TMI Blog2011 (1) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.1.2006 and 21.6.2006 for assessment years 2000-01 to 2003-04 respectively. As the disputes raised in all these appeals are identical these are being disposed of by a single consolidated order for the sake of convenience. The identical dispute raised is regarding the rate of tax applicable to royalty income and charge of interest under section 234B. 2. The assessee is a company incorporated under the laws of Netherlands having its registered office at Gerrit van de r Veenlaan 4, 3743 DN Baarn, Netherlands. The assessee who was the tax resident of Netherlands within the meaning of Article 4 of Double Taxation Avoidance Agreement (DTAA) signed between India and Netherlands was engaged in the following activities: l Manufacturing of audio and visual recordings, the development, manufacture and exploitation of audio and visual carriers or combinations thereof in the broadest sense of the word; l Development and exploitation of internet activities; l The acquisition, alienation exploitation, assignment and managing of copyrights, production and reproduction rights, licenses, patents and trademarks and all other forms of industrial and intellectual property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyalty. The AO asked the assessee to give the details of persons from whom the assessee had acquired the musical rights and also copies of agreements for sub-licensing in the musical rights and other details. The assessee explained that the various companies of the group were engaged in the business of music recording etc. It was submitted that the company who entered into contracts with various artists, like singers, performer etc were known as repertoire companies who were free to license the products to other companies of the group for exploitation. It was also explained that as per group policy, for any business outside the home territory of the repertoire company, the commercial exploitation rights were transferred to other group company and on request from any universal group company other group companies license the right to them to exploit the same in the home territory of the requesting company. Thus ultimately the group companies were license holders to commercially exploit the rights around the world. The assessee had given such rights of exploitation to Universal Music India Pvt. Ltd. in the Indian territory for which royalty had been received. However as per the AO the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertoire companies agreement between the repertoire companies and the assessee; and agreement between Universal India and the assessee. From perusal of the said agreements CIT(A) observed that the repertoire companies were the original owners of the musical rights. The world wide commercial exploitation rights granted to the assessee had been sub-licenses by the assessee to various group companies all over the world. The royalty had been received from the commercial exploitation of musical tracks in the territory of India. The assessee had also submitted certificate from the revenue authorities of Netherlands confirming that the assessee was resident of Netherlands and was the beneficial owner of the royalty. He therefore accepted the claim of beneficial ownership and directed the AO to levy tax @ 10%. Aggrieved by the said decision the revenue is in appeal in all the years. 8. Before us the Learned DR appearing for the revenue assailed the order of CIT(A). It was submitted that CIT(A) had entertained additional evidence in the form of agreements between the assessee and repertoire companies and other agreements as mentioned in para 5.4 of CIT(A) order without any opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to royalty income received by the assessee during the years under consideration. The assessee belongs to Universal group of companies which are engaged in manufacturing of audio and video recording, acquisition, alienation, exploitation, assigning and managing of copy rights, licenses, patents, etc. As per the business model being followed by the group, the group company which entered into contract with various artists, singers etc are known as repertoire companies and as per the business policy of the group, the rights of musical recordings etc of the repertoire company are transferred to other group companies for the purpose of exploitation in other territories. The assessee who is one of the group companies located at Netherlands had acquired musical recording rights from other repertoire companies and had granted the commercial exploitation rights of such musical tracks in India to Universal Music India Pvt. Ltd. from whom the assessee in all the four years under reference had received royalty. The assessee had filed copy of the agreement dated 5.6.2000 with Universal Music India Pvt. Ltd. regarding licensing of the catalogue of recordings owned/controlled by the assessee. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of the royalty as claimed in the agreement. In any case, the AO had any doubts and wants to verify genuineness of such claim the proper course of action could have been to make a reference to the revenue authorities of Netherlands who had jurisdiction over the assessee. The AO did not take any such action. 10.2 The assessee however on its own filed certificate dated 25.7.2003 from the tax authority of Netherlands having jurisdiction over it in which it has been clearly stated that the assessee was regularly filing return of income and paying tax thereon including the royalty income received from Universal Music India Pvt. Ltd. It was certified that the assessee was tax resident of Netherlands and further certified that the assessee was beneficial owner of royalty income received Universal Music India Pvt. Ltd. from time to time within the meaning of article 12 of the convention between Netherlands and India for avoidance of double taxation. Such certificate of residence issued by the tax authority of the contracting state has to be accepted as sufficient evidence regarding the status of the assessee and the beneficial ownership in terms of the circular No. 789 dated 13.4.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 We have heard both the parties perused the records and considered the matter carefully. The dispute is regarding levy of interest under section 234B. There is no dispute that entire income of the assessee was tax deductible at source under the provisions of section 195 and therefore in view of the provisions of section 209(l)(d), the advance tax payable by the assessee will be nil. This view is supported by several judgments including the judgment of Hon'ble jurisdictional High Court (313 ITR 187). We therefore see no infirmity in the order of CIT(A) deleting the interest and the same is therefore upheld. 12. In assessment year 2001-02 the revenue has also challenged the decision of CIT(A) holding that the royalty income amounting to Rs. 49,81,636 was not taxable in assessment year 2001-02. The royalty income amounting to Rs. 49,81,636 for the last quarter of the year 1999 and the first quarter of year 2000 had been declared by the assessee in assessment year 2000-01 on accrual basis that the same was accounted in assessment year 2001-02. The AO however tax the income in A.Y. 2001-02 also. In appeal CIT(A) noted that he already held the tax of Rs. 49,81,636 in assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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