TaxTMI 
TaxTMI 
2025 (6) TMI 1543
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....d was engaged in the business of production of theatrical and nontheatrical motion pictures and video tapes. For the year under consideration, TWI Inc. was carrying on the business of licensing broadcasting rights with both residents as well as non-residents and entered into direct contracts with the broadcasters for the licensing of broadcasting rights. On 05.05.2014, the 'TWI Inc. merged with Iris Trans World International Inc. and post that the surviving entity converted itself into a limited liability company and was named Trans world International LLC on 05.05.2014. In the instant case, information was received vide letter dated 26.02.2018, filed by the assessee company itself, wherein, it stated that during FY 2010-11 to 2013-14 and part of 2014-15 (till 4 May 2014), another group entity, incorporated in USA. namely Trans World International Inc. (TWI Inc.) had performed similar business activities and TWI Inc. had also obtained PAN in India- AADCT7478H. TWI Inc. merged with Iris Trans World International Inc. on May 05, 2014 (IRS Inc.) and IRIS was converted to a Limited Liability Company namely Trans World International LLC(TWI LLO) (ie. the captioned assessee), it was ....
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....bsp; Total 2,18,76,078/- 3.1. From the above table, it is seen that there is no dispute in respect of item no.1 to 5 and the dispute is only with respect to item no.6 and 7, where the consideration has been received for bundled rights i.e. both for broadcasting for live and recorded coverage of Sony Pictures Networks India Pvt. Ltd. and Taj television Private limited. The assessee as per the above table offered only 5% of the bundled receipts towards royalty income i.e. it considered only 5% of the consideration receipts towards recorded content and balance 95% towards live coverage of events. The Assessing Officer asked the assessee to justify the above bifurcation i.e. only 5% towards recorded events and offering it as royalty income and claiming balance 95% towards live coverage and claiming it as exempt. 3.2. In reply, the assessee submitted that in the media and entertainment industry, with respect to the broadcasting contact for a sports event, the consideration attributable towards the live telecast is more in comparison to the record feed. It was further submitted that the rationale behind the same was that the live telecast of the sport even....
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....ous judicial pronouncements, he observed that the Hon'ble Courts have upheld that the doctrine of 'substance over form' meaning that contract/arrangement has to be read/understood for the intent of which it was entered into and not mere by its legal form. The Assessing Officer referred that this agreement has been discussed in detail in assessment proceedings for AY 2017-18, wherein, it was highlighted that the assessee was granted rights to telecast the matches live and also other events. The relevant finding of the Assessing Officer is reproduced as under:- "that assessee was granted rights with respect to use of excerpts of minimum of 153 matches, 45 electronic weekly magazine programme, right to distribute, promote and broadcast on live or delayed basis all the matches, right to copy, reproduce, transmit, publish, download(including clips, highlights, still images) for unlimited time, to market and promote itself as the official broadcast partner, to transmit and publish via the licensed channels the trademarks, logos etc. Hence, the agreement gives a bundle of right to assessee/licensee to reproduce and record the matches and exploit the same along with trademarks, lo....
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....eproduced as under:- First Agreement with Taj TV Limited dated 08.08.2012 "Designated Rights: Exclusive rights of all forms of free to air television, pay television, IPTV broadcast, Direct to Home (DTH), Mobile, Internet, Linear and Non Linear Pay per view, Video on demand on its channels, namely Ten Sports, Ten Action, Ten HD and other channels of group/associate/affiliate company(s) of License." Second Agreement with Sony Pictures India Private Limited dated 18.05.2012 (a) The right to telecast and simulcast the Matches live, tape delayed or by way of deferred telecast on the Designated Platforms during the License Period; (b) The right to telecast/stream the Matches live On Demand via the Digital Platforms during the License Period; (c) The right to telecast the Matches as Recordings via the Basic Platforms during the Licensed Period (live, tape delayed or deferred live) of each of the Programme; (d) The right to telecast/stream the Match Highlights and Official Film on the Designated Platforms during the License Period; and (c) The right to use Clips of the Programmes for promotional and marketing purposes....
