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Income Tax Appellate Tribunal, DELHI BENCH ‘D: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
The appeal filed by the assessee is directed against the order dated 24.01.2025 passed under section 147 r.w.s. 144C (13) of the Income Tax Sri Lanka Cricket Act, 1961 (‘Act’) by the Assistant Commissioner of Income Tax (International Tax), Circle -3(1)(2), New Delhi. Along with this appeal, the assessee has also filed above captioned Stay Application (SA).
2. The assessee has raised following grounds of appeal:
1. On the facts and in circumstances of the case and in law, the Assistant Commissioner of Income Tax, (International Tax) Circle 3(1)(2), Delhi has erred in conducting the reassessment proceedings and passing the final reassessment order under section 147 r.w.s 144 of the Income Tax Act, 1961 ('the Act') as the requirements of the Section 148A read with Section 148 of the Act have not been met. Accordingly, the final reassessment order and draft assessment order under Section 147 r.w.s 144, notices issued under Section 148/148A and order passed under Section 148A(d) of the Act is bad in law, void ab initio and liable to be quashed.
2. On the facts and in circumstances of the case and in law, the learned AO has erred in holding that the income earned by the appellant from M/s Lex Sportel Vision Private Limited ('Lex Sportel') on account of grant of rights for live telecast of cricket matches is taxable royalty under the Act as well as under the India - Sri Lanka Tax Treaty.
3. Without prejudice, on the facts and in circumstances of the case and in law, the learned AO has erred in considering an incorrect amount of INR 121,86,67,498 as income earned from Lex Sportel as taxable in the hands of the appellant (instead of USD 45,00,000 equivalent to INR 29,13,75,000 actually earned from Lex Sportel in the year under consideration).
4. On the facts and in circumstances of the case and in law, the learned AO has erred in levying interest under Section 234A of the Act amounting to INR 8,04,32,022.
5. On the facts and in circumstances of the case and in law, the learned AO has erred in levying interest under Section 234B of the Act amounting to INR 9,99,30,694.
The Appellant craves leave to add to, withdraw or modify all or any of the grounds of appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”
The relevant facts giving rise to this appeal are that the assessee, the National Association for the sport of cricket in Sri Lanka, has granted broadcasting and certain ancillary rights to Lex Sportel Vision Private Limited (‘Lex Sportel’) for the live telecast of a particular cricket tournament held in Sri Lanka in the month of March 2018. In turn, the assessee has derived income, in the relevant year, in the form of license fees from Lex Sportel. Since the assessee has not offered that license fees as income; therefore, the AO initiated assessment proceedings under section 14 of the Income Tax Act, 1961 (‘Act’). The Assessing Officer (‘AO’), holding that the assessee has received Rs.121,86,67,498/- from Lex Sportel in lieu of broadcasting rights, was nothing but in the nature of royalty. Hence the AO taxed the entire receipt of Rs.121,86,67,498/- as royalty. Thereafter, the assessee filed an application under section 154 of the Act stating that the sum received from Lex Sportel was only Rs.28,70,32,330/- instead of the sum of Rs.121,86,67,498/- as mentioned by the AO. However, the assessee stated that the said rectification application under section 154 of the Act has not yet disposed of by the AO. The assessee objected the draft assessment order before the DRP, who disposed of the said objection vide its 3 Sri Lanka Cricket order dated 27 December 2024, held that the sum received by the assessee from Lex Sportel was royalty in nature and further directed to the AO to verify the sum received by the assessee from Lex Sportel and to do needful thereafter.
At the outset, the Ld. Sr Counsel submitted that the issue under consideration that whether the payment made by Lex Sportel to the assessee for live telecast rights of the sports event in March 2018 was squarely covered by the decision of the Hon’ble Tribunal in the case of Lex Sportel Vision Private Limited 158 taxman.com 129, wherein it had been held that the Lex Sportel had made payment for broadcasting ‘live matches’ in March 2018 to the assessee was not taxable as royalty under section 9(1)(vi) of the Act.
4.1 Further, the Ld. Sr. Counsel submitted that the actual sum received by the assessee was only Rs.28,70,32,330/-. In support of the above submission, he contended that the payment of Rs.28,70,32,330/- had been considered by the AO of Lex Sportel for TDS purposes. The application under section 154 of the Act was to treat the sum of Rs.28,70,32,330/- as receipt instead of Rs.121,86,67,498/- as royalty.
4.2 During the course of reassessment proceeding and the proceedings before the DRP, the appellant assessee submitted that the payment made by the Lex Sportel was not in the nature of royalty. Hence, no addition on this Sri Lanka Cricket score was warranted to be made in the hands of the assessee. The DRP had given direction to the AO to verify the facts that whether the Revenue had filed an appeal against the order of the Tribunal in the case of Lex Sportel before the Delhi High Court and to do needful thereafter. However, at the time of finalizing the assessment order, the Revenue had not filed the appeal though it was stated that the filing of appeal was in process. Hence, the AO did not take cognizance of final outcome of the order of the ITAT in the case of Lex Sportel. In view of the Tribunal decision in the case of Lex Sportel, it was submitted that the Lex Sportel had made payment, for live broadcasting of cricket matches, to the assessee during the year under consideration was not chargeable to tax in the hands of the assessee as a royalty under section 9(1)(vi) of the Act and also in view of provisions of the applicable tax treaty.
4.3 It was argued that the present case was squarely covered by the decision of the Hon’ble Delhi High Court in the case of Fox Network Group Singapore Pte. Ltd. 158 Taxmann.com 434. Further, reliance was placed on the following decisions: - Delhi Race Club (2014) 51 taxmann.com 550 (Delhi High Court) Cricket Australia (ITA no. 1179/Del/2022) (Delhi Tribunal) ADIT vs. Global Cricket Corporation P. Ltd. (2022) 145 Taxmann.com 570 (Mumbai Tribunal) ADIT vs. Neo Sports Broadcast Private Limited (2011) (15 taxmann.com 175) (Mumbai Tribunal)
Sri Lanka Cricket 4.4 Further, it was submitted that the case of the assessee was reopened without having valid approval under section 151(ii) of the Act as the said approval under section 148D of the Act was approved by the Commissioner of Income Tax, (International Tax), Delhi- 3, instead of the Principal Chief Commissioner of Income-Tax, International Taxation, the specified authority mentioned under section 151 of the Act as the case of the assessee was reopened. Further, it was argued that the notice under section 148A/148 was issued by the Jurisdictional AO instead of the Faceless AO, which was contrary to the provisions of section 151A of the Act. Reliance was placed on the following decisions: Abhinav Jindal HUF v. ITO (2024) 166 taxmann.com 536 (Delhi) Star Global Multi Ventures Pvt Lad (W.P.(C) 14237/2022) (Delhi) Appeal Kids Dream International Pvt Ltd. (W.P.(C) 2814/2023) (Delhi) Gudwala And Sons (W.P.(C) 12540/2022) (Delhi)
On the other hand, the Ld. CIT-DR, argued the case vehemently. She placed reliance on orders of the Authorities below. She prayed for dismissal of appeal and SA.
We have heard both parties and have perused the material available on records. We find that this case is squarely covered by the decision of the Hon’ble Delhi High Court in the case of Fox Network Group Singapore Pte. Ltd. (supra), wherein it has been held as under:
Sri Lanka Cricket “10. In light of the unequivocal conclusions as expressed by the Division Bench in Delhi Race Club and with which we concur, we find that once the Court came to the conclusion that a live telecast would not fall within the ambit of the expression “work‟, it would be wholly erroneous to hold that the income derived by the assessee in respect of “live feed‟ would fall within clause (v) of Explanation 2 to S.9(1)(vi) of the Act.
Notwithstanding the above, Mr. Rai, learned counsel appearing for the appellant, additionally sought to place the respondent’s income in clause (i) of Explanation 2 to Section 9(1)(vi) of the Act and sought to contend that the word “process‟ as occurring therein would make revenue earned from “live feed‟ taxable.
The aforesaid submission essentially proceeded on the basis of Explanation 6 to Section 9(1)(vi) which reads as under: - "Explanation 6. --For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret;]"
As is evident from a reading of the said Explanation, the clarification which is entered pertains to "transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology......". The aforesaid Explanation is thus hinged upon the activity of transmission by satellite. It is the aforesaid activity which is sought to be captured and included in clause (i) of Explanation 2 to Section 9(1)(vi) of the Act.
However, in the facts of the present case, it is admitted to the appellant that the actual transmission of content was undertaken by SIPL and not by the respondent. The Explanation, therefore in our considered opinion does not detract from the correctness of the view as ultimately expressed by the ITAT.
In addition to the above, we note that the arguments addressed on the anvil of Explanation 6 to Section 9(1)(vi) of the Act lose sight of the salient principles which were enunciated by our Court in Director 7 Sri Lanka Cricket of Income Tax vs. New Skies Satellite BV 68 taxmann.com8 ….. where the Court had recognized the primacy of provisions contained in the Double Taxation Avoidance Agreements as opposed to domestic statutes.
We deem it apposite to extract the following passages from the judgment of the Court in New Skies Satellite BV supra: - ……………………………………………………………………….
Accordingly, and for all the aforesaid reasons, we hold that the ITAT did not commit any error in passing the impugned orders dated 20 March 2020 and 21 February 2023 and that it was completely justified in arriving at the finding that the fees received by the respondents towards live transmission could not be classified as royalty income under Section 9(1)(vi) of the Act. Consequently, no substantial question of law arises in the instant appeals and the appeals stand dismissed on the aforesaid terms.”
Respectfully, following the decision of the Hon’ble Delhi High Court in the case of Fox Network Group Singapore Pte. Ltd. (supra), we hereby hold that the receipt for the live telecast received by the assessee from Lex Sportel is not the royalty income; hence, the same is held not taxable in the hands of the assessee as royalty under section 9(1)(vi) of the Act. This ground is accordingly allowed. Since, the case has already been decided on merit, other issues/grounds raised
by the appellant-assessee become academic in nature. Hence, all remaining grounds are left open.
8. In the result, the appeal of the assessee is allowed as above. SA No. 231/Del/2025:
9. In view of the above appellate order, SA become infructuous; hence, the same is dismissed.
Order pronounced in open Court on 28th July, 2025.