NEO SPORTS BROADCASTS P. LTD, MUMBAI V. DDIT (IT) RG 4(2), MUMBAI

ITA 1597/MUM/2011

• Counselvise Citation: 159719914 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM; ALOK BAIRAGRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI J. SUDHAKAR REDDY (ACCOUNTANT MEMBER) ITA NO.2269/MUM/2011 ASSESSMENT YEAR-2009-10 THE DDIT (IT) 4(2), SCINDIA HOUSE, BALLARD PIER, MUMBAI-400 038 VS. M/S. NEO SPORTS BROADCAST PVT. LTD., NIMBUS CENTRE, OBEROI COMPLEX, ANDHERI(W), MUMBAI-400 053 PAN-AACCN 2854Q (APPELLANT) (RESPONDENT) ITA NO.1597/MUM/2011 ASSESSMENT YEAR-2009-10 M/S. NEO SPORTS BROADCAST PVT. LTD., NIMBUS CENTRE, OBEROI COMPLEX, ANDHERI(W), MUMBAI-400 053 VS. THE DDIT (IT) 4(2), SCINDIA HOUSE, BALLARD PIER, MUMBAI-400 038 (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI MAHESH KUMAR ASSESSEE BY: S/SHRI K. SHIVARAM & ALOK BAIRAGRA DATE OF HEARING :24.4.2012 DATE OF PRONOUNCEMENT: 24.4.2012 O R D E R PER BENCH : THESE CROSS APPEALS ARE FILED BY DEPARTMENT AND AS SESSEE AGAINST ORDERS OF LD. CIT(A) DT. 4 TH JANUARY, 2011 ON FOLLOWING GROUNDS: 2. THE GROUND RAISED BY DEPARTMENT IN ITA NO. 2269 /M/2011 READS AS FOLLOWS: IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) ERRED IN HOLDING THAT PAYMENT MADE BY THE ASSESSEE TO NIMBUS SPORTS INTERNATIONAL PTE. LTD (SINGAPORE) (NS) FOR TH E ITA NOS. 2269 & 1597/M/11 2 BROADCAST OF LIVE FEED IS DIFFERENT FROM THAT MADE FOR THE PURPOSE OF BROADCAST OF RECORDED FEED, AND HENCE IS NOT IN THE NATURE OF ROYALTY. 3. THE GROUND RAISED BY ASSESSEE IN ITA NO. 1597/M /2011 READS AS FOLLOWS: THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER PASSED BY LD. DDIT, HOLDING THAT NSI HAS BUSINESS CONNECTION IN INDIA, HENCE INCOME THEREOF IS DEEMED TO ACCRUED OR ARISE IN INDIA, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 4. THE RELEVANT FACTS ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF BROADCASTING SPORTS EVENTS. THE ASSESSEE COMPANY HA S ENTERED INTO AN AGREEMENT WITH NIMBUS SPORTS INTERNATIONAL PTE LTD ( HEREINAFTER TO BE REFERRED IN SHORT NSI), WHO HAS ACQUIRED ALL MEDIA RIGHTS THROUGHOUT THE WORLD FROM SRILANKA CRICKET (HEREINAFTER REFERRED IN SHOR T SLC) OF CRICKET SERIES BETWEEN SRILANKA AND INDIA TO BE PLAYED IN SRILANKA . UNDER THIS AGREEMENT, ASSESSEE-COMPANY IS TO RECEIVE BROADCASTING FEED FO R CRICKET MATCHES PLAYED IN SRILANKA TO BE TELECASTED LIVE MATCHES AS WELL A S RECORDED MATCHES ON ITS NEO CRICKET CHANNEL. 