Royalty from Operator Agreement not chargeable to Income Tax under Indo-US Tax Treaty: ITAT [Read Order]

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The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that royalty from Operator agreement not chargeable to Income Tax under Indo-US Tax Treaty.

The assessee, Qualcom Technologies Inc. has raised the issues in respect of Treating revenue received by the assessee under the BREW agreement as taxable under the provisions of article of India-US DTAA. Treating revenue received by the assessee under the test tool agreements as income of the assessee.

The royalties or fees for included services do not arise in one of the contracting states, and the royalties relate to the use of, or the right to use, the right or property, or the fees for included services relate to services performed, in one of the contracting states, the royalties or fees for included services shall be deemed to arise in that contracting state.” The DRP has confirmed the proposed additions of Royalty made on account of revenue received through BREW Operator Agreements in earlier years in case of M/s Qualcomm Incorporated. Hence, the reasoning given in the earlier years orders in case of Mis Qualcomm Incorporated as confirmed by CIT (A) and DRP is followed in the current year also.

The coram of Sudhanshu Shrivastava and N.K. Billaiya that the royalty from BREW Operator agreement is not chargeable to tax in the hands of the assessee under Section 9(1)(vi) of the Income Tax Act and Article 12 of Indo-US Double Taxation Avoidance Treaty (DTAA) and also the revenue received under the test tools agreement. 

The ITAT directed the Assessing Officer to delete the impugned additions made in respect of revenue received by the assessee under the test tool agreements as income of the assessee.

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