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2021 (11) TMI 217 - AT - Income TaxIncome accrued in India - Royalty receipts - receipts from Indian customers - receipts from CAS division as well as from PUBS division - India-USA DTAA - HELD THAT - As relying in assessee's own case 2019 (4) TMI 1818 - ITAT MUMBAI we would hold that receipts from CAS division as well as from PUBS division could not be held to be royalty and hence, not taxable in the hands of the assessee. - Decided in favour of assessee.
Issues Involved:
1. Assessment of total income. 2. Taxability of receipts as royalty under India-US DTAA and Section 9(1)(vi) of the Income Tax Act. 3. Computation of tax rate. 4. Levying of interest under Section 234B of the Income Tax Act. Issue-wise Detailed Analysis: 1. Assessment of Total Income: The assessee appealed against the assessment of total income at INR 102,66,92,087 under Section 143(3) read with Section 144C(13) of the Income Tax Act, as opposed to the nil income returned by the assessee. The appeal arose from the final assessment order dated 16/04/2021, following the directions of the Dispute Resolution Panel (DRP). 2. Taxability of Receipts as Royalty: The primary contention was whether the receipts from Indian customers amounting to INR 102,66,92,087 should be taxed as royalty under Article 12(3) of the India-US Double Tax Avoidance Agreement (DTAA) and Section 9(1)(vi) of the Income Tax Act. 2.1 Subscription Charges from CAS and PUBS Divisions: The assessee argued that subscription charges received under the Chemical Abstract Service (CAS) division and Publications (PUBS) division should not be taxed as royalty. The CAS division provides access to databases of scientific content, while the PUBS division publishes and sells research journals and e-journals. The Assessing Officer (AO) and DRP held these receipts as taxable royalties for the use or right to use copyright in scientific work or information concerning industrial, commercial, or scientific experience. 2.2 Use of ACS Databases/Software: The AO/DRP considered the subscription charges for access to ACS databases/software as taxable under the India-US DTAA. The assessee contended that mere access to databases does not equate to the use or right to use copyright, as per the definition under the Copyright Act, 1957. 2.3 Supreme Court Ruling and Previous ITAT Decisions: The assessee referenced the Supreme Court's decision in Engineering Analysis Centre of Excellence Private Limited, arguing that the receipts should not be treated as royalties. The AO disregarded this, maintaining the stance that the receipts were for the use of copyright. The assessee also cited previous ITAT decisions in their favor for AYs 2014-15 to 2016-17, where similar receipts were not taxed as royalties. 2.4 Non-Adherence to Previous ITAT Decisions: Despite the ITAT's favorable decisions in earlier years, the AO/DRP did not follow these precedents, as the Tribunal's orders were under further appeal and had not attained finality. 3. Computation of Tax Rate: The AO computed the tax payable on assessed income at 15%, contrary to the assessee's claim that the applicable rate should be 10% as per the beneficial provisions of the Act, inclusive of surcharge and cess. 4. Levying of Interest under Section 234B: The AO levied interest of ?60,128,488 under Section 234B of the Income Tax Act, which was contested by the assessee. Tribunal's Decision: The Tribunal found that the issues were covered in the assessee's favor by earlier ITAT decisions for AYs 2014-15 to 2016-17. The Tribunal reiterated that mere access to copyrighted material does not constitute the use or right to use copyright, as detailed in the Copyright Act, 1957. The Tribunal held that the subscription fees for CAS and PUBS divisions do not qualify as royalties under Section 9(1)(vi) of the Act or Article 12(3) of the India-US DTAA. Conclusion: The Tribunal allowed the assessee's appeal, ruling that the receipts from CAS and PUBS divisions are not taxable as royalties. Consequently, the grounds related to the tax rate and interest under Section 234B were rendered infructuous. The stay application for recovery of outstanding demand was also dismissed. Order Pronounced on 26th October 2021.
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