TMI Blog2015 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... y" in terms of the India-UK DTAA. Though, it is not necessary to examine about the applicability of provisions of sec. sec. 9(1)(vi) of the Act, yet the facts discussed above would show that the payment received by the assessee cannot fall within the purview of sec. 9(1)(vi) of the Act also. Question of existence of “permanent establishment” and taxability of "reimbursement of expenses" grounds were not considered by the Ld DRP/AO, since they proceeded to assess the receipts as “fee for technical services”/royalty. Hence we set aside both the issues to the file of the AO for consideration of the same afresh. - Decided in favour of assessee for statistical purposes. - I.T.A.No.1513/Mum/2014 - - - Dated:- 26-8-2015 - SHRI B.R. BASKARAN AND AMIT SHUKLA, JJ. For The Appellant : S/Shri Ravi Sharma, Rahul Gupta and Mudit Sharma For The Respondent : Smt. Vandana Saltar ORDER PER B.R. BASKARAN (AM) The assessee has filed this appeal challenging the assessment order dated 10.1.2014 passed by the Assessing Officer under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (the Act) in conformity with the direction issued by the Dispute Resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also argued by the assessee that since, the cumulative period of stay of the assessee's personnel in India exceeded the threshold limit of 90 days in the 12 month‟ period, beginning from March 22, 2008 to March 21, 2009, a service permanent establishment ('PE'') of the assessee was constituted in India under Article 5(2)(k) of 'India-UK DTAA and the income attributable was computed on the basis of Transactional Net Margin Method ('TNMM') prescribed under the Indian transfer pricing regulations. The assessee further submitted the summary of returned income and proposed addition made by the AO as under : Returned income - Rs.(INR) 18,57,748/- (taxable @42.23%) Income as per draft assessment order by holding the same as FTS or alternatively Royalty -Rs.(INR) 20,23,11,392/- (taxable @10.5575%) According to the assessee, it has carried out its business activities in connection with the capture and delivery of live audio visual coverage of IPL 2008 and IPL 2009 matches. Accordingly, the assessee has contended that there existed a service PE an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the IPL 2009 season on the terms and conditions as set out herein. The parties hereby agree as follows: 1. Engagement 1.1 The BCCI hereby engages IMG to provide the services set out below and, in consideration for payment by the BCCI of the costs of providing those services in accordance with clause 3 below, IMG accepts such engagement: a) Production and provision to the Licensees (meaning MSM Satellite (Singapore) Pte Ltd, World Sport Group (Mauritius) Limited and Live Current Media Inc. ) of the High Definition world feed of the live audio-visual coverage (the feed ) for (i) All matches in the IPL season 2009 as set out in Schedule 1 (the Event and each match shall be referred to as a Match ) in accordance with the specification set out at Schedule 2 hereto; and (ii) The opening and closing ceremony for the IPL season 2009, as per the 2008 production brief unless otherwise agreed; and (b) Production liaison and administration of arrangements with the Licensees for the Event as set out at Schedule 3 hereto 1.2 IMG will not produce any feed of the Matches other than the feed produced for BCCI hereunder. 1.3 IMG shall be responsible for ensuring that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is provided by BCCI. The personnel in control room are also connected to the commentators who are hired by the assessee itself. Typically around 50 personnel are required for the live audio and video coverage of a cricket match . The personnel based in the temporary control room select the audio and video images of the stadium and commentators and mix them using technical desk claimed to be (standard equipment) and thereafter convert the same into the standard digitalized signals and deliver the same to BCCI for the purpose of telecasting and broadcasting. This completes the service by IMG. The most important part in this service is the part regarding selection of the audio and video images which are captured live and mixing of these images. A recorded copy of the live audio and video coverage is also to be given to BCCI Production is done by IMG Media on behalf of BCCI. BCCI hires IMG or other competitive companies to capture the event and does not do the same on their own. For the purpose of the live audio and video coverage of the match, IMG gives certain specifications of equipments to BCCI which is required for quality audio and video coverage of the event. Such specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldwide cannot be achieved. Moreover, each broadcaster breaks such live programming also for insertion of advertisements and other breaks. This live programming with breaks incorporated in it by the broadcaster is broadcast contents which itself is a copy righted product. What is tremendously important, therefore, is that the live feed (or delayed live feed as in this case) can be broken and taken up seamlessly by the broadcaster, which evidences the make available nature of FTS rendered. In this backdrop, it is evident that services of production and generation of live video signal rendered by the assessee in terms of agreement were in the nature of technical services. Assessee made available to its broadcasters the service which is based on technical knowledge, experience, skill, know-how and processes which also consisted of development and transfer to its broadcasters of technical plan and design relating to production and generation of live television signal. Further, schedule 3, of the said agreement mandates that IMG shall make available feed to the broadcasters at the production control room or the equivalent facility of the venue of the match. It shall also liaise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute a payment as Fee for technical services. He further placed reliance on the following decision in support of his contentions :- (a) De beers India Minerals (P) Ltd (2012)(346 ITR 467)(Kar) (b) Raymond Ltd Vs. DCIT (2003)(86 ITD 791)(Mum) (c) Guy Carpenter and Co. (346 ITR 504)(Del) The Ld A.R submitted that the principle of make available‟ has not been defined in the India-UK DTAA, but the same has been explained in the Protocol to the India-US DTAA as under:- Generally speaking, technology will be considered made available‟ when the person acquiring the same is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills etc., are made available to the person purchasing the service within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. He submitted that the concept or principle of Make available can be conveniently applied in the case of India-UK DTAA also. Accordingly he submitted that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce any other program content of similar nature. In the later case, the technology/knowhow would be made available to the recipient, in which case the payment given would fall under the category of Fee for technical services . However, in the former case, there is no question of making available of any technology/knowhow and hence the payment given would be in the nature of payment made for production of Program content or live feed and not for supply of technology. 8. The Ld DRP has observed that the agreement entered between the assessee and BCCI prescribes the quality standards in minute details and the same results in total exchange of technical plans and designs between the assessee and the broadcasters. In our view, there is a fallacy in the view taken by Ld DRP. The object of the production of live feed is to offer quality coverage of the live cricket matches to the viewers. The assessee‟s job is restricted to production of live coverage and the job of broadcasting the same is undertaken by the BCCI. The BCCI, in turn, has given license to certain companies (called licensees) and they have undertaken the job of broadcasting the live coverage of cricket matc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not bring the payment under the category of Fee for technical services . It only shows the technical expertise of the assessee to produce a flexible program content to give enhanced quality of viewing the live matches. 10. Before us, the Ld D.R placed reliance on the decision rendered by the Delhi bench of Tribunal in the case of Nimbus Sport International Pte Ltd (2012)(18 taxmann.com 105), wherein the Tribunal had held that the services or production and generation of live television signal were in the nature of technical services. The Ld A.R contended that the Delhi Tribunal did not examine the principle of make available‟. We notice that the case of Nimbus Sport International Pte Ltd is covered by India-Singapore DTAA and it also uses the expression make available in the definition of Fee for technical services . In the case of Nimbus sports International (supra), the principle or concept of make available‟ has not been examined by the Tribunal. Accordingly, we agree with the contentions of the assessee that the said decision is distinguishable. 11. Since the amount received by the assessee is held to be not in the nature of Fee for technical serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e world leader in this field and has developed commercial and scientific experience in the field of commercial and scientific experience. It has also developed a process which is unique to this company and the same process is being used for rendering these services. This is also because of the fact the assessee has been given this contract every year as it has a unique process for producing the live feed of matches. In this type of events the most important part that leads to generation of revenue for BCCI from IPL event is the seamless/uninterrupted production and broadcasting of the complete match. During such production process, a new work is created within a split of few macro seconds and the existing for keeps on merging with the new work being created. The activity which leads generation of revenue is the complete work being taken into consideration and therefore it would be incorrect to state that the payments received by assessee is for the live work and not for any work being in existence. Also, the production work being undertaken by the assessee is specialised in nature and the final signals being delivered by the assessee tantamount to use of process by the BCCI/its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent‟. According to the assessee, the program content shall become the property of the BCCI. We notice that the revenue has not brought any material on record to show that the assessee has kept the ownership rights over the program content. The Ld DRP has noticed that the BCCI is required to supply certain equipments and hence the Ld DRP has held as under:- the assessee would be using equipments to carry out this work which is nothing but equipment royalty as per the Act as well as the DTAA. We are unable to understand the rationale behind this observation. If the assessee was using the equipments belonging to BCCI and if that activity is examined in isolation, then the assessee should be paying money to BCCI for using the equipments. In the instant case, the assessee has received the money for producing live coverage of cricket matches. The equipments required for the said purpose may be brought by the assessee itself or it may be provided by the BCCI. Under commercial terms, if the assessee was required to bring the equipments, then the consideration payable for the production of live coverage of cricket matches should go up. Thus, in our view, it was a simple case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication of visual images to the public and would fall within the definition of the word broadcast‟ in Section 2(dd) (of the Copyright Act). That apart we note that Section 13 does not contemplate broadcast as a work in which copyright‟ subsists as the said Section contemplates copyright‟ to subsist in literary, dramatic, musical and artistic work, cinematograph films and sound recording. Similar is the provision of Section 14 of the Copyright Act which stipulates the exclusive right to do certain acts. A reading of Section 14 would reveal that copyright‟ means exclusive right to reproduce, issue copies, translate, adapt etc., of a work which is already existing 18. In view of the aforesaid position of law which brought out a distinction between a copyright and broadcast right, sufficie would it be to state that the broadcast or the live coverage does not have a copyright‟. The aforesaid would meet the submission of Mr. Sawney that the word Copyright‟ would encompass all categories of work including musical, dramatic, etc. and also his submission that the Copyright acknowledges the broadcast right as a right as a right similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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