2023 (10) TMI 765 - AT - Income Tax

Amounts from DJCIPL not taxable as 'royalty' under India-UK DTAA; no Permanent Establishment found in India.

M/s. Factiva Limited C/o. Price Waterhouse Coopers Pvt. Ltd. Versus Deputy Commissioner of Income Tax (International Taxation) -2 (3) (1), Mumbai

M/s. Factiva Limited C/o. Price Waterhouse Coopers Pvt. Ltd. Versus Deputy Commissioner of Income Tax (International Taxation) -2 (3) (1), Mumbai - TMI Issues Involved:1. Taxability of amount received as 'royalty' under Section 9(1)(vi) of the Income Tax Act and Article 13 of India-UK DTAA.2. Existence of Permanent Establishment (PE) in India under Article 5 of India-UK DTAA.Summary:1. Taxability of Amount Received as 'Royalty':The assessee challenged the taxability of amounts received from Dow Jones Consulting India Pvt. Ltd. (DJCIPL) as 'royalty' under Section 9(1)(vi) of the Income Tax Act and Article 13 of India-UK DTAA. The amounts in question were Rs. 3,22,32,290/- for A.Y. 2016-17 and Rs. 6,42,86,188/- for A.Y. 2017-18. The assessee argued that these amounts were not taxable in India as they did not constitute 'royalty' under the DTAA and that the assessee did not have a PE in India.The Tribunal referred to its earlier decision for A.Y. 2015-16, where it was held that the purchase price received by the assessee from the distributor in India for granting access to its database does not amount to 'royalty' under the India-UK DTAA. The Tribunal reiterated that the payment received by the assessee was for the use of a database and not for the use or right to use any equipment or copyright. Therefore, the amounts received were not taxable as 'royalty.'2. Existence of Permanent Establishment (PE) in India:The assessee contended that it did not have a PE in India under Article 5 of the India-UK DTAA. The Assessing Officer (AO) made a passing remark that DJCIPL could constitute an agency PE of the assessee, but no addition was made on this ground. The Tribunal noted that there was no material on record to prove that DJCIPL was an agency PE of the assessee. The Tribunal held that such casual and passing remarks could not lead to the conclusion that the assessee had an agency PE in India. Therefore, this issue was treated as academic and the grounds raised by the assessee were allowed.Conclusion:The Tribunal allowed both appeals of the assessee, holding that the amounts received from DJCIPL were not taxable as 'royalty' under the India-UK DTAA and that the assessee did not have a PE in India. The issue regarding the grant of credit for TDS was dismissed as infructuous.