TaxTMI 
TaxTMI 
2025 (12) TMI 1764
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....lder of various Hindi feature films produced and censored in India, as mentioned in Schedule 'C' annexed with the 'agreement of license' executed on dated 07.04.2003 between Assessee {Licensor} and M/s. Usha Kiron Television {a propriety concern of Shri Ramoji Rao (HUF)} [licensee] for granting non-exclusive license and to give delivery of 100 (one hundred only) Hindi feature films - particulars of which are mentioned in the Schedule 'C' annexed to the said agreement, to the licensee for broadcasting through all channels of E-TV network, as per terms and conditions, set out in the license agreement and its Schedules 'A, B & C', on a consideration of Rs.1,00,00,000/- only. 2.1 The Assessee claimed the said amount of Rs.1,00,00,000/- being exempt, on the following reasons: "That such transaction is outside the definition/parameters of the definition of "royalty" as per Explanation-2 to section 9(1)(vi) of the Act That the Assessee being a foreign company is not liable to pay tax on the income from the transactions done outside India, as the Assessee had sold/given non-exclusive license of 100 cinematographic films from his library abroad and executed the agreement and del....
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.... 3.5.3 The assessee submits that all its activities have been carried out outside India and has also done an FAR analysis to substantiate the same. However, as discussed in preceding paragraphs, it is evident that majority of functions are undertaken in India and further risks are also taken in India. Only some of the physical activities of the assessee are carried outside India such as uplinking of channels. Further, some entrepreneurial decisions and some strategic decisions on capital requirements etc. could have been carried outside India. In view of this, it is reasonable to estimate that at least 60 to 70% of the India specific profits are chargeable to tax in India. 3.5.4 In view of the above discussion and taking all the factors into consideration, and by applying Rule 10, the income of the assessee is estimated at 10% of the advertisement as well subscription revenue received by the assessee. During the year under consideration, the assessee has received total subscription and advertisement revenues amounting to 66,13,78,814 and 123,61,53,669 respectively, the taxable income on the said revenues worked out to Rs18,97,53,248/- i.e. 10% of Rs.189,75,32,483/-....
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....dings u/s. 271(1)(c) are initiated separately for furnishing inaccurate particulars. Since the assessee has also failed to get its books of accounts audited u/s. 44AB of the I.T. Act, penalty proceedings u/s. 271B is separately initiated. Subject to the above remarks, the total income of the assessee is computed as under: Business Income Income computed @ 10% of net revenue (as discussed in para 3.5.4) Rs.18,97,53,248/- Income from Royalty From sale of film rights (as discussed in para 4.2) Rs.1,00,00,000/- Total Income Rs.19,97,53,248/- Rounded off to Rs.19,97,53,250/-" 4. The Assessee, being aggrieved, challenged the decision of the AO for not allowing the deduction claimed to the tune of Rs.1,00,00,000/- being not liable to be taxed, before the Ld. Commissioner by filing first appeal inter alia challenging the other additions, however, could not get relief on this particular issue/aspect, as the Ld. Commissioner ultimately affirmed the decision of the AO in holding the said amount/receipt of Rs.1,00,00,000/- as "royalty", by holding "that there is no infirmity in the order of the AO in holding the said receipt as "roy....
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....elecast on television is not taxable in India as the income is not earned through the PE situated in India nor the right, property in the films on which royalty is paid is connected with such PE. Further if PE exists then this income cannot be taxed as Royalty hence the taxing the income and as Royalty is arbitrary. 7. I have considered the facts of the case. The term Royalty as defined in Article 12(3) of the India Mauritius treaty is as under: "1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the royalties. 3. The term "royalties" as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films, and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process or....
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....ows that * The agreement is executed in India * The broadcasting rights sold are of films which are meant for broadcast in India (Clause 2 r/w Schedule A and D) * That the films are delivered in India (Clause 12) * That the agreement itself is subject to the provisions of the Indian Arbitration & Conciliation Act 1996 (Clause 20) and the jurisdiction of Indian Courts (Clause 21) 7.5 This being the case the payment received for the assignment of broadcasting rights falls squarely within the definition of "Royalty' as per the Article 12(3) of the DTAA as per which "....such royalties may also be taxed in the Contracting State in which they arise". There is thus no infirmity in the order of the AO holding the said receipt as Royalty. Thus there is no merit in the argument of the appellant and the appeal of the appellant in respect of Ground No 8 is thus dismissed." 5. The Assessee, being aggrieved with the impugned order, challenged the decision of the Ld. Commissioner in upholding the decision of Ld. AO in treating the transaction qua sale/license for broadcasting of Hindi feature film, as "royalty income" taxable as per Article 12 ....
