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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI M. BALAGANESH & SHRI KULDIP SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “I”, MUMBAI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.6455/M/2018 Assessment Year: 2015-16
M/s. Factiva Ltd., Dy. Commissioner of C/o Price Waterhouse Income-tax (International Coopers Pvt. Ltd., Taxation) – 2(3)(1), PwC House, Plot 18-A, Vs. Room No.1614, 16th Floor, Guru Nanak Road, Bandra (W), Air India Building, Mumbai – 400 050 Nariman Point, PAN: AACCF5745J Mumbai - 400021 (Appellant) (Respondent)
Present for: Assessee by : Shri Dhanesh Bafna, A.R. Ms. Hirali Desai, A.R. Shri Yogesh Malpani, A.R. Ms. Kinjal Patel, A.R.
Revenue by : Shri Rajneesh Yadav, D.R. Date of Hearing : 25 . 04 . 2022 Date of Pronouncement : 31 . 05 . 2022
O R D E R Per : Kuldip Singh, Judicial Member: The appellant, M/s. Factiva Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 24.07.2018 passed by Dispute Resolution Panel-1 (WZ), Mumbai [hereinafter referred to as DRP)] qua the assessment year 2015-16 on the grounds inter alia that :-
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“1. That on the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation) 2(3)(1), Mumbai ('the Learned AO') and the Dispute Resolution Panel ('the DRP') erred in holding the sum of INR2,82,15,036 as 'Royalty' under Section 9(1)(vi) of the Income-tax Act, 1961 ('the Act') read with Article 13 of the Double Taxation Avoidance Agreement ('the DTAA') entered into between India and UK. 2. That on the facts and in the circumstances of the case and in law, the Learned AO erred in alleging that Dow Jones Consulting India Private Limited (DJCIPL) could constitute an Agency PE of the Appellant. 3. That on the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in not considering that the sum of INR 2,82,15,036 is in the nature of "Business Profits" under Article 7 of the DTAA, not taxable in India as the Appellant did not have a Permanent Establishment in India under Article 5 of the DTAA. 4. That on the facts and in the circumstances of the case and in law, the learned AO has erred in proposing to initiate penalty proceedings under section 271(1)(c) of the Act without appreciating that none of the provisions of section 271(1)(c) of the Act gets attracted in the facts of the Appellant's case. The Appellant prays to Your Honours to kindly direct the Learned AO to drop/ abate the penalty proceedings and oblige. The Appellant craves leave to add, to amend, to substitute, to withdraw, to modify, to alter and/ or re-instate the foregoing grounds of the appeal on or before the time of hearing.”
Briefly stated facts necessary for adjudication of the controversy at hand are : assessee being a company incorporated in the United Kingdom (UK) is into the business of providing global business news and information services to organizations worldwide by employing content delivery tools and services through a suite of products and services under the name Factiva. By virtue of the agreement dated 07.08.2014 referred to as Factiva Distribution agreement, the assessee claimed to have granted the rights to distribute the Factiva product in the Indian market to its group
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company, Dow Jones Consulting India Pvt. Ltd. (DJCIPL) on principle to principle basis. During the year under assessment the assessee received an amount of Rs.2,82,15,036/- from DJCIPL on account of distribution of its products by DJCIPL.
Assessee filed the return declaring total income at nil, claiming a refund of Rs.74,10,678/- which was subjected to scrutiny. The assessee also claimed that the amount received by it from DJCIPL is in the nature of business income under Double Taxation Avoidance Agreement (DTAA) between India and UK.
It is also the claim by the assessee that it does not have any Permanent Establishment (PE) in India and as such income attributable to the consideration received from DJCIPL in India is not liable to tax India. However, declining the contentions raised by the assessee the Assessing Officer (AO) in its draft assessment order proceeded to hold that payment made by DJCIPL to the assessee was taxable as royalty under section 9(1)(vi) of the Income Tax Act, 1961 (for short ‘the Act’) read with section 13(3)(a) of India-UK DTAA as the payment is for the use of copyright in literary work; use of information concerning commercial, scientific knowledge, experience and skill; and use or right to use equipment or process and thereby sought to tax as the royalty under the Act as well as the treaty.
Assessee carried the matter before the Ld. DRP by way of filing appeal who has upheld the order passed by the AO to the extent that the amount received by the assessee towards payment
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for Factiva product is in the nature of royalty as per Article 13 of India-UK DTAA. Consequently, pursuant to the order passed by the Ld. DRP, the AO framed the assessment under section 143(3) read with section 144C(13) of the Act at the total income of Rs.2,82,15,036/-. Feeling aggrieved the assessee has come up before the Tribunal by way of filing present appeal.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly during the year under assessment assessee received an amount of Rs.2,82,15,036/- for the distribution of financial products of DJCIPL after deducting tax at source under section 195 of the Act. It is also not in dispute that the assessee has claimed the aforesaid amount as its business income on the ground that it does not have a PE in India and as such claimed the same to be not taxed in India. It is also not in dispute that the assessee company has received an amount of Rs.2,82,15,036/- for distribution of financial products in territory of India of DJCIPL pursuant to the agreement dated 07.08.2014, known as Factiva distribution agreement vide which the assessee had granted the right to distribute the Factiva product (access to database) in Indian market to its group company DJCIPL on a principle to principle basis. It is also not in dispute that the AO as well as the Ld. DRP have held the aforesaid amount of Rs.2,82,15,036/- earned by the
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assessee as ‘royalty’ under section 9(1)(vi) of the Act and also owned Article 13 of India-UK DTAA.
The Ld. A.R. for the assessee challenging the impugned order passed by the AO pursuant to the directions issued by the Ld. DRP contended inter alia that the purchase price received by assessee company from DJCIPL was not taxable in India in terms of Article 13 and Article 5 of India-UK DTAA and as such declared its income at nil and claimed a refund of TDS credit amounting to Rs.74,10,678; that Factiva is an online database of assets from key newsletter and news wires from all over the world and the assessee collaborates with the news publishers/other sources and collates such relevant publicly available news/information to create a systematic database of news, articles/information with advanced search capability; that the copy right in the news articles/blog does not belong to assessee but always belongs to its publishers/others; that the assessee had granted the rights to distribute “Factiva product” (access to database) in the Indian market to its group company, DJCIPL on principle to principle basis and relied upon the decision rendered by co-ordinate Bench of the Tribunal in assessee’s group company case namely Dow Jones & Company Inc. vs. ACIT (2022) 135 taxamann.com 270 (Del ITAT), also relied upon the decision rendered by Authority for Advance Rulings in case of Dun and Bradstreet Espana S.A., IN RE (AAR) (2005) 272 ITR 99 (AAR) and confirmed by Hon’ble Bombay High Court cited as (2011) 338 ITR 95 (Bom HC) and the decision rendered by the co-ordinate
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Bench of the Tribunal in case of American Chemical Society vs. DCIT (IT) (2019) 106 taxmann.com 253 (Mum ITAT).
However, on the other hand, the Ld. D.R. for the Revenue in order to repel the argument addressed by the Ld. A.R. for the assessee contended that the payment made by DJCIPL to the assessee is taxable as ‘royalty’ under Article 13 of India-UK DTAA as the database was sector specific specialized in the portal and that a dedicated team of around 100 specialists were involved which updated the data on daily basis etc.; and that the payment in question falls within the ambit of use of copy right as well as information concerning industrial scientific or commercial experience and thereby relied upon the order passed by the AO/ Ld. DRP.
From the grounds raised by the assessee in the present appeal, undisputed facts and argument addressed by the Ld. A.Rs. of the parties the sole question arises for determination is : “AS to whether amount of Rs.2,82,15,036/- received by the assessee from the distribution of financial products of DJCIPL is a ‘royalty’ under section 9(1)(vi) of the Act and Article 13 of India-UK DTAA?”
When we examine the question framed in the light of the undisputed facts that the purchase price received by the assessee from DJCIPL is at arms length price; that the amount received by the assessee was for providing use of database specifically by not giving any copy right; and that transaction as to granting the right to distribute the Factiva product in the Indian markets to its group company DJCIPL on principle to principle basis, the amount
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received is not liable to be taxed as ‘royalty’ in the hands of the assessee.
Identical question has been decided by the co-ordinate Bench of the Tribunal in one of the assessee’s group company Dow Jones & Company Inc. vs. ACIT (supra) by returning following findings: “4. Briefly stated, the facts of the case are that the appellant company is a business corporation incorporated in USA and engaged in the business of providing information products and services containing global business and financial news to organizations worldwide. It offers information via newspapers, newswires, websites, applications, newsletters, magazines, proprietary databases, conferences and radio. 5. The appellant company appointed Dow Jones Consulting India Pvt Ltd [DJCIPL] on a principal to principal basis for distributing its products in the Indian market. Accordingly, the appellant company receives purchase price from DJCIPL at an arm’s length price. 6. During the course of scrutiny assessment proceedings, the Assessing Officer was of the firm belief that the receipts from DJCIPL should be taxed in India as ‘Royalty Income” under the provisions of the Act as well as India-USA DTAA. 7. Referring to the definition ‘Royalty’ given in Section 9(1)(vi) of the Act, the Assessing Officer treated the Indian receipts as taxable as ‘Royalty’. The Assessing Officer further examined the relevant Article of India-USA DTAA and again formed a belief that Indian receipts are also taxable under the India-USA DTAA and concluded the proceedings by taxing the same. 8. Before us, the ld. counsel for the assessee vehemently stated that the assessee has received consideration for providing use of database by which it has allowed DJCIPL to used its copy right and has not given any coy of right, therefore, the impugned receipts cannot be taxed as ‘Royalty’ in the hands of the assessee. 9. Per contra, the ld. DR strongly supported the findings of the lower authorities. 10. We have given thoughtful consideration to the orders of the authorities below. At the very outset, we have to state that basis the provisions of section 92 of the Act, the assessee is entitled to invoke the provisions of India –USA DTAA to the extent it is more beneficial. Our view is fortified by the decision of the Hon'ble Supreme Court in the case of Union of India Vs. Azadi Bachao
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Andalon 263 ITR 706. Accordingly, we will consider the beneficial provisions of the tax treaty to see whether the contention of the assessee that the alleged payment from DJCIPL is not royalty income.
As per Article 12 of the Tax Treaty, ‘Royalty” is defined as under: “10.1.4.1 (a) “payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and
(b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income, derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic.
10.1.5 Thus, Article 12 of the Tax Treaty brings within the ambit of the definition of royalty, a payment made for the use of or the right to use a copyright of a literary, artistic or scientific work. Thus, only those payments that allow a payer to use / acquire a right to use a copyright in a literary, artistic or scientific work arc covered within the definition of royalty. Payments made for acquiring the right in use the product it sell, without allowing any right to use the copyright in the product, are not covered within the scope of royally winch may gel covered under the term 'Royalty' as per the Act. Further, unless the payments are made towards acquiring the right to use a copyright in a literary, artistic, or scientific work, definition of Royalty would not get attracted.
10.1.6 In the current case, there is no transfer of legal title in the copyrighted article as the same rests with the Applicant. All rights, title and interest in the licensed software, which is being claimed to be copyrighted article, are the exclusive property of the Applicant. DJCIPL has no authority to reproduce the data in any material form, to make any translation in the data or to make any adaptation in the data. Further, the end user cannot be said to have acquired a copyright or right to use the copyright in the data and accordingly, the payments made by DJCIPL for accessing the database would not qualify as payments for the use of copyright.
10.1.7 The Applicant submits that the payments made by DJCIPL is not for the transfer of all or any rights in respect of
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the database Under the agreement, DJCIPL does not acquire any right in relation to the. products.
10.1.8 Thus in view of the above arguments, n shall be possible to conclude that the payment received by the Applicant cannot be treated as a consideration for the transfer of any 'copyright'. The transaction under consideration is tor the provision of accessing the database of the Applicant/financial products license, the same cannot he considered as ’royally' under Article 12 of the India-US DTAA.
10.1.9 Furthermore, in determining whether or not a payment is for the use of copyright, it is important to distinguish between a payment for the right to use the copyright in a programme and the right to use the programme itself. We have outlined below our detailed submission on the distinction between copyright and the copyrighted article:”
A perusal of the above Article shows that it brings within the ambit of the definition of ‘Royalty’ the payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. In our understanding of the Article, only those payments that allow a payer to use/acquire a right to use copyright in literary, artistic or scientific work are covered within the definition of ‘Royalty’. In our considered view, the payments made for acquiring right to use product itself, without allowing any right to use the copy right in the product are not covered with the scope of ‘Royalty’ which may get covered under the term under Royalty as per the Act.
