Emphasising that the right to broadcast live events, i.e., "Live Rights," is not "copyright," and thus any payment made to it cannot 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 not in default for failure to deduct tax at source on foreign remittances made towards acquisition of the right to broadcast 'live-events'.
The Member of ITAT comprising Saktijit Dey (Vice-President) and B.R.R. Kumar (Accountant Member) observed that the broadcasting "Live events" does not amount to a work in which copyright subsists, indicating that the right to broadcast live events, i.e., "Live Rights" is not "copyright" and consequently any payment made to it cannot be deemed to be liable to tax as royalty under section 9(1)(vi).
According to the brief facts of the case, the assessee company, which is in the business of broadcasting or sub-licensing the right to broadcast sports events, had entered into agreements with various non-resident entities to acquire the right to broadcast live sports events as well as the right to use audio-visual of the sports events for subsequent telecasting, cutting small clips for advertisements, creating highlights of the event, and so on.
The agreements and invoices clearly stated the entire consideration, including money for 'Live Rights' and 'Non-Live Rights. Even though the assessee deducted tax on payments made for the acquisition of 'Non-Live Rights' as royalty under Section 9(1)(vi), he did not deduct any tax at source under Section 195 on payments made for 'Live Rights'.
The Coram stated that the agreements and invoices relevant to the acquisition of Live Rights and Non-Live Rights from non-resident corporations divide the total consideration into consideration for Live Rights and consideration for Non-Live Rights.
Furthermore, the Coram found that the Department erred in classifying overseas remittances as liable to tax in the form of royalty in the hands of the recipient by characterising them as having been made for the use of a 'Process'.
As a result, finding that the assessee made payments to overseas rights holders rather than satellite operators or for using any satellite, the Bench ruled that payments for live rights are not made for using any process as defined under Section 9(1)(vi). It thus cannot be taxed as royalty by overseas rights holders.
As a result, the Bench ruled in favour of the assessee, holding that the assessee is not an assessee-in-default under Section 201 because Section 195 does not compel it to pay tax at source on such international transfers.
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