Non-exclusive broadcasting rights in films without copyright transfer are not royalty under tax law or the treaty.

Consideration received for granting only non-exclusive broadcasting rights in cinematographic films, without any transfer of copyright or right to use copyright, does not constitute royalty under section 9(1)(vi) of the Income-tax Act or Article 12(3) of the India-Mauritius DTAA. The statutory carve-out for sale, distribution, or exhibition of cinematographic films also supported the exclusion from royalty treatment. On these facts, the receipt was not taxable as royalty and the related addition was deleted.

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Issues: Whether the consideration of Rs. 1,00,00,000 received for granting non-exclusive broadcasting rights in cinematographic films, without transfer of copyright, is taxable as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Mauritius DTAA.

Analysis: The agreement granted only a non-exclusive licence to broadcast 100 Hindi feature films for a limited period and did not confer any right to use, exploit, modify, or otherwise transfer copyright in the films. The statutory definition of royalty in Explanation 2 to section 9(1)(vi) specifically carved out consideration for the sale, distribution, or exhibition of cinematographic films, and the treaty definition in Article 12(3) applied only where payment was made for the use of, or right to use, copyright. On the facts, the payment was for broadcasting rights alone and not for any copyright interest.

Conclusion: The receipt was not royalty and could not be brought to tax on that basis; the addition of Rs. 1,00,00,000 was deleted.

Ratio Decidendi: Consideration for non-exclusive broadcasting or licensing of cinematographic films, unaccompanied by transfer of copyright, does not constitute royalty under section 9(1)(vi) of the Income-tax Act, 1961 or Article 12(3) of the applicable DTAA.

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