TMI Blog2022 (3) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... el in respect of subscription charges collected by MSM which were taxed as royalty for use of copyright and the co-ordinate bench held that the amount received by the Singaporean company cannot be brought to tax in India as royalty and the same is in the nature of business income.This decision has been approved by the Hon'ble High Court of Bombay [ 2019 (4) TMI 1621 - BOMBAY HIGH COURT] as emphatically observed that there is difference in copyright and broadcast reproduction right As per Circular No. 6/2001, it has been clarified that subscription charges receivable for Foreign Telecasting Companies (FTCs) shall continue to be taxed in accordance with guidelines prescribed for advertisement revenue, i.e. as business income. - Decided in favour of assessee. - ITA Nos. 6565/DEL/2016, 2921/DEL/2014, 2922/DEL/2014, 1112/DEL/2015, 310/DEL/2016, 6269/DEL/2016 and 6209/DEL/2017 - - - Dated:- 17-2-2022 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER For the Appellant : Kanchun Kaushal, CA and Rishab Malhotra, AR For the Respondents : N.C. Swain, CIT-DR ORDER Per N.K. Billaiya, Accountant Member This above captioned bunch of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax in India. 7. For the sake of convenience, the relevant extract of the order of US - MAP authorities is reproduced below:- Although we do not agree on the technical merits that the TW group had PEs in India, we reached a mutual agreement with a view to avoid double taxation. Per the terms of the mutual agreement, the TW group will report deemed net profit of 10% of the advertising and subscription revenue received from Indian sources and India will withdraw the balance of the PE adjustments... 8. Complete order is placed at pages 78 to 84 of the paper book. Following the above MAP order, the assessee, in the captioned Assessment Years, returned its income on the same basis as had been agreed to by Indian and USA competent authorities. Full disclosure of the said fact giving the basis of declaration was made by the assessee in its computation of income statement and notes to tax computation filed during the assessment proceedings. 9. Though the assessee claimed that it does not have any PE and transactions with TIPL are on a principal-to-principal basis, and even if TIIPL is considered as an agent, it is an agent of independent status and remuneratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the copyright Act makes it clear that such communication is complete only when the work is made available for being seen or heard by the public. More specifically, the definition states that 'communication through satellite or cable or any other means of simultaneous communication to more than one household or place or residence, including residential room of any hotel, shall be deemed to be communication. In view of above it is clear that the subscription revenue received by the assessee company for granting right or license to distribute the channel in India would amount to consideration for the transfer of all or any right (including the granting of licenses) in respect of any copyright, literary, artistic or scientific work. Hence assessable to tax as royalty both under domestic law as well as DTAA. 12. Objections were raised before the DRP but the same were of no avail. 13. A perusal of the record shows that on identical set of facts in group company case in Turner Broadcasting System Asia Pacific, Inc. [TBSAP] vs. DDIT ITAs No. 1343/DEL/2014, 631/Del/2015, 4087/DEL/2016, 2610/DEL/2017, the Tribunal has decided the controversy in favour of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In light of the above Circular, the co-ordinate bench in the case of group entity TBSAP [supra] has held as under: 41. We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as material referred to before us. The appellant-assessee is a US based Company and is tax resident of US. During the relevant assessment years, it has derived advertisement and distribution revenue from grant of exclusive rights to an Indian Company TIIPL to sale advertisement on the products and to distribute the products as incorporated above. The Indian Company has an exclusive distributor of the said products to the cable operators on principle to principle basis. The distribution agreement allowed the TIIPL to distribute the products to various cable operators and ultimately to consumers in India. The distribution revenue collected by the TIIPL was to be shared between the appellant. The ownership of copyright was stipulated in clause 5 of the agreement which is reproduced hereunder: 5 Ownership As between TBSAP and Company: (a) TBSAP has the sole right to determine the content of the Products and reserves the right to change such content fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h have been accepted by the parties, then as a rule of consistency, the same position should not be altered or should be allowed to be changed. 43. Be that as may be, now we will independently analyse, whether distribution revenue on the facts of the present case can be considered as 'royalty' in terms of Article 12 of the DTAA between India and USA. Ld. Assessing Officer had applied the provision of domestic law u/s. 9(1)(vi) and held that payment received by the assessee for grant of right or license to distribute the channel in India tantamount to transfer of rights including the granting of license in respect of any copyright, etc. would amount to royalty. The relevant finding and observation of the Assessing Officer has already been dealt above. On perusal of the material placed on record and the facts of the case it is quite evident that the appellant- assessee has merely granted rights to TIIPL to 'receive, promote, market, license, distribute and sub-distribute the products to cable, satellite, broadcast, hotel, interactive and telecommunication entities and other users , sell advertising and performing ancillary activities. Clause 5 as reproduced above p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of products is taxable as 'royalty' albeit it is a business income of the assessee. 44. The Assessing Officer has tried to justify the tax the distribution revenue in the nature of royalty by applying the retrospective amendment made in Explanation-6 of Section 47, 9(1)(vi) of the Act. Such an approach cannot be upheld because there is no similar amendment in the definition of royalty under the DTAA and it has been well settled by the Hon'ble Delhi High Court in the case of New Skies Satellite BV (supra), that amendment in the domestic law cannot be imported or read into DTAA. 45. The Ld. Departmental Representative has relied upon various clauses of the agreement between the Appellant Company and TIIPL to state that the content in the product was licensed to TIIPL. Accordingly, the amount received by the Appellant Company from TIIPL (Indian Concern) needs to be brought to tax as Royalty and not business income. However, the Ld. DR has completely ignored Clause 5 of the agreement (reproduced above). Considering the specific clause, no inference to the effect that the copyright of the content in the product has been transferred can be drawn. The clause makes it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court has categorically held that subscription charges received by MSM Satellite was for only viewing of the channels operated by it and it cannot be said that such revenue was for parting of any copyright. Accordingly, if the aforesaid principle of the Hon'ble Bombay High Court is to be followed, then the amount received by the appellant company from the Indian concern is to be brought to tax as Business Income. 48. Lastly, the Ld. DR has relied heavily upon the decision rendered by the Hon'ble Supreme Court in the case of Star India Private Limited v. Department of Industrial Policy and Promotions Others. [C.A. Nos. 7326-7327 of 2018] to contend that the distribution fees[tariff] as received by the assessee relate to content which is protected and covered by the Copyright Act in form of Copyright , Broadcast Right and/or Rebroadcast Right . Accordingly, the amounts received by the Appellant Company needs to be brought to tax as Royalty. 49. If we go through judgment, it is seen that the issue before the Hon'ble Supreme Court was, whether the TRAI only had the power to regulate the means of transmission and did not have the authority to regulate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o protect the proprietary interest of the owner, which in the present case is a broadcaster, in the work , i.e. the original work, its broadcast and/or its re- broadcast by him. 51. Consequently, even the observations of the Hon'ble Apex Court in fact supports the case of assessee and its reliance on Bombay High Court that the broadcasting right a separate right which cannot come within the purview of copyright gets fortified. Even at the cost of repetition, it is again reiterated that even as per the agreement the copyrights in the product/channel has not been transferred to the Appellant and therefore it would not fall in the first category i.e. wherein the broadcaster himself has produced the serial. 52. The Ld. DR was not correct to compare with the first example wherein the broadcaster himself has produced the serial which is not the case of the Appellant Company In fact the case of the Appellant is covered by the judgement of the Hon'ble Bombay High Court in the case of MSM Satellite (Singapore) Pte Ltd., (Supra) wherein the Hon'ble Bombay High Court emphatically observed that there is a difference in copyright and broadcast reproduction rights . The ..... 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