The Income Tax Appellate Tribunal (ITAT), Mumbai Bench deleted the addition on account of alleged royalty taxable under section 9 (l)(vi) of the Income Tax Act, 1961 read with Article 12(3) of India Switzerland Double Taxation Avoidance Agreement (DTAA).
The assessee, IMS AG is a company incorporated, and fiscally domiciled, in Switzerland. The assessee company is engaged in providing market research reports on the pharmaceutical sector to its customers across the world at predetermined subscription price. The company collects, processes and utilizes the data and information, particularly in the field of medicine and pharmaceuticals for the delivery of reports through an online IMS knowledge link.
The company enters into agreements with its customers for providing the review reports (IMS reports) setting out the details of modules required to be accessed by the customers and the consideration for these services. In essence thus, the IMS reports, based on modules selected, are statistical database compilations, providing geo economical data, about a pharma molecule, providing insight into the connected issues relating to information and developments.
The licence access so granted is a non-exclusive and non-transferable right. It is a consideration received, as allowing this non-exclusive, non-transferable access to the database and IMS reports which is subject matter of dispute.
The lower authorities have held that these receipts are required to be taxed as royalty under section 9(l)(vi) as also under article 12(3) of the Indo Swiss DTAA.
The assessee contended that Assessing Officer erred in making the addition of Rs.29,49,80,527 on account of alleged royalty taxable under section 9 (l)(vi) of the Income Tax Act, 1961 read with Article 12(3) of India Switzerland Double Taxation Avoidance Agreement.
The ITAT clarified that it is only elementary that when the assessee is not taxable under the provisions of the respective DTAA, there is no occasion to examine the taxability under the Income Tax Act 1961 since the provisions of the Income Tax Act 1961 apply only when these provisions are more favourable to the assessee in relation to the provisions of the applicable DTAA.
Therefore, the two member bench headed by the Vice President Pramod Kumar uphold the plea of the assessee and delete the impugned addition of Rs 29,49,80,527.Subscribe Taxscan AdFree to view the Judgment