The Income Tax Appellate Tribunal (ITAT), Delhi Bench “D”, adjudicated on the appeal filed by Superbrands Ltd (UK), a company based in Gurgaon, against the order of DCIT, Circle-3(1)(2), International Taxation, New Delhi. The appeal, registered as ITA No. 332/DEL/2021, pertains to the assessment year 2016-17. The primary issue was the re-characterization of royalty income as business income.
Superbrands Ltd (UK) entered into an agreement with Superbrands India Pvt. Ltd. (SIPL) allowing SIPL the right to use the Superbrands logo. In the return of income for the assessment year 2016-17, Superbrands Ltd treated the receipts from SIPL as royalty under Article 13 of the India-UK Double Taxation Avoidance Agreement (DTAA) and computed its tax liability at 15%. The Assessing Officer, however, re-characterized the amount received as business income, arguing it was effectively connected to the company’s Permanent Establishment (PE) in India.
The dispute arose when the Assessing Officer treated the receipts from SIPL not as royalty income but as business income. This re-characterization was upheld by the Commissioner of Income Tax (Appeals)-43, New Delhi.
The grounds of appeal raised by Superbrands Ltd included:
The tribunal, comprising Shri G.S. Pannu (Hon’ble President) and Shri Saktijit Dey (Judicial Member), heard the case on 20th October 2022 and pronounced the order on 26th December 2022. The tribunal noted the following points:
The tribunal concluded that the Assessing Officer wrongly assumed jurisdiction under section 144C, rendering the assessment order invalid. Furthermore, since the assessment order was passed beyond the period of limitation, it was barred by limitation. Consequently, the tribunal quashed the assessment order and set aside the order of the Commissioner of Income Tax (Appeals).
The order pronounced on 26th December 2022 by the tribunal concluded the appeal in favor of the appellant.
Order Pronounced in the Open Court on 26/12/2022.
Signed by:
(G.S. Pannu) – President
(Saktijit Dey) – Judicial Member
Date: 26/12/2022
Kavita Arora, Sr. P.S.
Copy forwarded to:
Assistant Registrar, ITAT: Delhi Benches-Delhi
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