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TMI Blog2024 (9) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... Ayush Kumar, Adv For the Department : Sh. Vijay B Vasanta, CIT DR ORDER PER YOGESH KUMAR U.S., JM The above mentioned Appeals are filed by the assessee for Assessment Years 2020-21 and 2021-22 against the order passed by the Assessing Officer ( A.O for short) u/s 143(3) r.w.s 144C (13) Delhi order dated 29/06/2023 20/10/2023 respectively. 2. The assessee has raised the common Grounds of Appeal. For the sake of convenience the Grounds of Appeal for Assessment Year 2020-21 are reproduced as under:- The following grounds are independent of each other and without any prejudice to one another. 1. General 1.1. That on the facts and in the circumstances of the case and in law, the assessment order passed by the Ld. AO in line with the directions of DRP for the subject AY is bad both in law and on facts. The Ld. AO, based on surmises/ conjectures and in violation of the principles of natural justice, has grossly erred in assessing the income of TBSAP for subject AY at INR 1,51,71,99,007 as against INR 34,96,99,010 per return of income filed by the Appellant. 2. Grounds relating to taxability of distribution revenues 2.1. That on the facts and circumstances of the case and in law, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case and in law, the Ld. AO has erred in disregarding the decision of Hon'ble Bombay High Court in the case of MSM Satellite (Singapore) Pte Ltd [2019] 265 Taxmann 376 (Bom) and the decisions of Hon'ble Mumbai Bench of ITAT in the case of Dy. CIT v. Set India (P.) Ltd. (IT Appeal No. 4372 (Mum.) and ADIT (IT) v. Taj TV Ltd. [2016] 72 taxmann.com 143/161 ITD 339 (Mum.) wherein it was held that consideration received for the distribution of television channels does not qualify as Royalty under the respective tax treaties. 2.8. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not considering Clause 5 of the inter-company agreement between the Appellant and WMIPL covering the subject AY wherein it has been specifically mentioned that the Appellant is the owner of the channel and no proprietary rights have been given to WMIPL. Hence, the consideration received by the Appellant in lieu of grant of distribution rights to WMIPL does not qualify as Royalty under the Treaty; 2.10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not recognizing that Explanation 6 to section 9(1)(vi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the PE is remunerated at an arm's length, no further attribution of profit is required; 3.5. Without prejudice to the above, that on the facts and in circumstances of the case and in dave shof Ld. AO has erred in disregard that on the doch anved at between the Competent Authorstenment India and USA for TBsgarding the resolution arve 2004-05 wherein 10% of advertisement revenues received by TBSAP have been attributed to its alleged PE. 3.6. That on the facts and in circumstances of the case and in law, the Ld. AO has erred in disregarding the fact that attribution of 10% of advertisement revenues received by TBSAP has been accepted by the Hon'ble Delhi Bench of ITAT. Hon'ble Dispute Resolution Panel as well as the L.d. AO in the Appellant's own case for AY 2007-08 to AY 2017-18, facts of which are similar to the subject AY 3.7. That on the facts and in circumstances of the case and in law, with respect to the Appellant's advertisement revenue (as received by TBSAP from WMIPL), the Ld. AO has grossly erred in deviating from its consistent position per earlier years i.e. increasing the attribution from 10% to 15% on adhoc and arbitrary basis merely based on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case. 3. Since the issues involved in both the appeals are identical, both the Appeals for Assessment Years 2020-21 and 2021-22 are heard together and disposed in this common order. Brief facts of the case are as under:- 3.1. The assessee is a tax resident of USA within the meaning of Article 4 of the India-USA Double Taxation Avoidance Agreement ( DTAA ) and holds a valid Tax Residency Certificate for the Financial Year relevant to Assessment Year 2020-21 as well as 2021-22. For the years under consideration, the assessee entered into an agreement with WarnerMedia India Private Limited ( WMIPL ) effective from April 01, 2011, as amended from time to time, wherein the assessee granted WarnerMedia India Private Limited the rights to sell advertising and distribution of television and interactive platforms namely Cartoon Network, Cartoon Network HD (CN HD+) and POGO, and any other television, interactive television, and/or telecommunication services for viewership in India. As per the said agreement, WarnerMedia India Private Limited is to retain 50 percent of revenues earned from sale of advertisement inventory for the channels in India and from distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed in Assessee s own case for Assessment Years 2010-11 to 2017-18 of the Tribunal, which has been upheld by the Jurisdictional High Court, therefore, sought for allowing the Appeal. 5. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities sought for dismissal of the appeal, but neither disputed the order of the Tribunal in Assessee s own case for Assessment Year 2009-10 to 2017-18 which has been upheld by the Hon ble High Court of Delhi, nor produced any contrary judicial precedents before us. 6. We have heard both the parties and perused the material available on record. The identical question came up before the Tribunal in Assessee s own case for Assessment Year 2009-10 to 2017-18, wherein the Coordinate Bench of the Tribunal in ITA Nos. 1343/Del/2014, 631/Del/2015, 4987/Del/2016 and 2610/Del/2017 held that distribution revenues received by the assessee from WarnerMedia India Private Limited towards granting distribution rights of its channels constitutes business income, wherein rejected the stand of the revenue to tax the same as Royalty under the Act and the treaty in following manners:- 41. We have heard the rival submissions, peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accepted by the Department in the assessment orders for Assessment Years 2007-08 and 2009. Though assessee's case was throughout had been that it does not have any kind of plea and the transaction with TIIPL are on principle to principle basis and even if TIIPL is an agent of independent status, then remuneration paid to TIIPL was at arm's length, and therefore, TIIPL cannot be considered to be PE of assessee in India. It has been brought on record that in all the years and in subsequent years also Assessing Officer has held the advertisement revenue to be the business income following the MAP order. However, during the impugned assessment years, the said position has been digressed by the Assessing Officer without there being any material change in the facts and circumstances or the terms of agreement or the business mutual. Therefore, we are in tandem with the contention of the ld. counsel that when this fundamental aspect is permeating through different assessment years which have been accepted by the parties, then as a rule of consistency, the same position should not be altered or should be allowed to be changed. 