2016 (2) TMI 923 - AT - Income Tax

Taxability of advertisement revenue - Held that - So far as the issue relating to addition on account of advertisement revenue and distribution revenue the same stands decided in favour of the assessee by the Tribunal which has been affirmed by the Hon ble High Court in AY 1999-2000 and also in subsequent years. As regards the issue of distribution receipts treated as royalty income we find that this has been treated as business income and such a finding or conclusion now have attained finality as pointed out by the Ld. Senior Counsel. Taxability on distribution revenue - Held that - Since this issue has been decided in favour of the assessee by holding that the same is not taxable on the ground that it has been paid at Arm s length price therefore this ground becomes purely academic Taxability on distribution revenue and taxability of interest received u/s.244A - Held that - As regards the issue relating to taxability of interest received u/s 244A it is admitted that so far as taxability of interest u/s 244 is concerned under Article 11(4) of India Singapore Treaty the same is now covered by the decision of the Hon ble Special Bench in the case of ACIT vs Clough Engineering Ltd reported in 2011 (5) TMI 562 - ITAT DELHI .

Summary

Issues:
- Taxability of Advertisement Revenues
- Taxability of Distribution Revenues
- Taxability of Interest Received under Section 244A of Act

Taxability of Advertisement Revenues:
The appeals were filed against the direction of the Disputes Resolution Panel-1, Mumbai, for the assessment years 2007-08 & 2008-09. The key contentions were related to the business connection in India, Permanent Establishment (PE) in India under the India-Singapore Tax Treaty, arm's length remuneration to Multi Screen Media Private Limited (MSMI), estimation of taxable advertisement revenues, and the method of taxation. The Tribunal found in favor of the assessee based on previous decisions, holding that the advertisement revenue and distribution revenue were not taxable, and interest received under Section 244A was not taxable in the hands of the assessee due to losses suffered during the year.

Taxability of Distribution Revenues:
The issue of taxability of distribution revenues was also raised, asserting that they were in the nature of royalty and should be assessed at 10% on a gross basis under Article 12 of the Treaty. However, the Tribunal decided in favor of the assessee, stating that the distribution revenues were paid at an arm's length price, making the issue academic. The Tribunal's decision was consistent with previous rulings and principles of taxation, leading to the allowance of the assessee's appeals.

Taxability of Interest Received under Section 244A of Act:
Regarding the taxability of interest received under Section 244A of the Income Tax Act, the Tribunal held that it was not taxable in the year under consideration, as the tax liability for those assessment years had not yet attained finality. The interest income was not considered to be effectively connected with the alleged PE in India, and the Tribunal decided in favor of the assessee based on the India-Singapore Treaty and previous legal interpretations. The Tribunal's decision aligned with the principle of consistency and previous rulings, resulting in the allowance of both appeals filed by the assessee.

In summary, the Appellate Tribunal ITAT Mumbai ruled in favor of the assessee on all issues related to the taxability of advertisement revenues, distribution revenues, and interest received under Section 244A of the Income Tax Act. The Tribunal's decision was based on previous judgments and legal interpretations, ultimately leading to the allowance of the assessee's appeals for the assessment years 2007-08 & 2008-09.