Live Cricket Broadcast Payments Not Taxable as Royalty, Non-Live Broadcast Rights Are: ITAT Delhi

The Delhi Income Tax Appellate Tribunal has reiterated that payments for live cricket broadcasts are not taxable as royalty. However, the portion attributable to repeat or non-live broadcasts can be treated as royalty.

Relying on earlier judgments, including the Supreme court's ruling in CIT v. Sri Lanka Cricket, the tribunal ruled:

“Accordingly, we hold that the ld. CIT(A) has rightly held the live telecast as not the Royalty u/s 9(1)(vi) of the Act. However, the repeat telecast i.e. non live telecast is not out of the scope of Royalty."

A bench of Judicial Member Sudhir Kumar and Accountant Member Manish Agarwal was hearing the Revenue's appeals concerning assessment years 2016-17 to 2018-19.

Times Content Limited, now known as Time Internet Limited, had obtained media rights from Willow TV International Limited. The rights allowed it to broadcast ICC cricket matches in specified overseas territories through digital platforms. The agreement covered both live broadcasts and subsequent non-live or post-match broadcasts.

For assessment year 2016-17, the order records composite rights fees of about ₹20.26 crore for live and non-live broadcasting rights. The Assessing Officer treated the payment as royalty. He made a disallowance of about ₹15.19 crore for non-deduction of tax at source. In other words, the tax department's case was that tax should have been deducted before making the payment to the non-resident.

The Commissioner of Income Tax (Appeals) found that the agreement covered two sets of rights. The main rights concerned live broadcasting. The other rights allowed the recording, duplication and other exploitation of the broadcasts. It treated the arrangement as composite and applied a 95:5 split. It allocated 95% to live broadcasting and 5% to non-live broadcasting.

The Revenue challenged this allocation. It pointed out that the agreement also allowed the company to distribute, transmit, exhibit, duplicate, promote, perform, telecast and otherwise exploit the programmes. It therefore argued that the entire payment should be treated as royalty.

The tribunal, however, observed that the Revenue had failed to controvert the finding that live broadcasts did not carry copyright. Payments attributable to live broadcasts could therefore not be treated as royalty. The tribunal also considered earlier decisions on sports broadcasting rights, including the Supreme court's ruling in CIT v. Sri Lanka Cricket.

The question then was how the payment should be divided between live and non-live rights. The Commissioner of Income Tax (Appeals) had used a 95:5 ratio. ComScore data, however, showed that live broadcasts accounted for 93% of viewership. Non-live broadcasts accounted for the remaining 7%. The company's authorised representative accepted that the revenue could be bifurcated in the same ratio.

The tribunal consequently modified the earlier allocation. It attributed 93% to live broadcasting and 7% to non-live broadcasting. The 7% component was allocated to non-live broadcast rights and treated as royalty. As no tax had been deducted on that part of the payment, the tribunal confirmed the disallowance to that extent. It also directed the Assessing Officer to recalculate the disallowance accordingly.

The same approach was applied to assessment years 2017-18 and 2018-19. The tribunal recorded that the facts in those appeals were identical. It directed that the 93:7 ratio be followed for those years as well. All three Revenue appeals were partly allowed.

For Assessee: Mukesh Gupta, CA and Sourabh Gupta, CA

For Revenue: Bhopal Singh, CIT-DR