Payment from SET Satellite (Singapore) P. ltd are not Taxable as ‘royalty’ under Article 12(2) of India-Singapore Treaty: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the payments from the SET Satellite (Singapore) Pte Ltd are not taxable as royalty under Article 12(2) of the India-Singapore Treaty. 

Global Cricket Corpn Pte Ltd, the respondent-assessee was a company incorporated in Singapore and had obtained Worldwide Media and sponsorship rights concerning various cricketing events from 2000 to 2007 and had earned income from granting broadcasting and sponsorship rights to various broadcasters and sponsors and the assessee had filed its return of income declaring total income at Rs.55,67,480/- and the same was processed under section 143(1) of the Income Tax Act,1961. 

The revenue appealed against the order passed by the Commissioner of Income Tax (Appeals) for partly deleting the levy of penalty under section 271(1)(c) of the Income Tax Act of Rs.35,41,86,182/-. 

P J Pardiwala, the counsel for the assessee contended that only US Dollars 1,16,611 were taxable as royalty under Article 12 as per India Singapore treaty and the balance receipts are not taxable in India for the reason that the assessee had no permanent establishment. 

Ajay Kumar Sharma, the counsel for the department relied on the levy of penalty and the penalty imposed was as per the law and liable to be sustained. 

The Bench observed that the assessee was eligible to claim the benefit of the India-Singapore treaty the payment from SET Satellite (Singapore) Pte. Ltd. is not taxable as ‘royalty’ under Article 12(2) of the India-Singapore treaty and the payments from the Broadcasting Corporation of India and Prasar Bharati All India Radio are to be treated as ‘royalties’ and 50% of the payment received from LG, Hero Honda, and Hutchison for the use of trademarks, trade names, and copy rights are to be taxable as ‘royalties’ under Article 12 and clause (3)(a) of the India-Singapore treaty. 

The two-member bench comprising Kavitha Rajagopal (Judicial) and Om Prakash Kant (Accountant ) held that the assessee was eligible for the benefit of the India-Singapore treaty and the levy of penalty was not legally sustainable. 

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