TaxTMI 
TaxTMI 
2022 (12) TMI 287
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....ned by the assessee is chargeable to tax as royalty, and ii. Whether the assessee has a Permanent Establishment (PE) in India so as to attribute any part of the profit to such PE. 3. Briefly the facts are, BBC World News Ltd (in short 'BBCWN') is a company incorporated in United Kingdom (UK) and tax resident of UK. BBCWN is the owner of BBC World New Channel. BBCWN has granted non-exclusive global right to BBC World Distribution Limited (In short 'BBCWD'), the present assessee, to distribute the channel. BBCWD, in turn, has entered into an agreement with BBC World India Pvt. Ltd. (in short 'BWIPL') to distribute the channel to cable operators, DTH operators, hotels, institutions etc. in India. In assessment year 2006-07, the assessee received an amount equivalent to Indian Rs.94,58,039/- from distribution of BBC World News Channel in India. Before the Assessing Officer, the assessee pleaded that the amount received from distribution of channel in India is not taxable because of the following: * BWIPL to distribute the Channel to cable operators, DPI operators hotels, etc in specified territory including India; * BWIPL to provide assistance in collectio....
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....ion revenue has been received by BWIPL and offered to tax in India, nothing can be taxed at the hands of the assessee. However, the Assessing Officer did not accept the contention of the assessee. He held that as per the definition of Copyright Act, 1957, the distribution right granted by the assessee amounts to transfer of right to use Copyright, hence, in the nature of royalty. Further, referring to certain guidelines issued by the Ministry of Information and Broadcasting to the effect that the Indian company should have the authority to conclude contract on behalf of the channels for advertisements, subscription and program contents, the Assessing Officer concluded that not only the subscription/distribution revenue would be chargeable to tax as royalty but the Indian company, which has been granted the distribution rights can be considered to be a Permanent Establishment (PE) of the assessee in India. Accordingly, he brought to tax the distribution revenue received from DWIPL at the hands of the assessee by applying the rate of 15%. Though, the assessee raised objections before learned DRP against the additions made by the Assessing Officer, however, the objections were rejecte....
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....channel uplinked from abroad, inclusive of rights to subscription/revenue, the assessee entered into new agreement with BWIPL, under which, exclusive rights to BWIPL was granted to distribute the channel in India. Hence, BWIPL directly entered into contract with subscribers in its own rights and entire subscription revenue in these two years was received by BWIPL and was accounted in their books of account and offered to tax in India. He submitted, in these two assessment years no distribution revenue was received by the assessee. Thus, he submitted, taxing of notional income at the hands of the assessee is unjustified. In support of his contention, learned counsel relied upon the following decisions: * E.D. Sassoon & Co. Vs. CIT [1954] 26 ITR 27 (SC) * CIT Vs. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC) * Godhra Electricity Company Vs. CIT [1997] 225 ITR 746 (SC) * CIT Vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC) * Shivnandan Buildcon Pvt. Ltd. Vs. CIT [2015] 60 taxmann.com 347 8. Insofar as the allegation of the departmental authorities that the assessee has a PE in India in the form of BWIPL in assessment years 2007-08 and....
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.... into a distribution agreement with BWIPL. Facts on record reveal that in assessment year 2006-07, BBC World News Channel was available free for viewers, except in case of hotels and institutions. In assessment year 2006-07, the assessee received distribution/subscription revenue from the distribution of channels in India specifically to hotels and institutions. The Assessing Officer as well as learned Commissioner (Appeals) have treated the distribution revenue to be in the nature of royalty by primarily treating it as copyright under explanation 2(v) of section 9(1)(vi) of the Act. Since, the definition of copyright is not available either under India - UK Tax Treaty and the domestic law, the Assessing Officer and learned Commissioner (Appeals) have heavily relied upon the definition of copyright as provided under the Copyright Act, 1957 and specifically the meaning of copyright as provided under section 14 of the Copyright Act. However, it is the contention of the assessee that what the assessee has conferred upon the BWIPL through the distribution agreement, at best, can be considered to be broadcasting reproduction right as defined under section 37 of the Copyright Act. 12.....
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....r which payment can be considered as royalty payment. "copyright" has been defined in Section 14 of the copy right Act, 1957. A glance at the said provision would show that the copyright means exclusive right, subject to the provisions of this Act, to do or authorise the doing of any of the following acts specified in the said provision in respect of a work or any substantial part thereof. Term "work" is defined under Section 2(y) of the Copyright Act, 1957, as to mean any of the works namely a literary, dramatic, musical or artistic work or a cinematograph film and a sound recording. Sub-section (1) of Section 14 of the Copyright Act, 1957 lists several Acts in respect of a work in relation to which exclusive right would be termed as copyright. In the present case, the assessee had not created any literary, dramatic, musical or artistic work or cinematograph film and/or a sound recording. 11. Infact, Section 37 of Copyright Act, 1957 separately defines broadcast reproduction right. Sub-section (I ) of Section 37 of the said Act provides that every broadcasting organisation shall have special rights to be known as "broadcast reproduction right" in respect of its broadcasts....
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....istic or scientific work was b5ing made. 14. We may also notice that India Singapore Double Taxation Avoidance Agreement contains Article 12 pertaining to royalty and fees for technical service. Paragraph (3) of Article 12 defines the term "Royalty" as under- 'The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use: (a) any copyright of a literary, artistic or scientific work, including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right, property or information; (b) any industrial, commercial or scientific equipment, other than payments derived by an enterprise from activities described in Paragraph 4(b) or 4 (c of Article 8' 15. Even going by this definition, the payment in question can not be categorized as royalty." 14. On a comparative analysis of Article 12(3) of India - Singapore DTAA and Article 13(3A) of I....
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....ent company, which states that the right granted to the assessee under the agreement is not and shall not be construed to be a grant of any license or transfer of any right in any copyright. Ld CIT(A) has stated that the assessee submitted before him that the cable operator only retransmits the television signals transmitted to it by a broadcaster without any editing, delays, interruptions, deletions, or additions and, therefore the payment made by the assessee to the Non-resident company is not for M/s. SET India Pvt Ltd use of any copyright and consequently cannot be characterized as Royalty. Ld CIT(A) has held that Broadcasting Reproduction Right is not covered under the definition of Royalty under section 9(1)(vi) of the Income tax Act as well as Article 12 of the Treaty. Accordingly, the payment is not in the nature of Royalty but in the nature of business income 15. The aforesaid view expressed by the Coordinate Bench has been approved by the Hon'ble Bombay High Court while accepting that the right to distribute a channel is purely a commercial transaction and is distinct from copyright. In this regard, we may refer to the decision of the Hon'ble Bombay High Court in case ....