2013 (4) TMI 641 - HC - Income Tax

Royalty income received by assesse/respondent claiming for concessional rate of tax provided in Article 12 of DTAA tax rate of 10% - held that - the CIT(A) and the Tribunal arrived at a finding of fact on the basis of the evidence in the form of certificate dated 25/7/2003 from revenue authorities in Netherlands certifying that the respondent assessee was a beneficial owner of the royalty received in respect of musical track given to M/s. Universal Music Pvt. Ltd. Besides, reliance was placed by the Tribunal upon the CBDT Circular No.789 dated 13/4/2000 that certificate from revenue authorities is sufficient evidence of beneficial ownership. On these findings of fact the Tribunal upheld the order of CIT(A) and held that the respondent assessee is entitled to benefit of Article 12 of DTAA. - Appeal of the revenue dismissed.

Summary

Issues:
Interpretation of Double Tax Avoidance Agreement (DTAA) between India and Netherlands regarding beneficial ownership of royalty income received from a company.

Analysis:
The main issue in this case revolved around whether the assessee was the beneficial owner of the royalty income received from a specific company, thus entitled to a concessional tax rate of 10% as per the DTAA between India and Netherlands. The revenue contended that the assessee was not the beneficial owner of the musical tracks, and therefore not entitled to the concessional tax rate under the DTAA.

The respondent assessee claimed the benefit of Article 12 of the DTAA and sought to pay tax at a reduced rate of 10% on the royalty income received from the company. The revenue's argument was based on the assertion that the assessee did not meet the criteria of being the beneficial owner of the royalty income, as required by the DTAA.

Both the CIT(A) and the Tribunal examined the evidence presented, including a certificate from revenue authorities in Netherlands certifying the assessee as the beneficial owner of the royalty income. The Tribunal also referred to a CBDT Circular that supported the use of such certificates as evidence of beneficial ownership. Based on these findings of fact, the Tribunal upheld the assessee's entitlement to the benefits of Article 12 of the DTAA.

The respondent failed to provide any evidence to challenge the findings of fact established by the CIT(A) and the Tribunal regarding the beneficial ownership of the royalty income. Consequently, the Tribunal's decision was upheld, as it was based on factual findings, leaving no room to consider the revenue's proposed question of law.

Ultimately, the appeal was dismissed, and no costs were awarded in the case. The judgment reaffirmed the importance of factual evidence in determining beneficial ownership for tax purposes under international agreements like the DTAA.