2023 (5) TMI 542 - AT - Income Tax

Income deemed to accrue or arise in India - taxability of royalty' - subscription fees taxable as royalty in India - issue arising is recurring in nature - HELD THAT - This Tribunal in the latest judgement for A.Y.2017-18 2022 (10) TMI 1171 - ITAT MUMBAI uphold the plea of the assessee and delete the impugned addition in respect of subscription fees received by the assessee - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of Subscription Income as 'Royalty' u/s 9(1)(vi) and under Article 12(3) of the India-Switzerland DTAA.
2. Error in computing total income by adding subscription income twice.
3. Charging of Interest u/s 234B and 234D.

Summary:

1. Disallowance of Subscription Income as 'Royalty':
The primary issue was whether the subscription income received by the assessee for providing access to its online database should be treated as 'royalty' u/s 9(1)(vi) of the Act and under Article 12(3) of the India-Switzerland DTAA. The assessee, a tax resident of Switzerland, provided market research reports on the pharmaceutical sector to its customers. The income in question amounted to Rs. 42,71,17,413/- for the financial year 2017-18. The AO treated this subscription income as 'royalty', a view upheld by the DRP in previous years. However, the Tribunal noted that in the assessee's own case for earlier years (A.Y. 2013-14 to 2017-18), it was consistently held that the subscription fees were not taxable as 'royalty'. The Tribunal referenced several decisions, including those of the Hon'ble jurisdictional High Court and the Authority for Advance Rulings, which supported the assessee's stance. Consequently, the Tribunal upheld the assessee's plea and deleted the impugned addition, allowing the ground raised by the assessee.

2. Error in Computing Total Income:
The assessee challenged the computation of total income at Rs. 106,91,78,623/- instead of Rs. 64,16,78,198/- due to the subscription income being added twice. However, this ground was not pressed during the hearing and was thus dismissed as not pressed.

3. Charging of Interest u/s 234B and 234D:
The grounds regarding the charging of interest u/s 234B and 234D were stated to be consequential and did not require adjudication.

Conclusion:
The Tribunal allowed the appeal of the assessee concerning the taxability of the subscription income, following the principle of consistency with previous rulings in the assessee's own case. The other grounds were either dismissed or deemed consequential. The appeal was partly allowed.