Payments for Live Telecast of Cricket Matches without Enduring Benefit Not Taxable as Royalty: Delhi HC in Sri Lanka Cricket Case [Read Order]

In a recent ruling, the Delhi High Court held that payments received for live telecast of cricket matches, where the rights are limited only to live transmission and do not confer any enduring benefit cannot be taxed as royalty under the Income Tax Act.

The case arose from an appeal filed by the Commissioner of Income Tax (International Taxation) against Sri Lanka Cricket, a foreign cricketing body. The dispute related to the tax treatment of payments made by Indian broadcasters to Sri Lanka Cricket for the live telecast of cricket matches played in Sri Lanka.

Under the agreements in question, Sri Lanka Cricket granted broadcasters the right to transmit the matches live. These rights were confined strictly to live telecast during the relevant series and were valid only for matches conducted within a period of twelve months. The agreements did not grant any right to record, archive, rebroadcast, or exploit the matches after the live event.

The Assessing Officer treated the payments received by Sri Lanka Cricket as royalty under Section 9(1)(vi) of the Income Tax Act, taking the view that live telecast involved transfer of rights akin to copyright or the use of a process. The Income Tax Appellate Tribunal disagreed and ruled in favour of Sri Lanka Cricket.

Before the High Court, counsel for Sri Lanka Cricket argued that the issue was squarely covered by earlier judgments of the same Court, including CIT v. Delhi Race Club and CIT v. Fox Network Group Singapore Pte. Ltd. It was argued that a live telecast of a sporting event is not a “work” under the Copyright Act and does not involve transfer of copyright. It was further argued that the payments were event-specific and did not give rise to any enduring rights.

On the other hand, the Revenue counsel argued that the payments should be treated as royalty, either based on copyright or by invoking the meaning of “process” under Explanation 2 read with Explanation 6 to Section 9(1)(vi) of the Income Tax Act.

The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that the legal position on this issue was already settled by earlier judgments of the Court. The Court explained that a live telecast of a sporting event does not constitute a copyrightable work and that broadcasting rights are distinct from copyright.

The Bench further observed

“Because, royalty presupposes enduring benefits’. In case the licensee has a right to record or preserve the feed and he continues to derive benefit of that recording and has right to re-telecast or show those matches in future, beyond the period or event(s) other than such event, then only, the payment made to the licensee in appropriate case, can be treated as royalty.”

The court pointed out that in the present case, no such rights were granted under the agreement and the right to show the matches was confined only to live telecast for the duration of the series. The Revenue was also unable to show that the rights extended beyond live transmission.

The appeal filed by the Revenue was dismissed

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates