American Chemical Society Vs DCIT (ITAT Mumbai)
ITAT find that the Co–ordinate Bench of the Tribunal in assessee’s own case in American Chemical Society v/s DCIT, ITA no.6811/ Mum./2017, for the assessment year 2014-15, vide order dated 30/04/2019, held that subscription revenue received by the assessee in Chemical Extract Service and Publication division does not qualify as ‘Royalty’ in terms of section 9(1)(vi) of the Act as well as Article–12(3) of the India–USA DTAA.
ITAT further find that the Co–ordinate Bench of the Tribunal in assessee’s own case in American Chemical Society v/s DCIT, ITA no.5928/Mum./2018, for the assessment year 2015-16, vide order dated 21/08/2019, rendered similar findings following the aforesaid decision in the immediately preceding assessment year. Similarly was held in assessment years 2016-17, 2017-18, 2018-19, and 2019-20 by the Co–ordinate Bench of the Tribunal in assessee’s own case in ITA no.6952/Mum./2019, ITA no.1030/Mum./2021, ITA no.1521/Mum./2022 and ITA no.1520/Mum./2022 vide orders dated 13/12/2019, 26/10/2021, and 29/09/2022, respectively.
The learned D.R. could not show us any reason to deviate from the aforesaid decisions rendered in assessee’s own case and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided by the Co–ordinate Bench of the Tribunal in preceding assessment years. Thus, respectfully following the orders passed by the Co–ordinate Bench of the Tribunal in assessee’s own case cited supra, we uphold the plea of the assessee and delete the impugned addition in respect of the subscription fee received by the assessee under Chemical Abstract Service and Publications division. As a result, ground no.2, raised by the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the impugned final assessment order dated 12/01/2023, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (“the Act”), pursuant to the directions dated 28/12/2022 issued by the learned Dispute Resolution Panel–1, Mumbai–2, [“learned DRP”], under section 144C(5) of the Act for the assessment year 2020–21.
2. In its appeal, the assessee has raised the following grounds:–
“Appeal under section 253(1)(d) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), against the order dated 12 January 2023 (received on 19 January 2023), passed by the Deputy Commissioner of Income Tax, International Taxation Circle 1(1)(1), Mumbai (“Ld. AO”) under section 143(3) read with section 144C(13) of the Act.
1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant under section 143(3) read with section 144C(13) of the Act at INR 2,14,76,13,270 as against Nil returned income.
2. That on the facts and circumstances of the case and in law, the Ld. AO / Dispute Resolution Panel (“DRP”) have erred in holding that the receipts from Indian customers amounting to INR 2,14,76,13,270 are chargeable to tax as royalty in terms of Article 12(3) of India-US Double Tax Avoidance Agreement (“DTAA “) and under section 9(1)(vi) of the Act.
2.1 That on the facts and in the circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription charges received under Chemical Abstract Service (CAS) division and Publications (PUBS) division would be chargeable to tax in India under India-US DTAA being received for use or right to use of copyright in artistic, literary or scientific work and / or for use of information concerning industrial, commercial or scientific experience and / or for use of industrial, commercial or scientific equipment.
2.2 That on the facts and circumstances of the case and in law, the Ld. AO/ DRP have erred in holding that the subscription charges received under CAS and PUBS divisions would be chargeable to tax in India under India-US DTAA being received for use of ACS databases/software.
2.3 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in completely ignoring the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited (Civil Appeal No. 8733-8734 of 2018) while holding that the receipts of the Appellant be treated as being received for the use or right to use copyright in a literary or scientific work within the meaning of royalty as per section 9(1)(vi) of the Act as well as Article 12(3) of India-US DTAA.
2.4 That on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not following the decision passed by the Hon’ble Mumbai Bench of the Income-tax Appellate Tribunal (“ITAT”) in Appellant’s own case for immediately preceding assessment years i.e. AY 2014-15 to 2019-20, wherein on similar facts and circumstances, the Hon’ble ITAT held that the revenue from CAS and PUBS division cannot be taxed as royalty under section 9(1)(vi) of the Act as well as Article 12(3) of India-US DTAA.
3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 21,40,784 under section 234A of the Act, while the return of income was furnished by the appellant within the due date prescribed under section 139(1) of the Act.
4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest of INR 7,27,86,656 under section 2348 of the Act.”
3. Ground no.1, raised in assessee’s appeal being general in nature, hence, no separate adjudication is required.
4. The issue arising in ground no.2, raised in assessee’s appeal, is with regard to the taxability of subscription charges received by the assessee as “Royalty” under the provisions of Article–12(3) of India–USA Double Taxation Avoidance Agreement (“DTAA”) and under section 9(1)(vi) of the Act.
5. The brief facts of the case pertaining to this issue are: The assessee is a scientific society based in the United States of America that supports scientific enquiry in the field of chemistry. The assessee is the world’s largest scientific society by membership. For the year under consideration, the assessee filed its return of income on 02/11/2020 declaring a total income of Rs. Nil. During the year, the assessee received payment for providing the following products/services from outside India to Indian customers:-
