Lex Sportel Vision Pvt. Ltd. Vs ITO (ITAT Delhi)
ITAT Delhi held that broadcasting “Live events” does not amount to a work in which copyright subsists i.e., “Live Rights”, is not “copyright” and therefore any payment made thereto can’t be said to be chargeable to tax as royalty under section 9(1)(vi).
Facts- The assessee company engaged in the business of broadcasting or sub-licensing right to broadcast, sport events e.g., golf, cricket, soccer etc. on live and non-live basis. During the Financial Year 2017-18, the assessee had entered into agreements with various non-residents. The agreements and invoices pertaining to acquisition of “Live Rights” and “Non-Live Rights” clearly bifurcate the total consideration between consideration for “Live Rights” and consideration for “Non-Live Rights”.
The assessee has deducted tax at source u/s 195 of the Income Tax Act, 1961 on the payment remitted in lieu of acquisition of “Non-Live Rights” considering the same to be “Royalty” u/s 9(1)(vi) of the Act chargeable to tax in the hands of the non-resident overseas rights holder in India. The assessee has not deducted any tax at source u/s 195 on the payment made for “Live Rights”.
CIT(A) passed the order u/s 201 of the Act by observing that the payment for “Live Rights” is chargeable to tax as “Royalty” in the hands of the non-resident overseas rights holder warranting withholding of tax u/s 195 of the Act.
Conclusion- Held that broadcasting “Live events” does not amount to a work in which copyright subsists, meaning thereby right to broadcast live events i.e., “Live Rights”, is not “copyright” and therefore any payment made thereto can’t be said to be chargeable to tax as royalty under section 9(1)(vi). Further the courts have held that when the agreements clearly bifurcate the consideration paid towards Live and “Non-Live Rights”, the Department can’t deem the payment made for “Live Rights” to have been made for a bouquet of rights.
FULL TEXT OF THE ORDER OF ITAT DELHI
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 of the Income Tax Act, 1961 (the “Act”) pursuant to appeal against order under section 201(1) & 201(1A) of the Act.
2. That on the facts and circumstances of the case, the NFAC has grossly erred in facts and in law in holding that the payment made to non-residents for acquiring broadcasting rights of live events is taxable as “royalty” under section 9(1)(vi) read with Double Taxation Avoidance Agreements (“DTAAs”) and hence warrants withholding of tax under section 195.
2.1. That the NFAC has grossly erred in facts and in law in considering the right to broadcast live sport events and the separate right to use recorded audio-visuals of the sport events (non- live rights), as a single bundle of rights constituting “copyright” under the Copyright Act, 1957.
2.2. That the NFAC has grossly erred in facts and in law in considering the payment made to non-residents for acquiring broadcasting rights of live events as “royalty” under section 9(1)(vi) since the right to broadcast live event does not constitute “copyright” under the Copyright Act, 1957.
2.3. That the NFAC has grossly erred in facts and in law in considering the payment made to non-residents for acquiring broadcasting rights of live events as “royalty” under section 9(1)(vi) since the right to broadcast live event does not constitute “process” as per Explanation 6 to section 9(1)(vi).
2.4. That the NFAC has grossly erred in facts and in law in considering the payment made to X ‘ non-residents for acquiring broadcasting rights of live events as “royalty” under the respective DTAAs.
3. That the NFAC has passed the Impugned Order in complete violation of principles of natural justice and in contravention of the Faceless Appeal Scheme 2021 read with section 250(6B) of the Act in as much as the same is passed without providing an opportunity of personal hearing to the Appellant, despite having specifically asked for the same.”
3. The assessee company engaged in the business of broadcasting or sub-licensing right to broadcast, sport events e.g., golf, cricket, soccer etc. on live and non-live basis. The assessee company filed return of income on 30.11.2018 declaring total income of Rs. Nil.
4. During the Financial Year 2017-18, the assessee had entered into agreements with various non-residents for acquisition of two types of rights:
a) Right to broadcast live sports 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:
