Licence Fee Received By Cricket Australia For Live And Non-Live Transmissions Rights Can’t Be Taxed As Royalty: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that Cricket Australia is not liable to pay ‘royalty’ on licence fees received for live and non-live transmission rights.

The bench of Kul Bharat (Judicial Member) and M. Balaganesh (Accountant Member) has relied on the decision of the Co-ordinate Bench of the Tribunal in the case of Fox Network Group Singapore Pte. Ltd. vs. ACIT, in which it was held that there is no copyright on live events, and therefore, it is not taxable as ‘royalty’. Thus, the fee received towards live transmission cannot be taxed as ‘royalty’ in terms of Section 9(1)(vi).

The appellant/assessee filed its return of income on October 31, 2018, declaring a total income of INR 68,66,110/-. Thereafter, the case was selected for scrutiny through Computer Aided Scrutiny Selection (CASS), and a notice u/s 143(2) was issued on September 22, 2019, and duly served upon the assessee.

The notice under Section 142(1) was issued to the assessee. The reason for scrutiny was stated to be a high ratio of refund to TDS relating to Section 195 (Business ITR). The Assessing Officer noticed that the assessee did not offer certain income for tax, i.e., a licence fee for live and non-live transmission rights of INR 5,81,43,665 and a tournament fee of INR 2,48,266. Therefore, a draft assessment order was passed under Section 144C.

The AO had proposed to assess the income at INR 5,83,91,931 after proposing an addition in respect of royalty of INR 2,48,266/- qua tournament fee and in respect of licence fee of INR 5,12,77,558.

The AO made an addition of INR 5,12,77,558/- in respect of the licence fee for live and non-live transmission under Sony Pictures Networks India Pvt. Ltd. on the ground that live transmission of sports events in the modern era is not merely a process of streaming events from the venue to the television set of the viewer. As per the AO, there is value addition in live transmission; likely, studios have hosts speaking vernacular languages, interviewing experts and celebrity guests, and playing short replays of important moments in the game or match even as the game continues.

The assessee filed its objections against the draft assessment order before the Dispute Resolution Panel (DRP). The DRP was directed to dispose of the objection of the assessee. The DRP sustained the findings of the AO related to the licence fee received for live and non-live transmission rights. However, in respect of royalty, the AO was directed to pass a speaking order in accordance with the law.

The assessee argued that the authorities below failed to appreciate the facts and made the impugned additions contrary to the judicial pronouncements on the issues. Any change in domestic law would not alter the terms of the DTAA. Even otherwise, explanation 6 of Section 9 cannot be applied.

The department contended that it is not a simple live telecast but that value addition is made by way of expert comments and advertisements, etc.; it is not a mere transmission and telecast.

The tribunal held that there is a clear distinction between a copyright and a broadcasting right, broadcast or live coverage, which does not have a copyright, and therefore, payment for live telecast is neither payment for transfer of any copyright nor any scientific work so as to fall under the ambit of royalty under Explanation 2 to Section 9(1)(vi).

Case Title: Cricket Australia Versus ACIT

Case No.: ITA No.1179/Del/2022

Date: 24.08.2023

Counsel For Appellant: Percy Pardiwala, Nitesh Joshi

Counsel For Respondent: Vizay B.Vasanta

Click Here To Read The Order