1973 (3) TMI 19 - HC - Income Tax

The assessee society of composers and authors of copyright musical works performed in England. If the musical works belonging to the society was broadcast in India and fees paid in London whether it can be said that income accrues in India - whether such royalty is assessable as income in India

Summary

Issues:
1. Rejection of application under section 264 of the Income-tax Act, 1961 by the Additional Commissioner of Income-tax, West Bengal.
2. Taxability of royalties received by a non-resident company for broadcasting in India.
3. Interpretation of sections 5 and 9 of the Income-tax Act regarding the scope of total income and income deemed to accrue or arise in India.
4. Application of legal precedents in determining the taxability of income received outside India.

Analysis:
The judgment deals with a case where a non-profit making body, petitioner No. 1, entered into an agreement with All India Radio for broadcasting musical works and receiving royalties. The company filed an income-tax return, but the Income-tax Officer issued a notice under section 34(1) of the Income-tax Act for not including Indian broadcasting fees in the income. The petitioner then applied under section 264, arguing that the income received in London for broadcasting in India should not be taxable in India. The Additional Commissioner rejected this argument, leading to the present case.

The key issue revolves around the taxability of royalties received by a non-resident company for broadcasting in India. The petitioner contended that since the income was received outside India, it should not be taxed in India. However, the Income-tax Act's provisions under sections 5 and 9 deem income accruing or arising in India to be taxable. The court analyzed these sections and held that the source of income, i.e., broadcasting by All India Radio in India, determines the taxability, not the place of receipt.

In interpreting the Income-tax Act, the court referred to legal precedents, including the judgment of the Privy Council in Rhodesia Metals Ltd. v. Commissioner of Taxes. The court emphasized that the practical source of income, not just the place of receipt, determines taxability. The judgment highlighted the importance of where income accrues rather than where it is received, aligning with established legal principles.

The court dismissed the petitioner's argument regarding a circular by the Central Board of Revenue, stating that the circular did not apply to the case's facts. Ultimately, the court held that the rule must fail, and there would be no order as to costs. The judgment clarifies the principles governing the taxability of income earned outside India but connected to activities in India, providing clarity on the scope of total income under the Income-tax Act.