9911796707
TMI Blog2023 (1) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ration has been offered to tax in Singapore as income accruing in or derived from Singapore. Thus, accepting the contention of GCC that the income under consideration is not taxable in Singapore on receipt/remittance basis, but on accrual basis. Nothing has been placed on record to controvert 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 Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not provide separate consideration or break-up of consideration for different rights forming part of bouquet of rights obtained by SET. Whether Live Feed delivered to SET by GCC or by the producer on behalf of GCC in terms of the Heads Agreement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment u/s 147 - HELD THAT:- 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 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 Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls 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 circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax treaty ("Treaty"). The Appellant respectfully submits that the above finding is erroneous and should be set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 part of News Corporation Group of companies. 2.10 Thus, Master Rights Agreement was novated in favour of the GCC vide TNA and as a result, GCC stepped into the shoes of W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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.20,50,000/- from SET as "License Fee" for grant of the aforesaid rights. 3.3 LG Electronics India Private Limited (For Short "LGEIL") was granted sponsorship rights by GCC in terms of Global Partnership Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded 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 both the sides. We have considered the rival submission keeping in view the factual matrix and the position in law. We have also perused the judicial precedents cited during the course of hearings. A number of judicial precedents were cited by b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 Learned Special Counsel for the Revenue submitted that CIT(A) fell in error in granting benefit of the DTAA to GCC. He submitted that GCC is not entitled to relief under the provisions of the DTAA as the provisions relating to "Limitation of Relief" contained in Article 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 inspire correctness of the claim. The order of learned CIT(Appeals) in this regard is erroneous without appreciation of complete facts and deserves to be set aside to this effect." (Emphasis Supplied) The Ld. Counsel for Revenue also referred to the transfer cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf 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 25.06.2010 reported in 132 TTJ 459.) wherein in proceedings pertaining to SET it was held that provisions of Article 24 were no attracted and GCC was entitled to claim benefit of DTAA. 4.8. Without prejudice to the above, the Learned Senior Counsel for GCC submitted that as per the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: "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, subject to the provisions of this Act be payable at the rate or rates specified hereinafter for each year of assessment upon the income of any person accruing in or derived from Singapore or received in Singapore from outside Singapore in respect of --- (a) gains or profits from any trade, business, profe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 that Article 24 of the India Singapore tax treaty is applicable in the appellant's case mainly on the ground that payment has not been remitted to Singapore. The remittance from Jersey to Singapore becomes irrelevant in view of the above discussion on appellant's submissions that global revenues of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. 5.3. The Learned Counsel for Revenue submitted that SET had obtained the rights in respect of the India territory and the matches were telecasted in India from which advertisement and distribution income was earned by SET from India. Elaborating upon the aforesaid, he submitted that there existed an intricate web of complex ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Act as per Article 3(2) of the DTAA. Therefore, the Learned Counsel for Revenue placed reliance on the judgment of the Hon"ble Supreme Court in the case of Performing Rights Society Ltd. & Anr. Vs. CIT & Ors: [1977] 106 ITR 11(SC) to support the contention that the royalty income arose in India. 5.5. Per contra, the Learned Senior Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. 