The facts of the case in hand show that there is no transfer of legal title in the copyrighted article as the same rests with the assessee. All rights, title and interest in the licensed software which is being claimed to be copyrighted article are the exclusive property of the assessee. DJCIPL has no authority to reproduce the date in any material form to make any translation in the date or to make adaptation in the data.
We further find that the end user cannot be said to have acquired a copy right or right to use the copy right in data. A perusal of the agreement with DJCIPL shows that DJCIPL does not acquire any right in relation to the products. In our considered view, in determining whether or not a payment is for use of copyright, it is important to distinguish between ‘a payment for right to use the copy right in a program’ and ‘right to use the program itself’.
In the case in hand, the revenue derived by the assessee from granting limited access to its data base is akin to sale of book, wherein purchaser does not acquire any right to exploit the
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underlying copyright. In the case of a book, the publisher of the book grants the purchaser certain rights to use the content of the book, which is copyrighted. The purchaser of the book does not acquire the right to exploit the underlying copyright. When the purchaser reads the book, he only enjoys the contents. Similarly, the user of the database does not receive the right to exploit the copyright in the database he only enjoys the product in the normal course of his business. 16. In the present case, the appellant is only granting access to its database to DJCIPL. In our considered opinion, the payments received cannot be said to be ‘Royalty’ in nature. The transaction under consideration is for provision of accessing database of the assessee. Hence the same cannot be considered as ‘Royalty’ under Article 12 of the India-US DTAA. We, therefore, set aside the findings of the Assessing Officer and direct the Assessing Officer to delete the impugned addition. Ground No. 1 is, accordingly, allowed.”
Identical issue has also been decided by Authority for Advance Rulings in case Dun and Bradstreet Espana S.A., IN RE (supra) confirmed by the Hon’ble Bombay High Court wherein the issue was of a Spanish Company giving permission to Indian company belonging to same group which has received request from Indian customers, to download information regarding business in Spain exclusively for Indian customers’ use and the receipt from Indian company is not a ‘royalty’ or fee for technical services as the Indian company was not an agent or PE of Spanish company. So the Indian company was held not bound to deduct the tax at source from payment to Spanish company. Issue before the Bench in the case at hand is identical.
Co-ordinate Bench of the Tribunal in case of American Chemical Society vs. DCIT (supra) also decided the identical issue arisen under section 9(1)(vi) of the Act read with Article 12(3) of India-UK DTAA that:-
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“As to whether the income earned by the assessee from Indian customer for granting online/web based access to its database and general Indian customer in consideration of subscription fees is a ‘royalty’ to be taxed in India.”
This question has been decided by the co-ordinate Bench of the Tribunal in favour of the assessee by returning following findings: � It is evident that the assessee merely accumulates and organizes information already available in public domain/publicly disclosed information, and organizes the same at one place, thereby creating a database which is accessed by its customers against payment of subscription fee termed as CAS fee. Thus, prima facie. there is no copyright or intellectual property lying with the assessee itself in relation to such information or the contents of the database. Thus, there cannot be a case that the assessee-company has transacted in the copyrights or intellectual property rights of the contents of the database of information which is merely collated and collected by it. It is abundantly clear from a perusal of some of the sample agreements with customers that what the customers get is only the right to search, view and display information (whether online or by taking a print) and reproducing or exploiting the same in any manner; and its use for purposes other than personal use is strictly prohibited. The OECD commentary referred in the assessment order brings out that the payments which are to be understood as 'royalty' in the context of information concerning industrial, commercial or scientific experience ought to be in relation to information which is undivulged and/or arises from previous experience. In other words, in order to be understood as 'royalty', the payment must be for information which is exclusively possessed or secret under the ownership of the grantor of such information. It is to be considered that the fact-situation in the instant case does not comply with the aforesaid requirement so as to be treated as a payment for 'royalty', [Para 7] � In the instant case, the assessee merely identifies, aggregates, and organizes publicly disclosed chemistry related scientific information or publishes research work submitted by scientists worldwide. Thus, this information is clearly not undivulged; rather, it is an information which is available in the public domain. Further, chemistry and related scientific information accumulated by the assessee in the form of a database is the experience of various scientists, researchers and various other persons and not that of the assessee. Thus. What the assessee collates is experience of others and provides access thereto. The database does not provide any information arising from assessee's own previous experience or knowledge of the subject. The assessee's experience lies in the creation and maintaining the database, which
