Live telecast payments for horse races were not royalty, so no TDS obligation arose and disallowance failed.

Consideration paid for live telecast of horse races was treated as a reciprocal sharing of income, not payment for any grant of rights, licence, or use of copyright. A live event did not amount to a protected work, so the payment fell outside the definition of royalty under section 9(1)(vi). As a result, no tax deduction obligation arose under section 194J, and the consequential disallowance under section 40a(ia) was unsustainable.

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Issues: Whether consideration paid for live telecast of horse races constituted royalty so as to attract tax deduction at source under section 194J and, on failure to deduct tax, disallowance under section 40a(ia) could be made.

Analysis: The live telecast of races did not amount to use of any copyright or transfer of any right in a work. A copyright presupposes the existence of a protected work, whereas a live event does not create such a work for the purpose of copyright in the sense relevant to royalty. The payment was only a reciprocal sharing of income from live display of races and not consideration for any grant of rights, licence, or copyrighted work. On that footing, the sum paid could not be brought within the definition of royalty under section 9(1)(vi), and the corresponding TDS obligation under section 194J did not arise.

Conclusion: The payment was not royalty, section 194J was not attracted, and the disallowance under section 40a(ia) was not sustainable. The issue was decided in favour of the assessee.

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