2022 (3) TMI 1509

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....section 143(3) read with section 144(C) of the Act. 3. The Hon'ble DRP and the ld. AO have erred in holding that the income earned by the appellant is in nature of royalty under section 9(1)(vi) of the Income Tax Act,1961. 4. The ld. AO has failed to appreciate that the payment made by a resident company to the appellant cannot be treated as royalty, as the students are only provided with the course material and the Indian company did not obtain the use or right to use the copyright or literary work. 5. The ld. AO has erred by not appreciating that the services provided by the appellant do not allow the Indian Company to enjoy any patent, trademark or copyright. Therefore, receipt from such services cannot be considered as royalty under section 9(1)(vi) of the Act. 6. The Id. AO has erred in not appreciating that as the payer was not under an obligation to deduct tax at source and the income earned by appellant was also not chargeable to tax in India. Grounds relating to treatment of income from distance education under provisions of DTAA. 7. The ld. AO has erred in holding that the payment received by the appellant is in th....

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....d annual maintenance fee from Aditya Birla Management Corporation Ltd. In the draft assessment order, Ld.AO concluded that the amount received by the non resident assessee constituted royalty within the meaning of Article 12 (3) of the India Malaysia DTAA and as per the provisions of section 9(1)(vi) of the Act. The Ld.AO brought to tax the receipts from Aditya Birla Management Corporation Ltd., on account of providing educational programme for Masters degree in Business Administration as Royalty under article 12(3) of India Malaysia DTAA. 3.1 Aggrieved by the order of the Ld.AO, assessee raised objections before the DRP. The DRP observed as under: "Having considered the submissions, we not at the outset, that the assessee could not furnish any documentation as to the terms governing the used of Edunxt platform (Learning Management System), though called for. Only the invoice raised by the assesse was submitted which do not contain any terms of use of the software provided and delivered to the employees of ABMCL. It is rather difficult to accept the contention that the assessee had not entered into any agreement either in writing or e-form as to the terms of use of the ....

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.... technique, or methodology employed in evolving the database with the subscriber. It does not provide any right to the subscriber to use any industrial, commercial or scientific equipment. Thus, he submitted, the subscription fee received by the assessee for providing publicly available information cannot be treated as royalty. He placed reliance on the following decisions: • DIT(IT) v Dun & Bradstreet Information Services India (P.) Ltd [2012] 338 ITR 95 (Bombay) • Dun & Bradstreet Espana. S.A., In re [ 005] 272 ITR 99 (AAR) • Elsevier Information Systems GmbH v DCIT(IT) [2019] 106 taxmann.com 401 (Mumbai - Trib.) • American Chemical Society v DCIT(IT) [2019] 106 taxmann.com 253 (Mumbai - Trib.) • ITO(IT) v Cadila Healthcare Ltd [2017] 77 taxmann.com 309 (Ahmedabad - Trib.) • The Regents of the University of California UCLA Anderson School of Management Executive Education, USA (AAR No. 1656 of 2014) • Hughes Escort Communications Ltd. v DCIT [2012] 21 taxmann.com 171 (Delhi) 4.4 On the contrary, the Ld.CIT.DR strongly relied on the observations of the Ld.AO and the DRP submitted that the....

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....yright in literary, artistic or scientific work are covered within the definition of 'Royalty'. Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd. vs CIT reported in (2012) 432 ITR 471 as well as the decisions relied by the Ld.AR herein above. Hon'ble Supreme Court after analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with nonresident software suppliers, provisions of Copy Right Act, the circulars issued by CBDT, various case laws relied by the parties, concluded as under:- "CONCLUSION 168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not bein....