THE DDIT(IT)-2(1), MUMBAI v. M/S. UNIVERSAL INTERANTIONAL MUSIC BV, MUMBAI

ITA 2304/MUM/2006 | 2002-2003
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 230419914 RSA 2006
Assessee PAN AAACU5709P
Bench Mumbai
Appeal Number ITA 2304/MUM/2006
Duration Of Justice 4 year(s) 9 month(s) 13 day(s)
Appellant THE DDIT(IT)-2(1), MUMBAI
Respondent M/S. UNIVERSAL INTERANTIONAL MUSIC BV, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted L
Tribunal Order Date 31-01-2011
Date Of Final Hearing 25-01-2011
Next Hearing Date 25-01-2011
Assessment Year 2002-2003
Appeal Filed On 17-04-2006
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH MUMBAI BEFORE SHRI R.S.PADVEKAR (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.6063/M/2004 ASSESSMENT YEAR 2000-01 ITA NO.9034/M/2004 ASSESSMENT YEAR 2001-02 ITA NO.2304/M/2006 ASSESSMENT YEAR 2002-03 ITA NO.5064/M/2006 ASSESSMENT YEAR 2003-04 THE ADIT (INTERNATIONAL TAXATION)-2(1) M/S.UNIVERS AL INTERNATIONAL MUSIC BV R.NO.116 SCINDIA HOUSE C/O.PRICE WATER HOUSE T RADE WORLD BALLARD ESTATE N.M.ROAD 8 TH FLOOR C-WING KAMALA MILL MUMBAI 400 038. COMPOUND S.B.MARG MUMBAI -13. PAN : AAACU5709P APPELLANT RESPONDENT REVENUE BY : SHRI R.S.SRIVASTAVA ASSESSEE BY : SHRI ARVIND SONDE O R D E R PER RAJENDRA SINGH (AM) THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS OF CIT(A) DATED 26.5.2004 2.9.2004 31.1.2006 AND 21. 6.2006 FOR ASSESSMENT YEARS 2000-01 TO 2003-04 RESPECTIVELY. AS THE DISPU TES RAISED IN ALL THESE APPEALS ARE IDENTICAL THESE ARE BEING DISPOSED OFF BY A SINGLE CONSOLIDATED ORDER 2 FOR THE SAKE OF CONVENIENCE. THE IDENTICAL DISPUTE RAISED IS REGARDING THE RATE OF TAX APPLICABLE TO ROYALTY INCOME AND CHARGE OF INTE REST UNDER SECTION 234B. 2. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE LAWS OF NETHERLANDS HAVING ITS REGISTERED OFFICE AT GERRIT VAN DE R VEE NLAAN 4 3743 DN BAARN NETHERLANDS. THE ASSESSEE WHO WAS THE TAX RESIDENT OF NETHERLANDS WITHIN THE MEANING OF ARTICLE 4 OF DOUBLE TAXATION AVOIDANCE A GREEMENT (DTAA) SIGNED BETWEEN INDIA AND NETHERLANDS WAS ENGAGED IN THE FO LLOWING ACTIVITIES: MANUFACTURING OF AUDIO AND VISUAL RECORDINGS THE D EVELOPMENT MANUFACTURE AND EXPLOITATION OF AUDIO AND VISUAL CA RRIERS OR COMBINATIONS THEREOF IN THE BROADEST SENSE OF THE W ORD; DEVELOPMENT AND EXPLOITATION OF INTERNET ACTIVITIES ; THE ACQUISITION ALIENATION EXPLOITATION ASSIGNMEN T AND MANAGING OF COPYRIGHTS PRODUCTION AND REPRODUCTION RIGHTS LIC ENSES PATENTS AND TRADEMARKS AND ALL OTHER FORMS OF INDUSTRIAL AND IN TELLECTUAL PROPERTY RIGHTS ROYALTY RIGHTS AND SIMILAR RIGHTS AS WELL AS THE PRODUCTION AND PUBLISHING OF SHEET MUSIC MUSICAL SCORES AND SIMIL