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.... but not including consideration for the sale, distribution or exhibition of cinematographic films". 5.4 The Ld. Assessee's Counsel further claimed that the provision of section 9(1)(vi) of the Act shall come in play only when there is transfer of exclusive rights, such as right to modify, alter, change of the copy right. Broadcasting rights are distinguished from copy right, since broadcasting rights entail telecasting the content, on an as-is basis and does not involve any right to copy, modify or alter the content, hence would fall outside the purview of the definition of "royalty". 5.5 The Ld. Assessee's Counsel further claimed that the Assessee has only given a non-exclusive license to broadcast the films to M/s. Usha Kiron Television, therefore such transaction falls outside the purview of definition of "royalty". 5.6 The Ld. Assessee's Counsel in support of aforementioned contentions/claim, also relied on various judgments, which we will consider, while giving findings on the issue(s) involved. 6. On the contrary, the Ld. D.R. has claimed that on perusal of the Agreement referred to above shows that the agreement was executed in India. The broadcasting rights sol....
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....od of 30 months. The Assessee retained the right with it, to telecast such feature films, on all channels of Doordarshan and ZEE network and Alpha network. 6.5 The Ld. D.R. further claimed that perusing the schedule 'C' of the agreement dated 07.04.2003, it is observed that some of the dates mentioned in column "licensee should telecast before the expiry date" goes beyond the period of two years and six months viz. 06 October 2093, 16 October 2093, 01 March 2094, 05 October 2095 and many other such dates and thus the Assessee has given perpetual rights to the Licensee. 6.6 The Ld DR at last submitted that on the aforesaid facts and circumstances and contentions raised, it can easily be construed that both the Authorities below have rightly treated the transaction involved as "royalty income". 7. The Assessee in rejoinder reiterated its claim as made before the authorities below and this Court. The Ld. Counsel for the Assessee in response to the question raised by the Ld. D.R. specific to the dates of expiry dates of the movies/films, has contended/clarified that the Assessee has right over such films over the period mentioned in Schedule- C, however, the Assessee had given....
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....e rights of the said films to any other third party, but there shall be no bar on the licensor assigning/licensing the said films to third parties located outside India, provided that the territory of such assignment/license shall not cover the territory of India. (4) The period of license is 2(two) years and 6(six) months commencing from the respective dates of delivery of the said films to the licensee. The licensee shall be entitled to 3 (three) natural telecasts of each of the said films on all the channels of E-TV Network, viz., present and future channels, with 1 (one) repeat telecast for each natural telecast of the said films within 24 hours of the first telecast, on the same channel. (5) The agreed and total consideration for grant of satellite rights in respect of 100 (One hundred only) Hindi feature films more particularly mentioned in Schedule-C annexed hereto shall be Rs.1,00,00,000/- (Rupees one crore only). (6) The consideration in respect of each film delivered by the licensor to the licensee shall be payable in US Dollars. The licensor agrees to accept and the licensee agrees to pay consideration, as equivalent to the value of Indian Curr....
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....c work (including cinematograph films, and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." 10. The definition of "royalty" is also prescribed in the Explanation-2 to section 9(1)(vi) of the Act, which reads as under: "Explanation 2- For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent invention, model, design, secret formula or process or trade mark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar proper....
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.... prescribed in schedule 'C'. This fact is also clear from the specific finding of the Ld. Commissioner in para 7.2 at page no.22 of the impugned order, wherein the Ld. Commissioner has categorically held as under: "That the agreement of licensing is dated 07.03.2003. The period for which rights were assigned to M/s. Usha Kiron Television is listed out in schedule 'A' of the said agreement and is of two years and six months or the period of expiry of rights, whichever is earlier and commencing from the date of delivery of the material of each film as mentioned in schedule 'C' of the said agreement". Therefore, the contention raised by the Ld. D.R that some of the dates mentioned in column "licensee should telecast before the expiry date, goes beyond the period of two years and six months, cannot be construed contrary in the aforesaid observation and analyzations made above. 13. Now coming to main controversy we observe that both the Authorities below treated the said transaction as "royalty income "whereas the Assessee has claimed that the said transaction falls outside of the purview of "royalty". On the contrary, the Ld. DR has claimed the transaction as "royalty....
