Right To Broadcast Live Events Is Not 'Copyright', Hence Payment Made In Relation Thereto Cannot Be Taxed As 'Royalty' U/S 9(1)(VI), Clarifies Delhi ITAT

Emphasizing that the 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) of the Income tax Act, 1961, the Delhi ITAT holds assessee as not in default for non-deduction of tax at source on foreign remittances made towards acquisition of right to broadcast 'live-events'.

The Member of ITAT comprising Saktijit Dey (Vice-President) and B.R.R. Kumar (Accountant Member) observed 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)”. (Para 14)

As per the brief facts of the case, the assessee company, engaged in the business of broadcasting or sub-licensing right to broadcast sport events, had entered into agreements with various non-resident entities for acquisition of right to broadcast live sports events and right to use audio-visual recording of the sport events for subsequent telecasting, cutting small clips for advertisements, making highlights of the event etc. The agreements and invoices clearly mentioned total consideration between consideration for 'Live Rights' and consideration for 'Non-Live Rights'. Even though the assessee deducted tax at source on the payments made towards acquisition of 'Non-Live Rights' considering the same to be royalty under Section 9(1)(vi), however did not deduct any tax at source under Section 195 on the payment made for 'Live Rights'. The AO therefore passed order under Section 201(1) and 201(1A) by holding that the payment for 'Live Rights' is chargeable to tax as royalty in the hands of the non-resident recipients, and treated the assessee as in default for failing to deduct tax on same under Section 195.

The Coram noted that the agreements and invoices pertaining to acquisition of Live Rights and Non-Live Rights from the non-resident entities clearly bifurcate the total consideration between consideration for live rights and consideration for Non-Live Rights.

Further, the Coram observed that the Department had erred in treating the foreign remittance to be chargeable to tax in the nature of royalty in the hands of the recipient, by treating the remittances to have been made for use of a 'Process'.

Therefore, finding that the assessee had made the payments to overseas rights holder and not to any satellite operators nor towards use of any satellite, the Bench opined that the payments for live rights are not made for use of any process as defined under Section 9(1)(vi), and hence it cannot be charged to tax as royalty in the hands of the overseas rights holders.

Hence, the Bench answered in favour of assessee and held that the assessee is not an assessee-in-default under Section 201 as it is not required to deduct tax at source under Section 195 on such foreign remittances.

Counsel for Appellant: Ajay Vohra

Counsel for Respondent: Sanjay Kumar

Case Title: Lex Sportel Vision Pvt Ltd Verses Income Tax Officer

Case Number: ITA No. 2397/Del/2023

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