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From the Courts »
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 Deputy Director Of Income Tax Vs. Virage Logic International

IMG Media Limited, 608, 1,B/2 Sai Prasad Co.Hsg, Society, Western Expressway, Highway Road, Mumbai-400051 Vs. Dy. Director of Income Tax (International Taxation)-3(1), 136, 1st Floor, Scindia House, N.M.Road, Ballard Pier, Mumbai-400038
August, 27th 2015
               ,   "" 
   IN THE INCOME TAX APPELLATE TRIBUNAL "L" BENCH, MUMBAI

    BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM)
     ..,     ,                                       

                   ./I.T.A.No.1513/Mum/2014
                 (   / Assessment Year :2010-11)

 IMG Media Limited,            /        Dy. Director of Income Tax
 608, 1,B/2 Sai Prasad Co.Hsg,
                               Vs.      (International Taxation)-3(1),
 Society,                               136, 1st Floor, Scindia House,
 Western Expressway,
  Highway Road,
                                        N.M.Road, Ballard Pier,
 Mumbai-400051                          Mumbai-400038
       ( /Appellant)           ..       ( / Respondent)

      ./   ./PAN/GIR No. :AACCI4811L

            / Appellant by             S/Shri Ravi Sharma,
                                       Rahul Gupta and
                                       Mudit Sharma
            /Rspondent by              Smt. Vandana Saltar


           / Date of Hearing               : 02.6.2015
           /Date of Pronouncement : 26.8.2015

                                 / O R D E R

PER B.R. BASKARAN (AM)

      The assessee has filed this appeal challenging the assessment order
dated 10.1.2014 passed by the Assessing Officer under section 143(3)
read with section 144C(13) of the Income Tax Act, 1961 (the Act) in
conformity with the direction issued by the Dispute Resolution Panel
(DRP). The assessee is aggrieved by the decision of ld. DRP/AO in holding
that the amount received by the assessee from Board of Control of Cricket
in India (BCCI) is assessable to tax as "Fee for technical services" and
alternatively as "Royalty" also.
                                    2                 I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



2.    The facts relating to the case are stated in brief. The assessee is a
Company incorporated in United Kingdom (UK), hence a tax resident of UK
in terms of Article 4 of the India­UK Double Taxation Avoidance
Agreement (DTAA). The assessee has furnished a copy of tax residency
certificate also before the AO in support of the same. The assessee is a
world leader in the field of multimedia coverage of sports events including
cricket. The BCCI engaged the assessee for capturing and delivering live
audio and visual coverage of cricket matches conducted under the brand
name IPL, 2008 and also IPL, 2009. The taxability of the amount received
by the assessee from BCCI is the issue urged before us. The facts relating
to the case are described as under by Ld CIT(A):-
      "3.    It has further been submitted by the assessee that the
      assessee and the Board of Control for Cricket in India ('BCCI") had
      entered into an agreement for capturing and delivering of the live
      audio and visual coverage of the first Indian Premier League "IPL"
      2008 event which was conducted in India during April 18, 2008 ­
      June 01, 2008. Thereafter, the assessee also entered into another
      agreement dated April 15, 2009 with BCCI for the live audio and
      visual coverage of the matches for the second IPL 2009 event.

      The assessee further submitted that for IPL 2008 event, few
      personnel of the assessee had visited India for the live coverage of
      the matches and also for the purposes of recce/ inspection activities
      before the commencement of the event IPL 2009 event was initially
      supposed to be held in India; accordingly couple of personnel of the
      assessee was present in February/March 2009 for the purpose of
      recce/ inspection activities before the commencement of matches of
      IPL 2009. However, the second IPL 2009 event coincided with
      Indian elections and therefore, the Indian Government refused to
      commit security by Indian paramilitary forces. As a result, BCCI
      decided to host the second season of the league outside India. On
      24 March 2009, the BCCI officially announced that the second
      season of the IPL will be held in South Africa.

      It was also argued by the assessee that since, the cumulative period
      of stay of the assessee's personnel in India exceeded the threshold
      limit of 90 days in the ,,12 month period, beginning from March 22,
      2008      to    March      21,   2009,     a    service   permanent
      establishment ('PE'') of the assessee was constituted in India under
      Article 5(2)(k) of 'India-UK DTAA and the income attributable was
                                      3                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



      computed on the basis of Transactional         Net Margin Method
      ('TNMM') prescribed under the Indian transfer pricing regulations.

      The assessee further submitted the summary of returned income
      and proposed addition made by the AO as under :

      Returned income -         Rs.(INR) 18,57,748/- (taxable @42.23%)
      Income as per draft
      assessment order
      by holding the same as FTS or
      alternatively "Royalty"               -Rs.(INR) 20,23,11,392/-
                                             (taxable @10.5575%)


According to the assessee, it has carried out its business activities in
connection with the capture and delivery of live audio & visual coverage of
IPL 2008 and IPL 2009 matches. Accordingly, the assessee has contended
that there existed a service PE and income attributable to the Indian
operations was computed under TNMM method. However, the assessing
officer has taken the view that the amount received by the assessee was
in the nature of "Fee for Technical Services" and also in the nature of
"Royalty" and accordingly assessed the entire amount of gross receipts.


3.     The Ld Dispute Resolution Panel (DRP) held that the concept of
"Service PE" does not have application, once it is held that the gross
receipts are taxable as "Fee for technical services" or as "Royalty". Hence
the Ld DRP proceeded to examine the nature of amount received by the
assessee from BCCI. The relevant discussions made by Ld DRP in order to
hold that the amount received by the assessee is in the nature of "Fee for
technical services" are extracted below:-


      "5.4.1 For clarity sake, Article 13(4)(c) of the DTAA is reproduced as
      under:
            "4.   For the purpose of paragraph 2 of this Article, and
            subject to paragraph 5 of the Article, the terms "Fees for
            technical services" means payments of any kind of any person
                               4                   I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



      in consideration for rendering of any technical or consultancy
      services (including the provision of services of technical or
      other personnel) which :

      a)     are ancillary and subsidiary to the application or enjoyment
             of the right, property or information for ' which a
             payment described in paragraph 3(a) of this article is
             received: or

      b)     Are ancillary and subsidiary to the enjoyment of the
             property for which a payment described in paragraph 3(b)
             of this Article is received; or

      c)     Make available technical knowledge, experience, skill know
             how or processes or consist of the development and
             transfer of a technical plan or technical design"

Thus the assessee is claiming that his case is covered by the "make
available" clause of FTS and hence wont be taxable. In this
background, let us examine the fact of this case to see if the
assessees case falls under the restrictive definition of FTS or not?

5.4.2 The relevant clauses of the agreement entered into on 15 th
April, 2009 for IPL 2009 are reproduced as under:


"BCCI has commissioned IMG to produce and IMG has agreed to
produce and deliver the world feed of the live audio-visual coverage
of the Matches in the Indian Premier League (IPL) 2009 season
scheduled from 18th April to 24th May 2009 and to provide certain
other production services in respect of the IPL 2009 season on the
terms and conditions as set out herein.

The parties hereby agree as follows:
1. Engagement
1.1 The BCCI hereby engages IMG to provide the services set out
below and, in consideration for payment by the BCCI of the costs of
providing those services in accordance with clause 3 below, IMG
accepts such engagement:

a)      Production and provision to the "Licensees" (meaning MSM
Satellite (Singapore) Pte Ltd, World Sport Group (Mauritius) Limited
and Live Current Media Inc. ) of the High Definition world feed of
the live audio-visual coverage (the "feed") for
                               5                 I T A N o . 1 5 1 3 / Mu m / 2 0 1 4







(i) All matches in the IPL season 2009 as set out in Schedule 1 (the
"Event" and each match shall be referred to as a "Match") in
accordance with the specification set out at Schedule 2 hereto; and

(ii)   The opening and closing ceremony for the IPL season 2009, as
per the 2008 production brief unless otherwise agreed; and
(b)    Production liaison and administration of arrangements with
the Licensees for the Event as set out at Schedule 3 hereto

1.2 IMG will not produce any feed of the Matches other than the
feed produced for BCCI hereunder.

1.3 IMG shall be responsible for ensuring that equipment that it
introduce into the Match venues complies with international
standards of health and safety, it being acknowledged and agreed
that IMG shall not be responsible for the compliance of the
Match venues and their infrastructure with such international
standards of health and safety.

6.    Producer credit
BCCI agrees that on each occasion that the coverage of the IPL is
broadcast, there shall appear at the end of each such broadcast, a
credit stating "produced by IMG Sports Media", or such other credit
agreed between the BCCI and IMG.

7.    Delivery
The feed will be made available by IMG in the production control
room or equivalent facility of the Match venues"

                        SCHEDULE-3
1.    IMG shall make available the feed to the Licensees at the
production control room or equivalent facility of the venue of the
relevant Match at no cost to the Licensees.

1.     IMG shall liaise with the Licensees prior to the Event and on a
daily basis during the Event as required, including providing
personnel (including a Production Manager) for daily meetings with
the Licensees as required.

3. The Licensees will, subject to space and the facilities at the
relevant venue and subject to Licensee giving IMG and/or BCCI
reasonable notice, have a right to request on-site facilities, and
subject IMG shall coordinate and administer all such requests,
                                 6                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



rate card for all such additional facilities and production services as
required."

(Schedule 2 is not being produced for the sake of brevity as some
part has been quoted by the AO in his order.)


5.4.3 We find from a plain reading the agreement that the assessee
is a world leader in the field of multimedia coverage of sports
events, including cricket. The brief facts of the case as explained by
the assessee are that BCCI has engaged IMG Media to capture the
live audio and video coverage of IPL event. For the purpose of
capturing the IPL event, personal of IMG Media would be based at the
grounds where matches are played capturing the audio and video feeds
using different cameras and audio equipment located at different places in
the stadium and several personnel would be based in the temporary
control room located in or around the stadium. The personnel based
in the temporary control room are connected to the personnel based
in the stadium who would capture the event using cameras and
microphones i.e. equipment which is provided by BCCI. The personnel in
control room are also connected to the commentators who are hired
by the assessee itself. Typically around 50 personnel are required for
the live audio and video coverage of a cricket match".

The personnel based in the temporary control room select the audio
and video images of the stadium and commentators and mix them
using technical desk claimed to be (standard equipment) and
thereafter convert the same into the standard digitalized signals and
deliver the same to BCCI for the purpose of telecasting and
broadcasting. This completes the service by IMG. The most
important part in this service is the part regarding selection of the
audio and video images which are captured live and mixing of these
images. A recorded copy of the live audio and video coverage is also
to be given to BCCI

Production is done by IMG Media on behalf of BCCI. BCCI hires IMG
or other competitive companies to capture the event and does not
do the same on their own. For the purpose of the live audio and
video coverage of the match, IMG gives certain specifications of
equipments to BCCI which is required for quality audio and video
coverage of the event. Such specifications typically include:


 (i)    A number of cameras required around the stadium for quality
        coverage
 (ii)   The placement of cameras and microphones in and around the
                                 7                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



       stadium
 (iii) Recommendation regarding new technology such as Hawk eye
 (iv) Recommendation for Scoring graphics
 (v) Recommendation for hiring commentators ­if IMG given
       recommendation only why have you said before
       that commentators are hired by IMG (sic.)
 .(vi) Recommendation for hiring equipment suppliers


It is further seen that the specification are mentioned in the
Agreement, whereas some are discussed with BCCI orally. These
specifications are agreed by BCCI. The output of the services i.e.
final live audio and video coverage is converted into a digitalized
signal and the same is given to BCCI for the purpose of telecasting
and broadcasting. The services rendered by the assessee is to
deliver programmed content i.e. the mix of live audio and video
coverage which can be used freely in any manner whatsoever for its
purposes.


The production agreement for IPL has been perused, specifically,
the services to be provide by IMG. The Chief engagement of IMG is
for production and provisions of improved contents to the
"Licensees" i.e. broadcasters, in this case, viz MSM Satellie
Singapore Pte Ltd, world sport group (M) Ltd and Live Current
Media matches and Production liaisoning and administration of
arrangements with the licensees for the event as set out in
schedule 3 (Services). These are parties in agreement with BCCI for
Broadcasting.


Further, a look at schedule 2 of the said agreement shows the
minimum feed technical specification and requirements. There are
exhaustive lists of quality of specification of video signal, which shall,
at the least, match the international broadcasting standards. The
details and the finer aspects of capture of video signal is so
conspicuously laid down that there needs to be a total exchange of
technical plans and designs between the IMG and the broadcasters.
It is natural to the extent that without satisfying the requirements of
the broadcasters, the production of audio video signal by IMG is of
no commercial substance. In simple words, it means that unless
IMG shares and makes available its technical plan, design, the
broadcasters cannot seamlessly function and consequently the
ultimate objective of HD video feed to be broadcasters live
worldwide cannot be achieved.
                                      8                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



      Moreover, each broadcaster breaks such live programming also for
      insertion of advertisements and other breaks. This live programming
      with breaks incorporated in it by the broadcaster is "broadcast
      contents" which itself is a copy righted product.           What is
      tremendously important, therefore, is that the live feed (or delayed
      live feed as in this case) can be broken and taken up seamlessly by
      the broadcaster, which evidences the "make available" nature of
      FTS rendered.


      In this backdrop, it is evident that services of production and
      generation of live video signal rendered by the assessee in terms of
      agreement were in the nature of technical services. Assessee made
      available to its broadcasters the service which is based on technical
      knowledge, experience, skill, know-how and processes which also
      consisted of development and transfer to its broadcasters of
      technical plan and design relating to production and generation of
      live television signal. Further, schedule 3, of the said agreement
      mandates that IMG shall make available feed to the broadcasters at
      the production control room or the equivalent facility of the venue of
      the match. It shall also liaise activities aims at seamless production
      and transmission of video signal for worldwide broadcast in a real
      time.


      5.4.4 Hence it is held that these services are nothing but technical
      services as per section 9(i)(vii) of the Act as well as Article 13 of the
      DTAA between India and UK which makes available technical
      knowledge to the payer.


4.   We heard the parties on this issue. On a careful perusal of the facts
brought out by the tax authorities, we notice that the assessee possesses
required expertise in live audio-visual coverage of matches (called "feed")
and hence, the BCCI has engaged the assessee to produce and deliver live
audio-visual coverage of the IPL-2008 & IPL-2009 cricket Matches
conducted by BCCI.      According to the agreement, the assessee shall
produce the feed and deliver the same to the broadcasters, who are called
licensees. Thus, it is noticed that the job of the assessee shall come to an
end, once the feed is produced and delivered to the licensed broadcasters
in the form of digitalized signals. As per the agreement, the BCCI shall
                                      9                   I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



supply the equipments like cameras, microphones etc. of the required
quality to the assessee.


5.    The question that arises is as to whether such kind of production of
feeds would result in provision of technical services by the assessee to
BCCI in terms of Indo-UK DTAA?. Article 13(4)(c) of the DTAA defines the
terms "Fee for technical services" and for the sake of convenience, the
same is extracted below:
            "4.    For the purpose of paragraph 2 of this Article, and
            subject to paragraph 5 of the Article, the terms "Fees for
            technical services" means payments of any kind of any person
            in consideration for rendering of any technical or consultancy
            services (including the provision of services of technical or
            other personnel) which :

            a)      are ancillary and subsidiary to the application or enjoyment
                    of the right, property or information for ' which a
                    payment described in paragraph 3(a) of this article is
                    received: or

            b)      Are ancillary and subsidiary to the enjoyment of the
                    property for which a payment described in paragraph 3(b)
                    of this Article is received; or

            c)      Make available technical knowledge, experience, skill know
                    how or processes or consist of the development and
                    transfer of a technical plan or technical desig n"

The Ld A.R submitted that the technology should be made available in
order to constitute a payment as "Fee for technical services. He further
placed reliance on the following decision in support of his contentions :-
      (a) De beers India Minerals (P) Ltd (2012)(346 ITR 467)(Kar)
      (b) Raymond Ltd Vs. DCIT (2003)(86 ITD 791)(Mum)
      (c) Guy Carpenter and Co. (346 ITR 504)(Del)
The Ld A.R submitted that the principle of ,,make available has not been
defined in the India-UK DTAA, but the same has been explained in the
Protocol to the India-US DTAA as under:-
                                     10                 I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



      "Generally speaking, technology will be considered ,,made available
      when the person acquiring the same is enabled to apply the
      technology. The fact that the provision of the service may require
      technical input by the person providing the service does not per se
      mean that technical knowledge, skills etc., are made available to the
      person purchasing the service within the meaning of paragraph 4(b).
      Similarly, the use of a product which embodies technology shall not
      per se be considered to make the technology available."


He submitted that the concept or principle of "Make available" can be
conveniently applied in the case of India-UK DTAA also. Accordingly he
submitted that the assessee herein did not "make available" any
technology/know how relating to the production of live coverage of audio-
video visuals of the cricket matches, but only supplied the "program
content" produced by it.      Accordingly he submitted that the amount
received by the assessee from BCCI cannot fall under the category of "Fee
for technical services" in terms of Article 13(4)(c) of India-UK DTAA.


