Facts:- MSM Satellite Singapore Pte Ltd (SET), a tax resident of Singapore, is engaged in the business of acquiring television programs, motion pictures and sports events. It exhibits the same on its television channels from Singapore.
SET had entered into an agreement with Global Cricket Corporation (GCC), another tax resident of Singapore. GCC had granted rights to SET to transmit, broadcast, exhibit any moving or audio visual representations of cricket matches. The rights were for certain specified territories including India.
The Assessing officer (AO) treated the consideration paid to GCC in the nature of royalty under the Indian domestic tax law. Further, according to the AO since the consideration was deemed to accrue or arise in India, the payment received by GCC were subject to tax in India. Given that SET had failed to withhold taxes on payments made to GCC, the AO held SET as an „assessee in default? and sought to recover taxes from SET.
On appeal, the first appellate authority disagreed with the AO holding that the consideration does not arise in India by virtue of Article 12(7) of the India-Singapore Tax Treaty (Tax Treaty). Revenue filed an appeal against the order before the Income-tax Tribunal (Tax Tribunal).
Ruling of the Tribunal
