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2022 (5) TMI 1547 - AT - Income TaxIncome deemed to accrue or arise in India - Royalty receipts - taxability of subscription income received by the assessee under the provisions of section 9(1)(vi) of the Act as well as under the Article 12(3) of the India Switzerland Double Taxation Avoidance Agreement (DTAA) - HELD THAT - We find that the Co ordinate Bench of the Tribunal in assessee s own case in IMS AG (now known as IQVIA AG) 2020 (11) TMI 466 - ITAT MUMBAI , for the assessment year 2013 14, while holding that subscription fees received by the assessee is not taxable as Royalty under the provisions of DTAA. Similar findings were also rendered in assessee's own case in IMS AG (now known as IQVIA AG) v/s DCIT 2020 (7) TMI 829 - ITAT MUMBAI for the assessment year 2014 15. The learned Departmental Representative could not show any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decision of the Co ordinate Bench of the Tribunal for preceding assessment years. Thus we uphold the plea of the assessee and delete the impugned addition in respect of subscription fees received by the assessee. Decided in favour of assessee.
Issues Involved:
1. Taxability of subscription income as Royalty under Section 9(1)(vi) of the Income-tax Act, 1961 and Article 12(3) of the India-Switzerland Tax Treaty. 2. Levy of interest under Section 234B of the Income-tax Act. Issue-wise Detailed Analysis: 1. Taxability of Subscription Income as Royalty: The primary issue in this appeal is the taxability of subscription income received by the assessee as Royalty under the provisions of Section 9(1)(vi) of the Income-tax Act and Article 12(3) of the India-Switzerland Double Taxation Avoidance Agreement (DTAA). The assessee, a Swiss company, provides market research reports on the pharmaceutical sector. For the assessment year 2016-17, the assessee declared total income of Rs. 17,70,93,233 and claimed exemption for subscription fees amounting to Rs. 46,24,44,838 under Article 7 read with Article 5 of the DTAA. The Assessing Officer (AO) and Dispute Resolution Panel (DRP) concluded that the subscription fees should be treated as Royalty. The AO noted that similar findings were upheld in previous assessment years (2013-14, 2014-15, and 2015-16). The DRP, despite acknowledging that the Tribunal had previously ruled in favor of the assessee, rejected the objections to keep the issue alive for the Revenue. The Tribunal examined the facts and legal precedents, particularly the assessee’s own case in earlier years, where it was held that subscription fees are not taxable as Royalty under the DTAA. The Tribunal cited the jurisdictional High Court’s decision in DIT Vs Dun and Breadstreet Information Services India Pvt Ltd, which concurred with the Authority for Advance Rulings (AAR) that similar payments did not constitute Royalty. The Tribunal reiterated that the subscription income did not involve the transfer of any copyright or imparting of information concerning industrial, commercial, or scientific knowledge, experience, or skill. Consequently, it did not fall within the definition of Royalty under Section 9(1)(vi) of the Act or Article 12(3) of the DTAA. The Tribunal upheld the assessee’s plea and deleted the addition of Rs. 46,24,44,838 as Royalty. 2. Levy of Interest under Section 234B: The second issue pertains to the levy of interest under Section 234B of the Act, amounting to Rs. 1,77,90,467. The Tribunal noted that the levy of interest under this section is consequential. Since the main addition of subscription fees as Royalty was deleted, the issue of interest under Section 234B was rendered academic and allowed for statistical purposes. Conclusion: The Tribunal allowed the appeal, deleting the addition of subscription fees as Royalty and addressing the consequential levy of interest under Section 234B. The decision was pronounced in the open court on 11/05/2022.
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