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2024 Supreme(Online)(ITAT) 236
INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
Smt. Beena Pillai, J, Shri Laxmi Prasad Sahu, ACJ
PLURALSIGHT LLC UTAH – Appellant
Versus
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 2(1) BANGALORE – Respondent
ITA No.639/Bang/2023
For the Appellants/Petitioners: Shri Aliasgar Rampurwala, C.A
For the Respondents: Shri Praveen Karanth, CIT(DR)
Payments for subscription access do not equate to royalty; they don't confer rights over copyrights or equipment.
Headnote:(A) Income-tax Act, 1961 - Sections 143(3), 144C(13), 9(1)(vi), 234A, 234B - Assessment year 2020-21 - Appeal against final assessment order - Subscription fees received by assessee not treated as ‘royalty’ under the India-USA DTAA - Payment for access to a database does not equate to payment for use of copyright, nor does it impart industrial or commercial experience. (Paras 23 and 24)
(B) Royalty - Definition under DTAA - Consideration for subscription not for use of copyright or equipment, but mere access to content.
Facts of the case:
The appellant, a foreign company, received payments from Indian customers as subscription fees. The assessing officer treated these fees as ‘royalty’ under income-tax provisions.
Findings of Court:
The subscription revenues do not constitute ‘royalty’ as they do not grant rights to copyrights or proprietary materials. Appellate Tribunal found that payments are for access, not ownership or copyright release.
Issues: The court examined whether subscription fees amounted to payments for ‘royalty’, including rights under copyright, information experience, or equipment use.
Ratio Decidendi: The tribunal ruled that merely providing access for the purpose of viewing does not constitute payment for the use of copyrights or equipment, hence not taxable as ‘royalty’.
Result: Appeal allowed; the addition was deleted.
| Table of Content |
|---|
| 1. arguments raised regarding taxability of subscription fees. (Para 2 , 6 , 7) |
| 2. facts surrounding the subscription payment and appeal basis. (Para 3 , 4 , 5) |
| 3. court's observations regarding royalty classification under the india-usa dtaa. (Para 9 , 10 , 11) |
ORDER
This is an appeal filed by the assessee against the final order passed by the AO on 07/07/2023 in DIN No.ITBA/AST/S/143(3)/2023-24/1054219036(1) on the following grounds:
“Ground No. 1
On the facts and in the circumstances of the case and in law, the assessment order framed under section 143(3) read with section 144C( 13) of the Income tax Act 1961 ('the Act`) passed by the Learned Assessing ('learned AO) dated 7 duly 2023 incorporating the direction of Hon’ble Dispute Resolution Panel - 2, Bangalore ('Hon’bleI DRP') dated 07 June 2023 to the extent prejudicial to the Appellant, is bad in law. contrary to the facts and circumstances of the case and is liable to be quashed.
Ground No. 2
On the facts and in the circumstances of the ease and in late, the Hon'ble DRP / Learned AO erred in making an addition of INR 40,0072,256/- received from the Indian customers as subscription fees by treating it as 'Royalty' u/s 9(1)(vi) ('the Act') and Article 12(3) of the of the tax treaty between India and the. United States of America ('India-USA DTAA').
Accordingly, the Appellant prays that the aforesaid addition made by the Learned AO ought to be deleted.
Ground No. 3
3.1 On the facts and in the circumstances of the case and in law, the F3on'ble DRP erred in not quoting computer-generated DIN on the body of DRP directions u/s. 144C(5) of the Act, in contravention to Circular No. 19 of 201g issued by the CBOT, deeming such an order to be invalid and never to have been issued as per para 4 to the said Circular.
3,2. On the facts and in the circumstances of the case and in law, the final assessment order dated 7 July 2023 under section 143(3) read with section 144C(13) of the Act passed by the I,d. A0 pursuant to invalid directions passed by Hon’ble DRP, is illegal, thus making the final assessment order bad in law, null and void and liable to be quashed.
Ground No. 4
On the facts and in the circumstances of the case and in law, the Learned AO erred in levying interest under section 234A of the Act amounting to INR 2,27,154.
Ground No. 5
On the facts and in the circumstances of the case and in law, the Learned AU erred in levying interest under section 234B of the Act amountingtoINR30,28,720 Ground No. 6 On the facts and in the circumstances of the case and in law, the Learned AO has erred in initiating the penalty proceedings under section 24 read with section 'OA of the Act.
Accordingly, the Appellant prays that the penalty proceedings initiated by the Learned AO ought to be dropped.”
2. At the outset of hearing, the ld.AR of the assessee argued only groundNo.2 and rest of the grounds was not pressed, hence the ground, which were not pressed are dismissed as not pressed.
3. The brief facts of the case are that the assessee M/s Pluralsight LLC, USA, a foreign Company and non-resident filed its return of income for the asst. year 2020-21 on 12th Feb, 2021 declaring Nil income and claiming revenue of Rs.3,27,74,010/- from the TDS made by Indian company.
4. The case was selected for scrutiny and statutory notices were issued to the assessee. The assessee was issued a letter and accordingly, the assessee furnished information and the AO noted that as per letter dated 12/01/2022, the assessee had preferred an application before the Authority for Advance Ruling for ruling on the taxability of the receipts by the assessee company from the Indian clients. The assessee submitted the details on 12/01/2022, 30/08/2022, 16/09/2022 and 21/09/2022 has filed details as called for and the assessee also filed detailed submissions on the taxability of receipts by the assessee company from the Indian clients. The AO issued show cause notice on 17/09/2022 proposed to treat the consideration receipts a
