The Income Tax Appellate Tribunal (ITAT) Delhi Bench ruled that fee received towards live transmissions of cricket matches programs held in Australia is not royalty under India -Australia Double Taxation Avoidance Agreement .Hence the bench deleted the addition made against the Cricket Australia.
Assesee, Cricket Australia return of income was filed on 31.10.2018 after assessee case was selected for scrutiny through Computer Aided Scrutiny Selection (“CASS”) and a notice under Section 143(2) of the Income Tax Act was issued and served upon the assessee. The reason for scrutiny was stated to be a high ratio of refund to TDS relating to Section 195 Income Tax Act (Business ITR).
Thereafter the AO noticed that the assessee did not offer certain income for tax i.e. license fee for live and non-live transmission rights . Thereby, the AO had proposed to assess the income at INR 5,83,91,931/- after proposing addition in respect of Royalty of INR 2,48,266/- qua tournament fee and in respect of license fee of INR 5,12,77,558/.
Therefore, a draft assessment order was passed under Section 144C of the Income Tax Act .
Against the draft assessment order assessee filed objections before Dispute Resolution Panel (“DRP”) DRP sustained the findings of the AO related to license fee received for live and non live transmissions rights and observed that fee received towards live transmissions of cricket matches programs held in Australia is royalty under India -Australia Double Taxation Avoidance Agreement .
Aggrieved by the order, the assessee filed an appeal before the tribunal.
Before the bench ,Percy Pardiwala, counsel for the assessee submitted that there is no copyright on live events, and therefore, it is not taxable as ‘royalty.
Further there is a clear distinction between a copyright and a broadcasting right, broadcast or live coverage which does not have a copyright, and therefore, payment for live telecast is neither payment for transfer of any copyright nor any scientific work so as to fall under the ambit of royalty under Explanation 2 to Section 9(1)(vi) Income Tax Act.
Vizay B.Vasanta, Counsel for the revenue, supported the decision of the lower authorities.
It was observed by the tribunal that AO made addition in respect of license fee for live and non-live transmission qua Sony Pictures Networks India Pvt.Ltd. on the ground that live transmission of sports events in the modern era is not merely a process of streaming event from the venue to the television set of the viewer.
After reviewing the facts the two member bench of Kul Bharat, (Judicial Member )and M.Balaganesh,( Accountant Member)held that license fees earned by the assessee from Sony Pictures Networks India Private Limited pertaining to ‘live’ transmissions of the programmes i.cCricket matches held in Australia as not “Royalty” under the Income Tax Act as well as under the India – Australia Double Tax Avoidance Agreement.
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