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2014 (10) TMI 212 - AT - Income TaxApplication for admission of additional evidence - whether the application for admission of additional evidence dated 13.06.2014 as filed by the revenue before us in terms of Rule 29 of the ITAT Rules, 1963, should be allowable or not Held that - The information adduced by the Revenue Department particularly that of case details pertaining to assessee s case against Google Inc. before U.S. District Court, Colombia were time and again solicited from the Assessee/ Appellant at different stages of litigation i.e. both by AO as well as CIT(A) - the assessee was provided with sufficient opportunities to submit relevant details/ documents pertaining to Google Inc. case etc. but, such details/ documents were not submitted before AO and CIT(A) for consideration - the additional evidence as adduced by the revenue particularly the case-papers relating to assessee s case against Google Inc. before US District Court, Colombia had always remained within the exclusive knowledge and possession of the assessee and not produced before the AO as well as CIT(A) despite insistence by the respective authorities for reasons best known only to the assessee. The copy of complaint which could not be considered at any prior stage of proceedings in the instant case and could only be brought to light from the internet domain before us hence, the same needs to be considered - it would be prudent to state that in absence of any direct evidence to the contrary with respect to case-details/ complaint by the assessee, it is important to point out that, admission of the same shall cause no prejudice to the assessee as the same pertains to assessee s own case and even none of its contents have been controverted by the assessee thus, the Application for Additional evidence made by the revenue in terms of Rule 29 of the ITAT Rules, 1963 and admitted Decided in favour of revenue. Royalty u/s 9(1)(iv) Article 13 of Indo-French DTAA Consideration received from distribution agreement - Whether news reports and photographs could be subject matter of copyright in terms of Section 13 of the Copyright Act, 1957 and whether the consideration received by the assessee under the distribution agreements qualify as royalties in terms of Article 13 of Indo-French DTAA and also Section 9(1)(iv) Held that - AFP exercises a great degree of control and strictly regulates its news-content supplied by it to Indian news agencies and most of its information is proprietary-in-nature and copyrighted inasmuch as access to archived data, distribution rights, commercial rights, credit to AFP alongwith copyright symbol AFP or without copyright symbol AFP (as may be determined by AFP in terms of its internal policy), which can be used except as per terms of AFP - the news that is distributed by the assessee to various news agencies are obtained from different sources including AFP s own personnel, domestic as well as international news correspondents, and other agencies etc. who have a good amount of experience in news reporting - Such news stories as obtained by AFP is further evaluated and processed by its editorial team which comprises of a network of senior journalists who are the best journalistic minds in news business possessing specialized skills and are capable of coming out with news-stories having a distinct feature and innate quality. It is for this very distinct feature and innate quality that AFP news is preferred and is revered to as one of the most reliable news agencies in the world since its year of inception i.e. 1835. News-reports as well as archived data being in the nature of original literary works does not fall foul to the doctrine of de minimi and meet at statutory requirements for copyright outlines under Section 13(1)(a) of the Indian Copyright Act, 1957 - copyright subsists in such news item/ news story under consideration - taking cue from Section 2(c)(i) of the Indian Copyright Act, 1957 categorically includes photographs as artistic work - it cannot be denied that it has an intrinsic value of its own and when used for news items it helps assist in conveying the message in the news story - on a reading of Section 2(C)(i) of the Indian Copyright Act 1957 which deems photographs as artistic works keeping in view of the terms of use of such photographs vis-a-vis subscription agreement as discussed above as well as separate commercial value being ascribed to such photographs the same very clearly fits into the sweep of section 13(1)(a) of the Indian Copyright Act 1957 hence it could be concluded that copyright subsists in such photographs/ image under consideration. The assessee by way of grant of licence to its users obtained a commercial value for distribution of its news which cannot come into the public domain except by virtue of a license agreement - the question of fair dealing by the user of information covering bundle of first, second as well as third category of information does not come into play as it is strictly governed by the terms of the subscription agreement and comes for a commercial value hence, the reference to fair dealing in terms of Section 52(1)(b) is misplaced to this extent Decided against assessee. Charging of interest u/s 234B Obligation to deduct TDS u/s 195 Held that - Following the decision in DIT-I, International Taxation Versus Alcatel Lucent USA, Inc., Alcatel Lucent World Services Inc. 2013 (11) TMI 734 - DELHI HIGH COURT - even though there may not be any positive or direct evidence to show that the assessee did make a representation to its Indian telecom dealers not to deduct tax from the remittances, such a representation or informal communication of the request can be reasonably inferred or presumed - The Tribunal ought to have accorded due weightage to the strong possibility or probability of such a request having been made by the assessee to the Indian payers since otherwise the denial of its tax liability on its Indian income would have served little purpose for the assessee - the Indian payers did not deduct the tax u/s 195(1) because of the request made by the assessee, consistent with its stand that it was not liable to be taxed in India Decided against assessee.
Issues Involved:
1. Admissibility of additional evidence under Rule 29 of the ITAT Rules, 1963. 2. Whether copyright subsists in the news reports and photographs distributed by the assessee. 3. Whether the payments received qualify as "royalties" under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act. 4. Applicability of Section 52 of the Copyright Act regarding fair dealing. 5. Levy of interest under Section 234B of the Income Tax Act. Detailed Analysis: 1. Admissibility of Additional Evidence: The Tribunal examined whether the additional evidence submitted by the Revenue, particularly the case details of the assessee's dispute with Google Inc., should be admitted. The assessee had not provided these documents despite multiple requests. The Tribunal determined that the additional evidence was crucial for resolving the central issue of whether copyright subsists in the news reports and photographs. Hence, the Tribunal allowed the admission of the additional evidence under Rule 29 of the ITAT Rules, 1963. 2. Copyright in News Reports and Photographs: The Tribunal analyzed whether copyright subsists in the news reports and photographs distributed by the assessee. It was established that: - News per se or "hot news" is not copyrightable. - News stories and archived news, which involve a modicum of creativity and expression, are copyrightable. - Photographs taken by professional photographers with unique aesthetic merit are considered artistic works and are copyrightable under Section 2(c)(i) of the Indian Copyright Act, 1957. The Tribunal concluded that the news stories and photographs distributed by the assessee possess the necessary creativity and originality to qualify as "original literary works" and "artistic works," respectively, under Section 13(1)(a) of the Copyright Act. 3. Payments as "Royalties": The Tribunal examined whether the payments received by the assessee qualify as "royalties" under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act. It was determined that: - The payments for the use or right to use the copyright of literary, artistic, or scientific works fall within the definition of "royalties." - The agreements between the assessee and Indian news agencies explicitly stated that AFP is the copyright owner of the information provided and that the agreements constitute a license to use the information. The Tribunal upheld the view that the payments received by the assessee qualify as "royalties" and are taxable under the relevant provisions. 4. Applicability of Section 52 of the Copyright Act: The assessee argued that reporting of current events is an exception to copyright infringement under Section 52 of the Copyright Act. The Tribunal noted that Section 52 provides a defense to consumers from prosecution for copyright infringement. However, in the present case, the news content transmitted by AFP is not in the public domain and is accessible only through a license agreement. Therefore, the provision of fair dealing under Section 52 does not apply to the assessee's case. 5. Levy of Interest under Section 234B: The assessee contended that interest under Section 234B should not be levied as the payer is liable to deduct tax at source. The Tribunal referred to the decision in the case of DIT-I, International Taxation Vs. Alcatel Lucent USA, Inc., where it was held that if the assessee denies its tax liability in India, it implies that the payer did not deduct tax at source based on the assessee's representation. Consequently, the Tribunal dismissed the assessee's ground against the levy of interest under Section 234B. Conclusion: The Tribunal dismissed the appeal of the assessee, holding that: - The additional evidence submitted by the Revenue was admissible. - Copyright subsists in the news stories and photographs distributed by the assessee. - The payments received qualify as "royalties" under Article 13 of the Indo-French DTAA and Section 9(1)(vi) of the Income Tax Act. - The provision of fair dealing under Section 52 of the Copyright Act does not apply to the assessee's case. - The levy of interest under Section 234B was justified as per the decision in the case of Alcatel Lucent USA, Inc.
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