008 & IPL - 2009 CRICKET MATCHES CONDUCTED BY BCCI. ACCORDING TO THE AGREEMENT, THE ASSESSEE SHALL PRODUCE THE FEED AND DELIVER THE SAME TO THE BROADCASTERS, WHO ARE CALLED LICENSEES. THUS, IT IS NOTICED THAT THE JOB OF THE ASSESSEE SHALL COME TO AN END, ONCE THE FEED IS PRODUCED AND DELIVERED TO TH E LICENSED BROADCASTERS IN THE FORM OF DIGITALIZED SI GNALS . AS PER THE AGREEMENT, THE BCCI SHALL ITA NO. 1513 / MUM/20 1 4 9 SUPPLY THE EQUIPMENTS LIKE CAMERAS, MICROPHONES ETC. OF THE REQUIRED QUALITY TO THE ASSESSEE. 5. THE QUESTION THAT ARISES IS AS TO WHETHER SUCH KIND OF PRODUCTION OF FEEDS WOULD RESULT IN PROVISION OF TECH NICAL SERVICES BY THE ASSESSEE TO BCCI IN TERMS OF INDO - UK DTAA ? . ARTICLE 13(4)(C) OF THE DTAA DEFINES THE TERMS FEE FOR TECHNICAL SERVICES AND FOR THE SAKE OF CONVENIENCE, THE SAME IS EXTRACTED BELOW: 4. FOR THE PURPOSE OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5 OF THE ARTICLE, THE TERMS FEES FOR TECHNICAL SERVICES MEANS PAYMENTS OF ANY KIND OF ANY PERSON IN CONSIDERATION FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHE R PERSONNEL) WHICH : A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR ' WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED: OR B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH A PAYM ENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIG N THE LD A.R SUBMITTED THAT THE TECHNOLOGY SHOULD BE MADE AVAILABLE IN ORDER TO CONSTITUTE A PAYMENT AS FEE FOR TECHNICAL SERVICES. HE FURTHER PLACED RELIANCE ON THE FOLLOWING DECISION IN SUPPORT OF HIS CONTENTIONS : - (A) DE BEERS INDIA MINERALS (P) L TD (2012)(346 ITR 467)(KAR) (B) RAYMOND LTD VS. DCIT (2003)(86 ITD 791)(MUM) (C) GUY CARPENTER AND CO. (346 ITR 504)(DEL) THE LD A.R SUBMITTED THAT THE PRINCIPLE OF MAKE AVAILABLE HAS NOT BEEN DEFINED IN THE INDIA - UK DTAA, BUT THE SAME HAS BEEN EXPL AINED IN THE PROTOCOL TO THE INDIA - US DTAA AS UNDER: - ITA NO. 1513 / MUM/20 1 4 10 GENERALLY SPEAKING, TECHNOLOGY WILL BE CONSIDERED MADE AVAILABLE WHEN THE PERSON ACQUIRING THE SAME IS ENABLED TO APPLY THE TECHNOLOGY. THE FACT THAT THE PROVISION OF THE SERVICE MAY REQUIRE TECHNIC AL INPUT BY THE PERSON PROVIDING THE SERVICE DOES NOT PER SE MEAN THAT TECHNICAL KNOWLEDGE, SKILLS ETC., ARE MADE AVAILABLE TO THE PERSON PURCHASING THE SERVICE WITHIN THE MEANING OF PARAGRAPH 4(B). SIMILARLY, THE USE OF A PRODUCT WHICH EMBODIES TECHNOLOG Y SHALL NOT PER SE BE CONSIDERED TO MAKE THE TECHNOLOGY AVAILABLE. HE SUBMITTED THAT THE CONCEPT OR PRINCIPLE OF MAKE AVAILABLE CAN BE CONVENIENTLY APPLIED IN THE CASE OF INDIA - UK DTAA ALSO. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HEREIN DID NOT M AKE AVAILABLE ANY TECHNOLOGY/KNOW HOW RELATING TO THE PRODUCTION OF LIVE COVERAGE OF AUDIO - VIDEO VISUALS OF THE CRICKET MATCHES, BUT ONLY SUPPLIED THE PROGRAM CONTENT PRODUCED BY IT. ACCORDINGLY HE SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE FRO M BCCI CANNOT FALL UNDER THE CATEGORY OF FEE FOR TECHNICAL SERVICES IN TERMS OF ARTICLE 13(4)(C) OF INDIA - UK DTAA. 6 . WE NOTICE THAT THE ARTICLE 13(4)(C) OF THE INDIA - UK DTAA ALSO USES THE EXPRESSION MAKE AVAILABLE. THOUGH THE SAID EXPRESSION HAS NOT BEEN EXPLAINED IN THE CONTEXT OF INDIA - UK DTAA, IT IS THE PLEA OF THE ASSESSEE THAT THE PRINCIPLE OR CONCEPT OF MAKE AVAILABLE EXPLAINED IN THE INDIA - US PROTOCOL SHOULD ALSO BE APPLIED IN RESPECT OF INDIA - UK TREATY ALSO. BEFORE US, THE REVENUE COULD NOT SUBMIT ANY OTHER DECISION OR MATERIAL TO OPPOSE THE ABOVE SAID PLEA OF THE ASSESSEE. SINCE THE INDIA - UK DTAA AND ALSO INDIA - US DTAA USES THE SAME EXPRESSION, I.E., MAKE AVAILABLE IN THE CONTEXT OF FEE FOR TECHNICAL SERVICES , WE ARE OF THE VIEW TH AT THE PRINCIPLE OR CONCEPT OF MAKE AVAILABLE EXPLAINED IN THE CONTEXT OF INDIA - US DTAA CAN BE IMPORTED TO UNDERSTAND THE PROVISIONS OF ARTICLE 13(4)(C) OF THE INDIA - UK DTAA ALSO. 7. NOW WE SHALL EXAMINE THE QUESTION ON THE BASIS OF DISCUSSIONS MADE IN THE EARLIER PARAGRAPHS. WE NOTICE THAT THE ASSESSEE PRODUCES THE FEED ITA NO. 1513 / MUM/20 1 4 11 (PROGRAM CONTENT) OF LIVE COVERAGE OF AUDIO - VIDEO VISUALS OF THE CRICKET MATCHES BY USING ITS TECHNICAL EXPERTISE. AFTER THAT IT DELIVERS THE FEED (PROGRAM CONTENT) IN THE FORM OF DIGITALIZED SIGNALS TO THE LICENSEES (BROADCASTERS). THERE SHOULD NOT BE ANY DISPUTE THAT THE LICENSEES (BROADCASTERS) RECEIVE THE FEED ON BEHALF OF THE BCCI . WE NOTICE THAT WHAT IS DELIVERED BY THE ASSESSEE IS A FINAL PRODUCT IN THE FORM OF PROGRAM CON TENT PRODUCED BY IT BY USING ITS TECHNICAL EXPERTISE, I.E., THE ASSESSEE DOES NOT DELIVER OR MAKE AVAILABLE ANY TECHNOLOGY / KNOWHOW TO THE BCCI. THERE SHOULD NOT BE ANY DISPUTE THAT THE PRODUCTION OF PRO GRAM CONTENT BY USING TECHNICAL EXPERTISE IS ALTO GETHER DIFFERENT FROM THE PROVISION OF TECHNOLOGY ITSELF. IN THE FORMER CASE, THE RECIPIENT WOULD RECEIVE ONLY THE PRODUCT AND HE CAN USE THE PRODUCT ACCORDING TO HIS CONVENIENCE, WHERE AS IN THE LATER CASE, THE RECIPIENT WOULD GET THE TECHNOLOGY /KNOWHOW AND HENCE HE WOULD BE ABLE TO USE THE TECHNOLOGY /KNOWHOW ON HIS OWN IN OR DER TO PRODUCE ANY OTHER PROGRAM CONTENT OF SIMILAR NATURE. IN THE LATER CASE, THE TECHNOLOGY /KNOWHOW WOULD BE MADE AVAILABLE TO THE RECIPIENT, IN WHICH CASE THE PAYMENT GIVEN WOU LD FALL UNDER THE CATEGORY OF FEE FOR TECHNICAL SERVICES. HOWEVER, IN THE FORMER CASE, THERE IS NO QUESTION OF MAKING AVAILABLE OF ANY TECHNOLOGY /KNOWHOW AND HENCE THE PAYMENT GIVEN WOULD BE IN THE NAT URE OF PAYMENT MADE FOR PRODUCTION OF PRO GRAM CONTE NT OR LIVE FEED AND NOT FOR SUPPLY OF TECHNOLOGY. 