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2018 (4) TMI 331 - AT - Income TaxNature of receipt under the head fees for technical services (FTS)/Royalty - India-UK DTAA - income accrued in India - Held that - As decided in assessee s own case 2015 (9) TMI 16 - ITAT MUMBAI BCCI becomes the owner of the program content produced by the assessee. The job of the assessee ends upon the production of the program content and the broadcasting is carried out by some other entity to which license was given by the BCCI. Hence, in our view, the question of transfer of all or any right does not arise in the facts and circumstances of the instant case. Hence, we are of the view that the payment received by the assessee cannot be considered as royalty‟ in terms of the India-UK DTAA. Though, it is not necessary to examine about the applicability of provisions of sec. 9(1)(vi) of the Act, yet the facts discussed above would show that the payment received by the assessee cannot fall within the purview of sec. 9(1)(vi) of the Act also.
Issues Involved:
1. Taxability of sums received by the assessee under the head 'fees for technical services' (FTS) or Royalty. 2. Existence and implications of a service Permanent Establishment (PE). 3. Application of the Transactional Net Margin Method (TNMM) for income attribution. 4. Consistency in tax treatment across assessment years. Issue-wise Detailed Analysis: 1. Taxability of Sums Received as FTS or Royalty: The primary issue was whether the sums received by the assessee from BCCI for live audio and visual coverage of IPL matches could be assessed as 'fees for technical services' (FTS) or Royalty. The Tribunal referenced the India-UK Double Taxation Avoidance Agreement (DTAA), specifically Article 13(4)(c), which defines FTS as services that "make available technical knowledge, experience, skill know-how or processes." The Tribunal concluded that the assessee did not make available any technology or know-how to BCCI, but rather delivered a final product in the form of program content. Therefore, the sums could not be considered as FTS. Regarding the classification as Royalty, the Tribunal examined the definition under the India-UK DTAA and Section 9(i)(vi) of the Income Tax Act. It was determined that the payment was for producing program content, not for the use of any copyright, patent, or process. Consequently, the sums received did not qualify as Royalty. 2. Existence and Implications of a Service PE: The assessee argued that a service PE was constituted in India under Article 5(2)(k) of the India-UK DTAA due to personnel presence exceeding 90 days. The income attributable to this PE was computed using the TNMM method. The Tribunal acknowledged that the service PE existed but emphasized that the income should be computed based on the actual business activities carried out in India. 3. Application of TNMM for Income Attribution: The assessee computed the income attributable to the Indian operations using the TNMM method. The AO, however, assessed the entire amount of gross receipts. The Tribunal supported the assessee's approach, noting that the gross receipts should not be entirely taxed without considering the actual income attributable to the Indian operations. 4. Consistency in Tax Treatment Across Assessment Years: The Tribunal highlighted the importance of consistency in tax matters, referencing the principle of consistency as upheld by various High Courts and the Supreme Court. The Tribunal noted that the DRP's decision for AY 2012-13, which deviated from the Tribunal's earlier orders for AY 2010-11 and 2009-10, lacked justifiable reasons. The Tribunal emphasized that unless there are compelling reasons or changed circumstances, the settled position should not be disturbed. Conclusion: The Tribunal dismissed the AO's appeal for AY 2011-12 and allowed the assessee's appeal for AY 2012-13. The sums received by the assessee were not taxable as FTS or Royalty under the India-UK DTAA. The existence of a service PE was acknowledged, and income attribution should be computed using the TNMM method. The Tribunal reinforced the principle of consistency in tax treatment across assessment years.
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