Myntra Designs Pvt. Ltd. vs. Deputy Commissioner of Income Tax (International Taxation), Circle-1(2) - (Income Tax Appellate Tribunal) (03 Sep 2021)

Payments made by the non-resident company, cannot be considered as "royalty payments" and do not give rise any income chargeable in India under Indian IT Act

MANU/IL/0304/2021

Direct Taxation

The Assessee herein is an Indian company. The AO noticed that the Assessee has made payments to M/s Face Ireland Ltd towards advertisement charges. The AO held that, said payments are taxable in India primarily as 'royalty' and alternatively as FTS/FIS. Accordingly, the AO raised demand under Section 201(1) of Income Tax Act, 1961 (IT Act) @ 20% of the payments and also charged interest under Section 201(1A) of the Act in all the three years.

Learned CIT(A) has confirmed the demand raised by the AO under Section 201(1)/201(1A) of IT Act treating the Assessee as an 'assessee in default' for non-deduction of tax at source from the payments made to M/s Facebook Ireland towards advertisement fees.

The facts prevailing in the instant cases are identical with the facts of Urban Ladder Home Décor Solutions Pvt. Ltd. with regard to the payments made to Facebook, Ireland towards advertisement charges. Accordingly, in view of said decision, present Tribunal held that, the payments made by the Assessee the non-resident company Facebook, Ireland cannot be considered as "royalty payments" and hence they do not give rise any income chargeable in India under Indian Income tax Act in all the three years under consideration.

In that view of the matter, there is no requirement to deduct tax at source from those payments under Section 195 of the Act. Hence the Assessee cannot be considered as an Assessee in default under Section 201(1) of the IT Act. Accordingly, the orders passed by CIT(A) for the years under consideration are set aside and the AO is directed to delete the demand raised under Section 201(1) of the IT Act and also the consequential interest charged under Section 201(1A) of the IT Act in all the three years under consideration. Appeals of the Assessee are allowed.

Tags : ASSESSMENT DEDUCTION LEGALITY