TaxTMI 
TaxTMI 
2023 (1) TMI 161
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....ection 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). For the Assessment Year 2003-04 return of income was processed under Section 143(1) of the Act. Subsequently, reassessment proceedings were initiated, inter alia, in view of the information/material gathered during the assessment proceedings for the Assessment Year 2002-03 and assessment order dated 31.03.2005 was passed under Section 147 read with Section 143(3) of the Act. 1.2. Appeals preferred by the Assessee for the Assessment Year 2002-03 and 2003-04 were partly allowed by the CIT(A). 1.3. Being aggrieved, both, the Assessee and the Revenue are in appeal before us for Assessment Year 2002-03 and 2003-04. The Assessee has also filed Cross-Objection in appeal preferred by the Revenue. 1.4. The appeals involve common issues arising for identical facts and therefore, the appeals were heard together and are being disposed of by way of common order. We would first take up cross-appeals for the Assessment Year 2002-03 along with the cross objection preferred by the Assessee. For the Assessment Year 2002-03, we would also refer to corresponding facts and findings of CIT(A) for the Assessment Ye....
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.... without appreciating that the assessee is not the beneficial owner of the royalty. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing officer to compute the assessed tax after reducing the tax which is deductible at source by the payer from the tax on the total income determined on regular assessment (after giving appeal effect) and charge interest u/s, 234B of the Act accordingly." The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." CO No. 324/Mum/2006 in ITA No. 3130/Mum/2006 1.7. The Assessee has raised the following grounds in cross- objection: "Ground No 1 The learned CIT(A) has erred in holding that the Respondent has a source of income in India and hence, it has satisfied one of the conditions of Article 24 of the double taxation avoidance agreement executed between India and Singapore ('India-Singapore tax treaty"). The Respondent respectfully submits that the above finding is errone....
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.... and Singapore (for Short "DTAA") for the Assessment Years 2002-03 and 2003-04. 2.3 Eligibility of GCC to claim benefit of DTAA, and the characterization/taxability of income earned by GCC during the Assessment Year 2002-03 and 2003-04 is the subject matter of appeals before us. International Cricket Council & ICC Development (International) Ltd. 2.4 International Cricket Council (For short "ICC") is the global governing body of sport of Cricket and is responsible for organizing and regulating international cricket tournaments (hereinafter referred to as "ICC-Events"). The bodies governing cricket at national level are members of ICC. The revenues generated from ICC-Events are, inter alia, distributed amongst its members and utilized for development of sport of cricket across the world by ICC. 2.5 ICC Development (International) Ltd. [for short "IDI"], a company registered in the British Virgin Islands and having its principal office at Monaco at the relevant time, was formed by the members of ICC to own and control all its commercial rights including media, sponsorship and other intellectual property rights relating to the ICC events. 2.6 IDI authorizes ICC member t....
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.... SET India Private Limited to distribute, collect and retain the subscription revenues of SET, SET MAX and AXN channels with obligation to increase reach of channels. Paragraph 4 of SET Satellite (Singapore) Pte. Ltd. v. Deputy Director of Income-tax, (International Taxation), Range-2(1), Mumbai : 2011] 44 SOT 113 (Mumbai) (URO) 2.13 An Agreement, dated 25.01.2002, titled "Heads of Agreement relating to the audio visual transmission of International Cricket Council events in India and certain other territories for the period 2002-2007" (hereinafter referred to as the "Heads Agreement" or "THA") was executed amongst GCC, SET and World Sports Nimbus Pte Limited (A joint venture company between WSG and an Indian company Nimbus Communication) (For Short "WSN"). GCC granted rights/broadcasting rights to SET in relation to ICC events in consideration of "License Fee" to be paid by SET to GCC in terms of the Heads Agreement. The taxability and characterization of the aforesaid "License Fee" received by GCC from SET in India is one of the issues raised in the present appeals. 2.14 The Heads Agreement was followed by execution of Deed Regarding Novation, dated 26.03.2002, (for short "....
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....n India as "Business Income". Further, the revenues were also not covered by any other Article of the DTAA, and therefore, such revenues were not liable to tax in India. Assessment Proceedings 3.7 The Assessing Officer framed assessment of GCC under Section 143(3) of the Act vide order dated, 31.03.2005, at income of INR.2,50,06,600/- holding that: (a) GCC was not entitled to the benefits of the DTAA since the "Limitations of Relief" provision contained in Article 24 of the DTAA was attracted (b) Amount of USD 20,50,000/- received from SET as License Fees for grant of rights/broadcasting rights was taxable as "royalty" under the provisions of the Act. (c) Amounts received from LGEIL (USD 1,20,000/-) and HH (USD 88,000/-) for grant of sponsorship rights were also taxable as royalty as per the provisions of the Act holding the same to be payments for use or right to use of the commercial equipment (such as hoardings, banner, boards, scoreboards, screens, tickets, websites, & flags). (d) Assessee was liable to pay consequential interest under Sections 234A, 234B and 234C of the Act. Appellate Proceedings before CIT(A) 3.8 Being aggrieved....
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....has a source of income in India and hence, one of the conditions of Article 24 of DTAA stands satisfied. 4.1. Article 24 of the DTAA reads as under: "1. Where this Agreements provides (with or without other conditions) that income from sources in a Contracting State shall be exempt from tax, or taxed at a reduced rate in that Contracting State and under the laws in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State." 4.2. On perusal of the above, it is clear that the provisions of Article 24 are attracted resulting in denial of the benefits of the DTAA in case: (a) income under consideration is subjected to tax in Singapore as per domestic tax laws of Singapore by reference to the amount thereof which is remitted to Singapore and not by reference to the full amount thereof (hereinaf....
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....ever provided by GCC during the assessment proceedings. The relevant extract of written submission, dated 22.08.2022, filed by the Revenue in this regard reads as under: "The case of the Department is that limitation of benefit clause would apply for the reason that income is subject to preferential or reduced rate of tax in India as per Article 12 of the treaty and income has not been 'remitted to', or 'received' in Singapore as per the flow chart of movement of amounts shown above. In order to come out of the mischief of Article 24 of the treaty, the onus is on the appellant-assessee to show that the income is 'remitted to' or 'received' in Singapore and it is confined to the case in which the income is taxable in Singapore on limited receipt basis rather than on a comprehensive accrual basis. It is correct that where income is taxable on accrual basis in Singapore & not on remittance basis, the onus does not trigger. Article 24 is limiting the benefit only to the extent of the amount which is 'remitted to' or 'received' in Singapore and does not refer the full amount. The word 'remitted' by any stretch of reasoning....
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.... reliance was placed on Section 10 (Charge of income tax) of the Singapore Income Tax Act to establish that a person is taxable in Singapore not only with respect to the income received in Singapore but also with respect to income accruing in or derived from Singapore. For establishing that income was offered to tax in Singapore tax return as "Income accruing in/derived from Singapore" reliance was also placed on (i) tax return filed by GCC in Singapore for the year ended 31.12.2002 and 31.12.2003, (ii) audited global financial statement filed by GCC in Singapore for the year ended 31.12.2002 giving the balance sheet position as on 31.12.2001 and 31.12.2002 along with Profit & Loss earned during the calendar year 2001 and 2002 (Placed at page 74 to 82 of the paper-book for the Assessment Year 2002-03, and page 147 to 188 of paper-book for the Assessment Year 2003-04) (iii) Reconciliation of income offered to tax in Singapore tax return furnished during the course of hearing, and (iv) Confirmation, dated 15.02.2006 from tax advisors of GCC that GCC offered global income to tax on accrual basis in Singapore. The decision of the Tribunal in the case of Alabra Shipping Pte Ltd....
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....proceedings. Thus, income was received in Singapore. 4.9. We have considered the rival submission, perused the material on record and taken into account the judicial precedents cited by both the sides. In our view, all the above three conditions, (i.e., Condition 1,2 & 3 specified in paragraph 4.2 above), must be satisfied in case the provisions of Article 24 are to be attracted. Thus, even if one of the three conditions is not satisfied, the provisions of Article 24 of DTAA would not be attracted. Further, even if the provisions of Article 24 of DTAA are attracted the benefit of exemption or taxation at reduced rate would still be available to the part of income remitted to or received in Singapore. 4.10. The stand taken by the Assessing Officer, which has been supported by the Learned Counsel for Revenue in appeal before us, is premised upon the understanding that the income under consideration is taxable in Singapore on receipt/remittance basis being foreign sourced income. Whereas, it has been contended on behalf of GCC that the income under consideration was taxable in Singapore on accrual basis and has been, therefore, offered to tax in Singapore as income accruing in S....
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....re and has stated that in the present case, the income is accruing in or derived from Singapore. The appellant has drawn attention to its contention before the AO that "for the period under consideration, GCC has filed a tax return in Singapore reporting to tax its worldwide income for the subject period. Specifically. GCC has included the income under consideration..." It has been stated that at page: 6 of the return of income filed by the appellant in Singapore for the year ended 31.12.2002 (page 104 of Paper Book) the gross income was reflected at $ 53,595,059 and the loss before income tax was shown at $139,824,648 and these amounts of Gross Income and loss before income-tax were also reflected in the financial statements for the year ended 31.12.2002, (page 117 of Paper Book). It has been submitted that the total revenue is a sum of sponsorship income and income from grant of broadcasting rights and the entire income under consideration i.e. the sponsorship income and the income from grant of broadcasting rights has been offered to tax in the return of income filed with the Singapore authorities. By letter dt 17.2.2006, the appellant has further furnished a confirmation receiv....
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....f GCC that the income under consideration is not taxable in Singapore on receipt/remittance basis, but on accrual basis. Nothing has been placed on record to controvert the findings of CIT(A). We have perused the documents/material relied upon by GCC in this regard including the income tax returns, financial statements, and confirmation from tax advisor. GCC has offered to tax its worldwide income in Singapore. Since Condition No.1, being one of the three conditions which are to be satisfied simultaneously for triggering the provisions of Article 24 of DTAA, is not satisfied, the CIT(A) was correct in holding that the provisions of Article 24 of DTAA would not get attracted and GCC would be entitled to claim benefit of the provisions of the DTAA. Since Condition No. 1 is not satisfied, the rival contentions in relating to the other two conditions (Condition No. 2 & 3 specified in paragraph 4.2 above) do not require adjudication having become academic in the context of applicability of Article 24 of DTAA. Thus, in view of our conclusion that provisions of Article 24 of DTAA would not be attracted in case of GCC, we hold that GCC would be entitled to avail the benefit of the provisio....
