9911796707
TMI Blog2023 (1) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as "the Act"). For the Assessment Year 2003-04 return of income was processed under Section 143(1) of the Act. Subsequently, reassessment proceedings were initiated, inter alia, in view of the information/material gathered during the assessment proceedings for the Assessment Year 2002-03 and assessment order dated 31.03.2005 was passed under Section 147 read with Section 143(3) of the Act. 1.2. Appeals preferred by the Assessee for the Assessment Year 2002-03 and 2003-04 were partly allowed by the CIT(A). 1.3. Being aggrieved, both, the Assessee and the Revenue are in appeal before us for Assessment Year 2002-03 and 2003-04. The Assessee has also filed Cross-Objection in appeal preferred by the Revenue. 1.4. The appeals involve common issues arising for identical facts and therefore, the appeals were heard together and are being disposed of by way of common order. We would first take up cross-appeals for the Assessment Year 2002-03 along with the cross objection preferred by the Assessee. For the Assessment Year 2002-03, we would also refer to corresponding facts and findings of CIT(A) for the Assessment Year 2003-04 for holistic understanding of facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing officer to compute the assessed tax after reducing the tax which is deductible at source by the payer from the tax on the total income determined on regular assessment (after giving appeal effect) and charge interest u/s, 234B of the Act accordingly." The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." CO No. 324/Mum/2006 in ITA No. 3130/Mum/2006 1.7. The Assessee has raised the following grounds in cross- objection: "Ground No 1 The learned CIT(A) has erred in holding that the Respondent has a source of income in India and hence, it has satisfied one of the conditions of Article 24 of the double taxation avoidance agreement executed between India and Singapore ('India-Singapore tax treaty"). The Respondent respectfully submits that the above finding is erroneous and should be set aside. Ground No 2 The learned CIT(A) has erred in holding that the grant of broadcast rights and sponsorship rights by the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject matter of appeals before us. International Cricket Council & ICC Development (International) Ltd. 2.4 International Cricket Council (For short "ICC") is the global governing body of sport of Cricket and is responsible for organizing and regulating international cricket tournaments (hereinafter referred to as "ICC-Events"). The bodies governing cricket at national level are members of ICC. The revenues generated from ICC-Events are, inter alia, distributed amongst its members and utilized for development of sport of cricket across the world by ICC. 2.5 ICC Development (International) Ltd. [for short "IDI"], a company registered in the British Virgin Islands and having its principal office at Monaco at the relevant time, was formed by the members of ICC to own and control all its commercial rights including media, sponsorship and other intellectual property rights relating to the ICC events. 2.6 IDI authorizes ICC member to host an ICC Event in terms of Host Agreement. Each participating nation sends team consisting of players selected by their national body governing cricketing to participate in the ICC-Events in terms of the Participation Agreement between the host na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation), Range-2(1), Mumbai : 2011] 44 SOT 113 (Mumbai) (URO) 2.13 An Agreement, dated 25.01.2002, titled "Heads of Agreement relating to the audio visual transmission of International Cricket Council events in India and certain other territories for the period 2002-2007" (hereinafter referred to as the "Heads Agreement" or "THA") was executed amongst GCC, SET and World Sports Nimbus Pte Limited (A joint venture company between WSG and an Indian company Nimbus Communication) (For Short "WSN"). GCC granted rights/broadcasting rights to SET in relation to ICC events in consideration of "License Fee" to be paid by SET to GCC in terms of the Heads Agreement. The taxability and characterization of the aforesaid "License Fee" received by GCC from SET in India is one of the issues raised in the present appeals. 2.14 The Heads Agreement was followed by execution of Deed Regarding Novation, dated 26.03.2002, (for short "DRN") between IDI and all the parties to THA (i.e. GCC, SET and WNS) whereby IDI gave direct assurances to SET. LG Electronics Private Limited, Hero Honda Motors Private Limited etc. 2.15 GCC granted sponsorship rights to various companies (such as LG, Hero Honda, etc.) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 31.03.2005, at income of INR.2,50,06,600/- holding that: (a) GCC was not entitled to the benefits of the DTAA since the "Limitations of Relief" provision contained in Article 24 of the DTAA was attracted (b) Amount of USD 20,50,000/- received from SET as License Fees for grant of rights/broadcasting rights was taxable as "royalty" under the provisions of the Act. (c) Amounts received from LGEIL (USD 1,20,000/-) and HH (USD 88,000/-) for grant of sponsorship rights were also taxable as royalty as per the provisions of the Act holding the same to be payments for use or right to use of the commercial equipment (such as hoardings, banner, boards, scoreboards, screens, tickets, websites, & flags). (d) Assessee was liable to pay consequential interest under Sections 234A, 234B and 234C of the Act. Appellate Proceedings before CIT(A) 3.8 Being aggrieved GCC preferred appeal before the CIT(A). Vide order dated, 03.03.2006, the CIT(A) disposed off the Appeal holding as under: (a) The CIT(A) overturned the decision of the Assessing Officer to the extent the CIT(A) held that GCC was entitled to claim benefit of the provisions of DTAA since Article 24 of the DTAA was not attracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in force in the other Contracting State the said income is subject to tax by reference to the amount thereof which is remitted to or received in that other Contracting State and not by reference to the full amount thereof, then the exemption or reduction of tax to be allowed under this Agreement in the first-mentioned Contracting State shall apply to so much of the income as is remitted to or received in that other Contracting State." 