The Delhi High Court has clarified that “royalty” presupposes “enduring benefits”, and in case the licensee has a right to record or preserve the feed and he continues to derive benefit of that recording and has right to re-telecast or show those matches in future, beyond the period or event(s) other than such event, then only, the payment made to the licensee in appropriate case, can be treated as royalty.
Since the right to show cricket matches was confined to live telecast and the payment made was only for the matches held in the series (within 12 months) and not subsequent matches, the Court ruled that such amount paid to the Sri Lanka Cricket (respondent) cannot be considered as a royalty.
The ruling came while adjudicating whether the payment received by the respondent for granting rights for the ‘live feed’ of cricket matches constitutes ‘royalty’ under Section 9(1)(vi) of the Income Tax Act.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar, therefore, observed that that the Income Tax Appellate Tribunal (ITAT) did not commit any error in concluding that the fees received by the respondent for live transmission could not be classified as royalty income under Section 9(1)(vi).
The Bench clarified that the live broadcast is not a ‘work’ and lacks the requisite creativity to be protected by copyright. Further, the broadcast reproduction rights are distinct from copyright, and the payment does not create an ‘enduring benefit’ for the licensee, which is a prerequisite for a payment to be considered royalty.
The Bench also reiterated that for a right to be claimed under the Copyright Act, a ‘minimum requirement of creativity’ is necessary, which element is absent in the ‘live telecast of an event’.
Appearances:
Advocate Ruhir Bhatia, Anant Mann, and Lopamudra Mahapatra, for Appellant/ Taxpayer
Senior Advocate Ajay Vohra, along with Advocates Saksham Singhal and Samkth Chaudhari, for the Respondent/ Revenue
