TMI Blog2004 (4) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational Press Institute in response to the assessee's request for no objection certificate for payment to IPI. 3. The assessee is a member of IPI, whose headquarters is situated in Vienna, capital of the Republic of Austria, in Central Europe. IPI was constituted as a non-profit making membership corporation, pursuant to section 60 et seq of the Swiss Civil Code. IPI is a prestigious international body with worldwide membership, whose objective is to safeguard the freedom of the press, freedom of expression, and to facilitate free access to and circulation of news in order to promote better understanding among different nations of the world, thereby to prevent conflict and promote peace and prosperity, laudable objectives. Its sources are membership fees, contributions from newspaper publishers, radio and TV Channels etc. No part of its earnings of the Institute shall enure to the benefit of any member as per Article I of the Constitution of the IPI. Article X of the Constitution stipulates that in the event of dissolution of the IPI, its net assets, if any, are to be handed over to other organizations of similar character and aims. 4. During the relevant year, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 'income' within the meaning of section 2(24)(ii)(a) of the Income-tax Act, i.e., income of a trust. (c) He further opined that such payments fall within the meaning of income accruing or arising whether directly or indirectly through a source of income in India within the meaning of section 9(1)(i) of the Income-tax Act. He therefore, directed the appellant to deduct tax at source as per section 195(1). Aggrieved by the above findings, the assessee approached the first appellate authority. 7. The CIT (Appeals) held that IPI being a non-resident body without permanent establishment in India and as such section 9(1)(i) does not attract. Section 9(1)(i) applies only if there is any property, asset or source of income in India which belong to IPI. Not only such property, asset or source belongs to IPI in India, such source must be used to earn income in India. The assessee, i.e., Malayala Manoramma cannot be said to be a source of income for the IPI. The payment made by the assessee is purely voluntary in nature. The assessee does not act as the agent of the IPI, does not canvas any contribution or similar things. The services rendered by IPI, if at all by virtue of assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable in the case of the assessee in respect of the payment made by the assessee to IPI. The learned departmental representative submitted that the items like Membership fees, donation and advertisement charges to IPI will fall within the ambit of income under section 9(1)(i) of the Income-tax Act, 1961. The learned departmental representative submitted that the items mentioned in Article III(3) are illustrative and not conclusive and in the circumstances the payment by way of advertisement charges to IPI have the character of payments mentioned in Article III(3). 10. On the other hand the learned representative of the assessee submitted that the order of the first appellate authority has to be upheld. He submitted that out of the payment related to advertisement to IPI, no part of income will enure to the benefit of any member. IPI is the Apex Body, constituted under Swiss Civil Code. It is a non-profit making corporation with world wide Membership with the object of safeguarding the freedom of the press, freedom of expression, to facilitate free access to and circulation of news in order to promote better understanding between the nations. The profit so as to tax in India mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said interest or other sum if that sum is not chargeable under the provisions of the Income-tax Act. For instance, where there is no obligation on the part of the payer, and no right to receive the same by the recipient and the payment does not arise out of any contract or obligation between the assessee and the recipient but is made voluntary by the assessee those payment cannot be regarded as income chargeable under the Act. This view is also supported by the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. K. Ramabrahmam Sons (P.) Ltd. [1978] 115 ITR 369. 11.1 Article II(1)(b) of Double Taxation Avoidance Agreement (DTAA) define the term 'person'. It states the term 'person' includes 'individuals', companies and all other entities which are treated as taxable units under the tax laws in force in the respective territories. 11.2 The term 'permanent establishment' is defined again in Article II(1)(g) of DTAA as under: "(g) the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried off- (aa) The term "permanent establishment" shall include a place of management, a branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the territories on the industrial or commercial profits of an enterprise of the other territory unless profits are derived in the first mentioned territory through a permanent establishment of the said enterprise situated in the first mentioned territory. If profits are so derived, tax may be levied in the first mentioned territory on the profits attributable to the said permanent establishment. (3) The provisions of paragraph (1) of this article shall not be construed as preventing the taxation in one of the territories in pursuance of the present Convention and in conformity with the laws of that territory of income (e.g. dividends, interest, capital; gains, fees for technical services, income from the operation of aircraft, rents or royalties or income from immovable property) derived from sources therein by a resident of the other territory even if such income is not attributable to a permanent establishment situated in that former territory.' 11.4 Clauses (1) and (2) of Article XIV reads as under: '(1) Subject to Article XII, profits or remuneration from professional services or from services as an employee derived by an individual who is a resident of one of the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee transmission of news, free publication of newspapers, free expression of views. The achievement of understanding amongst journalists and so among peoples. The promotion of the free exchange of accurate and balanced news among nations. The improvement of the practices of journalism." 14. Article I(4) of the Constitution of IPI states: "The Institute is a non-profit membership corporation pursuant to section 60 et seq of the Swiss Civil Code. The resources of the Institute are derived from membership dues, contributions from newspaper publishers and radio and TV systems and grants. No part of the net earnings, if any of the Institute shall enure to the benefit of any member or individual." 15. From the above it is very clear that no part of the net earning is received by the assessee for its advantages by virtue of being a member of IPI. The only benefit received by the assessee is as given in Article I(5) that is the right to be a party to achieve the objects and goals stated in the preamble by virtue of taking participation in publications, seminars, conferences, exchange programmes, training courses, academic lectures. Article I(6) states that "No individual member assume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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