2018 (5) TMI 339 - AT - Income Tax

Income chargeable to tax in India - Income accrued in India - Royalty receipt - India Thailand DTAA - Held that - As decided in assessee s own case 2017 (10) TMI 827 - ITAT DELHI Income received by the assessee is not a royalty as per Article 12 of the DTAA between India and Thailand, therefore, the same is not chargeable to tax, despite the amendment in the Income Tax Act with retrospective effect by Finance Act, 2012. In the result, the common ground raised in both the appeals i.e. whether income received by the assessee is chargeable to tax according to the Indian Income Tax Act as royalty u/s. 9(1)(vi) of the Act as well as under Article 12 of the DTAA between India and Thailand are allowed.

Issues Involved:
1. Legality of the orders passed by the DCIT and DRP.
2. Taxability of income from providing telecasting services.
3. Applicability of Indian Income-tax Act and DTAA between India and Thailand.
4. Classification of income as 'royalty' under Section 9(1)(vi) of the Act and Article 12 of the DTAA.
5. Interest levy under Section 234B of the Act.
6. Penalty proceedings under Section 271(1)(c) of the Act.
7. Validity of reassessment under Section 147/143(3)/144C.

Detailed Analysis:

1. Legality of the Orders Passed by DCIT and DRP:
The assessee challenged the orders passed by the DCIT and DRP, claiming they were "bad in law and on facts." The Tribunal noted that the issues in both appeals (AY 2006-07 and 2011-12) were common and identical, hence they were heard together and disposed of by a common order. The Tribunal found that the orders were not sustainable as the income in question was not chargeable to tax in India.

2. Taxability of Income from Providing Telecasting Services:
The assessee contended that it was not liable to Indian taxation for income earned from providing telecasting services. The DCIT, however, assessed the income as taxable under the Indian Income-tax Act and the DTAA with Thailand. The Tribunal referred to the decision of the Coordinate Bench and the Hon’ble Delhi High Court in similar cases, concluding that the income from telecasting services was not taxable in India.

3. Applicability of Indian Income-tax Act and DTAA between India and Thailand:
The Tribunal examined whether the income earned by the assessee was taxable under the Indian Income-tax Act and the DTAA between India and Thailand. The Tribunal relied on the decision of the Hon’ble Delhi High Court in the case of DIT vs. New Skies Satellite BV & Ors., which held that the amendment made by the Finance Act 2012 would not affect Article 12 of the DTAA. Consequently, the income earned by the assessee could not be held as royalty and was not chargeable to tax in India.

4. Classification of Income as 'Royalty' under Section 9(1)(vi) of the Act and Article 12 of the DTAA:
The DCIT classified the income as royalty under Section 9(1)(vi) of the Act and Article 12 of the DTAA. The Tribunal, however, found that the income could not be classified as royalty based on the definition provided in the DTAA. The Tribunal cited the Hon’ble Delhi High Court's ruling that the retrospective amendments to Section 9(1)(vi) by the Finance Act, 2012, did not affect the definition of royalty under the DTAA.

5. Interest Levy under Section 234B of the Act:
The Tribunal dismissed the grounds related to the levy of interest under Section 234B of the Act as premature. It stated that since the addition did not remain, there was no question of charging any interest under Section 234B.

6. Penalty Proceedings under Section 271(1)(c) of the Act:
The Tribunal also dismissed the grounds related to the initiation of penalty proceedings under Section 271(1)(c) of the Act as premature.

7. Validity of Reassessment under Section 147/143(3)/144C:
For AY 2006-07, the assessee challenged the reassessment proceedings under Section 147/143(3)/144C. The Tribunal found that since the income received by the assessee was not taxable as royalty under the DTAA, the reassessment proceedings became infructuous and were dismissed.

Conclusion:
The Tribunal concluded that the income received by the assessee from providing telecasting services was not taxable in India as royalty under Article 12 of the DTAA between India and Thailand. Consequently, the appeals were partly allowed, and the grounds related to interest and penalty were dismissed as premature. The reassessment proceedings for AY 2006-07 were also dismissed as infructuous.

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