TMI Blog2016 (4) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... in its appeal, has agitated the action of the Ld. DRP in holding that the income received by the assessee is business receipts and not royalty/fee for technical services as was held by the Assessing Officer (hereinafter referred to as the AO) in draft assessment order. Whereas the assessee in his appeal has agitated the levy of interest under section 234B and section 234C of the Income Tax Act. The relevant facts relating to the issues under consideration as brought out from the order of the Ld. DRP are as under: It has been submitted by assessee that IMG Media Limited ( the Company or the assessee ) is a tax resident of United Kingdom ('UK') as per Article 4 of the India-UK DTAA. It is a world leader in the field of multimedia coverage of sports events, including cricket. It has further been submitted by the assessee that the assessee and the Board of Control for Cricket in India ( BCCI ) had entered into an agreement for capturing and delivering of the live audio and visual coverage of the first Indian Premier League ( IPL ) 2008 event which was conducted in India during April 18, 2008 - June 01, 2008. Thereafter, the assessee also entered into another agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s submissions that the production work flow for both the events is similar. The AO after relying on this later agreement has held that the services being provided by the assessee company are nothing but fees for technical services as per section 9(i)(vii) of the Act and Article 13 of the DTAA between India and UK. The AO also held that the service would also qualify as royalty under Article 13 of the DTAA and explanation to section 9(i)(vi) of the Act. It has further been held by the AO that once it is held that the services being provided are taxable as per Article 13 of the DTAA, the provisions of Article 5(2)(k) of the DTAA becomes redundant. The reason for the same being that Article 5(2)(k) of the DTAA specifically excludes the services in the nature of FTS / Royalty (under Article 13 of the DTAA) for the purpose of determination of service PE. The assessee has made detailed submissions factual as well as legal and argued that the receipts from BCCI would not constitute FTS under the provisions of the Act as well as DTAA between India and UK. The AO after considering the arguments of the assessee held that the income of the assessee company is taxable as Fees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee produces the feed (program content) of live coverage of audio-video visuals of the cricket matches by using its technical expertise. After that it delivers the feed (program content) in the form of digitalized signals to the licensees (broadcasters). There should not be any dispute that the licensees (broadcasters) receive the feed on behalf of the BCCI. We notice that what is delivered by the assessee is a final product in the form of program content produced by it by using its technical expertise, i.e., the assessee does not deliver or make available any technology/ knowhow to the BCCI. There should not be any dispute that the production of program content by using technical expertise is altogether different from the provision of technology itself. In the former case, the recipient would receive only the product and he can use the product according to his convenience, where as in the later case, the recipient would get the technology/knowhow and hence he would be able to use the technology /knowhow on his own in order to produce any other program content of similar nature. In the later case, the technology/knowhow would be made available to the recipient, in which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broad casters. If that be the case, the broadcasters should be in a position to use the technology in order to produce the live feed on their own. We notice that the revenue has not established that the broadcasters (who are acting on behalf of the BCCI) or the BCCI itself has acquired the technical expertise from the assessee which would enable them to produce the live coverage feeds on their own after the conclusion of IPL 2008 and IPL 2009 cricket matches. In that case the essential condition of make available clause fails and hence the amount received by the assessee cannot be considered as Fee for technical services in terms of Article 13(4)(c) of the DTAA entered between India and UK. 9. The ld DRP has observed that the live coverage of cricket matches involve instant and continuous production and broadcasting of live matches. The existing program would keep merging with the new work. Further, the broadcasters are able to split the program content in order to insert advertisements. All these aspects, in our view, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of commercial agreement entered between the parties with regard to the modalities to be followed and the same is not a determinative factor to decide about the nature of payment received by the assessee. 14. The Ld D.R.P. has further observed that the assessee has developed commercial and scientific experience in the field of commercial and scientific experience. The term royalty is defined as under in the India- UK DTAA:- 3. For the purposes of this Article, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 copyright . In view of the conclusion of this Court in ESPN Star Sports case (supra), such a submission needs to be rejected. Though the above said decision was rendered in the context of provisions of sec. 194J of the Act, yet section imports the definition of the term royalty from Explanation 2 to sec. 9(1)(vi) of the Act. Under the definition given in the above said provision also royalty means consideration for the transfer of all or any rights (including the granting of a licence) in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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