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....per Schedule 1 of the Heads Agreement, the ""License Fee"" was spread over for the periods from the year 2002 to 2007 with other stipulations like, authorized number of exhibitions, minimum commitment and rights provided therein. (b) As per the production agreement between GCC and the producer (i.e. Octagon CSI Limited) (Thought production agreement was not placed on record, but the same was relied upon by both the sides to the extent it was reproduced by the CIT(A) in paragraph 16 of his order disposing appeal for the Assessment Year 2003-04.), Feed was to be created at the place where match is played. The access to the production team is procured by GCC from the organizers of the matches (i.e. the various cricket associations who owned/controlled the venues). From the Schedule itself it was evident that at least one match was played in India. Further, as the information available, ICC Championship Trophy was held in India in the year 2006 and as per Schedule 2 to the Heads Agreement, 11% of the total consideration was apportioned to this event. (c) The Heads Agreement makes provision to define, Pay-per-view, terrestrial rights, terrestrial restrictions, telephon....
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....ed the aforesaid contention of GCC as the CIT(A) had concluded that the payments received from SET did not have any nexus or connection with the Permanent Establishment of the payer (i.e. SET) in India. Therefore, CIT(A) rightly held that the payments from SET did not arise in India in terms of Article 12(7) of DTAA. 5.6. Learned Senior Counsel for GCC further submitted that Section 12(7) of the DTAA exhaustively defines the place where royalty arises. Therefore, once the royalty cannot be said to have arisen in India in terms of Article 12(7) of DTAA, royalty income cannot be brought to tax in India. In this regard, the Learned Senior Counsel for GCC relied upon the decision of the Tribunal in the case of Decca Survey Overseas Limited, UK Vs ITO, Ward 12(2), Mumbai [ITA No. 8506 to 8508, 8895 and 8879/Bom/1990, Assessment Years 1984-85 to 1989-90, 30.01.2006] and the decision of Authority for Advance Ruling in the case of Jay Shree Tea and Industries Limited: 274 ITR 97. 5.7. Without prejudice to the above, the Learned Senior Counsel for GCC submitted that even if it is concluded that Article 12(7) does not define the phrase "arising in a State" exhaustively and the same is ....
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....ning the meaning of term "arise" as used in Article 12(2) of the DTAA does not arise keeping in view the context in which it has been used, as explained hereinafter. 5.10. Section 4 of the Act is the charging section which provides that income tax shall be charged in respect of total income. Section 5(2) prescribes the 'scope of total income' of a non-resident and provides that total income of a non-resident shall include all income, from whatever source, which accrues or arises in India or is deemed to accrue or arise in India. Section 9 of the Act lays down the various circumstances under which income would be deemed to accrue or arise in India. 5.11. The Hon"ble Supreme Court had, in the case of UOI Vs Azadi Bachao Andolan: 263 ITR 706, made following observations regarding bilateral double taxation avoidance agreements entered by nations which are germane to the issue before us: "16. Every country seeks to tax the income generated within its territory on the basis of one or more connecting factors, such as location of the source, residence of the taxable entity, maintenance of a permanent establishment, and so on. A country might choose to emphasise one o....
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....el Convention departed from this position and provided for sharing of taxing rights in respect of income in the nature of "royalties" between the Residence State and the Source State. It provided that the "royalties" may also be taxed in Source State and according to the law of the Source State at a rate not exceed the rate agreed upon by the contracting states through bilateral negotiation. Since the benefit was limited to reduce rate of tax in respect of defined royalty income, there was again no occasion to define the meaning of term "arise". However, Article 12(3) of DTAA provided a narrower definition of "royalties" as compared to the one contained in Explanation 2 to Section 9(1)(vi) of the Act. Therefore, the meaning and purport of "arise" as used in Article 12(2) or "arising in a contracting state" as used in Article 12(1) of the DTAA would, in our view, flow from the domestic tax law of the contract states only. 5.14. We are not inclined to accept the contention advanced on behalf of GCC that use of term "arise" in Article 12(2) of DTAA, when interpreted keeping in view the meaning of term "arise" as per the provisions of the Act in view of Article 3(2) of the DTAA, lea....
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....yalties arise. Reliance was placed on behalf of GCC on paragraph 26 and 27 of the OECD Commentary on Article 11 of Model Convention relating to interest income wherein in the context of Article 11(5) it has been provided that in absence of economic nexus between the interest-bearing loan and permanent establishment, the contracting state where such permanent establishment is situated cannot be regarded as a state where interest arises. Since Article 11(5) is couched in similar language as Article 12(7) of DTAA, it was contended on behalf of GCC, on the same analogy, that in absence of a nexus between the permanent establishment of SET in India and royalty income, India cannot be regarded as the state where income arises even in terms of Article 12(2) of DTAA. However, we are not inclined to accept the same. It is admitted position that OECD Model Convention Commentary does not provide similar/corresponding explanation in relation to Article 12(7) for the reason OECD Model Convention provided the Residence State exclusive right the tax royalty income. Further, the commentary on Article 11(5) seeks nexus between interest-bearing loans (which is the source of interest income) with the....
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....e basis, that the royalty income cannot, in any case, be said to accrue/arise or deemed to accrue/arise in India in terms of Section 9 read with Section 5 of the Act as payment of "License Fee" by SET to GCC was not for the purpose of business operation of SET in India. It was emphasized that income earned by GCC had no nexus with India as execution of contract, ICC-Event, production and up-linking of feed, and the receipt of consideration, all, took place outside India. 5.20. Per contra, it was contended by the Learned Counsel for Revenue that the royalty was paid for rights utilized for business operations of SET in India and for the purpose of earning income from sources in India. The Learned Counsel for Revenue submitted that contract could not be considered to be as the source of income, and more so when such contract was merely executory document. Reliance in this regard was placed by him on the decision of the Hon"ble Supreme Court in the case of Performing Rights Society Ltd. & Anr. Vs. CIT & Ors: [1977] 106 ITR 11(SC). 5.21. We note that the Hon"ble Supreme Court has, in the case of Performing Rights Society Ltd (supra), held as under: "The society is a non-....
