2022 (10) TMI 1171 - AT - Income Tax

Income deemed to accrue or arise in India - Royalty receipt - Non-taxable business income in the nature of Subscription Fees for standard online market research database on pharmaceutical sector taxed as Royalty under Section 9(1)(vi) - India- Switzerland Tax Treaty - HELD THAT - As decided in assessee own case 2022 (5) TMI 1547 - ITAT MUMBAI we uphold the plea of the assessee and delete the impugned addition in respect of subscription fees received by the assessee. Non granting of TDS Credit - AR submitted that assessee has filed rectification application u/s 154 requesting for grant of TDS - HELD THAT - AO has completed Assessment under section 143(3) r.w.s 144C(13) of the Act. Therefore, certain informations were not available with him at the time of completion of the final Assessment Order. However, assessee has filed rectification application u/s. 154 of the Act and it is the duty imposed on the AO to complete the rectification process within six months. Even otherwise the AO should have intimated the same - We remit this issue back to the file of the AO to verify the claim of the assessee - Ground raised by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Taxability of Subscription Income as Royalty.
2. Short grant of TDS credit.
3. Levy of Interest under Section 234B.
4. Levy of Interest under Section 234D.

Issue-wise Detailed Analysis:

1. Taxability of Subscription Income as Royalty:
The central issue is whether the subscription income received by the assessee, a Swiss company, from Indian customers for providing access to its online pharmaceutical database (IQVIA Reports) should be classified as 'Royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, and Article 12(3) of the India-Switzerland Tax Treaty. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) concluded that the income should be taxed as Royalty, referencing previous assessments and pending appeals. The assessee argued that the income is business income and not royalty, as the IQVIA Reports are compilations of publicly available data and do not satisfy the definitions of 'Royalty' under the Act or the Tax Treaty. The Tribunal observed that in the assessee's own case for previous years (A.Y. 2013-14 to A.Y. 2016-17), the Coordinate Bench had ruled in favor of the assessee, holding that such subscription fees are not taxable as Royalty under the DTAA. The Tribunal reiterated that the subscription fees are not taxable as Royalty, following the principle of consistency and previous rulings.

2. Short grant of TDS credit:
The assessee claimed a short grant of TDS credit amounting to Rs. 6,47,764. The Tribunal noted that the assessee had filed a rectification application under Section 154 of the Act for this shortfall. The Tribunal directed the AO to verify the claim and grant the TDS credit after due verification, remitting the issue back to the AO for appropriate action.

3. Levy of Interest under Section 234B:
The interest levied under Section 234B of the Act amounting to Rs. 1,64,07,015 was contested by the assessee. The Tribunal noted that the levy of interest is consequential in nature and should be deleted if the relief sought under the primary grounds (regarding the taxability of subscription fees and TDS credit) is granted. Thus, this issue was allowed for statistical purposes.

4. Levy of Interest under Section 234D:
Similarly, the interest levied under Section 234D of the Act amounting to Rs. 4,02,390 was also deemed consequential. The Tribunal held that this interest should be deleted if the primary grounds are resolved in favor of the assessee, allowing this issue for statistical purposes as well.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, directing the AO to verify and rectify the TDS credit and consequentially adjust the interest levied under Sections 234B and 234D, following the precedent set in the assessee's own cases from previous years regarding the non-taxability of subscription income as Royalty.