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2021 (5) TMI 1074 - AT - Income TaxIncome taxable in India - dependent agency permanent establishment (DAPE) in India - profits of the DAPE on account of advertisement sale revenues - distribution revenues earned by the assessee are taxable under article 12 of the Indo-US tax treaty - whether profits on account of advertisement sale revenues can be brought to tax in the hands of such a DAPE? HELD THAT:- We find that it is not even revenue’s case that the dependent agent has not been paid an arm’s length remuneration. As a matter of fact, the assessee has filed the evidences in support of the stand that these transactions have been held to be arm’s length transactions. Given this factual position, we find that this issue is squarely covered in favour of the assessee by case of ADIT vs Asia Today Ltd [2021 (2) TMI 95 - ITAT MUMBAI] - Thus we hold that as the dependent agent has been paid an arm’s length remuneration, nothing survives for taxation in the hands of the DAPE and therefore even existence of DAPE is wholly infractuous and tax neutral. To this extent, we uphold the plea of the assessee and delete the impugned taxability of advertisement sale revenues. The assessee gets the relief accordingly. Taxability of distribution revenues under article 12 of the Indo-US tax treaty - The first settled proposition is that the distribution rights cannot be treated as copyrights, as consistently held by the co-ordinate benches, e.g. in the case of the DDIT vs SET India Pvt. Ltd. [2012 (4) TMI 604 - ITAT MUMBAI] as stated that the assessee submitted before him that the cable operator only retransmits the television signals transmitted to it by a broadcaster without any editing, delays, interruptions, deletions, or additions and, therefore the payment made by the assessee to the Non-resident company is not for use of any copyright and consequently cannot be characterized as Royalty. CIT(A) has held that Broadcasting Reproduction Right is not covered under the definition of Royalty under section 9(1)(vi) of the Income tax Act as well as Article 12 of the Treaty. Accordingly, the payment is not in the nature of Royalty but in the nature of business income. Definition of term ‘process’ as defined by the Finance Act 2012 w.e.f. 1st June 1976 - So far as assessment years prior to 2012-13 are concerned, the issue is now settled by Hon’ble Supreme Court’s judgement in the case of Engineering Analysis Centre of Excellence Ltd [2021 (3) TMI 138 - SUPREME COURT] wherein their Lorships have held that the insertion of explanation 6, dealing with definition of process, is not retrospective in nature. Even so far as subsequent years are concerned, it is well settled in law, as was also held by Hon’ble jurisdictional High Court in the case of CIT vs Siemens [2008 (11) TMI 74 - BOMBAY HIGH COURT] and New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] a mere amendment in domestic law will not override the provisions in the applicable tax treaties. Revenue thus derives no advantage, so far as present case is concerned, from amendment by way explanation 6 to section 9(1)(vi). Also one argument adopted by the authorities below, in support of taxability on royalty and that is for the assessee having given licence for use of trademarks associated with NGC Asia. Such as incidental use of trademark and trade name etc. is only incidental to rendition of broadcasting services, and in the light of law laid down in the case of DIT vs Sheraton International Inc [2009 (1) TMI 27 - DELHI HIGH COURT] it cannot result in taxation as royalty either. Learned Departmental Representative nevertheless relies upon the stand of the authorities below. On all the three aspects, thus, this issue, regarding taxability of distribution revenues is also covered, in favour of the assessee.
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