Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (10) TMI 245 - AT - Income TaxIncome accrue in India - PE in India - nature of income - payment received by the assessee for grant of right or licenses to distribute the channel in India - income declared by the Appellant in its return of income as Business Income on the basis of the MAP order - distribution revenue as Business Income as declared by the Appellant or to be ‘Royalty’ as per section 9(1)(vi) of the Act and Article 12 of the DTAA between India and the USA - HELD THAT:- Appellant-assessee is a US based Company and is tax resident of US. During the relevant assessment years, it has derived advertisement and distribution revenue from grant of exclusive rights to an Indian Company TIIPL to sale advertisement on the products and to distribute the products as incorporated above. The Indian Company has an exclusive distributor of the said products to the cable operators on principle to principle basis. The distribution agreement allowed the TIIPL to distribute the products to various cable operators and ultimately to consumers in India. The distribution revenue collected by the TIIPL was to be shared between the appellant. Said agreement the appellant had the sole right to determine the content of the products and also the right to change such content from time to time and secondly, all the copyrights and other priority rights in the products and in any promotional material vested in the appellant company alone. It is a copyright of the content in the product which always remained with the appellant-assessee and was never transferred. The clause merely provides right to distribute the product. As brought on record that in all the years and in subsequent years also Assessing Officer has held the advertisement revenue to be the business income following the MAP order. However, during the impugned assessment years, the said position has been digressed by the Assessing Officer without there being any material change in the facts and circumstances or the terms of agreement or the business mutual - as a rule of consistency, the same position should not be altered or should be allowed to be changed. In this case, appellant never granted any licenses to use any copyright, either to distributor or to the cable operator albeit it has only granted right for purpose of selling advertisement on the product that are channels, etc. and distribution of such products in India. The Indian company is carrying out the distribution and selling of the advertisement and it does not have any kind of right to edit, interpret, add the products distributed by it. The assessee company only granted commercial rights in the nature of ‘broadcast reproduction right’ to the TIIPL, which has been separately defined u/s. 37 of the Copyright Act and therefore, it cannot be held that revenue derived by the assessee for distribution of products is taxable as ‘royalty’ albeit it is a business income of the assessee. AO has tried to justify the tax the distribution revenue in the nature of royalty by applying the retrospective amendment made in Explanation-6 of Section 9(1)(vi) of the Act. Such an approach cannot be upheld because there is no similar amendment in the definition of royalty under the DTAA and it has been well settled in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] that amendment in the domestic law cannot be imported or read into DTAA. Thus, we hold that the distribution revenue earned by the appellant-assessee cannot be taxed as royalty albeit as a business income. Since, assessee has already offered income as business income in terms of the MAP, therefore, the income as declared by the assessee in accordance with the MAP and accepted by the Department in the earlier years has to be accepted. Accordingly, the additions made by the Assessing Officer are deleted. - Decided in favour of assessee.
|