8 . THE LD DRP HAS OBSERVED THAT THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND BCCI PRESCRIBES THE QUALITY STANDARDS IN MINUTE DETAILS AND THE SAME RESULTS IN TOTAL EXCHANGE OF TECHNICAL PLANS AND DE SIGNS BETWEEN THE ASSESSEE AND THE BROADCASTERS. IN OUR VIEW, THERE IS A FALLACY IN THE VIEW TAKEN BY LD DRP. THE OBJECT OF THE PRODUCTION OF LIVE FEED IS TO OFFER QUALITY COVERAGE OF THE LIVE CRICKET MATCHES TO THE VIEWERS. THE ASSESSEES JOB IS RESTRI CTED TO PRODUCTION OF LIVE COVERAGE AND THE JOB OF BROADCASTING ITA NO. 1513 / MUM/20 1 4 12 THE SAME IS UNDERTA K EN BY THE BCCI. THE BCCI, IN TURN, HAS GIVEN LICENSE TO CERTAIN COMPANIES (CALLED LICENSEES) AND THEY HAVE UNDERTAKEN THE JOB OF BROADCASTING THE LIVE COVERAGE OF CRICKET MATCHES ON BEHALF OF BCCI. SINCE THE ASSESSEE IS SUPPLYING THE LIVE COVERAGE IN THE FORM OF DIGITALIZED SIGNALS, IT HAS TO ENSURE THAT THE BROAD CASTERS ALSO DO HAVE THE COMPATIBLE TECHNOLOGY AND EQUIPMENTS SO THAT THE LIVE COVERAGE CAN BE BROADCAST WITHO UT COMPROMISING THE QUALITY. THUS , IN OUR VIEW, THE TECHNICAL ASPECTS ARE SPECIFIED IN THE AGREEMENT IN ORDER TO ENSURE THAT THE PROGRAM CONTENT IS BROADCAST AT THE SAME QUALITY IN WHICH IT WAS PRODUCED. THE SAME WAS SOUGHT TO BE ACHIEVED BY SYNCHRONIZ IN G THE QUALITY OF TECHNICAL EQUIPMENTS BETWEEN THE ASSESSEE AND THE BROADCASTERS (LICENSEES) . SUCH KIND OF SYNCHRONIZATION OF TECHNOLOGY WOULD ENSURE SEAMLESS FUNCTION AND COMPLETE COORDINATION BETWEEN THE ASSESSEE AND THE BROADCASTERS. THUS, THERE IS A D IFFERENCE BETWEEN THE TECHNOLOGY INVOLVED IN THE PRODUCTION OF LIVE COVERAGE FEED OF CRICKET MATCHES AND THE TECHNOLOGY REQUIRED TO BROADCAST THE SAME IN THE REQUIRED QUALITY. HENCE, IN ORDER TO ENSURE AND MAINTAIN QUALITY OF LIVE COVERAGE FEED, IT BECOME S NECESSARY ON THE PART OF THE ASSESSEE TO SPECIFY OR OVERSEE THE TECHNOLOGY AVAILABLE WITH THE BROADCASTERS SO THAT THE SAME DOES NOT COMPROMISE ON THE QUALITY AND COMPATIBILITY . THE SPECIFICATION OF THE TECHNICAL REQUIREMENT S DOES NOT MEAN THAT THE ASSE SSEE HAS SUPPLIED THE TECHNOLOGY INVOLVED IN THE PRODUCTION OF LIVE COVERAGE FEED TO THE BROAD CASTERS. IF THAT BE THE CASE, THE BROADCASTERS SHOULD BE IN A POSITION TO USE THE TECHNOLOGY IN ORDER TO PRODUCE THE LIVE FEED ON THEIR OWN. WE NOTICE THAT THE REVENUE HAS NOT ESTABLISHED THAT THE BROADCASTERS (WHO ARE ACTING ON BEHALF OF THE BCCI) OR THE BCCI ITSELF HAS ACQUIRED THE TECHNICAL EXPERTISE FROM THE ASSESSEE WHICH WOULD ENABLE THEM TO PRODUCE THE LIVE COVERAGE FEEDS ON THEIR OWN AFTER THE CONCLUSION OF IPL 2008 AND IPL 2009 CRICKET MATCHES. IN THAT CASE THE ESSENTIAL CONDITION OF MAKE AVAILABLE CLAUSE FAILS AND HENCE THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE ITA NO. 1513 / MUM/20 1 4 13 CONSIDERED AS FEE FOR TECHNICAL SERVICES IN TERMS OF ARTICLE 13(4)(C) OF THE DTAA EN TERED BETWEEN INDIA AND UK. 9 . THE LD DRP HAS OBSERVED THAT THE LIVE COVERAGE OF CRICKET MATCHES INVOLVE INSTANT AND CONTINUOUS PRODUCTION AND BROADCASTING OF LIVE MATCHES. THE EXISTING PROGRAM WOULD KEEP MERGING WITH THE NEW WORK. FURTHER, THE BRO ADCASTERS ARE ABLE TO SPLIT THE PROGRAM CONTENT IN ORDER TO INSERT ADVERTISEMENTS. ALL THESE ASPECTS, IN OUR VIEW, WOULD NOT BRING THE PAYMENT UNDER THE CATEGORY OF FEE FOR TECHNICAL SERVICES. IT ONLY SHOWS THE TECHNICAL EXPERTI SE OF THE ASSESSEE TO P RODUCE A FLEXIBLE PROGRAM CONTENT TO GIVE ENHANCED QUALITY OF VIEWING THE LIVE MATCHES . 