AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 708
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....nd assessing the same as total income of the appellant. 2.2 The Hon'ble DRP has erred in confirming the action of the learned AO in passing the assessment order under section 143(3) read with section 144(C) of the Act. 2.3 The Hon'ble DRP and the learned 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. 2.4 The learned 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. 2.5 The learned AO has erred in not appreciating the fact 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. 2.6 The learned 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....
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.... Ld.AO also noted that while making the said payment to the assessee, Indian Companies have deducted tax of Rs.40,70,116/- at source. 2.2 The Ld.AO observed that the assessee while filing its ROI for AY 2016-17, declared, 'NIL' income and claimed the entire TDS amount of Rs. 40,70,116/- as refund. The Ld.AO called upon the assessee for information u/s 142(1) of the Act seeking reasons for filing 'NIL' return & claiming the said refund. The assessee in response submitted that since it is a Resident of Malaysia, it is eligible for the benefits of the India-Malaysia DTAA and it also doesn't have any PE in India, hence the amount of Rs. 3.59 Crores is not taxable in India. 2.3 The Ld.AO noted that the assessee during the course of assessment proceeding for AY 2013-14 (being the earlier AY) had submitted that, there does not exist any formal agreement with the Client Companies for the provision of the abovementioned services. Accordingly, a Notice u/s 133(6) of the Act, was issued to ABMC, being one of the Indian Companies, seeking details of any formal agreement on the basis of which it had remitted the service fee amounts to the assessee in that FY. In reply, ABMC mentioned ....
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....s of the opinion that payment received by assessee is in the nature of 'royalty'. The Ld.AO also referred to the directions of DRP dated 09/09/2017 in support of the view. The Ld.AO thus assessed the income in the hands of the assessee at Rs.3,59,11,128/-. On receipt of the DRP directions, assessee filed objections before the DRP. 3. The DRP after considering the submissions of the assessee, observed and held as under: 4. On receipt of the DRP directions, the Ld.AO passed the final assessment order by making the addition in the hands of the assessee as proposed by the Ld.AO in the draft assessment order. Aggrieved by the order of Ld.AO, the non-resident assessee is in appeal before this Tribunal. 4.1 The Ld.AR submitted that the subscription fee received by the assessee from Indian customer for providing access to the database is not in the nature of royalty, either under the Act or under the India-Malaysia DTAA. He submitted that the subscription fees received by the assessee are in the nature of business income. However, in the absence of a PE in India, the amount received is not taxable as per the provisions of India- Malaysia DTAA. 4.2 Ld.AR submitted that, th....
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.... applicable to the facts of the present case. The Ld.CIT.DR has filed certain additional evidence gathered by her from assessee's website, and from public domain being the student handbook issued by the assessee and the copyright works of one of the consultant faculty have been annexed. 4.5 The Ld.DR also referred to agreement between assessee and Manipal Global Education Services Pvt. Ltd. that was engaged as a service provider to provide for marketing, business development and accounting services including student enrolment, student back office support services, collection of fees and remitting into and bursar activities. (collectively referred to as "Support Services") upon mutually agreed terms and conditions and other support activities that was carried out as per the agreement dated 05/08/2013. She also referred to page 256 of the paper book, wherein certain faculties were appointed by assessee in India, who delivered the courses through online modes to the students across nations, of the companies with whom assessee had an agreement. 4.6 The Ld.DR submitted that though in the said letter, it is mentioned that these consultants are not employees of the assessee, howe....
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....r the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information (know-how) concerning industrial, commercial or scientific experience." 5.1 A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd. vs CIT reported in (2012) 432 ITR 471 has analysed the provisions of Income tax Act vis-a-vis provisions of DTAA. 5.2 We note that the details that were filed before the DRP were neither remanded nor has been verified by the DRP themselves and observes that assessee could not furnish any documents in para 2.1.3 which has been reproduced hereinabove in the preceding paras. 5.3 We note that the various agreements / documents that has been filed in piece mea....
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....ility in India. As rightly argued, it should also been seen whether the said amount would fall within the purview of "Royalty" as defined in the DTAA between India and Malaysia. Article 12(3) of the DTAA with Malaysia reads:- The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, Industrial, commercial or scientific equipment, or for information (know-how) concerning industrial, commercial or scientific experience. Document 2 2.1.5 A plain reading of the above provisions of the treaty would indicate that any payment made for the use or right to use any copy right would fall within the purview of this article. The Scope of 'royalty' under DTAA was discussed by the Hon'ble Karnataka High Court in the case of Synopsis International Old Ltd., as under: . In the DTAA for the term 'royalty' means paymen....