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 be considered to constitute source of income in India 5.8. Learned Senior Counsel for GCC, while concluding his arguments on this issue, submitted that even while deciding appeal for the Assessment Year 2003-04 the CIT(A) did not hold that income arose in India in terms of Section 5 of the Act as the CIT(A) only referred to Section 9(1)(vi)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 chargeable to tax in, both, Residence State and Source State. India has entered into DTAA with Singapore and taxing rights in respect of income in the nature of "royalties" have been allocated by Article 12 of DTAA. In Article 12(2) of DTAA the term "arise" has been in the context of the "contracting state" having right to tax income and not in the context of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income "deemed to accrue/arise" in India in terms of Section 9 read with Section 5 of the Act. Such income, which is deemed to accrue or arise in India as per the provisions of the Act, would also not be covered by Article 12(2) of DTAA, and therefore, be liable to tax at normal rates as per the provisions of the Act in India. This would clearly be an anomalous situation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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. The aforesaid contention was neither raised nor examined in the said cases. Thus, the decisions rendered in the context of Article 12(7) of DTAA are distinguishable on account of the aforesaid facts and therefore, not applicable to the issues raised by the Revenue in the present appeals. Accordingly, for the reason stated hereinabove we reject the contention advanced on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed 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 the stations of All India Radio arose in India. In our opinion, this was the correct view to take and we find no reason to differ from it." (Emphasis Supplied) 5.22. In the above case, the Hon"ble Supreme Court rejected the contention that income had accrued outside India which was the place of execution of the contract. We agree with the Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med 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)(vi) of the Act. Article 12(3)(a) of DTAA defines "royalties" to mean, inter alia, payments received as consideration for use of, or right to use of (i) any copyright of a cinematograph film or tapes used for radio or television broadcasting, or (ii) any trade mark. The issue that arises for consideration is whether the payment by SET to GCC could be reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Counsel for Revenue submitted that copyright exists in the 'modified' Feed. He further submitted that as per Clause 4 of the Master Rights Agreement, "Media Rights" included Recording and Transmission Rights, and Media Transmission. He submitted that the aforesaid rights were to be read together with Clause 4 of the Heads Agreement. Media Transmission Rights in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 as part of "Live" real time matches. An identical Feed was given to other broadcasters in respect of other territories with replays, commentary and graphics included as part of "Live" Feed. In view of the aforesaid, it was submitted that GCC received consideration for the purpose of grant of "Live" rights. Further, in a response to the specific query raised by the Bench it was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sual 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 by SET. Part 4 of Schedule annexed to the Heads Agreement gave details of Authorised Number of Exhibitions and read as under: "Authorised Number of Exhibitions: In relation to each Match: (a) During the Event (live/delayed coverage including customizations that the Licensee may create) 2 'exhibition days' ('exhibition day' meaning any day of 24 hours commencing on the first t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "copyright". In order to appreciate the proposition of law laid down by the Hon"ble High Court it would be pertinent to consider the facts of the case. This judgment was rendered in regular first appeal arising from the order dismissing suit for permanent injunction filed by ESPN Star Sports (ESS), holding exclusive right to broadcast some cricket matches at the relevant time, against Global Broadcast News Limited and other br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 specifically mentions that where in any case an element of copyright subsists in respect of any work that has been broadcast, the license to reproduce such broadcast will take effect only with the consent of the owner of the right. In our view, in the present case the copyright owner of the new product, after additions/alterations, which makes the appellant's telecast significantly different from the original feed of the cricket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Agreement between GCC & Octogon [as reproduced in the order of CIT(A) for the Assessment Year 2003-04] in support of their contentions. Accordingly, we also proceed to examine the same in the context of the issue before us. 5.47. Perusal of the Master Rights Agreement shows that various clauses made references to term "Recordings" and contained rights and obligation relating to "Recordings" some of which are summarized as under: (a) IDI had grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (a) transmit the Recordings and exploit the Media Transmission or adaptations thereof by all means of distribution and point to multipoint and/or point to point transmission now known or hereafter devised (whether simultaneous or delayed, digital or analogue or otherwise) including without limitation: (i) all forms of television whether pay (subscription and pay per view) or free including terrestrial, cable, satellite and microwave transmissions and re-transmissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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, GCC was under obligation to deliver the "Feed" that was of