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TMI Blog2022 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... n these two assessment years is purely academic in the nature, as, the entire income has been offered to tax by Indian entity. Before we part, for the sake of completeness, we must deal with the submission of learned Departmental Representative that the distribution revenue earned by the assessee would otherwise qualify as equipment royalty and process royalty under Explanation 2(iva) of section 9(1)(vi) of the Act. In our view, such argument of learned Departmental Representative is preposterous as no such finding has been recorded either by the Assessing Officer or by learned Commissioner (Appeals) and DRP. - Decided in favour of assessee. - ITA No.1907/Del/2011 And ITA No.610/Del/2011 And ITA No.5415/Del/2011 - - - Dated:- 21-11-2022 - Shri G.S. Pannu, Hon ble President And Shri Saktijit Dey, Judicial Member For the Appellant : Sh. Ajit Jain, CA For the Respondent : Ms. Anupama Anand, CIT(DR) ORDER PER SAKTIJIT DEY, JM: Captioned appeals by the assessee are for the assessment years 2006-07, 2007-08 and 2008-09. Appeals relating to assessment year 2006-07 arises out of order dated 27.12.2010 passed by learned Commissioner of Income Tax (Appeals)-XI, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lute discretion reject any such proposals; BWIPL. to have no authority to accept any proposal/orders or conclude any contracts with the customers for and on behalf of BBCWD BBCWD reserves the right to solicit orders, negotiate and conclude agreements with customers for distribution of the Channel; BWIPL shall not represent BBCWD in any manner whatsoever, inferring BWIPL an authority bind BBCWD, and For the above services, BBCWD shall remunerate BWIPL with a markup of 10% on direct and indirect costs, as agreed between the parties. 4. The Assessing Officer, however, did not agree with assessee s submissions. He held that while granting right to distribute BBC World News Channel in India, the assessee had transferred the right to use copyright to BWIPL, hence, the amount received from distribution of the channel in India is in the nature of royalty, both, under the domestic law as well as under India UK Double Taxation Avoidance Agreement (DTAA). Therefore, he held that the amount received by the assessee will be taxable at 15% on gross basis. Though, the assessee contested the aforesaid addition before learned Commissioner (Appeals), however, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself did not have copyright in the content which is displayed on the channel, the assessee could not have transferred any copyright to BWIPL. He submitted, as per the terms of the agreement, the broadcasters licensed to receive the channel has not right to change, modify, alter or edit the contents, which are displaced on the channel. He submitted, the assessee had only been given non-exclusive license to reception and simultaneous re-transmission of the channel and the broadcast of the program in the territory. Thus, what the assessee has is a broadcasting reproduction right, which is completely different from copyright. He submitted, this broadcasting reproduction right has been passed on to BWIPL. Thus, he submitted, broadcasting reproduction right, being distinct from copyright, cannot be treated as royalty. In this regard, he relied upon a decision of the Hon ble Bombay High Court in case of MSM Satellite (Singapore) Pte. Ltd. [2019] 106 taxmann.com 353 (Bombay). Further, he relied upon the decision of the Hon ble Delhi High Court in case of ESPN Star Sports Vs. Global Broadcast News Ltd. and Ors. [2008] 38 PTC 477 (Del.). Additionally, he also relied upon the following decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition. He submitted, even otherwise also the distribution revenue received by the assessee can be treated as royalty as defined under clause (iva) of Explanation 2 to section 9(1)(vi) of the Act as the consideration received is in respect of transfer of all or any right in respect of process and equipment. Thus, he submitted, the distribution revenue would be covered under equipment and process royalty. 10. As regards the existence of PE in India, learned Departmental Representative submitted, as per the guidelines issued by the Ministry of Information and Broadcasting, BWIPL, the Indian entity, has been authorized to conclude contract on behalf of the assessee. Therefore, there is a fixed place PE as well as dependent agent of the assessee in India in the form of BWIPL. 11. We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon. As far as the factual aspect relating to the issue in disputed is concerned, undoubtedly, neither the assessee (BBCWD) nor the Indian entity BWIPL are owners of the BBC World News Channel. The materials placed on record clearly reveal that BBC World News Ltd. is the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he content of BBC World News Channel, it is beyond comprehension, how the assessee can transfer such non-existent right in favour of BWIPL. Even, in the agreement between the assessee and BWIPL specific condition has been imposed that the distributor had no right to change, modify or alter or edit the content displayed on the channel. Thus, in sum and substance, what the assessee has conferred upon BWIPL through the distribution agreement is right to broadcast the channel circumscribed by certain conditions. In other words, BWIPL had only acquired broadcasting reproduction right as defined under section 37 of the Copyright Act. There are plethora of decisions, wherein, it has been very clearly and categorically held that broadcasting reproduction right as provided under section 37 of the Copyright Act is distinct and separate from copyright as defined under section 14 of the Copyright Act. 13. In case of MSM Satellite (Singapore) Pte. Ltd. (supra). Hon ble Bombay High Court while interpreting the meaning of copyright under Article 12(3) of India Singapore Tax Treaty, section 9(1)(vi) of the Income Tax Act and definition of copyright under the Copyright Act has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India: Explanation 2 below sub-section (1) of Section 9 describes the term royalty for the purpose of said clause, relevant portion of which reads as under:- Explanation 2.- For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains )for' 13. In our opinion, these provisions would in no manner change the position. Only if the payment in the present case by way of a royalty as explained in explanation (2) below sub-section (1) of Section 9 of the Act, the question of applicability of clause (vi) of sub-section (1) of Section 9 would arise. Learned counsel for the revenue placed considerable tress on clause (v) of explanation (2) by virtue of which the transfer of the rights in respect of copyright of a literary, artistic or scientific wok including cinematogr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perator. Facts are identical in assessee s own case, inasmuch as, the assessee even does not own the copyright over the content which is broadcasted on the channel. It only has the right to distribute the channel to third party distribution agency and hotels in India. In case of DDIT Vs. SET India Pvt. Ltd. (supra ), the Coordinate Bench has held that the distribution right of a channel is purely commercial right and is distinct from the right to use the copyright, hence, cannot be characterized as royalty. The following observation of the Bench is of much relevance: 6. Having heard both the sides, we observe that ld CIT(A) while examining the issue has stated that the Non-resident company has granted non-exclusive distribution rights of the channels to the assessee and has not given any right to use or exploit any copyright. The assessee is no way concerned whether the programs broadcast by the Non-resident company are copyrighted or not. The said distribution is purely a commercial right, which is distinct from the right to use copyright. We observe that ld CIT(A) has considered the provisions of Section 14 and Section 37 of the Copyright Act, 1957. It is observed that Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had entered into a fresh agreement with BWIPL, in terms of which, BWIPL was authorized to calculate and receive entire distribution revenue from the cable operators and credit it to its books of account. Thus, in nutshell, the entire distribution revenue generated in India was accounted for in the books of account of BWIPL and no part of it was shared with the assessee. It is also a fact that the entire distribution revenue has not only been accounted as income by BWIPL but profit derived there from has been offered to tax in India. The aforesaid factual position has not been controverted by the departmental authorities. However, the Assessing Officer as well as DRP has held that since as per the agreement the distribution revenue was required to be shared with the assessee, hence, a part of distribution revenue accrues at the hands of the assessee and has to be taxed in India as royalty. Further, the departmental authorities have held that since, BWIPL constitutes a fixed place PE and dependent agent PE, the distribution revenue is taxable in India. 17. Having considered the submissions of the parties, we are of the view that the approach of the departmental authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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