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NGC Network Asia LLC Versus Joint Director of Income Tax (International Taxation) , Range-4, Mumbai

2016 (1) TMI 131 - ITAT MUMBAI

Taxability of revenue generated through advertisements in India - Taxability under India-US tax treaty - assessee having a Permanent Establishment (PE) in India in terms of India-USA DTAA - whether the income generated through distribution of channels falls within the meaning of “Royalty” under Article 12 of India-USA DTAA and also u/s 9(1)(vi) of the Act and hence the same is also taxable in India? - Held that:- If the foreign company receives any money from the Indian soil and if it is held to .....

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that the assessee should be provided an opportunity to submit its contentions with regard to the computation of income from advertisement revenues. Hence, for this limited purpose, we restore this issue to the file of the assessing officer. If the assessee does not have to say anything in this regard, the income computed by the assessing officer shall stand.

We notice that the assessing officer has made a general observation that the Article 12 of the India-US DTAA shall be applicabl .....

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been defined in the treaty, but the same has been defined in Explanation 6 to sec. 9(1)(v) of the Actinserted by the Finance Act, 2012. We further notice that the various case law relied upon by the assessee has been rendered prior to the insertion of the above said Explanation-6 or the applicability of the above said explanation has not been examined therein. Hence, we are of the view that the question whether the payment received by the assessee for giving distribution rights shall fall in th .....

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light of discussions made supra and take appropriate decision in accordance with the law, after affording necessary opportunity of being heard to the assessee. - I.T.A. No.7994/Mum/2011, ITA No.7631/Mum/2012 - Dated:- 16-12-2015 - SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) For The Appellant : Shri Porus Kaka and Ms.Sheetal Shah For The Respondent : Ms.Vandana Sagar ORDER PER B.R. BASKARAN (AM) These are the two appeals filed by the assessee against the assessment orders passed for assessment .....

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e generated through distribution of channels falls within the meaning of Royalty under Article 12 of India-USA DTAA and also u/s 9(1)(vi) of the Act and hence the same is also taxable in India. 3. The facts relating to the case are discussed in brief. The assessee herein, viz., M/s NGC Network Asia, LLC ('NGC Asia); is a Delaware, US incorporated entity. The assessee is a subsidiary of Fox Entertainment Group Inc . The assessee holds 100% shares in NGC Network (Mauritius) Holden Ltd, which i .....

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('India - US Treaty), the assessee is eligible for the benefits of the India - US treaty by virtue of being a resident of USA. The assessee company has appointed M/s NGC India as its distributor to distribute its television channels and also to procure advertisements for telecasting in the channels. Hence the assessee company generates two streams of revenues from India, viz., (a) Fee for giving distribution rights for telecasting of its channels. and (b) Advertisement revenues. We shall fi .....

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Nepal, Bhutan, Bangladesh and Srilanka. In consideration for the right to distribute the said channel in India, NGC India is required to pay a fixed fee amounting to US$ 32,00,000 for the period 01.04.2006 to 31.03.2007 to the assessee. b) Further the assessee, has also sold advertising time on the National Geographic Channel during the year corresponding to A.Y.2007-08. In this regard, the assessee company has signed an Advertising Sales Representation Agreement (Ad Sale Agreement) with NGC Ne .....

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dvertisements. The revenues were collected by NGC India and remitted net of all commissions and taxes to the assessee company. Further, the said agreement was terminated and thereafter, with effect from 01/05/2006, the assessee has entered into an advertisement sales agreement with NGC India, wherein the assessee has sold the advertisement and sponsorship time on the channels to NGC India for a lump sum consideration of US $ 22,80,000. 5. Thus, during the year relevant for AY 2007-08, two agreem .....

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of revenue, viz., for giving distribution rights, the assessee has received US $ 32,00,000 during the year relevant for AY 2007-08. It is pertinent to note that, with regard to the various international transactions entered into by the assessee, a reference was made to the Transfer Pricing Officer (TPO) and the TPO has accepted the Arm‟ length Price of the international transactions entered into by the assessee with its Associated Enterprises (AE). The assessee took the view that both typ .....

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e. in the ratio of worldwide profits to worldwide revenue, in accordance with Rule 10B(ii) of the I.T Rules. The assessing officer held that the revenue generated on granting of Distribution rights is in the nature of Royalty and accordingly assessed 15% of thereof as income of the assessee as per Article 12 of India US DTAA. The DRP also confirmed the same. 6. We shall first take up the issue relating to the taxability of advertisement revenue. The assessee contended that the new agreement was .....

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y the TPO and hence no further income is required to be attributed to the assessee. We have earlier noticed that the new agreement took effect from 1.5.2006 and hence tor the month of April, 2006, the assessee had paid commission @ 15% of advertisement revenues to NGC India. It was submitted that the rate of commission of 15% was considered to be at arm‟s length by the Hon‟ble Bombay High Court in the case of SET Satellite (Singapore) Pte Ltd (218 CTR 452). Further, the TPO has accep .....

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as a dependent agent of NGC Asia. It was further submitted that NGC India does not constitute sales outlet of the assessee. It was also submitted that since the assessee has paid commission to NGC India at arms length basis, no further income can be attributed to the assessee. In this regard, the assessee placed reliance on the decision rendered by Hon‟ble Supreme Court in the case of DIT Vs. Morgan Stanley and Co. (292 ITR 416) and the Hon‟ble Bombay High Court in the case of SET Sa .....

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enues. -NGC India decides whether it should sell the advertisement airtime through its own sales force or through agents and accordingly, the advertising airtime is sold by NGC India -Further, NGC India also solely decides the price and other terms at which it should sell advertising airtime to any customer NGC India (directly or through it agent) directly negotiates and agrees to the terms with the advertisers/agencies (customers) -NGC India enters into contracts for sale of advertising airtime .....

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ssessee herein) submits that the above stated activities are undertaken by NGC India in its own right and on own its account and NGC Asia is not involved in any manner in respect of the sale of advertising airtime by NGC India. Further, NGC Asia does not have any control over the above stated activities undertaken by NGC India with respect to sale of advertisement nor does it undertake any activity in India as regards the advertisement and sponsorship time sold by it. Accordingly, we submit that .....

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relation to the sale of advertisement and sponsorship time. Explanation that NGC India should not be construed as an agent of NGC Asia under P2P arrangement NGC Asia reiterates that the arrangement between NGC Asia and NGC India with respect to sale of advertisement and sponsorship airtime is on a 'P2P' basis and the same are negotiated on arm's length basis. NGC Asia has sold the airtime inventory to NGC India. Based on the above, NOC Asia submits that the basic condition for a per .....

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avoidance of doubt it is clarified that while NGC India may deal with the Ad time and/or additional Ad time in its own right and in such manner as it deemed fit, onwards sale, if any, of Ad time and additional Ad time by NCG India to its customers will be entirely at its own risk, at price agreed between NGC India and such customers an and on such terms as it may consider appropriate. Further, no customer shall have privity of contact with NGC Asia and the entire risk and responsibility in all .....

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ons of the principal is not satisfied. Therefore, based on the terms of the contract, the intention of the parties and the above analysis of the provisions of the Contract Act, the nature of arrangement between NGC Asia and NGC India is on a principal-to-principal basis. Taxability under India-US tax treaty Without prejudice to above that the advertisement revenues earned by NGC Asia are not taxable in India under the Act, we further submit that the revenue with respect to outright sale of adver .....

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om PE's activities and arise economically from the business carried on by the PE. In view of this, we would like to mention that NGC India has purchased the advertisement and sponsorship time from NGC Asia on a P2P basis. Further, NGC India has not carried on any activities on behalf of NGC Asia and therefore, no income can be said to arise economically to NGC Asia from business carried on by NGC India." 4.2 The contentions of the assessee have been duly considered. NGC Asia (assessee) .....

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chain of cable operators in every footprint of the channel telecast. 4. Telecasting and marketing of the programmes follow the earlier modules. It involves up-linking the programmes to a satellite which may be owned, hired or taken on lease by the NGC Asia (assessee). Thereafter down-loading has to be done through decoders provided to the cable operators for which prescribed fee are levied. 5. The next step, as the main source of revenue, NGC Asia (assessee) have to procure advertisements from .....

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the NGC India through the help of agents, sub-agents and other concerns and subsidiaries. During the course of arguments, the Ld A.R submitted that the observations made by the AO in point no.5 and 6 are wrong, i.e., he submitted that the assessee does not procure advertisements directly. However, we are of the view that the assessing officer has discussed only the business module of the assessee and has not given any finding that the assessee procures advertisements directly, which is evident .....

