ITAT Rules Against Licence Fees Received For Live Telecast Of Cricket Matches In Australia As Royalty And Taxable In India

ITAT Rules Against Licence Fees Received For Live Telecast Of Cricket Matches In Australia As Royalty And Taxable In India

States that the assessing officer and the Dispute Resolution Panel erred in verifying the agreement details

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the license fees received by the assessee towards live transmissions of cricket matches held in Australia are not taxable as royalty in India.

The bench of G.S. Pannu (Vice President) and Anubhav Sharma (Judicial Member) observed that Balkrishna Industries Limited (sponsor) did not have exclusive rights to use the logo of the assessee or the event of the Big Bash League (BBL).

The logo was to be used in restricted areas and on BAL’s limited goods and services. As a sponsor, BAL’s responsibility was to use these and other rights in the intellectual property of the assessee to enhance the event’s viewership.

The rights were for advertising, communications, and sales and marketing campaigns showcasing the sponsor's association with BBL. The use of the logo was incidental to the objective of BBL’s promotion and sponsor’s products.

The rights were not 'copyright' but simplistic to represent in the advertising, communications, and sales and marketing campaign showcasing the sponsor's association with the BBL. Any payment within the scope of royalty meant the transfer of rights.

The appellant-assessee, a limited company, incorporated in Victoria, is a national government body for cricket in Australia. It is a tax resident, having a valid residency certificate.

The Income Tax Return (ITR) of the assessee was scrutinized for the receipt of large-value foreign remittances and low receipts.

The AO questioned the receipts of Rs.375,48,27,288 received from Sony Pictures. He alleged the amounts were license fees and should be treated as royalty under the provisions of the Double Taxation Avoidance Agreement (DTAA).

This was for the use of, or the right to use, motion picture films, films or videotapes related to television; or tapes in connection with radio broadcasting to be treated as royalty under the provisions of Article 12(3)(e) of the DTAA.

The AO also probed the receipts of Rs.13,70,00,000 from Balkrishna Industries instead of a commercial partnership agreement (CPA) to consider it as royalty under Article 22.

The assessee provided a detailed submission; however, the AO was unconvinced. He added Rs. 350,54,35,665 on account of license fee received from Culver Max Entertainment Private Limited for granting live transmission rights of programs i.e. cricket matches played in Australia under the sole control and auspices of the appellant as income from royalty.

The AO added the amount based on the difference reported by the appellant and Culver Max in Form 15CA/CB. It was on the revenue received from Balkrishna Industries in lieu of the CPA, treating it as royalty.

On the other hand, the assessee contended that the amount received under the Broadcasting Agreement could not be treated as royalty under the India-Australia DTAA.

However, the revenue department contended that the right to use the logo was given to use 'with or without' the joint logo, so the receipts were regarded as royalty.

The ITAT observed that the CPA did not indicate that BAL, as a sponsor, had any claim on the logo or other intellectual property rights of the assessee, beyond the BBL event.

Thus, the tribunal allowed the appeal and held that the AO and the Dispute Resolution Panel (DRP) erred by not verifying the agreement details. The rights were not in the logo or other intellectual property of the assessee, but to be a part of the BBL.