2016 (4) TMI 208 - AT - Income Tax

Income received - business receipts OR royalty/fee for technical services - PE in India - DTAA between India and UK - Held that - Decide the issue of the fee/income received by the assessee in favour of the assessee with a direction to the AO to treat the receipts of the assessee as business income of the assessee. Since the assessee has admitted that it has a PE in India hence the AO is directed to consider the taxability of the receipts as business income of the assessee as per the provisions of DTAA between India and UK.

Summary

Issues Involved:
1. Classification of income as business receipts vs. royalty/fee for technical services.
2. Levy of interest under sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Classification of Income as Business Receipts vs. Royalty/Fee for Technical Services:
The primary issue was whether the income received by the assessee, a tax resident of the UK, from the Board of Control for Cricket in India (BCCI) for live audio and visual coverage of IPL events should be classified as business receipts or as royalty/fee for technical services (FTS). The Assessing Officer (AO) had classified the income as FTS under Section 9(1)(vii) of the Income Tax Act and Article 13 of the India-UK DTAA, and alternatively as royalty under the same provisions.

The Dispute Resolution Panel (DRP) disagreed with the AO, holding that the fees were neither FTS nor royalty. Instead, the DRP upheld that the assessee had a service permanent establishment (PE) in India under Article 5(2)(k) of the India-UK DTAA, and the income should be taxed as business income under Article 7 of the DTAA.

The Tribunal referenced a prior decision for the assessment year 2010-11, which had concluded that the income was not FTS because the services did not "make available" any technology or know-how to BCCI, as required by Article 13(4)(c) of the DTAA. The Tribunal also determined that the payment did not constitute royalty since the assessee did not retain ownership rights over the program content produced. The program content became the property of BCCI, and the payment was for the production of the content, not for the use or right to use any intellectual property.

2. Levy of Interest under Sections 234B and 234C:
The assessee contested the levy of interest under sections 234B and 234C of the Income Tax Act. The Tribunal had previously addressed this issue for the assessment year 2010-11, directing the AO to reconsider the matter in light of the jurisdictional Bombay High Court's decision in "DIT vs. NGC Network Asia India" (313 ITR 187).

The Tribunal, following its previous decision, restored the issue of interest levy to the AO for fresh consideration, directing the AO to take into account relevant judicial precedents.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal for statistical purposes. It directed the AO to treat the receipts as business income and to reassess the levy of interest under sections 234B and 234C in accordance with the Tribunal's prior directions and relevant legal precedents. The order was pronounced in the open court on 26.02.2016.