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Judgment
PER SATBEER SINGH GODARA, JM
This Revenue’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”] Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1081109317(1), dated 24.09.2025 involving proceedings under section.143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
This Revenue appeal raises the following substantive grounds:
“1.Whether in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating foreign remittances not chargeable to tax as royalty under section 9(1)(vi) of the Income Tax Act, 1961?
2.Whether in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the payment made for "Live Rights" to have not been made for a bouquet of rights?
3.Whether in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the payments in dispute are not made for the use of any "process" as defined u/s 9(1)(vi) of the Act and can't be charged to tax as "Royalty" in the hands of the overseas rights holders?
4.Whether in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the provisions of Section 195 r.w.s. 40(a)(i) of the Act are not applicable to the payments made under the head 'Live Rights"?”
Suffice to say, it transpires during the course of hearing that the learned Assessing Officer has framed his assessment in the assessee’s case on 27.04.2021 inter alia invoking section 40(a)(i) disallowance for the reason that it had failed to deduct TDS on various payments made to non-residents involving the corresponding “live rights” which allegedly amounted to royalty u/s 9(1)(vi) of the Act. He thus invoked section 40(a)(i) of the Act to disallow the assessee’s claim of Rs.32,53,98,959/-, which stands reversed in the CIT(A)’s lower appellate discussion; reading as under:-
“5.2.4During the course of present appellate proceedings the appellant contended the conclusion drawn by the A.O. stating that the payments are neither for satellite services, as such, nor are made to the satellite owners/satellite service providers hence, the A.O. has erred in defining the scope of the term ‘process’ to conclude that the payments in question made by the appellant are in the nature of “royalty”. Further vide its supplementary submission dated 08.01.2024, the appellant has submitted that the Hon'ble Income Tax Appellate Tribunal, Delhi Bench 'D', New Delhi ("ITAT") vide its order dated 26.12.2023 in ITA No. 2397/Del/2023 for the A.Y. 2018-19 [in the case of the appellant Vs. ITO, Ward, Intl. Taxation-2(2)(1), New Delhi] has decided the issue in favour of the appellant holding that the payments under the head ‘Live Rights’ are not made for use of any “process” as defined u/s 9 (1)(vi) of the Act and can’t be charged to tax as “Royalty” in the hands of the overseas rights holders supplementary submission dated 08.01.2024 of the appellant is reproduced as under:
4.In addition to the aforesaid ground wise factual and legal submissions, the Appellant is hereby making the following supplementary submissions in support of Ground No. 1 to 7 of its grounds of appeal:
4.1.That in the facts of the present case, the Appellant is an Indian company, engaged in the business of broadcasting or sub-licensing right to broadcast, inter alia, sport events e.g., golf, cricket, soccer etc., on live and non-live basis. During captioned AY, the Assessee had entered into agreements with various non-residents for acquisition of two types of rights—
a)Right to broadcast live sports events ("Live Rights"), and
b)Right to use audio-visual recording of the sport events for subsequent telecasting, cutting small clips for advertisements, making highlights of the event etc. ("Non-Live Rights").
4.2.That the agreements and invoices in the present case pertaining to acquisition of Live Rights and Non-Live Rights from the aforesaid entities clearly bifurcate the total consideration between consideration for Live Rights and consideration for Non-Live Rights.
4.3.That the Appellant had deducted tax at source under section 195 of the Act on the payment remitted in lieu of acquisition of Non-Live Rights considering the same to be royalty under section 9(1)(vi) of the Act, but the Assessee did not deduct any tax at source under section 195 on the payments made for Live Rights.
4.4.That the Ld. AO passed the Impugned Order alleging that the payment of Rs. 32,53,98,959/- made to the non-residents towards acquiring the right to broadcast live content is "royalty" under the Act and hence disallowed the same under Section 40(a)(i) of the Act.
4.5.That section 40(a)(i) of the Act provides that if any interest or royalty, fees for technical services or other sum chargeable under the Act is payable by an assessee, inter-alia, to a non-resident on which tax is deductible under Chapter XVII-B of the Act and such tax has not been so deducted at source, then the entire amount payable by the assessee shall be disallowed.
4.6.Further, section 195 of the Act provides for the obligation to deduct tax at source on payments made to a non-resident. Accordingly, if payment to a non-resident is exigible to TDS under section 195 and the same is not deducted then the said payment would be disallowed under section 40(a)(i) of the Act.
4.7.It is humbly submitted that disallowance under section 40(a)(i) of the Act is attracted only when tax is required to be withheld under section 195 of the Act and the said withholding has not been done by the Assessee. Thus, if the amount payable to the non-resident does not warrant withholding of tax under section 195 of the same, the said amount cannot be disallowed under section 40(a)(i) of the Act.