43. Be that as may be, now we will independently analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght. The Term 'Copyright' has defined in Section 14 and 'broadcast reproduction right' has been defined in Section 37 and both are two distinctive and separate rights. 'Broadcast reproduction right' is not reckoned as copyright. Here, in this case, appellant never granted any licenses to use any copyright, either to distributor or to the cable operator albeit it has only granted right for purpose of selling advertisement on the product that are channels, etc. and distribution of such products in India. The Indian company is carrying out the distribution and selling of the advertisement and it does not have any kind of right to edit, interpret, add the products distributed by it. The assessee company only granted commercial rights in the nature of 'broadcast reproduction right' to the TIIPL, which has been separately defined u/s. 37 of the Copyright Act and therefore, it cannot be held that revenue derived by the assessee for distribution of products is taxable as 'royalty' albeit it is a business income of the assessee. 44. The Assessing Officer has tried to justify the tax the distribution revenue in the nature of royalty by applying the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product in the case at hand is a channel and what is streamed is the content, all of which gets distributed without any separation or dissection. Accordingly, the amount received from TIIPL cannot be brought to tax as 'royalty' in the hands of the Appellant Company. 47. Ld. DR has tried to distinguish the facts of the captioned matter from the case of MSM Satellite (Supra) and stressed heavily upon the ability of the consumer to 'store' and 'interact' with the content. However, the aforementioned factors cannot form basis for distinguishing the judgement rendered by the Hon'ble Bombay High Court. The crux and the core issue involved in the decision rendered by Hon'ble Bombay High Court and the impugned issue remains to be the same, i.e., whether the amounts received by a non- resident company for granting distribution rights to an Indian Company could be brought to tax as royalty or not. The Hon'ble Bombay High Court has categorically held that subscription charges received by MSM Satellite was for only viewing of the channels operated by it and it cannot be said that such revenue was for parting of any copyright. Accordingly, if the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Senior advocate for the appellants, makes it clear that broadcasters may, in fact, be the owners of the original copyright of a work- for example, if they themselves have produced a serial. They may also be the copyright owners of the broadcast of this serial which is a separate right under the Copyright Act which they are able to exploit, and if there is a re-broadcast of what has already been copyrighted, this again is protected by Chapter VIII of the Copyright Act. The argument before the Hon'ble Apex Court on the interpretation of the Copyright Act, 1957 was that, in case of a broadcaster there may be three different rights. First right when the broadcaster has produced the serial and second when they broadcast the serial and third again re broadcast. The Hon'ble Apex Court has concluded the same in para 64 as hereunder: The picture that, therefore, emerges is that copyright is meant to protect the proprietary interest of the owner, which in the present case is a broadcaster, in the work , i.e. the original work, its broadcast and/or its re- broadcast by him. 51. Consequently, even the observations of the Hon'ble Apex Court in fact supports the case of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of other. 54. Thus, we hold that the distribution revenue earned by the appellant-assessee cannot be taxed as royalty albeit as a business income. Since, assessee has already offered income as business income in terms of the MAP, therefore, the income as declared by the assessee in accordance with the MAP and accepted by the Department in the earlier years has to be accepted. Accordingly, the additions made by the Assessing Officer are deleted. 7. The said order of the Tribunal has been called in question before the Hon'ble High Court in ITA No. 282/2022 and connected matters and the Hon ble High Court of Delhi vide order dated 28/03/2024, found no justification to entertain the Appeal filed by the revenue in following manners:- 1. The Revenue has instituted the instant appeals and has proposed the following questions of law for our consideration:- 2.1 Whether on the facts and in the circumstances of the case, the !d. ITAT has erred in holding that the distribution revenue earned by the appellant assessee cannot be taxed as royalty, as per section 9(1 )(vi) of the Act and Article 12 of the DTAA between India and the USA but as a business income? 2.2 Whether on the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the above-captioned matters. 9.1. Mr Chandra will file the written submissions, not exceeding three pages, within the next two weeks. 9.2. Mr Chandra will also ensure that the appeal for AY 2014-2015 is listed by the next date of hearing. 10. List the above-captioned matters on 28.02.2023, at the end of the Board in the category of After Notice Miscellaneous Matters . 3. The fact of the Mutual Agreement Procedure having been adhered to by respective parties and consequent to the adjudication completed therein, the assessee having agreed to pay 10% of advertising and subscription revenue is not disputed. As would be manifest from a reading of paragraph nos. 4 to 6 of our order dated 14 December 2022, the aforesaid practice is also stated to have been accepted by the Revenue for Assessment Years 2007-08 and 2008-09. 4. In view of the aforesaid and bearing in mind the principles of consistency, we find no justification to entertain the challenge. 8. By respectfully following the order of the Co-ordinate Bench of the Tribunal and the order of the Jurisdictional High Court (supra), we hold that the subject distribution revenue earned by the assessee cannot be taxed as Royalty albei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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