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TMI Blog2022 (3) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant company is incorporated under the laws of the United States of America (USA) and is a tax resident of the USA during the captioned assessment years. The appellant derived advertisement and distribution income from grant of exclusive rights to Turner International India Private Limited ('TIIPL') (now known as Warner Media India Private Limited) which is an Indian Company, to sell advertising on the products and to distribute the products namely:- (a) television news and information services entitled CNN International, CNN Headline News, CNN New source; (b) interactive news and information services known as CNN.com and edition.CNN.com.; (c) news and information mobile telecommunications services known as CNN Mobile and any other television, interactive and/or telecommunications service for which CNN holds or acquires advertising and distribution rights for the Territory in the future. 5. TIIPL (Indian Company) acted as an exclusive distributor of the CNN TV Channel to the cable operators and other permitted systems on 'principal to principal basis'. The 'distribution agreement' allowed TIIPL to distribute the products to various cable op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unicate the work to public which is defined u/s. 2(ff) of the Copyright Act, 1957. 11. Basis this, the Assessing Officer treated the subscription/distribution revenue derived by the assessee as assessable to tax as royalty, both under the domestic law and the DTAA. The relevant part of the assessment order passed reads as under: "The issues for consideration are, therefore, whether and in what circumstances can the assessee company claim to own a copyright (right to broadcast) over the work it broadcasts, and whether there is a transfer, by grant of a license or otherwise, of this right to broadcast under the distribution agreements entered into by the assessee company with the Indian entity. Going by this principle, the assessee company can certainly claim authorship and copyright in a television program produced by it, even if the program is based on subject matter which is sourced from elsewhere. Thus, for example a programme produced by CNN on any nature related event that is put together and presented in a certain original form and manner, could be a work authored by the assessee company and protected by a copyright vested in the assessee company. Similarly, a live teleca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e wordings and findings are identical. 17. The Tribunal at Bombay in the case of MSM Satellite (Singapore) Pte Limited ITA No. 2523/Mum/2010 had the occasion to consider a similar quarrel 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. 18. This decision has been approved by the Hon'ble High Court of Bombay and the Hon'ble Bombay High Court has emphatically observed that there is difference in copyright and broadcast reproduction right. The Hon'ble High Court observed as under: "Section 37 of the Copyright Act, 1957 separately defines the broadcast reproduction right and, therefore, it is different from the payment of any copyright in literary, artistic or scientific work." 19. 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. The relevant extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely provides right to distribute the product. 42. In the case of the assessee in the earlier assessment year, the competent authority of India and USA had reached the agreement that 10% of the advertisement and subscription revenue received from the Indian sources was deemed to be net profit from the business chargeable to tax in India. In line of such an agreement the assessee in Assessment Years 2007-08 and 2008-09 had related its income on the same basis as agreed by the competent authority of both the countries. Accordingly fully disclosed its computation of income along with notice to the tax computation filed during the return of income/assessment proceedings, the same has been accepted by the Department in the assessment orders for Assessment Years 2007-08 and 2008-2009. Though assessee's case was throughout had been that it does not have any kind of plea and the transaction with TIIPL are on principle to principle basis and even if TIIPL is an agent of independent status, then remuneration paid to TIIPL was at arm's length, and therefore, TIIPL cannot be considered to be PE of assessee in India. It has been brought on record that in all the years and in subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific experience...................... " The Term copyright has not been defined in the DTAA albeit has been defined in Section 14 of the Copyright Act, 1957 as an exclusive right to do or authorize being of any of the acts specified in the said provision in respect of work or any substantial part thereof likewise work being defined in Section 2(y) of the said Act which is namely, literary, dramatic, musical or artistic work or a cinematograph film and a sound recording. Sub-section (1) of Section 14 of the Copyright Act, 1957 lists several Acts in respect of a work in relation to which exclusive right would be termed as copyright. Section 37 of the Copyright Act separately defines broadcast reproduction right. The Term 'Copyright' has defined in Section 14 and 'broadcast reproduction right' has been defined in Section 37 and both are two distinctive and separate rights. 'Broadcast reproduction right' is not reckoned as copyright. Here, in this case, appellant never granted any licenses to use any copyright, either to distributor or to the cable operator albeit it has only granted right for purpose of selling advertisement on the product that are channels, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the channel and should have the ability to conclude contracts in India on behalf of the channel for the programme content. TIIPL has been granted exclusive distribution rights by the Appellant Company with respect to the products (channels) in India. Surely, TIIPL can enter into an agreement with respect to the content of the programmes but this right does not allow them to take ownership of the content. The copyright within the product has always been vested with the Appellant Company. The clause must be seen from a business prospective and in a wholesome manner. What is streamed is uplinked and down linked without any change in the content. The Indian distributor cannot separate content from the channel stream. The product in the case at hand is a channel and what is streamed is the content, all of which gets distributed without any separation or dissection. Accordingly, the amount received from TIIPL cannot be brought to tax as 'royalty' in the hands of the Appellant Company. 47. Ld. DR has tried to distinguish the facts of the captioned matter from the case of MSM Satellite (Supra) and stressed heavily upon the ability of the consumer to 'store' and 'inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the issue involved in the case at the hand. It is a settled position of law that without appreciating the ratio decidendi of the judgement i.e. the rule of law on which judgement is based, a judgment cannot be applied blindly on different set of facts. Thus, the reliance of the Ld. Departmental Representatives on the judgement of the Hon'ble Apex Court has no application in the case at hand. 50. However, if we read para 60 of the aforesaid decision, wherein the Hon'ble Apex Court while delivering the verdict has recognized that the broadcasting is a separate right from the Copyright. Relevant Paragraph for the sake of ready reference is reproduced hereunder: "60. A reading of the aforesaid provisions, according to the learned Senior advocate for the appellants, makes it clear that broadcasters may, in fact, be the owners of the original copyright of a work- for example, if they themselves have produced a serial. They may also be the copyright owners of the broadcast of this serial which is a separate right under the Copyright Act which they are able to exploit, and if there is a re-broadcast of what has already been copyrighted, this again is protected by Chapter V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is further supported by the Latin maxim, Ubi Jus Ibi Remedium i.e. for every wrong there is a remedy. If one applies the same principle in the present case, the copyright and broadcasting reproduction right has been separately recognized in different chapters of the Copyright Act, 1957. The Copyright is defined in Chapter III of the Copyright Act while the broadcasting reproduction rights are a part of Chapter VIII of the same Act. This means the law has recognized separately these two rights. Again separate legal protection is provided for these two different rights. Accordingly, even following the jurisprudential principle it may be observed that the law has itself recognized two different right and exploitation of one cannot be confused with the use of other. 54. Thus, we hold that the distribution revenue earned by the appellant-assessee cannot be taxed as royalty albeit as a business income. Since, assessee has already offered income as business income in terms of the MAP, therefore, the income as declared by the assessee in accordance with the MAP and accepted by the Department in the earlier years has to be accepted. Accordingly, the additions made by the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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