5. THE ASSESSEE FILED AN APPLICATION U/S. 195(2) OF I.T. ACT BEFORE THE ASSESSING OFFICER FOR NIL DEDUCTION OF INCOME TAX ON PAYMENT TO BE MADE TO NSI FOR THE FOLLOWING: A) GRANT OF LICENSE FOR LIVE BROADCAST AMOUNTING TO RS. 19,66,25,000/- B) GRANT OF LICENCE FOR RECORDED BROADCAST AMOUNTING TO RS. 33,75,000/- ------------------------ RS. 20,00,00,000/- 6. THE ASSESSEE COMPANY SUBMITTED THAT LIVE BROADCA ST OF MATCHES IS NOT TAXABLE IN INDIA BECAUSE OF THE FOLLOWING REASONS: A) NSI AND SLC DOES NOT HAVE ANY BUSINESS CONNECTION I N INDIA, HENCE, NO INCOME IS ACCRUED OR ARISE IN INDIA OR DE EMED TO ACCRUE OR ARISE IN INDIA. ITA NOS. 2269 & 1597/M/11 3 B) THE AGREEMENT HAS BEEN SIGNED OUT OF INDIA AND CRIC KET MATCHES WILL BE PLAYED OUT OF INDIA. BROADCAST OF LIVE SIG NAL DOES NOT ENTAIL A COPY TO THE BROADCAST AND HENCE, THE SAME IS NOT COVERED WITHIN THE DEFINITION OF ROYALTY. SINCE, PAYMENT TOWARD S BROADCAST OF LIVE FEED IS NOT ROYALTY, THE SAME IS NOT TAXABLE I N INDIA WITHIN THE MEANING OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE I.T. ACT, 1961. C) IT WAS REQUESTED THAT NIL TDS DEDUCTION CERTIFICAT E MAY BE ISSUED IN RESPECT OF PAYMENT MADE TO NSI FOR LIVE BROADCA ST. 7. THE LD. DDIT DID NOT AGREE WITH THE ASSESSEE AND REJECTED THE APPLICATION FOR THE FOLLOWING REASONS: NSI HAS BUSINESS CONNECTION IN INDIA AS MATCHES AR E TO BE BROADCASTED IN INDIAN TERRITORY AND INCOME IS BEING EARNED BY WAY OF ADVERTISEMENT AND SUBSCRIPTION REVENUE, HENC E, INCOME IS DEEMED TO BE ACCRUED OR ARISE IN INDIA TO NSI, HEN CE, TAXABLE. BROADCASTING OF LIVE MATCHES IS COVERED UNDER COPY RIGHT, RESULTED PAYMENT THERETO IS IN THE NATURE OF ROYALTY, HENC E, TAXABLE UNDER THE PROVISIONS OF EXPLANATION 2 O SEC. 9(1)(V I) OF THE I.T. ACT, 1961. 8. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFO RE FIRST APPELLATE AUTHORITY. 9. THE LD. CIT(A) HAS AGREED WITH THE VIEW OF AO THAT NSI HAS A BUSINESS CONNECTION IN INDIA AND THE REASONS GIVEN BY HIM ARE (A) THAT CRICKET MATCHES WERE ACTUALLY BROAD CASTED IN INDIA AND ASSESSEE HAD PAID FEES TO NSI TO BROADCAST THESE MATCHES IN INDIA (B) THAT ASSESSEE COMPANY WAS ABLE TO SELL AIRTIME TO VARIOUS INDIAN ADVERTISING AGENCIES, COM MERCIALS OF WHICH WERE TO BE TELECASTED ALONGWITH THE CRICKET MATCHES (C) I N CASE, THE ASSESSEE COMPANY HAD NOT RECEIVED THE SIGNALS OF THE CRICKET MATCHES FROM NSI, IT WOULD HAVE BEEN DIFFICULT FOR THE ASSESSEE COMPANY TO SELL THE AIRTIME TO INDIAN ADVERTISERS (D) NSI HAD ENTERED INTO A SEPARA TE AGREEMENT WITH SRILANKA CRICKET SLC WITH A VIEW TO ACQUIRE ALL MED IA RIGHTS THROUGHOUT THE WORLD (INCLUDING INDIA) FOR BROADCASTING FEED FOR CR ICKET MATCHES. ALTHOUGH AS PER THE AGREEMENT BETWEEN ASSESSEE COMPANY AND NSI, IT WAS THE BEING ITA NOS. 2269 & 1597/M/11 4 RESPONSIBILITY OF THE NSI TO MAKE AVAILABLE BROADCA STING FEED FOR CRICKET MATCHES OUTSIDE INDIA I.E. IN SRILANKA FOR TELECAST ING CRICKET MATCHES ON NEO SPORTS CHANNEL. BUT UNLESS THESE SIGNALS WERE BEAM ED IN INDIA, THE ASSESSEE COMPANY WOULD NOT HAVE BEEN ABLE TO SELL AIRTIME. IN VIEW THEREOF, LD. CIT(A) HAS HELD THAT NSI HAD A BUSINESS CONNECTION IN INDIA . 10. HOWEVER, IN RESPECT OF THE PAYMENT TO BE MA DE TO NSI TOWARDS LIVE FEED FOR BROADCASTING CRICKET MATCHES IN INDIA WHET HER IT IS IN THE NATURE OF ROYALTY WITHIN THE MEANING OF EXPLANATION 2 TO SECT ION 9(1)(VI) OF THE I.T. ACT, LD. CIT(A) HAS HELD THAT PAYMENT MADE FOR LIVE TELE CAST OF EVENT DOES NOT FALL WITHIN THE DEFINITION OF ROYALTY AND THEREFORE T HERE IS NO REQUIREMENT FOR THE ASSESSEE TO DEDUCT TDS U/S. 195 OF THE I.T. ACT ON THE AMOUNT REMITTED TO NSI FOR LIVE BROADCAST, WHICH IS NOT TAXABLE IN INDI A. HENCE, DEPARTMENT AS WELL AS ASSESSEE ARE IN AP PEAL BEFORE TRIBUNAL. 11. AT THE TIME OF HEARING, LD. DEPARTMENTAL REPR ESENTATIVE RELIED ON THE ORDER OF AO IN RESPECT OF GROUND TAKEN BY DEPARTMEN T IN ITS APPEAL AND WHEREAS IN RESPECT OF GROUND TAKEN BY ASSESSEE, LD . DR PLACED RELIANCE ON THE ORDER OF LD. CIT(A). ON THE OTHER HAND, LD. AR SUBMITTED THAT BOTH ISSUES ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DT. 9.11.2011 IN ITA NO. 99/M/09 AND FILED A COPY OF SAID ORDER TO SUBSTANTIATE HIS SUBMISSION. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF AUTHORITIES BELOW AND HAVE CAREFULLY CONSIDERED THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE DT.9.1 1.2011 (SUPRA). 13. ON PERUSAL OF SAID ORDER OF TRIBUNAL, WE OBS ERVE THAT TRIBUNAL IN RESPECT OF THE ISSUE AS TO WHETHER THE PAYMENT MADE BY ASSE SSEE TO NSI FOR THE BROADCAST OF LIVE MATCHES IS IN THE NATURE OF ROYAL TY AND AS SUCH TDS IS TO BE ITA NOS. 2269 & 1597/M/11 5 DEDUCTED OR NOT U/S. 195 OF THE I.T. ACT, HAS HELD THAT PAYMENT MADE FOR LIVE BROADCASTING IS NOT COVERED WITHIN THE FRAME WORK O F SEC. 9(1)(VI). SINCE THE FACTS ARE IDENTICAL TO THE CASE OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION TO ASSESSMENT YEAR 2008-09 (SUPRA), W E UPHOLD THE ORDER OF LD. CIT(A) AND REJECT GROUND OF APPEAL TAKEN BY DEPARTM ENT. 14. IN RESPECT OF GROUND OF APPEAL TAKEN BY ASS ESSEE IN THE APPEAL FILED, WE OBSERVE THAT SAID ISSUE IS ALSO COVERED BY THE ABOV E ORDER OF TRIBUNAL DT. 9.11.2011 (SUPRA) IN FAVOUR OF ASSESSEE. IN THE SAI D CASE, TRIBUNAL HAS HELD VIDE PARAS 26 & 27 OF THE SAID ORDER THAT THE MERE ACT OF ALLOWING THE ASSESSEE BY NSI TO LIVE BROADCAST THE MATCHES FOR A DEFINED CONSIDERATION WOULD NOT CONSTITUTE A BUSINESS CONNECTION IN INDIA . AFTER THE LIVE