4.8.Reliance in this regard is also placed on CBDT circular number 3/2015 dated 12.02.2015, which states as follows:
"4.As disallowance of amount under section 40(a)(i) of the Act in case of a deductor is interlinked with the sum chargeable under the Act as mentioned in section 195 of the Act for the purposes of tax deduction at source, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Act, hereby clarifies that for the purpose of making disallowance of 'other sum chargeable' under section 40(a)(i) of the Act, the appropriate portion of the sum which is chargeable to tax under the Act shall form the basis of such disallowance and shall be the same as determined by the Assessing Officer having jurisdiction for the purpose of sub-section (1) of section 195 of the Act as per Instruction No. 2/2014, dated 26-2-2014 of CBDT."
(Emphasis Supplied)
4.9.That with respect to the non-deduction of tax under section 195 on the payments made to non-residents for acquisition of Live Rights during AY 2018-19, the Appellant was deemed to be assessee-in-default and an order to that effect was passed by Income Tax Officer, Ward International Taxation 2(2)(1) under section 201(1)/(1A) of the Act. The said order was upheld during the first appellate proceedings.
4.10.That aggrieved by the same, the Appellant had preferred an appeal before the Hon'ble Income Tax Appellate Tribunal, Delhi Bench 'D', New Delhi ("ITAT") vide ITA No. 2397/Del/2023. That the Hon'ble ITAT in the said appeal for AY 2018-19, vide its order dated 26.12.2023, has held as follows:
12 Heard the arguments of both the parties and perused the material available on record.
13.The question before us is as to, whether the right to broadcast "Live events" is not "copyright" and payment made there to is "Royalty" under section 9(1)(vi) or not?"
14 After detailed examination of the following judgments namely,
i.CIT vs. Delhi Race Club [2014] 51 taxmann.com 550 (Hon'ble Delhi HC) ii. Fox Network Group Singapore Pvt. Ltd. vs. AC IT(IT) (2020) 121 taxmann.com 330 (ITAT Delhi) iii. Cricket Australia vs. ACIT(IT) (ITA No. 1179/Delhi/2022) (ITAT Delhi) we hold that broadcasting "Live events" does not amount to a work in which copyright subsists, meaning thereby right to broadcast live events i.e., "Live Rights", is not "copyright" and therefore any payment made thereto can't be said to be chargeable to tax as royalty under section 9(1)(vi). Further the courts have held that when the agreements clearly bifurcate the consideration paid to wards Live and "Non-Live Rights", the Department can't deem the payment made for "Live Rights" to have been made for a bouquet of rights.
15.The other issue examined during the hearing was, whether the payments were made for the use of "process" or not?
16 We find that the payments in dispute are made to overseas rights holder. The said payments are neither made to any satellite operators nor for use of any satellite. Thus, the payments in dispute are not made for use of any "process" as defined u/s 9 (1)(vi) of the Act and can't be charged to tax as "Royalty" in the hands of the overseas rights holders. Accordingly, we hold that the AO while passing the order u/s 201 of the Act has erred in law by treating the remittances to have been made for use of a "Process".
17.In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 26/12/2023."
(Emphasis Supplied)
The copy of the order dated 26.12.2023 passed by the Hon'ble ITAT is submitted herewith as Annexure 3.
4.11.That the Appellant humbly submits that in the aforesaid appellate proceedings for AY 2018-19 itself, the Hon'ble ITAT has clearly held that the payments were made by the Appellant for Live Rights and since Live Rights is not copyright, the said payment will not be chargeable to tax under section 9(1)(vi) of the Act. Accordingly, the Hon'ble ITAT has held that the said foreign remittances made to the non-residents will not warrant withholding of tax under section 195 of the Act.
4.12.Since, the Hon'ble ITAT has held that there is no tax withholding obligation on the Appellant under Chapter XVIIB of the Act and the Appellant is not an assessee-in-default under section 201(1)/(1A) of the Act, the Appellant submits that the disallowance under section 40(a)(i) is not warranted in its case.
5.Further, it is humbly submitted that the present appellate proceedings have been pending before NFAC for almost two years. Accordingly, the Appellant requests for an early disposal of the current appeal.
6.In light of the aforesaid facts and circumstances of the present case, the Appellant humbly prays for the following:
6.1.That following the order of the ITAT in the Appellant's own case for AY 2018-19 (ITA No. 2397/Del/2023), the Impugned Order passed by the Ld. AO disallowing an amount of Rs. 32,53,98,959 under section 40(a)(i) of the Act for non-deduction of tax
5.2.5Relevant portion of the decision dated 26.12.2023 of the Hon'ble Income Tax Appellate Tribunal, Delhi Bench 'D', New Delhi ("ITAT") in ITA No. 2397/Del/2023 for the A.Y. 2018-19 [in the case of the appellant Vs. ITO, Ward, Intl. Taxation-2(2)(1), New Delhi] is reproduced as under:
“12.Heard the arguments of both the parties and perused the material available on record.
