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TMI Blog2024 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... - We find that the payments in dispute are made to overseas rights holder. The said payments are neither made to any satellite operators nor for use of any satellite. Thus, the payments in dispute are not made for use of any process as defined u/s 9(1)(vi) of the Act and can t be charged to tax as Royalty in the hands of the overseas rights holders. Accordingly, we hold that the AO while passing the order u/s 201 of the Act has erred in law by treating the remittances to have been made for use of a Process . Appeal of the assessee is allowed. - Sh. Saktijit Dey, Vice President And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Ajay Vohra, Sr. Adv. For the Revenue : Sh. Sanjay Kumar, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by assessee against the order of National Faceless Appeal Centre (NFAC), Delhi dated 10.08.2023. 2. Following grounds have been raised by the assessee: 1. That on the facts and in the circumstances of the case, the National Faceless Appeal Centre ( NFAC ) has grossly erred both in facts and law in passing the order( Impugned Order ) under section 250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts events ( Live Rights ) and b) Right to use audio-visual recording of the sport events for subsequent telecasting, cutting small clips for advertisements, making highlights of the event etc. ( Non-Live Rights ). 5. The assessee had entered into agreement with the following entities: Sl. No. Non-resident overseas rights holder Country 1. Trident8 Limited (Tennis Australia) Australia 2. Transworld International LLC USA 3. Global Sports Commerce Pte. Ltd. Singapore 4. Sri Lanka Cricket Sri Lanka 5. At the Races Limited UK 6. The agreements and invoices pertaining to acquisition of Live Rights and Non-Live Rights from the aforesaid entities clearly bifurcate the total consideration between consideration for Live Rights and consideration for Non-Live Rights . 7. The assessee has deducted tax at source u/s 195 of the Income Tax Act, 1961 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant must satisfy the Hon ble Bench about the manner in which the recipients were entitled to the benefit of any DTAA. Since it has not been done, the appellant is not entitled to seek relief under the DTAAs. Without prejudice the failure of the appellant in deducting tax at source is absolute in view of the position of law settled by the Hon ble Supreme Court- It is humbly submitted that there is no disputing the fact that entire sums paid to various non residents were not exempt from chargeability to tax in India even under the DTAAs. Undisputedly the appellant has deducted tax at source on a portion of sums paid to the Nonresident. Entire payments have been made in pursuance of a single contract and not even through separate invoices in all cases. The position of law in this regard has been laid down by the Hon ble Supreme Court long ago in the case of Transmission Corporation of AP Vs Commissioner of Income Tax (1999) 239 ITR 587 SC. Reliance placed by the appellant on the decision in Engineering Analysis Centre of Excellence is totally misplaced- The Hon ble Supreme Court in this case has only held that Transmission corporation decision does not apply to a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the provisions of subsection (2) of sec. 4. It provides that income which is chargeable to income-tax under sub-section (1) of sec.4, the provisions of TDS and advance tax shall apply. Impliedly, if the income is not chargeable to tax, provisions of TDS and advance tax will not apply. This aspect has been again clarified by the Supreme Court in the case of Eli Lilly Co. (312 ITR 225). In this case, it was argued that TDS provisions are independent of the charging provisions which are applicable to the recipient of income whereas the TDS provisions are applicable to the payer of income. In reply to this contention, the Court observed at placitum 30 as follows: To answer the contention herein we need to examine briefly the scheme of the 1961 Act. Section 4 is the charging section. Under sec. 4(1), total income for the previous year is chargeable to tax. Sec.4(2), inter alia, provides that in respect of income chargeable under sub-section (1), income-tax shall be deducted at source whether it is so deductible under any provision of the 1961 Act which, inter alia, brings in the TDS provisions ITA 663/03 contained in Chapter XVII- B. In fact, if a particular income falls outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rates. The expression the whole of such sum would not be income chargeable , is to be understood as that only part of such sum has income character, and it is not to be understood to mean that the entire payment is without income character If the payer fails to make an application under sec. 195(2), then the payer will have to deduct tax from the entire payment. We repeat that this ruling of the Supreme Court is applicable only where the entire payment bears income character and also where part of the payment bears income character. To put it differently, if the payer has a bona fide belief that no part of the payment has income character, then sec. 195(1) will not apply because as we have observed earlier, sec. 195 will apply only if the payment is chargeable to income-tax, either wholly or partly. 25. We now take up the discussion with regard to sub- sections (2) and (3) of sec. 195 together. In para 24 above, on the basis of the judgment in the case of Transmission ITA 663/03 Corporation (supra), it is observed that where only a part of the payment bears income character, the payer may make an application under sec. 195(2) for deduction of tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the various provisions of the Act. The question is, if he is expected to know what income is taxable or not taxable in his own case, why can't he decide in respect of the payment he is making to non-resident. It is to be appreciated that the payer has not to determine the tax liability of the total income of the payee. He has to consider the chargeability only in respect of the payment he is making to the payee. Further, sub- section (2) states, Where the person responsible for paying (emphasis supplied) any such sum chargeable under this Act to a non-resident considers (emphasis supplied) that the whole of such sum would not be income chargeable in the case of the recipient,... (emphasis supplied). Consider the words which are underlined by us. They clearly indicate that it is the payer who will first consider whether the payment or any part of it bears income character. Therefore, in our view, it is the payer who is the first person to decide whether the payment he is making bears any income character or not. Now we can visualize various situations that can arise for the applicability of sec.195: a) If the bona fide belief is that no part of the payment has any portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ients can still be fastened on the appellant. All these submissions are irrespective of the fact whether assessments in the cases of recipients have yet been made or not. However, the factum of assessments in the case of recipients is required to be ascertained from the field authorities. In view of the above submissions it is humbly submitted that failure of the assessee in deducting tax at source in accordance with the provisions of Income Tax Act is absolute and the appellant has rightly been treated as an assessee in default in respect of tax which has not been deducted at source along with the compensatory interest. The appeal being devoid of merit be dismissed. It is prayed accordingly. 12. Heard the arguments of both the parties and perused the material available on record. 13. The question before us is as to, whether the right to broadcast Live events is not copyright and payment made thereto is Royalty under section 9(1)(vi) or not? 14. After detailed examination of the following judgments namely, i. CIT vs. Delhi Race Club [2014] 51 taxmann.com 550 (Hon ble Delhi HC) ii. Fox Network Group Singapore Pvt. Ltd. vs. ACIT(IT) (2020) 121 taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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