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cer did not accept the said submissions of the assessee. The assessing officer took the view that time cannot be delivered in advance and hence the Advertisement Airtime cannot be considered to be Goods , capable of being sold. Since capability of using goods is absent in the case of Advertisement airtime, the AO held that the NGC India cannot use the Ad airtime independent of the assessee. He also observed that, unlike in the case of goods‟, time cannot be stocked for future sale, since t .....

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t be segregated into transferable modules. Accordingly the AO held that the NGC India is only functional agent of the assessee and accordingly held that the assessee has only granted Permissive right to NGC India. The AO further substantiated his view by stating that the advertisement procured by NGC India, per se, does not have any commercial value unless it is telecast by the assessee and hence the procurement of advertisement is part of telecasting activity only. 10. The assessing officer fur .....

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flow of telecast contents and hence it cannot be segregated and sold. Accordingly the assessing officer held that NGC India is only a functional agent of the assessee. 11. The assessing officer further observed that the procurement of advertisement as well as its telecast takes place in India, i.e., the purchase, sales, delivery and consumption of advertisements are generated as well as concluded in India. Hence the source of advertisement revenues is India. The AO also observed that the NGC Ind .....

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8. 12. The Assessing officer further held that there is no material changes in the rights and obligations of the assessee under the old agreement (principal to agent agreement) and the new agreement (principal to principal agreement). Accordingly, the AO held that NGC India is dependent agent of the assessee in terms of paragraph 4(c) of Article 5 of India-USA DTAA. Consequently, he held that the assessee is having PE in India. In this regard, the assessing officer took support of the decision r .....

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ied on its activities through a PE in India and hence the profits attributable to PE are liable to be taxed in India under Article 7 of DTAA. 13. The AO then referred to a Circular issued by CBDT, wherein it is stated that the income attributable to PE shall be computed as per Rule 10 of I.T Rules, if separate accounts for Indian operations are not available. 14. The Ld D.R.P. also upheld the view taken by the assessing officer. Accordingly, the assessing officer computed income from advertiseme .....

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ump sum consideration. The revenue generated on sale of advertisement air time is in the nature of business income and hence the same can be taxed in India only if the assessee holds a Permanent Establishment (PE) in India. Since the relationship between NGC India and the assessee is on principal to principal basis, NGC India cannot be considered as dependent agent and hence NGC India cannot be considered to be the PE of the assessee. In support of these contentions, the Ld A.R submitted that (a .....

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24 hours. This time limit appears to have been segregated into Advertisement airtime and Programme air time , meaning thereby, the assessee has prefixed the time limit for telecasting advertisements. For soliciting the advertisements, the assessee is required to appoint persons and the assessee has appointed M/s NGC India to solicit advertisements from India. Under the old agreement entered by the assessee with NGC India, the assessee has paid 15% of advertisement revenues to the Indian company. .....

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nded that the Advertisement air time is goods capable of being transferred and hence the agreement has been entered on Principal to Principal basis. If the contention of the assessee is accepted that M/s NGC Asia cannot be considered to be the dependent agent of the assessee, in which case, M/s NGC Asia cannot become PE of the assessee company and hence the advertisement revenue earned by the assessee company shall not be liable to taxation in India. When this contentions were put to the assessi .....

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t the same cannot fall in the category of goods , since it cannot be stocked or used independently. Before us, the Ld A.R placed reliance on the decision rendered by Hon‟ble Supreme Court in the case of Tata Consultancy Services Vs. State of Andhra Pradesh (271 ITR 401) to support his contentions that the advertisement air time is goods . In the case of Tata Consultancy services (supra), the question urged before the Hon‟ble Supreme Court was about the character of software , i.e, wh .....

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of being abstracted, consumed and used and/or transmitted, transferred, delivered, stored or possessed etc. are goods‟ for the purposes of sales tax… Based on the above said reasoning, it was held in the case of Ambient Space sellers Ltd Vs. Asia Industrial Technology Pvt Ltd 1998 PTC (18) (Bom) that Signals shall constitute goods, since they can also be transmitted, transferred, delivered, stored and possessed. In the case of CIT Vs. Sun TV Ltd (296 ITR 274)(Mad), it was held that .....

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t is predetermined. The right over the advertisement air time may also be capable of being possessed till the time of its expiry. For example, if a person purchases the right over the advertisement airtime of say, 30 minutes to be used before the expiry of a particular month, then the said can possess the right till the expiry of that month. Accordingly, after the expiry of the that month, the said right would automatically lapse and hence the characteristic of capable of being stored would have .....