international quality, live, clean and continuous, with English commentary, international sound effects and generic non-branded English language graphics. In terms of Clause 16 of the Heads Agreement, SET could ask for customization of the "Feed" by specifying Customization Requirements to the producer. As per Clause 17 and 18 of the Heads Agreement, in addition to the "Feed", the deliverables also included highlights package, customizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 rights and obligation in relation of "Recordings" and the Heads Agreement contained rights and obligations in relation to "Feed". In order to understand the relation between the two it would be pertinent to refer to the relevant clauses of the production agreement reproduced by the CIT(A) in paragraph 16 of his order for the Assessment Year 2003-04 on which reliance has been placed by both the sides which are as under. (a) Clause 3.1 of the Production Agreement appointed Octagon as producer to exclusively produce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, 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 GCC need not be same as Broadcasted Feed transmitted/broadcasted by SET as observed by the Hon"ble Delhi High Court in the case of ESPN Star Sports (supra) on account of inclusion of commentary, advertising and programming content. However, the rights in the Broadcasted Feed shall vest in SET. For the issue before us we reiterate that we are only concerned with the rights in Recording and "Live" Feed acquired by SET from GCC. 5.58. As per the Heads Agreement, SET has acquired right to transmit, exhibit and distribute the Feed. Section 2(ff) of ICA defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, 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 to acquire only "live" ball-by-ball Feed. Accordingly, the judgment of the Hon"ble Delhi High Court in the case of Sheraton International Inc. (313 ITR 267) would not be of any aid to GCC. We would also like to observe that a number of judgments were relied upon on behalf of GCC wherein it has been held that consideration for live feed does not amount royalty. However, all the decisions could not be applied to the present case in view of the factual findings returned by us, after examining various agreements, to the effect that the consideration received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 attributable to the Non-Live Exhibitions and recorded content in "Live" Feed. There is no material placed on record by both the sides to arrive at the more precise or better estimation/apportionment. Accordingly, in view of the above, we hold that 25% of the Licensee Fee paid by SET to GCC as fair estimate of income taxable in India as "royalties" in terms of Article 12(2) read with Article 12(3)(a) of the DTAA. 5.62. In view of the above, Ground No. 4 raised by the Revenue is partly allowed. 6. Ground No. 5 of Departmental Appeal (ITA.No.3130/MUM/ 2006) along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration 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 "right to use" equipment. The Learned Senior Counsel for GCC impressed upon the fact that GCC neither owned any equipment nor advertising spaces nor did it have any ownership over the hoardings or other advertising sites. The stadiums including the scoreboards, perimeter boards, etc did not belong to GCC but to the host cricket associations. GCC did not incur any cost in respect of hoardings that were put up at the venue, as the same were either constructed at the cost of sponsors and, subsequently placed at the venue or owned by the stadium owners or the host cricket associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 promotion material. 6.8. The Learned Counsel for Revenue, taking us through the Master Rights Agreement, submitted that sponsorship rights obtained by GCC from IDI in terms of the Master Rights Agreement could be classified in two classes. First - "Included Sponsorship Rights" (Refer to Clause 5.1 of the Master Rights Agreement) and Second - "Excluded Sponsorship Rights" (Refer to Clause 5.2 of the Master Rights Agreement). Clause 6.2 of the Master Rights Agreement gave GCC the right of first negotiation with IDI to exploit any of the excluded rights enumerated in Clause 6.1 of the Master ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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. Thus, GCC/WSN was in a position to exploit the rights which were granted to LGEIL & HH as sub-licensee. While concluding his submissions on this issue he submitted that the agreements with the host cricketing board/association were never placed on record by GCC. 6.12. He submitted that in view of the above the Assessing Officer was justified in holding that payments received by GCC from LGEIL/HH were in the nature of royalty for right to use commercial equipment as per Section 9(1)(vi) of the Act. In this regard, the Learned Counsel for Revenue placed reliance the decision of Kolkata Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stadium and the advertising sites by virtue of contractual rights and obligations arising from agreements entered into between the ICC member country authorized by IDI to host ICC-Event (i.e. Host), IDI and Participating Nation. The Venues were under control of IDI and/or the Host and by virtue of contractual rights GCC had access to the Venue to the