Independent licence agreements can qualify for concessional royalty taxation where they are genuine fresh contracts after the statutory cut-off.

Later licence fee agreements executed in 2007 were treated as independent contracts, not mere extensions of earlier arrangements, because the revised royalty structure did not by itself convert them into a continuation. The Revenue could not replace the assessee's commercial structuring absent proof of a colourable device. As the royalty was received under agreements made after the statutory cut-off date, the concessional rate under section 115A(1)(b)(AA) applied rather than the higher treaty rate under Article 13(2)(a)(ii) of the India-UK DTAA, and the income was taxable at 10%.

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Issues: Whether the licence fee agreements executed in 2007 were new and separate agreements or merely extensions of the earlier agreements, and whether the royalty income was taxable at 10% under section 115A(1)(b)(AA) of the Income-tax Act, 1961 or at 15% under Article 13(2)(a)(ii) of the Double Taxation Avoidance Agreement between India and the United Kingdom.

Analysis: The agreements entered into in 2007 were held to be independent contracts and not a mere continuation of the earlier arrangements. The mere fact that the assessee had revised the royalty structure did not make the later agreements an extension of the earlier ones. The Revenue could not substitute its view for the assessee's commercial decision unless the arrangement was shown to be a colourable device. Section 115A(1)(b)(AA) permits the concessional rate where royalty is received in pursuance of an agreement made on or after 1 June 2005, and the later agreements satisfied that requirement.

Conclusion: The royalty/licence fee income was entitled to taxation at 10%, and the finding that the later agreements were only an extension of the old agreements was rejected.

Final Conclusion: The assessee succeeded in establishing that the later licence arrangements were fresh agreements qualifying for the concessional royalty rate, and the assessment had to be recomputed accordingly.

Ratio Decidendi: A later agreement executed after the statutory cut-off date is entitled to the concessional royalty rate if it is a genuine independent agreement, and the Revenue cannot deny that benefit merely by treating it as a continuation of an earlier contract without proving a colourable device.

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