Case Law Details
Plural Sight LLC Vs DCIT (ITAT Bangalore)
Introduction: In a landmark decision, the Income Tax Appellate Tribunal (ITAT) Bangalore has set a significant precedent by ruling in favor of Plural Sight LLC, a United States-based company, in its appeal against the Income Tax Department. The core of the dispute revolved around whether the receipts from the sale of online videos to Indian clients should be taxed as ‘Royalty’ under the terms of the India-USA Double Taxation Avoidance Agreement (DTAA).
Detailed Analysis: Plural Sight LLC, engaged in the business of providing online technology learning platforms, challenged the Assessing Officer’s (AO) decision to tax its subscription revenue received from Indian customers as ‘Royalty’ under both the Income-tax Act, 1961, and the India-USA DTAA. The ITAT meticulously examined the nature of the transactions, the business model of Plural Sight LLC, and the applicable provisions of the India-USA DTAA, alongside relevant case laws and statutory provisions.
The Tribunal’s decision hinged on interpreting the term ‘Royalty’ as defined in Article 12(3) of the India-USA DTAA. It evaluated whether the subscription fees received by Plural Sight LLC constituted payment for the use of or right to use copyright, patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial, or scientific experience.
The ITAT observed that Plural Sight LLC provided a non-exclusive, non-transferable license to its subscribers to access and view pre-recorded online video content. Subscribers did not receive any rights to copyright, nor were they allowed to download, store, transmit, or edit the videos. Furthermore, the Tribunal noted that the access provided was to copyrighted products, and not to any copyright per se, thus not constituting ‘Royalty’ as per the DTAA.
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