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2024 (1) TMI 269 - AT - Income TaxIncome taxable in India - royalty receipts - subscription revenue received by the assessee - addition u/s 9(1)(vi) and Article 12(3) of India-USA DTAA - assessee is a foreign Company - HELD THAT - We note from the submissions that the issue has been decided by the coordinate bench of the Tribunal in assessee s own case for assessment year 2016-17 2023 (9) TMI 252 - ITAT BANGALORE and considering the submissions of the assessee that the facts and agreement made with the Indian entities are the same as submitted by the ld.AR in this assessment year. We also observe from the order that the issue is squarely covered in favour of the assessee to hold that the payment made for viewing the videos on the database cannot be termed as consideration for use or right to use any industrial, commercial or scientific equipment. Thus we hold that the subscription revenue received by the assessee is not taxable as Royalty in the hands of the assessee under Article 12 of the India-USA DTAA read with the provisions of the Act. Accordingly, the impugned addition made by the AO in this regard, as upheld by the CIT(A) is hereby deleted. Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order. 2. Addition of subscription fees as 'Royalty'. 3. Non-quoting of computer-generated DIN. 4. Levy of interest under section 234A. 5. Levy of interest under section 234B. 6. Initiation of penalty proceedings under section 24 read with section 40A. Summary: Issue 1: Validity of the Assessment Order The assessee challenged the assessment order framed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, claiming it was contrary to the facts and circumstances of the case and liable to be quashed. However, this ground was not pressed during the hearing and was dismissed as not pressed. Issue 2: Addition of Subscription Fees as 'Royalty' The primary contention was the addition of INR 40,007,256 received from Indian customers as subscription fees, treated as 'Royalty' under section 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA. The Tribunal, after considering the submissions and relying on the assessee's own case for the assessment year 2016-17, concluded that the subscription fees did not amount to 'Royalty'. The Tribunal noted that the subscribers only received a non-exclusive, non-transferable license to view videos on the website without any rights to the copyright or the infrastructure. Thus, the addition made by the AO was deleted. Issue 3: Non-quoting of Computer-generated DIN The assessee argued that the DRP's directions were invalid due to non-quoting of the computer-generated DIN, as required by Circular No. 19 of 2019 issued by the CBOT. However, this ground was not pressed during the hearing and was dismissed as not pressed. Issue 4: Levy of Interest under Section 234A The assessee contested the levy of interest amounting to INR 2,27,154 under section 234A of the Act. This ground was not pressed during the hearing and was dismissed as not pressed. Issue 5: Levy of Interest under Section 234B The assessee also contested the levy of interest amounting to INR 30,28,720 under section 234B of the Act. This ground was not pressed during the hearing and was dismissed as not pressed. Issue 6: Initiation of Penalty Proceedings The assessee challenged the initiation of penalty proceedings under section 24 read with section 40A of the Act. This ground was not pressed during the hearing and was dismissed as not pressed. Conclusion: The Tribunal allowed the appeal of the assessee concerning the addition of subscription fees as 'Royalty' but dismissed the other grounds as not pressed. The appeal was partly allowed.
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