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Live feed from foreign jurisdiction and money earned from that isn’t royalty: Tax ruling

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Mumbai: Live feed or live transmission from any other country to India and the money earned from that cannot be defined as royalty, an income tax tribunal has ruled.

As per the regulations royalty has to be subjected to certain taxation in India under transfer pricing framework.

A Singapore based company had received some money from an Indian company. The Singapore company said it was consideration from sub-licensing of sports broadcasting rights for “live” and “non-life” feeds from the Indian company. Tax treaties are essentially agreements that give a broad framework of which country has first right to tax a company or a transaction and at what rate.

The company while filing its tax returns said that live feed isn’t defined under the India-Singapore tax treaty. Even the Indian Income-Tax Act doesn’t define live feed and can’t be considered royalty. Also, live feed isn’t “copyright” as per the Indian Copyright Act.

The tax department on the other hand said that the entire income was taxable in India as per the India-Singapore tax treaty. The tax department levied 10% tax on the consideration and said this amount was nothing but royalty.

The dispute reached the doorsteps of Income Tax Appellate Tribunal, Delhi.

“The ITAT noted that the only issue which required its consideration was whether the consideration received in relation to ‘live’ feeds constituted royalty under the ITA or under the India-Singapore tax treaty,” a Deloitte tax research note said.

“When the parties (companies) entered in the agreement agreed that there were two streams of fees i.e. live transmission and non-live transmission and even payments were made separately under the distinctive heads, then it was not correct to hold that both constituted one and the same thing. – Live feed did not have any lasting time as it was not a film which could constitute a ‘work’ in which a copyright could be given. There could not be copyright on broadcast covering live events of sports,” the ITAT said.

“This ruling affirms that there is a distinction between a copyright and a broadcasting right, broadcast or live coverage which does not have a copyright and payment for live telecast is neither payment for transfer of any copyright nor of any scientific work and hence, does not qualify as royalty under the Income Tax Act,” the Deloitte tax note read.



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