Appeal details
Counselvise Citation
[2012] 119 COUNSELVISE.COM (IT) 9341 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-11-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
L
Next Hearing Date
07-08-2012
Assessment Year
2009-2010
Appeal Filed On
24-02-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 2270/MUM/2011 ASSESSMENT YEAR : 2009-10. DY. DIRECTOR OF INCOME-TAX, NIMBUS COMMUNICATIONS LTD. (INTERNATIONAL TAXATION), VS. NIMBUS CENTRE, OBEROI COMPLEX, 4(2), MUMBAI. ANDHERI (WEST), MUMBAI 400 053. PAN AAACN 3947L APPELLANT. RESPONDENT . I.T.A. NO. 1598/MUM/2011 ASSESSMENT YEAR : 2009-10. NIMBUS COMMUNICATIONS LTD., DY. DIRECTOR OF INCOME-TAX, MUMBAI. VS. (INTERNATIONAL TAXATION), RANGE-4(2), MUMBAI. APPELLANT RESPONDENT. DEPARTMENT BY : SHRI NARENDR A KUMAR. ASSE SSEE BY : SHRI K.SHIVARAM, SHRI AJAY R. SINGH. DATE O F HEARING : 31-10-2012 DATE OF PRONOUNCEMENT : 23-11-2012. O R D E R PER P.M. JAGTAP, A.M. : THESE TWO APPEALS, ONE FILED BY THE ASSESSEE BEING ITA NO. 1598/MUM/2011 AND THE OTHER FILED BY THE REVENUE BE ING ITA NO.2270/MUM/2011 ARE CROSS APPEALS WHICH ARE DIRECT ED AGAINST THE ORDER OF LEARNED CIT(APPEALS)-11, MUMBAI DATED 04-01-2011. 2 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF SPORTS MARKETING AND AIRTIME MARKETING AVAILABLE ON TELEVISION PROGRAMME. IT IS ALSO ENGAGED IN THE BUSINESS OF PR ODUCTION, TELECASTING AND MARKETING OF TELEVISION SERIALS. IT ENTERED INTO AN AGREEMENT WITH NIMBUS SPORTS INTERNATIONAL PTE LTD. (NSI), A COMPANY INCORPORATE D IN SINGAPORE, WHO HAD ACQUIRED ALL MEDIA RIGHTS THROUGHOUT THE WORLD FROM SRILANKA CRICKET OF THE CRICKET SERIES BETWEEN SRILANKA AND INDIA TO BE PLAYED IN S RILANKA. AS PER THE SAID AGREEMENT DATED 21-01-2009, THE ASSESSEE COMPANY WA S GRANTED BY NSI A LICENSE FOR LIVE TERRESTRIAL TELEVISION RIGHTS OF THE CRICK ET SERIES BETWEEN SRILANKA AND INDIA TO BE PLAYED IN SRILANKA TO BE TELECASTED ON DOORDA RSHAN (PRASAR BHARTI) FOR A FEES OF RS.4 CRORES. THE ASSESSEE COMPANY FILED AN APPLI CATION U/S 195(2) OF THE ACT SEEKING A NIL DEDUCTION CERTIFICATE IN RESPECT OF T HE PAYMENT TO BE MADE TO NSI AS PER THE AGREEMENT DATED 21-01-2009 ON THE GROUND TH AT THE PAYMENT TO BE MADE ON ACCOUNT THE BROADCAST OF LIVE MATCH WAS NOT COVERED WITHIN THE DEFINITION OF ROYALTY AND THE SAME, THEREFORE, WAS NOT TAXABLE IN INDIA IN THE HANDS OF NSI. THE STAND OF THE ASSESSEE WAS THAT THE BROADCAST OF LIV E SIGNAL DOES NOT ENTAIL THE COPY RIGHT TO THE BROADCASTER AND THE SAME IS NOT IN THE NATURE OF ROYALTY. 