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cannot be labelled as industrial or commercial or scientific in anyway in the context of the receipts in question. The Indian customers do not make payments for availing the knowledge of assessee's experience of creating/maintaining database; what they pay for is access to information that such database encompasses. By granting access to the information forming part of the database, the assessee neither shares its own experience, technique or methodology employed in evolving databases with the users, nor imparts any information relating to them.[Para 8] � In this context the Madhya Pradesh High Court in the case of ClT v. HEG Ltd. [2003] 130 Taxman 72/263 1TR 230 held that purchase of any and every type of commercial information cannot earn the status of royalty. To have the status of royalty, the infonnation transacted should have some special features, which is hitherto not available in public domain. [Para 10] � With respect to the subscription fee for the CAS division being considered as royalty for 'use' of or 'right to use1 of a copyright, a reference to the Copyright Act, 1957 is also relevant. A person can be said to have acquired a copyright or the right to use the copyright in a computer software or database (as described by the Assessing Officer), where he is authorized to do all or any of the acts as per the definition of the term 'copyright' under section 14 of the Copyright Act, 1957. However, mere access to that work or permission to use the work cannot imply that the payer is paying for use or right to use the copyright. In other words, when no copyright is acquired by the payer, question of using it or getting a right to use it does not arise. [Para 11 ] � The transfer of a copyrighted right means that the recipient has a right to commercially exploit the database/software, e.g. reproduce, duplicate or sub-license the same; such payments may be classified as royalty, but factually speaking in the present no such rights in database or search tools (SciFinder or STN) are acquired by the customers, as is evident from the terms of the sample agreement of CAS customers. It is to be considered that the transfer of any right in a copyrighted article is analogous to the rights acquired by the purchaser of a book. In the instant case, customers of the assessee only enjoy the benefits of using SciFinder and STN and do not acquire the right to exploit any copyright in these software. The difference between a copyright and a copyrighted article in context of software has been brought out very clearly by the Supreme Court of India in the case of Tata Consultancv Services v. State of Andhra Pradesh [2004] 141 Taxmann 132/271 ITR401. [Para 12] � Thus, it is to be held that the income earned by the assessee from the Indian customers with respect to the subscription fees for CAS cannot be taxed as royalty as per section 9(l)(vi) as well as article 12(3) of the Indian-USA DTAA. [Para 13]
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� The issue with respect to the PUBS division coincides with the issues on the CAS fee. The journal provided by the PUBS division do not provide any information arising from the assessee's previous experience. The assessee's experience lies in the creation of/maintaining such information online. By granting access to the journals, the assessee neither shares its experiences, techniques or methodology employed in evolving databases with the users, nor imparts any information relating to them. As is clearly evident from the sample agreements, all that the customers get is the right to search, view and display the articles (whether online or by taking a print) and reproducing or exploiting the same in any manner other than for personal use is strictly prohibited. Further, the customers do not get any rights to the journal or articles therein. They can only view the article in the journal that they have subscribed to and cannot amend or replicate or reproduce the journal. Thus, the customers are only able to access journal/articles for personal use of the information. No 'use or right to use1 in any copyright or any other intellectual property of any kind is provided by the assessee to its customers. Furthermore, the information resides on servers outside India, to which the customers have no right or access, nor do they possess control or dominion over the servers in anyway. Therefore, the question of such payments qualifying as consideration for use or right to use any equipment, whether industrial, commercial or scientific, does not arise. [Para 17] � In the instant case, what is acquired by the customer is a copyrighted article, copyrights of which continue to lie with assessee for all purposes. It is a well settled law that copyrighted article is different from a copyright, and that consideration for the former, i.e. a copyrighted article does not qualify as royalties. [Para 18] � Thus, the principles noted in the context of the income earned by way of CAS fee are squarely applicable to the subscription revenue received from customers of PUBS division for sale of journal also, and, accordingly, PUBS fee also does not qualify as 'Royalty' in terms of section 9(l)(w) as well as article 12(3) of the India-USA DTAA. [Para 19]” 16. From the discussion made in the preceding paras and following the decision rendered by the co-ordinate Bench of the Tribunal and Hon’ble High Court of Bombay, we are of the considered view that Article 13 of India-UK DTAA defined ‘royalty’ only when a payment is made for the use or the right to use a copy right of literary, artistic or scientific work. So the only
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those payments which allow payers to use/acquire a right to use a copy right in literary, artistic or scientific work are commissioned under the definition of ‘royalty’. In the instant case the assessee used to collect the information available in the public domains viz. newspaper and news wires from all over the world including global business and trade publications, targeted industry and regional publications, key websites and business blogs, market data and company professionals by collaborating with the news publishers and other sources and collates such relevant publically available news/information, then create a systematic database of news, article/information with advanced search capabilities and then subscriber of Factiva product gets access to the database, business puts a query in the search box, various news articles and other information in relation to search term, as actual public appears on the screen.
