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2019 (12) TMI 1555 - AT - Income TaxIncome accrued in India - Income taxable in India - subscription charges received - As per AO subscription charges received under Chemical Abstract Services (CAS) division and publications (PUBS) division would be chargeable to tax in India under India US DTAA being received for use of copyright of artistic literary or scientific work and /or for use of information concerning industrial commercial or scientific experience and/ or for use of industrial commercial or scientific equipment - HELD THAT - We notice that in the assessment year 2014-15 the assessee filed its return of income declaring nil income on the plea that it was a tax resident of USA and entitled to be taxed in accordance with the provisions of India USA Double Taxation Avoidance Agreement (DTAA) to the extent they are more beneficial. The AO however taxed the income earned by the assessee from Indian customers with respect to the subscription fees for Chemical Abstracts Services (CAS) division and (PUBS) Division as royalty in terms of section 9(1) (vi) of the Act as well as Article 12(3) of the India USA DTAA. The contention of the assessee was that these incomes constitute business profits which are not taxable in the absence of any permanent establishment (PE) in India and since the services were being provided from outside India. The coordinate Bench decided both the issues in favour of the assessee. The coordinate Bench has decided the identical issues in favour of the assessee in assessee s appeal 2019 (4) TMI 1818 - ITAT MUMBAI - Decided in favour of assessee.
Issues:
Grant of stay on recovery of outstanding demand based on impugned order passed by AO u/s143(3) read with section 144C(13) for the assessment year 2016-17. Analysis: The applicant filed for a stay on the recovery of outstanding demand totaling ?143,725,351, including interest, based on the AO's order for the assessment year 2016-17. The AO determined the income at ?879,938,280 following DRP directions regarding revenues from subscription to data base (CAS) division and subscription revenues for journals (PUBS division). The applicant challenged this order before the Tribunal, citing favorable decisions in previous years. The DRP confirmed the additions based on directions from previous years, leading to a dispute between the parties. The issues revolved around whether the subscription charges under CAS and PUBS divisions could be taxed as royalty under India US DTAA. The Tribunal analyzed the nature of the payments and the rights acquired by customers. It was established that customers did not acquire any copyright or intellectual property rights, merely accessing and using the information provided. The Tribunal referred to previous decisions and established that the payments did not qualify as royalty under section 9(1)(v) of the Act or Article 12(3) of the India USA DTAA. The Tribunal emphasized that the considerations were for the purchase of a product, not for the use of copyright. In previous years, the assessee had declared nil income, arguing for taxation under more beneficial provisions of India USA DTAA due to being a tax resident of the USA. The AO, however, taxed income from Indian customers as royalty, which the Tribunal found incorrect based on the absence of a permanent establishment in India. The Tribunal relied on previous decisions to rule in favor of the assessee, highlighting consistency in decisions across assessment years. The Tribunal allowed the appeal of the assessee, dismissing the application for stay on recovery of outstanding demand as infructuous. The impugned order was found to be not in accordance with previous decisions and the decision of the coordinate Bench. The grounds of appeal raised by the assessee were deemed covered by the decisions of the coordinate Bench, leading to the allowance of the appeal. In conclusion, the Tribunal ruled in favor of the assessee, holding that the impugned order was not in line with previous decisions and allowed the appeal. The application for stay on recovery of outstanding demand was dismissed as the appeal was allowed.
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