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TMI Blog2012 (12) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... e design department, quality control department etc., in order to manufacture its own garments. In order to get an idea of international trend analysis and other information for fashion design and style, the assessee entered into an agreement with Worth Global Style Network Ltd (in short WGSN) and thereby subscribed to an internet site namely www.wgsn.com which belongs to WGSN based in United Kingdom. The subscription charges for accessing the website is UK Pound 17000 for which the foreign company has raised an invoice. The assessee filed an application u/s 195(2) of the act requesting the revenue authorities to issue No Objection Certificate for remittance of the aforesaid amount to the foreign company without deduction of tax. 3.1 The assessee submitted before the ADIT(IT) that as per the provisions of sec. 90(2) of the Act where the Central Government has entered into any DTAA with the Government of other countries outside India for the purpose of granting relief or avoidance of double taxation, the provisions of the Act or the DTAA whichever is more beneficial to the assessee shall apply. It is stated that the foreign company is a resident of UK and therefore, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income and in the absence of PE, the same is not liable to tax in India. Accordingly, the Commissioner of Income Tax (Appeals) held that the assessee is not liable to deduct tax at source on the impugned payment to WGSN. 5. Before us, the ld DR has submitted that the Commissioner of Income Tax (Appeals) has relied upon the decision of the Bangalore Benches of the Tribunal in the case of Wipro Ltd. (supra) which has been reversed by the Hon'ble Karnataka High Court reported in 203 Taxman 621. Thus, the ld DR has submitted that now this issue is covered against the assessee by the decision of the Hon'ble Karnataka High Court (supra). She has referred various clauses of the agreement between the assessee and WGSN and submitted that the payment in question was for license granted to the assessee for access and utilisation of the site of WGSN. She has submitted that as per the terms of the agreement, the subscription fee is nothing but royalty against the grant of license for access and utilisation of the site and the information available on the site. It is stated in the agreement that all the material on the site belongs to WGSN or its licensor and the assessee is permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Singapore. Thus, the ld DR has submitted that the payment in question, being subscription fee is for utilising of the information related to industrial and commercial knowledge, experience and skill; therefore, the same would fall under the definition and meaning of 'royalty' under Explanation 2 of sec. 9(1)(vi) of the Act as well as Article 13(3) of the DTAA between Indo-UK treaty. She has relied upon the orders of the Assessing Officer and ADIT. 5.4 On the other hand, the ld AR of the assessee has submitted that the assessee is in the business of retailing fashionable ready garments through departmental stores and therefore to get an idea of latest international trends in fashion and style in the garments, the assessee had subscribed to an internet site of WGSN Ltd. He has referred Article 13(3) of the Indo UK treaty and submitted that the terms 'royalty' means payment for use or right to use any copyright, any patent, trade mark, design or model, plan, secret formula or process or for information concerning industrial, commercial or scientific experience as provided in sub. para (1) of para 3 of article 13 of the Indo-UK treaty. He has referred the clauses of the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to use of any know-how as per the OECD Commentary that the information concerning industrial, commercial or scientific experience has to be equivalent to know-how. 5.6 The ld AR has also relied upon the decision of the coordinate Benches of the Tribunal in the case of the Dy. DIT v. Solid Works Corpn. [2012] 51 SOT 34. The ld AR has contended that the AAR in the case of Cargo Community Network (P.) Ltd (supra) is not applicable as the payment is not for use of any equipment in the case of the assessee as in the said case. The ld AR has further submitted that the decision in the case of Wipro Ltd. (supra) is also not applicable in the facts of the assessee's case because in the said case, the issue was payment for use of technical know-how, which is not in the case of the assessee. The ld AR has submitted that in the case of Wipro Ltd. (supra), the Hon'ble High Court has framed the question regarding whether the payment to the foreign software supplier was not royalty and accordingly, the Hon'ble High Court has decided the issue by holding that such right to access the database maintained by the supplier would amount to transfer of right to use the copyright held by the supplier a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle and not transfer of right in the copyright in the article. Accordingly, the Commissioner of Income Tax (Appeals) has held that the foreign company has not transferred the copy right therein; but only online fashion magazine available on the website. 6.3 There is no dispute that the information available on the website of the WGSN is not a database available in public domain but access to the information is restricted only to the subscribers. The Commissioner of Income Tax(Appeals) has decided the issue by following the order of the Tribunal in the case of Wipro Ltd. (supra) which has been reversed by the Hon'ble Karnataka High Court CIT (International Taxation) v. Wipro Ltd. and held in para 6 as under: "6. It is clear from the material on record that in identical cases i.e., I.T.A. No. 2988/2005 and connected cases, this Court after considering the contentions, which are identical to the contentions raised in these appeals. In the light of the decisions relied upon by the learned counsel appearing for the parties in the said cases, by a separate order, held that the payment made by the respondent to M/s. Gartner, which is a non-resident Company would amount to 'royalty' a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 72,533 10.08.2000 2000-2001 USD 2,16,166.67 97.16,691 17.11.2000 2000-2001 USD 15,000 6,99,900 17.08.2001 2001-2002 GBP 46,471.58 31,20,566 21.08.2001 2001-2002 GBP 1,09,347 76,55,385 18.03.2002 2001-2002 USD 1,31.714 64,10.520 15.05.2002 2002-2003 USD 58,000 28,34.460 02.12.2002 2002-2003 USD 1,45.000 70,06.400 Since prima-facie, the payments appeared to be royalty payments, wherein the respondent-assessee was required to deduct tax at source on such remittances and no deduction had been made as required under Section 195(1) of the Act, show cause notice under Section 201 of the Act was issued to the assessee to explain the reasons for non-deduction of tax. In response to the show cause notice, the assessee tiled a reply dated 10.01.2003 wherein it was submitted that payment is akin to making a subscription for a journal or magazine of a foreign publisher and though the journal contained information concerning commercial, industrial or technical knowledge, the payee makes no attempt to impart the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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