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....transfer of any rights for transmission by satellite by any process, whether secret or not. Thus, under the amended law, the license fees received for transfer of rights of transmission by the assessee would indubitably partake the character of royalty in terms of the domestic law of India referred to above. He further held that even under Article 12 of the India-USA Treaty, the expression royalty is widely worded to include all payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with 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 or property which are contingent on the productivity, use, or disposition thereof. 3.10. Thereafter, the Assessing Officer placing reliance on the decision of the Tribuna....
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....of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8." 3.12. Thereafter, the Assessing Officer referring to the contention of the assessee that similar treatment of 5% towards live streaming and 95% towards recorded content was accepted by the Assessing Officer in AY 2011-12 observed that the agreements are different for different assessment year and in each year a different factual exercise has to be done to each and every agreement. Accordingly, the Assessing Officer held that therefore, there is no change in stand and the assessment being done based on the material on record for the year under consideration. Further on the reliance by the ld. Counsel for the assessee placed reliance on the judgment of Hon'ble Supreme Court in the case of Radhasoami Satsang vs CIT, the Assessing Officer observed that the same could not be accepted as the agreements are different one from the previous year and each agreement is distinguishable from t....
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.... directions of the Dispute Resolution Panel and final assessment order, the assessee is in appeal before us on the following grounds of appeal. 1. That in the facts and circumstances of the case & in law, the final reassessment order passed by the Ld. Deputy Commissioner of Income-tax, Circle 3()O), International Taxation, New Delhi (Ld. AO') under section 147 read with section 144C(13) of the Income Tax Act, 1961 (the Act), in pursuance to the directions of the Learned Dispute Resolution Panel - 2, New Delhi (Ld. DRP'), assessing the income of the Appellant at INR 2,18,76,078/- is bad-in-law and invalid. 2. That in the facts and circumstances of the case & in law, notice issued under section 148 on June 28, 2021, of the Act for impugned Assessment Year 2013-14 is barred by time limitation as the Ld. AO while issuing the notice has not considered the time limit specified under first proviso to Section 149(1) of the Act. The benefit and relaxations conferred under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('TOLA' will not extend the limitation provided under the first proviso to section 149(1) of the Act.....
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....d with 271F of the Act and section 271(1)(c) of the Act for the subject year as the same is bad in law. 10. That in the facts and circumstances of the case & in law, the Ld. AO erred in levying interest under section 234A and 234B of the Act." 6. At the time of hearing, the ld. AR submitted that ground no.1, 2 and 3 are not pressed and this was also mentioned in the written submission. Therefore, the above ground no.1, 2 and 3 are dismissed as not pressed. 7. Regarding the action of the Assessing Officer and the Ld. Dispute Resolution Panel in holding that license fee receipt with respect to live content for granting broadcasting rights of various events as taxable as 'royalty' income u/s 9(1)(vi) r.w.s DTAA the assessee made the following submission. 7. During the year under consideration, the Appellant has entered into agreements for live contract as well as bundled contracts, details of which has been mentioned in the order passed by the Ld. AO (Refer Page 13 to 14 of Appeal Set). The Ld. AO / DRP has concluded that income from broadcasting rights is for use of, or right to use of "process" and therefore, qualified as royalty income as per the provisions ....
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.... it is admitted to the appellant that the actual transmission of content was undertaken by SIPL and not by the respondent. The Explanation, therefore in our considered opinion does not detract from the correctness of the view as ultimately expressed by the ITAT." (refer to para 11 to 14 at Page no 28 to 29 of the CLC) 11. From the above, it is clearly evident that the Hon'ble Delhi High Court had rejected the contention of the revenue on application of Explanation 2 & 6 of section 9(1)(vi) of the Act and upheld the decision of the Coordinate Bench of Delhi Tribunal in the case of Fox Network Group Singapore Pte Limited s ACIT, 121 taxmann.com 330 (Delhi - Trib.) (refer pg. 35-48 of CLC). 12. In the present case, the limited examination is restricted whether there is a transfer of a right in respect of any copyright, literary, artistic or scientific work including films or videotapes for use in connection with television or tapes for use in connection with radio broadcasting, etc, as defined in clause (v) to section 9(1)(vi) of the Act. 13. The term 'copyright' has not been defined in the India-USA tax treaty or under the Act and thus,....
