Licence Fees Received Towards Live Transmissions of Cricket Matches Held in Australia Not Taxable in India: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the licence fees received by the assessee towards live transmissions of cricket matches held in Australia are not taxable in India as royalty.

Cricket Australia, the appellant Assessee's return of income was taken up for scrutiny for examination of receipt of large value foreign remittance and low receipts in Income Tax Returns.

The assessee is incorporated in Victoria and is a Company Limited by guarantee. It is a national government body for the game of cricket in Australia. It is a tax resident of Australia and has a valid tax residency certificate.

The Income Tax Assessing Officer had questioned the receipts of Rs. 375,48,27,288 received from Sony Pictures alleging that the same amounts to a license fee and be treated as royalty consideration for the use of, or the right to use, any copyright, trademark or other like property or right, to be royalty under the provisions of the Act and be treated as royalty for use of, or the right to use, motion picture films, films or videotapes for use in connection with television; or tapes for use in connection with radio broadcasting as royalty under the provisions of Article 12(3)(e) of the DTAA.

The AO also questioned the receipts of 13,70,00,000 from Balkrishna Industries instead of a Commercial partnership agreement to treat the same as royalty under the Act or as well as under Article 22 of the DTAA.

The assessee had given a detailed submission which was not found satisfactory and the AO had made an addition on account of the license fee of Rs. 350,54,35,665 received from Culver Max Entertainment Private Limited in respect of granting rights for live transmission of programmes i.e. cricket matches played in Australia under the sole control and auspices of the appellant as royalty income.

The AO added an amount based on the difference in the amounts reported by the appellant and the amounts reported by Culver Max Entertainment Private Limited in Form 15CA/CB. An addition was made, on account of the consideration received from Balkrishna Industries Limited, instead of the Commercial Partnership Agreement, treating it as Royalty.

The assessee argued that the amount received by the appellant under the Broadcasting Agreement cannot be regarded as royalty under the India-Australia DTAA. The department contended that the right to use the logo was given to use 'with or without' the joint logo, so receipts are like royalty.

The two-member bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) have observed the rights were merely for advertising, communications, and sales and marketing campaigns showcasing the Sponsor's association with the Big Bash League (BBL). The use of intellectual property rights like the logo of the assessee or BBL, was incidental to the objective of the promotion of BBL and the products of the sponsor.

Further viewed that the rights given were not of the nature of 'copyright' but a simplistic right to represent in the advertising, communications, and sales and marketing campaign showcasing the Sponsor's association with the BBL. Any payment falling within the scope of royalty has to be some kind of transfer of rights.

While allowing the appeal, the Tribunal held that there was a failure on part of AO and DRP also, to have not gone into the recitals of agreements in a holistic manner, but very summarily the conclusion was drawn that, BAL as sponsor had got any exclusive right in the logo or other intellectual property of assessee.  Nitesh Joshi appeared for the appellant and Vizay B. Vasanta appeared for the respondent.

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