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

ITA 1933/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3947 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHOUHAN
• Keywords: Business income; Transfer pricing; Double taxation relief; Permanent establishment
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.1555/M/2014 ASSESSMENT YEAR: 2009-10 DY. DIRECTOR OF INCOME-TAX- 3(1), ROOM NO.136, 1 ST FLOOR, SCINDIA HOUSE, N.M. ROAD, BALLARD ESTATE, MUMBAI - 400038 VS. M/S. IMG MEDIA LTD., C/O. P.W.C. PVT. LTD., PWC HOUSE, 18/A, GURU NANAK ROAD (STATION ROAD), BADRA (W), MUMBAI 400 050 PAN: AACCI 4811L (APPELLANT) (RESPONDENT) ITA NO.1933/M/2014 ASSESSMENT YEAR: 2009-10 M/S. IMG MEDIA LTD., 608, 1, B/2 SAI PRASAD CO. HSG. SOCIETY, WESTERN EXPRESSWAY HIGHWAY ROAD, BANDRA, MUMBAI 400 051 PAN: AACCI 4811L VS. DY. DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION -3(1), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAVI SHARMA, A.R. REVENUE BY : SHRI JASBIR CHOUHAN, D.R. DATE OF HEARING : 17.02.2016 DATE OF PRONOUNCEMENT : 26.02.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED ARE THE CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE AGAINST THE ORDER DATED 23.12.2013 O F THE DISPUTE RESOLUTION PANEL [HEREINAFTER REFERRED TO AS THE DRP] RELEVANT TO ASSESSMENT YEAR 2009-10. ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 2 2. THE REVENUE, IN ITS APPEAL, HAS AGITATED THE ACT ION OF THE LD. DRP IN HOLDING THAT THE INCOME RECEIVED BY THE ASSESSEE IS BUSINESS RECEIPTS AND NOT ROYALTY/FEE FOR TECHNICAL SERVICES AS WAS HELD BY T HE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) IN DRAFT ASSESS MENT ORDER. WHEREAS THE ASSESSEE IN HIS APPEAL HAS AGITATED THE LEVY OF INT EREST UNDER SECTION 234B AND SECTION 234C OF THE INCOME TAX ACT. THE RELEVANT F ACTS RELATING TO THE ISSUES UNDER CONSIDERATION AS BROUGHT OUT FROM THE ORDER O F THE LD. DRP ARE AS UNDER: IT HAS BEEN SUBMITTED BY ASSESSEE THAT IMG MEDIA L IMITED ('THE COMPANY OR THE ASSESSEE') IS A TAX RESIDENT OF UN ITED KINGDOM ('UK') AS PER ARTICLE 4 OF THE INDIA-UK DTAA. IT IS A WORLD LEADER IN THE FIELD OF MULTIMEDIA COVERAGE OF SPORTS EVENTS, INCLUDING CRI CKET. 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 INDIAN PREMIER LEAGUE (IPL') 2008 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 MATCH ES FOR THE SECOND IPL 2009 EVENT. THE ASSESSEE FURTHER SUBMITTED THAT FOR IPL 2008 EV ENT, 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 OR THE ASSESSEE WAS PRESENT IN INDIA IN FEBRUARY/MARCH 2009 FOR THE PURPOSE OR RECCE / INSPECTION ACTIVITIES BEFORE THE COMMENCEMENT OF MATCHES OF IP L 2009 EVENT. HOWEVER, THE SECOND IPL 2009 EVENT COINCIDED WITH INDIAN ELE CTIONS AND THEREFORE, THE INDIAN GOVERNMENT REFUSED TO COMMIT SECURITY BY IND IAN PARAMILITARY FORCES. AS A RESULT, BCCI DECIDED TO HOST THE SECOND SEASON OF THE LEAGUE OUTSIDE INDIA. ON 24 MARCH 2009, THE BCCI OFFICIALLY ANNOUN CED 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 ASSESSEES PERSONNEL IN INDIA EXCEEDED THE THRESHOLD LIMIT OF 90 DAYS IN THE '12 MONTHS' PERIOD, BEGINNING FROM MARCH 22, 2008 TO MARCH 21, 2009, A SERVICE PERMANENT ESTABLISHMENT (PE') OF THE ASSESSEE WAS CONSTITUTE D IN INDIA UNDER ARTICLE 5(2)(K) OF THE INDIA-UK DTAA AND THE INCOME ATTRIBU TABLE WAS COMPUTED ON THE BASIS OF TRANSACTIONAL NET MARGIN METHOD (TNMM ) PRESCRIBED UNDER THE INDIAN TRANSFER PRICING REGULATIONS. THE ASSESSEE FURTHER SUBMITTED THE SUMMARY OF THE R ETURNED INCOME AND PROPOSED ADDITION MADE BY THE AO AS UNDER: PARTICULAR AMOUNT (INR) RETURNED INCOME 9,23,36,823 ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE AO THAT THE SERVICES RENDERED BY THE ASSESSEE WERE IN THE NATURE OF TECHNICAL SERVICES AND ACCORDINGLY, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE REVENUE EARNED BY IT SHOULD NOT BE TAXABLE AS FEE F OR TECHNICAL SERVICES UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE INCOME T AX ACT 1961 (THE ACT') READ WITH THE PROVISIONS OF ARTICLE 13 OF THE DTAA. WHI LE PASSING THE ORDER FOR THIS ASSESSMENT YEAR, THE AO HAS RELIED ON THE AGRE EMENT FOR THE IPL 2009 EVENT ON THE PREMISE THAT BOTH THE EVENT RELATES TO LIVE AUDIO AND VIDEO COVERAGE OF MATCHES AND ON THE BASIS OF THE ASSESSE ES SUBMISSIONS THAT THE PRODUCTION WORK FLOW FOR BOTH THE EVENTS IS SIMILAR . THE AO AFTER RELYING ON THIS LATER AGREEMENT HAS HELD THAT THE SERVICES BEI NG PROVIDED BY THE ASSESSEE COMPANY ARE NOTHING BUT FEES FOR TECHNICAL SERVICES AS PER SECTION 9(I)(VII) OF THE ACT AND ARTICLE 13 OF THE DTAA BETWEEN INDIA AN D UK. THE AO ALSO HELD THAT THE SERVICE WOULD ALSO QUALIFY AS ROYALTY UNDER ARTICLE 13 OF THE DTAA AND EXPLANATION TO SECTION 9(I)(VI) OF THE ACT . IT HAS FURTHER BEEN HELD BY THE AO THAT ONCE IT IS HELD THAT THE SERVICES BEING PROVIDED ARE TAXABLE AS PER ARTICLE 13 OF THE DTAA, THE PROVISIONS OF ARTICLE 5(2)(K) OF THE DTAA BECOMES REDUNDANT. THE REASON FOR THE SAME BEING THAT ARTICLE 5(2)(K) OF THE DTAA SPECIFICALLY EXCLUDES THE SERVICES IN THE NATURE OF FTS / ROYALTY (UNDER ARTICLE 13 OF TH E DTAA) FOR THE PURPOSE OF DETERMINATION OF SERVICE PE. THE ASSESSEE HAS MADE DETAILED SUBMISSIONS FACTUAL AS WELL AS LEGAL AND ARGUED THAT THE RECEIPTS FROM BCCI WOULD NOT CONSTI TUTE FTS UNDER THE PROVISIONS OF THE ACT AS WELL AS DTAA BETWEEN INDIA AND UK. THE AO AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE HELD THAT THE INCOME OF THE ASSESSEE COMPANY IS TAXABLE AS FEES FOR TECHNICAL SERVICES A S PER THE PROVISIONS OF THE ACT AS WELL AS THE DTAA BETWEEN INDIA AND UK. ALTE RNATIVELY, THE AO ALSO HELD THAT THE SAME WOULD ALSO BE TAXABLE AS ROYALTY INCOME IN INDIA. 3. HOWEVER, THE LD. DRP, AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE, HELD THAT THE FEES RECEIVED BY THE ASSESS EE FOR THE SERVICES WAS NEITHER FEES FOR TECHNICAL SERVICES NOR WOULD FALL IN THE D EFINITION OF ROYALTY. THE LD. DRP UPHELD THE CONTENTION OF THE ASSESSEE THAT IT H AS A SERVICE PE IN INDIA IN TERMS OF ARTICLE 5(2)(K) OF DTAA BETWEEN INDIA AND UK AND INCOME FROM THIS SERVICE WOULD BE TAXABLE AS BUSINESS INCOME UNDER A RTICLE 7 READ WITH ARTICLE (TAXABLE @ 42.23%) INCOME AS PER DRAFT ASSESSMENT ORDER BY HOLDING THE SAME AS FTS OR ALTERNATIVELY AS ROYALTY 254,356,860 (TAXABLE @ 10.5575%) ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 4 5 OF THE DTAA BETWEEN INDIA AND UK. BEING AGGRIEVE D FROM THE ABOVE DIRECTIONS OF THE LD. DRP, THE REVENUE HAS COME IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS SUBMITTED THAT EVEN IN THE SUBSEQUENT YEAR A.Y. 2010-11, THE RELEVANT ISSUE WA S RAISED BEFORE THE TRIBUNAL IN ITA NO.1513/M/M/2014 FOR A.Y. 2010-11. THE TRIBUNAL, AFTER GOING THROUGH THE VARIOUS CLAUSES OF THE DTAA BETWE EN INDIA AND UK AND CONSIDERING THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE, HAS HELD VIDE ITS ORDER DATED 26.08.15 THAT THE AMOUNT RECEIVED BY TH E ASSESSEE WAS NOT IN THE NATURE OF FEE FOR TECHNICAL SERVICES BY OBSERVING A S UNDER: 6. WE NOTICE THAT THE ARTICLE 13(4)(C) OF THE INDIA-UK DTAA ALSO USES THE EXPRESSION 'MAKE AVAILABLE'. THOUGH THE SAID EXPRES SION 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 S AME EXPRESSION, I.E., 'MAKE AVAILABLE' IN THE CONTEXT OF 'FEE FOR TECHNICAL SER VICES', WE ARE OF THE VIEW THAT 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 O F DISCUSSIONS MADE IN THE EARLIER PARAGRAPHS. WE NOTICE THAT THE ASSESSEE PRO DUCES THE FEED (PROGRAM CONTENT) OF LIVE COVERAGE OF AUDIO-VIDEO VISUALS OF THE CRICKET MATCHES BY USING ITS TECHNICAL EXPERTISE. AFTER THAT IT DELIVERS THE FEE D (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 CONTENT' PRODUCED BY IT BY USING ITS TECHNICAL EXPE RTISE, I.E., THE ASSESSEE DOES NOT DELIVER OR MAKE AVAILABLE ANY TECHNOLOGY/ KNOWHOW T O THE BCCI. THERE SHOULD NOT BE ANY DISPUTE THAT THE PRODUCTION OF 'PROGRAM CONT ENT' BY USING TECHNICAL EXPERTISE IS ALTOGETHER DIFFERENT FROM THE PROVISIO N OF TECHNOLOGY ITSELF. IN THE FORMER CASE, THE RECIPIENT WOULD RECEIVE ONLY THE P RODUCT AND HE CAN USE THE PRODUCT ACCORDING TO HIS CONVENIENCE, WHERE AS IN T HE LATER CASE, THE RECIPIENT WOULD GET THE TECHNOLOGY/KNOWHOW AND HENCE HE WOULD BE ABLE TO USE THE TECHNOLOGY /KNOWHOW ON HIS OWN IN ORDER TO PRODUCE ANY OTHER PROGRAM CONTENT OF SIMILAR NATURE. IN THE LATER CASE, THE TECHNOLOG Y/KNOWHOW WOULD BE 'MADE AVAILABLE' TO THE RECIPIENT, IN WHICH CASE THE PAYM ENT GIVEN WOULD FALL UNDER THE CATEGORY OF 'FEE FOR TECHNICAL SERVICES'. HOWEVER, IN THE FORMER CASE, THERE IS NO QUESTION OF MAKING AVAILABLE OF ANY TECHNOLOGY/KNOW HOW AND HENCE THE PAYMENT GIVEN WOULD BE IN THE NATURE OF PAYMENT MADE FOR PR ODUCTION OF 'PROGRAM CONTENT OR LIVE FEED' AND NOT FOR SUPPLY OF TECHNOLOGY. ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 5 8. THE LD DRP HAS OBSERVED THAT THE AGREEMENT ENTER ED BETWEEN THE ASSESSEE AND BCCI PRESCRIBES THE QUALITY STANDARDS IN MINUTE DET AILS AND THE SAME RESULTS IN TOTAL EXCHANGE OF TECHNICAL PLANS AND DESIGNS BETWEEN THE ASSESSEE AND THE BROADCASTERS. IN OUR VIEW, THERE IS A FALLACY IN TH E 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 RESTRICTED TO PRODUCTION OF LIVE COVERAGE AND THE JOB OF BROADCASTING THE SAME IS UNDERTAKEN BY T HE BCCI. THE BCCI, IN TURN, HAS GIVEN LICENSE TO CERTAIN COMPANIES (CALLED LICENSEE S) AND THEY HAVE UNDERTAKEN THE JOB OF BROADCASTING THE LIVE COVERAGE OF CRICKET MA TCHES 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 COMP ATIBLE TECHNOLOGY AND EQUIPMENTS SO THAT THE LIVE COVERAGE CAN BE BROADCA ST WITHOUT COMPROMISING THE QUALITY. THUS, IN OUR VIEW, THE TECHNICAL ASPECTS A RE SPECIFIED IN THE AGREEMENT IN ORDER TO ENSURE THAT THE PROGRAM CONTENT IS BROADCA ST AT THE SAME QUALITY IN WHICH IT WAS PRODUCED. THE SAME WAS SOUGHT TO BE ACHIEVED BY SYNCHRONIZING THE QUALITY OF TECHNICAL EQUIPMENTS BETWEEN THE ASSESSEE AND TH E BROADCASTERS (LICENSEES). SUCH KIND OF SYNCHRONIZATION OF TECHNOLOGY WOULD EN SURE SEAMLESS FUNCTION AND COMPLETE COORDINATION BETWEEN THE ASSESSEE AND THE BROADCASTERS. THUS, THERE IS A DIFFERENCE BETWEEN THE TECHNOLOGY INVOLVED IN THE P RODUCTION OF LIVE COVERAGE FEED OF CRICKET MATCHES AND THE TECHNOLOGY REQUIRED TO B ROADCAST THE SAME IN THE REQUIRED QUALITY. HENCE, IN ORDER TO ENSURE AND MAI NTAIN QUALITY OF LIVE COVERAGE FEED, IT BECOMES NECESSARY ON THE PART OF THE ASSES SEE 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 REQUIREMENTS DOES NOT MEAN THAT THE ASSESSEE HAS SUPPLIED THE TE CHNOLOGY INVOLVED IN THE PRODUCTION OF LIVE COVERAGE FEED TO THE BROAD CASTE RS. IF THAT BE THE CASE, THE BROADCASTERS SHOULD BE IN A POSITION TO USE THE TEC HNOLOGY 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 WOU LD ENABLE THEM TO PRODUCE THE LIVE COVERAGE FEEDS ON THEIR OWN AFTER THE CONCLUSI ON OF IPL 2008 AND IPL 2009 CRICKET MATCHES. IN THAT CASE THE ESSENTIAL CONDITI ON OF 'MAKE AVAILABLE' CLAUSE FAILS AND HENCE THE AMOUNT RECEIVED BY THE ASSESSEE CANNO T BE CONSIDERED AS 'FEE FOR TECHNICAL SERVICES' IN TERMS OF ARTICLE 13(4)(C) OF THE DTAA ENTERED BETWEEN INDIA AND UK. 9. THE LD DRP HAS OBSERVED THAT THE LIVE COVERAGE O F CRICKET MATCHES INVOLVE INSTANT AND CONTINUOUS PRODUCTION AND BROADCASTING OF LIVE MATCHES. THE EXISTING PROGRAM WOULD KEEP MERGING WITH THE NEW WORK. FURTHER, THE BROADCASTERS ARE ABLE TO SPLIT THE PROGRAM CONTENT IN ORDER TO INSERT ADVERTISEMEN TS. ALL THESE ASPECTS, IN OUR VIEW, WOULD NOT BRING THE PAYMENT UNDER THE CATEGOR Y OF 'FEE FOR TECHNICAL SERVICES'. IT ONLY SHOWS THE TECHNICAL EXPERTISE OF THE ASSESSEE TO PRODUCE A FLEXIBLE PROGRAM CONTENT TO GIVE ENHANCED QUALITY OF VIEWING THE LIVE MATCHES. 10. BEFORE US, THE LD D.R PLACED RELIANCE ON THE DE CISION RENDERED BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF NIMBUS SPORT INTER NATIONAL PTE LTD (2012)(18 TAXMANN.COM 105), WHEREIN THE TRIBUNAL HAD HELD THA T THE SERVICES OR PRODUCTION AND GENERATION OF LIVE TELEVISION SIGNAL WERE IN TH E NATURE OF TECHNICAL SERVICES. THE LD A.R CONTENDED THAT THE DELHI TRIBUNAL DID NOT EX AMINE THE PRINCIPLE OF MAKE ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 6 AVAILABLE. WE NOTICE THAT THE CASE OF NIMBUS SPORT INTERNATIONAL PTE LTD IS COVERED BY INDIA-SINGAPORE DTAA AND IT ALSO USES THE EXPRES SION 'MAKE AVAILABLE' IN THE DEFINITION OF 'FEE FOR TECHNICAL SERVICES'. IN THE CASE OF NIMBUS SPORTS INTERNATIONAL (SUPRA), THE PRINCIPLE OR CONCEPT OF MAKE AVAILABL E HAS NOT BEEN EXAMINED BY THE TRIBUNAL. ACCORDINGLY, WE AGREE WITH THE CONTENTION S OF THE ASSESSEE THAT THE SAID DECISION IS DISTINGUISHABLE. 11. SINCE THE AMOUNT RECEIVED BY THE ASSESSEE IS HE LD TO BE NOT IN THE 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. 5. THE TRIBUNAL FURTHER EXAMINED WHETHER THE PAYMEN T RECEIVED BY THE ASSESSEE WOULD FALL UNDER THE CATEGORY OF ROYALTY. AFTER CONSIDERING THE SUBMISSIONS AND THE DETAILED EVIDENCE ON THE FILE, THE TRIBUNAL HELD THAT THE PAYMENT RECEIVED BY THE ASSESSEE CANNOT BE CONSIDER ED AS ROYALTY IN TERMS OF INDIA UK DTAA. THE RELEVANT FINDINGS OF THE TRIB UNAL ON THIS ISSUE ARE REPRODUCED AS UNDER: 13. WE HAVE NOTICED EARLIER, THE ASSESSEE WAS ENGA GED BY BCCI TO PRODUCE LIVE COVERAGE OF AUDIO AND VIDEO VISUALS OF CRICKET MATC HES. THE ASSESSEE SHALL PRODUCE THE PROGRAM CONTENT, WHICH IS BROADCAST THROUGH THE BROADCASTERS APPOINTED BY BCCI. THE JOB OF THE ASSESSEE ENDS UPON THE PRODUCT ION OF THE PROGRAM CONTENT. ACCORDING TO THE ASSESSEE, THE PROGRAM CONTENT SHAL L BECOME THE PROPERTY OF THE BCCI. WE NOTICE THAT THE REVENUE HAS NOT BROUGHT AN Y MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS KEPT THE OWNERSHIP RIGHTS OVE R 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 USING EQUIPMENTS TO CARRY OUT THIS WORK WHICH IS NOTHING BUT EQUIPMENT ROYALTY AS PER THE ACT AS WEL L AS THE DTAA.' WE ARE UNABLE TO UNDERSTAND THE RATIONALE BEHIND TH IS OBSERVATION. IF THE ASSESSEE WAS USING THE EQUIPMENTS BELONGING TO BCCI AND IF T HAT 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 R ECEIVED THE MONEY FOR PRODUCING LIVE COVERAGE OF CRICKET MATCHES. THE EQUIPMENTS RE QUIRED 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 B RING THE EQUIPMENTS, THEN THE CONSIDERATION PAYABLE FOR THE PRODUCTION OF LIVE CO VERAGE OF CRICKET MATCHES SHOULD GO UP. THUS, IN OUR VIEW, IT WAS A SIMPLE CASE OF C OMMERCIAL AGREEMENT ENTERED BETWEEN THE PARTIES WITH REGARD TO THE MODALITIES T O BE FOLLOWED AND THE SAME IS NOT A DETERMINATIVE FACTOR TO DECIDE ABOUT THE NATU RE OF PAYMENT RECEIVED BY THE ASSESSEE. ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 7 14. THE LD D.R.P. HAS FURTHER OBSERVED THAT THE ASS ESSEE HAS DEVELOPED COMMERCIAL AND SCIENTIFIC EXPERIENCE IN THE FIELD OF COMMERCIA L AND SCIENTIFIC EXPERIENCE. THE TERM 'ROYALTY' IS DEFINED AS UNDER IN THE INDIA- UK DTAA:- 3. FOR THE PURPOSES OF THIS ARTICLE, THE TERM 'ROYA LTIES' MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N 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 OTHE R MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROA DCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTI FIC EQUIPMENT, OTHER THAN INCOME DERIVED BY AN ENTERPRISE OF A CONTRACTING ST ATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC.' A CAREFUL PERUSAL OF THE DEFINITION OF ROYALTIES EXTRACTED ABOVE, WOULD SHOW THAT THE PAYMENT, IN ORDER TO CONSTITUTE ROYALTY, SHOULD HAVE BEEN MADE 'FOR THE USE OF, OR THE RIGHT TO USE ANY COPYRIGHT ETC'. IN THE INST ANT CASE, WE HAVE NOTICED THAT THE PAYMENT WAS MADE BY BCCI TO THE ASSESSEE FOR PRODUC ING THE PROGRAM CONTENT CONSISTING OF LIVE COVERAGE OF CRICKET MATCHES. FUR THER, WE HAVE NOTICED THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD RETAINED THE OWNERSHIP OF THE PROGRAM CONTENT. THE HONBLE DELHI HIGH COURT HAD A N OCCASION TO EXAMINE AN IDENTICAL ISSUE IN THE CASE OF CIT VS. DELHI RACE C LUB (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 CONDUCTING OF HORSE RACES AND IT MADE PAYMENT FOR LIVE TELECAST OF RACES. THE AO HELD THA T THE SAID PAYMENT WOULD FALL UNDER THE DEFINITION OF ROYALTY FALLING WITHIN TH E 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 COMMUNIC ATION 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 WHIC H COPYRIGHT SUBSISTS AS THE SAID SECTION CONTEMPLATES COPYRIGHT TO SUB SIST IN LITERARY, DRAMATIC, MUSICAL AND ARTISTIC WORK, CINEMATOGRAPH FILMS AND SOUND RECORDING. SIMILAR IS THE PROVISION OF SECTION 14 OF THE COPYRIGHT ACT WHICH STIPULATES THE EXCLUSIVE RIGHT TO DO CERTAIN ACTS. A READING OF SE CTION 14 WOULD REVEAL THAT COPYRIGHT MEANS EXCLUSIVE RIGHT TO REPRODUCE, ISS UE 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 W OULD 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 T HAT THE WORD COPYRIGHT WOULD ENCOMPASS ALL CATEGORIES OF WORK INCLUDING MUSICAL, ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 8 DRAMATIC, ETC. AND ALSO HIS SUBMISSION THAT THE COP YRIGHT ACKNOWLEDGES THE BROADCAST RIGHT AS A RIGHT AS A RIGHT SIMILAR TO C OPYRIGHT. IN VIEW OF THE CONCLUSION OF THIS COURT IN ESPN STAR SPORTS CASE ( SUPRA), SUCH A SUBMISSION NEEDS TO BE REJECTED.' THOUGH THE ABOVE SAID DECISION WAS RENDERED IN THE CONTEXT OF PROVISIONS OF SEC. 194J OF THE ACT, YET SECTION IMPORTS THE DEFINITION OF THE TERM ROYALTY FROM EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT. UNDER TH E DEFINITION GIVEN IN THE ABOVE SAID PROVISION ALSO 'ROYALTY' MEANS CONSIDERATION FOR TH E TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENCE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY. 15. IN THE INSTANT CASE, WE HAVE NOTICED THAT THE B CCI BECOMES THE OWNER OF THE PROGRAM CONTENT PRODUCED BY THE ASSESSEE. THE JOB O F THE ASSESSEE ENDS UPON THE PRODUCTION OF THE PROGRAM CONTENT AND THE BROADCAST ING 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 A RISE IN THE FACTS AND CIRCUMSTANCES 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 APPLICABIL ITY OF PROVISIONS OF SEC. 9(1)(VI) OF THE ACT, YET THE FACTS DISCUSSED ABOVE WOULD SHOW T HAT THE PAYMENT RECEIVED BY THE ASSESSEE CANNOT FALL WITHIN THE PURVIEW OF SEC. 9(1)(VI) OF THE ACT ALSO. 6. THE LD. A.R. HAS FURTHER INVITED OUR ATTENTION T O PARA 17 OF THE SAID ORDER WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE OF CHA RGING OF INTEREST UNDER SECTION 234B OF THE ACT TO THE FILE OF THE AO WITH A DIRECTION TO THE AO TO TAKE APPROPRIATE DECISION BY CONSIDERING THE DECISION O F THE JURISDICTIONAL HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT VS. NGC NETWO RK ASIA INDIA 313 ITR 187 AND ALSO SUCH OTHER DECISIONS RELEVANT TO T HE SAID ISSUE. THE LD. A.R. HAS FURTHER STATED THAT THE ISSUE RAISED IN THE APP EAL UNDER CONSIDERATION IS IDENTICAL AND IS RELATING TO THE INTERPRETATION OF THE SAME DTAA AND ALSO THE CLAUSES OF THE AGREEMENT WITH THE BCCI ARE ALSO IDE NTICAL UPON WHICH THE CO- ORDINATE BENCH OF THE TRIBUNAL FOR SUBSEQUENT ASSES SMENT YEAR 2010-11 HAS SETTLED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. THE LD. D.R. HAS ALSO FAIRLY AGREED THAT THE ISS UE RAISED BY THE REVENUE IN ITS APPEAL IS SQUARELY COVERED BY THE ABOVE DECI SION OF THE TRIBUNAL FOR THE SUBSEQUENT ASSESSMENT YEAR. ITA NO.1555/M/2014 & ITA NO.1933/M/2014 M/S. IMG MEDIA LTD. 9 8. WE, RESPECTFULLY FOLLOWING THE SAME, DECIDE THE ISSUE OF THE FEE/INCOME RECEIVED BY THE ASSESSEE IN FAVOUR OF THE ASSESSEE WITH A DIRECTION TO THE AO TO TREAT THE RECEIPTS OF THE ASSESSEE AS BUSINESS INCO ME OF THE ASSESSEE. SINCE THE ASSESSEE HAS ADMITTED THAT IT HAS A PE IN INDIA, HE NCE THE AO IS DIRECTED TO CONSIDER THE TAXABILITY OF THE RECEIPTS AS BUSINESS INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF DTAA BETWEEN INDIA AND UK. 9. SO FAR AS THE ISSUE OF LEVY OF INTEREST UNDER SE CTION 234B AND 234C IS CONCERNED, AS OBSERVED ABOVE, THE TRIBUNAL HAS REST ORED THE MATTER TO THE FILE OF THE AO FOR DECISION AFRESH. WE ACCORDINGLY REST ORE THIS ISSUE TO THE FILE OF THE AO AND DIRECT THE AO TO DECIDE THE SAME IN TERM S OF THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE SUBSEQUENT YEAR. 10. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED WHEREAS THE APPEAL OF THE ASSESSEE IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.02.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 26 02.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.