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of <h1>US Film Distributor Found Without Permanent Establishment in India, Tax Appeal Succeeds</h1> <h3>Warner Bros. Distributing Inc. Versus Additional Director of Income-tax (IT), Range 2, Mumbai</h3> Warner Bros. Distributing Inc. Versus Additional Director of Income-tax (IT), Range 2, Mumbai - TMI Issues:Assessment of royalty income as business profit attributable to PE in India.Analysis:The appellant, a US tax resident, engaged in film distribution in India, challenged the taxability of royalty income under section 9(1)(vi) of the IT Act. The Assessing Officer proposed to assess the royalty as business income attributable to PE in India. The DRP upheld this view, considering income generated by film distribution in India as accruing in India. The key issue was whether the royalty income is taxable in India as business profit attributable to the PE.The appellant contended that a previous Tribunal decision favored their position, while the Revenue argued that the issue of PE was not examined for the previous assessment year. The Tribunal noted that for the earlier year, the Assessing Officer did not consider PE due to applying DTAA provisions. However, the Tribunal concurred with the view that the amount received could not be considered royalty, as done by the Assessing Officer. It was held that the appellant lacked a PE in India, and income arising outside Indian territories could not be taxed as business income in India.Referring to the earlier Tribunal decision, it was established that the appellant had no PE in India, as the Indian company acted independently. Consequently, Agency PE provisions did not apply. As the facts remained unchanged, the Tribunal held that the appellant had no PE in India, and the income from the distribution agreement was not taxable in India.The Tribunal concluded that the other issues raised by the appellant were consequential and thus dismissed. Ultimately, the appeal by the assessee was allowed based on the findings regarding the taxability of royalty income as business profit attributable to PE in India.
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