6.   We notice that the Article 13(4)(c) of the India-UK DTAA also uses the
expression "make available". Though the said expression has not been
explained in the context of India-UK DTAA, it is the plea of the assessee
that the principle or concept of ,,make available explained in the India -US
protocol should also be applied in respect of India-UK treaty also. Before
us, the revenue could not submit any other decision or material to oppose
the above said plea of the assessee. Since the India-UK DTAA and also
India-US DTAA uses the same expression, i.e., "make available" in the
context of "Fee for technical services", we are of the view that the
principle or concept of ,,make available explained in the context of India -
US DTAA can be imported to understand the provisions of Article 13(4)(c)
of the India-UK DTAA also.


7.   Now we shall examine the question on the basis of discussions made
in the earlier paragraphs. We notice that the assessee produces the feed
                                    11                 I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



(program content) of live coverage of audio-video visuals of the cricket
matches by using its technical expertise. After that it delivers the feed
(program content) in the form of digitalized signals to the licensees
(broadcasters).   There should not be any dispute that the licensees
(broadcasters) receive the feed on behalf of the BCCI.         We notice that
what is delivered by the assessee is a "final product in the form of
program content" produced by it by using its technical expertise, i.e., the
assessee does not deliver or make available any technology/ knowhow to
the BCCI.    There should not be any dispute that the production of
"program content" by using technical expertise is altogether different from
the provision of technology itself. In the former case, the recipient would
receive only the product and he can use the product according to his
convenience, where as in the later case, the recipient would get the
technology/knowhow and hence he would be able to use the technology
/knowhow on his own in order to produce any other program content of
similar nature.   In the later case, the technology/knowhow would be
"made available" to the recipient, in which case the payment given wou ld
fall under the category of "Fee for technical services". However, in the
former case, there is no question of making available of any
technology/knowhow and hence the payment given would be in the nature
of payment made for production of "Program content or live feed" and not
for supply of technology.


8.    The Ld DRP has observed that the agreement entered between the
assessee and BCCI prescribes the quality standards in minute details and
the same results in total exchange of technical plans and designs between
the assessee and the broadcasters. In our view, there is a fallacy in the
view taken by Ld DRP. The object of the production of live feed is to offer
quality coverage of the live cricket matches to the viewers. The assessees
job is restricted to production of live coverage and the job of broadcasting
                                        12               I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



the same is undertaken by the BCCI. The BCCI, in turn, has given license
to certain companies (called licensees) and they have undertaken the job
of broadcasting the live coverage of cricket matches on behalf of BCCI.
Since the assessee is supplying the live coverage in the form of digitalized
signals, it has to ensure that the broad casters also do have the
compatible technology and equipments so that the live coverage can be
broadcast without compromising the quality.         Thus, in our view, the
technical aspects are specified in the agreement in order to ensure that
the program content is broadcast at the same quality in which it was
produced.      The same was sought to be achieved by synchronizing the
quality   of   technical   equipments    between   the   assessee           and        the
broadcasters (licensees). Such kind of synchronization of technology would
ensure seamless function and complete coordination between the assessee
and the broadcasters. Thus, there is a difference between the technology
involved in the production of live coverage feed of cricket matches and the
technology required to broadcast the same in the required quality. Hence,
in order to ensure and maintain quality of live coverage feed, it becomes
necessary on the part of the assessee to specify or oversee the technology
available with the broadcasters so that the same does not compromise on
the quality and compatibility.          The specification of the technical
requirements does not mean that the assessee has supplied the
technology involved in the production of live coverage feed to the broad
casters. If that be the case, the broadcasters should be in a position to
use the technology in order to produce the live feed on their own. We
notice that the revenue has not established that the broadcasters (who are
acting on behalf of the BCCI) or the BCCI itself has acquired the technical
expertise from the assessee which would enable them to produce the live
coverage feeds on their own after the conclusion of IPL 2008 and IPL 2009
cricket matches. In that case the essential condition of "make available"
clause fails and hence the amount received by the assessee cannot be
                                        13              I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



considered as "Fee for technical services" in terms of Article 13(4)(c) of
the DTAA entered between India and UK.


