Search Results For: royalty


ACIT vs. Netafim Irrigation India Pvt. Ltd (ITAT Mumbai)

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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2003-04
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S. 92C/ Rule 10B: If the TPO is not satisfied with the assessee's method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

The Transfer Pricing Officer has not proceeded to benchmark the payment of royalty by applying any of the prescribed methods provided under the statute. Without assigning any reason, the Transfer Pricing Officer has determined the arm’s length price of the royalty payment at nil. Prima-facie, it appears, the determination of arm’s length price of royalty payment at nil by the Transfer Pricing Officer is completely on ad-hoc basis without following the due process of law as provided under the statute

CIT vs. Reliance Infocomm Ltd (Bombay High Court)

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DATE: February 5, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
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S. 9(1)(vi) 'Royalty': The insertions of Explanations 5 & 6 to s. 9(1)(vi) by the Finance Act 2015 w.r.e.f. 01.04.1976, even if declaratory and clarificatory of the law, will not apply to the DTAAs. The DTAAs are a bilateral agreement between two Countries and cannot be overridden by a unilateral legislative amendment by one Country (New Skies Satellite BV 382 ITR 114 (Del) & Siemens AG 310 ITR 320 (Bom) followed)

India’s change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty.

DCIT vs. Reliance Jio Infocomm Ltd (ITAT Mumbai)

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DATE: May 10, 2019 (Date of pronouncement)
DATE: June 8, 2019 (Date of publication)
AY: 2016-17
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S. 9(1)(vi) Royalty: Payment for 'bandwith services' is not assessable as 'royalty' if the assessee only has access to services and not to any equipment. The assessee also did not have any access to any process which helped in providing of such bandwith services. All infrastructure & process required for provision of bandwith services was always used and under the control of the service provider and was never given either to the assessee or to any other person availing the said services

The assessee pursuant to the terms of the “agreement‟ had only received standard facilities i.e bandwith services from RJIPL. In fact, as observed by the CIT(A), the assessee only had an access to services and did not have any access to any equipment deployed by RJIPL for providing the bandwith services. Apart there from, the assessee also did not have any access to any process which helped in providing of such bandwith services by RJIPL. As a matter of fact, all infrastructure and process required for provision of bandwith services was always used and under the control of RJIPL, and the same was never given either to the assessee or to any other person availing the said services

EPRSS Prepaid Recharge Services India P. Ltd vs. ITO (ITAT Pune)

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DATE: October 24, 2018 (Date of pronouncement)
DATE: November 6, 2018 (Date of publication)
AY: 2011-12
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S. 9(1)(vi) Royalty/ 40(a)(i): Law explained on whether payment of web hosting charges to Amazon Web Services LLC (USA) (AWS) constitutes "royalty" under Explanation 2 to s. 9(1)(vi) read with the India USA DTAA and whether there is any obligation to deduct TDS thereon u/s 195

The aspect which needs to be seen is whether the assessee is paying consideration for getting any right in respect of any property. The assessee claims that it does not pay for such right but it only pays for the services. The claim of assessee before us was that it was only using services provided by Amazon and was not concerned with the rights in technology. The fees paid by assessee was for use of technology and cannot be said to be for use of royalty, which stands proved by the factum of charges being not fixed but variable i.e. it varies with the use of technology driven services and also use of such services does not give rise to any right in property of Amazon and consequently, Explanation under section 9(1)(vi) of the Act is not attracted

Godaddy.com LLC vs. ACIT (ITAT Delhi)

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DATE: April 3, 2018 (Date of pronouncement)
DATE: April 4, 2018 (Date of publication)
AY: 2013-14
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S. 9(1)(vi) Royalty: Domain name is an intangible asset which is similar to trademark. Consequently, income from services rendered in connection with such domain name registration is assessable as "royalty" u/s 9(1)(vi) of the Income-tax Act

It is now settled law that with the advent of modern technology particularly that relating to cyberspace, domain names or Internet sites are entitled to protection as a trade mark because they are more than a mere address. The rendering of Internet services is also entitled to protection in the same way as goods and services are, and trade mark law applies to activities on Internet

CIT vs. NGC Networks (India) Pvt. Ltd (Bombay High Court)

