TaxTMI 
TaxTMI 
2024 (3) TMI 530
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....Act 1957 and Trade Mark Act 1999, under Section 9(1)(vi) r.w.s. 195 of the act. The added TDS of Rs. 1,56,598 on the payment of Rs 15,65,984 should be deleted. 2. The Learned D.C.I.T, Intl. Tax, Ahmedabad has erred in charging interest u/s 201 and 201(1)(A) of the income tax act, 1961 on the payment made to International boards without deducting TDS u/s. 195. The added Interest of Rs 29,159 should be deleted. 3. The appellant craves, to add, amend, alter, edit, delete, modify and change all or any of the grounds of appeal at the time of or before hearing of this appeal." ITA No. 183/Ahd/2020 (A.Y. 2018-19) "1. The Learned D.C.I.T., Intal. Tax., Ahmedabad has erred in charging TDS provision on Annual Payment made to the international boards through affiliation with IBO, Cambridge etc.. under the head authorization fee, fee for enrolment/ license fee/ registration fee as per the provision of Income Tax Act and the respective DTAA, Copy right Act 1957 and Trade Mark Act 1999, under Section 9(1)(vi) r.w.s. 195 of the act. The added TDS of Rs. 2,30,091 on the payment of Rs 23,00,915 should be deleted. 2. The Learned D.C.I.T, Intl. Tax, Ahmedabad has erred in charging interest....
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...., other item - study, material, fees for enrolment/registration fees etc. Out of various payments made by the assessee, some payments are made on per student charges like evaluation fees, per teacher charges, training charges. However, other charges like annual program payments are not based on per student, rather it is a onetime payment made annually. After taking the submissions of the assessee on record, the AO observed that the foreign institutions viz. IBO/University of Cambridge have registered themselves in India under the Trademarks Act, 1999. The AO observed that the owners of trademarks being International Schools have received payment based on per student as well as on annual fees basis. However, the assessee has not submitted the basis of annual payments made to International Schools during the course of 201 proceedings. The AO observed that the assessee has been authorized to use the trademarks for attracting students in India and also in making advertisement for attracting various courses offered by these overseas International Schools. The consideration received by the overseas owners of trademarks would therefore be a consideration for such authorization for use of ....
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....tly to the students and even the examinations are conducted by the overseas university itself and the degree certificate is also issued by the overseas university itself to the students directly. The assessee only determines the admission and fees criteria and the assessee is not using any services of the overseas International educational Institutions and the assessee is only acting as a facilitator between the student and the international education institutions. Accordingly, it was submitted that in the instant facts, the payment by the assessee do not qualify as royalty since it is not for the use of any trademark or copyright and it is a pure business arrangement and in absence of Permanent Establishment of the overseas educations in India, there is no requirement for deduction of tax at source. 6. Ld. CIT(Appeals) observed that the assessee has claimed that the payments under various heads like evaluation fees, authorization fees, items like study, materials, fees for enrolment/registration fees etc have been made to the overseas institutions. However, both during the course of 201 proceedings as well as appellate proceedings, the assessee has failed to submit the basis of a....
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....d study material are provided by them from time to time. To ensure the quality of teaching, training is also being organized regularly. These foreign institutions are providing services related to use and application of the trade marks. Thus, the payment also falls under Royalty as defined in explanation 2(vi) of the section 9(l)(vi) of the Act and hence taxable under the Act. Further, in the present case, the Appellant has been authorized to use the trade mark for advertisement to attract the students. It is an admitted fact that a trade marks is entitled to be registered as copyright. Once it is held that trademarks used by the Appellant falls in the category of copyright, the payment in respect of the same will fall in the category of royalty and therefore would be taxable under the provisions of the IT Act 1961. Based on above provisions of the Income Tax Act, the AO has held that the payment to international educational institute falls under nature of royalty and taxable under the I.T. Act. I do not see any reasons for disagreeing with the findings of the AO. However, for taxation of income under the Income Tax Act, the taxability under the DTAA needs to be evaluated. As....
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.... the Income Tax Act 1961 and the DTAA cover intangibles like trade mark. The use of trade mark between the Appellant and the foreign educational institutions has been authorized on the basis of certificate issued by them. Thus, the payment made by the Appellant falls under the category of royalty as per the provisions of income Tax act as well as DTAA. The case laws relied upon by the Appellant are distinguishable on facts. The Agreement between the Appellant and the non-resident institutions is not based on sharing of profits. The Appellant has not provided any basis for annual lump sum payment. The Appellant has not rebutted arguments of the AO. In the present case the assessee has right to use the trade marks for its purpose and the payment is made for its purpose only. As per Explanation 2 of section 9(1)(vi), the payment falls under it and hence taxable as royalty. The payment of the assessee falls under explanation 2(ii) as the has been made for imparting of information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property. In this case the IBO/Cambridge University is providing all mater....
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....there is nothing to suggest that payments were made towards use of trademark of the overseas education institutions. The counsel for the assessee submitted that in the instant case, the payments were made by the assessee only for the "authorization" given by the overseas education institutions to the assessee to enroll Indian students in various courses offered by overseas International educational Institutions. The use of trademarks of Cambridge/IBO at the school premises is only "incidental" to such authorization given to the assessee for enrolment of students to various courses run by the overseas education institutions. No separate payments has been made by the assessee towards use of trademarks as can be seen from the material available on record. The counsel for the assessee relied on several judicial precedents in support of the contention that payments are only for the authorization given by the overseas educational institutions to enable the assessee to enroll students to various courses offered by overseas International educational Institutions and not for the use of trademarks by the assessee and the use of trademarks / brand-name is purely incidental to such "authorizat....
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....use of brand name of Cambridge/IBO for the purpose of attracting students to enroll for the courses offered by overseas International educational Institutions. In our view, the students are attracted to enroll for the courses offered by overseas educational institutions on the basis of reputation carried by these overseas institutions and therefore, it cannot simply be said that the use of brand name of the educational institutions is only "incidental" to the payments made by the assessee to overseas education institutions and such payment is only for authorization granted by the overseas institutions to attract students to enroll with the courses offered by them via the medium of the assessee. It is also observed that the overseas education institutions have applied for registration under Trademarks Act, 1999, which is ostensibly with a view to ensure that their brand name/trademark is not exploited by any other entity/person in India and with a view to protect their trademark / brand name in India. In our considered view, it is important for the Tax Authorities to analyze the basis of payment made by the assessee to the overseas institutions on an annual/lump sum basis. We also o....