Live broadcasting payments are not royalty unless tied to pre-existing copyright, and no business connection arises without Indian operations.

Consideration for live broadcasting of cricket matches was analysed as potential royalty under section 9(1)(vi). The text states that royalty covers rights in a pre-existing copyrighted work, whereas live telecast is the original capture of an event and not use of an existing copyright. Accordingly, the payment was not royalty and no tax deduction under section 195 arose on that basis. The text also states that a business connection under section 9(1)(i) requires business operations in India with territorial nexus; a principal-to-principal licence for exploitation rights, without the non-resident carrying on operations in India, is insufficient. No business connection was established, and the payment was not deemed to accrue in India.

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Issues: (i) Whether consideration paid for live broadcasting of cricket matches constituted royalty within section 9(1)(vi) of the Income-tax Act, 1961 so as to require deduction of tax at source under section 195. (ii) Whether the non-resident recipient had a business connection in India under section 9(1)(i) of the Income-tax Act, 1961, making the payment chargeable to tax in India.

Issue (i): Whether consideration paid for live broadcasting of cricket matches constituted royalty within section 9(1)(vi) of the Income-tax Act, 1961 so as to require deduction of tax at source under section 195.

Analysis: Royalty under Explanation 2 to section 9(1)(vi) extends to consideration for transfer of rights in copyright. Copyright under the Copyright Act arises only in relation to a defined work, and in the context of cinematograph film or similar visual work, the work must first come into existence before copyright can subsist. Live telecast of an event is the original capture of the event and is not the use of a pre-existing copyrighted work. Live coverage was also separately recognised in the later Direct Tax Code framework, indicating that it was not already encompassed within copyright-based royalty under the Income-tax Act, 1961.

Conclusion: The payment for live broadcasting was not royalty and did not attract deduction of tax at source on that basis.

Issue (ii): Whether the non-resident recipient had a business connection in India under section 9(1)(i) of the Income-tax Act, 1961, making the payment chargeable to tax in India.

Analysis: Business connection requires some business activity or operations of the non-resident in India, with a sufficient territorial nexus to the income sought to be taxed. A mere licence granted on principal-to-principal terms for commercial exploitation of broadcast rights, without operations carried out by the non-resident in India, does not establish business connection. The fact that the resident payer earns revenue in India from exploitation of the licence does not, by itself, create a business connection for the non-resident.

Conclusion: No business connection of the non-resident in India was established, and the payment was not chargeable to tax under section 9(1)(i).

Final Conclusion: Since the live broadcast consideration was neither royalty nor income deemed to accrue or arise in India through business connection, the assessee was not required to deduct tax at source on that payment, and the Revenue's appeal failed.

Ratio Decidendi: Live broadcasting consideration is not royalty unless it is payment for a pre-existing copyrighted work, and a non-resident is chargeable in India under business connection only when it carries out business operations in India with a real territorial nexus to the income.

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