TaxTMI 
TaxTMI 
2020 (3) TMI 1428
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.... income; Ground number 2 erred in characterizing the income earned by the Appellant from sublicensing of 'Designated Rights' pertaining to 'live' transmissions of sporting events amounting to Rs 11,15,91,18,375 as 'Royalty' under the Act as well as under the India-Singapore Tax Treaty; Ground number 3 the learned AO erred in holding that receipts from sub-licensing of 'Designated Rights' pertaining to 'live' transmissions of sporting event involves transfer of rights in respect of a 'Process' as per Explanation 6 to Section 9(l)(vi) of the Act as well as under Article 12 of India-Singapore Tax Treaty; Ground number 4 the learned AO erred in holding that a unilateral amendment of the term 'process' under the Act would get imported into the definition of 'royalty ' given under Article 12 of India-Singapore tax treaty; Ground number 5 the learned AO erred in holding that 'Designated Rights' sub-licensed by the Appellant is a 'bouquet of rights' and does not comprise of 'broadcasting rights' alone without appreciating the fact that the 'Designated Rights' sub-licensed by the Appellant under the Master Right Agreeme....
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....ber 2013 (forming part of novated agreements); and iii. Fees for technical services amounting to Rs. 29,15,832 as per the Master Production & Content Delivery Agreement effective from 01 February 2015). 3. During the course of assessment proceedings, the assessee was asked to provide complete details of receipt from sub-licensing of broadcasting right to SIPL under the Master Rights Agreement (MRA). From the details provided by the assessee, the Assessing Officer observed that assessee had received license fee during the year at Rs.11,81,35,85,574/- from SIPL under the MRA. The Assessing Officer inquired the assessee as to why out of total license fee, only Rs. 65,44,67,199/- has been offered to tax as 'royalty'. In response, the assessee submitted that it has received gross consideration amounting to Rs.1181.63 crore on account of sub-licensing of sports broadcasting rights in relation to 'Live' as well as 'Non Live' Feeds from SIPL for the period between 1st January, 2015 to 31st March, 2015. It was further submitted that, only income arising from sub-licensing of 'Non Live' feeds is taxable as 'royalty' under the provisions of the Act as well as under Article 12 of t....
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....copyright in the live event. The Assessing Officer has summarized the assessee's submission in the following manner: "1. Live transmission rights do not get covered in the definition of royalty given in section 9(1)(vi) of the Income Tax Act; 2. Live transmission rights are also not covered under the scope of copyright as provided in the Copyright Act. 1957: 3. Live transmission rights are not covered under the definition of royalty as per the India Singapore DTAA also; and 4. There are judicial decisions such as in the case of Delhi Race Club (ITA Nos. 6 & 241 of 2014, Del. HC) and Neo Sports broadcast Pvt. Ltd. 133 ITD 468 (ITAT, Mumbai). 5. The proposed Direct Tax Code in its definition of royalty had expressly covered 'Live coverage of any event' within the definition of royalty, therefore, it is presumed that the definition in the existing Act excludes live transmission." 4. The Assessing Officer did not agree with the contentions raised by the assessee and observed that, in terms of Master Rights Agreement under which the said license fees have been received, through MRA there are integrated bundle of rights licensed by ....
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....ights Contracts, excluding the Cricket & Hockey Media Rights and the Archive Rights "Cricket & Hockey Media Rights" shall mean the Media Rights with respect to cricket and hockey that ESS is entitled to itself, or authorise another party to, use and exploit in the Designated Territory under and pursuant to the relevant Designated Rights Contracts;" "Archive Rights" means ESS' right, pursuant to the relevant Designated Rights Contracts, to exploit in the Designated Territory certain Media Rights with respect to archival content relating to Sporting Events that occurred before the Effective Date and those which will occur on or after the Effective Date" 5.3 The term "Media Rights" used in the definition of "Sports Media Rights" and "Cricket & Hockey Media Rights" is defined as below in the MRA. "Media Rights" shall mean any or all of the following rights of exploitation with respect to Sporting Events,: Including but not limited to, broadcasting rights (whether terrestrial, cable, satellite, DSL, broadband, Internet, wireless or wireline, or any other technology which may be known now or may come into existence in the future), theatrical and public scre....
