Royalty withholding on Cambridge remittances rejected where payment did not involve use of copyright or similar rights.

Remittance to the University of Cambridge for examination fees, books purchased and teacher training fees was analysed under section 9(1)(vi), section 9(2) and section 195 of the Income-tax Act, 1961, together with Article 13 of the India-UK DTAA. The payment was treated as falling within the same legal question previously decided in relation to Cambridge assessment receipts, where such receipts were held not to be royalty. Applying the principle that royalty arises only from use of, or the right to use, copyright or similar protected rights, the remittance did not fall within the royalty clause. As the treaty position was more beneficial, domestic royalty provisions were held inapplicable and no TDS was deductible.

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Issues: Whether the remittance made to the University of Cambridge for examination fee, books purchased and teacher training fee constituted royalty so as to attract tax deduction at source and consequential interest.

Analysis: The payment was examined in the light of section 9(1)(vi), section 9(2) and section 195 of the Income-tax Act, 1961 as well as Article 13 of the India-UK DTAA. The payment was found to be covered by the same legal question already decided in the context of Cambridge assessment receipts, where it was held that such receipts do not amount to royalty. Following the binding principle that royalty arises only where there is use of, or right to use, copyright or similar protected rights, the remittance in question was held not to fall within the royalty clause. Since the treaty position was more beneficial, the domestic provisions for royalty were held inapplicable on these facts.

Conclusion: The payment did not constitute royalty and no TDS was deductible on the remittance.

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