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....to guide us. 5.23. Assessing Officer had concluded that income received from SET by GCC was in the nature and would be deemed to accrue/arise in India as per Section 9(1)(vi) of the Act. In appeal preferred by GCC, CIT(A) concluded that income did not arise in India as deeming provisions contained in Article 12(7) of DTAA were not attracted. We have rejected the reasoning given by the CIT(A) in paragraph 5.17 above, and therefore, we are examining whether income from SET could be said to have arisen in India for the purpose of Article 12(2) of the DTAA. For now we proceed on the presumption, which we would revisit later on, that the payments received from SET are in the nature of "royalty" in terms of Explanation 2 to Section 9(1)(vi) of the Act read with Article 12(3) of the DTAA. Section 9(1)(vi)(c) of the Act provides that income by way of royalty payable by a person who is a non-resident shall be deemed to accrue/arise in India, where the royalty is payable, inter alia, in respect of any right, property or information used or services utilised for the purposes of making or earning any income from any source in India. We note that "License Fee" has been paid by SET to GCC ....
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.... in respect of a "work" being a "cinematograph film": (a) to make a copy of the film, including storing of it in any medium by electronic or other means, (b) to communicate the film to the public. 5.26. Thus, for a copyright to exist there must be "work". Section 2(y) of TCA defines "work" to include "cinematograph film" which is in turn defined by Section 2(f) of TCA as under: "cinematograph film means any work of visual recording 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; (Emphasis Supplied) 5.27. On perusal of the above, it is clear that to qualify as work being cinematograph film there must be visual/sound recording. In case of a live broadcast of a sporting event there is no recording and therefore, no "work". It is for this reason that it has been contended by GCC that the Feed received from SET is "live" Feed whereas the Learned Counsel for Revenue, at the outset, submitted that the payments made by SET to GCC were not for "live" broadcast of sporting event. 5.28. In this regard, the L....
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.... stills taken from the Feed. SET was also given right to appoint broadcaster or on-air sponsorships in connection with its transmissions and other related rights. 5.31. Responding to the above submissions of the Revenue, the Learned Senior Counsel for GCC submitted that the consideration was paid to SET by GCC for delivery of "Live" Feed which was not pre-recorded. Hence, there was no "work" and consequently no copyright. Thus, the payments made by SET to GCC could not be considered as payments for use of, or right to use of copyright in a cinematograph film. The Learned Senior Counsel submitted that the objective of the Heads Agreement was grant of "Live" broadcasting rights whereby GCC would give "Live" Feed to SET in which no copyright subsisted. In this regard, reference was made to the following: (a) Definition of "Feed" at page 25 of the Heads Agreement wherein Feed was defined to mean "a live television signal of the Matches" (b) Clause 15 of Heads Agreement pertaining to Feed Specifications wherein it was stated that the Feed comprised an international quality live clean and continuous Feed (without commercials and/ or virtual advertising) together with....
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....t live broadcasting neither involved a recording by way of cinematography nor by way of sound recording. Reliance was also placed on behalf of GCC on the following judicial precedents wherein it was held that payments made for "live Feed" for broadcasting live sports event was not in the nature of "royalty" as per Section 9(1)(vi) of the Act: (a) Delhi Race Club (1940) Ltd (113 DTR 0420) (b) Neo Sports Broadcast Private Limited (67 DTR 0170) (c) Nimbus Communications Ltd (32 taxmann.com 53) (d) Taj TV Ltd (ITA No 1079/Mum/2008 and ITA No 3702/Mum/2005) 5.34. Reliance was also placed on the definition of "royalty" contained in the Direct Tax Code, 2010 which specifically included live coverage of events within the definition of royalty, which was absent in the definition of royalty given in Explanation 2 to Section 9(1)(vi) of the Act. 5.35. We have considered the rival submissions as well as the judicial precedents cited by both the sides, and have perused the material on record. 5.36. On perusal of the Master Rights Agreement and Heads Agreement it becomes clear that SET had acquired a bouquet of rights out of larger basket of rights gr....
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....sion of a relevant programme and consisting of 2 exhibition days per exhibition week; (d) Clip Programming: up to 3 programmes featuring clips may be transmitted per week, each episode of each such programme shall have 10 exhibition days during the Exhibition Period (subject at all times to the limitation of no more than 3 programmes featuring clips being transmitted by the Licensee in any week). (e) During the Event: the Licensee's exploitation via Pay Per View shall be unlimited during the currency of the Event from which the relevant coverage is drawn. After completion of any Event, the Licensee shall not exploit Pay Per View Rights in respect of that Event for a period of 14 days, when after it shall be free to exploit Pay Per View rights and to coverage of the Event without restriction during the remainder of the Exhibition Period." (Emphasis Supplied) 5.38. Thus, SET had the right to exhibit live/delayed coverage during the ICC-Event. After the ICC-Event, SET could exhibit full match recordings for the year of the ICC-Event and for subsequent year. SET also had the right to exhibit the highlights and programme featuring clips after the ICC-Event. SET ....