AR PUBLICATIONS; AND THE ACQUISITION MANAGING ADMINISTRATING FINANCIN G AND ALIENATING OF PARTICIPATION AND INTERESTS IN OTHER COMPANIES AND ENTERPRISES WITH A SIMILAR OR RELATED AIM. 3. DURING THE RELEVANT YEARS THE ASSESSEE HAD RECE IVED ROYALTY INCOME FROM UNIVERSAL MUSIC INDIA PVT. LTD. FOR GRA NTING COMMERCIAL EXPLOITATION RIGHTS OF MUSICAL TRACKS. THE DETAILS OF ROYALTY INCOME RECEIVED DURING THE RELEVANT YEARS WERE AS UNDER : 3 A.Y AMOUNT RS. 1. 2000-01 1 69 46 150 2. 2001-02 2 96 16 790 3. 2002-03 1 64 84 076 4. 2003-04 72 69 345 4. THE ASSESSEE OFFERED TAX @ 10% IN RESPECT OF TH E ABOVE ROYALTY INCOME IN TERMS OF THE AMENDED ARTICLE 12 OF DTAA B ETWEEN INDIA AND NETHERLANDS APPLICABLE FROM 1.4.97 AS NOTIFIED BY C BDT NOTIFICATION NO.S.O.693(E) DATED 30.8.99. THE SAID AMENDED ARTIC LE 12 IS REPRODUCED BELOW AS A READY REFERENCE : ARTICLE 12 ROYALTIES AND FEES FOR TECHNICAL SERVI CES. 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISING I N A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STA TE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER SUCH ROYALTIES AND FEES FOR TECHNICAL SERV ICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAWS OF THAT STATE BUT IF THE RECIPIENT IS THE BEN EFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES THE TAX SO CHARGED SHALL NOT EXCEED 10 PER CENT OF THE GROSS AMOUNT OF THE ROYAL TIES OR THE FEES FOR TECHNICAL SERVICES. 3. THE COMPETENT AUTHORITIES OF THE STATES SHALL BY MU TUAL AGREEMENT SETTLE THE MODE OF APPLICATION OF PARAGRAPH 2. 4. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF OR THE R IGHT TO USE ANY 4 COPYRIGHT OF LITERARY ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS ANY PATENT TRADE MARK DESIGN OR MODEL PLA N SECRET FORMULA OR PROCESS OR FOR INFORMATION CONCERNING INDUSTRIAL COMMERCIAL OR SCIENTIFIC EXPERIENCE. . . . . . . . . . . . . . . . . . . . . 5. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT TH E CONCESSIONAL RATE OF 10% IS APPLICABLE ONLY WHEN THE ASSESSEE IS BENEFICIAL OWNER OF THE ROYALTY. THE AO ASKED THE ASSESSEE TO GIVE THE DETA ILS OF PERSONS FROM WHOM THE ASSESSEE HAD ACQUIRED THE MUSICAL RIGHTS A ND ALSO COPIES OF AGREEMENTS FOR SUB LICENSING IN THE MUSICAL RIGHTS AND OTHER DETAILS. THE ASSESSEE EXPLAINED THAT THE VARIOUS COMPANIES OF TH E GROUP WERE ENGAGED IN THE BUSINESS OF MUSIC RECORDING ETC. IT WAS SUBM ITTED THAT THE COMPANY WHO ENTERED INTO CONTRACTS WITH VARIOUS ARTISTS LI KE SINGERS PERFORMER ETC WERE KNOWN AS REPERTOIRE COMPANIES WHO WERE FREE TO LICENSE THE PRODUCTS TO OTHER COMPANIES OF THE GROUP FOR EXPLOITATION. I T WAS ALSO EXPLAINED THAT AS PER GROUP POLICY FOR ANY BUSINESS OUTSIDE THE H OME TERRITORY OF THE REPERTOIRE COMPANY THE COMMERCIAL EXPLOITATION RIG HTS WERE TRANSFERRED TO OTHER GROUP COMPANY AND ON REQUEST FROM ANY UNIVERS AL GROUP COMPANY OTHER GROUP COMPANIES LICENSE THE RIGHT TO THEM TO EXPLOIT THE SAME IN THE HOME TERRITORY OF THE REQUESTING COMPANY. THUS ULTI MATELY THE GROUP COMPANIES WERE LICENSE HOLDERS TO COMMERCIALLY EXPL OIT THE RIGHTS AROUND THE WORLD. THE ASSESSEE HAD GIVEN SUCH RIGHTS OF EX PLOITATION TO UNIVERSAL MUSIC INDIA PVT. LTD. IN THE INDIAN TERRITORY FOR W HICH ROYALTY HAD BEEN RECEIVED. HOWEVER AS PER THE AO THE ASSESSEE COULD NOT FILE COPIES OF THE AGREEMENT BETWEEN THE ASSESSEE AND REPERTOIRE COMPA NIES. THE AO THEREFORE HELD THAT THE ASSESSEE WAS NOT THE BENEFI CIAL OWNER OF THE ROYALTY AND WAS ONLY A COLLECTING AGENT FOR THE REPERTOIRE COMPANIES. THE AO 5 THEREFORE DID NOT GIVE THE BENEFIT OF AMENDED ARTIC LE 12 AND LEVIED TAX @ 30%. 6. IN APPEAL THE ASSESSEE SUBMITTED THAT THE AO HA D DENIED THE BENEFIT OF CONCESSIONAL RATE OF TAX ONLY ON THE GROUND THAT TH E ASSESSEE WAS NOT THE OWNER OF BENEFICIAL RIGHTS OF ROYALTY. IT WAS EXPLA INED THAT ARTICLE 12 HAD CONFERRED THE BENEFIT ONLY ON BENEFICIAL OWNER WITH THE INTENTION TO DENY TAX TREATY BENEFITS TO INTERMEDIARIES OR CONDUIT COMPAN IES. THE ASSESSEE WAS NOT A CONDUIT AND WAS THE ULTIMATE LICENSE OWNER OF THE PRODUCTS OFFERED AND WAS OPERATING IN THIS BUSINESS IN A FULL-FLEDGE D MANNER IN THE NETHERLANDS. THE ROYALTY HAD ARISEN FROM COMMERCIAL EXPLOITATION OF MUSICAL RIGHTS OWNED/ CONTROLLED BY THE ASSESSEE ON ITS OWN . THE ASSESSEE REFERRED TO THE CERTIFICATE DATED 25.7.2003 ISSUED BY THE IN SPECTOR TAX OFFICE NETHERLANDS IN WHICH IT WAS CERTIFIED THAT (I) THE ASSESSEE WAS A TAX RESIDENT OF NETHERLANDS WITHIN THE MEANING OF ARTIC LE 4 OF THE CONVENTION BETWEEN NETHERLANDS AND INDIA FOR AVOIDANCE OF DOUB LE TAXATION. (II) THE ASSESSEE WAS THE BENEFICIAL OWNER OF THE ROYALTY IN COME RECEIVED FROM UNIVERSAL MUSIC INDIA PVT. LTD. FROM TIME TO TIME W ITHIN THE MEANING OF ARTICLE 12 OF THE TAX TREATY. THE ASSESSEE ALSO RE FERRED TO THE CIRCULAR NO.789 DATED 13.4.2000 ISSUED BY THE CBDT IN REGARD TO DOUBLE TAXATION AVOIDANCE AGREEMENTS BETWEEN INDIA AND MAURITIUS IN WHICH IT WAS STATED THAT TAX RESIDENCE CERTIFICATE ISSUED BY THE TAX AU THORITIES OF THE CONTRACTING STATE WOULD BE SUFFICIENT EVIDENCE FOR ACCEPTING TH E STATUS OF RESIDENCE IN MAURITIUS AND FOR BENEFICIAL OWNERSHIP. IT WAS ALSO POINTED OUT THAT THE HONBLE SUPREME COURT IN CASE OF UNION OF INDIA AND ANR. VS AZADI BACHHAO ANDOLLAN & ANR. (263 ITR 706) HAD UPHELD THE VALIDI TY OF THE CIRCULAR ISSUED BY THE CBDT. IT WAS ACCORDINGLY URGED THAT THE ASSE SSEE WAS THE BENEFICIAL 6 OWNER OF THE ROYALTY AND THE SAME SHOULD BE TAXED @ 10% UNDER THE PROVISIONS OF ARTICLE 12 OF DTAA. 7. THE CIT(A) WAS SATISFIED BY THE EXPLANATION GIV EN BY THE ASSESSEE. IT WAS OBSERVED BY HIM THAT DURING THE APPELLATE PR OCEEDINGS THE ASSESSEE HAD FILED COPIES OF AGREEMENTS BETWEEN THE ARTISTS AND REPERTOIRE COMPANIES AGREEMENT BETWEEN THE REPERTOIRE COMPANIES AND THE ASSESSEE; AND AGREEMENT BETWEEN UNIVERSAL INDIA AND THE ASSESSEE. FROM PERUSAL OF THE SAID AGREEMENTS CIT(A) OBSERVED THAT THE REPERTOIRE COMPANIES WERE THE ORIGINAL OWNERS OF THE MUSICAL RIGHTS. THE WORLD WI DE COMMERCIAL EXPLOITATION RIGHTS GRANTED TO THE ASSESSEE HAD BEE N SUB LICENSES BY THE ASSESSEE TO VARIOUS GROUP COMPANIES ALL OVER THE WO RLD. THE ROYALTY HAD BEEN RECEIVED FROM THE COMMERCIAL EXPLOITATION OF M USICAL TRACKS IN THE TERRITORY OF INDIA. THE ASSESSEE HAD ALSO SUBMITTED CERTIFICATE FROM THE REVENUE AUTHORITIES OF NETHERLANDS CONFIRMING THAT THE ASSESSEE WAS RESIDENT OF NETHERLANDS AND WAS THE BENEFICIAL OWNE R OF THE ROYALTY. HE THEREFORE ACCEPTED THE CLAIM OF BENEFICIAL OWNERSHI P AND DIRECTED THE AO TO LEVY TAX @ 10%. AGGRIEVED BY THE SAID DECISION THE REVENUE IS IN APPEAL IN ALL THE YEARS. 8. BEFORE US THE LEARNED DR APPEARING FOR THE REVE NUE ASSAILED THE ORDER OF CIT(A). IT WAS SUBMITTED THAT CIT(A) HAD E NTERTAINED ADDITIONAL EVIDENCE IN THE FORM OF AGREEMENTS BETWEEN THE ASSE SSEE AND REPERTOIRE COMPANIES AND OTHER AGREEMENTS AS MENTIONED IN PARA 5.4 OF CIT(A) ORDER WITHOUT ANY OPPORTUNITY TO AO WHICH WAS IN VIOLATIO N OF RULE 46A. AN ADDITIONAL GROUND IN THIS REGARD HAS ALSO BEEN FILE D. IT WAS ACCORDINGLY URGED THAT THE ORDER OF CIT(A) SHOULD BE SET ASIDE AND TH E MATTER SHOULD BE 7 RESTORED TO AO FOR CONSIDERING SUCH EVIDENCE FOR VE RIFYING THE CLAIM OF BENEFICIAL OWNERSHIP. 9. THE LEARNED AR FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT THE ASSESSEE WAS THE BENEFICIAL OWNER OF THE RECORDINGS LICENSED TO UNIVERSAL MUSIC INDIA LTD. IT WAS SUBMITTED THAT THE AGREEMEN T DATED 5.6.2000 BETWEEN THE ASSESSEE AND THE UNIVERSAL MUSIC INDIA PVT. LTD HAD BEEN FILED BEFORE THE AO ALSO (COPY AVAILABLE AT PAGE 1 OF THE PAPER BOOK FOR A.Y.2002-03) IN WHICH IT WAS CLEARLY MENTIONED THAT THE CATALOGUE OF RECORDINGS WERE OWNED AND CONTROLLED BY THE ASSESSE E AND THE SAME HAD BEEN LICENSED TO UNIVERSAL MUSIC INDIA PVT. LTD. IT WAS ALSO POINTED OUT THAT SUCH ROYALTY AGREEMENTS WERE ALSO APPROVED BY THE GOVERNMENT. IT COULD NOT THEREFORE BE SAID THAT THE ASSESSEE WAS NOT THE BENEFICIAL OWNER OF THE ROYALTY. HE ALSO REFERRED TO THE CERTIFICATE OF RES IDENCE DATED 25.07.2003 PLACED AT PAGE 62 OF THE