2022 (12) TMI 1349 - AT - Income Tax

Royalty Payment - TDS on remittance to University of Cambridge, UK, which is for examination fee, books purchased and teacher s training fee - HELD THAT - We note that an identical controversy arose before ITAT, Delhi in ACIT, International Taxation, New Delhi Vs. M/s The Chancellor, Masters and Scholars of the University of Cambridge 2022 (10) TMI 450 - ITAT DELHI treated the receipts (exactly same as paid by assessee) as Royalty , invoking the same legal provisions as in present appeal, and taxed in India. The matter travelled upto ITAT and the Hon ble Delhi Bench, relying upon the decision of Hon ble Supreme Court in the case of Engineering Analysis Center of Excellence Pvt Ltd. 2021 (3) TMI 138 - SUPREME COURT was pleased to hold that the impugned receipts were not in the nature of royalty . Thus, the view taken by Hon ble ITAT, Delhi is quite clear that the impugned receipts were not in the nature of royalty . This view equally applies to the present assessee. For the sake of completeness and clarity, we may mention that the decision of ITAT, Delhi was in the matter of recipient i.e. M/s The Chancellor, Masters and Scholars of the University of Cambridge and the present-appeal before us is in the matter of payer. But that would not make any difference in the conclusion qua the nature of receipt/payment. Hence respectfully following the decision of Hon ble ITAT, Delhi, we do hold that the payment made by assessee was not in the nature of royalty as claimed by revenue-authorities and hence does not attract TDS. Resultantly, the Ld. AO is directed to delete the demand of TDS and consequential interest created upon the assessee. Appeal of assessee is allowed

Summary

Issues:
Interpretation of payment made to University of Cambridge as royalty and imposition of tax and interest on the appellant.

Analysis:
1. The appellant, a society running an educational institution, remitted a payment to University of Cambridge without deducting TDS. The Assessing Officer viewed the payment as royalty under relevant sections of the Income-tax Act, 1961 and the India-UK DTAA, imposing TDS and interest. The appellant challenged this decision.

2. The core issue revolved around whether the payment of Rs. 24,33,853/- to University of Cambridge constituted "royalty." The revenue contended it did, while the appellant disagreed, leading to the appeal.

3. The Tribunal noted a similar case before ITAT, Delhi involving the University of Cambridge, where it was held that such receipts were not royalty. Citing the decision, the Tribunal concluded that the payment made by the appellant was not royalty, aligning with the Delhi ITAT's ruling.

4. Referring to the India-UK DTAA, the Tribunal analyzed the definition of royalty and emphasized that the impugned transaction must involve the use of copyrights or industrial information to qualify as royalty. Relying on the Supreme Court's decision, the Tribunal held that the payment did not fall under the ambit of royalty, thus directing the deletion of TDS demand and interest.

5. The Tribunal clarified that the Delhi ITAT's decision, though involving the recipient, applied equally to the present appellant as the payer. Therefore, the payment was not deemed royalty, and the demand for TDS and interest was to be deleted.

6. Consequently, the Tribunal allowed the appeal of the appellant, setting aside the orders of the lower authorities and directing the Assessing Officer to delete the TDS demand and interest. The judgment was pronounced on 06/12/2022 in favor of the appellant.