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....ipt as 'Royalty Income? The Tribunal had dealt with this issue, by making an extensive reference to the order of CIT (Appeals). Relevant portion of this judgment of the Tribunal dated 28th August, 2015 reads as under:- "7. Regarding distribution revenue also, the Ld. CIT (A), though discussed the issue in detail that it is not "royalty", decided the issue in favour of the assessee, following the past history of the assessee from assessment year 1999-2000 to 2004-05, wherein this issue was decided in favour of the assessee. The relevant observation and finding of the CIT (A) is as under: 11. After considering the rival contention and above facts, we find that, so far as the issue relating to addition on account of 'advertisement revenue' and 'distribution revenue' the same stands decided in favour of the assessee by the Tribunal, which has been affirmed by the Hon'ble High court in AY 1999-2000 and also in subsequent years. As regards the issue of 'distribution receipts' treated as royalty income, we find that this has been treated as business income and such a finding or conclusion now have attained finality, as pointed out....
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.... Copy Right Act and not under section 14 thereof. We observe that Id CIT (A) has also considered Clause 6.3 of the distribution agreement entered into between assessee company and Non-resident company, which states that the right granted to the assessee under the agreement is not and shall not be construed to be a grant of any license or transfer of any right in any copyright. Ld. CTT(A) has stated that the assessee submitted before him that the cable operator only retransmits the television signals transmitted to it by a broadcaster without any editing, delays, interruptions, deletions or additions and therefore payment made by the assessee to the Non-resident company is not for use of any copyright and consequently cannot be characterized as Royalty. Ld. CIT (A) has held that Broadcasting Reproduction Right is not covered under the definition of Royalty under section 9(1) (vi) of the Income Tax Act as well as Article 12 of the Treaty. Accordingly, the payment is not in the nature of Royalty but in the nature of business income." 10. In our opinion, the Tribunal has not committed any error. As noted, the assessee would receive a part of subscription charges paid by a larg....
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....siness or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Explanation 2 below sub-section (1) of Section 9 describes the term "royalty" for the purpose of said clause, relevant portion of which reads as under: - Explanation 2.- For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for' 13. In our opinion, these provisions would in no manner change the position. Only if the payment in the present case by way of a royalty as explained in explanation (2) below sub-section (1) of Section 9 of the Act, the question of applicability of clause (vi) of sub-section (1) of Section 9 would arise. Learned counsel for the revenue placed considerable tress on clause (v) of explanation (2) by virtue of which the transfer of the rights in respect of copyright of a literary, artistic or scientific wok including cinematograph film or films or tape used for radio or television broadcasting etc. would come within the fold of royalty for t....
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....) The following incomes shall be deemed to accrue or arise in India: - (i)............. (v) (vi) income by way of royalty payable by (a) The Government or (b) A person who is a resident, except where the royalty is payable in respect of any right, property or information used or service utilized for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India or (c) A person who is a non-resident where the royalty is payable in respect of any right, property or information used or service utilized for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: ******* Explanation 2 - For the purpose of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for- (i) The transfer of all or any rights including the granting of a license) in respect of a patent, invention, model, d....
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....consideration for the payment of the agreed license fees. This being the fact of the case, it transpires that such consideration for the sale, distribution or exhibition of cinematographic films cannot be taxed as Royalty on account of specific exclusion given in Explanation 2(v) of section 9(1)(vi) per the Income Tax Act 1961. 3.18 The next question for consideration is if the royalty received by the assessee is not covered by the definition of royalty either under the Act or the DTAA whether the same is not liable to tax or it is covered by the general clause (i) of section 9(1). In this regard the learned Counsel reiterated the following submissions which have been referred to earlier in this order: (A) When there is a special provision dealing with a specific type of income such a provision would exclude the general provision. (B) Appellant does not have business connection in India. Hence the appellant has no business income in India. (C) Even if it is held that the royalty is income arising from business connection in India, the same is not taxable as the appellant does not have a PE in India. (D) The royalty received by the appell....
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....ndia, other arguments of the appellant in this behalf are not adjudicated upon. ...... 3.30 In this regard the legal position is that if royalty received by the appellant is not taxable under the Act, then there is no need to refer to the provision of the DTAA. There is overwhelming judicial precedence on the issue that if an income is not taxable under the domestic law, the same cannot be taxed under the DTAA as the DTAA does not create a charging provision to assessee an income which is not otherwise chargeable to tax under the domestic law. The Apex Court has, in no uncertain terms held in the case of P.V.A.L. Kulandagan Chettiar 267 ITR 654 (SC) that "The provisions of such agreement cannot fasten a tax liability where the liability is not imposed by a local Act. Where tax liability is imposed by the Act, the agreement may be resorted to either for reducing the tax liability or altogether avoiding the tax liability" (Emphasis supplied). 3.31 However, the Assessing Officer has held that the definition in the India USA treaty makes the royalty received by the appellant as taxable in India. Assuming this to be the case, the matter still does not....
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....ution, it was held that the said amount fall outside the purview of the royalty within the meaning of Section 9(1)(vi) and therefore, no TDS is required to be made from such payment and consequently no disallowance under section 40(a)(i) was called for. Similar view was also held in the case of ACIT vs. Manish Dutta in 2011 - TMI-204199-Income Tax Appellate Tribunal Mumbai in ITA No.4017/Mum/2010 dated 17.6.2011 wherein the ITAT held that in view of the specific provision of Explanation 2, clause (v) of section 9(1)(vi) of the Act consideration for exhibition of cinematographic films are excluded from the purview of the definition of royalty. It was fairly submitted that the assessee has no rights for broadcasting on Radio and TV and therefore, the principles established in the above decisions would apply to the facts of the case. He then referred to the order of the CIT (A) to submit that on the facts, there is no dispute with reference to the issue that the amounts are not taxable under section 9(2)(vi) and Article 12(3) of the DTAA. He submitted that the assessee has objection with reference to the findings of the CIT (A) that the provisions of section 9(1)(i) which are general ....
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....nder section 9(1)(vi) Explanation 2 to (v) excludes the payment received with reference to sale, distribution and exhibition of cinematographic films. There is also no dispute with reference to the provisions of DTAA entered into by India with USA, notified on 20th December, 1990, that the term royalty used in the Article 12 does not include payment of any gain received as consideration for the use of any copyright or literary, artistic or scientific work including cinematographic films or work on films, tape or other means of production for use in connection with Radio or T.V. broadcasting. In view of this specific provisions, the amount received by the assessee cannot be considered as royalty as was done by the Assessing Officer while invoking the Article 12(2) of the DTAA for taxing the amounts. To that extent the findings of the CIT (A) are correct and there is no need to deviate from such findings. In view of this the amount received by the assessee cannot be considered as royalty within the meaning of Indian Income Tax Act or under the DTAA. 10) The issue can be examined in another dimension whether the amount is taxable under the Indian Income Tax Act in India if no....
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....the two decisions of the Gujarat and Madras High Courts referred (supra). Even though the cross objection was raised on findings of CIT(A), in view of the observations given above, we are of the opinion that the issue is only academic and does not require any specific adjudication. 13) In the result, Revenue's appeal as well as the Cross Objection filed by the assessee are dismissed." 16. We further observe that in the case of ESS Distribution (Mauritius) SNC ET Compagnie Vs. DDIT (145 taxmann.com 267) the co-ordinate Bench of the Tribunal also dealt with an issue and the treaty as involved in this case, wherein the entity being resident of Mauritius distributed sports related television broadcasting rights through network of Indian cable operators and earned revenue from subscription and therefore the coordinate Bench of the Tribunal has held that the then Assessee was merely granted broadcasting right through distribution agreement but not any copy right and therefore such subscription/distribution revenue received by the Assessee, would not be in the nature of "royalty", either u/s 9(1)(vi) of the Act or under article 12(3) of the DTAA. 17. We further observe that....
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....any, no further attribution of profit be made on foreign company, when the functions performed by the subsidiary company are much more what has been reported before TPO Analysis? 2.5 Whether on the facts and in the circumstances of the case and in law, the Ld. ITAT is correct in holding that no further attribution of profit be made on foreign company when the TP analysis did not adequately reflect the FAR borne by the Indian enterprise, for additional functions/risk performed by it as DAPE?" 2. The appeals emanate from agreements entered into between ESS Distribution (Mauritius) S.N.C. ET Compagnie³, ESPN Star Sports and ESPN Software India Private Limited. ESS Distribution (Mauritius) holds a valid Tax Residency Certificate and claims benefits in terms of the provisions contained in the India -Mauritius Double Taxation Avoidance Agreement. The subject matter of the agreements executed by it with ESPN Star Sports and ESPN India pertain to distribution of Star Sports and ESPN channels in India. Both ESPN Star Sports and ESPN India are designated as Distributors under the two agreements. 3. ........ 4. ........ 5. ........ 6.....
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.... (A) the storing of it in any medium by electronic or other means; or (B) depiction in three-dimensions of a two-dimensional work; or (C) depiction in two-dimensions of a three-dimensional work:] (d) in the case of a cinematograph film, - 4[(1) to make a copy of the film, including- (A) a photograph of any image forming part thereof, or (B) storing of it in any medium by electronic or other means.) 5[(6) to sell or give on commercial rental or offer for sale or for such rental, any copy of the film. (ii) to communicate the film to the public (e) in the case of a sound recording. (1) to make any other sound recording embodying it 6f including storing of it in any medium by electronic or other means); ** ** ** 15. It is further relevant to observe, the consequences for infringement of copyright and broadcast reproduction right have been dealt with differently under the Copyright Act. Thus, on a conjoint reading of section 14 and 37 of the Copyright Act, a holistic view can be taken that broadcast reproduction right is distinct and separate from Copyright Act. In case of DDIT v. ....
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....(the "ESPN Service") throughout the Area effective April 1, 2002 through March 31, 2003(the "Term") and Distributor hereby, accepts such appointment. The Term shall automatically renew for successive periods of one year each unless ESS gives written notice to Distributor of its intent not to renew at least forty-five days prior to the scheduled expiration of the original or then applicable renewal Term. (b) Distributor acknowledges and agrees that the above appointment is limited and qualified to the extent of solely making the ESPN Service available in the Area to approved sub distributors in strict accordance 'With the terms and conditions herein. Distributor further agrees that nothing in this Agreement shall provide Distributor with any rights whatsoever to the ESPN Service, nor convey, confer, grant, assign or otherwise provide Distributor with copyright, title or any other proprietary or ownership interest in or to the ESPN Service or any elements thereof. All rights in the content of the ESPN Service are expressly reserved by ESS. Distributor shall not use, authorize or permit the use of the FSPN Service, or any element thereof, for any purpose other than the pu....
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....mptly discontinue, use of any material or material containing any of the names and marks of ESPN STAR Sports and ESPN. 4(a) In consideration of the appointment of the Distributor to distribute the ESPN Service in the Area, Distributor shall pay ESS (subject to deduction, if required, of all applicable taxes), the aggregate of the following amounts: (1) a minimum guaranteed amount of USD 9,500,000 (United States Dollars Nine Million Five Hundred Thousand only) per annum; and (ii) an amount which is equal to 88% of the excess of the total gross revenues of the Distributor per annurn over and above USD 9,500,000. For this purpose gross revenues shall mean the amount due to the Distributor from distributing the ESPN Service in the Area as reduced by any taxes that are withheld in the Area. ** ** ** 7(c) ESS will indemnify Distributor from and against any and all claims, damages, liabilities, costs and expenses arising out of the distribution, pursuant to this Agreement, of the ESPN Service to the extent that such claims, damages, liabilities, costs and expenses are: (i) based upon alleged libel slander, defamation or invasion of the right of priva....
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....i) the arrangement with such sub-distributor may be terminated; or (ii) the rights and obligations of distributor under the arrangement with such sub-distributor may, automatically, be assigned to ESS Distribution. Distributor further agrees that nothing in this agreement shall provide Distributor with any rights whatsoever to the ESPN Service, nor convey, confer, grant, assign or otherwise provide Distributor with copyright, title or any other proprietary or ownership interest in or to the ESPN Service or any elements thereof. Distributor shall not use, authorize or permit the use of the ESPN Service or any element thereof, for any purpose other than the purpose expressly specified under this Agreement. Notwithstanding anything contained in this Agreement, if the Distributor becomes aware of any infringement or threatened infringement in the Area of-any intellectual property in the ESPN Service, the Distributor shall inform ESS Distribution of such infringement. ESS Distribution may require Distributor to take, either by itself or through a person authorised by it, all reasonable steps to end such infringement including initiating appropriate legal action on behalf of ESS Distribu....
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....ming Service ("STAR Sports Service"). The Services are available in two packages to the Affiliate namely, a Bouquet, In which both ESPN Service' as well as Star Sports Service will be provided ("Bouquet") and Alacarte under which package the Affiliate can choose to take either ESPN Service or Star Sports Service. The rates for both these packages have been fully communicated to and understood by the Affiliate. The Affiliate has indicated his choice by ticking the relevant box. VI. GENERAL TERMS AND CONDITIONS 1. NON EXCLUSIVE RIGHT The Licensor grants to the affiliate the non-exclusive right to distribute the Service in the area for reception by subscribers of the Distribution System(s) (referred to in Article II) whether directly, or through its sub operators and sub affiliates/cable operators of the Affiliate listed at Annexure I, collectively referred to as the Affiliate's Subscribers. For purposes of this Agreement, sub-operators', 'sub affiliates/cable operators' shall mean and include and person or entity that receives the service from the affiliate or from a person permitted by the affiliate to provide the service and who re-tra....
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....erform its obligations hereunder. It is clarified that licensor's authority to Licence the Service is derived from agreements granted to the Licensor by ESPN Star Sports ('ESS') for the ESPN Service and for the Star Sports Service (the ESS Agreements"). Affiliate expressly acknowledges and agrees that upon termination of either of the ESS Agreements by ESPN Star Sports, this agreement shall stand terminated as concerns the service for which the ESS Agreement(s) has been terminated. ** ** ** 15.3 No Agency Neither Affiliate nor Licensor shall be or hold itself out as the agent of the other under this Agreement. No Sub-operators/Subscribers shall be deemed to have any privity of contract or direct contractual or other relationship with Licensor by virtue of this Agreement or by Licensor's delivery of the Service of the Affiliate." 12. We also deem it apposite to notice Articles 5 and 12 as contained in the India - Mauritius DTAA and which are reproduced hereinbelow: - "Article 5 - Permanent establishment 1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through whi....
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....atus to whom the provisions of paragraph (5) apply] shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if: (i) he has and habitually exercises in that first-mentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (ii) he habitually maintains in that first-mentioned State a stock of goods or merchandise belonging to the enterprise from which he regularly fulfils orders on behalf of the enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted exclusively or almost exclusively on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 6. The fact that a company, whic....
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....n the Contracting State in which the permanent establishment is situated. 6. Where, by reason of a special relationship between the payer and the recipient or between both of them and some other person, the amount of royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of this article shall apply only to the last mentioned amount. In that case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention." 13. Taking up the issue of royalty first, it is manifest from a reading of Article 12(3) that payments would fall within its ambit provided they represent "consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work.....". As is evident from a reading of the agreement conditions extracted hereinabove, there was no transfer of copyright. The agreement that ESS Distribution (Mauritius) came to execute conferred no right with respect to copyright upon ....
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.... in simple analysis of the definition in clause v of the explanation-2 of section 9(1){vi} of the Act, would reveal that the consideration for the sale, distribution or exhibition of cinematographic films is kept outside the purview of the definition of "royalty" unless "royalty" arises on the transfer of all or any rights (including the granting of license) in respect of any copyright, literacy, artistic or scientific work, including films or video tapes for use in connection with the television or tapes for use in connection with the radio broadcasting. Further, the definition of "royalty" as enshrined in Article 12, para-3 also talks about any copyright of a literary, artistic or scientific work including cinematographic film or films or tapes used for radio or television broadcasting, which goes to show that assigning a right of copyright of a cinematographic film is mandatory for considering the transaction as "royalty" but not otherwise. Even otherwise, Article 12(3) of the Treaty mandates that the payments would fall within its ambit provided they represent "consideration for the use of, or the right to use, any copyright of literacy, artistic or scientific work ..... Adm....