DIT vs. Set Satellite (Singapore) Pvt. Ltd.; [2014] 45 taxmann.com 100 (Bom):
The assessee is a Singapore based company engaged in the business of acquiring rights in television programmes, motion pictures and sports events and exhibiting the same on its television channels from Singapore. The assessee is a tax resident of Singapore. The assessee entered into an agreement on 25th January, 2002 with Global Cricket Corporation Private Limited (GCC), also a tax resident of Singapore. Under that agreement, GCC granted rights to the assessee throughout the licence territory. The licence territory, inter alia, included India. The assessee paid consideration to GCC for acquisition of such rights. The Assessing Officer made an addition of the amount so paid to GCC by way of disallowance on the ground that the tax was not deducted at source on such payment. The Tribunal deleted the addition. On appeal by the Revenue, the following questions were raised: “
i) Whether the payment to GCC (a Singaporean Company)for acquisition of telecasting rights were in the nature of ‘royalty’ covered by Explanation 2 to section 9(1)(vi)(c)?
ii) Even if payments would be deemed as royalty, whether they would not be chargeable to tax as per Article 12(7) of India-Singapore DTAA ?
The Bombay High Court upheld the decision of the Tribunal and held as under:
“i) The appellate authorities had already held that payment was made only for broadcasting operations carried out from Singapore, which had no connection with the marketing activities carried out through alleged Permanent Establishment (‘PE’) of assessee in India.
ii) Thus, there was no economic link between the payments. The payer was not a resident of India and the liability to pay royalty had not been incurred in connection with and was not borne out by the PE of the payer in India.
iii) The absence of economic link was thus the foundation on which the Tribunal’s conclusions were based. Thus, the Appeal was to be dismissed as no substantial question of law was involved.
iv) Once it does not raise any substantial question of law, then, the Appeal deserves to be dismissed. It is also dismissed because the view taken by the Tribunal in the given facts and circumstances cannot be said to be perverse or based on no material.”
