The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has recently ruled that BBC World Distribution Limited (BBCWD) is not liable to income tax for distribution of channels in India.
BBCWN, the owner of BBC World News Channel had granted the right to the assessee-BBC World Distribution Limited (BBCWD), to distribute the channel in India. BBCWD, in turn entered into an agreement with BBC World India Pvt. Ltd. (BWIPL) to distribute the channel to different operators of India and assessee had received an amount Rs.94,58,039/- in the AY 2006-2007 from distribution of the BBC World News Channel in India.
The Assessing Officer imposed tax at 15% holding that the assessee had transferred the right to use copyright to BBC World India Pvt. Ltd (BWIPL) which was in the nature of royalty. The Commissioner of Income Tax, Appeals [CIT(A)] also upheld the decision of the assessing officer.
Ajit Jain who appeared for the appellant submitted that, the assessee had only broadcasting reproduction right, which was completely different from copyright. The council also contended that the right which was passed to BWIPL could not be treated as royalty. The counsel argued to delete the addition as the BWIPL could not be considered as a permanent establishment (PE).
AnupamaAnand, on behalf of the department contended that the transfer of the distribution right which was in the nature of copyright would be treated as royalty as per Explanation 2(v) to Section 9(1)(vi) of the Income Tax Act, 1961, Copyright Act 1957 as well as Article 12(3) of India – Mauritius Tax Treaty. He further submitted that the addition must be confirmed as the BWIPL was in the nature of permanent establishment.
The Tribunal bench of G.S Pannu (President) and SakjithDey (Judicial Member) held that, BWIPL had only acquired broadcasting reproduction right as defined under Section 37 of the Copyright Act 1957 and broadcasting reproduction right was distinct and separate from copyright as defined under Section 14 of the Copyright Act. The bench also held that the distribution revenue received by the assessee could not be termed as royalty referring to DDIT Vs. SET India Pvt. Ltd and further observed that the distribution right of a channel was purely a commercial right and was also distinct from the right to use the copyright. The Tribunal thus allowed the appeal and set aside the addition made by the assessing officer.
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