Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal holding that Cricket Australia, a non-resident entity incorporated in Australia and governing the sport of cricket in that country, was not liable to tax in India on broadcast-related receipts as business income.

Cricket Australia had entered into agreements granting media and broadcast rights in respect of cricket matches played in Australia to Indian broadcasters. The matches were conducted outside India, and Cricket Australia did not have any office, branch, or fixed place of business in India. It also did not have any dependent agent in India authorised to conclude contracts on its behalf.

The Assessing Officer sought to tax the receipts as business income accruing or arising in India, alleging economic presence and commercial exploitation of the Indian market. The CIT(A) and ITAT rejected this approach and held that the receipts were taxable, if at all, only as royalty in accordance with the India–Australia DTAA.

Issues Involved

Whether income received by Cricket Australia from grant of broadcasting and media rights to Indian broadcasters constituted business income taxable in India in the absence of a Permanent Establishment, or whether such income was taxable only as royalty under the India–Australia Double Taxation Avoidance Agreement.

Petitioner’s Arguments (Revenue)

The Revenue contended that Cricket Australia commercially exploited the Indian market by permitting live telecast of cricket matches in India, thereby earning substantial revenue from Indian broadcasters. It was argued that such income had sufficient nexus with India and ought to be taxed as business income under the Act. The Revenue further contended that the DTAA did not prevent taxation of such income as business profits.

Respondent’s Arguments (Assessee)

Cricket Australia submitted that it had no Permanent Establishment in India and carried out no business operations in India. It was argued that the grant of broadcast rights constituted royalty under Article 12 of the India–Australia DTAA and that taxation was limited to the rate and manner prescribed therein. In the absence of a Permanent Establishment, the income could not be taxed as business profits under Article 7 of the DTAA.

Court Order / Findings

The Delhi High Court upheld the findings of the ITAT and held that the receipts from grant of broadcast rights were in the nature of royalty as defined under the India–Australia DTAA. The Court held that Cricket Australia did not have any Permanent Establishment in India and that all cricket matches were played outside India, with no business operations carried out within Indian territory.

The Court observed that mere viewership or commercial exploitation of broadcast rights in India does not constitute a Permanent Establishment. In the absence of a PE, business income cannot be taxed under Article 7 of the DTAA.

The Court rejected the Revenue’s attempt to characterise the receipts as business income and affirmed that taxation must strictly follow the treaty provisions. The Court relied upon settled jurisprudence governing taxation of sports bodies and broadcasting rights, including earlier decisions of the Delhi High Court on similar issues.

Important Clarification

The Court clarified that income arising from grant of broadcasting rights by non-resident sports bodies is taxable in India only in accordance with the applicable DTAA. In the absence of a Permanent Establishment, such income cannot be taxed as business income merely because Indian broadcasters or viewers are involved.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that Cricket Australia did not have a Permanent Establishment in India and that income from grant of broadcast rights to Indian broadcasters was taxable only as royalty under the India–Australia DTAA, subject to treaty rates, and not as business income.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769841560_THEPRCOMMISSIONEROFINCOMETAXINTERNATIONALTAXATION1VsCRICKETAUSTRALIA.pdf

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