2017 (4) TMI 1461 - AT - Income Tax

Erroneous treatment of Business Income as Royalty Income - DRP confirming entire payments received by the Appellant from customers in India during the captioned year are taxable as royalty under Section 9(1)( vi) and under Article 12 of India - Ireland DTAA - HELD THAT - The issue has been decided by this tribunal in assessee s own case against the assessee 2014 (1) TMI 1281 - ITAT MUMBAI as held a customer of the present assessee made payment without deduction of tax at source u/s 195 of the Act - the payments made for online use of database was for licence to use said database and hence the consideration was royalty liable for deduction of tax at source u/s 195 of the Act - Decided against Assessee. Levy of interest u/s. 234B - HELD THAT - AO erred in charging the interest u/s. 234B as assessee being a non-resident the Indian payers were obliged to withhold Tax at Source u/s. 195 of the Act and therefore the question of payment of advance tax and corresponding levy of interest u/s. 234B of the Act does not arise. - Decided in favour of Assessee.

Summary

Issues Involved:
1. Erroneous treatment of Business Income as Royalty Income
2. Erroneous charging of interest under Sections 234B of the Act

Analysis:

Issue 1: Erroneous treatment of Business Income as Royalty Income
The appeal was against the order of the assessing officer treating the entire payments received by the appellant from customers in India as taxable "royalty" income under Section 9(1)(vi) of the Income-tax Act. The tribunal noted that the issue had been previously decided against the assessee in earlier assessment years. The appellant argued that decisions favoring the assessee had not been considered in the earlier decision. However, the tribunal found that the facts of those cases were different from the appellant's case. The tribunal held that since the issue had been consistently decided against the assessee earlier and the jurisdictional High Court had not reversed it, the appeal was decided against the assessee.

Issue 2: Erroneous charging of interest under Sections 234B of the Act
The appellant challenged the charging of interest under Section 234B of the Act, amounting to a specific sum. The counsel for the assessee cited several decisions of the Hon'ble Bombay Court and Delhi High Court in favor of the assessee. The tribunal, noting that the revenue did not dispute this proposition, held that the assessing officer erred in charging the interest under Section 234B. It was reasoned that as the appellant was a non-resident, Indian payers were required to withhold Tax at Source under Section 195 of the Act, making the levy of interest under Section 234B unwarranted. Consequently, the tribunal partly allowed the appeal by the assessee.

In conclusion, the tribunal's judgment addressed the erroneous treatment of business income as royalty income and the charging of interest under Sections 234B of the Act. The decision was based on the interpretation of relevant legal provisions, precedents, and the specific circumstances of the case, ultimately resulting in a partial allowance of the appeal by the assessee.