Consistency in tax treatment under Mutual Agreement Procedure led to rejection of the Revenue's contrary challenge.

A dispute over whether distribution and advertising revenue constituted royalty under section 9(1)(vi) of the Income-tax Act and Article 12 of the India-USA tax treaty was not reopened because the parties had already resolved the treatment through a Mutual Agreement Procedure. The Court noted that 10% of the advertising and subscription revenue had been treated as taxable profit under that arrangement and that the Revenue had accepted the same position in earlier assessment years. Applying the principle of consistency, the Court declined to entertain the Revenue's contrary challenge for the years in question and disposed of the appeals, leaving the questions of law open for appropriate proceedings.

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Issues: Whether the Revenue's challenge to the taxation treatment of distribution and advertising revenue could be entertained in view of the parties' prior Mutual Agreement Procedure resolution and the Revenue's acceptance of the same treatment in earlier assessment years.

Analysis: The disputes arose from the treatment of distribution and advertising revenue as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-USA tax treaty. The Court noted that the parties had proceeded under a Mutual Agreement Procedure, under which 10% of the advertising and subscription revenue was treated as taxable profit, and that this position had been accepted by the Revenue for earlier assessment years. Applying the principle of consistency, the Court found no justification to entertain a contrary challenge for the years in question.

Conclusion: The Revenue's appeals were not entertained and stood disposed of, with the questions of law left open for consideration in appropriate proceedings.

Final Conclusion: The Court declined to interfere with the Revenue's challenge and brought the appeals to an end while keeping the legal questions open.

Ratio Decidendi: Where a tax position has been consistently accepted between the parties under a Mutual Agreement Procedure and followed by the Revenue in earlier years, the Court may decline to entertain a contrary challenge for subsequent years on the ground of consistency.

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