10 . BEFORE US, THE LD D.R PLACED RELIANCE ON THE DECISION RENDERED BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF NIMBUS SPORT INTERNATIONAL PTE LTD (2012)(18 TAXM ANN.COM 105), WHEREIN THE TRIBUNAL HAD HELD THAT THE SERVICES OR PRODUCTION AND GENERATION OF LIVE TELEVISION SIGNAL WERE IN THE NATURE OF TECHNICAL SERVICES. THE LD A.R CONTENDED THAT THE DELHI TRIBUNAL DID NOT EXAMINE THE PRINCIPLE OF MAKE AVAILABLE. WE NOTICE THAT THE CASE OF NIMBUS SPORT INTERNATIONAL PTE LTD IS COVERED BY INDIA - SINGAPORE DTAA AND IT ALSO USES THE EXPRESSION MAKE AVAILABLE IN THE DEFINITION OF FEE FOR TECHNICAL SERVICES. IN THE CASE OF NIMBUS SPORTS INTERNATIONAL (SUPRA), THE PR INCIPLE OR CONCEPT OF MAKE AVAILABLE HAS NOT BEEN EXAMINED BY THE TRIBUNAL . ACCORDINGLY, WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT THE SAID DECISION IS DISTINGUISHABLE. 11. SINCE THE AMOUNT RECEIVED BY THE ASSESSEE IS HELD TO BE NOT IN TH E NATURE OF FEE FOR TECHNICAL SERVICES AS PER THE DEFINITION OF ARTICLE 13(4)(C) OF THE INDIA - UK DTAA, IN OUR VIEW, THERE IS NO NECESSITY TO EXAMINE ABOUT ITS TAXABILITY U/S 9(1)(VII) OF THE INCOME TAX ACT, 1963. ITA NO. 1513 / MUM/20 1 4 14 1 2 . THE AO/LD DRP HAVE ALSO EXPRESSE D THE VIEW THAT THE PAYMENT RECEIVED BY THE ASSESSEE WOULD FALL UNDER THE CATEGORY OF ROYALTY ALSO. THE RELEVANT OBSERVATIONS MADE BY LD DRP ARE EXTRACTED BELOW: - 5.5 ADDITIONALLY, WE FIND THAT THE SAID SERVICES WOULD ALSO BE IN THE NATURE OF ROYALTY A S PER THE PROVISIONS OF SECTION 9(I)(VI) OF THE ACT AND ARTICLE 13 OF THE DTAA BETWEEN INDIA AND UK. THE REASONS FOR THE SAME ARE, AS UNDER: (1) ON A PERUSAL OF THE AGREEMENT, IT IS CLEAR THAT FOR DOING THIS WORK, THE ASSESSEE IS REQUIRED TO BRING IN EQUIPMENTS FOR CAPTURING THE LIVE FEED. THE SAME HAS BEEN GIVEN IN CLAUSE 1.3 OF THE AGREEMENT WHICH IS REPRODUCED AS UNDER: 1.3 IMG SHALL BE RESPONSIBLE FOR ENSURING THAT EQUIPMENT THAT IT INTRODUCES INTO THE MATCH VENUES COMPLIES WITH INTERNATIONAL STA NDARDS OF HEALTH AND SAFETY, IT BEING ACKNOWLEDGED AND AGREED THAT IMG SHALL NOT BE RESPONSIBLE FOR THE COMPLIANCE OF THE MATCH VENUES AND THEIR INFRA S TRU CTU RE WITH SUCH INTERNATIONAL STANDARDS OF HEALTH AND SAFETY THIS MAKES IT CLEAR THAT THE ASSESS EE IS REQUIRED TO BRING AND USE SOME EQUIPMENT FOR RECORDING LIVE AUDIO - VISUAL FEED OF THE MATCHES. IN SCHEDULE 2 OF THE SAID AGREEMENT AS WELL, VARIOUS MINIMUM CAMERA AND EQUIPMENT SPECIFICATION HAS BEEN GIVEN. THE