Income from Transfer of Channels being an Asset Outside India not Taxable u/s 9(1)(i) Income Tax Act: ITAT deletes Addition [Read Order]

The two member bench of Delhi Income Tax Appellate Tribunal ( ITAT ) comprising Amit Shukla ( Judicial Member ) and Padmavathy S. ( Accountant Member ) while deleting the addition held that Income from transfer of channels being an asset outside India should not be taxable under Section 9(1)(i) of the Income Tax Act,1961. The Assessee Star Asian Region FZ LLP ( SARF ) is a non resident company and is a tax resident of Hong Kong belonging to the Star Television group of companies.

During the year under consideration, the assessee ( SARF ) a resident of Hong Kong has transferred channel i.e. STAR Vijay channel to another sister concern “Vijay Television Private Limited”. However SARF did not offer to tax the income earned in to the same of Brand, Goodwill and revenue contracts in respect of STAR Vijay channel for the reason that these intangibles are not an asset situated in India.

The assessee submitted before the Assessing Officer that the business of the channels namely broadcasting of television channels was carried on from outside of India and the assets transferred are global intangible assets not specific to Indian business.

The Assessing Officer did not accept the submissions of the assessee and proceeded to treat the entire transaction value as short term capital gain taxable in India. while adjudicating the issue of transfer of STAR World channel by STEL to SIML the tribunal held that for an intangible asset the situs is where the owner of the   asset is situated and since the STAR World is owned by STEL who is a non resident the intangible asset being the channel is not a capital asset situated in India and accordingly the gain on transfer of such asset is not taxable in India. Accordingly the ITAT bench held that the income arising out of the transfer of STAR Vijay channel, being an asset outside India by the SARF to VTPL will not fall within the provisions of section 9(1)(i) and hence not taxable in India. Finally the bench elated the addition made by the AO and allowed the ground raised by the assessee. Porus Kaka, counselappead for the assessee and Himanshu Sharma, counsel appeared for the revenue.

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