2024 (5) TMI 960 - AT - Income Tax

Royalty income - Taxability of the amount received towards Bandwidth charges as royalty u/s 9(1)(vi) and Article 12(3) of India Singapore Double Taxation Avoidance Agreement (DTAA) - assessee is a non-resident corporate entity incorporated under the laws of Singapore - HELD THAT - While deciding the issue for the first time in assessee s case in assessment years 2011-12, 2012-13 and 2014-15, Tribunal in 2020 (10) TMI 604 - ITAT DELHI and in subsequent assessment years, till assessment year 2019-20 held that Bandwidth charges are not taxable as royalty income. As established on record that there is no factual difference relating to the issue in the impugned assessment year compared to the past assessment years. Therefore, respectfully following the consistent view of the Tribunal on the issue we hold that the receipts from Bandwidth charges are not taxable as royalty income either u/s 9(1)(vi) of the Act or under Article 12(3) of India Singapore DTAA. Accordingly, we direct the AO to delete the addition. Grounds are decided accordingly. TDS credit - credit for corresponding TDS deducted on the interest on income tax refund - HELD THAT - It is the say of the assessee that though it has offered to tax the interest income on income tax refund, however, the credit for corresponding TDS deducted on the interest on income tax refund has not been granted by the AO, while computing the tax liability in the final assessment order. We direct the AO to factually verify assessee s claim and grant TDS credit in accordance with law.

Summary

Issues:
1. Taxability of amount received towards Bandwidth charges as royalty under section 9(1)(vi) of the Act and Article 12(3) of India-Singapore DTAA.
2. Short grant of TDS credit.

Analysis:
1. Taxability of Bandwidth charges as royalty:
The appeal challenged the final assessment order regarding the taxability of Bandwidth charges as royalty under section 9(1)(vi) of the Act and Article 12(3) of India-Singapore DTAA for the assessment year 2021-22. The assessee, a non-resident corporate entity from Singapore, provided Bandwidth services in India and received an amount. The Assessing Officer considered Bandwidth charges as royalty income and proposed their addition to the assessment. The assessee contended that Bandwidth charges were not royalty and not taxable in India due to the absence of a Permanent Establishment. The learned DRP upheld the addition based on past directions. The Tribunal, considering previous decisions, held that Bandwidth charges were not taxable as royalty income under section 9(1)(vi) of the Act or Article 12(3) of India-Singapore DTAA. The Tribunal directed the Assessing Officer to delete the addition, citing consistency in its previous rulings.

2. Short grant of TDS credit:
The assessee raised the issue of short grant of TDS credit in ground no. 5. The contention was that while the interest income on income tax refund was offered for tax, the corresponding TDS credit on the interest was not granted by the Assessing Officer in the final assessment order. The Tribunal directed the Assessing Officer to verify the assessee's claim regarding TDS credit and grant it in accordance with the law. Ground no. 6, being premature, was dismissed. Consequently, the appeal was partly allowed, and the order was pronounced on 17th May, 2024.