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TMI Blog2022 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... , and ii. Whether the assessee has a Permanent Establishment (PE) in India so as to attribute any part of the profit to such PE. 3. Briefly the facts are, BBC World News Ltd (in short 'BBCWN') is a company incorporated in United Kingdom (UK) and tax resident of UK. BBCWN is the owner of BBC World New Channel. BBCWN has granted non-exclusive global right to BBC World Distribution Limited (In short 'BBCWD'), the present assessee, to distribute the channel. BBCWD, in turn, has entered into an agreement with BBC World India Pvt. Ltd. (in short 'BWIPL') to distribute the channel to cable operators, DTH operators, hotels, institutions etc. in India. In assessment year 2006-07, the assessee received an amount equivalent to Indian Rs.94,58,039/- from distribution of BBC World News Channel in India. Before the Assessing Officer, the assessee pleaded that the amount received from distribution of channel in India is not taxable because of the following: * BWIPL to distribute the Channel to cable operators, DPI operators hotels, etc in specified territory including India; * BWIPL to provide assistance in collection, follow-up and remittance of monies to BBCWD: * The relationship betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer did not accept the contention of the assessee. He held that as per the definition of Copyright Act, 1957, the distribution right granted by the assessee amounts to transfer of right to use Copyright, hence, in the nature of royalty. Further, referring to certain guidelines issued by the Ministry of Information and Broadcasting to the effect that the Indian company should have the authority to conclude contract on behalf of the channels for advertisements, subscription and program contents, the Assessing Officer concluded that not only the subscription/distribution revenue would be chargeable to tax as royalty but the Indian company, which has been granted the distribution rights can be considered to be a Permanent Establishment (PE) of the assessee in India. Accordingly, he brought to tax the distribution revenue received from DWIPL at the hands of the assessee by applying the rate of 15%. Though, the assessee raised objections before learned DRP against the additions made by the Assessing Officer, however, the objections were rejected. 6. Before us, learned counsel appearing for the assessee submitted that in assessment year 2006-07, the assessee had appointed BWIPL as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BWIPL was granted to distribute the channel in India. Hence, BWIPL directly entered into contract with subscribers in its own rights and entire subscription revenue in these two years was received by BWIPL and was accounted in their books of account and offered to tax in India. He submitted, in these two assessment years no distribution revenue was received by the assessee. Thus, he submitted, taxing of notional income at the hands of the assessee is unjustified. In support of his contention, learned counsel relied upon the following decisions: * E.D. Sassoon & Co. Vs. CIT [1954] 26 ITR 27 (SC) * CIT Vs. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC) * Godhra Electricity Company Vs. CIT [1997] 225 ITR 746 (SC) * CIT Vs. Excel Industries Ltd. [2013] 358 ITR 295 (SC) * Shivnandan Buildcon Pvt. Ltd. Vs. CIT [2015] 60 taxmann.com 347 8. Insofar as the allegation of the departmental authorities that the assessee has a PE in India in the form of BWIPL in assessment years 2007-08 and 2008-09, learned counsel submitted that the issue is academic in nature as no attribution of profit can be made at the hands of the assessee as entire distribution revenue generated in India has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2006-07, the assessee received distribution/subscription revenue from the distribution of channels in India specifically to hotels and institutions. The Assessing Officer as well as learned Commissioner (Appeals) have treated the distribution revenue to be in the nature of royalty by primarily treating it as copyright under explanation 2(v) of section 9(1)(vi) of the Act. Since, the definition of copyright is not available either under India - UK Tax Treaty and the domestic law, the Assessing Officer and learned Commissioner (Appeals) have heavily relied upon the definition of copyright as provided under the Copyright Act, 1957 and specifically the meaning of copyright as provided under section 14 of the Copyright Act. However, it is the contention of the assessee that what the assessee has conferred upon the BWIPL through the distribution agreement, at best, can be considered to be broadcasting reproduction right as defined under section 37 of the Copyright Act. 12. On going through the terms of the distribution agreement, firstly, between the BBC World News Ltd. and assessee and between the assessee and BWIPL, it is very much clear that while granting non-exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the provisions of this Act, to do or authorise the doing of any of the following acts specified in the said provision in respect of a work or any substantial part thereof. Term "work" is defined under Section 2(y) of the Copyright Act, 1957, as to mean any of the works namely a 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. In the present case, the assessee had not created any literary, dramatic, musical or artistic work or cinematograph film and/or a sound recording. 11. Infact, Section 37 of Copyright Act, 1957 separately defines broadcast reproduction right. Sub-section (I ) of Section 37 of the said Act provides that every broadcasting organisation shall have special rights to be known as "broadcast reproduction right" in respect of its broadcasts. Sub-section (2) of Section 37 provides that the broadcast reproduction right shall subsist until twenty-five years from the beginning of the calender year next following the year in which the broadcast is made. 1 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use: (a) any copyright of a literary, artistic or scientific work, including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right, property or information; (b) any industrial, commercial or scientific equipment, other than payments derived by an enterprise from activities described in Paragraph 4(b) or 4 (c of Article 8' 15. Even going by this definition, the payment in question can not be categorized as royalty." 14. On a comparative analysis of Article 12(3) of India - Singapore DTAA and Article 13(3A) of India -UK DTAA it can be safely concluded that both the provisions are pari materia. Therefore, applying the ratio laid down by the Hon'ble Bombay High Court, as aforesaid, it can be concluded that the distribution revenue received by the assessee cannot be termed as royalty, either under section 9(1)(vi) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted to it by a broadcaster without any editing, delays, interruptions, deletions, or additions and, therefore the payment made by the assessee to the Non-resident company is not for M/s. SET India Pvt Ltd use of any copyright and consequently cannot be characterized as Royalty. Ld CIT(A) has held that Broadcasting Reproduction Right is not covered under the definition of Royalty under section 9(1)(vi) of the Income tax Act as well as Article 12 of the Treaty. Accordingly, the payment is not in the nature of Royalty but in the nature of business income 15. The aforesaid view expressed by the Coordinate Bench has been approved by the Hon'ble Bombay High Court while accepting that the right to distribute a channel is purely a commercial transaction and is distinct from copyright. In this regard, we may refer to the decision of the Hon'ble Bombay High Court in case of Set Satellite (Singapore) Pvt. Ltd. Vs. Dy. DIT [2008] 307 ITR 205. Thus, in view of the aforesaid, we hold that the distribution revenue received by the assessee is not in the nature of royalty, hence, not taxable in India in absence of a PE. It is a fact on record that in assessment year 2006-07, the departmental au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attributed to the assessee notionally and taxed in India. Therefore, the addition made has to be deleted. 18. In view of our decision above, the issue, whether the assessee had a PE in India in these two assessment years is purely academic in the nature, as, the entire income has been offered to tax by Indian entity. Before we part, for the sake of completeness, we must deal with the submission of learned Departmental Representative that the distribution revenue earned by the assessee would otherwise qualify as equipment royalty and process royalty under Explanation 2(iva) of section 9(1)(vi) of the Act. In our view, such argument of learned Departmental Representative is preposterous as no such finding has been recorded either by the Assessing Officer or by learned Commissioner (Appeals) and DRP. 19. At this stage, learned Departmental Representative cannot give a new dimension to the issue which was never the case of departmental authorities. In this regard, we rely upon the decision of the Coordinate Bench in case of Mahindra & Mahindra Vs. DCIT, ITA No.2606, 2607, 2613 and 2614/Mum/2000. Thus, we reject the aforesaid contention of learned Departmental Representative. 20. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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