Income derived from transmission of ‘live feed’ not taxable as ‘royalty income’ u/s 9(1)(vi) of Income Tax Act, 1961: Delhi High Court

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Delhi High Court: In an appeal filed against the orders of Income Tax Appellate Tribunal (‘ITAT’) (‘impugned orders’) regarding the taxability of total license fee earned in respect of live telecast as royalty; the Division Bench of Yashwant Varma and Girish Kathpalia, JJ., upheld the impugned orders and held that the income of respondent towards live transmission could not be classified as ‘royalty income’ under Section 9(1)(vi) of the Income Tax Act, 1961 (‘the Act’).


Respondent, Fox Network Group Singapore Pte Ltd. entered into a tripartite agreement titled as the ‘Novation Agreement’ with ESS Singapore (‘ESS’) and Star India Private Limited (‘SIPL’) which novated all the existing agreements between SIPL and ESS regulating the distribution of channels, advertisement sales, license agreements and other aspects governing the contractual relationship between them.

For Assessment Year 2015-16 (‘AY’), respondent had in return of income offered Rs 65,44,67,199 as royalty income, subject to tax in terms of the provisions contained in Section 9(1)(vi) of the Act. The income was stated to be earned from sublicensing of broadcasting ‘non-live’ content as per the Master Rights Agreement (‘MRA’) which formed part of the Novated Agreement.

Respondent was asked to furnish an explanation as only Rs 65,44,67,199 was offered to tax as royalty out of total license fee earned. Respondent submitted that out of gross consideration of Rs 1181.63 crores which was earned from sub-licensing of sports broadcasting rights, it had earned Rs 65,44,67,199 from ‘non-live’ feed and that the balance amount of Rs 1115.91 crores was attributable to ‘live’ feed which would not fall within the ambit of Section 9(1)(vi) of the Act. It was further contended, referring to Novation Agreement that in the bifurcation of the royalty earned in the ratio of 95% and 5%, only 5% was liable to be recognized as revenue generated from ‘non-live’ feed.

Analysis, Law, and Decision

The Court opined that the contention of appellant that the ratio adopted for bifurcation of income was either unsubstantiated or arbitrary had no merit.

The Court relied on Commissioner of Income Tax v. Delhi Race Club (1940) Ltd., 2014 SCC Online Del 7619, and opined that once the Court had concluded that a live telecast would not fall within the ambit of the expression ‘work’, it would be erroneous to hold that the income derived by respondent in respect of ‘live feed’ would fall within Clause (v) of Expression 2 to Section 9(1)(vi) of the Act.

The Court further took note of the submission of appellant that respondent’s revenue earned from ‘live feed’ would be taxable in accordance with Clause (i) of Explanation 2 to Section (9)(1)(vi) of the Act and opined that the explanation covered the activity of transmission by satellite. However, in the instant case, appellant admitted that the actual transmission of content was undertaken by SIPL and not by respondent. Thus, the explanation did not detract from the opinion of ITAT.

The Court upheld that the impugned orders and further held that the fees received by respondent towards live transmission could not be classified as royalty income under Section 9(1)(vi) of the Act.

[CIT-International Taxation v. Fox Network Group Singapore Pte Ltd., 2024 SCC OnLine Del 433, Order dated: 05-01-2024]

Advocates who appeared in this case :

For the Appellant: Ruchir Bhatia, Puneet Rai, SSC; Ashvini Kumar and Rishabh Nangia, St. Counsels; Deeksha Gupta, Advocate

For the Respondent: Porus Kaka, Senior Advocate; Ashok Mathur, Divesh, Saurabh Jain and Sandy Sharma, Advocates

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