2024 (1) TMI 21 - AT - Income Tax

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 ... Income taxable in India - royalty receipts - whether the right to broadcast “Live events” is not “copyright” and payment made thereto is “Royalty” u/s 9(1)(vi) or not? - HELD THAT:- We hold that broadcasting “Live events” does not amount to a work in which copyright subsists, meaning thereby right to broadcast live events i.e., “Live Rights”, is not “copyright” and therefore any payment made thereto can’t be said to be chargeable to tax as royalty under section 9(1)(vi). See Delhi Race Club [2014 (12) TMI 265 - DELHI HIGH COURT], Fox Network Group Singapore Pvt. Ltd. [2020 (3) TMI 1428 - ITAT DELHI], Cricket Australia [2023 (8) TMI 1253 - ITAT DELHI] Further the courts have held that when the agreements clearly bifurcate the consideration paid towards Live and “Non-Live Rights”, the Department can’t deem the payment made for “Live Rights” to have been made for a bouquet of rights. Whether payments were made for the use of “process” or not? - We find that the payments in dispute are made to overseas rights holder. The said payments are neither made to any satellite operators nor for use of any satellite. Thus, the payments in dispute are not made for use of any “process” as defined u/s 9(1)(vi) of the Act and can’t be charged to tax as “Royalty” in the hands of the overseas rights holders. Accordingly, we hold that the AO while passing the order u/s 201 of the Act has erred in law by treating the remittances to have been made for use of a “Process”. Appeal of the assessee is allowed. 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 JusticeThe 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.