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TMI Blog1976 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... established to grant permission for the public performance, and in accordance with more recent copyright legislation, broadcast by diffusing by relay service of copyright music. The society collects royalties for issuing licence granting such permission and distributes such royalties to the members of the society, namely, the composers, authors, music publishers and other persons having interest in the copyright. The society's constitution is that of a company limited, by guarantee having no share capital. It makes no profit for itself, pays no dividend and does not charge its members any agency commission or any fees or subscription. All royalties collected and an receipts from other sources are distributed among the composers, authors and publishers concerned in proportion to the respective extent to which their works are publicly performed and/or broadcast. The society does not deduct from the royalties anything beyond a bare pro rata cost of administration. The second appellant, Messrs. Natsin India Private Ltd. (hereinafter referred to as the " India agent "), is a private limited company incorporated under the Indian Companies Act having its office at 26, Chowringhee Road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements filed at the time of original assessment the Indian broadcasting fees had not been included in the income. In the assessment year 1947-48 the Income-tax Officer held that though All India Radio paid fees to the society in England for the transmission of music from India the income accrued or arose or was deemed to accrue or arise to the society in India and as similar facts exist in every year also, he assessed such income to tax after deducting proportionate distribution expenses for all the years. The society, thereafter, preferred a revisional application under section 264 of the Income-tax Act before the Commissioner of Income-tax, West Bengal (where the society's income-tax files had been transferred in the meantime). By an application dated July 4, 1970, in support of its revisional application filed before the Commissioner of Income-tax, West Bengal, the society took a plea that the business in India is carried on by All India Radio and not by the society and that payments were made by All India Radio to the society in England in terms of the agreement and as such the royalties received by the society in England cannot be said to have been received in India and, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which ---...... (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which--- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ......... 9. Income deemed to accrue or arise in India.---(1) The following incomes shall be deemed to accrue or arise in India--- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through or from any money lent at interest and brought into India in cash or in kind or through the transfer of a capital asset situate in India ; ..........." Learned counsel for the appellants has submitted that section 5(2)(b) is controlled by section 9(1). According to him any income for the purpose of section 5(2)(b) relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, All India Radio. It has been further contended that in a particular year All India Radio may not earn any income but it has to pay royalties if it broadcasts the music over which the society has a copyright. Similarly, All India Radio may have a great deal of income, in a particular year, but no royalties would be payable by it to the society, if it does not broadcast any music over which the society has a copyright. In the case in Caltex (India) Ltd. v. Commissioner of Income-tax [1952] 21 ITR 278 (Bom), it was contended that the territorial nexus was between the assessee-company and British India because the assessee-company earned its profit in British India but when it comes to the question of the dividends the mere fact that dividends were paid by the assessee-company out of profits which it earned in British India does not constitute the territorial nexus between the assessee-company and British India which country was taxing the assessee-company, because the assessee-company was registered in the Bahamas Island and the situs of share was outside British India. In that connection the Bombay High Court observed that in order to decide that question one important fact had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any statutory force or not because the circular relates to income accruing or arising through or from business connection in India. Paragraph 7 of the said circular is as follows : " 7. Extent of the profits assessable under section 9---Section 9 does not seek to bring into the tax net the profits of a non-resident which cannot reasonably be attributed to operations carried out in India. Even if they may be a business connection in India, the whole of the profits accruing or arising from the business connection is not deemed to accrue or arise in India. It is only that portion of the profit which can reasonably be attributed to the operations of the business carried out in India which is liable to income-tax. " This circular, therefore, contemplates a situation quite different from that in the present case. Mr. Dutt has lastly argued that his writ application was directed against the order passed by the Additional Commissioner of income-tax refusing to exercise his revisional power by not allowing the appellants who were the petitioners before the Additional Commissioner of Income-tax in the revisional application, to raise a point on the ground that it was not taken befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming right in such works. " Performing right " means the right of performing in public, broadcasting and causing to be transmitted to subscribers to a diffusion service, in all parts of the world. The members of the society are required to assign to the society the performing right in their works, and the society exercises and enforces on their behalf all rights and remedies in respect of any exploitation of such works. The society collects royalties for the issue of licences granting such permission and distributes the royalties to the members of the society, namely, the composers, authors, music publishers and other persons having an interest in the copyright, in proportion to the extent to which a member's work is publicly performed or broadcast after a pro-rata deduction of the expenses. Article 43 of the articles of association of the society provides that the business and operations of the society shall be conducted and managed by a general council, and article 48 authorises the general council to apply the receipts also for certain other purposes. Article 48 reads as follows : " 48. The general council may, before making any distribution among the members : (a) apply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of sound broadcasting as aforesaid, any originating performance of the such musical works, irrespective of the source of such performance and the means whereby the such performance is conveyed to the point of broadcast transmission from the licensee's stations. The agreement was executed in England. It may be stated here that previous to this agreement the parties had entered into a similar agreement in the year 1940. The agreement of 1953 states that the licence granted thereby " shall be deemed to have come into force on April 1, 1949, and shall continue from year to year until determined by either party giving to the other three calendar months' notice, in writing to expire on March 31 in any year ". The agreement provides that the licensee shall send to the society at its registered office in London, the lists of all musical works broadcast in each week during the term of the licence from each of the licensee's main stations (Delhi, Bombay, Calcutta and Madras) and the external services, and requires the licensce to furnish a return after the first day of April every year during the period of licence, stating the aggregate number of hours occupied during the period ended on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of assessment, the society through the second appellant made a revisional application under section 264 of the Income-tax Act , 1961 (hereinafer referred to as " the Act "), to the Commissioner of Income-tax, West Bengal, where the society's income-tax file had been transferred in the meantime. The Additional Commissioner of Income-tax who dealt with the application dismissed the same by his order dated July 18, 1970. The society then moved a writ petition before the Calcutta High Court challenging the order of the Additional Commissioner of Income-tax. A rule nisi was issued on the petition by a learned judge of the High Court but ultimately the rule was discharged and the petition was dismissed. On appeal by the society, a Division Bench of the High Court affirmed the view taken by the learned single judge and dismissed the appeal on September 24,1973. In this appeal by special leave the appellants question the correctness of that decision and challenge the order of assessment on two grounds : (1) the agreement between the society and the licensee having been executed in England and the royalties being also payable in England, the income out of this agreement is not liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of fact " which should be looked at and decided in the light of commonsense and plain thinking " as the Calcutta High Court considering a similar question under section 4(1) of the Indian Income-tax Act, 1922, observed : V. G. Every, In re [1937] 5 ITR 216 (Cal). In the case before us the High Court and the income-tax authorities considered it a hard matter of fact that the income derived from broadcast of copyright music from the stations of All India Radio arose in India. In our opinion, this was the correct view to take and we find no reason to differ from it. The next question is whether the income from the royalties was the society's own income. It was contended on the authority of Bejoy Singh Dudhuria v. Commissioner of Income-tax [1933] 1 ITR 135 (PC) that the obligation to disburse the sum among its members diverted the income from the society to the members, and it could not be called the income of the society. In Bejoy Singh Dudhuria's case [1933] 1 ITR 135 (PC) there was a decree of the court charging the appellant's whole resources with a specific payment to his step-mother ; the Privy Council held that the decree had to that extent diverted his income from him and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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