TaxTMI 
TaxTMI 
2011 (11) TMI 23
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....l deduction of income tax on the following payments to be made to M/s. Nimbus Sports International Pte. Ltd. (hereinafter called the "Nimbus") in pursuance to the agreement dated 20.02.2008:- (a) Grant of license for live broadcast amounting to US$ 56,24,920. (b) Grant of license for recorded broadcast amounting to US$ 2,52,000. 4. This application was filed requesting for Nil deduction certificate on account of payment to be made under (a) above; and a certificate for rate as applicable to Royalty payment under (b) above. The Dy. Director of Income Tax (International Taxation) [hereinafter called the 'DDIT'] noted that the assessee entered into an agreement with Nimbus, a commercial agent of Bangladesh Cricket Board (hereinafter called the 'BCB'), for receiving and broadcasting matches that were to be played in Bangladesh. It was further observed that the signals to be broadcasted by the assessee were to be both on account of live matches and on account of recorded matches. The assessee contended that the payment to be made on account of recorded matches was in the nature of royalty but that towards live matches was not covered within the definition of royalty....
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....chargeable in the case of recipient, he may make an application to the Assessing Officer to determine the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted u/s 195(1) only on that proportion of the sum which is so chargeable. It is noticed that the assessee filed application u/s 195(2) in respect of payments to be made to Nimbus split into two parts. Insofar as the payment towards grant of license for recorded broadcast is concerned, the assessee accepted that it was covered within the meaning of royalty, which has not been denied by the DDIT. The dispute centers round the payment for live broadcasting. Whereas the assessee contended that such amount is not chargeable to tax in the hands of Nimbus and hence no deduction of tax at source was required, the DDIT held that the assessee is liable to deduct tax at source on the amount to be paid for the live coverage of the events for the reason that such consideration is chargeable to tax in the hands of Nimbus as royalty u/s 9(1)(vi). He also held that Nimbus has business connection in India [impliedly referring to section 9(1)(i)] by reason of the assessee earning revenues from India ....
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....s the exclusive right, subject to the provisions of this Act, to do or authorize the doing of any of the following acts in respect of a work or any substantial part thereof, namely:- (a) in the case of a literary, dramatic or musical work, not being a computer programme, - (i) to reproduce the work in any material form including the storing of it in any medium by electronic means; (ii) to issue copies of the work to the public not being copies already in circulation; (iii) to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work (v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-clauses (i) to (vi); (b) and (c) ** ** ** (d) In the case of cinematograph film, - (i) to make a copy of the film, including a photograph of any image forming part thereof; (ii) to sell or give on hire, or offer for sa....
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....rk of visual recording on any medium produced through a process from which a moving image may be produced by any means and includes a sound recording accompanying such visual recording and "cinematograph" shall be construed as including any work produced by any process analogous to cinematography including video films'. When we read section 14 in juxtaposition to section 2(y) read with section 2(f) of the Copyright Act, it becomes abundantly clear that the 'copyright' means exclusive right to use the 'work' in the nature of cinematography. The question of granting exclusive right to do any work can arise only when such 'work' has come into existence. In other words, the existence of work is a pre-condition and must precede the granting of exclusive right for doing of such work. It cannot be in the reverse direction. Unless the work itself has been created, there cannot be any question of granting copyright of such work. To put is simply, the sequence is that firstly the work itself comes into existence and only then the second stage of its copyright comes into being. The process of doing or creating the work itself cannot be simultaneous with the use of such work. It is only when t....
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....pyright. In our considered opinion the live telecast of a match or any other event cannot be considered as transfer of copyright in such match. It is only when the live telecast of a match is done that the question of creation of copyright in such match arises. The second or later telecasting of the such event shall be considered as use of the "work" and consideration for the broadcasting of such recorded matches shall be considered as payment for the use of copyright in such event. It is for this reason and rightly so that the assessee volunteered to include the consideration for the license of the recorded broadcast as royalty while making application u/s 195(2) of the Act. 14. At this juncture it will be useful to make reference to a book titled "Law of Copyright and Industrial Designs" by P. Narayanan. Chapter 17 of it deals with the 'Infringement of Cinematograph Films'. It has been elaborated in it that if the use of the copyright work in the film is only for fair dealing for the purpose of research or private study or criticism or review, or for reporting current events, it will not constitute infringement. It further states that there is no copyright in the live events. ....
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....p; cinematographic films or work on films, tapes or any other means of reproduction; or (iii) live coverage of any event; (h) the rendering of any services in connection with the activities referred to in sub-clauses (a) to (g); [Emphasis supplied] 17. From the above definition of 'royalty', it can be seen that clause (g) refers to royalty as consideration for transfer of (i) any copyright of a literary, artistic or scientific work; and (iii) "live coverage" of any event. Categorizing copyright and live coverage in distinct sub-clauses fairly indicates that these have been rightly understood as independent of each other. If 'live coverage' had been a part of copyright of any work, as has been contended on behalf of the Revenue, then there was no need to classify live coverage as a separate item. It, therefore, clearly emerges that the definition of 'royalty' under the Income-tax Act, 1961 does not include any consideration for live coverage of any event, which is now sought to be broadened by the Direct Tax Code 2010 by bring it distinctly within the purview of "royalty". 18. We, therefore, sum up the position that a 'copyright' can be created only ....
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....us. Further it is not the case of the DDIT that any income accrued or arose to Nimbus on this account. The DDIT has restricted his finding only to section 9, dealing with income which shall be deemed to accrue or arise in India. Again the ambit has been narrowed down by the DDIT to the Royalty income u/s 9(1)(vi) and also reference has been made to the business connection of Nimbus in India, impliedly referring to sec. 9(1)(i). 21. In the preceding paras we have held that the receipt by Nimbus does not fall within the realm of section 9(1)(vi). Merely because it does not fall under this provision does not mean that the income per se ceases to be taxable in India. If the income is found taxable in the hands of the non-resident under any other clause of section 9(1), the requirement of deduction of tax at source by the assessee shall very much remain. 22. In this connection it would be relevant to note that the DDIT in para (a) on page 2 of his order has held that the matches are to be broadcasted in Indian Territory and the income of the assessee is to be by way of advertisement and subscription revenue. The assessee would be paying tax on this income. Without the receipt of s....
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.... has held that the payment made by the assessee to Nimbus will be held as arising out of business connection in India, which finding has been echoed in the first appeal. 26. We are unable to approve this point of view of the authorities below for the reason that Nimbus has provided license for the live broadcast of certain matches to the assessee for a definite consideration. The rights in such broadcast vest with Nimbus. After the live broadcast by the assessee, Nimbus will continue to hold right over such broadcast. The mere act of allowing the assessee by Nimbus to live broadcast the matches for a defined consideration, in our considered opinion, would not constitute a business connection in India. In order to constitute a business connection of a non-resident in India, it is necessary that some sort of business activity must be done by the non-resident in the taxable territory of India. Clause (a) of Explanation 1 to section 9(1)(i) provides that in the case of business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to....