Moreover, payment received by the assessee is not for any information qua industrial scientific or commercial experience rather it is only for preparing a database on the basis of information already available in the public domain in the form of news, articles etc. Moreover, payment received by the assessee is merely for the use of database and not for the use or right to use any equipment as the subscriber and DJCIPL have no access, right or control of any manner whatsoever offer the data storage devises or the server maintained by the assessee to update its database.
In these circumstances, copy right in the news article/blog never belongs to the assessee but always belongs to the publisher or author. So the database prepared by the assessee does not have any
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copy right or intellectual copy right with the assessee and the customer only gets the right to search, view and display information. So in these circumstances findings returned by the Ld. DRP that Factiva product (access to database) is in the nature of ‘royalty’ under Article 13 of India-UK DTAA was sector specific specialized knowledge portal as the assessee has a dedicated team of 100 specialists to collate and update the data on daily basis and as such fall within the ambit of use of copy right as well as information concerning industrial scientific or commercial experience is not sustainable in the eyes of law.
Even otherwise this issue is covered in favour of the assessee in its group company case M/s. Dow Jones and Company India Pvt. Ltd. (supra). So the question framed is answered in the negative and as such the payment received by the assessee is not a ‘royalty’ under Article 13 of India-UK DTAA. So we hereby set aside the addition made by the AO under section 9(1)(vi) of the Act read with Article 13(3) of India-UK DTAA and as such ordered to be deleted the same.
Assessee company has also raised ground No.2 & 3 challenging the findings returned by the AO/ Ld. DRP that DJCIPL could constitute an agency PE of the assessee and as such amount of Rs.2,82,15,036/- is in the nature of “business profits” under Article 7 of India-UK DTAA.
We have perused the findings returned by the AO as well as Ld. DRP. AO in para 8.6 of its order has given a stray remarks that
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DJCIPL could constitute an agency PE of the assessee by returning following findings: “8.6 Alternatively, without prejudice to the above, the assessee's argument that the assessee is having business income but the same is not taxable, since the assessee is not having permanent establishment in India, is also not acceptable, in view of the facts and circumstances of the case. The assessee has granted rights for distribution of its product in the specified territory only to the Distributor. All the rights, titles and interest in the products are vested with the assessee company and not parted with. The assessee has insulated the Distributor from the loss with dynamic pricing structure of cost plus mark up of 5%. The Distributor i.e. M/s. Dow Jones Consulting India Private Limited is wholly owned indirect subsidiary of the assessee company. Considering these facts of the case, it is evident that the Distributor is falls within the concept of agency PE and therefore it is incorrect to say that the assessee does not have any permanent establishment in India.”
Since assessee has vehemently opposed the observation made by the AO that DJCIPL is an agency PE of the assessee. Moreover there is not an iota of material on record to prove this fact. So the payment received by the assessee is not taxable in India as the Revenue has failed to prove that the assessee has a PE in India in terms of Article 5 of India-UK DTAA.
In view of what has been discussed above appeal filed by the assessee is allowed.
Order pronounced in the open court on 31.05.2022.
Sd/- Sd/- (M. BALAGANESH) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 31.05.2022.
* Kishore, Sr. P.S.
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Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.