2014 (12) TMI 265 - HC - Income Tax

Royalty paid to other centres and live telecast royalty disallowed u/s 40(a)(ia) TDS not deducted on the expenses u/s 194J Whether payment for live telecast of horse race is a payment for transfer of any copyright and as such royalty or in the alternative whether the live telecast of the horse race would be termed as a scientific work and payment thereof would be royalty - Held that - The payment has been made by the assessee to other clubs/centres on account of live telecast of races - The payment of royalty is covered u/s 194J which was inserted with effect from 13.07.2006 - the assessee was engaged in the business of conducting horse races and derived income from betting, commission, entry fee etc. and had made payment to other centres whose races were displayed in Delhi - It is not known whether such races had any commentary or analysis of the event simultaneously - the broadcast/live telecast is not a work within the definition of 2(y) of the Copyright Act and also that broadcast/ live telecast doesn t fall within the ambit of Section 13 of the Copyright Act, it would suffice to state that a live telecast/broadcast would have no copyright . In Espn Star Sports Versus Global Broadcast News Ltd. & Others 2008 (9) TMI 916 - DELHI HIGH COURT it has been held that the legislature itself by terming broadcast rights as those akin to copyright clearly brought out the distinction between two rights in Copyright Act, 1957 - it was a clear manifestation of legislative intent to treat copyright and broadcasting reproduction rights as distinct and separate rights - the amendment of the Act in 1994 not only extended such rights to all broadcasting organizations but also clearly crystallized the nature of such rights thus, the broadcast or the live coverage does not have a copyright - the word Copyright would encompass all categories of work including musical, dramatic, etc. and also his submission that the Copyright Act acknowledges the broadcast right as a right similar to copyright . Clause (v) to explanation 2 to clause (vi) or sub section 1 of Section 9 is an inclusive provision for films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting - It was held by the AO that when any person pays any amount for getting rights/licence to telecast any event (which is a copyright of particular person i.e. no one can copy it for direct telecast or deferred telecast) then amount so paid is to be treated as royalty and very much covered under Section 9(1)(vi) - scientific work has not been defined in the Act nor in the Copyright Act - It is not necessary that because the live telecast of an event is being done at a distant place, the same would be a scientific work - when reference is made to films or video tapes, then the intent of the provision is related to work of visual recording on any medium or video tape and can be seen on the television - it is not known nor pleaded that the live telecast, in this case, was accompanied by commentary, analysis etc. It is an issue of fact, which cannot be gone into or raised at this stage thus, no question of law arises for consideration Decided against revenue.

Issues Involved:
1. Whether payment for live telecast of horse races is a payment for transfer of any "copyright" and as such "royalty".
2. Whether live telecast of horse races would be termed as a "scientific work" and payment thereof would be "royalty".

Issue-wise Detailed Analysis:

1. Payment for Live Telecast as Transfer of "Copyright" and "Royalty":
- The Assessing Officer disallowed expenses under Section 40(a)(ia) on account of "royalty paid to other centres" and "live telecast royalty" due to non-deduction of TDS.
- The CIT (Appeals) upheld this disallowance for expenses incurred post-13.07.2006, when royalty was included under Section 194J.
- The Tribunal, relying on DIT vs. Neo Sports Broadcast (P) Ltd., held that live telecast payments were not royalties as per Section 9(i)(vi) of the Act, and thus TDS was not required.
- The Revenue argued that the term "royalty" under Explanation 2 Clause (v) includes transfer of rights in any copyright, literary, artistic, or scientific work, and that live telecast rights are akin to copyright.
- The Court analyzed whether live telecast of horse races constitutes a work with copyright under Section 2(y) of the Copyright Act, 1957, which defines "work" as literary, dramatic, artistic work, cinematographic film, or record.
- The Court noted that Section 13 of the Copyright Act does not contemplate broadcast as a work in which copyright subsists, and Section 14 defines copyright as exclusive rights over existing works.
- The Court concluded that live telecast does not fall within the definition of "work" under Section 2(y) and does not have copyright, thus not qualifying as royalty under Section 194J.

2. Live Telecast as "Scientific Work" and "Royalty":
- The Revenue alternatively argued that live telecast is a "scientific work" and payment for it should be considered royalty.
- The Court rejected this argument, noting that the clause (v) to Explanation 2 to Section 9(1)(vi) relates to work including films or video tapes for television or radio broadcasting, not live telecasts.
- The Court emphasized that the term "scientific work" is not defined in the Act or the Copyright Act, and live telecast does not fit within this category.
- The Court also dismissed the argument that live telecast with commentary and analysis constitutes a distinct copyright, as this was neither pleaded nor established as a fact.

Conclusion:
- The Court held that live telecast of horse races does not constitute a transfer of copyright or a scientific work under the relevant sections of the Income Tax Act and the Copyright Act.
- Consequently, payments for live telecast are not considered royalties, and TDS was not required to be deducted.
- The appeals filed by the Revenue were dismissed, with no costs awarded.

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