Subscription Fee Received by American Chemical Society from Indian Customers cannot be Treated as Royalty under Indo-US Treaty: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the subscription fee received by the American Chemical Society from customers from India cannot be treated as “royalty” under the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and USA.

The Assessee is a scientific society based in the United States of America that supports scientific enquiry in the field of chemistry. The assessee is the world’s largest scientific society by membership. For the year under consideration, the assessee filed its return of income on 02/11/2020 declaring a total income of Rs. Nil. During the year, the assessee received payment for providing the following products/services from outside India to Indian customers.

The Assessing Officer observed that the said income is taxable as a “royalty.”

A two-Member ITAT comprising Shri G S Pannu, President and Shri Sandeep Singh Karhail, Judicial Member observed that the subscription revenue received by the assessee in Chemical Extract Service and Publication division does not qualify as “Royalty” in terms of section 9(1)(vi) of the Act as well as Article–12(3) of the India–USA DTAA.

Relying on the past decisions of the Tribunal, the ITAT held that “the Co-ordinate Bench of the Tribunal in assessee’s own case in American Chemical Society v/s DCIT, ITA no.5928/Mum./2018, for the assessment year 2015-16, vide order dated 21/08/2019, rendered similar findings following the aforesaid decision in the immediately preceding assessment year. Similarly was held in assessment years 2016-17, 2017-18, 2018-19, and 2019-20 by the Co-ordinate Bench of the Tribunal in the assessee’s own case in ITA no.6952/Mum./2019, ITA no.1030/Mum./2021, ITA no.1521/Mum./2022 and ITA no.1520/Mum./2022 vide orders dated 13/12/2019, 26/10/2021, and 29/09/2022, respectively.”

The assessee was represented by Shri Paras Savla and the Revenue was represented by Shri Soumendu Kumar Dash.

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