Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (1) TMI 131 - AT - Income TaxTaxability of revenue generated through advertisements in India - Taxability under India-US tax treaty - assessee having a Permanent Establishment (PE) in India in terms of India-USA DTAA - whether the income generated through distribution of channels falls within the meaning of “Royalty” under Article 12 of India-USA DTAA and also u/s 9(1)(vi) of the Act and hence the same is also taxable in India? - Held that:- If the foreign company receives any money from the Indian soil and if it is held to be having a “Permanent Establishment”, then the taxability of the same have to be examined in accordance with the provisions of Indo-US treaty as well as under the provisions of Indian Income tax Act. We have noticed that the assessee had contended before the AO that it is not taxable at all in respect of advertisement revenue and hence we notice that the assessee has not challenged the income worked out by the assessing officer. In the interest of natural justice, we are of the view that the assessee should be provided an opportunity to submit its contentions with regard to the computation of income from advertisement revenues. Hence, for this limited purpose, we restore this issue to the file of the assessing officer. If the assessee does not have to say anything in this regard, the income computed by the assessing officer shall stand. We notice that the assessing officer has made a general observation that the Article 12 of the India-US DTAA shall be applicable without critically analyzing the provisions of the treaty. Though the assessing officer has also referred to the provisions of Explanation 2 to sec. 9(1)(vi) of the Act for examining the definition of the term “royalty”, yet he has not critically discussed about its applicability to the impugned payment. It is pertinent to note that the definition of the term “royalty” given in sec. 9(1)(vi) of the Act as well as in the Indo-USA treaty uses the expression “process”. The said expression has not been defined in the treaty, but the same has been defined in Explanation 6 to sec. 9(1)(v) of the Actinserted by the Finance Act, 2012. We further notice that the various case law relied upon by the assessee has been rendered prior to the insertion of the above said Explanation-6 or the applicability of the above said explanation has not been examined therein. Hence, we are of the view that the question whether the payment received by the assessee for giving distribution rights shall fall in the category of “Royalty” needs to be examined afresh at the end of the assessing officer. Further, while dealing with the issue relating to the advertisement revenue, we have taken the view that assessee is having dependent agent PE. The said fact also needs to be taken into account while examining the issue. In view of the above, we set aside the order of the AO on this issue and restore the same to the file of the assessing officer with the direction to examine the same afresh in the light of discussions made supra and take appropriate decision in accordance with the law, after affording necessary opportunity of being heard to the assessee.
|