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2023 (3) TMI 708 - AT - Income TaxIncome received or deemed to be received in India - royalty receipts - assessee is a non resident company incorporated in Malaysia. It is engaged in the business of provision of distant education courses to individuals for various post-graduation courses - HELD THAT - A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. As in case of Engineering Analysis Centre of Excellence Pvt.Ltd. vs CIT 2021 (3) TMI 138 - SUPREME COURT has analysed the provisions of Income tax Act vis-a-vis provisions of DTAA. We note that the details that were filed before the DRP were neither remanded nor has been verified by the DRP themselves and observes that assessee could not furnish any documents which has been reproduced hereinabove in the preceding paras. We note that the various agreements / documents that has been filed in piece meal before the AO and the DRP has not thoroughly verified the materials / document that were filed by the assessee. Infact before the DRP, various documents filed by the assessee has not been considered. As has been submitted by Ld.CIT.DR that identical issue has been remanded to the Ld.AO for fresh consideration for A.Y. 2014-15 2022 (3) TMI 1509 - ITAT BANGALORE we do not wish to express our opinion in the present facts as it would prejudice the rights of assessee as well as the revenue. In the interest of justice, we deem it proper to remand this issue back to Ld.AO to be decided along with A.Y. 2014- 15 as there are voluminous details available in the present assessment year under consideration before us. It is appropriate to remit the issue in dispute to the file of the Ld.AO for deciding the comparability of these transactions in the light of the judgment of the Hon ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited (supra) and the decisions relied by the Ld.AR reproduced herein above. Accordingly, the issue in dispute is remitted to the Ld.AO for fresh decision with the above directions. In the result the appeal of the assessee is partly allowed for statistical purposes.
Issues Involved:
1. General Ground challenging the legality of the assessment order. 2. Treatment of income from distance education under the Income Tax Act, 1961. 3. Treatment of income from distance education under the Double Taxation Avoidance Agreement (DTAA) between India and Malaysia. 4. Discrepancy in Tax Deducted at Source (TDS) credit. Detailed Analysis: 1. General Ground: The appellant contended that the order passed by the Assessing Officer (AO) and the directions of the Dispute Resolution Panel (DRP) were prejudicial and should be quashed. 2. Treatment of Income from Distance Education under the Income Tax Act, 1961: The AO and DRP made an addition of Rs. 3,59,11,128 to the appellant's income, treating it as royalty under section 9(1)(vi) of the Income Tax Act, 1961. The appellant argued that the income earned was not royalty since the Indian companies only received course material and did not obtain the right to use any copyright or literary work. The AO, however, held that the payment for access to the education software and related services constituted royalty, referencing the Karnataka High Court's decision in Samsung Electronics Ltd. (345 ITR 494). 3. Treatment of Income from Distance Education under the DTAA: The AO treated the payment received by the appellant as royalty under Article 12 of the India-Malaysia DTAA. The appellant contended that the income should be classified as business profits under Article 7 of the DTAA and, in the absence of a Permanent Establishment (PE) in India, should not be taxable. The appellant emphasized that the definition of royalty under the DTAA is narrower than under the Income Tax Act, and the subscription fees received did not grant any right to use the copyright in the database. 4. Discrepancy in TDS Credit: The AO granted TDS credit of Rs. 36,15,113 against the claimed amount of Rs. 40,70,116. The appellant sought the correct TDS credit as claimed in the return of income. Judgment: The Tribunal noted that the details filed before the DRP were neither remanded nor verified. The AO and DRP did not thoroughly verify the documents submitted by the appellant. The Tribunal referenced the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. (432 ITR 471) and decided to remand the issue back to the AO for fresh consideration. The AO was directed to reassess the comparability of the transactions in light of the Supreme Court judgment and other relevant decisions cited by the appellant. Conclusion: The appeal of the assessee was partly allowed for statistical purposes, with the issue remitted to the AO for a fresh decision. The Tribunal emphasized the need for a thorough verification of the documents and compliance with the principles laid down by the Supreme Court. The order was pronounced in the open court on 30th August 2022.
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