SAME IS ALSO REPRODUCED AS UNDER - (III) MI NIMUM CAMERA AND EQUIPMENT SPECIFICATION (1) THE FEED SHALL BE PRODUCED USING 29HD CAMERAS (OF WHICH 14 WILL BE MANNED) HD , VT & GRAPHICS EQUIPMENT ALONG WITH CRICKET SOUND PACKAGE. ALL OF THIS EQUIPMENT WILL BE SUPPLIED BY ZOOM (PLEASE NOTE SECTION (D)(II ) BELOW) . LIKEWISE, IN SCHEDULE 4 TO THIS AGREEMENT, THE DETAILS OF PRODUCTION BUDGET HAVE BEEN SPECIFIED. IN THIS BUDGET ALSO, VARIOUS HEADS OF EXPENSES HAVE BEEN IDENTIFIED AND COSTS ASSIGNED. IN THIS ALSO, A LOT OF THESE RELATE TO USE OF EQUIPMENTS L IKE PRODUCTION EQUIPMENTS , MAINTENANCE OF EQUIPMENTS, SETTING UP OF A STUDIO IN INDIA , BROADCAST FROM OUTSIDE ETC . ALL THESE CLEARLY ESTABLISH THAT THE ASSESSEE WOULD BE USING EQUIPMENTS TO CARRY OUT THIS WORK WHICH IS NOTHING BUT EQUIPMENT ROYALTY AS PER THE ACT AS WELL AS THE DTAA. ITA NO. 1513 / MUM/20 1 4 15 5.5.1 ON A PERUSAL OF THIS AGREEMENT, IT IS ALSO OBSERVED THAT THE ASSESSEE COMPANY IS THE WORLD LEADER IN THIS FIELD AND HAS DEVELOPED COMMERCIAL AND SCIENTIFIC EXPERIENCE IN THE FIELD OF COMMERCIAL AND SCIENTIFIC EXPERIENCE . IT HAS ALSO DEVELOPED A PROCESS WHICH IS UNIQUE TO THIS COMPANY AND THE SAME PROCESS IS BEING USED FOR RENDERING THESE SERVICES. THIS IS ALSO BECAUSE OF THE FACT THE ASSESSEE HAS BEEN GIVEN THIS CONTRACT EVERY YEAR AS IT HAS A UNIQUE PROCESS FOR PROD UCING THE LIVE FEED OF MATCHES. IN THIS TYPE OF EVENTS THE MOST I MPORTANT PART THAT LEADS TO GENERATION OF REVENUE FOR BCCI FROM IPL EVENT IS THE SEAMLESS / UNINTERRUPTED PRODUCTION AND BROADCASTING OF THE COMPLETE MATCH. DURING SUCH PRODUCTION PROCESS, A NE W WORK IS CREATED WITHIN A SPLIT OF FEW MACRO SECONDS AND THE EXISTI NG FOR KEEPS ON MERGING WITH THE NEW WORK BEING CREATED. THE ACTIVITY WHICH LEADS GENERA TION OF REVENUE IS T HE CO M PLETE W ORK BEING TAKE N INTO CONSIDERATION AND THEREFORE IT WOULD BE INCORR ECT TO STA T E THAT THE PAYMENTS RECEIVED BY ASSESSEE IS FOR THE LIVE WORK AND NOT FOR ANY WORK BEING IN EXISTENCE. ALSO, THE PRODUCTION WORK BEING UNDERTAKEN BY THE ASSESSEE IS SPECIALISED IN NATURE AND THE FINAL SIGNALS BEING DELIVERED BY THE ASSESSEE TAN TAMOUNT TO USE OF PROCESS BY THE BCCI/ITS BROADCASTERS . THIS IS ALSO EVIDENCED WITH VARIOUS CLAUSES OF THE AGR EE MENTS. THE RELEVANT CLAUSES ARE REP RODUCED AS UNDER: 5. PRODUCER CREDIT BCCL AGREES THAT ON EACH OCCASION THAT THE COVERAGE OF THE IPL IS BROADCAST, THERE SHALL APPEAR AT THE END OF' EACH SUCH BROADCAST, A CREDIT STATING PRODUCED BY IMG SPORTS MEDIA, OR SUCH OTHER CREDIT AGREED BETWEEN THE BCCI AND IMG AS PER THIS CL AUSE, THE ASSESSEE COMPANY IS TAKING THE CREDIT FOR THIS CREATION. HAD T HIS N OT BEEN A UNIQUE CREATION WHICH IS OF WORLD STANDARD , THE ASSESSEE COMPANY WOULD NOT CLAIM THE CREDIT. BY TAKING THIS CREDIT , I T IS BEING DEMONSTRATED BY THE ASSESSEE THAT IT IS A UNIQUE PRODUC T WHICH