9.    The ld DRP has observed that the live coverage of cricket matches
involve instant and continuous production and broadcasting of live
matches. The existing program would keep merging with the new work.
Further, the broadcasters are able to split the program content in order to
insert advertisements. All these aspects, in our view, would not bring the
payment under the category of "Fee for technical services". It only shows
the technical expertise of the assessee to produce a flexible program
content to give enhanced quality of viewing the live matches.


10.     Before us, the Ld D.R placed reliance on the decision rendered by
the Delhi bench of Tribunal in the case of Nimbus Sport International Pte
Ltd (2012)(18 taxmann.com 105), wherein the Tribunal had held that the
services or production and generation of live television signal were in the
nature of technical services. The Ld A.R contended that the Delhi Tribunal
did not examine the principle of ,,make available. We notice that the case
of Nimbus Sport International Pte Ltd is covered by India-Singapore DTAA
and it also uses the expression "make available" in the definition of "Fee
for technical services". In the case of Nimbus sports International (supra),
the principle or concept of ,,make available has not been examined by the
Tribunal. Accordingly, we agree with the contentions of the assessee that
the said decision is distinguishable.


11.    Since the amount received by the assessee is held to be not in the
nature of "Fee for technical services" as per the definition of Article
13(4)(c) of the India-UK DTAA, in our view, there is no necessity to
examine about its taxability u/s 9(1)(vii) of the Income tax Act, 1963.
                                    14                 I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



12.     The AO/Ld DRP have also expressed the view that the payment
received by the assessee would fall under the category of "Royalty" also.
The relevant observations made by Ld DRP are extracted below:-
      "5.5 Additionally, we find that the said services would also be in
      the nature of Royalty as per the provisions of section 9(i)(vi) of the
      Act and Article 13 of the DTAA between India and UK. The
      reasons for the same are, as under:

      (1) On a perusal of the agreement, it is clear that for doing this
      work, the assessee is required to bring in equipments for capturing
      the live feed. The same has been given in clause 1.3 of the
      agreement which is reproduced as under:

             "1.3 IMG shall be responsible for ensuring that equipment
             that it introduces into the Match venues complies with
             international standards of health and safety, it being
             acknowledged and agreed that IMG shall not be responsible
             for the compliance of the Match venues and their
             infrastructure with such international standards of health and
             safety"

      This makes it clear that the assessee is required to bring and use
      some equipment for recording live audio-visual feed of the matches.
      In schedule 2 of the said agreement as well, various minimum
      camera and equipment specification has been given. The same is
      also reproduced as under-





       (iii) Minimum camera and equipment specification
       (1)   The feed shall be produced using 29HD cameras (of which 14
       will be manned) HD, VT & graphics equipment along with Cricket
       Sound package. All of this equipment will be supplied by Zoom
       (please note section (d)(ii) below)".

      Likewise, in Schedule 4 to this agreement, the details of production
      budget have been specified. In this budget also, various heads of
      expenses have been identified and costs assigned. In this also, a lot
      of these relate to use of equipments like production equipments,
      maintenance of equipments, setting up of a studio in India,
      broadcast from outside etc. All these clearly establish that the
      assessee would be using equipments to carry out this work which is
      nothing but equipment royalty as per the Act as well as the DTAA.
                                  15                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



5.5.1 On a perusal of this agreement, it is also observed that the
assessee company is the world leader in this field and has developed
commercial and scientific experience in the field of commercial and
scientific experience. It has also developed a "process" which is
unique to this company and the same process is being used for
rendering these services. This is also because of the fact the
assessee has been given this contract every year as it has a unique
process for producing the live feed of matches. In this type of events
the most important part that leads to generation of revenue for BCCI
from IPL event is the seamless/uninterrupted production and
broadcasting of the complete match. During such production
process, a new work is created within a split of few macro seconds
and the existing for keeps on merging with the new work being
created. The activity which leads generation of revenue is the
complete work being taken into consideration and therefore it would
be incorrect to state that the payments received by assessee is for
the live work and not for any work being in existence. Also, the
production work being undertaken by the assessee is specialised in
nature and the final signals being delivered by the assessee
tantamount to use of process by the BCCI/its broadcasters. This is
also evidenced with various clauses of the agreements. The
relevant clauses are reproduced as under:

5.     Producer Credit

BCCl agrees that on each occasion that the coverage of the IPL is
broadcast, there shall appear at the end of' each such broadcast, a credit
stating "Produced by IMG Sports Media", or such other credit agreed
between the BCCI and IMG"


As per this clause, the assessee company is taking the credit for this
creation. Had this not been a unique creation which is of world
standard, the assessee company would not claim the credit. By
taking this credit, it is being demonstrated by the assessee that it is a
unique product which has been created by following a unique
product and thats why they are demonstrating before the world that
it is created by the assessee company. Hence, in a way the assessee
is claiming copyright in at least producing this feed.