PAPER BOOK IN WHICH THE NE THERLANDS TAX AUTHORITIES HAD CERTIFIED THAT THE ASSESSEE WAS TAX RESIDENT OF NETHERLANDS AND WAS THE BENEFICIAL OWNER OF THE ROYALTIES. SUCH CERTIFICATE ISSUED BY THE TAX AUTHORITIES OF A CONTRACTING STATE HAS TO BE AC CEPTED AND FOLLOWED IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT I N CASE OF AZADI BACHHAO ANDOLLAN (SUPRA). IT WAS ALSO POINTED OUT T HAT THOUGH THE CERTIFICATE OF RESIDENCE HAD NOT BEEN FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2000-01 THE SAME WA S AVAILABLE BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS IN ASSESSM ENT YEARS 2001-02 TO 2003-04. THEREFORE THE ASSESSEE AS WELL AS THE BUSI NESS REMAINING THE SAME AND THE INCOME ARISING IN TERMS OF THE SAME AG REEMENT WHICH WAS EFFECTIVE FROM 1.4.1999 THE CLAIM HAD TO BE ACCEPTE D IN THE EARLIER YEAR ALSO. IT WAS FURTHER SUBMITTED THAT THE AGREEMENTS FILED BEFORE THE CIT(A) 8 WERE ONLY SAMPLE AGREEMENTS AND THE CIT(A) HAD NOT DECIDED THE ISSUE ONLY BASED ON SUCH AGREEMENT. IT WAS ACCORDINGLY URGED T HAT THE CLAIM OF THE ASSESSEE HAS TO BE ACCEPTED AND THE PLEA OF THE LEA RNED DR FOR RESTORING THE MATTER TO THE AO WAS NOT JUSTIFIED. 10. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING RATE OF TAX APP LICABLE TO ROYALTY INCOME RECEIVED BY THE ASSESSEE DURING THE YEARS UNDER CON SIDERATION. THE ASSESSEE BELONGS TO UNIVERSAL GROUP OF COMPANIES WH ICH ARE ENGAGED IN MANUFACTURING OF AUDIO AND VIDEO RECORDING ACQUISI TION ALIENATION EXPLOITATION ASSIGNING AND MANAGING OF COPY RIGHTS LICENSES PATENTS ETC. AS PER THE BUSINESS MODEL BEING FOLLOWED BY THE GR OUP THE GROUP COMPANY WHICH ENTERED INTO CONTRACT WITH VARIOUS ARTISTS S INGERS ETC ARE KNOWN AS REPERTOIRE COMPANIES AND AS PER THE BUSINESS POLICY OF THE GROUP THE RIGHTS OF MUSICAL RECORDINGS ETC OF THE REPERTOIRE COMPANY ARE TRANSFERRED TO OTHER GROUP COMPANIES FOR THE PURPOSE OF EXPLOITATION IN OTHER TERRITORIES. THE ASSESSEE WHO IS ONE OF THE GROUP COMPANIES LOCATED AT NETHERLANDS HAD ACQUIRED MUSICAL RECORDING RIGHTS FROM OTHER REPERT OIRE COMPANIES AND HAD GRANTED THE COMMERCIAL EXPLOITATION RIGHTS OF SUCH MUSICAL TRACKS IN INDIA TO UNIVERSAL MUSIC INDIA PVT. LTD. FROM WHOM THE ASSES SEE IN ALL THE FOUR YEARS UNDER REFERENCE HAD RECEIVED ROYALTY. THE ASSESSEE HAD FILED COPY OF THE AGREEMENT DATED 5.6.2000 WITH UNIVERSAL MUSIC INDIA PVT. LTD. REGARDING LICENSING OF THE CATALOGUE OF RECORDINGS OWNED/CONT ROLLED BY THE ASSESSEE. AS PER THE AMENDED ARTICLE 12 OF DTAA BETWEEN INDIA AND NETHERLANDS ROYALTY ARISING IN INDIA IN CASE THE ASSESSEE IS BE NEFICIAL OWNER OF THE ROYALTY HAS TO BE TAXED AS THE CONCESSIONAL RATE OF 10%. THE AO HAD