Income Tax Appellate Tribunal sets aside tax demand of Rs. 1 crore on Asia Today Ltd., holding that licensing broadcasting rights without transfer of copyright does not constitute royalty income.
In a significant ruling dated December 24, 2025, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench "I", delivered a detailed judgment in the case of M/s Asia Today Limited versus the Assistant Director of Income Tax (International Taxation). The tribunal clarified the tax treatment of income earned by a Mauritius-based foreign telecasting company from licensing broadcasting rights of Hindi feature films to an Indian licensee.
Asia Today Limited, a Mauritius resident company engaged in acquiring and producing television films and holding copyrights of various Hindi feature films, had entered into a non-exclusive license agreement dated April 7, 2003, with M/s Usha Kiron Television, India. The agreement granted broadcasting rights of 100 Hindi feature films for a period of two years and six months, for which Asia Today received Rs. 1 crore. The company contended that this amount was exempt from Indian income tax as it constituted neither royalty under Section 9(1)(vi) of the Income Tax Act nor taxable income under the India-Mauritius Double Taxation Avoidance Agreement (DTAA), since the transaction was executed and performed outside India and involved no transfer of copyright.
The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) rejected this contention, holding that Asia Today had a Permanent Establishment (PE) in India and that the payment constituted royalty under Article 12 of the DTAA. Accordingly, the Rs. 1 crore income was taxed as royalty at 15%. The AO relied on the broad definition of "royalty" in the DTAA, which includes payments for the use or right to use any copyright, including cinematographic films.
Asia Today challenged this finding before the ITAT, arguing that the Explanation 2 to Section 9(1)(vi) of the Income Tax Act explicitly excludes consideration for sale, distribution, or exhibition of cinematographic films from the definition of royalty. They contended that only transfer of copyright or rights to modify or exploit films amounts to royalty, which was not the case here since they granted only non-exclusive broadcasting rights without transferring any copyright or modification rights.
The tribunal undertook a thorough examination of the license agreement, relevant statutory provisions, and judicial precedents. It noted that while the DTAA defines royalty to include payments for use of copyrights, it necessarily implies transfer of copyright or rights connected to copyright. Asia Today had not transferred any copyright but only granted limited broadcasting rights for a fixed period, with no rights to modify, edit, or exploit the films beyond telecasting.
The tribunal analyzed several key precedents, including judgments of the Bombay High Court in CIT v. MSM Satellite (Singapore) PTE Ltd. and the Delhi High Court in CIT v. ESPN Star Sports Mauritius, which distinguished broadcasting rights from copyright and held that payments for mere broadcasting or distribution rights do not constitute royalty. The tribunal also relied on decisions of coordinate benches of the ITAT and the Supreme Court emphasizing that the exclusion under Explanation 2(v) for sale, distribution, or exhibition of cinematographic films is clear and binding.
Furthermore, the tribunal clarified that the Finance Act, 2020, which removed this exclusion effective April 1, 2021, is not applicable retrospectively to the assessment year under consideration (2004-05). Therefore, the exclusion applied to Asia Today's case.
Accordingly, the ITAT set aside the tax demand of Rs. 1 crore treated as royalty income and held that the licensing fee received by Asia Today for broadcasting rights of Hindi feature films does not qualify as royalty under the Income Tax Act or the India-Mauritius DTAA. The tribunal allowed the appeal of Asia Today Limited.
This ruling provides important guidance on the tax treatment of broadcasting rights and copyright-related payments under international tax treaties and domestic law, affirming that mere licensing of broadcasting rights without transfer of copyright does not attract royalty tax. It also underscores the significance of precise contractual terms and the distinction between copyright and broadcasting rights in international taxation.
Bottom Line:
Consideration received for non-exclusive broadcasting rights of cinematographic films without transfer of copyright does not constitute "royalty" under Explanation 2 to Section 9(1)(vi) of the Income Tax Act, 1961 or Article 12(3) of the India-Mauritius DTAA.
Statutory provision(s): Section 9(1)(vi) Explanation 2 of the Income Tax Act, 1961, Article 12 of India-Mauritius DTAA, Section 44AB of the Income Tax Act, 1961, Section 271(1)(c), Section 271B