Clause 14 is also relevant which is also being reproduced as under-
Clause 14 Assignment

This Agreement may not be assigned by either party without the express
written consent of the other, however IMG shall be, entitled to perform
                                      16                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



      its obligations hereunder through any of its associated companies within
      the International Group of Companies.:"

      As per this clause, the assessee cannot assign this work to any other
      party except its Associated Enterprises. This clearly shows that BCCI
      has given this work only to the assessee company and does not
      want it to assign this work to anybody else as it has got a unique
      process of producing the live feed. This also establishes that it has
      developed commercial and scientific experience in this field which is
      being used for proving these services.

      5.5.2 In view of the above discussions, it is held that the payments
      would be taxable as "Royalty" both under the provisions of Section
      9(i)(vi) of the Act and Article 13 of the DTAA. The judgments
      related upon by the assessee have not been taken the above facts
      into consideration and hence the benefit of the same cannot be
      granted to the assessee."

13.    We have noticed earlier, the assessee was engaged by BCCI to
produce live coverage of audio and video visuals of cricket matches. The
assessee shall produce the program content, which is broadcast through
the broadcasters appointed by BCCI. The job of the assessee ends upon
the production of the ,,program content. According to the assessee, the
program content shall become the property of the BCCI. We notice that
the revenue has not brought any material on record to show that the
assessee has kept the ownership rights over the program content. The Ld
DRP has noticed that the BCCI is required to supply certain equipments
and hence the Ld DRP has held as under:-
      "...the assessee would be using equipments to carry out this work
      which is nothing but equipment royalty as per the Act as well as the
      DTAA."


We are unable to understand the rationale behind this observation. If the
assessee was using the equipments belonging to BCCI and if that activity
is examined in isolation, then the assessee should be paying money to
BCCI for using the equipments.       In the instant case, the assessee has
                                    17                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



received the money for producing live coverage of cricket matches. The
equipments required for the said purpose may be brought by the assessee
itself or it may be provided by the BCCI.   Under commercial terms, if the
assessee was required to bring the equipments, then the consideration
payable for the production of live coverage of cricket matches should go
up.   Thus, in our view, it was a simple case of commercial agreement
entered between the parties with regard to the modalities to be followed
and the same is not a determinative factor to decide about the nature of
payment received by the assessee.


14.    The Ld D.R.P. has further observed that the assessee has developed
commercial and scientific experience in the field of commercial and
scientific experience. The term "royalty" is defined as under in the India-
UK DTAA:-
      3. For the purposes of this Article, the term "royalties" means:


      (a)    Payments of any kind received as a consideration for the use
            of, or the right to use, any copyright of a literary, artistic or
            scientific work, including cinematography films or work on
            films, tape or other means of reproduction for use in
            connection with radio or television broadcasting, any patent,
            trade mark, design or model, plan, secret formula or process,
            or for information concerning industrial, commercial or
            scientific experience; and

      (b)   Payments of any kind received as consideration for the use of,
            or the right to use, any industrial, commercial or scientific
            equipment, other than income derived by an enterprise of a
            Contracting State from the operation of ships or aircraft in
            international traffic."

A careful perusal of the definition of ,,royalties" extracted above, would
show that the payment, in order to constitute royalty, should have been
made "for the use of, or the right to use any copyright etc". In the instant
case, we have noticed that the payment was made by BCCI to the
                                     18                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