TAKEN THE VIEW THAT THE ASSESSEE HAD NOT FILED THE EVIDEN CE REGARDING OWNERSHIP 9 OF ROYALTY SUCH AS COPIES OF THE AGREEMENT WITH THE REPERTOIRE COMPANIES FROM WHOM SUCH RIGHT HAD BEEN ACQUIRED AND THEREFOR E HELD THAT THE ROYALTY HAD TO BE TAXED @ 30% AND NOT @ 10%. BEFORE CIT(A) THE ASSESSEE FILED COPIES OF SAMPLE AGREEMENTS WITH REPERTOIRE COMPANI ES REGARDING ACQUISITION OF RIGHTS. THE ASSESSEE ALSO FILED CERT IFICATE DATED 25.7.2003 FROM REVENUE AUTHORITIES OF NETHERLANDS DURING THE ASSESSMENT YEARS 2001- 02 TO 2003-04 IN WHICH IT WAS CERTIFIED THAT THE AS SESSEE WAS TAX RESIDENT OF NETHERLANDS AND THAT THE ASSESSEE WAS BENEFICIAL OW NER OF ROYALTY INCOME RECEIVED FROM UNIVERSAL MUSIC INDIA PVT. LTD. CIT(A ) HAS DECIDED THE ISSUE BASED ON SUCH MATERIAL FILED BEFORE HIM. HE HAS REF ERRED TO THE CIRCULAR NO.789 DATED 30.4.2000 ISSUED BY CBDT IN WHICH IT H AS BEEN STATED THAT TAX RESIDENCE CERTIFICATE ISSUED BY TAX AUTHORITIES OF THE CONTRACTING STATE WOULD BE SUFFICIENT EVIDENCE FOR ACCEPTING THE STAT US OF RESIDENCE AND BENEFICIAL OWNERSHIP. CIT(A) HAS THEREFORE HELD THA T THE ASSESSEE WAS THE BENEFICIAL OWNER OF THE ROYALTY AND THEREFORE TAX R ATE OF 10% HAS TO BE APPLIED. 10.1. THE REVENUE HAS OBJECTED TO THE FRESH MATERIA L FILED BEFORE THE CIT(A) IN THE FORM OF AGREEMENT WITH REPERTOIRE COM PANIES ETC AND CONSIDERATION OF THE SAME BY CIT(A) WITHOUT OPPORTU NITY TO THE DEPARTMENT AND AN ADDITIONAL GROUND AGAINST ADMISSION OF ADDIT IONAL EVIDENCE IN VIOLATION OF RULE 46A HAS ALSO BEEN FILED. WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECTS OF THE MATTER. IN OUR VIEW CIT(A) H AS NOT ACCEPTED THE CLAIM OF BENEFICIAL OWNERSHIP ONLY ON THE BASIS OF COPIES OF AGREEMENTS FILED BEFORE HIM. THE ASSESSEE HAD ALSO FILED COPY OF AGR EEMENT DATED 5.6.2000 WITH UNIVERSAL MUSIC INDIA PVT. LTD. IN ALL THE YEA RS IN WHICH IT WAS CLEARLY STATED THAT THE CATALOGUE OF RECORDINGS LICENSED BY THE ASSESSEE TO UNIVERSAL 10 MUSIC INDIA PVT. LTD. WERE OWNED AND CONTROLLED BY THE ASSESSEE. IT WAS ALSO CLEARLY MENTIONED THAT SUCH ROYALTY AGREEMENT WAS APPROVED BY THE GOVERNMENT OF INDIA ALSO. THE GOVERNMENT IS NOT EXP ECTED TO APPROVE ROYALTY AGREEMENT WITHOUT BEING SATISFIED THAT THE ASSESSEE WAS OWNER OF THE ROYALTY AS CLAIMED IN THE AGREEMENT. IN ANY CAS E THE AO HAD ANY DOUBTS AND WANTS TO VERIFY GENUINENESS OF SUCH CLAI M THE PROPER COURSE OF ACTION COULD HAVE BEEN TO MAKE A REFERENCE TO THE R EVENUE AUTHORITIES OF NETHERLANDS WHO HAD JURISDICTION OVER THE ASSESSEE. THE AO DID NOT TAKE ANY SUCH ACTION. 