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....it, was applicable to a claim of infringement of broadcast reproduction rights and non-impleadment of the owner of copyright was fatal to the maintainability of suit. In appeal, ESS contended that provisions of Section 61 of ICA were not applicable to a case of infringement of broadcast reproduction rights. In addition, as an alternative argument, it was contended by ESS that ESS would get separate copyright in the final feed telecasted after making its own additions/alterations etc. in the live feed received from the host broadcaster. Thus, it was contended by ESS that there were two separate rights, broadcast reproduction right (which was separate right of ESS independent of the copyright in the feed received from host broadcaster), and the cinematographic copyright in the final feed, giving rise to two distinct causes of actions. The Hon"ble High Court concluded the final feed/transmission made by ESS, particularly the non-live portion, was substantially different from the feed received from the host broadcaster and the same resulted in independent copyright in the final feed "whether it be treated and termed as broadcasting reproduction rights or copyright". Therefore, the Hon"....
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....e broadcasting reproduction right, the monopoly of which belongs to the appellant as above. However, we make it clear that this position of law does not apply to news coverage falling within the ambit of 'fair dealing' by the respondent T.V. Channel." (Emphasis Supplied) 5.42. Before moving further, we would like to observe that the Revenue had also placed reliance on the above judgment of the Hon"ble Delhi High Court to contend that the "live" Feed was a modified one in which copyright subsisted as per the above judgment. At this junction it would be pertinent to note that the "Live" Feed that we are concerned with is the one delivered by GCC or delivered by producer in behalf of GCC to SET and not the final Feed broadcasted by SET (hereinafter referred to as "Broadcasted Feed"). 5.43. Accordingly, we proceed to examine the issue whether "Live" Feed delivered to SET by GCC or by the producer on behalf of GCC in terms of the Heads Agreement was "Live" Feed or "modified" Feed. 5.44. It was contended on behalf of GCC that the Feed delivered to SET was live and uninterrupted and was not pre-recorded. Reliance in this regard was placed upon the report of Broadcast Cabl....
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....he Recordings by way of transmission, distribution etc. (b) Term "Recordings" was defined to mean any form of audio, visual and/or audio-visual coverage or other reproductions of matches and all live videos & audio signals of an Event. Thus, Recordings meant audio-visual coverage of matches (including their reproductions) as well as live audio-visual signals. (c) Allowable Expenditure was defined to mean production cost for Recording of Events. (d) Clause 4.1, pertaining to recording and transmission rights, gave GCC exclusive rights of access, free of charge, to all avenues for the purpose of producing the Recordings. (e) Clause 4.1(b)(iv) specifically provided that all costs payable for Recordings for the 2003 World Cup shall be payable from the Revenue Account as allowable expenditure for the 2003 World Cup. (f) Clause 4.2 relating to Media Transmission provided that GCC was granted exclusive rights to transmit the "Recordings" and exploit the Media Transmission or adaptations thereof by all news of distribution whether simultaneous or delayed, digital or analogue or otherwise) (g) Clause 4.5(a) dealing with Copyright and Con....
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....itation, technology of video, sound and in data transmission to portable devices (such as, mobile telephones and palm-top computers) and/or any similar or related systems; (v) all forms of electronic publishing (including CD Roms); and (vi) all forms of software downloading, and (vii) áll forms of electronic communication system developed for the delivery and provision of content for use by an end-user, and (b) operate an official internet website for each Event" 5.49. On the strength of the Master Rights Agreement, GCC granted rights to SET the rights specified in Clause 4 read with Part 6 of Schedule 1 annexed to the Heads Agreement in terms of the Heads Agreement (read with the TNA). 5.50. As per Clause 5 of Heads Agreement, SET was permitted to reconfigure, combined and/or package the Feed for the purpose of exploiting the "Rights" (i.e. the right to transmit, broadcast, exhibit, perform, include in cable programmes, and/or otherwise distribute or make available to the public, any moving visual and/or audiovisual representations including the Feed, Highlights Package and any recordings by specified means). The Heads agreement ....
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....ent, while GCC was under obligation to provide the aforesaid deliverables, SET had acquired the Rights to exploit same. In order to enable exploitation of the deliverables including "Feed", GCC had granted to SET exclusive license of all "Proprietary Interests" in the Feed and Highlights Package in terms of Clause 43 of the Heads Agreement which read as under: "Ownership and License of the Rights 43. The Licensee acknowledges that the Licensor is and will continue to own all Proprietary Interests in the Feed and Highlights Package. The Licensor hereby grants to the Licensee an exclusive licence of all such Proprietary Interests in the Feed and Highlights Package and waives all moral rights (and agrees to procure that all contributors of content included in the Feed and Highlights Package shall waive their moral rights) to enable the Licensee to fully exploit the Rights granted in these Heads. On the expiry of the Exhibition Period, the Licensee shall assign to IDI all Proprietary Interests in the Feed and Highlight Package it may have acquired but specifically excluding for the avoidance of doubt any Proprietary Interests in any programmes created by the Licensee,....
