2022 (12) TMI 287 - AT - Income Tax

Income accrued in India - subscription/distribution revenue earned by the assessee - royalty receipt - Permanent Establishment (PE) in India so as to attribute any part of the profit to such PE - HELD THAT:- We are of the view that the approach of the departmental authorities in taxing the royalty income in these two assessment years is quite baffling. When, it is a fact on record that the entire distribution revenue generated in India from distribution of BBC World News Channel has been accounted for in the books of Indian entity and offered to tax in India, how a part of such income can be notionally attributed to the assessee and taxed in India. Firstly, as held by us earlier, the distribution revenue is not in the nature of royalty and secondly when the assessee has not received any part of such revenue, which has been offered to tax at the hands of BWIPL, no part of such income can again be attributed to the assessee notionally and taxed in India. Therefore, the addition made has to be deleted.

Thus the issue, whether the assessee had a PE in India in these two assessment years is purely academic in the nature, as, the entire income has been offered to tax by Indian entity. Before we part, for the sake of completeness, we must deal with the submission of learned Departmental Representative that the distribution revenue earned by the assessee would otherwise qualify as equipment royalty and process royalty under Explanation 2(iva) of section 9(1)(vi) of the Act. In our view, such argument of learned Departmental Representative is preposterous as no such finding has been recorded either by the Assessing Officer or by learned Commissioner (Appeals) and DRP. - Decided in favour of assessee.