assessee for producing the program content consisting of live coverage of
cricket matches. Further, we have noticed that there is nothing on record
to show that the assessee had retained the ownership of the program
content. The Honble Delhi High Court had an occasion to examine an
identical issue in the case of CIT Vs. Delhi Race Club (2015)(273 CTR 503)
in the context of the provisions of sec. 194J of the Act. In the above said
case, the assessee was engaged in the business of conducting of horse
races and it made payment for live telecast of races. The AO held that the
said payment would fall under the definition of ,,royalty falling within the
purview of the provisions of sec. 194J of the Act and hence disallowed the
payments u/s 40(a)(ia) of the Act. The Honble Delhi High Court observed
as under:-
      "16. A live T.V coverage of any event is a communication of visual
      images to the public and would fall within the definition of the word
      ,,broadcast in Section 2(dd) (of the Copyright Act). That apart we
      note that Section 13 does not contemplate broadcast as a work in
      which ,,copyright      subsists as the said Section contemplates
      ,,copyright to subsist in literary, dramatic, musical and artistic work,
      cinematograph films and sound recording. Similar is the provision of
      Section 14 of the Copyright Act which stipulates the exclusive right
      to do certain acts. A reading of Section 14 would reveal that
      ,,copyright means exclusive right to reproduce, issue copies,
      translate, adapt etc., of a work which is already existing...


      18.      In view of the aforesaid position of law which brought out a
      distinction between a copyright and broadcast right, sufficie would it
      be to state that the broadcast or the live coverage does not have a
      ,,copyright. The aforesaid would meet the submission of Mr. Sawney
      that the word ,,Copyright would encompass all categories of work
      including musical, dramatic, etc. and also his submission that the
      Copyright acknowledges the broadcast right as a right as a right
      similar to ,,copyright. In view of the conclusion of this Court in ESPN
      Star Sports case (supra), such a submission needs to be rejected."


Though the above said decision was rendered in the context of provisions
of sec. 194J of the Act, yet section imports the definition of the term
,,royalty from Explanation 2 to sec. 9(1)(vi) of the Act.                Under the
                                     19                  I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



definition given in the above said provision also "royalty" means
consideration for the transfer of all or any rights (including the granting of
a licence) in respect of a patent, invention, model, design, secret formula
or process or trade mark or similar property.


15.     In the instant case, we have noticed that the BCCI becomes the
owner of the program content produced by the assessee. The job of the
assessee ends upon the production of the program content and the
broadcasting is carried out by some other entity to which license was given
by the BCCI. Hence, in our view, the question of transfer of all or any
right does not arise in the facts and circumstances of the instant case.
Hence, we are of the view that the payment received by the assessee
cannot be considered as ,,royalty in terms of the India-UK DTAA. Though,
it is not necessary to examine about the applicability of provisions of sec.
sec. 9(1)(vi) of the Act, yet the facts discussed above would show that the
payment received by the assessee cannot fall within the purview of sec.
9(1)(vi) of the Act also.





16.     The foregoing discussions dispose the Ground no.4 and 5 of the
Grounds of Appeal. The ground no.1 and 2 are general in nature. The
Ground no.3 relates to the question of existence of "permanent
establishment" and the Ground no.6 relates to the taxability of
,,reimbursement of expenses. Both these grounds were not considered by
the Ld DRP/AO, since they proceeded to assess the receipts as "fee for
technical services"/royalty. Hence we set aside both the issues to the file
of the AO for consideration of the same afresh.

17.    Since we have set aside the ground no.3 and ground no.6, we also
deem it proper to set aside the ground no.7 relating to charging of interest
u/s 234B of the Act. The AO may take appropriate decision by considering
the decision of jurisdictional High Court in the case of DIT Vs. NGC
                                     20                I T A N o . 1 5 1 3 / Mu m / 2 0 1 4



Network Asia LLC (313 ITR 187) and also such other decisions relevant to
the said issue.

18.    In the result, the appeal filed by the assessee is treated as allowed
for statistical purposes.
             Pronounced accordingly on 26th Aug, 2015.
            26th Aug, 2015    

 Sd                                      sd
(  / AMIT SHUKLA)                     (.. / B.R. BASKARAN)
  / JUDICIAL MEMBER                    / ACCOUNTANT MEMBER

 Mumbai: 26th Aug,2015.

.../ SRL , Sr. PS

    /Copy of the Order forwarded to :
1.  / The Appellant
2.     / The Respondent.
3.      () / The CIT(A)- concerned
4.       / CIT concerned
5.     ,   ,                      /
      DR, ITAT, Mumbai concerned
6.      / Guard file.

                                                          / BY ORDER,
True copy
                                                     (Asstt. Registrar)
                                            ,  /ITAT, Mumbai

 
 
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