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....ause 4.1 of the Productions Agreements casted obligations upon the producer to make the Recording and produce the Feed. (b) Clause 10.1 provided that the producer shall assign to GCC, by way of assignment of present and future copyrights, all copyright and Proprietary Interest in Recordings and Feed as well as broadcast or transmission made by the producer in respect of the same. (c) Clause 10.4 specifically provided that GCC would have the right to sue for infringement of copyright or any other proprietary interest in Recordings or Feed or broadcast/transmission of the same. (d) Clause 10.6 provided that the producer was required to display specified copyright notice as part of the Recordings and the Feed. 5.55. On perusal of the above clauses of the Production Agreement, it is clear that Recordings and Feed are not one and the same. Clause 1.1 contains definition of Recordings and Feed which are as under: "Recordings means the live audio and visual coverage (including all live video and audio signals) of the matches of the 2003 World Cup." "Feed means the live audio and visual signals derived from the Recordings in the form of live ....
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....of ICA defines "communication to the public" to, inter alia, mean making any work available for being seen or heard or otherwise enjoyed by the public by any means of display or diffusion. Term "Broadcast" is defined in Section 2(dd) to mean communication to public by means of wireless diffusion or by wire and includes a re-broadcast. Thus, right to broadcast is a species of communication to public. Explanation to Section 2(ff) of ICA specifically provides that communication through satellite or cable or any other means of simultaneous communication shall be deemed to be communication to the public. Section 14 of ICA defines copyright in the case of a cinematograph film to mean exclusive right to communicate to public. Therefore, the exclusive right to broadcast (which amounts to communication to public) when granted in respect of cinematograph film would result in grant of copyright in such cinematograph film. The aforesaid right in respect of cinematograph film is separate and distinct from the special rights, generally referred to as "neighboring rights", granted to "broadcasting organisations" in the respect of broadcasts under Section 37 of ICA. These rights protect the broadc....
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....ion received by GCC from SET was (a) for live and non-live exhibitions and (b) the "Live" Feed was not simply live feed but the same was modified to include non-live content. At this point it would be pertinent to note that perusal of the decision cited on behalf of the GCC shows that the production agreement, which according to us provided the link between "Recording" and "Feed", was not placed before the Tribunal/Court in any of the matters. Even before us, the production agreement has not been placed on record and has been referred to an relied upon by the parties and considered by us to the extent the same has been reproduced in the order passed by the CIT(A) for the Assessment Year 2003-04. 5.60. This takes us to the issue of allocation/apportionment of the Licensee Fee income received by GCC from SET in terms of the Heads Agreement. We have concluded that the Licensee Fee paid by SET to GCC is not only for exhibition of the "Live" Feed of match (hereinafter referred to as "Live Exhibitions") but also for other exhibitions to be made after the conclusion of match (hereinafter referred to as "Non-Live Exhibitions") as specified in Part 4 of Schedule 1 annexed to the Heads Ag....
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....130/MUM/ 2006) along with Ground No. 2 of CO No. 324/Mum/2006 filed by the Assessee, and Ground No. 1 of Appeal of the Assessee (ITA No. 3135/Mum/2006) 6.1. Ground No. 5 of the Departmental Appeal and Ground No.1 of the Appeal preferred by GCC are directed against the order of CIT(A) holding that the payments received by GCC from from LGEIL and HH which are in the nature of royalties is taxable at 10% of the gross amount in view of Article 12(2)(b) of the DTAA. 6.2. For Assessment Year 2002-03, both, the Assessing Officer and CIT(A) held that the sponsorship fee received by GCC from LGEIL and HH in terms of the GPA and SA, respectively, was taxable being in the nature of royalty for "use or right to use commercial equipment". 6.3. The grievance of the Revenue is that in appeal preferred by the GCC against the order of Assessing Officer holding the aforesaid payments as royalties under the provisions of the Act, the CIT(A) granted the benefit of the provisions of DTAA to GCC entitling GCC to claim benefit of lower tax rate of 10% as per Article 12(2) of the DTAA whereas GCC is aggrieved by the order CIT(A) characterization of sponsorship fee as "royalties" for use of equipm....
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....rs or the host cricket associations. GCC merely granted the right to advertise at the venue to the sponsor by placing hoardings, banners, etc at the venue. The sponsors provided the advertisements which were to be shown/displayed at the venue and the same were placed/displayed on the perimeter boards, etc by the host cricket association. 6.6. He further submitted that the payments received by GCC from the sponsors were not in the nature of rental income for the lease of any equipment but for advertising their products/services. In essence, the agreements between Assessee and both LGEIL and HH were of grant of sponsorship rights which primarily entailed grant of right to the sponsors to advertise their products and be associated with the events as sponsors. The substance of agreements was grant of sponsorship rights and not the right to use equipment. Further, user of certain intellectual property rights, if any, was ancillary and could not have resulted in the characterization of the advertisement/sponsorship receipt as consideration for the use of such intellectual property rights to justify such income being classified as royalty. In this regard, reliance was placed on the Hon....
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....f the excluded rights enumerated in Clause 6.1 of the Master Rights Agreement. The "Included Rights" included naming rights, designation rights, trade mark rights, tickets & hospitality rights, advertising rights, broadcast sponsorship rights, official event internet sponsorship rights, and other rights. The advertising rights required prior approval of IDI and similarly other rights were also subject to approval of IDI. Trade mark rights were given "permitted use" by IDI to GCC. GCC was given right to sub-grant the rights in such manner (as per Clause 10.3) as it thought fit but subject to IDI's approval to such requests which were to be made in writing as per Clause 10.7 of the Master Rights Agreement which approval could not be withheld unreasonably or delayed. 6.9. He submitted that the rights which were given to LGEIL under GPA dated 28.07.2002 and to HH under SA dated 08.07.2002. Master Rights Agreement was executed on 05.07.2000 among IDI, WSG, and News Corp. This means that at least for the events in the year 2000 & 2001, payments were made to WSG, a BVI company with which MRA was in vogue. There is no tax treaty with BVI & hence domestic law would apply and the paym....