10.2 THE ASSESSEE HOWEVER ON ITS OWN FILED CERTIFI CATE DATED 25.7.2003 FROM THE TAX AUTHORITY OF NETHERLANDS HAVING JURISD ICTION OVER IT IN WHICH IT HAS BEEN CLEARLY STATED THAT THE ASSESSEE WAS REGUL ARLY FILING RETURN OF INCOME AND PAYING TAX THEREON INCLUDING THE ROYALTY INCOME RECEIVED FROM UNIVERSAL MUSIC INDIA PVT. LTD. IT WAS CERTIFIED T HAT THE ASSESSEE WAS TAX RESIDENT OF NETHERLANDS AND FURTHER CERTIFIED THAT THE ASSESSEE WAS BENEFICIAL OWNER OF ROYALTY INCOME RECEIVED UNIVERS AL MUSIC INDIA PVT. LTD. FROM TIME TO TIME WITHIN THE MEANING OF ARTICLE 12 OF THE CONVENTION BETWEEN NETHERLANDS AND INDIA FOR AVOIDANCE OF DOUB LE TAXATION. SUCH CERTIFICATE OF RESIDENCE ISSUED BY THE TAX AUTHORIT Y OF THE CONTRACTING STATE HAS TO BE ACCEPTED AS SUFFICIENT EVIDENCE REGARDING THE STATUS OF THE ASSESSEE AND THE BENEFICIAL OWNERSHIP IN TERMS OF T HE CIRCULAR NO.789 DATED 13.4.2000 OF CBDT. THE SAID CIRCULAR WAS SUBJECT MA TTER OF DISPUTE BEFORE THE HONBLE SUPREME COURT IN CASE OF UNION OF INDIA AND ANR. VS AZADI BACHAO ANDOLLAN (SUPRA) IN WHICH THE HONBLE SUPREM E COURT UPHELD THE VALIDITY OF CIRCULAR ISSUED BY CBDT. THE AO HAS NOT DOUBTED THE TAX RESIDENCE CERTIFICATE ISSUED BY THE NETHERLAND TAX AUTHORITY. THEREFORE IN OUR 11 VIEW BASED ON SUCH CERTIFICATE THE ASSESSEE HAS TO BE TREATED AS BENEFICIAL OWNER OF ROYALTY EVEN IF NO AGREEMENTS WITH REPERTO IRE COMPANIES REGARDING ACQUISITION OF RIGHTS BY THE ASSESSEE HAD BEEN FILE D. THEREFORE THE ADDITIONAL GROUND RAISED BY THE REVENUE IS OF NO CONSEQUENCE A S TAX RESIDENCE CERTIFICATE IS A SUFFICIENT EVIDENCE OF THE BENEFIC IAL OWNERSHIP AS PER THE CIRCULAR OF CBDT WHICH IS BINDING ON THE AO. 10.3 IT MAY HOWEVER BE PERTINENT TO POINT OUT THAT THE TAX RESIDENCE CERTIFICATE WAS FILED BY THE ASSESSEE ONLY DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ASSESSMENT FOR A.Y.2001-02 TO 2003-04 A ND SUCH CERTIFICATE WAS NOT AVAILABLE IN A.Y.2000-01. BUT ONCE THE CLAI M OF BENEFICIAL OWNERSHIP IS ACCEPTED IN ASSESSMENT YEARS 2001-02 TO 2003-04 THE SAME HAS TO BE FOLLOWED IN A.Y.2000-01 ALSO BECAUSE THE ASSESSEE A S WELL AS NATURE OF BUSINESS REMAINED THE SAME AND ROYALTY INCOME HAD A RISEN IN ALL THE FOUR YEARS IN TERMS OF THE SAME AGREEMENT DATED 5.6.2000 WHICH WAS APPLICABLE FROM 1.4.99. IT IS NOT THEREFORE NECESSARY TO RESTO RE THE APPEAL FOR ASSESSMENT YEAR 2000-01 TO THE AO FOR CONSIDERING A DDITIONAL EVIDENCE OF TAX RESIDENCE CERTIFICATE. IN VIEW OF THE FOREGOING DECISION WE SEE NO INFIRMITY IN THE ORDER OF CIT(A) IN COMING TO THE C ONCLUSION THAT THE ASSESSEE WAS THE BENEFICIAL OWNER OF THE ROYALTY AN D THE SAME HAS TO BE TAXED @ 10% FOR ALL THE YEARS. 