Live broadcasting rights and bundled sports contracts: royalty classification, reasonable apportionment, and reassessment limitation under tax law

Live broadcasting receipts were analysed as distinct from copyright in a pre-existing work, so payments for live telecast rights were not treated as royalty under section 9(1)(vi) or Article 12 of the India-USA DTAA. The domestic expansion in Explanation 6 could not enlarge the treaty definition absent a corresponding amendment. Where contracts bundled live and recorded or ancillary rights, the consideration required reasonable apportionment on the contract facts, and the Tribunal reduced the live component allocation from 95:5 to 90:10. The reassessment notice for Assessment Year 2015-16 was also treated as time-barred under the applicable limitation framework, and the reassessment was quashed.

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Issues: (i) whether consideration received for live broadcasting rights and bundled broadcast contracts constituted royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-USA Double Tax Avoidance Agreement; (ii) whether the consideration in bundled contracts required apportionment between live and recorded components and, if so, at what ratio; and (iii) whether the reassessment notice for Assessment Year 2015-16 was barred by limitation.

Issue (i): whether consideration received for live broadcasting rights and bundled broadcast contracts constituted royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-USA Double Tax Avoidance Agreement.

Analysis: Live telecast and broadcast rights were held to be distinct from copyright in a pre-existing work. The reasoning proceeded on the basis that a live sporting broadcast does not create a copyright in the event itself, and therefore payments for such live coverage do not fall within the ordinary ambit of royalty as consideration for use of, or right to use, copyright. The Tribunal also held that the domestic deeming expansion in Explanation 6 to section 9(1)(vi) could not be imported into the treaty definition of royalty in the absence of a corresponding treaty amendment.

Conclusion: The receipts for live broadcasting rights were not wholly taxable as royalty; the issue was decided in favour of the assessee, subject to apportionment in bundled contracts.

Issue (ii): whether the consideration in bundled contracts required apportionment between live and recorded components and, if so, at what ratio.

Analysis: The bundled agreements contained both live transmission rights and additional recorded or ancillary exploitation rights. On the facts of the contracts, the Tribunal accepted that a composite payment had to be split on a reasonable basis, but found that the assessee's 95:5 allocation over-stated the live component. Considering the nature of the rights granted and the relative commercial value of live and recorded usage, the Tribunal adopted a 90:10 allocation between live coverage and recorded events.

Conclusion: Apportionment was required, but the assessee's ratio was not fully accepted; the allocation was modified to 90% live and 10% recorded, resulting in a partial relief to the assessee.

Issue (iii): whether the reassessment notice for Assessment Year 2015-16 was barred by limitation.

Analysis: The notice under section 148 was issued on 28 June 2021. On the facts found, the Tribunal treated the notice as falling outside the permissible limitation framework for that assessment year and followed its earlier view on identical limitation facts. The reassessment order was therefore quashed, and the remaining grounds were rendered academic.

Conclusion: The reassessment for Assessment Year 2015-16 was held to be time-barred and was set aside in favour of the assessee.

Final Conclusion: The royalty addition relating to live broadcast receipts was not upheld in full, the composite receipts required only a limited apportionment, and the reassessment for one year failed on limitation, leaving the assessee substantially successful overall.

Ratio Decidendi: Live broadcast rights do not, by themselves, constitute royalty absent transfer of copyright, and a domestic deeming expansion cannot enlarge an unamended treaty definition of royalty; composite broadcast receipts must be reasonably apportioned on the facts of the contract.

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