3. THE STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTAB LE BY THE AO FOR THE FOLLOWING REASONS : A) THE MATCHES ARE TO BE BROADCASTED IN INDIAN TERR ITORY AND THE INCOME TO THE APPLICANT IS TO BE BY WAY OF ADVERTISEMENT R EVENUE AND SUBSCRIPTION REVENUE. THE APPLICANT WOULD BE PAYING TAXES ON THIS INCOME. WITHOUT THE RECEIPT OF SIGNAL ON ACCOUNT OF THE MATCHES TO BE PLAYED, NONE OF THIS INCOME WOULD ACCRUE TO THE APP LICANT. THUS, THIS CONTENTION OF THE APPLICANT THAT THE INCOME, IF ANY , ACCRUING TO M/S NIMBUS SPORTS INTERNATIONAL PTE LTD. CANNOT BE DEEM ED TO ACCRUE OR ARISE IN INDIA IS NOT CORRECT AND THE BUSINESS CONN ECTION OF ALL RECEIPTS IS IN INDIA AND HENCE, ALL RECEIPTS TO M/S NIMBUS S PORTS INTERNATIONAL PTE LTD. IS DEEMED TO ACCRUE OR ARISE IN INDIA. 3 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 B) THE BROADCAST OF LIVE MATCHES MEANS CAPTURING TH E IMAGE ON CAMERAS, AND THEN EDITING THE SAME BEFORE SENDING THE SIGNAL FOR TRANSMISSION AND ALSO ARRANGING FOR REPLAYS TO BE PROVIDED DURIN G THE MATCH ITSELF. THUS, PAYMENT FOR PURPOSE OF BROADCAST OF LIVE FEED IS IN THE NATURE OF ROYALTY AS PER THE PROVISIONS OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE INCOME TAX ACT, 1961. C) THE APPLICANT HAS STATED THAT THE PAYMENTS ARE S OLELY TO BE TAXED AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961 I.E. AS PER THE PROVISIONS OF SECTION 115A GOVERNING THE TAXABILITY OF ROYALTY. 4. FOR THE REASONS GIVEN ABOVE, THE AO HELD THAT TH E ENTIRE AMOUNT OF RS.4 CRORES PAYABLE BY THE ASSESSEE TO NSI WAS IN THE NA TURE OF THE ROYALTY AND TAX AT THE RATE OF 10% WAS DEDUCTIBLE FROM THE SAID PAYMENT. H E ALSO NOTED FROM CLAUSE NO. 4.3 OF THE AGREEMENT DATED 21-01-2009 THAT THE AMOU NT PAYABLE BY THE ASSESSEE COMPANY TO NSI WAS NET OF TAXES AND THE TAX LIABILI TY WAS TO BE BORNE BY THE ASSESSEE COMPANY. HE HELD THAT THE AMOUNT PAYABLE B Y THE ASSESSEE COMPANY TO NSI THUS WAS LIABLE TO BE GROSSED UP AS PER THE PRO VISIONS OF SECTION 195A OF THE ACT AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT TH E RATE OF 11.80% AT SOURCE FROM THE PAYMENTS TO BE MADE TO NSI IN TERMS OF THE AGRE EMENT DATED 21-01-2009. 5. AGAINST THE ORDER PASSED BY THE AO U/S 195, AN A PPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD, THE LEARNED CIT(APPEALS) FOUND THAT A SIMILAR ISSUE INVOLVED IN THE CASE OF NEO SPORTS BROADCAST PVT. LTD. WAS DECIDED BY HIS PREDECESSOR VIDE ORDER DATED 29-09-2008 IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS : SECTION 13 AND 14 OF C.P. ACT MAKES IT CLEAR THAT COPYRIGHT CAN ONLY SUBSIST IN A WORK. THEREFORE, IF THE FEED IS NOT CONSIDERED TO BE A WORK WITHIN THE MEANING OF THE ACT, THERE CAN BE NO COPYRIGHT PROTE CTION FOR THE SAME. WORK IS DEFINED IN SECTION 2(Y) OF THE ACT. UNDER THIS D EFINITION WORK IS A LITERARY, DRAMATIC, MUSICAL OR ARTISTIC WORK, A CINEMATOGRAPH FILM, AND A SOUND RECORDING. IT IS IMPORTANT TO NOTE THAT THE DEFINIT ION IS NOT AN INCLUSIVE 4 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 DEFINITION. A LIVE FEED HAS TO BE BROUGHT EXPRESSLY INTO ONE OF THESE CATEGORIES. THE