Distribution revenue treated as business income where no copyright was transferred and treaty royalty definition controlled.

Exclusive distribution and related commercial rights, without any transfer of copyright or permission to copy, modify, or alter channel content, were treated as falling within broadcast reproduction rights rather than royalty. The treaty definition of royalty was not expanded by the retrospective domestic amendment, so the receipts could not be taxed as royalty on that basis. Consistency with earlier years, where the same treatment had been accepted under the mutual agreement procedure, also supported the position. The distribution revenue was therefore taxable as business income.

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Issues: Whether the distribution revenue received by the assessee from the Indian distributor was taxable as royalty or as business income.

Analysis: The assessee only granted exclusive distribution and related commercial rights, while the copyright in the channel content and other proprietary rights remained vested in the assessee. The agreement did not transfer any copyright or allow the distributor to copy, modify, or alter the content. The statutory distinction between copyright under the Copyright Act, 1957 and broadcast reproduction right was treated as material, and the revenue was held to fall within the latter category rather than a transfer of copyright. The retrospective domestic amendment could not expand the scope of the treaty definition of royalty. Consistency was also noted because the same basis had been accepted in earlier years pursuant to the mutual agreement procedure.

Conclusion: The distribution revenue was not royalty and was taxable as business income.

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