In a major relief to ESPN Star Sports, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the entity is not taxable in the absence of a Business Connection or PE in India in view of the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius.

ESPN Star Sports is a partnership firm established under the laws of Mauritius and is engaged in the business of selling advertisement time and program sponsorship from Mauritius in connection with the programming via non-standard television on ESPN, Star Sports, and Star Cricket programming services. The assessment history of the appellant shows that for the past A.Ys., ESPN India has been held to be dependent agent PE and fixed place PE of the assessee. During the course of assessment proceedings for A.Y 2005-06 and 2006-07, it was revealed that there was a considerable change in the activities as compared with the earlier years. The Assessing Officer, based on the same, assessed the total income of the assessee and raised demand.

The two-member bench of the Tribunal comprising Judicial member Amit Shukla and Accountant Member N K Billaiya relied on the decision of the Supreme Court in the case of E-funds IT Solutions Inc. wherein the Apex Court laid down a test for whether there is fixed place PE.

“Considering the past history of the assessee in light of the decision of this Tribunal read with the decision of the Hon’ble Supreme Court in the case of E-funds IT Solutions Inc. [supra], we hold that the assessee has no business connection in India in terms of section 9(1) of the Act and has no PE under Article 5(2), 5(4) and 5(5) of India Mauritius DTAA,” the Tribunal said.

“Since we have held that there is no PE, we are of the considered view that there cannot be any attribution of profit as held by this Tribunal in assessee’s own case in A.Ys 2009-10 and 2011-12,” the Tribunal added.

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