Film Broadcasting Licence Fees Not Royalty Under India–Mauritius DTAA: Mumbai ITAT
The Mumbai Bench of the Income Tax Appellate Tribunal has allowed the appeal, holding that the consideration received for granting non-exclusive broadcasting rights of Hindi feature films does not constitute “royalty” taxable in India under the Income Tax Act or the India–Mauritius Double Taxation Avoidance Agreement (DTAA). A Bench comprising Judicial Member Narender Kumar...
The Mumbai Bench of the Income Tax Appellate Tribunal has allowed the appeal, holding that the consideration received for granting non-exclusive broadcasting rights of Hindi feature films does not constitute “royalty” taxable in India under the Income Tax Act or the India–Mauritius Double Taxation Avoidance Agreement (DTAA).
A Bench comprising Judicial Member Narender Kumar Choudhry and Accountant Member Omkareshwar Chidara was hearing the appeal for Assessment Year 2004-05 against an order passed by the Commissioner of Income Tax (Appeals), which had upheld the Assessing Officer's decision to tax ₹1 crore received from licensing film broadcasting rights as royalty.
The assessee M/s Asia Today Limited, a Mauritius-based foreign telecasting company, had entered into an agreement with Usha Kiron Television for grant of non-exclusive satellite broadcasting rights of 100 Hindi feature films for a limited period of two years and six months. The company received a total consideration of ₹1 crore.
The Assessing Officer treated the said receipt as “royalty” under Article 12 of the India–Mauritius DTAA and taxed it at 15%, holding that the right to use cinematographic films fell squarely within the definition of royalty. This view was affirmed by the CIT(A).
The Tribunal (ITAT) examined the terms of the licence agreement in detail and noted that Asia Today had merely granted non-exclusive broadcasting rights for a fixed duration, without transferring any copyright or conferring any right to exploit, modify or commercially use the films beyond telecast.
Relying on Explanation 2 to Section 9(1)(vi) of the Income Tax Act, the Bench reiterated that while transfer of copyright may attract royalty, consideration for sale, distribution or exhibition of cinematographic films is specifically excluded from the definition of royalty.
The Bench also placed reliance on binding precedents, including the Bombay High Court decision in CIT (International Tax) v. MSM Satellite (Singapore) Pte Ltd.(2019) 106 taxmann.com (Bom.), to hold that mere broadcasting or telecasting rights do not amount to use or transfer of copyright.
The Bench rejected the Revenue's contention that certain dates mentioned in the schedule indicated perpetual rights, observing that the agreement clearly restricted the licence period to two years and six months or till expiry of rights, whichever was earlier.
The Bench observed that the ₹1 crore received by Asia Today Limited for granting non-exclusive broadcasting rights could not be characterised as royalty either under domestic law or under the India–Mauritius DTAA; and observed that since the assessee also did not have a permanent establishment in India in relation to the transaction, the income was held to be not taxable in India.
In view of the above, the Bench set aside the orders of the lower authorities on this issue and allowed the appeal filed by the assessee.
Case Title: M/s Asia Today Limited Vs. Asst. Director of Income Tax (International Taxation)- 2(2)
Case No.: ITA No. 1403/M/2008 A.Y.: 2004-2005
Appearance for Assessee: Shri Niraj Sheth, Ld. A.R.
Appearance for Revenue: Shri Krishna Kumar, Ld. Sr. D.R.