TMI Blog2011 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute a business connection in India. In the case of R.D. Aggarwal And Company And Anothers (1964 -TMI - 49330 - SUPREME Court) the Hon'ble Supreme Court has held that the expression "business connection" undoubtedly mean some thing more than "business". A business connection has been held to be involving a relation between the business carried on by a nonresident yielding profits or gains and some activity in the taxable territories which provides directly or indirectly to the earning of those profits or gains. A stray or isolated transaction has been held to be not constituting a business connection. As the consideration for live broadcasting does not fall either u/s 9(1)(i) or u/s 9(1)(vi), such amount is not chargeable to tax under the provisions of this Act in the hands of non-resident. - Decided in favor of assessee. - IT Appeal No. 99 (Mum.) of 2009 - - - Dated:- 9-11-2011 - N.V. Vasudevan, R.S. Syal, JJ. ORDER R.S. Syal, Accountant Member This appeal by the Revenue is directed against the order passed by the Commissioner of Income-tax (Appeals) on 29.09.2008 in relation to the assessment year 2008-09. 2. The only effective ground is as under: "On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth were covered within Explanation 2 to section 9(1)(vi) of the Income-tax Act, being in the nature of royalty. The contention of the assessee that India Bangladesh DTAA be applied as Nimbus was only a marketing agent of BCB, also did not find favour with the DDIT because in his view Nimbus was incorporated in Singapore and it was Nimbus who was going to have dealings with the assessee in India. It was also noticed that as per clause 3.3 of the agreement between the assessee and Nimbus, the payment was to be made in a bank account maintained in London. The DDIT, therefore, held that this transaction would be covered by Article 24 of the India-Singapore DTAA and hence no benefit even under Indo-Singapore DTAA would be available. In the final analysis the DDIT held that the request for grant of Nil deduction certificate in respect of payment for live broadcasting was not acceptable. 5. In the first appeal the learned CIT(A) upheld the DDIT's contention as regards business connection of Nimbus in India. He held that without the receipt of signal on account of matches to be played none of this income would accrue to the assessee. However he did not accept the DDIT's order that payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. The contention of the Revenue is that the present case falls u/s 9(1)(vi)(b). Explanation 2 gives meaning of "royalty" for the purposes of section 9(1)(vi) to mean consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for ( i ) to ( iva ) ** ** ** "(v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films;" [Emphasis supplied] 8. The learned Departmental Representative submitted that the payment under consideration was in the nature of royalty for the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative contended that the playing of cricket match is akin to performing the work in public and hence the consideration for live broadcasting would amount to consideration for transfer of copyright of a work which is in the nature of performing the same in public. We are unable to accept this contention. The obvious reason is that the above sub-clauses (i) to (vii) of clause (a) need to be seen in conjunction with the section 14(1), which means that falling under any of the sub-clauses will make it copyright only if the prescription of the main provision of section 14(1) is satisfied. Looking at various sub-clauses sans the sub-section (1) of section 14 itself is meaningless. It is only when the main mandate of section 14(1) is satisfied qua any of the sub-clauses (i) to (vii), that it assumes the character of copyright. When we read section 14 in entirety it emerges that doing of the acts specified in sub-clauses in respect of a 'work' amounts to copyright. The word "work" has been defined in section 2(y) of the Copyright Act, 1957 as under: "work" means any of the following words, namely: (i) a literary, dramatic, musical or artistic work; (ii) a cinematograph film; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hooting and in case of any event including matches, it can be only when that event is taking place. Once an event is captured, only then the question of making its copy arises. As the meaning of copyright u/s 14 in the context of cinematograph film clearly refers to the making a copy of a film and not its original recording, obviously the broadcast of live telecast can not be equated with the copyright of such film. 13. Adverting to the facts of the instant case it is noticed that the dispute has arisen on the consideration for live broadcasting of matches, which has been categorized by the DDIT as synonymous with the granting of copyright in such work. The learned Departmental Representative has accentuated on the point that the live telecasting itself involves the transfer of copyright. In support of this contention he referred to para 16.4 of the impugned order as per which the assessee itself submitted that for live telecasting, images of the matches have to be captured which are transferred to control room by different cameras. The director then chooses the best image out of those received from different angles to be telecasted so that viewers can enjoy the same from the bes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010. The proposed section 314 is Interpretation clause and 'royalty' has been defined in sub-section 220, as under : 314. In this Code, unless the context otherwise requires ** ** ** (220) "royalty" means consideration (including any lump-sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for (a) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, trade mark, secret formula, process, or similar property; (b) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula, process, trade mark, or similar property; (c) the use of any patent, invention, model, design, secret formula, process, trade-mark, or similar property; (d) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; (e) the use or right to use of any industrial, commercial or scientific equipment including ship or aircraft but excluding the amount, referred to in item numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered opinion the answer to this question has to be in negative for the reason that a non-resident is not chargeable to tax in India in respect of royalty income alone. 20. In order to avoid any obligation to deduct tax at source on the payments to non-residents, it is sine qua non that the sum paid or payable should not be chargeable under the provisions of this Act in the hands of non-resident recipient etc. To find out whether a particular sum is chargeable to tax in India or not, we need to visit section 4, which provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act, in respect of the total income of the previous year of every person. Scope of total income has been enshrined in section 5. Subsection (2) of section 5 provides that the total income of any previous year of a person who is a non-resident, subject to the provisions of this Act, includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on certain case laws. 24. Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 provides that "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him". It is seen that the ld. CIT(A) has held in para 18 of the impugned order 'that payments towards live telecast of events are not a royalty payment; hence there was no requirement of deduction of tax u/s 195'. Despite the fact that the point of business connection was decided by him against the assessee, he chose to hold that there was no requirement of deduction of tax u/s 195. As the duty to deduct tax at source cast by the DDIT was relaxed by the ld. CIT(A), the assessee did not file any appeal. Since the Revenue has filed appeal, the assessee as respondent, is entitled to file application under rule 27 to protect its interest on the point decided by the ld. CIT(A) against him on the question of business connection of Nimbus in India. We, therefore, admit the application filed by the assessee under Rule 27 and take up the question of business connection of Nimbus in India for disposal on merits. 25. It is noticed that the DDIT has held that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee earns income or suffers losses from the exploitation of such broadcasting is not the concern of Nimbus. Such transaction of the assessee with Nimbus on principal to principal basis cannot be considered as a ground for holding that Nimbus has a business connection in India and hence the income shall accrue to Nimbus through this business connection in India. 28. In the case of CIT v. R.D. Agarwal Co. Anr. [1965] 56 ITR 20 (SC) the Hon'ble Supreme Court has held that the expression "business connection" undoubtedly mean some thing more than "business". A business connection has been held to be involving a relation between the business carried on by a nonresident yielding profits or gains and some activity in the taxable territories which provides directly or indirectly to the earning of those profits or gains. A stray or isolated transaction has been held to be not constituting a business connection. In this case the assessee procured orders in taxable territories for non-resident for which he was not duly authorized and contracted for the sale of goods. The orders were accepted by the non-resident. Price was received and delivery was given outside India. No oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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