FEED CLEARLY CANNOT BE A LITERARY, DRAMATIC, MUSICAL OR ARTISTIC WORK, AS NO ELEMENT OF ORIGINALITY GOES INTO THE SA ME. AS FAR AS THE DEFINITIONS OF CINEMATOGRAPHIC FILMS AND SOUND RECO RDING ARE CONCERNED, THE ACT CLEARLY CONTEMPLATES THAT THERE SHOULD BE A REC ORDING. IN OTHER WORDS, THERE IS A REQUIREMENT UNDER THE ACT THAT THE SOUND S AND IMAGES MUST BE REDUCED TO SOME TANGIBLE FORM WHEREUPON THE WORKS W OULD ENJOY COPYRIGHT PROTECTION. THE LIVE FEED IS NOT RECORDED ON ANY ME DIUM. IT IS SIMPLY TRANSMITTED DIRECTLY FROM THE STADIUM TO THE COORDI NATION STUDIO AND THEREON TO THE ORIGINATING FACILITY. IN SUCH A CASE, THERE CANNOT BE ANY COPYRIGHT IN THE LIVE FEED ITSELF. THIS MAKES IT CLEAR THAT A LI VE FEED, WHERE NO WORK WITHIN THE MEANING OF THE CP ACT IS CREATED, DOES NOT CONS TITUTE A COPYRIGHT, WHEREAS THE FEED RECEIVED IN THE FORM OF A RECORDIN G ON A TAPE OF DISC ETC. IS COVERED BY COPYRIGHT. I, THEREFORE, AGREE WITH THE CONTENTION OF THE APPELLANT THAT PAYMENTS TOWARDS LIVE TELECAST OF EVENTS ARE N OT A ROYALTY PAYMENT, HENCE, THERE WAS NO REQUIREMENT OF DEDUCTION OF TAX U/S. 195. KEEPING IN VIEW THE ABOVE DECISION OF HIS PREDECESS OR IN THE CASE OF NEO SPORTS BROADCAST PVT. LTD. ON A SIMILAR ISSUE AS WELL AS T HE DEFINITION OF THE TERM ROYALTY GIVEN IN THE INCOME-TAX ACT AS WELL AS IN ARTICLE 1 2(3) OF THE INDO-SINGAPORE DTAA, THE LEARNED CIT(APPEALS) HELD THAT THE AMOUNT PAYABLE BY THE ASSESSEE TO NSI AS PER THE AGREEMENT DATED 21-01-2009 WAS NOT I N THE NATURE OF ROYALTY AND THE SAME NOT BEING TAXABLE IN INDIA, THE ASSESSEE WAS N OT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID AMOUNT. 6. AS REGARDS THE OTHER ISSUE RAISED BY THE ASSESSE E IN ITS APPEAL RELATING TO THE BUSINESS CONNECTION OF NSI IN INDIA, THE LEARNED CI T(APPEALS), HOWEVER, HELD THAT NSI HAD BUSINESS CONNECTION IN INDIA FOR THE FOLLOW ING REASONS GIVEN IN PARAGRAPH NO. 4.3 OF HIS IMPUGNED ORDER : I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE AS SESSING OFFICER AND ALSO THE SUBMISSIONS AS MADE BY THE AUTHORIZED REPR ESENTATIVE OF THE APPELLANT COMPANY. HOWEVER, I AM INCLINED TO AGREE WITH THE VIEWS OF THE ASSESSING OFFICER. I FIND THAT THE CRICKET MATCHES WERE ACTUALLY BROADCASTED IN INDIA AND THE APPELLANT COMPANY WAS ALSO ABLE TO SELL AIRTIME TO VARIOUS 5 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 INDIAN ADVERTISING AGENCIES, COMMERCIALS OF WHICH W ERE TO BE TELECASTED ALONG WITH THE CRICKET MATCHES. IN CASE, THE APPELL ANT COMPANY HAD NOT RECEIVED THE SIGNALS OF THE CRICKET MATCHES FROM TH E NSI, IT WOULD HAVE BEEN DIFFICULT FOR THE APPELLANT COMPANY TO SELL THE AIR TIME TO INDIAN ADVERTISERS. FURTHER, THE NSI HAS ENTERED INTO A SEPARATE AGREEM ENT WITH SRILANKA CRICKET SLC WITH A VIEW TO ACQUIRE ALL MEDIA RIGHTS THROUGH OUT THE WORLD (INCLUDING INDIA) FOR BROADCASTING FEED FOR CRICKET MATCHES. A LTHOUGH, AS PER THE AGREEMENT BETWEEN THE APPELLANT COMPANY AND NSI, IT WAS RESPONSIBILITY OF THE NSI TO MAKE AVAILABLE BROADCASTING FEED FOR CRI CKET MATCHES OUTSIDE INDIA I.E. IN SRILANKA FOR TELECASTING CRICKET MATC HES ON NEO SPORTS CHANNEL. BUT UNLESS THESE SIGNALS WERE BECAMED IN INDIA, THE APPELLANT COMPANY WOULD NOT HAVE BEEN ABLE TO SELL AIRTIME. THEREFORE , I AM OF THE VIEW THAT THE NSI HAS A BUSINESS CONNECTION IN INDIA AND THIS GRO UND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEAL S), BOTH THE ASSESSEE AND REVENUE HAVE PREFERRED THEIR APPEALS BEFORE THE TRI BUNAL ON THE FOLLOWING GROUND : GROUND RAISED BY THE ASSESSEE: THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER P ASSED BY LD. DDIT, HOLDING THAT NSI HAS BUSINESS CONNECTION IN INDIA, HENCE INCOME THEREOF IS DEEMED TO ACCRUED OR ARISE IN INDIA, WITHOUT PROPER LY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. GROUND RAISED BY THE REVENUE: 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. (SINGAPURE {NS} FOR THE BROA DCAST OF LIVE FEED IS DIFFERENT FROM THAT MADE FOR THE PURPO SE OF BROADCAST OF RECORDED FEED, AND HENCE IS NOT IN THE NATURE OF ROYALTY. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE REVENU E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ADIT, INTERNATIONAL TAXATION VS. NEO SPORTS BROADCAST PVT. LTD. RENDERE D VIDE ORDER DATED 9 TH NOV., 6 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 2011 PASSED IN ITA NO.99/MUM/2009. A COPY OF THE SA ID ORDER IS PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT SIMIL AR ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. AS REGARDS THE NATURE OF PAYMENT FOR LIVE BROADCASTING OF MATCHES, THE TRIBUNAL HAS DISCUSSED THE ISSUE IN THE LIGHT OF THE RELEVANT FACTS IN PARAGRAPH NO. 13 WHICH READS AS U NDER : ADVERTING TO THE FACTS OF THE INSTANT CASE IT IS NOTICED THAT THE DISPUTE HAS ARISEN ON THE CONSIDERATION FOR LIVE BROADCASTI NG OF MATCHES, WHICH HAS BEEN CATEGORIZED BY THE DDIT AS SYNONYMOUS WITH THE GRANTING OF COPYRIGHT IN SUCH WORK. THE LEARNED DEPARTMENTAL REPRESENTATI VE HAS ACCENTUATED ON THE POINT THAT THE LIVE TELECASTING ITSELF INVOLVES THE TRANSFER OF COPYRIGHT. IN SUPPORT OF THIS CONTENTION HE REFERRED TO PARA 6.4 OF THE IMPUGNED ORDER AS PER WHICH THE ASSESSEE ITSELF SUBMITTED THAT FOR LI VE TELECASTING, IMAGES OF THE MATCHES HAVE TO BE CAPTURES WHICH ARE TRANSFERRED T O CONTROL ROOM BY DIFFERENT CAMERAS. THE DIRECTOR THEN CHOOSES THE BE ST IMAGE OUT OF THOSE RECEIVED FROM DIFFERENT ANGLES TO BE TELECASTED SO THAT VIEWERS CAN ENJOY THE SAME FROM THE BEST POSSIBLE ANGLES. WE ARE UNABLE T O APPRECIATE AS TO HOW THIS PROCEDURE OF LIVE TELECASTING RESULTS INTO TRA NSFER OF COPYRIGHT CRICKET MATCH. THE RELEVANT CRITERIA IS NOT CAPTURING OF DI FFERENT IMAGES AND SENDING THEM TO THE CONTROL ROOM, BUT TELECASTING THE FINAL IMAGE. IT IS ONLY WHEN A PARTICULAR IMAGE IS FINALLY CHOSEN OUT OF DIFFERENT OPTIONS AVAILABLE BEFORE THE DIRECTOR WHICH IS TELECASTED THAT GIVES BIRTH T O A WORK AS PER SECTION 2(Y) OF THE COPYRIGHT ACT,1957 CAPABLE OF COPYRIGHT . IN OUR CONSIDERED OPINION THE LIVE TELECAST OF A MATCH OR ANY OTHER E VENT CANNOT BE CONSIDERED AS TRANSFER OF COPYRIGHT IN SUCH MATCH. IT IS ONLY WHEN THE LIVE TELECAST OF A MATCH IS DONE THAT THE QUESTION OF CREATION OF COPY RIGHT IN SUCH MATCH ARISES. THE SECOND OR LATER TELECASTING OF THE SUCH EVENT S HALL BE CONSIDERED AS USE OF THE WORK AND CONSIDERATION FOR THE BROADCASTIN G OF SUCH RECORDED MATCHES SHALL BE CONSIDERED AS PAYMENT FOR THE USE OF COPYRIGHT IN SUCH EVENT. IT IS FOR THIS REASON AND RIGHTLY SO THAT TH E ASSESSEE VOLUNTEERED TO INCLUDE THE CONSIDERATION FOR THE LICENSE OF THE RE CORDED BROADCAST AS ROYALTY WHILE MAKING APPLICATION U/S 195(2) OF THE ACT. 8. THE TRIBUNAL THEN REFERRED TO A BOOK TITLED LAW OF COPYRIGHT AND INDUSTRIAL DESIGNS BY P. NARAYANAN WHEREIN IT WAS STATED IN PARAGRAPH NO. 17.02 THAT A CINEMATOGRAPH FILM DEPICTING LIVE EVENTS LIKE SPORT ING EVENTS, HORSE RACE, ETC. 7 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 CANNOT INFRINGE ANY COPYRIGHT BECAUSE THERE IS NO COPYRIGHT IN LIVE EVENTS. THE TRIBUNAL HELD THAT THERE IS THUS NO COPYRIGHTS IN T HE LIVE EVENTS AND DEPICTING THE SAME CANNOT INFRINGE ANY COPYRIGHT. THE TRIBUNAL AL SO REFERRED TO THE PROPOSED DIRECT TAX CODE BILL WHEREIN LIVE COVERAGE OF ANY EVENT IS PROPOSED TO BE INCLUDED IN THE DEFINITION OF ROYALTY AND HELD T HAT IF LIVE COVERAGE HAD BEEN A PART OF COPYRIGHT OF ANY WORK AS WAS SOUGHT TO BE C ONTENDED ON BEHALF OF THE REVENUE, THEN THERE WAS NO NEED TO CLASSIFY LIVE CO VERAGE AS A SEPARATE ITEM. IT WAS HELD BY THE TRIBUNAL THAT THE DEFINITION OF ROYALTY UNDER THE INCOME-TAX ACT, 1961 THUS DOES NOT INCLUDE ANY CONSIDERATION FOR LIVE CO VERAGE OF ANY EVENT WHICH IS NOW SOUGHT TO BE INCLUDED IN THE DEFINITION OF ROY ALTY BY THE DIRECT TAX CODE, 2010. THE TRIBUNAL, THEREFORE, HELD THAT ANY CONSID ERATION FOR LIVE BROADCASTING CANNOT BE CONSIDERED AS ROYALTY FOR THE TRANSFER OF COPYRIGHT SO AS TO FALL WITHIN THE DOMINE OF EXPLANATION 2 TO SECTION 9(1)(VI). RESPE CTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL R ENDERED IN THE CASE OF NEO SPORTS BROADCAST PVT. LTD (SUPRA), WE UPHOLD THE IM PUGNED ORDER OF THE LEARNED CIT(APPEALS) HOLDING THAT THE AMOUNT PAID BY THE AS SESSEE FOR LIVE COVERAGE OF CRICKET MATCHES TO NSI IS NOT TAXABLE IN THE HANDS OF NSI AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID AMOU NT. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 9. AS REGARDS THE APPEAL OF THE ASSESSEE, IT IS OBS ERVED THAT THE SOLITARY ISSUE INVOLVED THEREIN IS ALSO SQUARELY COVERED BY THE DE CISION OF THE TRIBUNAL IN THE CASE OF NEO SPORTS BROADCAST PVT. LTD (SUPRA) WHEREIN A SIMILAR ISSUE REGARDING BUSINESS CONNECTION IN INDIA HAS BEEN DECIDED BY TH E TRIBUNAL IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO. 26 TO 29 : 8 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 26. WE ARE UNABLE TO APPROVE THIS POINT OF VIEW OF THE AUTHORITIES BELOW FOR THE REASON THAT NIMBUS HAS PROVIDED LICENSE FOR THE LIVE BROADCAST OF CERTAIN MATCHES TO THE ASSESSEE FOR A DEFINITE CONSIDERATIO N. THE RIGHTS IN SUCH BROADCAST VEST WITH NIMBUS. AFTER THE LIVE BROADCAS T BY THE ASSESSEE, NIMBUS WILL CONTINUE TO HOLD RIGHT OVER SUCH BROADC AST. THE MERE ACT OF ALLOWING THE ASSESSEE BY NIMBUS TO LIVE BROADCAST T HE MATCHES FOR A DEFINED CONSIDERATION, IN OUR CONSIDERED OPINION, WOULD NOT CONSTITUTE A BUSINESS CONNECTION IN INDIA. IN ORDER TO CONSTITUTE A BUSIN ESS CONNECTION OF A NON- RESIDENT IN INDIA, IT IS NECESSARY THAT SOME SORT O F BUSINESS ACTIVITY MUST BE DONE BY THE NON-RESIDENT IN THE TAXABLE TERRITORY O F INDIA. CLAUSE (A) OF EXPLANATION 1 TO SECTION 9(1)(I) PROVIDES THAT IN THE CASE OF BUS INESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN IND IA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARIS E IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTAB LE TO THE OPERATIONS CARRIED OUT IN INDIA. FROM THE ABOVE PROVISION IT BECOMES M ANIFEST THAT THE NON- RESIDENT MUST CARRY OUT CERTAIN OPERATIONS IN INDIA SO AS TO FALL WITHIN THE AMBIT OF SECTION 9(1)(I). 27. THE RELEVANT CRITERIA IS THE CARRYING ON OF BUS INESS OPERATIONS IN INDIA BY THE NON-RESIDENT AND NOT THE EARNING OF INCOME BY A NY RESIDENT FROM THE USE OF ANY PRODUCT ACQUIRED FROM THE NON-RESIDENT. WHER E THE NON-RESIDENT ONLY ALLOWS SOME RESIDENT TO EXPLOIT CERTAIN RIGHT VESTE D IN IT ON COMMERCIAL BASIS, IT CANNOT BE SAID THAT THE NON-RESIDENT HAS CARRIED OUT ANY BUSINESS ACTIVITY IN INDIA. THE ACT OF THE ASSESSEE EARNING REVENUES FROM INDIA CANNOT LEAD TO A BUSINESS CONNECTION OF NIMBUS IN INDIA AS THE TRANSACTION BETWEEN ASSESSEE AND NIMBUS IS CONFINED TO RECEIVING BROADC ASTING RIGHT FOR A CONSIDERATION. WHETHER THE ASSESSEE EARNS INCOME OR SUFFERS LOSSES FROM THE EXPLOITATION OF SUCH BROADCASTING IS NOT THE CONCER N OF NIMBUS. SUCH TRANSACTION OF THE ASSESSEE WITH NIMBUS ON PRINCIPA L TO PRINCIPAL BASIS CANNOT BE CONSIDERED AS A GROUND FOR HOLDING THAT N IMBUS HAS A BUSINESS CONNECTION IN INDIA AND HENCE THE INCOME SHALL ACCR UE TO NIMBUS THROUGH THIS BUSINESS CONNECTION IN INDIA. 