Anuvu UK Operations Ltd. Vs ACIT (ITAT Delhi)
Summary: In Anuvu UK Operations Ltd. vs ACIT (ITAT Delhi), the Tribunal addressed whether payments received by the UK-based assessee for supplying in-flight entertainment (IFE) content to Indian airlines, including Air India and Jet Airways, constituted “royalty” under Section 9(1)(vi) of the Income-tax Act, 1961 or Article 13 of the India–UK DTAA, or alternatively, “fees for technical services” (FTS) under Section 9(1)(vii) and Article 13(4). The assessee, which procured copyrighted audio-visual content and prepared it in formats compatible with aircraft IFE systems, did not transfer copyright ownership or technical know-how to the airlines; integration with hardware was handled by third parties. The AO and DRP treated the receipts as royalty/FTS, invoking the Finance Act 2012 amendment, but the Tribunal, relying on the Supreme Court’s decision in Engineering Analysis Centre of Excellence (P) Ltd. vs CIT, held that mere provision of copyrighted content for limited exhibition does not constitute royalty under the DTAA, nor satisfy the “make-available” test for FTS, as no technical knowledge enabling independent replication was transferred. Consequently, the Tribunal deleted the additions treating the receipts as taxable, while upholding interest under Sections 234A, 234B, 234D as statutory and dismissing penalty proceedings under Section 270A as premature. Appeals for AYs 2018–19 to 2021–22 were thus partly allowed, granting the assessee substantive relief on royalty and FTS issues.