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DATE: January 29, 2018 (Date of pronouncement)
DATE: February 16, 2018 (Date of publication)
AY: 2009-10
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S. 40(a)(i) TDS disallowance: A party cannot be called upon to perform an impossible Act i.e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. S. 40(a)(i) disallowance can be made only if the royalty falls under Explanation 2 to s. 9(1)(vi) but not if it falls under Explanation 6 to s. 9(1)(vi)

The view taken by the Tribunal that a party cannot be called upon to perform an impossible Act i.e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. This is in accord with the view taken by this Court in CIT v/s. Cello Plast (2012) 209 Taxmann 617 – wherein this Court has applied the legal maxim lex non cogit ad impossibilia (law does not compel a man to do what he cannot possibly perform)

DDIT vs. Reliance Communication Ltd (ITAT Mumbai)

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DATE: January 3, 2018 (Date of pronouncement)
DATE: January 4, 2018 (Date of publication)
AY: -
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Taxability of software payments as royalty: The fact that there is a conflict of judicial opinion on whether payments for software are assessable as royalty or not does not entitle the Dept to seek a reference to the Special Bench. The Tribunal has to follow judicial discipline. Also, if a reference is made to the Special Bench it will violate the principle in Vegetable Products 188 ITR 192 (SC) that if there are two possible views, the view favourable to the assessee must be adopted

So far as Constitution of special Bench is concerned, a reference to constitute a Special Bench flows from the members and not from the parties to the case. Furthermore, such a reference can be made by the members when they do not agree with the view taken by the earlier order of the Tribunal. However, in the instant cases before us, it is not a situation, only after hearing, the matter afresh by the division bench in terms of direction of Hon’ble High Court dated 08.08.2017, the bench may decide the issue to agree or disagree with the view already taken by the earlier bench. Furthermore merely on the conflict view .of the decision of the High Court, a reference cannot be made to constitute Special Bench. If the present application of the Revenue is accepted, the process of reference to a Special Bench / larger Bench would never reach an end. Reference to Special Bench would continue to be moved by the parties upon every subsequent non-jurisdictional High Court decision, thus, leading to a number of cases being referred to constitute Special Bench. However, correct decision is to follow the judicial hierarchy and maintain judicial discipline. Furthermore, if the applications of the Revenue were to be allowed, it would lead to the violation of the principle laid down by the Hon’ble Supreme Court in the case of CIT Vs. Vegetable Products (1973) (188 ITR 192) (SC)

Google India Private Ltd vs. ACIT (ITAT Bangalore)

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DATE: October 23, 2017 (Date of pronouncement)
DATE: October 28, 2017 (Date of publication)
AY: 2007-08 to 2012-13
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Royalty u/s 9(1)(vi) & Article 12: The Google Adwords advertisement module is not merely an agreement to provide advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer using Google's patented algorithm, tools and software. Google Adwords uses data regarding the age, gender, region, language, taste habits, food habits, etc of the customer so as to maximize the impression and conversion to the ads of the advertisers. Consequently, the payments to Google Ireland are taxable as "royalty" and the assessee ought to have deducted TDS thereon u/s 195

If we look into the advertisement module of Adword program stated herein above, then we will come to an irresistible conclusion that it is not merely an agreement to provide the advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer. If we look into the submission made by the learned AR, it is clear that the advertiser, selects some key words and on the basis of key words, the advertisement is displayed on the website or along with the search result as and when the customer selects the key words relatable to the advertisement. The module as suggested does not merely work by providing the space in the Google search engine, but it works only with the help of various patented tools and software. As we have analyzed detailed functioning of Adword program, it is clear that with the help of the search tool/software / data base, the Google is able to identify the targeted consumer/person as per the requirement of the advertiser

HITT Holland Institute of Traffic Technology B.V. vs. DDIT (ITAT Kolkata)

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DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle

Geo Connect Ltd vs. DCIT (ITAT Delhi)

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DATE: January 17, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2002-03, 2003-04
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S. 9(1)(i)/ 9(1)(vi)/ 9(1)(vii)/ 40(a)(i): Law on whether payment by the assessee to non-resident parties for “call transmission services through dedicated bandwidth” is assessable as income accruing in India, royalty or fees for technical services and whether a disallowance can be made for failure to deduct TDS explained

In the instant case also, the undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s Kick Communication in India. It was responsible for restoring connectivity and Managing faults in connectivity etc in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in USA and not in India. Since operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) is of the Act is not attracted in case of above two non-resident parties

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