Distribution rights revenue treated as business income where no copyright was transferred and royalty character was rejected.

Distribution revenue received for granting channel distribution rights was held to be business income because the arrangement transferred only a commercial right to distribute and did not involve transfer of copyright. The assessee retained ownership of the content, and the receipts were linked to broadcast reproduction rights rather than royalty under domestic law or the treaty. A consistent treatment accepted in earlier years, including under the MAP arrangement, was followed in the absence of any material change in facts or law. The additions were deleted and the assessee's appeals were allowed.

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Issues: Whether distribution revenue received for grant of distribution rights was taxable as royalty or as business income.

Analysis: The dispute turned on whether the rights granted under the distribution arrangement involved transfer of copyright or only a commercial right to distribute channels. The earlier coordinate bench decision in the assessee's own case had held that the assessee retained ownership of the content, the Indian entity received only distribution rights, and the receipts were linked to broadcast reproduction rights rather than copyright. The same view had been carried forward and accepted in earlier years under the MAP arrangement, and the jurisdictional High Court had declined to interfere with that consistent position. Following that binding and consistent line of reasoning, the receipt could not be characterized as royalty under domestic law or the treaty.

Conclusion: The distribution revenue was not taxable as royalty and was to be assessed as business income in favour of the assessee.

Final Conclusion: The additions made in the assessments were deleted and the assessee's appeals were allowed.

Ratio Decidendi: Where an assessee grants only distribution rights without transferring copyright, the consideration received is business income and not royalty; a consistent MAP-based treatment accepted in earlier years should not be disturbed in the absence of any material change in facts or law.

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