[2015] 60 taxmann.com 432 (Mumbai – Trib.) IMG Media Ltd vs. DDIT A.Y..: 2010-11, Order dated: 26th August, 2015

Facts:
The
Taxpayer was a Company incorporated in the UK and a tax resident of UK
having a tax residency certificate for the relevant year. The Taxpayer
was engaged in the business of multimedia coverage of sports events
including cricket. BCCI engaged the Taxpayer for capturing and
delivering live audio and visual coverage of cricket matches. The
Taxpayer had contended that since the cumulative period of stay in India
of personnel of the Taxpayer exceeded the threshold limit of 90 days in
the ’12 month’ period, from March 22, 2008 to March 21, 2009, service
PE of the Taxpayer was constituted in India under Article 5(2)(k) of
India-UK DTAA. Accordingly, the payment made by BCCI to the Taxpayer
constituted business income, taxable on net basis

The Tax
Authority contended that the amount received by the Taxpayer was in the
nature of FTS and Royalty and assessed the entire amount on gross basis.

Held:
On FTS
Having regard to the following facts, the Tribunal held that payment received by the Taxpayer was not FTS.

• The
  Taxpayer had delivered the final product (i.e., program content)
  produced by it by using its technical expertise which was altogether
  different from provision of technology itself.
• In the former
  case, the recipient would get only the product which he can use
  according to his convenience, whereas in the latter case, the recipient
  would get the technology/knowhow which would enable him to produce other
  program content on his own and thus, know-how would be made available
  and would constitute FTS.
• The Tax Authority had not established
  that the broadcasters (acting on behalf of the BCCI) or the BCCI itself
  had acquired the technical expertise from the Taxpayer which would
  enable them to produce the live coverage feeds on their own after the
  end of contract.
• Since the essential condition of “make
  available” clause was not satisfied, the amount received by the Taxpayer
  for delivering live audio and visual coverage of cricket matches was
  not FTS in terms of Article 13(4) (c) of India-UK DTAA.

On Royalty
Having regard to the following facts, the Tribunal held that payment received by the Taxpayer was not Royalty.

In
order to constitute ‘royalty’, the payment should have been made “for
the use of, or the right to use any copyright etc”. In the instant case,
the payment made to the Taxpayer was for producing the program content
consisting of live coverage of cricket matches.

The job of the
Taxpayer ended upon the production of the program content. BCCI was the
owner of the program content produced by the Taxpayer. The broadcasting
was carried out by some other entity licensed by BCCI.

Thus,
there was no question of transfer of all or any right. Therefore, the
payment received by the Taxpayer could not be considered ‘royalty’
either under India-UK DTAA or u/s. 9(1)(vi) of the Act.