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....nsel for Revenue placed reliance the decision of Kolkata Bench of the Tribunal in the case of Selvel Advertising Pvt. Ltd. vs. Commissioner of Income-tax, Kolkata [2016] 75 taxmann.com 249 (Kolkata-Trib.) and One Ad Display Pvt Ltd (ITA No. 1373/Kol/2015), and Circular No. 715 of 1995, dated 08.08.1995 6.13. In rejoinder, the Learned Senior Counsel submitted that the agreements entered into by GCC with IDI and the sponsors nowhere mentioned or indicated that GCC had control/ ownership over the venues. The venues or the stadiums with perimeter boards, scoreboards, etc at which the advertisements were placed were owned by the host cricket associations. He further submitted that the reliance placed by Revenue upon the decisions of Selvel Advertising Pvt Ltd (supra) and One Ad Display Pvt Ltd (supra) was misplaced. He submitted that in both the aforesaid decisions it was held that hoardings were temporary structures on which 100% depreciation was allowable. Placing reliance on Question 5 of the Circular No. 715 of 1995, dated 08.08.1995, he submitted that the Central Board of Direct Taxes (CBDT) had clarified that payment made for putting up a hoarding are in the nature of advertisi....
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....ertising material, GCC continue exercise control and dominion over the same by providing specific conditions advertising and advertising material (such as those relating to dimensions, place, placement, material and duration). The advertising material could be displayed at the Advertising Sites only subject to fulfillment of the aforesaid conditions. However, GCC did not part with such control or dominion over the Advertising Sites while granting rights to LGEIL and HH. GCC/WSN continued to administer the Advertising Sites and were responsible to ensure that the advertising material are manufactured, incorporated, erected, maintained and removed with reasonable care. GCC/WSN was also required to ensure that such boards are not deliberately obscured or concealed during matches. Thus, in our view, LGEIL and HH paid consideration for obtaining commercial right to advertise and not for obtaining right to use the equipment as contended by the Revenue. Perusal of the sponsorship agreement shows that the intention of LGEIL/HH and GCC was not to lease the equipment. LGEIL/HH intended to associate with the ICC-Event as sponsors to advertise their products/services by reaching out to a broad....
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.... for sponsorship of Championship Trophy 2006, we find that the Central Govt. vide notification No. S0 1230(E) dt 31.7.2006 as amended by notification No. SO 1445(E) 6-9-2006 and notified that payments to ICC in relation to such Trophy as exempt u/s 10 (39) of the Act. A perusal of the notification demonstrates that amounts received or receivable from Global Cricket Corporation PEE Ltd., by ICC(development) International Ltd. (IDIL) are exempt. The payments were received by GCC, only for onward payment to IDIL. In our view the overall objective of the notification and the mechanism employed by IDIL for sale of media and sponsorship rights have to be taken into consideration for deciding the matter. When so considered, it is clear that the payments made to GCC are tax exempt, having no element of income and hence there is no requirement of withholding tax u/s.195 of the Act." 6.17. We concur with the reasoning given by the Tribunal in the above decisions. To the same effect is the decisions of the Tribunal in the case of Reebok India Company (supra) wherein in identical facts ad circumstances it has been held that the "rights fee" paid to IDI to be the "Official Partner of ICC" ca....
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....2003-04 8. We would now take up cross-appeals/cross-objection for the Assessment Year 2003-04. The Grounds raised in the appeals/cross-objections for the Assessment Year 2003-04 are as under: ITA No. 1444/Mum/2009 8.1 The Revenue has raised the following grounds of appeal: "1 On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in allowing the benefit of India Singapore Tax Treaty to the assessee in respect of receipts of US $ 20,50,000 from Set Satellite (Singapore) Pte Ltd., ("SET)" 2. On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in holding that Article-24 of the India Singapore Tax Treaty is not applicable and also holding that the income is taxable under Article-12 of the said treaty in respect of income from Prasar Bharati and AIR. 3. On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in holding that income received by way of payments from SET in a third country Jersey would not be hit by Article-24 of the India Singapore Tax Treaty. 4. On the facts and in the circumstances of the case and in law, the ld. CIT (App....
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.... learned CIT(A) has erred in holding that payments made by Sony Entertainment Television Pte Limited ('SET Singapore') to the Appellant are taxable as 'Royalty under Article 12 of the India - Singapore Double Tax Avoidance Agreement ("India - Singapore Tax Treaty'). The Appellant prays that the payments made by SET Singapore to the Appellant are not in the nature of 'Royalty". Ground No. 3 The learned CIT(A) has erred in holding that the payments made by SET Singapore to the Appellant are taxable in India. The Appellant prays that the payments made by SET Singapore to the Appellant are not liable to tax in India. Ground No. 4 The learned CIT(A) has erred in computing the taxable profits of the Appellant with respect to payments made by SET Singapore without considering the fact that the global losses incurred by the Appellant. The Appellant prays that in view of the global losses, payments made by SET Singapore ought not to be taxed in India. Ground No. 5 The learned CIT(A) has erred in holding that 75 percent of the payments made by SET Singapore are for use of copyright in 'li....