11. THE REVENUE IN THE ASSESSMENT YEAR 2000-01 HAS ALSO RAISED A GROUND REGARDING LEVY OF INTEREST UNDER SECTION 234 B. THE AO HAD CHARGED INTEREST UNDER SECTION 234B FOR SHORTFALL IN PAYMEN T OF ADVANCE TAX. CIT(A) HAS DELETED THE LEVY OF INTEREST ON THE GROUND THAT THE ENTIRE INCOME OF THE ASSESSEE WAS TAX DEDUCTIBLE AT SOURCE AND THEREFORE THERE WILL BE NO 12 ADVANCE TAX LIABILITY UNDER THE PROVISIONS OF SECTI ON 209(1)(D). CIT(A) HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COU RT OF MADRAS IN CASE OF CIT VS MADRAS FERTILISERS LTD. (149 ITR 743) AND SE VERAL DECISIONS OF THE TRIBUNAL. AGGRIEVED BY THE SAID DECISION THE REVENU E IS IN APPEAL. 11.1 WE HAVE HEARD BOTH THE PARTIES PERUSED THE REC ORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REG ARDING LEVY OF INTEREST UNDER SECTION 234B. THERE IS NO DISPUTE THAT ENTIR E INCOME OF THE ASSESSEE WAS TAX DEDUCTIBLE AT SOURCE UNDER THE PROVISIONS O F SECTION 195 AND THEREFORE IN VIEW OF THE PROVISIONS OF SECTION 209( 1)(D) THE ADVANCE TAX PAYABLE BY THE ASSESSEE WILL BE NIL. THIS VIEW IS S UPPORTED BY SEVERAL JUDGMENTS INCLUDING THE JUDGMENT OF HONBLE JURISDI CTIONAL HIGH COURT ( 313 ITR 187). WE THEREFORE SEE NO INFIRMITY IN THE ORDE R OF CIT(A) DELETING THE INTEREST AND THE SAME IS THEREFORE UPHELD. 12. IN ASSESSMENT YEAR 2001-02 THE REVENUE HAS ALSO CHALLENGED THE DECISION OF CIT(A) HOLDING THAT THE ROYALTY INCOME AMOUNTING TO RS.49 81 636/- WAS NOT TAXABLE IN ASSESSMENT YEAR 2 001-02. THE ROYALTY INCOME AMOUNTING TO RS.49 81 636/- FOR THE LAST QUA RTER OF THE YEAR 1999 AND THE FIRST QUARTER OF YEAR 2000 HAD BEEN DECLARE D BY THE ASSESSEE IN ASSESSMENT YEAR 2000-01 ON ACCRUAL BASIS THAT THE S AME WAS ACCOUNTED IN ASSESSMENT YEAR 2001-02. THE AO HOW EVER TAX THE IN COME IN A.Y.2001-02 ALSO. IN APPEAL CIT(A) NOTED THAT HE ALREADY HELD T HE TAX OF RS.49 81 636/- IN ASSESSMENT YEAR 2000-01 HE THEREFORE DELETED THE ADDITION MADE IN ASSESSMENT YEAR 2001-02. AGGRIEVED BY WHICH THE REV ENUE IS IN APPEAL. 13 12.1 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. WE FIND THAT THE ROYALTY OF RS.49 81 636/- HAD BEEN TAXED BY THE AO IN A.Y.2000-01 AND THE DECISION OF THE AO HAS BEEN UPHELD BY CIT(A). T HE REVENUE IS NOT RAISED ANY DISPUTE IN ASSESSMENT YEAR 2000-01. THEREFORE S INCE THE INCOME HAS ALREADY BEEN TAXED IN A.Y.2000-01 THE SAME CANNOT B E TAXED AGAIN IN A.Y.2001-02. WE THEREFORE CONFIRMED THE ORDER OF CI T(A) DELETING THE ADDITION. 13. IN THE RESULT ALL THE APPEALS OF THE REVENUE AR E DISMISSED. 14. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 31.0 1.2011. SD/- SD/- ( R. S. PADVEKAR) (RAJEN DRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 31.01.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR L BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK