Broadcast distribution receipts are not royalty where no copyright is transferred and the income is taxable as business income.

Subscription and distribution receipts from telecasting channels were held not to constitute royalty under section 9(1)(vi) of the Income-tax Act or Article 12 of the India-Singapore treaty. The receipts were linked only to distribution of broadcast signals, not to any transfer or use of copyright in literary, artistic, scientific works, cinematograph films, or sound recordings. As the broadcaster did not part with copyright, the consideration fell outside the statutory and treaty definition of royalty. The receipts were therefore taxable as business income, and the revenue's appeal was rejected.

---

---

Issues: Whether subscription/distribution receipts received by a non-resident broadcaster for telecasting channels constituted royalty under Section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Singapore Double Taxation Avoidance Agreement, or were taxable only as business income.

Analysis: The receipts were examined in the light of the Copyright Act, 1957. Copyright under Section 14 of that Act is the exclusive right in respect of specified works, while Section 37 separately recognises broadcast reproduction right. The payments in question were found to relate to distribution rights for telecast signals and not to any transfer or use of copyright in literary, artistic, scientific works, cinematograph films, or sound recordings. Since the assessee was not parting with copyright, the consideration could not be brought within the definition of royalty in Section 9(1)(vi) read with Explanation 2. The same result followed under Article 12 of the treaty, which also confines royalty to consideration for use of, or the right to use, specified intellectual property or equipment.

Conclusion: The distribution and subscription receipts were not royalty and were liable to be treated as business income. The revenue's appeal was therefore not accepted.

---