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.....3 GCC also earned sponsorship fee of USD 39,71,200/- from LGEIL, USD 25,51,000/- from HH and USD 15,22,780/- from Hutchison Max Telecom Private Limited (For short "Hutch"). 9.4 GCC earned aggregate revenue of USD 16,01,27,908/- (including the above stated revenues) for the Assessment Year 2003-04 Return of Income 9.5 GCC filed return of income in India on 27.11.2003 declaring income of INR.55,67,480/- after claiming benefit of DTAA on the grounds that only revenues amounting to USD 116,611/- were liable to tax in India as "royalties" while the balance of the revenues earned by GCC were in the nature of "Business Income" and in the absence of Permanent Establishment ("PE") of the GCC in India, the same were not taxable in India as "Business Income". Further, the aforesaid revenues were also not covered by any other Article of the DTAA, and therefore, such revenues were not liable to tax in India. Assessment Proceedings 9.6 The return of GCC was processed under Section 143(1) of the Act. Subsequently, the re-assessment proceedings were initiated under Section 147 of the Act as notice under Section 148 of the was issued to GCC on 28.04.2005 after recording reasons (Rep....
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....n the form of written submissions filed by both the sides. We have considered the rival submission keeping in view the factual matrix and the position in law. We have also perused the judicial precedents cited during the course of hearings. 10. Ground No. 1 of Appeal of the Assessee (ITA.No.1510/MUM/ 2006) 10.1. We would first take up Ground No. 1 raised by GCC in its appeal for the Assessment Year 2003-04 as it goes to root of the matter. GCC has challenged the reopening of assessment under Section 147 of the Act. The contention of GCC is that the entire re-assessment proceedings void-ab-initio and therefore, liable to be set aside. 10.2. The Ld. Senior Counsel for GCC submitted that the return of income for Assessment Year 2003-04 was filed before due date on 27.11.2003. In the notes to return of income all primary facts were disclosed fully and truly. The return was not selected for scrutiny as no notice under Section 143(2) of the Act was issued to GCC. 10.3. The Ld. Senior Counsel emphasized on the fact that re-assessment proceedings were initiated under Section 147 of the Act by relying upon the Assessment Order for the Assessment Year 2002-03, and submitted that ....
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....sment Year 2003-2004 are bad in law and therefore, should be quashed. 10.6. He further submitted that provisions of Section 147 of the Act cannot be invoked to cover the loss of opportunity to frame assessment under Section 143(3) of the Act. The return filed by GCC had become final in the absence of initiation of assessment proceedings under Section 143(3) of the Act within the prescribed time, and the notice under Section 148 of the Act cannot be issued only to revive the time for issuance of notice under Section 143(2) of the Act. 10.7. Per contra, the Ld. Counsel for the Revenue submitted that re-assessment proceedings were valid and in this regard relied upon paragraph 6 of the order of CIT(A) which reads as under: "6. I have gone through the submissions. In this case, the return for this A.Y. was processed u/s. 143(1). No assessment u/s. 143(3) was done in this case earlier. From the materials collected during the assessment proceedings for A.Y. 2002-03, the A.O. was satisfied that income has escaped for A.Y. 2003-043. The issue involved is whether certain receipts are taxable in India or not. The nature of receipts are same in both the years i.e. A.Y. 2002-03 ....
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....constituted tangible material on the basis of which the Assessing Officer formed the belief that taxable income had escaped assessment. Further, Explanation 2 to Section 147 of the Act specifically provides that income chargeable to tax shall be deemed to have escaped assessment where return of income has been furnished but no assessment has been made, and it is noticed by the Assessing Officer that the Assessee has understated the income or has claimed excessive deduction or relief in the return. Thus, there existed tangible material on the basis of which the Assessing Officer formed belief that income chargeable to tax for the Assessment Year 2003-04 has escaped assessment. 10.10. In view of the above, we hold that re-assessment proceedings for the Assessment Year 2003-04 were initiated in compliance with the provisions of Section 147/148 of the Act and the same cannot be regarded as bad in law. Accordingly, Ground No. 1 raised by GCC in Appeal is dismissed. We proceed to examine Ground No. 1 raised by the Revenue in its appeal along with connected grounds raised by the Assessee in its appeal and/or its cross objections. 11. Ground No. 1,2 and 3 of Departmental Appeal (I....
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.... of Departmental Appeal (ITA.No. 1444/Mum/2009) along with Ground No. 8 of Appeal by the Assessee (ITA.No.1510/MUM/ 2006) 13.1. Ground No. 5 and 6 raised by Revenue and Ground No. 8 raised by GCC pertain to income from sponsorship agreement received by GCC from various parties (i.e. LGEIL, HH and Hutchinson Max Telecom). We have already concluded that GCC would be entitled to claim benefit of the provisions of DTAA. Therefore, contentions raised by Revenue in this regard in Ground No. 5 are rejected. Both the sides agreed that for the Assessment Year 2003-04 the nature of sponsorship fee as well as the rights and obligations of the parties to the sponsorship agreements were identical to the Assessment Year 2002-03 and therefore, our findings/adjudication in relation to sponsorship fee received by GCC for the Assessment Year 2002-03 shall apply mutatis mutandis to the sponsorship fee received by GCC during the Assessment Year 2003-04. In paragraph 6 to 6.19 above we have held that the sponsorship fee would not be liable to tax in India in the hands of GCC for the Assessment Year 2002-03. Accordingly, we hold that for Assessment Year 2003-04 also, the sponsorship fee of INR receiv....