Live telecast payments are not royalty, and no Indian business connection arises from principal-to-principal broadcast rights.

Consideration for live telecast or live coverage of cricket matches was treated as outside the scope of royalty because it did not involve use of copyright in a recorded work; accordingly, no tax deduction at source was required on that payment. A non-resident was also found to have no business connection in India where it merely granted live broadcast rights on a principal-to-principal basis and carried on no operations in India; mere revenue earned by the resident from exploiting those rights in India was insufficient, so the income was not deemed to accrue or arise in India on that basis.

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Issues: (i) Whether consideration paid for live telecast or live coverage of cricket matches constituted royalty so as to require tax deduction at source. (ii) Whether the non-resident had a business connection in India so that income from the transaction was deemed to accrue or arise in India.

Issue (i): Whether consideration paid for live telecast or live coverage of cricket matches constituted royalty so as to require tax deduction at source.

Analysis: The payment related to live broadcasting of sporting events and not to the use of any copyright in a recorded work. Live feed, as distinguished from recorded broadcast, was treated as not giving rise to copyright in the event itself. The definition of royalty under the Income-tax Act was held not to extend to consideration for live coverage, and the treaty definition was also read consistently with that view.

Conclusion: The amount paid for live coverage was not royalty and no tax was required to be deducted at source from that payment.

Issue (ii): Whether the non-resident had a business connection in India so that income from the transaction was deemed to accrue or arise in India.

Analysis: The non-resident merely granted a licence for live broadcast on a principal-to-principal basis and did not carry out business operations in India. Mere earning of revenue by the resident from exploitation of the broadcast rights in India was held insufficient to establish business connection. Deemed accrual under the provision required operations in India by the non-resident, which were absent on the facts.

Conclusion: No business connection in India was established and the income was not deemed to accrue or arise in India on that basis.

Final Conclusion: The cross-appeals were disposed of in favour of the assessee on both substantive issues, leaving the Revenue's challenge unsuccessful and the assessee's challenge accepted.

Ratio Decidendi: Consideration for live telecast of an event is not royalty unless it involves use of copyright in a recorded work, and a non-resident cannot be said to have a business connection in India merely because a resident earns revenue in India from the commercial exploitation of rights granted on a principal-to-principal basis.

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