Case Number: ITA 120/DEL/2021
Appellant: Dow Jones & Company Inc., Mumbai
Respondent: ACIT (International Taxation) 1(2)(2), New Delhi
Assessment Year: 2016-17
Date of Filing: 2021-02-18
Order Type: Final Tribunal Order
Date of Order: 2022-09-29
Date of Pronouncement: 2022-09-29
This case involves a dispute between Dow Jones & Company Inc., a non-resident corporate entity from the USA, and the Assistant Commissioner of Income Tax (International Taxation) 1(2)(2), New Delhi. The issue at hand is the taxability of amounts received by Dow Jones & Company Inc. from Dow Jones Consulting India Pvt. Ltd. (DJCIPL) for distributing its products in the Indian market, specifically whether these amounts should be treated as royalty under the Income Tax Act and the India-USA Double Taxation Avoidance Agreement (DTAA).
Dow Jones & Company Inc. is engaged in providing information products and services, including global and financial news, through various mediums such as newspapers, websites, applications, newsletters, magazines, proprietary databases, conferences, and radio. The company entered into an agreement with DJCIPL for the distribution of its products in India.
In the assessment years 2016-17 and 2017-18, Dow Jones received payments from DJCIPL under this distribution agreement. The Assessing Officer (AO) argued that these payments should be treated as royalty under both the Income Tax Act and the provisions of the India-USA DTAA. Dow Jones contested this view, arguing that the payments were not in the nature of royalty as the transaction was on a principal-to-principal basis and did not involve the transfer of rights to use a copyright.
The AO issued a draft assessment order treating the payments as royalty. Dow Jones raised objections before the Dispute Resolution Panel (DRP), which upheld the AO’s decision based on their ruling in a similar case for the assessment year 2015-16. Consequently, the AO passed the final assessment orders.
During the tribunal hearing, Dow Jones and the Revenue agreed that the issue was similar to the one decided by the Coordinate Bench in Dow Jones & Company Inc. vs. ACIT for the assessment year 2015-16. The Coordinate Bench had ruled in favor of Dow Jones, stating that the payments received from DJCIPL were not royalty under Article 12 of the India-USA DTAA.
The tribunal noted that according to Article 12 of the DTAA, royalty includes payments for the use of, or the right to use, any copyright of a literary, artistic, or scientific work. However, payments made for acquiring the right to use the product itself, without transferring rights to the underlying copyright, do not qualify as royalty.
In this case, the tribunal found that Dow Jones retained all rights, titles, and interests in the licensed software, and DJCIPL did not acquire any rights to reproduce or adapt the data. Therefore, the payments made by DJCIPL for accessing the database were not for the use of a copyright and did not qualify as royalty.
The tribunal concluded that the payments received by Dow Jones from DJCIPL were not royalty under the India-USA DTAA. As a result, the tribunal set aside the AO’s findings and directed the AO to delete the additions made for the assessment years 2016-17 and 2017-18.
In view of this decision, the tribunal dismissed other grounds raised by Dow Jones regarding the existence of a Permanent Establishment (PE) and applicable tax rates as infructuous.
Final Judgment: The appeals by Dow Jones & Company Inc. were allowed, and the additions made by the Assessing Officer were deleted.
Order pronounced in the open court on 29th September, 2022 by Shri Saktijit Dey, Judicial Member, and Shri N.K. Billaiya, Accountant Member.
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