exclusion of all others. Thus, GCC had controlled over the Venue and in turn the advertising sites at the Venue. Further, while GCC may not have borne the cost of hoardings and/or other advertising material, GCC continue exercise control and dominion over the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty 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 International Inc. (supra), and the judgment of Sahara India Financial Corporation (supra), in our view squarely apply to the facts of the case. Thus the amount in question paid to Nimbus Sports International and GCC PTE Ltd., Singapore is not royalty as the payment was not for use of any trade mark, brand name. As both these organizations do not have any P/E in India the income is not taxable in India and consequently there is no requirement of deduction of tax at source. 53.39 Even otherwise, in case of payments to GCC for sponsorship of Championship Trophy 2006, we find that the Central Govt. vide notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Year 2013-14, prior to the Financial Year 2012-13, an assessee was permitted to reduce the amount of income-tax which was deductible at source while computing the advance tax liability and therefore an assessee cannot be held to have defaulted in payment of its advance tax liability. Accordingly, no interest would be charged under Section 234B of the Act. 7.3. In view of the above Ground No. 6 of Departmental appeal is dismissed and Ground No. 2 raised in Appeal by GCC is disposed off as being infructuous. Assessment Year 2003-04 8. We would now take up cross-appeals/cross-objection for the Assessment Year 2003-04. The Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respectfully submits that the above finding is erroneous and should be set aside." ITA No. 1510/Mum/2009 8.3 The Assessee has raised the following grounds of appeal: "Ground No. 1 The learned CIT(A) has erred in holding that the assessment can be re-opened under section 147 of the Income Tax Act, 1961 ("Act"). The Appellant prays that the entire proceedings under Section 147 of the Act be declared as void ab-initio and hence invalid. Ground No 2 The learned CIT(A) has erred in holding that payments made by Sony Entertainment Television Pte Limited ('SET Singapore') to the Appellant are taxable as 'Royalty under Article 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 South Africa, Kenya and Zimbabwe (February-March 2003) 9.2 For the relevant previous year SET had rights/broadcasting rights in terms of THA for the aforesaid ICC-Event. GCC earned USD.7,99,50,000/- from SET as "License Fee". Further, GCC also earned fees of USD 1,22,00,000/- and USD 1,10,000/- for grant of broadcasting rights to Prashar Bharti (Broadcasting Corporation of India) and All India Radio, respectively. 9.3 GCC also earned sponsorship fee of USD 39,71,200/- from LGEIL, USD 25,51,000/- from HH and USD 15,22,780/- from Hutchison Max Telecom Private Limited (For short "Hutch"). 9.4 GCC earned aggregate revenue of USD 16,01,27,908/- (including the above stated revenues) for the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), 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 both the sides. We have considered the rival submission keeping in view the factual matrix and the position in law. We have also perused the judicial precedents cited during the course of hearings. 10. Ground No. 1 of Appeal of the Assessee (ITA.No.1510/MUM/ 2006) 10.1. We would first take up Ground No. 1 ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Income Tax - XI: [2014] 366 ITR 115 (Delhi)[28-01-2014] 10.5. He submitted that in the absence of specific material showing/establishing escaped income for the Assessment Year 2003-04, no belief could have been formed about the escaped income merely on the basis of assessment of Assessment Year 2002-03. Thus, the initiation of the proceedings under Section 147 of the Act for the Assessment Year 2003-2004 are bad in law and therefore, should be quashed. 10.6. He further submitted that provisions of Section 147 of the Act cannot be invoked to cover the loss of opportunity to frame assessment under Section 143(3) of the Act. The return filed by GCC had become final in the absence of initiation of assessment proceedings under Section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 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. Further, 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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/adjudication in paragraph 5 to 5.63 above, we hold that 25% of the Licensee Fee paid by SET to GCC for the Assessment Year 2003-04 is liable to tax in India as "royalties" in terms of Article 12(2) read with Article 12(3)(a) of the DTAA and the provision of the Act. 12.3. In view of the above, Ground No. 2 to 5 raised by GCC and Ground No. 4 raised by the Revenue are dismissed. 13. Ground No. 5&6 of Departmental Appeal (ITA.No. 1444/Mum/2009) along with Ground No. 8 of Appeal by the Assessee (ITA.No.1510/MUM/ 2006) 13.1. Ground No. 5 and 6 raised by Revenue and Ground No. 8 raised by GCC pertain to income from sponsorship agreement received by GCC from various parties (i.e. LGEIL, HH and Hutchinson Max Telecom). We have already concluded that GCC would be entitled to claim benefit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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