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....eaty and thus, analysis and case laws discussed above in the context of the provisions of India-USA tax treaty is equally applicable/relevant to the provisions of the Act. 17. Recently, in the case of Lex Sportel Vision Pvt. Ltd. Vs ITO (ITA No. 2397/Del/2023) (which is also one of the contractees of the Appellant) wherein Hon'ble Delhi ITAT held that right to broadcast live events is not a copyright and thus, payment should not be qualified as royalty itself under section 9(1)(vi) of the Act. Kindly refer to para 5, 6 and 13 to 17 on page no 80-92 of the CLC for the relevant findings of Hon'ble ITAT. 18. Hence, it can be concluded that the consideration received by the Appellant from broadcasting rights is not for use of "process" and therefore, should not be qualified as royalty income as per provisions of the Act as well as the India-USA tax treaty. 19. The appellant further submits that Article 12(3) of India- USA tax treaty provides that consideration for the use or right to use of "process" shall be characterized as royalty income under India-USA tax treaty. However, the term "process" is not defined in the India-USA tax treaty and according....
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....mme which inter alia include live and recorded content and has nothing to do with the actual transmission of programmes. Thus, receipts from broadcasting rights can in no manner qualify as royalty income under the Act and in India-USA tax treaty. 23. Reliance in this regard is placed on: a. Fox Network Group Singapore Pte Limited (supra) wherein the Hon'ble Delhi High Court recently noted this distinction and clarified that the actual transmission of content was undertaken by another entity and not by the Appellant. Thus, it was held that receipts for providing broadcasting rights would not fall within the definition of 'process' as envisioned in Explanation 6 to section 9(1)(vi) of the Act. (refer Page no 22-34 of the CLC). b. Lex Sportel Vision Pvt. Ltd. (supra) where the Hon'ble Delhi Tribunal similarly held that the Assessee had made the payments for broadcasting rights and neither to satellite operators nor for use of satellite and thus, should not be qualified as 'process under section 9(1)(vi) of the Act. (refer Page no 80-92 of the CLC). 24. In the light of the above discussions, it is submitted that the issue of taxab....
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....fining the term 'work' to mean (i) A literary, dramatic or artistic work; (ii) A cinematographic film; (iii) A record. Further, in the same para the Hon'ble Court also dealt with section 2(dd) of the copyright Act defining the word 'broadcast' and the section 2(ff) of the Copyright Act defining communication to the public. Further, the Hon'ble Court also dealt with the provisions of section 13 of the Copyright Act stipulating the work in which the copyright subsists. The Court also referred to section 14 of the Copyright Act defining the meaning of 'Copyright'. Thereafter analysing the above sections, the Hon'ble Court observed in para no.16 about 'live TV coverage' of any event and the relevant observation of the Hon'ble Court in Para no.16 is reproduced as under:- 16. 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 we note 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 record....
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.... acts. A reading of Section 14 would reveal that "copyright" means exclusive right to reproduce, issue copies, translate, adapt etc. of a work which is already existing. 17. Adverting to the facts of this case we note that the assessee was engaged in the business of conducting horse races and derived income from betting, commission, entry fee etc. and had made payment to other centres whose races were displayed in Delhi. It is not known whether such races had any commentary or analysis of the event simultaneously. It is not the case of the Revenue that the live broadcast recorded for rebroadcast purposes. Having held that the broadcast/live telecast is not a work within the definition of 2(y) of the Copyright Act and also that broadcast/ live telecast doesn't fall within the ambit of Section 13 of the Copyright Act, it would suffice to state that a live telecast/broadcast would have no "copyright". This issue is well settled in view of the position of law as laid down by this Court in ESPN Star Sports case (supra), wherein this Court after analysing the provisions of the Copyright Act was of the view that legislature itself by terming broadcast rights as those akin to "cop....
