Relief to Myntra: Advertisement Charges paid to Non-Resident Company can’t be considered as ‘Royalty’, rules ITAT [Read Order]

Myntra - Advertisement Charges - Non-Resident Company - Royalty - ITAT - Taxscan

In a major relief to Myntra Designs Pvt. Ltd, the Bangalore Bench of Income Tax Appellate Tribunal (ITAT) ruled that no Income tax chargeable on payments towards advertisement charges made to non-resident companies cannot be considered as “royalty payments”.

The assessee, M/s. Myntra Designs Pvt. Ltd. has filed these three appeals challenging the common order passed by CIT(A) and they relate to the assessment years 2012-13 to 2015-16. In all the three years, the CIT(A) has confirmed the demand raised by the AO under section 201(1) or 201(1A) treating the assessee as an ‘assessee in default’ for non-deduction of tax at source from the payments made to M/s Facebook Ireland towards advertisement fees.

The AO noticed that the assessee has made payments to M/s Face Ireland Ltd. towards advertisement charges. The AO noticed that the assessee had made the above-said payments without deducting tax at source under section 195 of the Act. Hence the AO initiated proceedings under section 201(1) of the Act treating the assessee as an ‘assessee in default.

The Coram of Judicial Member George George K and Accountant Member B.R. Baskaran ruled that the payments made by the assessee the non-resident company M/s Facebook, Ireland cannot be considered as “royalty payments” and hence they do not give rise to any income chargeable in India under Indian Income Tax Act in all the three years under consideration. “There is no requirement to deduct tax at source from those payments u/s 195 of the Act. Hence the assessee herein cannot be considered as an assessee in default u/s 201(1) of the Act. Accordingly, we set aside the orders passed by Ld CIT(A) for the years under consideration and direct the AO to delete the demand raised u/s 201(1) of the Act and also the consequential interest charged u/s 201(1A) of the Act in all the three years under consideration,” the ITAT said.

Subscribe Taxscan Premium to view the Judgment

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.

taxscan-loader