Facts of the Case

The assessee, Lex Sportel Vision Pvt. Ltd., is engaged in the business of acquiring and sub-licensing broadcasting rights of various sports events such as cricket, golf and football. For the Assessment Year 2018-19, the assessee entered into agreements with various non-resident entities for acquiring broadcasting rights relating to sports events.

The agreements clearly distinguished between “Live Rights” (rights to broadcast live sporting events) and “Non-Live Rights” (rights to use recorded footage, highlights, clips, etc.).

The assessee deducted tax at source on payments relating to “Non-Live Rights”, treating them as royalty under the Income-tax Act. However, no tax was deducted on payments made for “Live Rights” on the ground that live telecast does not constitute copyright and therefore does not fall within the definition of royalty.

The Assessing Officer (AO) passed an order under Sections 201(1) and 201(1A) treating the assessee as an assessee in default for failure to deduct TDS under Section 195, holding that payments for live telecast rights were in the nature of royalty. The order was upheld by the CIT(A).

Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi. 

Issues Involved

  1. Whether payment made for acquisition of “Live Broadcasting Rights” of sports events constitutes “royalty” under Section 9(1)(vi) of the Income-tax Act, 1961?
  2. Whether the assessee was liable to deduct tax at source under Section 195 on payments made to non-residents for live telecast rights? 

Petitioner’s Arguments (Assessee)

The assessee contended that:

  • The agreements clearly segregated payments for “Live Rights” and “Non-Live Rights”, and therefore payments for live broadcasting cannot be treated as a bundle of copyright rights.
  • Live telecast of sports events does not constitute a “copyright work”, since the event is simultaneously broadcast and not a recorded copyright product.
  • Therefore, the payment made for Live Rights cannot be categorized as royalty under Section 9(1)(vi).
  • The assessee relied on several judicial precedents including:
    • Delhi Race Club Ltd. v. CIT (Delhi High Court)
    • Fox Network Group Singapore Pte. Ltd. v. ACIT
    • Cricket Australia v. ACIT (ITAT)
    • ADIT v. Neo Sports Broadcast Pvt. Ltd.
    • ADIT v. Global Cricket Corporation Pvt. Ltd.
  • Based on these precedents, it was argued that live telecast rights do not involve use of copyright and therefore payments are not taxable as royalty, hence no obligation to deduct TDS under Section 195. 

Respondent’s Arguments (Revenue)

  • Payments made to non-resident entities for broadcasting rights were essentially payments for the use of intellectual property and broadcasting rights, which should be treated as royalty.
  • Therefore, the assessee was required to deduct tax at source under Section 195.
  • Since the assessee failed to deduct tax, the AO correctly treated it as an assessee in default under Sections 201(1) and 201(1A). 

Court Findings

The Income Tax Appellate Tribunal (ITAT), Delhi Bench observed that:

  • The agreements specifically bifurcated payments between “Live Rights” and “Non-Live Rights.”
  • Live broadcasting of sports events does not amount to a “copyright work.”
  • The rights granted for live telecast merely allow broadcasting of a live event and do not involve transfer or use of copyright.
  • Judicial precedents have consistently held that live telecast cannot be treated as copyright work, and therefore payments for such rights cannot be characterized as royalty.

The Tribunal also relied on the decision of the Delhi High Court in Fox Network Group Singapore Pte. Ltd., which held that income from live feed or live telecast cannot be classified as royalty under Section 9(1)(vi). 

Court Order

The ITAT allowed the appeal of the assessee and held that:

  • Payments made for acquisition of “Live Broadcasting Rights” are not taxable as royalty.
  • Consequently, no tax was required to be deducted at source under Section 195 on such payments.
  • Therefore, the assessee cannot be treated as an assessee in default under Sections 201(1) and 201(1A). 

Important Clarification

The Tribunal clarified an important principle in international taxation relating to sports broadcasting:

  • Broadcasting of live sports events does not constitute copyright.
  • Payments made only for live telecast rights cannot be treated as royalty income under Section 9(1)(vi).
  • Accordingly, TDS under Section 195 is not required on such payments to non-residents, unless the payment involves use of recorded content or copyright-related rights.

Sections Involved

  • Section 9(1)(vi) – Royalty Income
  • Section 195 – TDS on payments to Non-Residents
  • Section 201(1) – Assessee in Default
  • Section 201(1A) – Interest for failure to deduct TDS

Link to download the order -  https://itat.gov.in/public/files/upload/1703667000-2397%20Lex%20Sportel%20Vision%20Pvt.%20Ltd..pdf

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