4.2. On perusal of the above, it is clear that the provisions of Article 24 are attracted resulting in denial of the benefits of the DTAA in case: (a) income under consideration is subjected to tax in Singapore as per domestic tax laws of Singapore by reference to the amount thereof which is remitted to Singapore and not by reference to the full amount thereof (hereinafter referred to as "Condition 1"); (b) such income is earned from a source of income in India (hereinafter referred to as "Condition 2"); (c) such income is exempt from tax, or is taxed at a reduced rate in India (hereinafter referred to as "Condition 3"). 4.3. We note that the Assessing Officer has, while finally concluding, denied the benefit of DTAA to GCC by holding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 'received' in Singapore as per the flow chart of movement of amounts shown above. In order to come out of the mischief of Article 24 of the treaty, the onus is on the appellant-assessee to show that the income is 'remitted to' or 'received' in Singapore and it is confined to the case in which the income is taxable in Singapore on limited receipt basis rather than on a comprehensive accrual basis. It is correct that where income is taxable on accrual basis in Singapore & not on remittance basis, the onus does not trigger. Article 24 is limiting the benefit only to the extent of the amount which is 'remitted to' or 'received' in Singapore and does not refer the full amount. The word 'remitted' by any stretch of reasoning cannot be read as 'accrued' for the purposes of Article 24 of the treaty as is being argued for and on behalf of the appellant-assessee. It is also not the case of the appellant-assessee that amount deposited in the joint account is the full amount shown as income on accrual basis. Singapore imposes tax on "territorial basis" under which system tax is imposed on all income accruing in or derived from Singapo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C in Singapore for the year ended 31.12.2002 and 31.12.2003, (ii) audited global financial statement filed by GCC in Singapore for the year ended 31.12.2002 giving the balance sheet position as on 31.12.2001 and 31.12.2002 along with Profit & Loss earned during the calendar year 2001 and 2002 (Placed at page 74 to 82 of the paper-book for the Assessment Year 2002-03, and page 147 to 188 of paper-book for the Assessment Year 2003-04) (iii) Reconciliation of income offered to tax in Singapore tax return furnished during the course of hearing, and (iv) Confirmation, dated 15.02.2006 from tax advisors of GCC that GCC offered global income to tax on accrual basis in Singapore. The decision of the Tribunal in the case of Alabra Shipping Pte Ltd (175 TTJ 359) and APL Co Pte Ltd (ITA No. 4435/M/2013) were relied upon in support the above contentions. (b) Condition No. 2 gets satisfied in case income is earned from a source from India. It was contended on behalf of GCC that source of income was outside India, and therefore, Condition No.2 above was also not satisfied. (c) Condition No. 3 gets satisfied in case income is exempt from tax or is taxed at a reduced rate in India. It was cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f DTAA would not be attracted. Further, even if the provisions of Article 24 of DTAA are attracted the benefit of exemption or taxation at reduced rate would still be available to the part of income remitted to or received in Singapore. 4.10. The stand taken by the Assessing Officer, which has been supported by the Learned Counsel for Revenue in appeal before us, is premised upon the understanding that the income under consideration is taxable in Singapore on receipt/remittance basis being foreign sourced income. Whereas, it has been contended on behalf of GCC that the income under consideration was taxable in Singapore on accrual basis and has been, therefore, offered to tax in Singapore as income accruing in Singapore. 4.11. We note that the Assessing Officer had returned a finding that GCC has failed to provide relevant evidence to support the contention that the income under consideration has been offered to tax in Singapore. In appeal preferred by GCC on this issue, the CIT(A) has, after examining the information and documents placed on record by GCC, returned a finding that GCC has offered its worldwide income to tax in Singapore. The relevant extract of the order of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected at $ 53,595,059 and the loss before income tax was shown at $139,824,648 and these amounts of Gross Income and loss before income-tax were also reflected in the financial statements for the year ended 31.12.2002, (page 117 of Paper Book). It has been submitted that the total revenue is a sum of sponsorship income and income from grant of broadcasting rights and the entire income under consideration i.e. the sponsorship income and the income from grant of broadcasting rights has been offered to tax in the return of income filed with the Singapore authorities. By letter dt 17.2.2006, the appellant has further furnished a confirmation received from their tax advisors clearly confirming that the global revenues of the appellant are subject to tax in Singapore. The confirmation given in reference no. F/34/103/100539/GC 15.2.2006 by Mrs. Chong Lee Siang Tax Partner Ernst & Young 10 Hoe Chiang Road 18-00 Keppel Towers Singapore 089315 is as follows:- "This is to confirm that Global Cricket Corporation Pte Ltd (GCC) has been filing its tax returns in Singapore and subjecting to tax in Singapore all its global revenues irrespective of the place of receipt of such revenues, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the CIT(A) was correct in holding that the provisions of Article 24 of DTAA would not get attracted and GCC would be entitled to claim benefit of the provisions of the DTAA. Since Condition No. 1 is not satisfied, the rival contentions in relating to the other two conditions (Condition No. 2 & 3 specified in paragraph 4.2 above) do not require adjudication having become academic in the context of applicability of Article 24 of DTAA. Thus, in view of our conclusion that provisions of Article 24 of DTAA would not be attracted in case of GCC, we hold that GCC would be entitled to avail the benefit of the provisions of DTAA. Ground No. 1, 2 and 3 raised by the Revenue are dismissed. Ground No.1 raised in the Cross Objection by GCC is disposed off as being infructuous. Ground No. 4 Departmental Appeal (ITA.No.3130/MUM/2006) 5 Ground No. 4 of the Departmental Appeal is directed against the order of CIT(A) deleting the addition of INR.99,425,000 made by the Assessing Officer holding that the payments of Licensee Fee made by SET to GCC in terms of the Heads Agreement are not taxable in India as "royalties" in terms of Article 12 of the DTAA since the same cannot be said to arise in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch is played. The access to the production team is procured by GCC from the organizers of the matches (i.e. the various cricket associations who owned/controlled the venues). From the Schedule itself it was evident that at least one match was played in India. Further, as the information available, ICC Championship Trophy was held in India in the year 2006 and as per Schedule 2 to the Heads Agreement, 11% of the total consideration was apportioned to this event. (c) The Heads Agreement makes provision to define, Pay-per-view, terrestrial rights, terrestrial restrictions, telephony rights, video rights and theatrical rights to define how these rights can be exercised. Clearly these rights had nexus with the "Licensed Territory" which included India. (d) There was coverage of viewership in the India where SET had a PE which telecasted the matches in India. 5.4. Learned Counsel for Revenue submitted that the CIT(A) had, while deciding appeal for the Assessment Year 2002-03, incorrectly concluded the royalty income did not accrued in India merely because the provisions of Article 12(7) of the DTAA were not attracted. The applicability or otherwise of Article 12(7) of the DTAA doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, the Learned Senior Counsel for GCC relied upon the decision of the Tribunal in the case of Decca Survey Overseas Limited, UK Vs ITO, Ward 12(2), Mumbai [ITA No. 8506 to 8508, 8895 and 8879/Bom/1990, Assessment Years 1984-85 to 1989-90, 30.01.2006] and the decision of Authority for Advance Ruling in the case of Jay Shree Tea and Industries Limited: 274 ITR 97. 5.7. Without prejudice to the above, the Learned Senior Counsel for GCC submitted that even if it is concluded that Article 12(7) does not define the phrase "arising in a State" exhaustively and the same is to be interpreted having regard to Article 3(2) of the DTAA, even then royalty income cannot be said to have arisen in India. He submitted that the Act also does not define the term "arise". Further, there is a clear distinction between the wordings in Section 5 and Article 12(2) of the DTAA. As per section 5(1)(b) of the Act, a non-resident is taxable in India if income "accrues or arises" or is "deemed to accrue or arise" in India. Thus, references to both "accrue or arise" and "deemed to accrue or arise" exist in Section 5 of the Act and Section 9 defines the scope of "deemed to accrue or arise" in India. The expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.11. The Hon"ble Supreme Court had, in the case of UOI Vs Azadi Bachao Andolan: 263 ITR 706, made following observations regarding bilateral double taxation avoidance agreements entered by nations which are germane to the issue before us: "16. Every country seeks to tax the income generated within its territory on the basis of one or more connecting factors, such as location of the source, residence of the taxable entity, maintenance of a permanent establishment, and so on. A country might choose to emphasise one or the other of the aforesaid factors for exercising fiscal jurisdiction to tax the entity. Depending on which of the factors is considered to be the connecting factor in different countries, the same income of the same entity might become liable to taxation in different countries. This would give rise to harsh consequences and impair economic development In order to avoid such an anomalous and incongruous situation, the Governments of different countries enter into bilateral treaties, Conventions or agreements for granting relief against double taxation. Such treaties, conventions or agreements are called double taxation avoidance treaties, conventions or agreements." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 9(1)(vi) of the Act. Therefore, the meaning and purport of "arise" as used in Article 12(2) or "arising in a contracting state" as used in Article 12(1) of the DTAA would, in our view, flow from the domestic tax law of the contract states only. 5.14. We are not inclined to accept the contention advanced on behalf of GCC that use of term "arise" in Article 12(2) of DTAA, when interpreted keeping in view the meaning of term "arise" as per the provisions of the Act in view of Article 3(2) of the DTAA, leads to the conclusion that income which is "deemed to arise" in India in terms of Section 9 read with Section 5 of the Act would fall outside the ambit of Article 12(2) of the DTAA. The aforesaid interpretation would, in our view, lead to anomalous situation as explained hereafter. Expression "deemed to arise" is absent in, both, Article 12(1) and 12(2) of the DTAA. Article 12(1) and 12(2) of DTAA read as under: "Article 12 Royalties and Fees for Technical Services 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te where income arises even in terms of Article 12(2) of DTAA. However, we are not inclined to accept the same. It is admitted position that OECD Model Convention Commentary does not provide similar/corresponding explanation in relation to Article 12(7) for the reason OECD Model Convention provided the Residence State exclusive right the tax royalty income. Further, the commentary on Article 11(5) seeks nexus between interest-bearing loans (which is the source of interest income) with the permanent establishment. Given the nature of interest income nexus between interest-bearing loans with the permanent establishment could have been the only criterion of establishing economic nexus with the contracting state. However, the same need not be the case with royalty income which can have economic nexus in different form or manner depending upon the nature of right, asset, property in relation to which it arises, location of payer, place of utilization etc. For the aforesaid reasons, the judicial precedents rendered in the context of Article 11 of DTAA on which reliance has been placed on behalf of GCC would not be of any assistance to GCC. 5.17. Further, the other judicial precedents (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Revenue submitted that contract could not be considered to be as the source of income, and more so when such contract was merely executory document. Reliance in this regard was placed by him on the decision of the Hon"ble Supreme Court in the case of Performing Rights Society Ltd. & Anr. Vs. CIT & Ors: [1977] 106 ITR 11(SC). 5.21. We note that the Hon"ble Supreme Court has, in the case of Performing Rights Society Ltd (supra), held as under: "The society is a non-resident company, and though it receives the income out of the agreement executed not in India but in England, the income undoubtedly accrues or arises in India. On behalf of the appellants it was contended that the source of income was really the agreement which was entered into in England. We do not think that the question as to the source of the income is relevant because sub-section (2) of section 5 provides that all income "from whatever source derived" is to be included in the total income of the non-resident assessee if the income accrues or arises in India during the relevant year. Reference was also made to section 9 of the Act which enumerates the incomes that shall be "deemed to accrue or arise in India" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 9(1)(vi) of the Act read with Article 12(3) of the DTAA. Section 9(1)(vi)(c) of the Act provides that income by way of royalty payable by a person who is a non-resident shall be deemed to accrue/arise in India, where the royalty is payable, inter alia, in respect of any right, property or information used or services utilised for the purposes of making or earning any income from any source in India. We note that "License Fee" has been paid by SET to GCC in respect of rights granted in terms of Heads Agreement. SET exploited these rights in the licensed territory of India for the purpose of earning income from source in India in the form of advertisement revenue and subscription/distribution fee from India. Whether the aforesaid income earned by SET was chargeable to tax in India or not is irrelevant for the purpose of applicability of the provisions of Section 9(1)(vi)(c) of the Act. Thus, we hold that Licensee Fee received by GCC from SET is deemed to accrue/arise in India as per the provisions of the Act. We have already concluded in paragraph 5.18 above that for the purpose of Article 12(2) income which is deemed to accrue/arise in India a per the provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng cinematograph film there must be visual/sound recording. In case of a live broadcast of a sporting event there is no recording and therefore, no "work". It is for this reason that it has been contended by GCC that the Feed received from SET is "live" Feed whereas the Learned Counsel for Revenue, at the outset, submitted that the payments made by SET to GCC were not for "live" broadcast of sporting event. 5.28. In this regard, the Learned Counsel for Revenue took us through the order of CIT(A) for the Assessment Year 2003-04 and referred to the factual findings and reasoning given by the CIT(A). He submitted that the Feed received from SET was not 'Live" Feed but a 'modified' one. In this regard he relied upon Clause 4 to Clause 11 of the Heads Agreement describing various rights, and submitted that the aforesaid clauses must be read with Clause 15 to Clause 20 under the head "Deliverables". He further submitted that bare reading of the aforesaid clauses reveals that the Feed was a 'modified' Feed that was produced by a producer appointed to cater to the needs of viewers in India. The producer provided Feed to GCC who granted transmission rights to SET. In ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard, reference was made to the following: (a) Definition of "Feed" at page 25 of the Heads Agreement wherein Feed was defined to mean "a live television signal of the Matches" (b) Clause 15 of Heads Agreement pertaining to Feed Specifications wherein it was stated that the Feed comprised an international quality live clean and continuous Feed (without commercials and/ or virtual advertising) together with English commentary and international sound effects (c) Clause 18 of Heads Agreement relating to Highlights wherein it was stated that GCC would create and deliver to SET highlights package at no additional cost (d) Clause 19 of Head Agreement containing obligation of GCC to deliver Feed 5.32. It was contended on behalf of GCC that the signals received by SET contained live visuals of the match and commentary captured from the cameras placed at several locations at the stadium. The transmission of "Live" signals to SET through satellite did not involve any recording in any medium. It was obligation of GCC to produce the Feed and for this purpose it outsourced the activity to production companies such as Octagon CSI Ltd (For short "Octagon"). Even under the Productio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y given in Explanation 2 to Section 9(1)(vi) of the Act. 5.35. We have considered the rival submissions as well as the judicial precedents cited by both the sides, and have perused the material on record. 5.36. On perusal of the Master Rights Agreement and Heads Agreement it becomes clear that SET had acquired a bouquet of rights out of larger basket of rights granted by IDI to GCC. By way of DRN (Deed Regarding Novation, dated 26.03.2002), IDI gave direct assurances to SET regarding relationship between IDI & GCC. The consideration paid to SET was not for just "live" broadcast of cricket matches as explained hereinafter. 5.37. Clause 4 to 16 of the Heads Agreement described the various rights granted to SET. As per Clause 4 of the Heads Agreement SET had the exclusive "Rights", for the "Authorised Number of Exhibitions" throughout the Licensed territory (including India). Part 6 of Schedule annexed to the Heads Agreement provided that "Rights" meant the right to transmit, broadcast, exhibit, perform, include in cable programmes and/or otherwise distribute, or make available to the public any moving visual and/or audio-visual representations and/or images of matches, players or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied) 5.38. Thus, SET had the right to exhibit live/delayed coverage during the ICC-Event. After the ICC-Event, SET could exhibit full match recordings for the year of the ICC-Event and for subsequent year. SET also had the right to exhibit the highlights and programme featuring clips after the ICC-Event. SET could also exhibit/exploit coverage via Pay-Per-View during/after the event. Further, Clause 6 of Heads Agreement specifically provided that the rights granted to the Licensee shall include the rights to use the Feed and/or recording thereof on live, as live, delayed, deferred, highlights, clips, news, features, magazine and/or documentary basis. 5.39. In view of above, it cannot be said that consideration paid by SET to GCC was simply for "live" broadcast/re-broadcast of the cricket match. The Heads Agreement, however, did not provide separate consideration or break-up of consideration for different rights forming part of bouquet of rights obtained by SET. 5.40. Further, as regards, the exhibitions made by SET after the conclusion of the match are concerned, it cannot be said that there existed no recording and/or cinematograph film as it would not have been able to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /transmission made by ESS, particularly the non-live portion, was substantially different from the feed received from the host broadcaster and the same resulted in independent copyright in the final feed "whether it be treated and termed as broadcasting reproduction rights or copyright". Therefore, the Hon"ble High Court held that the mandate of Section 61, even if held to be applicable, would stand fulfilled with ESS being owner of the independent copyright in the final feed. The issue whether "right to broadcast" or "broadcast reproduction rights" was a species of copyright was not examined/decided as is clear from the following observations of the Hon"ble Delhi High Court: "25. Even if we accept the respondent's plea on the presumption that copyright includes broadcasting rights and section 61 applies, since we have found the eventual telecast of the appellant to be distinct and different from as received by the host broadcaster, the independent copyright owner of the modified product is the appellant itself and not C.A. and the dismissal of the suit on the ground of maintainability by application of Section 61 of the Act is thus not warranted. This issue does not find men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the producer on behalf of GCC in terms of the Heads Agreement was "Live" Feed or "modified" Feed. 5.44. It was contended on behalf of GCC that the Feed delivered to SET was live and uninterrupted and was not pre-recorded. Reliance in this regard was placed upon the report of Broadcast Cable Services, Inc [hereinafter referred to as the "Technical Expert"] dated 15.01.2004 pertaining to matches played in 2003 ICC World Cup, South Africa in February and March, 2003 wherein it was stated as under: "We have determined the following: * All of the ICC Cricket World Cup matches were broadcast "live" on the SET Channels....... * At no time was any ICC Cricket World Cup match recorded and re-broadcast as pre-recorded event." However, the above report also stated as under: "The network used to transmit these "live" telecasts was composed on the following: * xx * Instant replay highlights were included as part of the production of ICC Cricket World Cup matches, but these highlights were, at all times, included as an integrated production value of the "live" real time match" 5.45. From the above report it is clear that the entire cricket matches were not first recorded and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmission or adaptations thereof by all news of distribution whether simultaneous or delayed, digital or analogue or otherwise) (g) Clause 4.5(a) dealing with Copyright and Content provided that by way of assignment of future copyrights the entire copyright and all other intellectual property and other rights throughout the universe in all Recordings and Media Transmissions including the electronic data Feed signal shall vest in IDI absolutely free from encumbrance for the full period of copyright protection. (h) Clause 4.6(a), dealing with Production and Quality Control, provided that GCC shall ensure that all Recordings and its Media Transmission by GCC are of the best quality. (i) Clause 4.6(b) provided that GCC shall make or procure to be made accessible Recordings available for transmission and Media Transmissions of matches. (j) Clause 4.6(f) provided that GCC shall within 7 days of conclusion of the Event deliver to IDI one best quality Master Copy of each Recording made by the GCC or host broadcasters in a broadcast quality format. (k) Clause 4.6(i) provided that GCC shall ensure that there are sufficient replacement/reserve resources in facilities to ensure tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any recordings by specified means). The Heads agreement did not contain definition of terms "Recordings" or made any reference to the same. The Heads Agreement defined the term "Feed" and various rights and obligation of GCC and SET in relation to the same. The term "Feed" was defined to mean live television signals of matches as per Clause 15 which reads as under: "15. Feed Specifications: The Feed shall comprise an international quality live clean and continuous Feed (without commercials and/or virtual advertising) together with English language commentary and international sound effects (each on separate tracks) and generic non branded English language graphics (including occasional references to the Event website URL) and sponsored data and sponsored timing graphics all in accordance with minimum indicative technical specifications to be included in the Long Form Agreement The Licensor shall produce & Feed of all Matches necessary for the Licenses to fulfill the Minimum Commitment, together with (subject to reasonable notice by the Licensee and at the Licensee's request but at the cost of the Licensor) the Indian team Matches in the U19 Cricket World Cups. The Feed sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y programmes created by the Licensee, of the programmes, any studio presentations or promotional materials, dubs, sub-titles, language versions which may be produced and/or created by or on behalf of the Licensee, including without limitation those materials referred to at paragraph 5." (Emphasis Supplied) As per Clause 43 above, GCC continued to be the owner of the Proprietary Interest while SET enjoyed exclusive license for Proprietary Interest in Feed and Highlights Package during the Exhibition Period. However, on expiry of the Exhibition Period SET was required to assign to GCC all Proprietary Interest it may have acquired in the Feed and Highlight Package during this period except for the Proprietary Interests in any programmes, any studio presentations or promotional materials, dubs, sub-titles, language versions produced and/or created by or on behalf of SET. 5.52. The expression "Proprietary Interest" was defined in Schedule 3 annexed to the Heads Agreement as under: "Proprietary Interests: shall mean all rights and interests of a proprietary nature, including, without limitation, all copyright, database rights and analogous rights, moral rights, performing rights, per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... digital format as provided under Clause 4.2" Clause 4.2 reads as under: "4.2. The Feed - The Feed for each match must be live, continuous and uninterrupted and (a) be in digital format (b) include coverage of entirety of each match (c) xx (d) xx (e) include separate track of stereo audio made up of English commentary and sound effects for integration with the vision (f) xx" (Emphasis Supplied) 5.56. On co-joint reading of the above, it becomes clear that the Feed is live, continuous and uninterrupted audio-visual signals in the form of live televisions picture in digital format derived from the Recordings (which according to us are the actual live coverage of sporting event from different cameras). The preparation of Feed involves use of Recording and the recorded content in the form of instant replay highlights as well as additions or modifications in the form of commentary and sound effects (each on separate tracks) and generic non-branded English language graphics. Therefore, we hold that the "Live" Feed received by SET from GCC does not consist of only live coverage of cricket matches and therefore, we reject the contention of GCC that the broadcasts of "Live" F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction of fixation, and re-broadcast of the broadcast. Grant of exclusive license/rights by GCC to SET amounted to grant of copyright. On the other hand, the statutory rights known as "broadcast re-production rights" accrued to SET by virtue of being a broadcasting organization. Thus, we hold that the grant of rights to SET which included exclusive right to communicate the Recordings/Feed to public amount to grant of copyright as per the provisions of ICA. 5.59. We note that GCC had, on without prejudice basis, contended that the grant of right to SET in relation to non-live exhibitions or non-live content forming part of the "Live" Feed was merely ancillary. It was contended on behalf of GCC that the main intent behind the Heads Agreement with SET was the grant of broadcasting rights to SET whereby, SET would receive "Live" Feed of ball-by-ball coverage of the matches which can be broadcasted across Licensed Territory. Hence, the rights granted by GCC to SET were predominantly for telecast of "live" matches to the viewers. Therefore, even if a view is taken that the "Live" Feed comprised of any "non-live" elements, the same is incidental and not relevant for determining the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions and Non-Live Exhibitions [which would be taxable as "royalties" in terms of Article 12(2) read with Article 12(3)(a) of DTAA]. We have also concluded that "live" Feed received by SET also contains recorded content in which copyright subsisted as the rights granted to SET included exclusive right to communicate the Recordings/Feed to public which amounted to grant of copyright. The consideration for the same would also be liable to tax as "royalties" in terms of Article 12(2) read with Article 12(3)(a) of DTAA. This would require further apportionment of amount of Licensee Fee allocated for Live Exhibitions. 5.61. In this regard, by placing reliance on the decision of the Tribunal in the case of Fox Network Group Singapore Pte Ltd Vs. Assistant Commission of Income Tax (international Taxation), Circle 1(3)(1), New Delhi : [2020] 121 taxmann.com 330 (Delhi - Trib.) [20-03-2020] it was contended on behalf of GCC that only 5% of the consideration can be allocated to the non-live transmission/content. However, we note that in the case of Fox Network Group Singapore Pte Ltd (supra) the contract itself provided that 5% of the consideration was for the non-live transmission which as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded that GCC would be entitled to the beneficial provisions of DTAA. Therefore, the issue that remains to be addressed pertains to characterisation of payments received by GCC from LGEIL and HH as "royalties" in terms of Article 12(3)(b) of the DTAA. 6.5. The Learned Senior Counsel for GCC, advancing arguments on the issue, submitted that the nature of sponsorship rights granted by GCC to LGEIL and HH were commercial rights which enabled the sponsors to be designated as "official partner of ICC" or "official global partner" of the ICC-Events for which the rights have been granted, and to advertise/distribute their products/services. With respect to the finding of CIT(A) that receipts from LGEIL and HH were for use or right to use commercial equipments, it was submitted that the hoardings and other advertising sites at the venue cannot constitute "equipments". Without prejudice to the aforesaid contention, the Learned Senior Counsel for GCC contended that, even assuming that the hoardings and other advertising materials are regarded as commercial equipments, the payments under consideration could not constitute consideration for the "use" of such hoardings or other advertising sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 313 ITR 267 (Delhi) and Formula One World Championship Ltd. vs. Commissioner of Income Tax, International Taxation-3, 390 ITR 199 (Delhi) which looked into the principal purpose of the consideration for determining taxability of consideration and use of any trademarks, etc was considered incidental. Reliance was also placed on the following judicial precedents wherein it was held that payments made for sponsorship rights cannot be characterised as royalty: (a) Sahara India Financial Corporation Ltd (321 ITR 349) wherein it was held that payments made for obtaining title sponsorship rights of a sporting event were not payments for acquisition of copyright and, therefore, were not royalty. (para 6). (b) Hero MotoCorp Ltd vs. Additional CIT, Range-12, New Delhi (156 TTJ 139) wherein it was held that the amount in question could not be royalty for the use of any trademark, brand name. (para 53.38). (c) Reebok India Company vs. Deputy Commissioner of Income-tax, Circle-2(1), New Delhi [2017] 79 taxmann.com 271 (Delhi-Trib.) wherein it was held that the "rights fee" paid to IDI to be the "Official Partner of ICC" cannot be considered as royalty in the hands of the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons. 6.10. The Learned Counsel for Revenue referred to "Schedule 3 - The Global Partnership Rights" annexed to GPA and "Schedule 4 - The Official Sponsor Rights" annexed to the SA, submitted that as per the aforesaid schedules rights have been granted to respective parties. The Learned Counsel for Revenue took us through the definition of Advertising Materials, Advertising Sites, Brand Manual, Designated account, Event Marks, Global Partner Marks, Host, Host Licensees, ICC Mark, Stadium & Venue. "Venue" was defined to include geographical within the control of IDI/GCC at or around the stadium at which matches were to be held. "Advertising sites" were defined to mean advertising sites, signage, hoarding, electronic scoreboard, displays and posters at the Venues. GCC was in control of the Venue and the Advertising Sites through host cricketing board/associations. The details of advertising materials to be erected, maintained and removed by GCC/WSN were specifically provided in the agreements. He further submitted that as per Clause 7.2 contained in GPA and SA, worded similarly, GCC/WSN was under obligation to ensure that the advertising boards and signage were manufactured, incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter, sublets for putting up a hoarding, the same would be liable for withholding under section 194I. Accordingly, while payments by Selvel Advertising Pvt Ltd (for short "Selvel") to a building owner for putting up a hoarding will be liable for withholding under section 194I, payments made by an advertiser to Selvel will be in the nature of advertisement liable for withholding under section 194C. Therefore, even the CBDT does not imply that the payments made for advertisement placed on a hoarding are royalties for the use of equipment liable for withholding under section 194J. The Learned Senior Counsel reiterated that payments made to GCC by LGEIL in terms of GPA, and by HH in terms of SA, were not "royalties" in terms of Article 12(3)(b) of the DTAA or Section 9(1)(vi) of the Act. Further, in absence of PE of GCC in India, the aforesaid payments were not liable to tax in India as business profits in terms of Article 7 of the DTAA. 6.14. We have heard the rival contention and perused the material on record including the judicial precedents cited during the course of hearing. We note that the first contention of GCC is that the advertising sites and other advertising material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in the case of Hero Honda Motocorp Ltd. vs. Additional Commissioner of Income Tax: (2013) 156 TTJ (Del) 139 wherein the Tribunal was examining the issue of deductibility of payments made by sponsor to GCC for the sponsorship rights in respect of ICC-Events (namely, ICC Trophy 2006, India and ICC World Cup 2007, West Indies). The Tribunal allowed deduction claimed by the sponsor holding that the provisions of Section 195 of the Act were not attracted since the payments paid by the sponsor to GCC was purely for advertisement and publicity of brand name and products during the cricketing events and not payment of royalty in terms of Article 12(3) of DTAA. The relevant extract of the decision of the Tribunal rendered in identical facts and circumstances reads as under: "53.38 Applying the propositions laid down in these case laws to the facts of the case, we are of the considered view that the claim of the assessee that the payment was purely for advertisement and publicity of the brand name of the assessee and for promotion of its product during the Cricketing events of ICC and not the payment of royalty as defined used in para 3 of Article 12 of DTAA between India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at payments made by LGEIL and HH to GCC for rights acquired in terms of GPA and SA, respectively, were for promotion, advertisement and publicity of their respective brands and products/services. We reject the contention of the Revenue that the aforesaid payments were made by LGEIL/HH for right to use equipment. It was also contended on behalf of GCC the advertising sites, scoreboards etc. do not constitute equipment. Since we have concluded as aforesaid, the examination of the said contention raised by GCC does not require adjudication as the issue raised therein has become academic. 6.19. Accordingly, in view of the above, Ground No. 2 raised by the GCC in appeal is allowed. Ground No. 5 raised by the Revenue is dismissed. Ground No.2 of Cross Objections filed by GCC is disposed off as being infructuous. 7. Ground No. 6 of Departmental Appeal (ITA.No.3130/MUM/ 2006) along and Ground No. 2 of Appeal of the Assessee (ITA No. 3135/Mum/2006) 7.1. Ground No. 6 of the Departmental Appeal and Ground No.2 of the Appeal preferred by GCC pertain to levy and computation of interest under Section 234A and 234B of the Act. 7.2. The grievance of the Revenue is that the CIT(A) has directing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch benefit was not available to the assessee. 5. On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in holding that Article-24 of the India Singapore Tax Treaty is not applicable in respect of income from "Royalty" received from LG, Hero Honda and Hutchinson Max Telecom and further erred in holding that the same would be taxable under Article-12 of the said Treaty. 6. On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in apportioning 50% of the income received as "Royalty" from LG, Hero Honda and Hutchinson Max Telecom as not being "Royalty" and which income was assessable under section 9(1)(vi) of the Income Tax Act, 1961 and not under the said treaty. 7. On the facts and in the circumstances of the case and in law, the ld. CIT (Appeals) erred in directing the Assessing Officer to compute the assessed tax after reducing the tax which is deductible at source by the payer from the tax on the total income determined on regular assessment (after giving appeal effect) and charge interest under section 234B of the Act accordingly. The Appellant prays that the order of the ld. CIT (Appeals) on the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia "Royalty" under Article of the India-Singapore Tax Treaty. The Appellant prays that payments made AIR cannot characterised as 'Royalties' and such they not taxable India. Ground No. 7 The learned CIT(A) has erred in holding that payments made by Prasar Bharati Broadcasting Corporation India ("Prasar Bharati') to the Appellant are taxable India "Royalty" under Article 12 of the India - Singapore Tax Treaty. The Appellant prays that the payments made by Prasar Bharati cannot be characterised as Royalties" and as such they are taxable in India. Ground No. 8 The learned CIT(A) erred in holding 50 percent of the payments made LG Electronics Private Limited ("LG"), Hero Honda Motors Private Limited (Hero Honda') and Hutchison Max Telecom Private Limited (Hutch') to the Appellant for the use of trademark, tradename and copyright and accordingly taxable as "Royalty" under Article 12 of the India- Singapore Tax Treaty The Appellant prays that the entire payments made by LG, Hero Honda and Hutch to the Appellant are not be characterised as 'Royalty and as such they are not taxable in India. The Appellant requests that the above grounds be decided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and All India Radio for grant of rights/broadcasting rights were taxable as "royalty" under the provisions of the Act. (c) Amounts received from LGEIL, HH and Hutch for grant of sponsorship rights were also taxable as royalty as per the provisions of the Act holding the same to be payments for use or right to use of the commercial equipment (i.e., article such as hoardings, banner, boards, scoreboards, screens, tickets, websites, & flags). (d) Assessee was liable to pay consequential interest under Section 234B of the Act. Appellate Proceedings before CIT(A) 9.8 Being aggrieved GCC preferred appeal before the CIT(A). Vide order dated, 18.11.2008, the CIT(A) disposed off the Appeal as under: (a) The CIT(A) overturned the decision of the Assessing Officer to the extent the CIT(A) held that GCC was entitled to claim benefit of the provisions of DTAA since Article 24 of the DTAA was not attracted. (b) The CIT(A) concluded that payments received from SET, Prashar Bharti and AIR were taxable in India as "royalty" in terms of Article 12(2) of the DTAA Referred to paragraph 17.13 of the order passed by CIT(A) (c) The CIT(A) concluded that 50% of the payments from LGEIL, HH and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer should apply his/her mind to such material before initiating re-assessment. The material on record should be such as to lead to the inference that income has escaped assessment. Thus, the belief on the basis of which the Assessing Officer seeks reassessment must not be arbitrary or irrational and should postulate a bona fide belief that income has escaped assessment. In order to support the aforesaid contentions reliance was placed of the judgment of Hon"ble Supreme Court in the case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. : 320 ITR 561 and the decision of the Mumbai Bench of the Tribunal in the case of Assistant Director of Income-tax (International Taxation)-1 (1), Mumbai vs. Delta Airline Inc. : (2008) 26 SOT 514 (Mumbai) 10.4. The Ld. Senior Counsel for GCC submitted that in the present case, the learned Assessing Officer had initiated reassessment proceedings based on the position adopted by the Assessing Officer in the assessment order of Assessment Year 2002-2003. Such re-opening on the basis of assessment proceedings conducted for AY 2002-03 does not demonstrate that there is any new material on record indicating that any income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the rival submissions and perused the material on record including judicial precedents cited by both the sides. We note that for Assessment Year 2003-04 the return of income was processed under Section 143(1) of the Act. It is settled legal position that the processing of income under Section 143(1) of the Act does not amount to framing of assessment (ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC) and DCIT vs. Zuari Estate Development and Investment 373 ITR 661 (SC). Since assessment is not framed, it cannot be said that any opinion was formed by examining the return and/or the documents accompanying the return and therefore, question of change in opinion and consequently, the requirement of having "fresh" tangible material (as opposed to tangible material) does not arise. The material/information gathered during the assessment proceedings for one assessment year can constitute tangible material for initiating assessment for another assessment year. The Assessing Officer is not precluded from reopening the assessment of an earlier year made on the basis of fresh material in the course of assessment proceedings of a subsequent year ESS KAY Engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of the provisions of DTAA for the Assessment Year 2002-03. There is no change in the facts and circumstances for the Assessment Year 2003-04. Accordingly, we hold that the GCC would be entitled to claim the benefit of provision of DTAA for the Assessment Year 2003-04. Accordingly, Ground No. 1, 2, and 3 raised by the Revenue are dismissed. Cross objection raised by the GCC is disposed off as being infructuous. 12. Ground No. 4 of Departmental Appeal (ITA.No. 1444/Mum/2009) along with Ground No. 2 to 5 of Appeal of the Assessee (ITA.No.1510/MUM/ 2006) 12.1. Ground No. 4 raised by the Revenue pertain to order of CIT(A) holding that the payment of INR 56,80,84,725/- received from SET would be taxed at the beneficial right provided in Article 12(2) of DTAA. In Ground No. 2 to 5 raised by GCC in Appeal for the Assessment Year 2003-04, GCC has also challenged the order of CIT(A) contending that CIT(A) has erred in holding that payment received from SET were liable to tax in India as royalty under the provisions of Article 12 of the DTAA read with the provisions of the Act. 12.2. During the hearing both the sides agreed that there is no change in the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, Ground No. 7 raised by Revenue is dismissed. 15 Ground No. 6 & 7 of Appeal of the Assessee (ITA.No.1510 /MUM/ 2006) 15.1. As regards Ground No. 6 and 7 relating to payments received by GCC from All India Radio (AIR) and Prashar Bharti Broadcasting Corporation of India (for short "Prasar Bharti") are concerned, during the course of hearing arguments both the sides adopted the arguments made in respect of "License Fee" received by GCC from SET and agreed that our findings/adjudication in respect of "License Fee" received from SET shall apply in mutatis mutandis to the payments received from AIR and Prashar Bharti. Accordingly, in view of our findings in paragraph 11 above, we hold that 25% of the payments received from AIR and Prashar Bharti for the Assessment Year 2003-04 shall be liable to tax in India as "royalties" in terms of Article 12(2) read with Article 12(3) of the DTAA and the provisions of the Act. Accordingly, Ground No. 6 & 7 raised by the GCC are dismissed. 16 In result, for the Assessment Year 2002-03 appeal of the Revenue is dismissed, and cross-objection by the Assessee are disposed off as infructuous. Appeal of the Assessee is partly allowed. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X
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