The Delhi Income Tax Appellate Tribunal (ITAT) has clarified an important issue concerning the taxability of payments for sports broadcasting rights. The Tribunal held that consideration attributable to live cricket broadcasting rights cannot be treated as royalty under Section 9(1)(vi) of the Income-tax Act, 1961, where the live broadcast does not involve the transfer or use of copyright.
At the same time, the Tribunal drew a distinction between live and non-live broadcasting rights. It held that payments attributable to repeat telecasts or non-live broadcasts can fall within the scope of royalty.
The ruling was delivered in a batch of appeals involving Times Content Limited, now known as Time Internet Limited, for Assessment Years 2016-17, 2017-18 and 2018-19.
Background of the Case
Times Content Limited had acquired media rights from Willow TV International Limited for broadcasting ICC cricket matches through digital platforms in specified overseas territories.
The agreement covered different forms of exploitation of the cricket programmes, including their live transmission as well as subsequent non-live or repeat broadcasts.
For AY 2016-17, the agreement involved composite rights fees of approximately ₹20.26 crore. The Assessing Officer (AO) treated the entire payment as royalty under Section 9(1)(vi).
Since the assessee had not deducted tax at source on the payment made to the non-resident rights holder, the AO consequently made a disallowance of approximately ₹15.19 crore on account of non-deduction of TDS.
The assessee challenged the treatment before the Commissioner of Income Tax (Appeals) [CIT(A)].
CIT(A)’s Findings
The CIT(A) examined the nature of rights granted under the agreement and concluded that the arrangement essentially contained two categories of rights.
The first category related to live broadcasting, while the second concerned rights associated with recording, duplication and subsequent exploitation of the programmes.
The CIT(A) therefore did not accept the Revenue’s position that the entire consideration constituted royalty. Instead, it treated the consideration as composite and allocated 95% towards live broadcasting rights and 5% towards non-live rights.
The Revenue challenged this finding before the ITAT.
ITAT Examines Live and Non-Live Rights
The Delhi ITAT, comprising Judicial Member Sudhir Kumar and Accountant Member Manish Agarwal, examined the agreement and the earlier judicial precedents dealing with sports broadcasting rights.
The Tribunal noted that the Revenue had not been able to dislodge the factual finding that the live broadcast rights did not involve copyright.
This distinction was crucial because royalty taxation under Section 9(1)(vi) is connected with consideration for the use or right to use specified intellectual property and copyright-related rights.
The Tribunal also relied upon earlier judicial decisions concerning sports broadcasting, including the Supreme Court’s decision in CIT v. Sri Lanka Cricket.
Accordingly, the Tribunal upheld the principle that consideration attributable to live telecasting cannot be treated as royalty merely because the assessee acquired broadcasting rights.
However, the Tribunal did not extend the same protection to repeat or non-live broadcasts.
Repeat Telecast Rights Can Constitute Royalty
The Tribunal specifically held that non-live or repeat telecast rights remain within the scope of royalty.
The underlying distinction is that the live broadcast itself does not necessarily involve exploitation of copyright. In contrast, rights involving the recording, duplication, reproduction or subsequent exploitation of a programme may involve copyright-related rights and therefore attract royalty treatment.
The Tribunal therefore concluded that the payment had to be appropriately divided between live and non-live rights.
93:7 Ratio Adopted for Allocation
While the CIT(A) had originally adopted a 95:5 allocation, the ITAT found that the available viewership data provided a more appropriate basis for determining the proportion attributable to live and non-live broadcasts.
The Tribunal referred to ComScore data, which showed that approximately 93% of the viewership related to live broadcasts, while the remaining 7% related to non-live broadcasts.
The assessee’s authorised representative also accepted that the revenue could be bifurcated using this ratio.
Consequently, the ITAT modified the allocation from 95:5 to 93:7.
Under the revised allocation:
- 93% of the consideration was attributable to live broadcasting rights and was held not taxable as royalty.
- 7% of the consideration was attributable to non-live broadcasting rights and was held taxable as royalty.
Since tax had not been deducted on the royalty component, the Tribunal confirmed the corresponding TDS-related disallowance, directing the AO to recompute the amount based on the revised 93:7 allocation.
Same Principle Applied to Other Assessment Years
The Tribunal observed that the appeals relating to AYs 2017-18 and 2018-19 involved substantially identical facts.
Accordingly, it directed the Assessing Officer to apply the same 93:7 ratio for determining the live and non-live components for those years.
The three Revenue appeals were therefore partly allowed.
Key Takeaway for Broadcasters and Digital Platforms
The ruling provides an important distinction for businesses acquiring sports and media rights from non-residents.
A payment for broadcasting rights should not automatically be classified as royalty in its entirety. The actual nature of the rights acquired and the manner in which those rights are exploited must be examined.
Where consideration relates to live transmission without copyright exploitation, it may fall outside the royalty provisions. However, consideration attributable to repeat telecasts, recording, duplication or other copyright-related exploitation may attract royalty taxation and corresponding TDS obligations.
For taxpayers involved in international broadcasting arrangements, therefore, careful contractual drafting, proper segregation of rights and reasonable allocation of consideration can have significant tax implications.
Case Details
Case: ACIT v. Times Content Limited (now known as Time Internet Limited)
Appeal Nos.: ITA Nos. 5328, 5331 & 5333/Del/2024
Assessment Years: 2016-17, 2017-18 and 2018-19
Tribunal: ITAT Delhi
Key Issue: Taxability of payments for live and non-live cricket broadcasting rights as royalty under Section 9(1)(vi) of the Income-tax Act, 1961.