High Court upholds decision: Payment for TV channel distribution not royalty

The High Court of Bombay dismissed the appeal challenging the Tribunal's decision that the consideration paid for acquiring the right to distribute TV channels to a non-resident company is business income, not royalty. The Court upheld the previous decision favoring the non-resident company, concluding that the payment was not royalty. Therefore, the payment was not treated as royalty for withholding tax purposes, resulting in the appeal being dismissed with no costs awarded.

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Issues:
- Interpretation of whether consideration paid by assessee to non-resident company for acquiring the right to distribute TV channels is in the nature of Royalty or business income under the Income Tax Act, 1961.

Analysis:
The High Court of Bombay was presented with an appeal challenging the order of the Income Tax Appellate Tribunal (the Tribunal) for the Assessment Year 2003-04. The main question of law before the court was whether the Tribunal erred in holding that the consideration paid by the assessee to the non-resident company for acquiring the right to distribute TV channels is not in the nature of Royalty but is considered as business income, hence not subjected to withholding tax. The Tribunal had previously dismissed the Revenue's appeal by deciding that the amount received by the non-resident company was not in the nature of royalty, leading to no withholding tax liability. The Revenue, dissatisfied with the Tribunal's decision, had appealed to the High Court. However, the High Court noted that a previous decision by the Court had already concluded the matter in favor of the non-resident company, Set Satellite (Singapore) Pte. Ltd., by determining that the payment received was not royalty. Consequently, as the payment was not considered royalty in the hands of the recipient company, it would also not be treated as royalty in the hands of the payee. The Court, therefore, found no substantial question of law to consider and dismissed the appeal, with no order as to costs being issued.

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