Nimbus Sport International Pte. Ltd. v. DDIT (2011) TII 178 ITAT-Del.-Intl. Articles 5, 7 & 12 of India-Singapore DTAA A.Ys.: 2002-03, 2003-04, 2004-05 Dated: 30-9-2011 Before K. D. Ranjan (AM) and R. P. Tolani (JM) Counsel for assessee/revenue: S. R. Wadhwa/A. K. Mahajan, A. D. Mehrotra

Facts:
The taxpayer was Singapore company (‘SingCo’) engaged in the business of sports coverage, production, distribution, event management, sponsorship, etc. SingCo was formed as a joint venture between two independent and unrelated companies, one was a Mauritius company and another was a BVI company. SingCo was a tax resident of Singapore and was wholly managed and controlled from Singapore. It had claimed that it did not have a fixed place PE, a service PE, an agency PE or any other type of PE in India. Pursuant to an International Bidding, SingCo entered into agreement with Prasar Bharti (‘PB’), a broadcaster owned by the Government of India for production of TV signals of international cricket events from February 2002 to October 2004 for which it received remuneration from PB. SingCo also received advertisement revenue outside India from certain advertisers in India.

The AO held: (i) that SingCo had a PE in India; (ii) its income was in the nature of FTS; and (iii) accordingly, in terms of section 44D read with section 115A, its gross receipts were taxable @20%. The AO further held that the advertisement revenue of SingCo was changeable to tax in India.

The issues before the Tribunal were as follows:

(i) Whether SingCo had a PE in India?

(ii) Whether receipts of SingCo from PB were business income of a taxpayer having no PE in India?

(iii) Whether gross receipts of SingCo from PB should be treated as FTS and taxed @10% as claimed by SingCo or @20% as held by AO?

(iv) Whether advertisement revenue received by SingCo in Singapore from Indian companies was taxable in India?

Held:
The Tribunal observed and held as follows.

• Contract was signed in Singapore and all activities relating to it were carried out from Singapore.

• There was no evidence that the management and control of SingCo were not situated in India. Holding of mere one board meeting in India cannot lead to the conclusion that the control and management of SingCo was situated only in India.

• On facts, affairs and management of SingCo were not carried out in India and SingCo was rightly held to be non-resident.

• Further, SingCo had provided sufficient evidence to establish that while furnishing the services, the stay of its personnel in India was less than 90 days. Consequently, SingCo did not have a fixed place PE or service PE in India during the relevant years.

(ii) Nature of receipts:

The receipts of SingCo from PB were FTS as service of production and generation of live television signal rendered by SingCo was in the nature of technical service and SingCo had made available services which were based on technical knowledge, skill and know-how.

(iii) Applicable rate of tax:
In terms of Article 12(2) of the DTAA, taxability of FTS would be chargeable to tax @10% of the gross receipts.

(iv) Taxability of advertisement revenue:

• The key fact is that SingCo did not have a PE in India, the advertisement revenue was in respect of the matches that were not played in India and the telecast of those matches was also not in India.

• Hence, force of attraction cannot apply merely because some viewers may be in India and advertisement may have some incremental value in India.

• As the dominant object of the Indian advertisers was advertising outside India, advertisement revenue cannot be attributed to India and in absence of PE, it was not taxable in India.