HAS BEEN CREATED BY FOLLOWING A UNIQUE PRODUCT AN D THATS WHY THEY ARE DEMONSTRATING BEFORE THE WORLD THAT IT IS CREATED BY THE ASSESSEE COMPANY. HENCE, IN A WAY THE ASSESSEE IS CLAIMING COPYRIGHT IN AT LEAST PRODUCING THIS FEED. CLAUSE 14 IS ALSO RELEVANT WHICH IS ALSO BEING REPRODUCED AS UNDER - CLAU SE 14 ASSIGNMENT THIS AGREEMENT MAY NOT BE ASSIGNED BY EITHER PARTY WITHOUT THE EXPRESS WRITTEN CONSENT OF THE O THER, HOWEVER IMG SHALL BE, ENTITLED TO PERFORM ITA NO. 1513 / MUM/20 1 4 16 ITS OBLIGATIONS HEREUNDER THROUGH ANY OF ITS ASSOCIATED COMPANIES WITHIN THE INTERNATIONAL GRO UP OF COMPANIES.: AS PER THIS CLAUSE , THE ASSESSEE CANNOT ASSIGN THIS WORK TO ANY OTHER PARTY EXCEPT ITS ASSO CIATED ENTERPRISES . THIS CLEARLY SHOWS THAT BCCI HAS GIVEN THIS WORK ONLY TO THE ASSESSEE COMPANY AND DOES NOT WANT IT TO ASSIGN THIS WORK TO AN YBODY ELSE AS IT HAS GO T A U NIQUE PROCESS OF PRODUCING THE LIVE FEED. THIS ALSO ESTABLISHES THAT IT HAS DEVELOPED COMMERCIAL AND SC IENTIFIC EXPERIENCE IN THIS FIELD WHICH IS BEING USED FOR PROVING THESE SERVICES . 5 .5.2 IN VIEW OF THE ABOVE DISCUSSIONS, I T IS HELD THAT THE PAYMENTS WOULD BE TAXABLE AS ROYALTY' BOTH UNDER THE PROVISIONS O F SECTION 9(I)(VI) OF THE ACT AND ARTICLE 13 OF THE DTAA. THE JUDGMENTS RELATED UPON BY THE ASSESSEE HAVE NOT BEEN TAKEN THE ABOVE FACTS INTO CONSIDERATION AND HENCE TH E BENEFIT OF THE SAME CANNOT BE GRANTED TO THE ASSESSEE. 1 3 . WE HAVE NOTICED EARLIER, THE ASSESSEE WAS ENGAGED BY BCCI TO PRODUCE LIVE COVERAGE OF AUDIO AND VIDEO VISUALS OF CRICKET MATCHES. THE ASSESSEE SHALL PRODUCE THE PROGRAM CONTENT, WHICH IS B ROADCAST THROUGH THE BROADCASTERS APPOINTED BY BCCI. THE JOB OF THE ASSESSEE ENDS UPON THE PRODUCTION OF THE PROGRAM CONTENT. ACCORDING TO THE ASSESSEE, THE PROGRAM CONTENT SHALL BECOME THE PROPERTY OF THE BCCI. WE NOTICE THAT THE REVENUE HAS NOT BROU GHT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS KEPT THE OWNERSHIP RIGHTS OVER THE PROGRAM CONTENT. THE LD DRP HAS NOTICED THAT THE BCCI IS REQUIRED TO SUPPLY CERTAIN EQUIPMENTS AND HENCE THE LD DRP HAS HELD AS UNDER: - THE ASSESSEE WOULD BE USI NG EQUIPMENTS TO CARRY OUT THIS WORK WHICH IS NOTHING BUT EQUIPMENT ROYALTY AS PER THE ACT AS WELL AS THE DTAA. WE ARE UNABLE TO UNDERSTAND THE RATIONALE BEHIND THIS OBSERVATION. IF THE ASSESSEE WAS USING THE EQUIPMENTS BELONGING TO BCCI AND IF THA T ACTIVITY IS EXAMINED IN ISOLATION, THEN THE ASSESSEE SHOULD BE PAYING MONEY TO BCCI FOR USING THE EQUIPMENTS. IN THE INSTANT CASE, THE ASSESSEE HAS ITA NO. 1513 / MUM/20 1 4 17 RECEIVED THE MONEY FOR PRODUCING LIVE COVERAGE OF CRICKET MATCHES. THE EQUIPMENTS REQUIRED FOR THE SAID PURPOSE MAY BE BROUGHT BY THE ASSESSEE ITSELF OR IT MAY BE PROVIDED BY THE BCCI. UNDER COMMERCIAL TERMS, IF THE ASSESSEE WAS REQUIRED TO BRING THE EQUIPMENTS, THEN THE CONSIDERATION PAYABLE FOR THE PRODUCTION OF LIVE COVERAGE OF CRICKET MATCHES SHOULD GO UP. THUS, IN OUR VIEW, IT WAS A SIMPLE CASE OF COMMERCIAL AGREEMENT ENTERED BETWEEN THE PARTIES WITH REGARD TO THE MODALITIES TO BE FOLLOWED AND THE SAME IS NOT A DETERMINATIVE FACTOR TO DECIDE ABOUT THE NATURE OF PAYMENT RECEIVED BY THE ASSESSEE. 14 . THE LD D.R.P. HAS FURTHER OBSERVED THAT THE ASSESSEE HAS DEVELOPED COMMERCIAL AND SCIENTIFIC EXPERIENCE IN THE FIELD OF COMMERCIAL AND SCIENTIFIC EXPERIENCE. THE TERM ROYALTY IS DEFINED AS UNDER IN THE INDIA - UK DTAA: - 3. FOR THE PURPOSES OF THIS AR TICLE, THE TERM ROYALTIES MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TAPE OR OTHER MEANS OF REP RODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIV ED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTHER THAN INCOME DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC. A CAREFUL PE RUSAL OF THE DEFINITION OF ROYALTIES EXTRACTED ABOVE, WOULD SHOW THAT THE PAYMENT , IN ORDER TO CONSTITUTE ROYALTY, SHOULD HAVE BE EN MADE FOR THE USE OF, OR THE RIGHT TO USE ANY COPYRIGHT ETC. IN THE INSTANT CASE, WE HAVE NOTICED THAT THE PAYMENT WAS M ADE BY BCCI TO THE ITA NO. 1513 / MUM/20 1 4 18 ASSESSEE FOR PRODUCING THE PROGRAM CONTENT CONSISTING OF LIVE COVERAGE OF CRICKET MATCHES. FURTHER, WE HAVE NOTICED THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD RETAINED THE OWNERSHIP OF THE PROGRAM CONTENT. THE HONBL E DELHI HIGH COURT HAD AN OCCASION TO EXAMINE AN IDENTICAL ISSUE IN THE CASE OF CIT VS. DELHI RACE CLUB (2015)(273 CTR 503) IN THE CONTEXT OF THE PROVISIONS OF SEC. 194J OF THE ACT. IN THE ABOVE SAID CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONDU CTING OF HORSE RACES AND IT MADE PAYMENT FOR LIVE TELECAST OF RACES. THE AO HELD THAT THE SAID PAYMENT WOULD FALL UNDER THE DEFINITION OF ROYALTY FALLING WITHIN THE PURVIEW OF THE PROVISIONS OF SEC. 194J OF THE ACT AND HENCE DISALLOWED THE PAYMENTS U/S 40(A)(IA) OF THE ACT. THE HONBLE DELHI HIGH COURT OBSERVED AS UNDER: - 16. A LIVE T.V COVERAGE OF ANY EVENT IS A COMMUNICATION OF VISUAL IMAGES TO THE PUBLIC AND WOULD FALL WITHIN THE DEFINITION OF THE WORD BROADCAST IN SECTION 2(DD) (OF THE COPYRIGHT ACT). THAT APART WE NOTE THAT SECTION 13 DOES NOT CONTEMPLATE BROADCAST AS A WORK IN WHICH COPYRIGHT SUBSISTS AS THE SAID SECTION CONTEMPLATES COPYRIGHT TO SUBSIST IN LITERARY, DRAMATIC, MUSICAL AND ARTISTIC WORK, CINEMATOGRAPH FILMS AND SOUND RECOR DING. SIMILAR IS THE PROVISION OF SECTION 14 OF THE COPYRIGHT ACT WHICH STIPULATES THE EXCLUSIVE RIGHT TO DO CERTAIN ACTS. A READING OF SECTION 14 WOULD REVEAL THAT COPYRIGHT MEANS EXCLUSIVE RIGHT TO REPRODUCE, ISSUE COPIES, TRANSLATE, ADAPT ETC., OF A WORK WHICH IS ALREADY EXISTING 18. IN VIEW OF THE AFORESAID POSITION OF LAW WHICH BROUGHT OUT A DISTINCTION BETWEEN A COPYRIGHT AND BROADCAST RIGHT, SUFFICIE WOULD IT BE TO STATE THAT THE