2014 (10) TMI 212 - AT - Income Tax

Tribunal rules in favor of Revenue, deems payments as royalties for copyrighted news content.

Agence France Presse, C/o. Vishwanath Singh & Associates Versus ADIT, Circle 1(1), International Taxation, New Delhi

Agence France Presse, C/o. Vishwanath Singh & Associates Versus ADIT, Circle 1(1), International Taxation, New Delhi - TMI Issues Involved:1. Admissibility of additional evidence under Rule 29 of the ITAT Rules, 1963.2. Whether copyright subsists in the news reports and photographs distributed by the assessee.3. Whether the payments received qualify as 'royalties' under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act.4. Applicability of Section 52 of the Copyright Act regarding fair dealing.5. Levy of interest under Section 234B of the Income Tax Act.Detailed Analysis:1. Admissibility of Additional Evidence:The Tribunal examined whether the additional evidence submitted by the Revenue, particularly the case details of the assessee's dispute with Google Inc., should be admitted. The assessee had not provided these documents despite multiple requests. The Tribunal determined that the additional evidence was crucial for resolving the central issue of whether copyright subsists in the news reports and photographs. Hence, the Tribunal allowed the admission of the additional evidence under Rule 29 of the ITAT Rules, 1963.2. Copyright in News Reports and Photographs:The Tribunal analyzed whether copyright subsists in the news reports and photographs distributed by the assessee. It was established that:- News per se or 'hot news' is not copyrightable.- News stories and archived news, which involve a modicum of creativity and expression, are copyrightable.- Photographs taken by professional photographers with unique aesthetic merit are considered artistic works and are copyrightable under Section 2(c)(i) of the Indian Copyright Act, 1957.The Tribunal concluded that the news stories and photographs distributed by the assessee possess the necessary creativity and originality to qualify as 'original literary works' and 'artistic works,' respectively, under Section 13(1)(a) of the Copyright Act.3. Payments as 'Royalties':The Tribunal examined whether the payments received by the assessee qualify as 'royalties' under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act. It was determined that:- The payments for the use or right to use the copyright of literary, artistic, or scientific works fall within the definition of 'royalties.'- The agreements between the assessee and Indian news agencies explicitly stated that AFP is the copyright owner of the information provided and that the agreements constitute a license to use the information.The Tribunal upheld the view that the payments received by the assessee qualify as 'royalties' and are taxable under the relevant provisions.4. Applicability of Section 52 of the Copyright Act:The assessee argued that reporting of current events is an exception to copyright infringement under Section 52 of the Copyright Act. The Tribunal noted that Section 52 provides a defense to consumers from prosecution for copyright infringement. However, in the present case, the news content transmitted by AFP is not in the public domain and is accessible only through a license agreement. Therefore, the provision of fair dealing under Section 52 does not apply to the assessee's case.5. Levy of Interest under Section 234B:The assessee contended that interest under Section 234B should not be levied as the payer is liable to deduct tax at source. The Tribunal referred to the decision in the case of DIT-I, International Taxation Vs. Alcatel Lucent USA, Inc., where it was held that if the assessee denies its tax liability in India, it implies that the payer did not deduct tax at source based on the assessee's representation. Consequently, the Tribunal dismissed the assessee's ground against the levy of interest under Section 234B.Conclusion:The Tribunal dismissed the appeal of the assessee, holding that:- The additional evidence submitted by the Revenue was admissible.- Copyright subsists in the news stories and photographs distributed by the assessee.- The payments received qualify as 'royalties' under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act.- The provision of fair dealing under Section 52 of the Copyright Act does not apply to the assessee's case.- The levy of interest under Section 234B was justified as per the decision in the case of Alcatel Lucent USA, Inc.