BROADCAST BY THE ASSESSEE, NSI WILL CONTINUE TO HOLD RIGHT OVE R SUCH BROADCAST. IT IS STATED THAT IN ORDER TO CONSTITUTE A BUSINESS CONNE CTION OF A NON-RESIDENT IN INDIA, IT IS NECESSARY THAT SOME SORT OF BUSINESS AC TIVITY MUST BE DONE BY THE NON-RESIDENT IN THE TAXABLE TERRITORY OF INDIA. CL AUSE (A) OF EXPLANATION I TO SEC. 9(1)(I) PROVIDES THAT IN THE CASE OF BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUS INESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SUC H PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED O UT IN INDIA. THEREFORE IT BECOMES MANIFEST THAT THE NON-RESIDENT MUST CARRY O UT CERTAIN OPERATIONS IN INDIA SO AS TO FALL WITHIN THE AMBIT OF SEC. 9(1)(I) OF THE ACT. THEREFORE, THE RELEVANT CRITERIA IS THE CARRYING ON OF BUSINESS OP ERATIONS IN INDIA BY THE NON- RESIDENT AND NOT THE EARNING OF INCOME BY ANY RESID ENT FROM THE USE OF ANY PRODUCT ACQUIRED FROM THE NON-RESIDENT. WHERE THE NON-RESIDENT ONLY ALLOWS SOME RESIDENT TO EXPLOIT CERTAIN RIGHT VESTED IN IT ON COMMERCIAL BASIS, IT CANNOT BE SAID THAT THE NON-RESIDENT HAS CARRIED OU T ANY BUSINESS ACTIVITY IN INDIA. THE ACT OF THE ASSESSEE EARNING REVENUES FRO M INDIA CANNOT LEAD TO A BUSINESS CONNECTION OF NSI AS THE TRANSACTION BETWEE N ASSESSEE AND NSI IS CONFINED TO RECEIVING BROADCASTING RIGHT FOR A CONS IDERATION. WHETHER THE ASSESSEE EARNS INCOME OR SUFFERS LOSSES FROM THE EX PLOITATION OF SUCH ITA NOS. 2269 & 1597/M/11 6 BROADCASTING IS NOT THE CONCERN OF NSI. SUCH TRANSA CTION OF THE ASSESSEE WITH NSI ON PRINCIPAL TO PRINCIPAL BASIS CANNOT BE CONSI DERED AS A GROUND FOR HOLDING THAT NSI HAS A BUSINESS CONNECTION IN INDIA AND HENCE THE INCOME SHALL ACCRUE TO NSI THROUGH THIS BUSINESS CONNECTIO N IN INDIA. 15. THUS, TRIBUNAL HELD THAT WHEN A NON-RESIDENT ALLOWS ANY RESIDENT TO COMMERCIALLY EXPLOIT ITS ASSET FOR A CONSIDERATION, THE BUSINESS CONNECTION IN TERMS OF SEC. 9(1)(I) WILL BE LACKING AND AUTHORITI ES BELOW WERE NOT JUSTIFIED IN HOLDING THAT NSI HAS A BUSINESS CONNECTION IN INDIA. 16. IN VIEW OF ABOVE, GROUND OF APPEAL TAKEN BY ASSESSEE IS COVERED IN FAVOUR OF ASSESSEE BY THE AFORESAID ORDER OF TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 (SUPRA). HENCE, GROUND OF APPEAL TAKEN BY ASSESSEE IS ALLOWED. 17. IN THE RESULT, APPEAL FILED BY DEPARTMENT I S DISMISSED, WHEREAS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 24.4.2012. SD/- SD/- (J. SUDHAKAR REDDY) (B.R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER MUMBAI, DATED 24 TH APRIL, 2012 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR L BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI