Non-exclusive TV channel distribution rights were held to be commercial rights, not royalty, under treaty and tax law.

Non-exclusive rights to distribute television channels were treated as a commercial distribution arrangement, not a transfer or licence of copyright. The agreement stated that no copyright was granted, and the rights given did not amount to use or exploitation of copyright within the meaning of section 14 of the Copyright Act. Broadcast reproduction rights were distinguished from copyright rights, so the consideration did not fall within the treaty or domestic-law definition of royalty under Article 12 of the India-Singapore DTAA or section 9(1)(vi) of the Income-tax Act. The same receipt having been treated as business income in the recipient's case reinforced that no withholding tax as royalty was exigible.

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Issues: Whether consideration paid for acquiring non-exclusive rights to distribute television channels was royalty taxable under Article 12 of the India-Singapore Double Tax Avoidance Agreement and section 9(1)(vi) of the Income-tax Act, 1961, or business income.

Analysis: The non-resident had granted only non-exclusive distribution rights and no right to use or exploit any copyright. The agreement itself clarified that the grant was not a licence or transfer of any copyright. The right involved was a commercial distribution right and not a copyright right. Broadcast reproduction rights under section 37 of the Copyright Act, 1957 were distinguished from the rights contemplated under section 14 of that Act. On that basis, the payment did not fall within the treaty or domestic-law meaning of royalty. The same amount had also been treated as business income in the recipient's case.

Conclusion: The payment was not royalty but business income, and no withholding tax as royalty was exigible.

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