BROADCAST OR THE LIVE COVERAGE DOES NOT HAVE A COPYRIGHT. THE AFORESAID WOULD MEET THE SUBMISSION OF MR. SAWNEY THAT THE WORD COPYRIGHT WOULD ENCOMPASS ALL CATEGORIES OF WORK INCLUDING MUSICAL, DRAMATIC, ETC. AND ALSO HIS SUBMISSION THAT THE COPYRIGHT ACKNOWLEDGES THE BROADCAST RIGHT AS A RIGHT AS A RIGHT SIMIL AR TO COPYRIGHT. IN VIEW OF THE CONCLUSION OF THIS COURT IN ESPN STAR SPORTS CASE (SUPRA), SUCH A SUBMISSION NEED S TO BE REJECTED. THOUGH THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF PROVISIONS OF SEC. 194J OF THE ACT, YET SECTION IMPORTS TH E DEFIN ITION OF THE TERM ROYALTY FROM EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT. UNDER THE ITA NO. 1513 / MUM/20 1 4 19 DEFINITION GIVEN IN THE ABOVE SAID PROVISION ALSO ROYALTY MEANS CONSIDERATION FOR THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RE SPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY. 1 5 . IN THE INSTANT CASE, WE HAVE NOTICED THAT THE BCCI BECOMES THE OWNER OF THE PROGRAM CONTENT PRODUCED BY THE ASSESSEE. THE JOB OF THE ASSES SEE ENDS UPON THE PRODUCTION OF THE PROGRAM CONTENT AND THE BROADCASTING IS CARRIED OUT BY SOME OTHER ENTITY TO WHICH LICENSE WAS GIVEN BY THE BCCI. HENCE , IN OUR VIEW, THE QUESTION OF TRANSFER OF ALL OR ANY RIGHT DOES NOT ARISE IN THE FACTS AND CIRCUMSTA NCES OF THE INSTANT CASE. HENCE, WE ARE OF THE VIEW THAT THE PAYMENT RECEIVED BY THE ASSESSEE CANNOT BE CONSIDERED AS ROYALTY IN TERMS OF THE INDIA - UK DTAA . THOUGH, IT IS NOT NECESSARY TO EXAMINE ABOUT THE APPLICABILITY OF PROVISIONS OF SEC. SEC. 9(1)( VI) OF THE ACT , YET THE FACTS DISCUSSED ABOVE WOULD SHOW THAT THE PAYMENT RECEIVED BY THE ASSESSEE CANNOT FALL WITHIN THE PURVIEW OF SEC. 9(1)(VI) OF THE ACT ALSO . 16 . THE FOREGOING DISCUSSIONS DISPOSE THE GROUND NO.4 AND 5 OF THE GROUNDS OF APPEAL. THE GROUND NO.1 AND 2 ARE GENERAL IN NATURE. THE GROUND NO.3 RELATES TO THE QUESTION OF EXISTENCE OF PERMANENT ESTABLISHMENT AND THE GROUND NO.6 RELATES TO THE TAXABILITY OF REIMBURSEMENT OF EXPENSES. BOTH THESE GROUNDS WERE NOT CONSIDERED BY THE LD DRP/AO, SINCE THEY PROCEEDED TO ASSESS THE RECEIPTS AS FEE FOR TECHNICAL SERVICES/ROYALTY. HENCE WE SET ASIDE BOTH THE ISSUES TO THE FILE OF THE AO FOR CONSIDERATION OF THE SAME AFRESH. 17 . SINCE WE HAVE SET ASIDE THE GROUND NO.3 AND GROUND NO.6, W E ALSO DEEM IT PROPER TO SET ASIDE THE GROUND NO.7 RELATING TO CHARGING OF INTEREST U/S 234B OF THE ACT. THE AO MAY TAKE APPROPRIATE DECISION BY CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. NGC ITA NO. 1513 / MUM/20 1 4 20 NETWORK ASIA LLC (313 ITR 187 ) AND ALSO SUCH OTHER DECISIONS RELEVANT TO THE SAID ISSUE. 18 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 26TH AUG , 2015. 2 6TH AUG , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTAN T MEMBER MUMBAI: 26TH AUG ,2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI