TMI Blog2023 (1) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrovert the findings of CIT(A). We have perused the documents/material relied upon by GCC in this regard including the income tax returns, financial statements, and confirmation from tax advisor. GCC has offered to tax its worldwide income in Singapore. Since Condition No.1, being one of the three conditions which are to be satisfied simultaneously for triggering the provisions of Article 24 of DTAA, is not satisfied, 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 infructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was Live Feed or modified Feed? - In view of the factual findings returned by us, after examining various agreements, to the effect that the consideration received by GCC from SET was (a) for live and non-live exhibitions and (b) the Live Feed was not simply live feed but the same was modified to include non-live content. At this point it would be pertinent to note that perusal of the decision cited on behalf of the GCC shows that the production agreement, which according to us provided the link between Recording and Feed , was not placed before the Tribunal/Court in any of the matters. Even before us, the production agreement has not been placed on record and has been referred to an relied upon by the parties and considered by us to the extent the same has been reproduced in the order passed by the CIT(A) for the Assessment Year 2003-04. Allocation/apportionment of the Licensee Fee income received by GCC from SET in terms of the Heads Agreement - As in the present case the Heads Agreement does not provide any break-up of the consideration. We note that the CIT(A) had, while deciding the appeal for the Assessment Year 2003-04, attributed 75% of the consideration fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, no opinion was formed on the same. The return of income, the accompanying documents as well as the material/information gathered during the course of assessment for the Assessment Year 2002-03 (including Master Right Agreement, Head Agreement and Production Agreement which were relevant/operative for the Assessment Year 2003-04) and the findings returned in the Assessment Order for the Assessment Year 2002-03 constituted tangible material on the basis of which the Assessing Officer formed the belief that taxable income had escaped assessment. Explanation 2 to Section 147 of the Act specifically provides that income chargeable to tax shall be deemed to have escaped assessment where return of income has been furnished but no assessment has been made, and it is noticed by the Assessing Officer that the Assessee has understated the income or has claimed excessive deduction or relief in the return. Thus, there existed tangible material on the basis of which the Assessing Officer formed belief that income chargeable to tax for the Assessment Year 2003-04 has escaped assessment. Thus we hold that re-assessment proceedings for the Assessment Year 2003-04 were initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid repetition. The connected grounds in the cross-appeals and cross-objection are taken up together wherever possible. Assessment Year 2002-03 1.5. The Grounds raised in the appeals/cross-objections for the Assessment Year 2002-03 are as under: ITA No. 3130/Mum/2006 1.6. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the India Singapore Tax Treaty relief to the appellant in respect of receipts from Set Setellite Singapore Pte. Ltd. (SET). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the benefit of India Singapore Tax Treaty is available to the appellant in respect of revenues earned from LG and Hero Honda. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the limitation of relief under Article 24 of the India Singapore Tax Treaty is not applicable to the appellant without appreciating that the payment by SET has not been received in Singapore but in the third country i.e. Jersey. 4. On the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the grant of broadcast rights and sponsorship rights by the Respondent is on a similar footing as sale of advertising airtime by Satellite Television Asian Region Limited ( Star Ltd ) and on that basis, holding that the decision by the Honourable Mumbai Income Tax Appellate Tribunal in the case of Star Ltd for Assessment Year 2000-01 (ITA No 5066/M/04) is applicable to the Respondent's case. The Respondent respectfully submits that the above finding is erroneous and should be set aside. The Respondent respectfully submits that the above finding is erroneous and should be set aside. The Respondent craves leave to add, alter, amend or modify the aforesaid grounds at or before the hearing of the appeal. ITA No. 3135/Mum/2006 1.8. The Assessee has raised the following grounds of appeal: Ground No. 1 The learned CIT(A) has erred in holding that the consideration received by the Appellant from LG Electronics Private Limited ( LG ) and Hero Honda Motors Private Limited (Hero Honda ) is for the use or right to use commercial equipment and is royalty taxable at the rate of 10 percent on a gross basis as per Article 12(2)(b) of the India-Singapore t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their national body governing cricketing to participate in the ICC-Events in terms of the Participation Agreement between the host nation and the participating nations. The News Corporation Limited 2.7 The News Corporation Limited (For short News Corporation ) was a company incorporated in South Australia which forming part of the News Corporation Group of Companies engaged, inter alia, in multinational mass media business. The World Sport Group Limited 2.8 IDI granted to The World Sport Group Limited (For short WSG ), a company incorporated in British Virgin Islands, the worldwide media and sponsorship rights in respect of various ICC-Events for years 2000 to 2007 through the Media and Sponsorship Rights Contract, dated 20.07.2000 executed between IDI, News Corporation and WSG. [hereinafter referred to as the Master Rights Agreement or MRA ] 2.9 Subsequently, News Corporation enter into an arrangement with WSG and the Novation Agreement, dated 02.07.2001 (hereinafter referred to as the TNA ), was executed amongst IDI, WSG, News Corporation, Sky Global Networks Inc and GCC/the Assessee. GCC, and Sky Global Networks Inc, a Delaware corporation, both, were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.) for different ICC-Events under separate agreements (hereinafter referred to as the Sponsorship Agreements ) and earned advertising revenues. According to such sponsorship agreements these companies could advertise on the various advertising sites (sign boards, score boards, websites, tickets etc.) which included advertising sites at the venue matches and surrounding spaces during the ICC-Events. The taxability/characterization of the income earned by GCC from the aforesaid companies is one of the issues raised in the present appeals. 3. The relevant facts, in brief, relating to the proceedings for the Assessment Year 2002-03 are as under: 3.1 During the Financial Year 2001-02 relevant to the Assessment Year 2002-03, two ICC-Events were held. First, 2001-ICC Trophy in Canada (June-July 2001), and Second, 2002-ICC U19 World Cup in New Zealand (January-February 2002). 3.2 For the relevant previous year SET held rights/broadcasting rights in terms of THA for the aforesaid ICC-Event and GCC earned USD.20, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: (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 Licensee Fee received from SET was not taxable in India as royalty as the same did not arise in India in terms of Article 12(7) of the DTAA. (c) The CIT(A), however, concluded that payments from LGEIL and HH were taxable as royalties as per Article 12(2)(b) of the DTAA for the use or right to use commercial equipment. (d) The CIT(A) also confirmed the levy of interest under Sections 234A and 234B of the Act. Present Cross-Appeals before Tribunal 3.9 Being aggrieved by the order of CIT(A), both, GCC and the Revenue are in cross-appeals before us. The GCC is also filed cross objection against the appeal preferred by the Revenue. Shri P.J. Pardiwala, Senior Counsel advance arguments on behalf of GCC, while the Revenue was represented by Shri Girish Dave, Special Counsel for the Revenue. Both the sides advanced submissions during the course of the hearing which were summarized in the form of written submissions filed by bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 the provisions of Article 24 of DTAA are attracted mainly on the ground that payments have not been remitted to Singapore. The relevant extract of the Assessing Officer reads as under: Thus it is held that the treaty does not provide any relief to GCC on taxation of its receipts from the assessee mainly on the ground that payment has not been remitted to Singapore (Refer to page 11 of 39 of the Assessment Order for the Assessment Year 2002-03, dated 31.03.2005.) 4.4. In appeal preferred by GCC on this issue, CIT(A) was of the view that all the three conditions specified in paragraph 4.2. above should be satisfied simultaneously. Since in case of GCC Condition 1 and Condition 3 were not satisfied, the provisions of Article 24 of DTAA would not be attracted. Accordingly, the CIT(A) held that GCC was entitled to claim benefit of the provisions of DTAA. 4.5. Being aggrieved the Revenue is in appeal before us on this issue. 4.6. The Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Singapore and all foreign sourced income remitted or deemed to be remitted to Singapore in the preceding year subject to certain exceptions. In the case of the appellant-assessee as could be seen from a reading of various agreements, the gross amounts deposited in the 'Revenue' account were subject to various adjustments in accordance with varying interests of concerned parties. The appellant-assessee has not given the details of 'gross revenues' earned from various events, adjustments thereof and the manner in which 'net revenues' was arrived at which are shown as income by respective parties. In fact, the payments are firstly made with Jersey'/Monaco' accounts which must have been subject to some taxation, in whatever way as per the laws prevailing therein. Strictly speaking, the income cannot be said to have been 'remitted to or received in Singapore. The return of Income and documents attached do not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 contended on behalf of GCC that income was not taxable in India which was not same as being exempt from tax in India. Therefore, Condition No.3 was also not satisfied. It was contended on behalf of GCC that none of the conditions of Article 24 were satisfied in case of GCC and, hence, the provisions of Article 24 of DTAA were not attracted. Consequently, GCC was entitled to claim the benefits of the provisions of DTAA. It was also pointed out that the CIT(A) had, for the Assessment Year 2003-04, accepted the contention of GCC that Article 24 was not applicable and that GCC was entitled to the beneficial provisions contained in the DTAA. Reliance was also placed on order, dated 11.02.2011 passed by the Tribunal in MA No. 520/Mum/2010 arising out of ITA No. 7574 7349/Mum/2004 (Miscellaneous Application arose out of the appeals filed by SET before the Mumbai Bench of the Tribunal disposed vide order dated 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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) reads as under: 8. As regards the first condition, the AO's findings in this regard is that whereas worldwide income of residents is subjected to tax in India, residents of Singapore are subjected to tax only on the income accruing or arising in Singapore i.e. offshore income is not taxable in Singapore unless it is received in Singapore. The AO also found that the assessee's claim that the amount is included in its return of income filed at Singapore is without any proof and assessee has also not furnished any explanation as to in which the account the sums were received in Jersey and how the same were brought back to Singapore. During the appellate proceedings, the appellant has furnished a copy of the Singapore Income tax Act and in submissions dt. 17.2.2006, has reproduced the relevant extract of Section 10 of the Singapore Income Tax Act as under: 10 (1) Income tax shall, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the basis that these revenues are accruing in or derived from Singapore. Such basis of taxation is as per the provisions of Section 10 of the Singapore Income Tax Act. GCC has been filing its tax returns in Singapore on this basis since its date of incorporation. 10. This confirmation is to the same effect as the letter addressed by GCC to SET Singapore referred to in para 8.6 of appeal order dt. 2.7.2004 in the case of SET Satellite (Singapore) Pte Ltd relating to Section 201(1) and 201(1A) of the Act. The fetter as reproduced therein is as under: ...We confirm that GCC is a Singapore incorporated company and has filed income-tax Return (Form C) in Singapore. In particular, the company has included payment from SET Satellite (Singapore) Pte Ltd to calculate the income tax liability in Singapore.... 11. At page 11 of the assessment order, the AO has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental 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 India as the provisions Article 12(7) of DTAA. 5.1. The facts relevant to the adjudication of the issue, in brief, are that the Assessing Officer had denied GCC the benefit of the provisions of DTAA. The CIT(A) overturned the decision of Assessing Officer by holding that the benefit of provisions of DTAA would be available to GCC since the provisions of Article 24 of DTAA would not be attracted. The CIT(A), thereafter, proceeded to conclude that the income received by GCC from SET did not arise in India since the provisions of Article 12(7) of DTAA were not attracted. Being aggrieved the Revenue has carried this issue in appeal before us. 5.2. The Learned Counsel for Revenue submitted that the case of the Revenue is that the royalty income from SET arose in India as per Article 12(2) of DTAA read with Article 3(2) and Section 5 9 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 does not preclude the applicability to Article 12(1)/(2) of the DTAA. Article 12(1) of the DTAA lays down the principle of exclusive right to tax royalties in state of payee (i.e. Residence State). Article 12(2) of the DTAA gives a secondary/limited right to tax royalties to the state of payer (i.e. the Source State). Article 12(6) of the DTAA excludes the applicability of Article 12(1)/(2) of DTAA. Article 12(7) of DTAA deems the royalty to arise in the state of Permanent Establishment provided specified conditions are satisfied. Article 12(7) of the DTAA does not define the phrase arising in a State for the purpose of Article 12(2) and only expands the scope of the phrase arising in a State like Section 5 and Section 9 of the Act. Since term arise is not defined in the Act, its meaning must be understood as per the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expression deemed to arise is missing in Article 12(2) of the DTAA. Therefore, to fall within the ambit of Article 12(2), royalty income must accrue or arise in India in terms of Section 5 of the Act without the aid of Section 9 of the Act. Accordingly to him since royalty income did not arise in India in terms of Section 5 of the Act in view of the following, the provisions of Article 12(2) of the DTAA would not be attracted: (a) the agreement with SET and GCC granting rights to SET was entered outside India (b) GCC carried out all its business operations outside India (c) payment and receipt of consideration was outside India (d) the broadcast of matches, which were held outside India, happened from SET s broadcasting facility in Singapore (e) mere fact that the signals were downlinked and viewed in India cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. (Emphasis Supplied) 5.12. In the Section 90(1) of the Act enables the Union of India to enter into the above agreements, conventions or tax treaties with the foreign Governments [hereinafter referred to as Tax Treaties ], inter alia, for the purpose of granting relief against double taxation to the residents of such foreign countries having income taxable in India. The Tax Treaties allocate right of taxation between the two Contracting States the Residence State (i.e. the State of residence of the taxpayer in receipt of income) and the Source State (i.e. the Other Contracting State where income arises). Tax Treaties, generally, do not create a charge on income but merely allocate taxing rights by, inter alia, providing for restricted scope of income and/or beneficial rate of taxation in respect of income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed . 5.15. In case proposed meaning of the term arise or arising is accepted, the ambit of the right of State of Residence of the recipient of royalty income to tax such royalty income would get also restricted to income arising in India in terms of Section 5 of the Act as Article 12(1) also does not use the expression deemed to arise whereas Section 5 uses the expression deemed to accrue/arise in addition to accrues/arises . Thus, depriving the beneficial treatment available in terms of Article 12(1) of the DTAA in respect of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (including those pertaining to SET) upon which reliance was placed on behalf of GCC are also distinguishable on facts as in each of the those cases the conclusion that royalty income did not arise in India in terms of Article 12(7) of the DTAA was based upon the factual finding by Tribunal that royalty income had no nexus/connection with the permanent establishment of the assessee in India. In the aforesaid cases the contention of the Revenue was limited to the applicability of the deeming fiction contained in Article 12(7) of DTAA whereas in the present case the contention of the Revenue is that the royalty income is liable to tax in India in terms of Article 12(2) of DTAA and that the applicability/non-applicability of Article 12(7) does not preclude the applicability of Article 12(2) of DTAA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion 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 though actually accruing elsewhere, to establish that the income in question could not be deemed to accrue or arise in India. But the income in this case has in fact accrued in India and no question arises whether it should be deemed to accrue or arise in India. Whether a certain income accrued or arose in India within the meaning of section 5(2) is a question of fact which should be looked at and decided in the light of commonsense and plain thinking as the Calcutta High Court considering a similar question under section 4(1) of the Indian Income-tax Act, 1922, observed: V.G. Every, In re [1937] 5 ITR 216 (Cal). In the case before us the High Court and the income-tax authorities considered it a hard matter of fact that the income derived from broadcast of copyright music from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 9 read with Section 5 of the Act would be considered as income arising in India for the purpose of Article 12(2) of the DTAA. Therefore, income received from SET by GCC would be considered as income arising in India which may also be taxed in India in terms of Article 12(2) of the DTAA provided it is in the nature of royalty. Accordingly, we would now be required to examine the character of payments received from SET. 5.24. Since we have held that GCC would be entitled to claim benefit of provisions of the DTAA we proceed to examine whether payments received by GCC from SET would constitute royalties in terms of Article 12(3) of the DTAA as Article 12(3) is a beneficial provisions containing narrower definition of royalties as compared to Explanation 2 to Section 9(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement 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 effect, however, there was no transfer of the 'modified' Feed to GCC and as soon as the Feed was produced (as per the agreement between the producer and GCC), the same would be passed onto SET for transmission across the licensed territory which included India. 5.29. Placing reliance on Clause 43 of the Heads Agreement, he submitted GCC continued to own all Proprietary Interests in the Feed and highlights package, and granted only an exclusive license of such Proprietary Interests in the Feed and highlight package to SET to enable fully exploitation of the Feed. 5.30. Relying upon the decision of the Hon'ble Delhi High Court, dated 26.09.2008, in the case of ESPN Star Sports Vs. Global Broadcast News Ltd: 2008 SCC OnLine Del 1385, the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Production Agreement with Octagon [as referred in the CIT(A) order for AY 2003-04], the Feed to be produced by Octagon was only Live Feed. The Feed produced by Octagon was defined to mean live audio and visual signals derived from the Recordings in the form of a live television picture in digital format. The term Recordings was also defined to mean the live audio and visual coverage of the Matches of 2003 World Cup. Clause 4.2 of the aforesaid Production Agreement also mentioned that the Feed must be live, continuous and uninterrupted. Even the Technical Expert Report issued by Broadcast Cable Services, Inc, had concluded that all the matches were broadcast Live on SET channels and there was no recording of the matches. Further, replays were included a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 play in any ICC-Event including the Feed, Highlights Package and any recordings and other material by specified means. Thus, the rights granted to SET by GCC were not limited to grant of live rights or broadcast of Feed. SET also had right to transmit, exhibit and distribute to public moving visuals, images and audio-visual representation of matches, players and plays during the event as well as after the event. The 'Exhibition Period was defined in Schedule 1 annexed to the Heads agreement as from the date of the Heads Agreement until three months after the completion of the last ICC-Event which was specified in Schedule 4 to be 2007 Cricket World Cup. However, there was a cap on the number of exhibitions that could be made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration 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 such exhibitions without there being a recording/cinematograph film. Clearly there existed recordings which constituted cinematograph film as defined in Section 2(f) of ICA and qualified as work as defined in Section 2(y) of ICA. Since SET had exclusive right to exhibit, communicate or distribute this work to public in the Licensed Territory, the same amounted to having right to use copyright. The consideration given to GCC for the grant of the aforesaid copyright was in the nature of royalties as defined in Article 12(3) of the DTAA. 5.41. This takes us to the judgment of the Ho ble Delhi High Court which has been relied upon on behalf of the GCC to contend that the broadcasting rights are not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 mention in the learned Single Judge's judgment and we have therefore, dealt with it on the existing pleadings. It is amply clear from the Act itself, as the proviso to Section 39A in Chapter VIII relating to broadcasting reproduction rights specifically lays down, that where copyright subsists in respect of any work or performance that has been broadcast, no license of the reproduction of such broadcast will be permitted without the consent of the owner of the Rights. The Legislative intent can be clearly discerned from the proviso to Section 39A which specifically mentions various Sections of the Act which apply to broadcasting rights with necessary modifications and adaptations and the proviso specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 thereafter, telecasted as pre-recorded cricket match. However, it can also be inferred from the report that there was recording during the match which enabled the production team to produce instant replay highlights which were then included in the Feed to produce uninterrupted Live Feed. Further, consideration for use, as well as for the right to use copyright qualifies as royalties in terms of Article 12(3) of the DTAA. Therefore, merely because the right to use copyright has not been exploited would not lead to rejection of the claim of the Revenue. 5.46. Both the sides had relied upon the provisions of the Master Rights Agreement, Heads Agreement, the Production Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that all Recordings are made to the requisite standard. (l) Clause 4.6(k), inter alia, provided that GCC shall supply or make available to IDI within 30 days after each Media Transmission for television broadcast transmission report. 5.48. Thus, simply put, the right to make Recordings (which included audio-visual coverage of the matches) and to exploit the same was granted by IDI to GCC. The existence of Recordings was pre-condition for Media Transmission which was defined in Clause 4.2 of the Master Rights Agreement as under: Media Transmission 4.2. Subject to the provisions of this Contract the Counterparty is granted the exclusive right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall contain coverage of the entirety of each such Match (including without limitation all on pitch activities during warm ups, stoppages, breaks in play and following close of play), together with opening/closing and all pre/post Match ceremonies The Feed shall not contain pictures which focus on advertising at any Event to an extent not editorially justified. The Feed shall commence a minimum of 5(five) minutes prior to the start of any activities and continue until 5 (five) minutes after the end of any activities (including, without limitation, any post-match ceremonies) (Emphasis Supplied) 5.51. As per Clause 15 above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, personality rights, rights of publicity, trade mark rights, goodwill and title to any physical material; (Emphasis Supplied) 5.53. Thus, GCC granted to SET exclusive license of Proprietary Interest which included, copyrights, trademarks rights, and performing rights in Feed for exploitation of Feed. The delivery of Live Feed was a condition precedent for the same. It is admitted position that the Feed was produced by production companies such as Octagon in terms of production agreement(s) entered between GCC and such production companies. 5.54. As noted earlier while Master Rights Agreement contained rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icture 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 Feed amounts to live broadcast of sports event. In our view, the Live Feed also contains recorded content in which copyright subsists. Our aforesaid views draws support from the provisions discussed hereinabove including those relating to copyright contained in Clause 10.1, 10.4 10.6 of the Production Agreement, Clause 43 of the Heads Agreement read with the definition of expression Proprietary Interest and provisions contained in Clause 18 of the Heads Agreement pertaining to Tape-Back up. 5.57. It would be pertinent to note that the Feed received by SET from G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 characterization of consideration received from SET. We do not find any merit in the aforesaid contentions advanced on behalf of GCC. As discussed hereinabove the rights granted to SET were not limited to grant of broadcasting right. Further, the additional rights (such as right to make exhibition of the match after the ICC-Events but during the Exhibition Period) granted to SET were capable of being exercised independently and could not be termed as ancillary. We reject the contention advanced on behalf of GCC that the predominant purpose of the Heads Agreement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 was offered to tax as royalty income. Whereas, in the present case the Heads Agreement does not provide any break-up of the consideration. We note that the CIT(A) had, while deciding the appeal for the Assessment Year 2003-04, attributed 75% of the consideration for use of copyright in the live feed and balance 25% for use of copyright in non-live feed/transmission such as highlights, telecast of recorded matches etc. Keeping in view the overall facts and circumstances of the case, we hold that 25% of Licensee Fee is fair estimation of the Licensee Fee attrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sites since use requires dominion or control over the equipment which was not with GCC. He took us through the financial statement to demonstrate that GCC did not own any equipment (except computer equipment). He further submitted alleged equipments were not at the disposal of GCC or the sponsors. Reference in this regard was placed on the decision of the Hon ble Supreme Court in the case of Bharat Sanchar Nigam Limited (282 ITR 273) wherein, the Hon ble Supreme Court had held that services provided to a telephone subscriber does not involve ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 9(1)(vi) of the Act and, therefore, provisions of Section 195 of the Act requiring deduction of tax at source were not attracted (para 39). 6.7. Per contra, the Learned Counsel for Revenue supported the order passed by Assessing Officer contending that payments received by GCC from LGEIL and HH were in the nature of royalty for right to use equipment being the advertising sites of different dimensions fixed at different placed at the stadiums, sites screen, scoreboards, electric screens, tickets, website and event promoti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude 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, incorporated, erected, maintained at the stadia as well as removed from the stadia with reasonable care. GCC/WSN was also required to ensure that such boards are not deliberately obscured or concealed during matches. 6.11. He submitted that the control and possession over these advertising sites, hoardings and signage rested with GCC. The definition of Host , Host Licensees , Stadium Venue , when read together, clearly establish that GCC/WSN were in full and complete control of the stadium where a match were being played ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 do not constitute equipment, while the second, without prejudice, contention raised by GCC is that the payments made to GCC by LGEIL/HH are not in the nature of royalty for use of equipment. For now we proceed to examine the second, without prejudice, contention raised by GCC on the premise that the advertising sites and other advertising material does constitute equipment. 6.15. A co-joint reading of the Master Rights Agreement and the sponsorship agreement (i.e. GPA/SA), shows that GCC was in control of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 and Singapore has much force. The agreement in question includes sponsorship rights like advertising on bill boards, advertisement in official brochure, Web site of ICC etc., which is purely incurred for the promotions, advertisement and publicity of the assessee's brand name and products. If incidentally, the proprietary trade mark or logo of ICC is put alongside the assesssee's logo it is only incidental to the main services obtained by the assessee. The ratio of the Judgment in the case of Sheraton I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 the Assessing Officer to compute assessed tax after reducing the tax which is deductible at source by the payer from out of the tax on the total income determined on regular assessment and charge interest under Section 234B of the Act accordingly. We note that this issue stand settled by the judgment of the Hon ble Supreme Court in the case of Director of Income Tax, New Delhi vs. Mitsubishi Corporation : [2021] 438 ITR 174 (SC)[17-09-2021] wherein it has been held that prior to Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 grounds be set aside and that of the Assessing Officer restored. Co No. 160/Mum/2009 in ITA No. 1444/Mum/2009 8.2 The Assessee has raised the following grounds in cross- objection: 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. The Respondent re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on merits of the case. 9. The relevant facts, in brief, relating to the proceedings for the Assessment Year 2003-04 are as under: 9.1 During the Financial Year 2002-03 relevant to the Assessment Year 2003-04, the two ICC-Events were held. First, 2002-ICC Knockout Trophy in Sri Lanka (September 2002), and Second, 2003-ICC World Cup in So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hutch were taxable as royalties as per Article 12(2)(b) of the DTAA for the use or right to use commercial equipment. (d) The CIT(A) held that interest under Sections 234B of the Act was not leviable. Present Cross-Appeals before Tribunal 9.9 Being aggrieved by the order of CIT(A), bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 has escaped assessment for AY 2003-04 as envisaged in section 147 of the Act. In this regard, reliance was on following judicial precedents - Das Friends Builders Pvt. Ltd vs. Deputy Commissioner of Income Tax 2006] 280 ITR 77 (Allahabad), and Mohan Gupta (HUF) vs. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing 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 Company Ltd. Vs CIT: 247 ITR 818 (SC) . 10.9. The return of income for the Assessment Year 2003-04 was merely process under Section 143(1) of the Act. The income tax return and/or accompanying documents were yet to be examined and therefore, no opinion was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment 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 the case for the Assessment Year 2003-04 and therefore, they agreed that our finding/adjudication on this issue for the Assessment Year 2003-03 shall apply mutatis mutandis for Assessment Year 2003-04. Accordingly, in view of our findings/adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. Similarly, for the Assessment Year 2003-04 appeal of the Revenue is dismissed, and cross-objection by the Assessee are disposed off as infructuous. Appeal of the Assessee is partly allowed. Order pronounced on 14.12.2022. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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