Payment received by Non Resident assessee from Indian Company for IUC cannot be taxed as Royalty in India u/s 9(1)(vi) of Act on absence of DTAA: ITAT [Read Order]

The Bangalore bench of Income Tax Appellate Tribunal (ITAT) held that payment received by the non resident assessee from an Indian Company for IUC could not be taxed as royalty in India under Section 9(1)(vii) of the Income Tax Act, 1961 in the absence of Double Taxation Avoidance Agreement (DTAA).

The Assessee  Globe Teleservices Ltd. is a non-resident company registered in Hongkong. Who received  payment from M/s. Vodafone South Ltd., an Indian entity during the relevant assessment years. During the proceedings the Assessing Officer (AO)  was of the opinion that the assessee’s income was chargeable to tax in India as the deductor did not deduct TDS under the provisions of section 191 of the act that would fasten to assessee. Accordingly  the AO reopened the proceedings and passed assessment order and held that payment received by the non resident assessee from an Indian Company for IUC shall be  taxed as royalty in India under Section 9(1)(vii) of the Income Tax Act.

Aggrieved by the order the assessee filed another appeal before the Commissioner of Income Tax (Appeal), who dismissed  the appeal of the assessee.Accordingly the assessee filed another appeal before the tribunal.

Rohan Sogani, the counsel for assessee   submitted that though there was no DTAA between India and Hongkong for the relevant AYs under consideration, the payment received from Indian customers cannot be taxed in Indian under Section 9(1)(vi) income Tax Act

Naman Maloo,counsel for revenue, supported the order of lower authorities .

It was observed that there is no treaty between India and Hong Kong, the country of which the assessee is a tax resident. Therefore the payment received by assessee has to be analyzed under the Income Tax Act alone.

After reviewing the facts the ITAT bench of Beena Pillai, (Judicial Member )and Laxmi Prasad Sahu(Accountant Member) relied upon the decision of Karnataka High Court in case of Vodafone Idea Ltd. hold that the payments received by the assessee cannot be held to be royalty under section 9(1)(vi) of the Income Tax Act.

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