Section 9(1)(vi) provides for certain income by way of royalty as deemed to accrue or arise in India. Explanation 2 of said clause defines the term ‘royalty’ to, inter alia, mean the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting.
However, the said Explanation specifically excludes consideration for the sale, distribution or exhibition of cinematographic films. Due to such exclusion, such royalty income is not taxable in India even if the DTAA gives India the right to tax such royalty. There is no such exemption in the corresponding laws of partner countries leading to discrimination against Indian residents. Thus, the Finance Bill 2020 proposes to amend the definition of royalty so as not to exclude consideration for sale, distribution or exhibition of cinematographic films from its meaning. |
