AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1435
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....einafter referred to as 'the Act'). 3. The facts of the case as emanating from records are: The assessee company is based in United Kingdom. The assessee is engaged in providing portable wireless in-flight entertainment (IFE) system and related services. The assessee also provides management, sales and inventory management of advertising slots (static and video advertisements). The assessee is providing aforesaid services to Air India Ltd. and Jet Airways (India) Ltd. During the period relevant to assessment year under appeal, the assessee received Rs. 32,62,81,393/- from Jet Airways (India) Ltd. On aforesaid payments Jet Airways (India) Ltd. deducted TDS treating payments as royalty/FTS at the rate of 10%. The claim of the assessee is that the aforesaid amount is not taxable in India under the provisions of the Act read with provisions of India-UK DTAA. The Assessing Officer (AO) not convinced with the claim of assessee held that fee for provision of content Rs. 32,62,81,393/- received by assessee is in nature royalty u/s. 9(1)(vi) of the Act and also in terms of Article 13 of India-UK DTAA, hence, the same is taxable. The AO further held that the fees for provision of content ....
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....in to a final product by the assessee. After assimilation and encoding of the media content, the assessee forwards the entire content to 3rd party like Thales or Panasonic for content integration and to make it compatible with the hardware systems of the aircrafts, so that the content can be watched when the aircraft is air borne. 5. The ld. Counsel for the assessee submitted that the AO has erred in coming to the conclusion that the payments received by the assessee from airlines for providing content for in-flight entertainment system to Air India Ltd. and Jet Airways (India) Ltd. is in nature of royalty as the process of obtaining, encoding the media content into a compilation results into a new product developed by the assessee for the use of which, charges received by the assessee are in the nature of royalty under the Act as well as the India-UK DTAA. The AO fails to appreciate the fact that as per the agreement between the assessee and airlines the copyrights are intact with the assessee and what has been transferred is only a limited exhibition rights which are non transferable and non exclusive rights to be used during the flight only. Further, the exhibition rights gra....
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....ertainment content is a complex and specialized process. Though as per the agreement it is only the content which has been licensed but in essence the content cannot be used without further processing and making it compatible with components/hardware. The content is integrated with the hardware installed in the aircrafts. The process of obtaining, copyrighted content and converting it into IFE system compatible content by encoding by using software, hardware etc., gives rise to a new product which is not independently available in open domain or one size fit for all product. Collection of content and encoding is a 'process'. Payment for providing/supply of a product after processing falls under the definition of royalty. Accordingly, the receipt for supply of such programs fall within the definition of royalty under the Act, as well as, DTAA. The ld. DR made an alternate argument that the assessee has given right to the airlines for use of product. For granting right to use the product for a limited period, the payment is in the nature of royalty. 7. Rebutting the alternate plea raised by the DR, the ld. Counsel for assessee submitted that the assessee had provided a copyrigh....
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.... Systems by using Digital Content Management Station (DCMS), offered by Thales to Air India. c. Supply of Valid & Licensed Video and Audio IFE Content The CSP shall supply Valid & Licensed Video and Audio IFE Content which includes selection, negotiation and contracting with distributors and other third parties, securing licensing, commission of post-production (as required from time to time) and managing the labeling and duplication of Cassettes, DVD's, VHS, Hi-8's, Encoding of Video IFE Content and relevant copyright clearance of Video and Audio titles and content for exhibition license, as well as the production of audio content in the correct format for each aircraft type/system and quality control of all content. d. CSP shall provide Copies of all IFE Content as played on the IFE System for office records in digital format, except Hollywood movies. xxxxxxx 4. PPL/IPRS licensing Content & Licensing fess All subject IFE Content shall be offered by the CSP as governed under the Licensing of Content by PPL / IPRS. Any PPL/IPRS fees, shall be paid directly by Air India to PPL/IPRS. xxxxxxx 6. Cost and R....
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....ll related permissions, clearance, authorizations and licenses, and Air India grants CSP the right and license to process, integrate and distribute such IFE Content to Air India as part of the deliverables. All intellectual property Rights in such IFE content shall remain vested in Air India its licensors and suppliers, as applicable.; A perusal of the agreement reveals that the assessee is required to provide IFE content and services to Air India Ltd. that includes Hollywood movies, Indian movies, Indian regional movies, International and Indian music videos, documentaries, reality shows, etc. as per the choice and prerogative of Air India Ltd. The responsibility of procuring exhibiting rights of the content is on the assessee. Further, for screening of content in aircrafts, the assessee was required to perform the process of encoding, duplicating, integrating with IFE system. The license fee for exhibiting contents i.e. audio/video on IFE is to be paid by Air India directly to the concerned agencies. As per clause 6 of the agreement, Air India Ltd. has entered into a separate triparty agreement with the assessee and Thales/Panasonic for integration of content for screening ....
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....ned under section 9(1)(vi) of the Act by the Finance Act, 2012 does not impact the definition of royalty as defined in Article 13 of India-UK DTAA. Therefore, in terms of provisions of section 90(2) of the Act, the provisions which are more beneficial i.e. provisions of Act or DTAA, shall apply. Once it is accepted by the Revenue that assessee is eligible for India- UK DTAA benefit, the definition of royalty as per Article 13(3) of the DTAA would prevail as it is more beneficial to the assessee. 12. IFE System stream audio/video content viz. movies, songs, TV serial episodes, games, etc. that are licensed. The copyrights in the aforesaid contents are not transferred to the airlines. The owners of the license holders merely grant access or usage rights to stream the content. The assessee's role is limited to procure exhibition rights and perform the process of encoding, integrating etc. so that the content is available for screening on IFE system. Even the process of integration is carried out by third party for which airlines have entered into separate contract. The assessee is merely providing copyrighted content. Hence, the payments received by the assessee for performing the ....
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.... an admitted that in these appeals facts and the issues are identical to that of ITA No. 1878/Del/2019 (supra). Thus, the findings given by us while adjudicating the aforesaid appeal would mutatis mutandis apply to both these appeals as well. For parity of reasons, both the appeals are partly allowed. ITA No.3338/Del/2023 for AY 2021-22 20. This appeal by the assessee is directed against assessment order dated 26.09.2023 u/s. 143(3) r.w.s 144C(13) of the Act. 21. The assessee in appeal has raised as many as eight grounds. The ld. Counsel for the assessee made statement at Bar that he is not pressing ground no. 1 and 2 of appeal. 22. The assessee in ground of appeal no.3 & 4 has assailed the Assessment Order treating in fee for provision of content for in-flight entertainment system as royalty under section 9(i)(vi) of the Act and also as per Article 13 of India-UK DTAA and in ground no. 4 of appeal, the assessee has assailed treating fee for provision of in-flight entertainment system as fee for FTS. Both these issues are identical to the one raised in ground no. 2 & 3 in ITA No. 1879/Del/2022 for AY 2018-19. The findings given by us on both the issues in AY 2018-19 wou....