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....sion by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret. He further held that entire license fee is license under the India-Singapore DTAA under Article 12 also. Accordingly, he taxed 10% of the gross receipt as royalty. 8. The Ld. DRP has by and large has endorsed the view taken by the Assessing Officer and in so far as assessee's contention and strong objection that the agreement itself provided that 95% of the payment would be for live events, and therefore, any fee for live events will not constitute royalty, the DRP observed that when assessee had received the fees/money for live and repeat telecast, is nothing but part of bundle of license given for sports events, therefore, entire right has to be seen as they are arising in a similar manner from similar set of users in India, and therefore, to be taxed in the similar manner, that is, both live and non-live has to be seen in same way. The assessee cannot bifurcate the whole bundle of rights into live or non live transmissions. 9. Before us, ld. Senior Counsel, Mr. Porus Kaka after expl....
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.... scope of 'royalty' as defined in Explanation 2 or Explanation 6. He further relied upon the decision of ITAT Mumbai Bench in the case of New Sports Broadcast Pvt. Ltd. (supra) and Nimbus Communication Ltd., 32 Taxman.com 53 wherein on exactly similar issue matter has been decided in favour of the assessee. 10. On the other hand, ld. CIT-DR strongly relied upon the direction and observation of the DRP and the order of the Assessing Officer. Apart from that after referring to Section 13 and Section 14 of the Copyright Act, he submitted that as per this definition in case of cinematograph film, right to communicate to the public, constitutes a copyright if the appellant receives any consideration for exploiting this right, i.e., for communicating the cinematograph film to the public, the same shall be the use of the copyright and the consideration received for this shall be taxed as 'royalty' as per the Income Tax Act as defined in Section 9(l)(vi), Explanation 2 (v) and Article 12(3) of the DTAA. 11. He further referred to definition of "Cinematograph film" as been defined in section 2(f) of the Copyright Act, which reads as under: "2(f) "cinematograph film" means any....
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....as already brought out above from definition of these terms as per the Indian Copyright Act. Section 13(4) of the Copyright specifically takes care of such a situation where it is stated that the copyright in cinematograph film shall not affect the separate copyright in any work in respect which or in respect of a substantial part of which, the film is made. This can be best understood with the example of a cinematograph film which has its own copyright even though the constituent works like music, story, script etc have their own copyrights. Similarly in the appellant's case, in the case of a live telecast, the broadcast by the appellant consists of not only the feed obtained from the event manager but also the replays of views taken from different angles, comments of the experts hired by the appellant, advertisements inserted in the telecast at regular intervals, editing etc. This value addition constitutes 'work' as per Copyright Act. Thus, final product (work) gets ready for telecast and it is in the nature of a cinematograph film which is composed of several components each of which enjoys copyright but final product which is telecasted by the appellant has its own....
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.... the event, such as the marks and logos of the team, stadium and leagues or federations (protected by trademark and possibly copyright law); team uniforms (protected by copyright law, with trademark law protection over certain elements); rights of publicity (protected via state statutory and common law); and background music (protected by copyright law). 14. We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us. The assessee- company had received gross consideration amounting to Rs.1181.36 under MRA on account of sub-licensing of sport broadcast right of 'live' and 'non-live' feed to SIPL. It is not in dispute that income arising from sub-licensing of 'non-live' feed has been offered to tax in India as 'royalty'; and it is only with regard to the consideration received in relation to 'live' feeds, the assessee's contention is that it does not constitute 'royalty' either under the Income Tax Act or under the India-Singapore Treaty. The entire case of the Revenue hinges upon the reason that, the agreement consists of integrated bundle of rights licensed by the third parties like various internation....
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....y ; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ; (iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or (vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to (iv), (iva) and (v). 17. Since, the Ld. DRP has observed that assessee's case is also covered by Explanation 6 as the receipt are for the transfer of all or any rights given to SIPL by the assessee and also the phrase 'process' is defined in Explanation 6, which reads as under: "Explanation 6.-For the removal of doubts, it is hereby clarified that the expression "process" includes and s....
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.... Explanation - In the case of a work of joint authorship, the conditions conferring copyright specified in this sub-section shall be satisfied by all the authors of the work. (3) Copyright shall not subsist- (a) in any cinematograph film if a substantial part of the film is an infringement of the copyright in any other work; (b) in any sound recording made in respect of a literary, dramatic or musical work, if in making the sound recording, copyright in such work has been infringed. (4) The copyright in a cinematograph film or a sound recording shall not affect the separate copyright in any work in respect of which or a substantial part of which, the film, or, as the case may be, the sound recording is made. (5) In the case of work of architecture, copyright shall subsist only in the artistic character and design and shall not extend to processes or methods of construction. 14. Meaning of Copyright.- For the purposes of this Act, "copyright" means the exclusive right subject to the provisions of this Act, to do or authorise the doing of any of the following acts in respect of a work or any substantial part thereof, namely:- ....
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....ding storing of it in any medium by electronic or other means; (ii) to sell or give on commercial rental or offer for sale or for such rental, any copy of the sound recording; (iii) to communicate the sound recording to the public. The terms 'work' has been defined in Section 2(y) of the Copyright Act to mean; * a literary dramatic, musical or artistic work; * a cinematograph film; * or a sound recording. 19. Now, whether the live feed of event can be regarded as 'work' as defined above, because live feed or transmission to get cover under the terms cinematograph films or sound recording, presupposes some kind of recording, i.e., the images must be reduced to some tangible form whereupon the work would enjoy copyright protection. Here, in this case, the right has been granted by the assessee to SIPL which is mere a transfer of live feed through satellite, the entire transmission otherwise is done by SIPL. There is neither a recording by way of cinematography nor by way of sound recording is involved in live broadcast. Further, there is no artistic work which is being created when the events are captured on cameras for the live tran....
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....ich makes telecast of event possible at a distant place over television and the transaction in the instant case covered. (iii) The 'rights of broadcasting' was akin to 'copyright'. The substantial question of law involved before the Hon'ble High Court was; "Whether payment for live telecast of horse race is a payment for transfer of any 'copyright' and as such 'royalty' or in the alternative whether the live telecast of the horse race would be termed as a 'scientific work' and payment thereof would be 'royalty'? 21. After considering the definition of 'Royalty' as given in Section 9(1)(vi) and relying upon various sections of Copyright Act, Their Lordships held that:-. ■ It is not in dispute that the payment has been made by the respondent assessee to other clubs/centres on account of live telecast of races. The payment of 'royalty' is covered under section 194J which was inserted with effect from 13-7-2006. The said section, contemplates that in the eventuality a payment is made towards 'royalty', an amount equal to 10 per cent of such sum needs to be deducted as income- tax on income comprised therein. Explanation (ba) to the se....
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....ned. [Para 9] ■ Accordingly in provision (v) the words 'in respect of any copyright in literary, artistic or scientific work' were read to, inter alia, hold that 'royalty' is payable only on 'transfer of all or any rights (including granting of licence) in respect of any copyright in literary, artistic or scientific work including films or video tapes for use in connection with television or tapes were used in connection with radio broadcasting but not including consideration for the sale, distribution or exhibition of cinematographic films'. [Para 14] ■ Now the question which arises is whether live telecast of horse race is a work to have a 'copyright'. [Para 15] ■ A live T.V coverage of any event is a communication of visual images to the public and would fall within the definition of the word 'broadcast' in section 2(dd). That apart it was noted that section 13 does not contemplate broadcast as a work in which 'copyright' subsists as the said section contemplates 'copyright' to subsist in literary, dramatic, musical and artistic work, cinematograph films and sound recording. Simi....
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....' would encompass all categories of work including musical, dramatic, etc. and also his submission that the Copyright Act acknowledges the broadcast right as a right similar to 'copyright' needs to be rejected.[Para 18] ■ Insofar as the submission of revenue that the live telecast of an event is the outcome of 'scientific work' and payment thereof would be covered under the definition of 'royalty' is concerned, the said submission is also liable to be rejected first it runs contrary to his earlier submission and also for the simple reason the clause (v) to Explanation 2 to clause (vi) or sub-section (1) of section 9 would relate to work which includes films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting. It is to be seen whether consideration for transfer of all or any rights of 'scientific work' including films or video tapes would include a live telecast. The clause is an inclusive provision for films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting. It was noted that such a case was not set up by the revenue be....