The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition as Warner Bros had no permanent establishment in India.
The assessee was a tax resident of the USA who engaged in export of films from the USA, produced either by its group studios or produced by third parties. The assessee entered into an agreement dated 01/04/2009 with Warner Bros. Pictures (India) Pvt. Ltd. which granted exclusive rights of distribution of cinematographic films on payment of royalty . Assessee also received Rs.39,19,73,663/- in the nature of royalty income from Warner Bros. Pictures (India) Pvt. Ltd. Assessee had claimed the aforesaid “Royalty Income” as exemption under the income tax Act 1961 as well as under India US Double Tax Avoidance Agreement (DTAA).
AF. Jahangir ,who appeared for the assessee submitted that the Dispute Resolution Panel had erred in holding that Warner Bros. Pictures (India) Pvt. Ltd. was the Dependent Agent Permanent Establishment (DAPE) of the appellant and had been continuously ignoring the directions of the tribunal in appellant’s own case since the 2010-11 Annual Year. He also contended that the Commissioner of Income Tax Appeal ( CIT(A)) had already overturned the decision of the AO holding that the income from distribution and exhibition of films were not taxable in India as the assessee had no PE in India.
Soumendu Kumar Dash, who appeared for the revenue contented that the assessee had Dependent Agent Permanent Establishment (DAPE) in India and royalty payable to the assessee by Warner Bros. Pictures India Pvt. Ltd would be taxable in India. He also submitted that the income received by the assessee from the exhibition & distribution of films in India had accrued and arose in India u/s 5(2) of the Income Tax Act1961. He further submitted that the assessee had business connection in India within the meaning of section 9(1)(i) of the Income Tax Act1961.
The Mumbai Bench of Vikas Avasthy (Judicial Member) and Gagan Goyal (Accountant Member) observed that the Indian company who had obtained the rights were acting independently and also held that the assessee could not be said to have any permanent establishment in India . The bench allowed the appeal and deleted the addition.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