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y if the assessee agrees to telecast the concerned advertisement material. For example, if the assessee refuses to telecast the advertisements procured by M/s NGC India, then the advertisement airtime purchased by it under the agreement shall not have any value. In case of goods , it gets separated from its manufacturer and it can be used/consumed by anyone independent of or without any support from the manufacturer. Further, the goods shall be capable of universal use. However, the advertisemen .....

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ent airtime, a person gets a right to get his advertisement material telecasted in the television channels owned by the assessee. Hence, we agree with the view taken by the assessing officer that the advertisement air time cannot fall under the category of goods . It is only a right given to M/s NGC India to procure advertisements. Though the right to procure advertisements for particular airtime may be capable of being transferred, but the same cannot be consumed/used by the buyer of the right, .....

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ip came to be examined by the Hon‟ble Delhi High Court in the case of CIT Vs. Idea Cellular Ltd (325 ITR 148), wherein the Hon‟ble High Court has observed as under:- 19. This Court in Commissioner of Income Tax, New Delhi Vs. Singapore Airlines Ltd. [2009-ITOL-183-HC-DEL-IT] analyses the aforesaid definition in the following manner: "16. It is clear from the definition that an agency comes into existence where one person is vested with the authority or capacity to create a legal .....

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transaction on behalf of the principal would have the power to create, modify or terminate contractual relationship between his principal, that is, the person whom he represents, and the third parties. - P. Krishna Bhatta v. Mundila Ganapathi Bhatta AIR 1955 Mad. 648 at page 651, para 36. An agent, though bound by instructions given to him by the principal does not work under the direct control and supervision of the principal. The agent thus uses his own discretion to act on behalf of the princ .....

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werable to third parties. The agent may not act under the direct control of the Principal, though bound by the instructions given by the principal, and he may use its own discretion. In the instant case also, M/s NGC India, by way of selling advertisement airtime, only canvasses advertisements for being telecast by the assessee in its television channels. Thus, M/s NGC India only establishes a relationship between the assessee and the clients (who gave advertisements). It is also pertinent to no .....

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elationship would be entirely different. On the sale of goods, the ownership passes between the manufacturer and the distributors. It is the responsibility of the distributor thereafter to sell those goods further to the consumers - the ultimate users. The principal/manufacturer does not come in picture at all. Of course, he may be liable for some action by the consumer because of defective goods, etc., which is the result of other enactments conferring certain rights on the consumer or common l .....

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e manufacturer does not come in the picture in respect of further sale of goods. We have earlier noticed that the advertisement airtime referred to here does not give to anybody the right of universal use and the same is restricted to the channels owned by the assessee only. Even after the sale of advertisement airtime by the assessee, the purchaser gets only a right to enforce the assessee herein to telecast the advertisement material of the purchaser, i.e., assessee‟s concurrence to tele .....

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terials given by the clients. Hence, the NGC India cannot be considered to be selling any goods and in effect, it is only canvassing the advertisements for the assessee herein. Thus M/s NGC India provides only agency services to the assessee and in turn, the assessee is providing advertisement services or telecasting services to the clients. Thus the concept of purchase and sale of goods, in our view, cannot be applied to the facts of the instant case. Accordingly, we are of the view that M/s NG .....

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ts for the assessee through the purchase and sale of advertisement airtime relating to the television channels owned by the assessee and the same makes NGC India a agent of the assessee, since the advertisement airtime, per se, does not have any value without the assessee agreeing to telecast the advertisement material. It is well settled proposition that the substance shall prevail over the form and hence even if the new agreement states that the relationship between the assessee and NGC India .....

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adcasting of advertisements. Under the old agreement, the compensation given to NGC India as well as the revenue generated by the assessee was agreed to be shared in a fixed proportions, whereas under the new agreement, it has been determined at the consolidated figure. In our view, the methodology adopted by the parties to share the revenue or to give compensation to NGC India for services rendered may not be the determining factor to decide about the nature of relationship between the parties. .....

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es that the new agreement entered between the parties altering the terms and conditions would not make it materially different from the old agreement. There may be some modification with regard to the rights and obligations, but in essence, the assessee has retained control in connection with the advertisements procured by NGC India. 24. The dependent agent PE is specified in Article 5(4) of India-USA DTAA as under:- 4. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other .....

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f business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph; (b) he has no such authority but habitually maintains in the first mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of that enterprise, and some additional activities conducted in the State on behalf of the enterprise have contributed to the sale of the goods or merchandise; or (c) he habitually secures orders in .....

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t it is clarified that while NGC India may deal with the Ad time and/or additional Ad time in its own right and in such manner as it deemed fit, onwards sale, if any, of Ad time and additional Ad time by NCG India to its customers will be entirely at its own risk, at price agreed between NGC India and such customers an and on such terms as it may consider appropriate. Further,no customer shall have privity of contact with NGC Asia and the entire risk and responsibility in all respect regarding s .....

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:- 3(a)(iii) NGC Asia agrees to insert the advertisements provided by NGC India, as per schedule provided by NGC India, into the Channel(s) for broadcasting. On a combined reading of the various clauses of the new agreement coupled with the view expressed by us in the previous paragraphs, we are of the view that M/s NGC India has and habitually exercises in India an authority to conclude contracts on behalf of the assessee and the same is binding on the assessee, since it has agreed to broadcast .....

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le to the assessee and in rebuttal of the same, the assessee had demonstrated before that M/s NGC India does not secure orders wholly or almost wholly for the assessee herein by filing the financial details. Since, we have taken the view that the provisions of Article 5(4)(a) is applicable, we do not find it necessary to consider Article 5(4)(c) of the Indo US treaty. 26. The assessee had also taken another argument that the Transfer pricing officer has held that the international transactions h .....

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Vs. B4U International Holdings Ltd (2015)(57 taxmann.com 146). 27. The facts prevailing in the case of Morgan Stanely & Co. Inc (supra) are that the foreign company therein had engaged the services of an Indian company. It is pertinent to note that the foreign company paid service charges to the Indian company and it did not receive any type of income from any of the Indian parties including the Indian company. The question before the Hon‟ble Supreme Court was that whether the foreign .....

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t of transfer pricing regulations is to prevent shifting of profits outside India. Under art. 7(2) not all profits of MSCo would be taxable in India but only those which have economic nexus with PE in India. A foreign enterprise is liable to be taxed in India on so much of its business profit as is attributable to the PE in India. The quantum of taxable income is to be determined in accordance with the provisions of IT Act. All provisions of IT Act are applicable, including provisions relating t .....

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nalysis (ALA) with attribution of profits. It holds that once a transfer pricing analysis is undertaken; there is no further need to attribute profits to a PE. The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has been remunerated on an arm‟s length basis taking into account all the risk-taking functions of the enterprise. In such cases nothing further would be left to be attributed to the PE. The situation would be different if tr .....

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ertaken in each case. Lastly, it may be added that taxing corporates on the basis of the concept of economic nexus is an important feature of attributable profits (profits attributable to the PE). In our considered view, the above said observations shall apply, qua the payments made by the foreign company to the Indian company for the services availed by it. We may prefer to explain our understanding by way of an example. If a foreign company A avails services of an Indian company AE B and remun .....

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e contrary, if the TPO determines the ALP at ₹ 1.00 lakh, then there is no necessity to attribute any further income, since the India has already received its due share of income. We wish to clarify here that the ratio laid down in the above said case has application while examining the existence of PE under Article 5(5) of the Act. Once the foreign company is held to have PE in India, then the taxability of business income is required to be determined in terms of Article 7 of the India-US .....

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ore) Pte Ltd (307 ITR 205). However, in the said case also, there is a clear finding that the contracts were concluded in Mauritius. Hence paragraph 5 of Article 5 of treaty was applied. In the instant case, we have held that the paragraph 4 of Article 5 of the treaty shall apply and hence, we are of the view that the assessee cannot take support of this decision. The department also took a contention that the decision in the case of Set Satellite (Singapore) Pte Ltd (supra), which was considere .....

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decision of the Hon‟ble Supreme Court and other High Courts cited above would be applicable only in respect of the payments made by a foreign company to its Indian AE in respect of services availed by it. On the contrary, if the foreign company receives any money from the Indian soil and if it is held to be having a Permanent Establishment , then the taxability of the same have to be examined in accordance with the provisions of Indo-US treaty as well as under the provisions of Indian Inco .....

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issue to the file of the assessing officer. If the assessee does not have to say anything in this regard, the income computed by the assessing officer shall stand. 31. The next issue relates to the treatment of fee received by the assessee from giving distribution rights to M/s NGC India. As per the distribution agreement, M/s NGC India is given right to distribute the channels telecasted by the assessee through any means to intermediaries in the assigned territory. The assessing officer propos .....

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control over the channels and NGC India is allowed to only exploit the channels. He further held that the definition of term royalty given in Explanation 2 to sec. 9(1)(vi) of the Act is wider in scope that the definition given in the Indo-US treaty Further, the AO analyzed some of the clauses of the agreement and observed as under:- (a) As per the definition, the broadcast has been defined as broadcasting distribution and redistribution of the channels in the territory. (b) Channels means progr .....

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y has also restricted NGC India and the intermediaries from modifying, replacing or copying any copyright, trademarks, trade names, logos and names. The assessee has also prohibited NGC India and its intermediaries from copying any programs included on the channels. 5.7 Royalty can be said to be a compensation paid under the license granted by the owner to the other who wishes to make use of the license. In this case, the ownership remains with the licensor, i.e., the assessee and from terms of .....

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e company enjoys the rights of owners, whereas NGC India is paying compensation for the exploitation of the channels. 5.8 Since NGC India is paying for the use of the channels and since many restrictions are placed upon it, the license fee payment made is covered within the definition of royalty as per Article 12 of the U.S. Treaty as being payments made for use of any copyright or a literary, artistic or scientific work, including cinematograph films or work on films, tape or other means of rep .....

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s towards use of any copyright of a literary, artistic or scientific work, including cinematograph films, tape or other means of reproduction for use in connection with radio or television broadcasting and hence taxable as royalty under the Treaty with U.S. The AO also observed that the United States has considered the broad casting reproduction rights as copyright. Accordingly, the assessing officer has assessed the fee received for giving distribution rights as royalty income. The Ld DRP also .....

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the intermediaries can modify or delete anything in the course of Channel, i.e., the programmes shall be transmitted in its entirety without making any amendment. Further NGC India or any of the intermediaries cannot copy any of the programmes included on the Channel for the purpose of re-transmitting them later or for any other reason. Accordingly, the Ld A.R submitted that the assessee has granted NGC India non-exclusive license to use the trade marks associated with the Channel solely for the .....

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right‟ is not defined under the Act. Adverting our attention to the definition of the term Copyright‟ given under the Copyright Act, the Ld A.R submitted that the payment received by the assessee does not fall under any of the clauses given therein. He further submitted that, based on combined reading of Section 37 and 39A with section 2(dd) of the Copyright Act, the consideration paid by NGC India is for Broadcast Re-reproduction and distribution rights causing the broadcast to be .....

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eproduction right‟ are two distinct and separate rights. He further submitted that identical view has been expressed by the Hon‟ble Delhi High Court in the case of Star India Pvt Ltd Vs. Piyush Agarwal & ors. (CS(OS) Nos.2722/2012, 3232/2012 and 2780/2012)(Del) and also by the co-ordinate bench of Mumbai Tribunal in the case of DDIT Vs. SET India Private Limited (ITA No.4372/Mum/2004). He further submitted that the Hon‟ble Bombay High Court has held in the case of SET Satel .....

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NGC India is paying for is the right to use the copyrighted article (i.e., if the channel could be considered to be so) by virtue of being permitted to distribute the channel. Accordingly the ld A.R submitted that the NGC India does not acquire any right in the underlying copyright (i.e., right to modify/reproduce the channel/content) and hence it cannot be said that NGC India is making payment for a copyright. 35. The Ld A.R submitted that the assessee has permitted NGC India to use its trade .....

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rnational, USA (16 taxmann.com 69) (b) Harvard Medical International Inc. Vs. DCIT (33 taxmann.com 50) 36. The ld A.R further submitted that the distribution rights given by it is only a Commercial right and is also not covered by the definition of royalty or fee for included services given under Article 12 of India-USA treaty. He submitted that the tax treaties entered with some countries like Hungary, United Mexican States, Croatia etc., the definition of royalty specifically covers payment fo .....

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xable only if the assessee has a PE in India. He contended that the assessee does not have a PE and hence the payment received by the assessee for giving distribution rights is not taxable in India. 38. On the contrary, the Ld D.R submitted that the expression Copyright includes broadcasting rights. Further the assessee has permitted NGC India to use is trade mark and trade name. She further submitted that the assessee, through giving distribution rights, has granted M/s NGC India secondary tran .....

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critically analyzing the provisions of the treaty. Though the assessing officer has also referred to the provisions of Explanation 2 to sec. 9(1)(vi) of the Act for examining the definition of the term royalty , yet he has not critically discussed about its applicability to the impugned payment. It is pertinent to note that the definition of the term royalty given in sec. 9(1)(vi) of the Act as well as in the Indo-USA treaty uses the expression process . The said expression has not been defined .....

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