2014 (5) TMI 327 - HC - Income Tax

TDS on Payment made for acquisition of telecast rights Royalty as per Explanation 2 of section 9(1)(vi)(c) of the Act or not Article 12(7) of DTAA Chargeability of payment Held that - Both the CIT(A) as also the Tribunal was of the view that if the underlying facts are not in dispute, then, the payment for the cricket rights is made only for broadcasting operations of the assessee which are carried out from Singapore - The liability for the payment is incurred by the assessee in connection with the broadcasting operations in Singapore - That has no connection with the marketing activities carried out through its alleged permanent establishment in India - There is no economic link between the payments assuming that they are in the nature of royalties made out of India cannot be termed as perverse - the Revenue stand cannot be upheld - There has been no general rule laid down nor can the Tribunal s order be seen as having any impact or repercussion on cases pending before the authorities or before the Tribunal - none of the apprehensions of Mr.Tejveer Singh can enable the court to entertain the appeal no substantial question of law arises for consideration Decided against Revenue.

Summary

Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal, Mumbai Bench.
2. Determination of whether the payment for acquisition of telecast rights constitutes "royalty" under section 9(1)(vi)(c) of the Income Tax Act, 1961.
3. Analysis of whether the payment is chargeable to tax in India under Article 12(7) of the Double Taxation Avoidance Agreement.
4. Examination of the economic link between the payments and the broadcasting operations in Singapore.

Issue 1:
The appellant challenged the order passed by the Income Tax Appellate Tribunal, Mumbai Bench, delivered in a batch of Appeals on 25th June 2010. The appellant sought time to study the impact of the Tribunal's order on other pending cases, but the court refused the request, emphasizing that matters are notified in advance for admission, and counsel should be prepared with arguments to avoid wasting the court's time.

Issue 2:
The appellant argued that the payment for telecast rights constitutes "royalty" under section 9(1)(vi)(c) of the Income Tax Act, 1961. However, the court disagreed, noting that the assessee, a Singapore-based company, entered into an agreement with another Singapore company for rights in television programs. The court found no economic link between the payments and the marketing activities through the alleged permanent establishment in India, leading to the dismissal of the appellant's claim.

Issue 3:
Regarding the chargeability of the payment to tax in India under Article 12(7) of the Double Taxation Avoidance Agreement, the court held that the liability for the payment was incurred by the assessee in connection with broadcasting operations in Singapore, not India. The court found that the economic link was with the assessee's head office in Singapore, and the payment to the other party was not incurred in connection with the appellant's permanent establishment in India, leading to the dismissal of the appeal.

Issue 4:
The court examined the economic link between the payments and the broadcasting operations in Singapore. It was established that the liability for the payment was connected to the broadcasting operations in Singapore and not with the alleged permanent establishment in India. The court affirmed the Tribunal's finding that there was no economic link between the payments and the operations in India, leading to the dismissal of the appeal based on factual conclusions specific to the case.