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....ai (32 taxmann.com 53) 12. Further, with respect to the finding of the Assessing Officer that broadcasting rights is use of, or right to use of 'process', the Hon'ble Delhi Court in the case of Fox Network Group Singapore Pte. Ltd. vs ACIT(supra) distinguished between transmission and broadcasting and held that since, the transmission of the content was undertaken by another entity and not by the assessee company but by SIPL, therefore, it would not come under the term 'process'. The relevant observation of the Hon'ble High Court is reproduced as under:- 10. Be that the Ld. AO/DRP had relied upon explanation 2 and 6 of Section 9(1)(vi) of the Act to contend that the broadcasting rights is for use of, or right to use of "process". The above reliance is completely misplaced and Hon'ble Delhi High Court while re-affirming the decision in the case Delhi Race Club (supra) [page 1-21 of the CLC] and in the case of CIT vs Fox Network Group Singapore Pte Limited [2024] 158 taxmann.com 434 (Delhi)[05-01-2024] in this regard as held as under: "11. Notwithstanding the above, Mr. Rai, learned counsel appearing for the appellant, additionally sought to place the respond....
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....Trans World International Inc. and post that the surviving entity converted itself into a limited liability company and was named Trans world International LLC on 05.05.2014. It carried on the same business as was carried on by TWI Inc. Therefore, given that the old entity i.e. 'TWI Inc' is not in existence anymore, all the compliances under the provisions of Income Tax Act are now required to be and are being carried out by the assessee i.e. M/s Trans World International LLC in respect of income earned by 'TWI Inc.' for the year under consideration." Emphasis supplied 14. Further, the assessee in its written submission, as reproduced above in para 22 of its written submission has asserted that the assessee was providing broadcasting rights of the programme/inter alia included live and recorded content and had nothing to do with actual transmission of programmes. The said para no.22 of the written submission is reproduced as under:- "22. In doing so, the Ld.AO as well as Ld. DRP relied on the decision of Viacom 18 Media (P.) Ltd. Vs ADIT (2014) 44 taxmann.com 1 (Mumbai) [refer page 219 to 229 of the CLC] wherein the payment pertaining to the transmiss....
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....manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAS." (emphasis in original) 17. In view of the above decision, the view of the Assessing Officer relying upon the order of Mumbi Bench of the Tribunal in the case of Viacom 18 Media (P) Ltd. vs ADIT (supra) that in view of the amendment by way of insertion of Explanation-6 to Section 9(1)(vi) of the Act defining 'process' to include transmission by ....
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....25% in cases of bundled contracts. 27. The Ld. AO in principle agreed with order passed by the Hon'ble Mumbai ITAT in the case of Neo Sports Broadcast (P) Ltd. (supra) and order passed by the Hon'ble Delhi ITAT in the case of Fox Network Group Singapore Pte Ltd (supra) wherein the consideration was bifurcated as 4% and 5% respectively for recorded transmission of the programme. 28. It is an undisputed fact that the Appellant has entered into a bundled contract, the predominant objective of which is to grant the right to broadcast live sports event. It is pertinent to mention that right to broadcast the recorded feed or the highlights is merely an incidental right granted to the recipient for promotional purposes. 29. The consideration received for such bundled contracts is for the right to broadcast live event which is the main driver of the market value of the consideration for such bundled contracts. This is because, the live sports events have a unique appeal that consistently draws in a large number of viewers, which in turn attracts significant sponsorship deals for broadcasters. This high viewership is the cornerstone of a broadcaster's ....
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....295 (Supreme Court) 34. The Appellant further submits that the apportionment of revenue in the case of bundled contract needs to be carried out in case of composite contract, and the same being always subject to guesswork especially in the absence of any pre-defined formula prescribed under the Act. 35. The aforesaid proposition has been approved and acknowledged by the Hon'ble Supreme Court in the case of Hukam Chand Mills Ltd. v. CIT [1976] 103 ITR 548 (SC) wherein it was held that: "The question as to what proportion of the profits of the sales in categories (a), (b), (c) and (d) arose or accrued in British India is essentially one of fact depending upon the circumstances of the case. In the absence of some statutory or other fixed formula, any finding on the question of proportion involves some element of guess work. The endeavour can only be to be approximate and there cannot in the very nature of things be great precision and exactness in the matter. As long as the proportion fixed by the Tribunal is based upon the relevant material, it should not be disturbed." (refer Page no 116-119 of the CLC) 36. Similar view has also been expressed....
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....% towards live coverage and 10% towards recorded coverage. Regarding the agreement with M/s Sony Pictures Networks India Pvt. Ltd., the assessee, relying upon the similar agreement entered into by the assessee with Lex Sportel Visions Pvt. Ltd. which is entered for similar bundled contract in question containing both live and recorded content, wherein, 95% value has been attributed towards the live transmission and 5% value has been attributed towards non-live transmission. 22. On the other hand, the Assessing Officer as well as the Ld. CITDR has relied upon the decision of the Mumbai Bench of the Tribunal in the case of ADIT(IT)-3(1) vs Global Cricket Corporation Pte Ltd. in ITA No.3130/Mum/2009 and Ors., wherein the Tribunal held that 25% of licensee fee was fair estimation of the licensee fee attributable to the non-live exhibitions and recorded content in 'Live Feed' as there was no material placed on record by both the sides to arrive at more precise or better estimation/apportionment. The relevant observation of the Tribunal is reproduced as under:- "5.60. This takes us to the issue of allocation/apportionment of the Licensee Fee income received by GCC from SET in....
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....er estimation/apportionment. Accordingly, in view of the above, we hold that 25% of the Licensee Fee paid by SET to GCC as fair estimate of income taxable in India as "royalties" in terms of Article 12(2) read with Article 12(3)(a) of the DTAA. 5.62. In view of the above, Ground No. 4 raised by the Revenue is partly allowed." 23. On the basis of general observation of the society, we note that in any sporting event 'live coverage' of the event is important because in each such coverage, the winner of the game or the champion of the tournament is decided and the fans of the game watch the said 'live coverage' with full passion and excitement, which is decided in each such respective game/tournament. In this regard, we are also mindful of the fact that when a match is held telecast live during the odd hours or when a live event is missed for some reasons, there is a conscious effort by the viewers who watch the recorded events to not to know the result of the said game before watching the recorded event to have some trace of excitement as watching the live telecast as the excitement and thrill of the live match is the key essence of watching any sporting activity. Therefo....
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....e coverage' by way of TV broadcast only in 'broadcast rights' but considering the fact that the broadcast of recorded event is also available on other medium and other rights as mentioned in the said two agreements and salient features of the same as highlighted in para no.3.5 and 3.6 of this order, we consider it appropriate to allocate 10% of the receipts towards recorded, events and 90% towards 'live coverage' as offered as against 5% towards recorded event and 95% towards 'live coverage' as offered by the assessee. Ground no.6 of the appeal is partly allowed. 24. Further, the assessee in ground no.6, the assessee has contested the action of the Assessing Officer in taxing the receipts from non-resident payers @40% sur-charge instead of 15% (prescribed under treaty). 25. Further, in ground no.7, the assessee has contested the action of the Assessing Officer in taxing the receipts from resident payers @40% sur-charge @10% (prescribed under treaty). 26. In this regard, the assessee filed a written submission, which is reproduced as under:- 39. In the year under consideration, the Appellant received the total amount of INR 2,18,76,078/- (i.e. INR 21,70,085/- from ....
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....fore, our above decision would apply mutatis-mutandis to this appeal also. Accordingly, this appeal of the assessee is partly allowed. ITA No.2146/Del/2024 32. Ground no.5 to 11 of the appeal are similar to the grounds of appeal for AY 2013-14 except for the numberings of the said grounds. However, the assessee in ground no.2, 3 ad 4 of the appeal has challenged the validity of notice issued u/s 148 on June, 28, 2021 for the present assessment year being barred by time limitation as the Assessing Officer did not consider the time limit specified under first provision to section 149(1) of the Act. The said ground of appeal no.2, 3 and 4 are reproduced as under:- "2. That in the facts and circumstances of the case & in law, notice issued under section 148 on June 28, 2021, of the Act for impugned Assessment Year 2015-16 is barred by time limitation as the Ld. AO while issuing the notice has not considered the time limit specified under first proviso to Section 149(1) of the Act. The benefit and relaxations conferred under The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('TOLA') will not extend the limitation provided under....