28. IN THE CASE OF CIT VS. R.D.AGARWAL & CO. & ANR. [(1965) 56 ITR 20 (SC)] THE HONBLE SUPREME COURT HAS HELD THAT THE EXPRESS ION BUSINESS CONNECTION UNDOUBTEDLY MEAN SOME THING MORE THAN BUSINESS. A BUSINESS CONNECTION HAS BEEN HELD TO BE INVOLVING A RELATION BETWEEN THE BUSINESS CARRIED ON BY A NONRESIDENT YIELDING PROFITS OR GAI NS AND SOME ACTIVITY IN THE 9 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 TAXABLE TERRITORIES WHICH PROVIDES DIRECTLY OR INDI RECTLY TO THE EARNING OF THOSE PROFITS OR GAINS. A STRAY OR ISOLATED TRANSAC TION HAS BEEN HELD TO BE NOT CONSTITUTING A BUSINESS CONNECTION. IN THIS CASE TH E ASSESSEE PROCURED ORDERS IN TAXABLE TERRITORIES FOR NON-RESIDENT FOR WHICH H E WAS NOT DULY AUTHORIZED AND CONTRACTED FOR THE SALE OF GOODS. THE ORDERS WE RE ACCEPTED BY THE NON- RESIDENT. PRICE WAS RECEIVED AND DELIVERY WAS GIVEN OUTSIDE INDIA. NO OPERATION SUCH AS PROCURING OF MATERIAL OR MANUFACT URE OF FINISHED GOODS TOOK PLACE WITHIN INDIA. THE HONBLE SUPREME COURT HELD THAT THERE WAS NO BUSINESS CONNECTION OF THE NON-RESIDENT. 29. FROM THIS JUDGMENT IT CAN BE EASILY DEDUCED THA T WHAT IS RELEVANT IS THE BUSINESS CONNECTION OF THE NON-RESIDENT BY CARRYING OUT SOME OPERATIONS IN INDIA. MERE SALE OF GOODS BY A NON-RESIDENT IN INDI A ON PRINCIPAL TO PRINCIPAL BASIS DOES NOT ESTABLISH ANY BUSINESS CONNECTION OF NON-RESIDENT WITH INDIA. IF WE PRESUME FOR A MOMENT WITHOUT AGREEING THAT CO NTENTION ADVANCED ON BEHALF OF THE REVENUE IN THIS REGARD MERITS ACCEPTA NCE, EVEN THEN NO INCOME WILL BE DEEMED TO ACCRUE OR ARISE TO THE NON-RESIDE NT IN INDIA BY REASON OF APPLICATION OF EXPLANATION 1 (A) TO SECTION 9(1)(I) , WHICH PROVIDES THAT ONLY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTAB LE TO THE OPERATIONS CARRIED OUT IN INDIA SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER THIS CLAUSE. AS BY SELLING THE GOODS IN INDIA, THE NON-RESIDENT CAN NOT BE SAID TO HAVE CARRIED OUT ANY BUSINESS IN INDIA, THERE CANNOT BE ANY ISSU E OF THE APPLICABILITY OF SECTION 9(1)(I). IN THE SAME MANNER, WHEN A NON-RES IDENT ALLOWS ANY RESIDENT TO COMMERCIALLY EXPLOIT ITS ASSET FOR A CONSIDERATI ON, THE BUSINESS CONNECTION IN TERMS OF SECTION 9(1)(I) WILL BE LACKING. THUS I T IS CLEAR THAT BOTH THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN HOLDING THA T NIMBUS HAS A BUSINESS CONNECTION IN INDIA. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL A S ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF THE CASE OF NEO SPOR TS BROADCAST PVT. LTD. (SUPRA), WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH IN THE SAID CASE AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 10 ITA NO.2270/MUM/2011 ITA NO.1598/MUM/2011 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF NOV., 2012. SD/- SD/- (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED: 23 RD NOV., 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, L-BENCH. (TRUE COPY) BY ORD ER ASSTT. REGI STRAR, ITAT, MUMBAI BENCHES, MUMB AI. WAKODE
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