Income from Live Sports Licensing Not Taxable as Royalty Due to Lack of Copyright Protection: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that income earned from licensing live sports broadcasts is not taxable as royalty because live broadcasts do not enjoy copyright protection under Indian law.

Trans World International LLC, a company based in the United States, had licensed broadcasting rights for sports events such as football and badminton to Indian broadcasters, including Sony Pictures Networks and Taj Television. The Assessing Officer (AO) treated the entire amount received as royalty under Section 9(1)(vi) of the Income Tax Act and Article 12 of the India-USA Double Taxation Avoidance Agreement (DTAA). The AO argued that the rights involved use of copyrighted material and technical processes and should therefore be taxed as royalty.

The assessee approached the ITAT arguing that live sports broadcasts are not copyrightable under Indian law and cannot be taxed as royalty. The assessee’s counsel argued that under the Copyright Act, 1957, copyright applies only to completed works such as films, recordings, or artistic creations, and not to real-time telecasts of sports events. They also argued that the assessee only licensed the right to broadcast the live events and did not carry out any transmission or technical process on its own.

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The assessee’s counsel relied on the decision of the Delhi High Court in Delhi Race Club, where it was held that live telecasts do not fall within the scope of copyright and hence, licensing such rights cannot result in royalty income. The assessee also relied on the ITAT decision in Fox Network Singapore, which had taken a similar view.

The counsel also pointed to the Delhi High Court’s decision in New Skies Satellite BV and the Supreme Court’s ruling in Engineering Analysis Centre of Excellence, to argue that changes in domestic tax law cannot override treaty provisions unless the treaty itself is amended.

The two-member bench comprising Brajesh Kumar Singh (Accountant Member) and Vikas Awasthy (Judicial Member) considered arguments from both sides and the evidence presented. The tribunal observed that the AO wrongly applied Explanation 6 to Section 9(1)(vi), which deals with satellite transmission, even though the assessee was not involved in the actual transmission of the content. The tribunal further observed that live sports broadcasts do not qualify as copyrightable works under Indian law, and the income from licensing such live broadcasts does not fall under the definition of royalty.

The tribunal explained that the income related to live sports coverage is not royalty either under the Income Tax Act or the India-USA tax treaty, as there is no copyright in live events. The tribunal directed the AO to exclude income from live broadcasts while calculating royalty income. The tribunal partly allowed the appeal.

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