Case Law Details
Citation:- Assistant Director of Income-tax Vs. M/s. Universal International Music BV (ITA No. 6063/M/2004, 9034/M/2004, ITA 2304/M/2006 & ITA 5064/M/2006) dated 31 January 2011
The taxpayer, a resident of Netherlands, belongs to Universal group of companies which are engaged in manufacturing of audio and video recording, acquisition, alienation, exploitation, assigning and managing of copy rights, licenses, patents, etc.
Under the business model, a group company would enter into contracts with various artists, singers etc. Such company was known as repertoire companies. The repertoire company was free to license the products to other group companies for exploitation. Further, as per group policy, for any business outside the home territory of the repertoire company, the commercial exploitation rights were transferred to another group company. Accordingly, repertoire company was license holders to commercially exploit the rights around the world.
The Taxpayer had acquired musical recording rights from other repertoire companies and had been granted the commercial exploitation rights of such musical tracks in India and licensed the same to an Indian company against payment of royalty.
The Taxpayer offered tax @ 10% in respect of the above royalty income received from the Indian company in accordance with Article 12 of India-Netherlands Tax Treaty (DTAA). However, the Tax Officer (TO) denied the beneficial rate, by observing that the Taxpayer was not the beneficial owner of the royalty and was only a collecting agent for the repertoire companies.
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