2023 (7) TMI 394 - AT - Income Tax

Income accued in India - taxability of subscription charges received by the assessee as Royalty u/Article 12(3) of India USA DTAA and u/s 9(1)(vi) - subscription revenue received by the assessee in Chemical Extract Service and Publication division - assessee is a scientific society based in the USA that supports scientific enquiry in the field of chemistry - HELD THAT - As respectfully following the orders passed in assessee s own case 2019 (4) TMI 1818 - ITAT MUMBAI as held what is acquired by the customer is a copyrighted article, copyrights of which continue to lie with assessee for all purposes. It is a well settled law that copyrighted article is different from a copyright, and that consideration for the former, i.e. a copyrighted article does not qualify as royalties. Thus, the principles noted by us in the earlier part of this order in the context of the income earned by way of CAS fee are squarely applicable to the subscription revenue received from customers of PUBS division for sale of journal also, and accordingly PUBS fee also does not qualify as 'Royalty' in terms of section 9(1)(vi) of the Act as well as Article 12(3) of the India-USA DTAA. Thus we uphold the plea of the assessee and delete the impugned addition in respect of the subscription fee received by the assessee under Chemical Abstract Service and Publications division. Decided in favour of assessee.

Summary

Issues Involved:
1. Assessment of total income.
2. Taxability of subscription charges as "Royalty".
3. Levy of interest under section 234A.
4. Levy of interest under section 234B.

Summary:

Issue 1: Assessment of Total Income
The assessee challenged the assessment of total income at INR 2,14,76,13,270 under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, against a Nil returned income. This issue was deemed general in nature and required no separate adjudication.

Issue 2: Taxability of Subscription Charges as "Royalty"
The primary contention was whether subscription charges received by the assessee from Indian customers 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 Act. The assessee, a US-based scientific society, argued that these receipts did not qualify as royalty or fees for included services under the India-US DTAA. The Tribunal noted that in previous assessment years (2014-15 to 2019-20), similar subscription revenues were not treated as royalty by the Co-ordinate Bench of the Tribunal. The Tribunal upheld this view, stating that the subscription fees for Chemical Abstract Service (CAS) and Publications (PUBS) divisions do not qualify as "Royalty" under section 9(1)(vi) of the Act or Article 12(3) of the India-US DTAA. The Tribunal found no reason to deviate from prior decisions and deleted the impugned addition.

Issue 3: Levy of Interest under Section 234A
The assessee contested the levy of interest under section 234A of the Act, arguing that the return of income was filed within the prescribed time. The Tribunal remanded this issue to the Assessing Officer for de novo adjudication after examining whether the return was indeed filed within the due date. This ground was allowed for statistical purposes.

Issue 4: Levy of Interest under Section 234B
The levy of interest under section 234B was considered consequential in nature. The Tribunal allowed this ground for statistical purposes.

Conclusion:
The appeal by the assessee was allowed for statistical purposes, with the Tribunal upholding the plea regarding the non-taxability of subscription fees as "Royalty" and remanding the issue of interest levy under section 234A for further examination.