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TMI Blog2024 (1) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Delhi Race Club [ 2014 (12) TMI 265 - DELHI HIGH COURT] . The attention of the ITAT was additionally drawn to the decisions rendered by M/s Neo Sports Broadcast Private Limited [ 2011 (11) TMI 23 - ITAT MUMBAI] and Nimbus Communications Limited [ 2013 (9) TMI 795 - ITAT MUMBAI] wherein the issue had come to be decided and answered in favour of the assessee. Bifurcation of revenue - We find no merit in the contention of the appellants that the ratio adopted for the purposes of bifurcation of income was either unsubstantiated or arbitrary. Whether service from which income was generated would clearly fall within the ambit of Explanation 2 as placed in Section 9(1)(vi)? - In light of the unequivocal conclusions as expressed by the Division Bench in Delhi Race Club[ 2014 (12) TMI 265 - DELHI HIGH COURT] and with which we concur, we find that once the Court came to the conclusion that a live telecast would not fall within the ambit of the expression work , it would be wholly erroneous to hold that the income derived by the assessee in respect of live feed would fall within clause (v) of Explanation 2 to S.9(1)(vi) of the Act. As in the facts of the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ESS came to be novated. 3. For the purposes of AY 2015-16, the respondent assessee had in its return of income offered an amount of Rs. 65,44,67,199/- as royalty income subject to tax in terms of the provisions contained in Section 9(1)(vi) of the Income Tax Act, 1961 [ Act ]. The aforesaid royalty income was stated to have been earned from sublicensing of broadcasting non live content as per the Master Rights Agreement [ MRA ] dated 31 October 2013 and which formed part of the Novated Agreements. The Assessing Officer required the respondent assessee to furnish an explanation as to why out of the total license fee earned by it, only Rs. 65,44,67,199/- had been offered to tax as royalty . Responding to the aforesaid query, the respondent is stated to have asserted that out of the gross consideration of Rs. 1181.63 crores earned from sub-licensing of sports broadcasting rights, it had earned an income of Rs. 65,44,67,199/- alone from non live feed and that the balance amount of Rs. 1115.91 crores was attributable to live feed which would not fall within the ambit of royalty as contemplated under Section 9(1)(vi) of the Act. The submission essentially appears to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right so as to fall within the ambit of 'royalty' or and whether it is taxable. 6. In view of the findings as expressed above, we find no merit in the contention of the appellants that the ratio adopted for the purposes of bifurcation of income was either unsubstantiated or arbitrary. 7. Before us, both Mr. Bhatia as well as Mr. Rai have assailed the view taken by the ITAT contending that the service from which income was generated would clearly fall within the ambit of Explanation 2 as placed in Section 9(1)(vi) of the Act. 8. We, however note that Delhi Race Club has clearly ruled on the scope and ambit of the expression the transfer of all or any rights (including the granting of a license), in respect of any copyright, literary, artistic or scientific work including films or video tube tapes.... as finding place in clause (v) of Explanation 2 to Section 9(1)(vi). 9. On a due consideration of the relevant provisions contained in the Copyright Act, 1957, the Court in Delhi Race Club observed as follows:- 16. Adverting to the facts of this case we note that the assessee was engaged in the business of conducting horse races and derived income from bett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirement of creativity for claiming a right under the Copyright Act, which is absent in a live telecast of an event . We note for benefit that the United States Court of Appeal Second Circuit Ruling in National Basket Ball Association NBA Properties NIC v. Motorola Inc, 105 F.3d. 841 (1997) held that a sports event is a performance and not a work. It is not copyrightable. 18. Insofar as the submission of Mr. Sawhney that the live telecast of an event is the outcome of scientific work and payment thereof would be covered under the definition of royalty is concerned, the said submission is also liable to be rejected; first, it runs contrary to his earlier submission and also for the simple reason the cl. (v) of explanation 2 to clause (vi) of sub-section(1) of Section 9 would relate to work which includes films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting. It is to be seen whether consideration for transfer of all or any rights of scientific work including films or video tapes would include a live telecast. The clause is an inclusive provision for films or video tapes for use in connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the expression work , it would be wholly erroneous to hold that the income derived by the assessee in respect of live feed would fall within clause (v) of Explanation 2 to S.9(1)(vi) of the Act. 11. Notwithstanding the above, Mr. Rai, learned counsel appearing for the appellant, additionally sought to place the respondent s income in clause (i) of Explanation 2 to Section 9(1)(vi) of the Act and sought to contend that the word process as occurring therein would make revenue earned from live feed taxable. 12. The aforesaid submission essentially proceeded on the basis of Explanation 6 to Section 9(1)(vi) which reads as under:- Explanation 6. For the removal of doubts, it is hereby clarified that the expression process includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret ;] 13. As is evident from a reading of the said Explanation, the clarification which is entered pertains to transmission by satellite (including up-linking, amplification, conversio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive or prospective? The Revenue argues that it must, while the assessees argue to the contrary. This court is inclined to uphold the contention of the latter. 41. This court is of the view that no amendment to the Act, whether retrospective or prospective can be read in a manner so as to extend in operation to the terms of an international treaty. In other words, a clarificatory or declaratory amendment, much less one which may seek to overcome an unwelcome judicial interpretation of law, cannot be allowed to have the same retroactive effect on an international instrument effected between two sovereign states prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this court, indefensible. xxxx xxxx xxxx 45. At the very outset, it should be understood that it is not as if the dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the double taxation avoidance agreements. When that is the case, there is no need to refer to the laws in force in the Contracting States, especially to deduce the meaning of the definition under the double taxation avoidance agreements and the ultimate taxability of the income under the agreement. That is not to say that the court may be inconsistent in its interpretation of similar definitions. What that does imply however, is that just because there is a domestic definition similar to the one under the double taxation avoidance agreement, amendments to the domestic law, in an attempt to contour, restrict or expand the definition under its statute, cannot extend to the definition under the Double Taxation Avoidance Agreement. In other words, the domestic law remains static for the purposes of the double taxation avoidance agreement. The court in Sanofi (supra) had also held similarly (page 442 of 354 ITR): We are in agreement with the petitioners and in the light of our preceding analyses, discern no textual, grammatical or syntactic ambiguity in article 14(5), warranting an interpretive recourse. In the circumstances, invoking the provisions of article 3(2) by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the treaty, we have already held in Ericsson A. B. (2012) 343 ITR 470 (Delhi) that a copyrighted article does not fall within the purview of royalty. Therefore, we decide question of law Nos. 1 and 2 in favour of the assessee and against the Revenue. 52. Thus, an interpretive exercise by Parliament cannot be taken so far as to control the meaning of a word expressly defined in a treaty. Parliament, supreme as it may be, is not equipped, with the power to amend a treaty. It is certainly true that law laid down by Parliament in our domestic context, even if it were in violation of treaty principles, is to be given effect to ; but where the State unilaterally seeks to amend a treaty through its Legislature, the situation becomes one quite different from when it breaches the treaty. In the latter case, while internationally condemnable, the State's power to breach very much exists ; courts in India have no jurisdiction in the matter, because in the absence of enactment through appropriate legislation in accordance with article 253 of the Constitution, courts do not possess any power to pronounce on the power of the State to enact a law contrary to its treaty obligations. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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