Broadcasting live events not copyright work, payments for live rights cannot be taxed as royalty under section 9(1)(vi)

ITAT Delhi held that broadcasting live events does not constitute copyright work, and payments for live broadcasting rights cannot be taxed as royalty under section 9(1)(vi). The tribunal distinguished between live and non-live rights, ruling that when agreements clearly bifurcate consideration, the Department cannot treat live rights payments as part of a bouquet of rights. Additionally, payments to overseas rights holders were not for satellite use or any defined process under the Act. The AO erred in treating remittances as royalty payments, and the assessee's appeal was allowed.

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Issues Involved:
1. Whether the payment made for acquiring broadcasting rights of live events is taxable as "royalty" under section 9(1)(vi) of the Income Tax Act, 1961.
2. Whether the payment made for acquiring broadcasting rights of live events constitutes a "process" under section 9(1)(vi) of the Income Tax Act, 1961.
3. Violation of principles of natural justice and the Faceless Appeal Scheme 2021.

Summary:

Issue 1: Taxability of Payments as "Royalty"
The Tribunal examined whether the payment for acquiring broadcasting rights of live events is taxable as "royalty" under section 9(1)(vi) of the Income Tax Act, 1961. The assessee argued that the right to broadcast live events does not constitute "copyright" under the Copyright Act, 1957, and hence should not be considered as "royalty." The Tribunal referred to various judgments, including CIT vs. Delhi Race Club and Fox Network Group Singapore Pvt. Ltd. vs. ACIT, and concluded that broadcasting "Live events" does not amount to a work in which copyright subsists. Therefore, the right to broadcast live events is not "copyright," and any payment made thereto cannot be charged to tax as royalty under section 9(1)(vi).

Issue 2: Payments Constituting a "Process"
The Tribunal also examined whether the payments were made for the use of a "process" under section 9(1)(vi). It was found that the payments in dispute were made to overseas rights holders and not to any satellite operators or for the use of any satellite. Consequently, the payments were not made for the use of any "process" as defined under section 9(1)(vi) and cannot be charged to tax as "royalty."

Issue 3: Violation of Principles of Natural Justice
The assessee contended that the NFAC passed the impugned order without providing an opportunity for a personal hearing, despite a specific request. This was argued to be in violation of the principles of natural justice and the Faceless Appeal Scheme 2021. The Tribunal did not specifically address this issue in its final ruling, as the primary issues were resolved in favor of the assessee.

Conclusion:
The Tribunal held that the payment for broadcasting rights of live events is not taxable as "royalty" under section 9(1)(vi) and does not constitute a "process." The appeal of the assessee was allowed, and the AO's order treating the remittances as payments for a "process" was found to be erroneous. The Tribunal pronounced the order in the open court on 26/12/2023.

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