13.The question before us is as to, whether the right to broadcast "Live events" is not "copyright" and payment made thereto is "Royalty" under section 9(1)(vi) or not? 14. After detailed examination of the following judgments namely,
i.CIT vs. Delhi Race Club [2014] 51 taxmann.com 550 (Hon'ble Delhi HC)(2020) 121 taxmann.com 330 (ITAT Delhi)
ii.Fox Network Group Singapore Pvt. Ltd. vs. ACIT(IT)
iii.Cricket Australia VS. ACIT(IT) (ITA No. 1179/Delhi/2022) (ITAT Delhi)
iv.ESS (formerly known as ESPN Star Sports) vs. ACIT (ITA No. 7903/DEL/2018) (ITAT Delhi)
v.ESPN Star Sports vs. Global Broadcast News Ltd. 2008 (38) PTC 477 (ITA T Delhi)
vi.ADIT (IT) vs. Neo Sports Broadcast Pvt. Ltd. (2011) 133 ITD 468 (ITAT Mumbai)
vii.DDIT(IT) vs. Nimbus Communications Ltd (2013) 20 ITR(T) 754 (ITAT Mumbai), we hold that broadcasting "Live events" does not amount to a work in which copyright subsists, meaning thereby right to broadcast live events i.e., "Live Rights", is not "copyright" and therefore any payment made thereto can't be said to be chargeable to tax as royalty under section 9(1)(vi). Further the courts have held that when the agreements clearly bifurcate the consideration paid towards Live and "Non-Live Rights", the Department can't deem the payment made for "Live Rights" to have been made for a bouquet of rights.
15.The other issue examined during the hearing was, whether the payments were made for the use of "process" or not?
16.We find that the payments in dispute are made to overseas rights holder. The said payments are neither made to any satellite operators nor for use of any satellite. Thus, the payments in dispute are not made for use of any "process" as defined u/s 9(1)(vi) of the Act and can't be charged to tax as "Royalty" in the hands of the overseas rights holders. Accordingly, we hold that the AO while passing the order u/s 201 of the Act has erred in law by treating the remittances to have been made for use of a "Process".
17.In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 26/12/2023.”
5.2.6I have gone through the assessment order, grounds of appeal, statement of facts, written submission of the appellant and other materials available on record. Hon'ble Income Tax Appellate Tribunal, Delhi Bench 'D', New Delhi ("ITAT") vide its order dated 26.12.2023 in ITA No. 2397/Del/2023 for the A.Y. 2018-19 [in the case of the appellant Vs. ITO, Ward, Intl. Taxation2(2)(1), New Delhi] has already decided the issue in favour of the appellant holding that the payments under the head ‘Live Rights’ are not made for use of any “process” as defined u/s 9 (1)(vi) of the Act and can’t be charged to tax as “Royalty” in the hands of the overseas rights holders. Hence, in accordance with the above decision of the Hon’ble ITAT, provisions of section 195 r.w.s. 40(a)(i) of the Act also are not applicable to the payments under the head ‘Live Rights’. Accordingly, addition of 32,53,98,959/-is deleted and grounds No. 1 to 15 including the additional grounds are allowed.”
That being the case, the Revenue vehemently argues that the CIT(A) herein has erred in law and on facts while holding that the assessee’s expenditure under the head “live rights” are not made for use of any process as defined u/s 9(1)(vi) of the Act so as to attract TDS deduction under the head “Royalty” payment.
Learned Senior Counsel, on the other hand, has invited our apt attention to the fact that this tribunal has already decided the very issue of TDS deductibility on the assessee’s “Live Rights” against the department, as relied upon in the CIT(A)’s lower appellate discussion. He further takes us to pages 63 to 73 of the case records wherein the hon’ble jurisdictional high court has dismissed the Revenue’s ITA No.4/2026 directed against one of the assessee’s payees, M/s Sri Lanka Cricket, for the very assessment year, thereby concluding that such “live rights” are not taxable as income representing “Royalty”. It is in this factual backdrop that we find merit in the assessee’s foregoing contentions supporting the CIT(A)’s detailed discussion reversing the assessment findings treating his “Live Rights” payments as “Royalty” u/s 9(1)(vi) of the Act. The Revenue fails in its instant sole substantive grievance in very terms.
This Revenue’s appeal is dismissed.