2012 (12) TMI 370 - AT - Income Tax

Royalty received on account of distribution of films - DRP directing income being generated by the distribution and exhibition of the films in India by the Agent of the assessee WIPL on behalf of the assessee in India, income accrues and arises in India is tenable or not - held that:- even if income arises to the Non-Resident due to the business connection in India, the income accruing or arising out of such business connection can only be taxed to the extent of the activities attributed to permanent establishment. In this case, the assessee does not have any permanent establishment in India. Since the Indian company who obtained the rights is acting independently, Agency PE provisions are not applicable to the assessee company. Incomes arising to a Non-Resident cannot be taxed as business income in India, without a PE. As the assessee does not have any permanent establishment in India, the incomes arising outside Indian Territories cannot be brought to tax. Therefore, there is no need to differ from the findings of the CIT (A) and accordingly Revenue Appeal is dismissed - in favor of assessee.

Decision in the case of Ishikawajma-Harima Heavy Industries Ltd v. Director of Income Tax [2007 (1) TMI 91 - SUPREME COURT] followed.