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TMI Blog2017 (4) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... Returned income Assessment Date Assessed income 2009-10 24.03.2011 Nil 01/09/2016 Rs.21,39,71,104/- 2010-11 30.09.2011 Nil 01/09/2016 Rs.42,28,05,363/- 2013-14 30.09.2011 Nil .. .. .. Rs.59,93,15,781/- ITA/6436/Mum/2016-AY.2009-10: First effective ground of appeal is about holding the sum of Rs. 21.93 crores as royalty/fees for technical services u/s. 9 (1) (vi)/9 (1)(vii) of the Act. It was brought our notice that in the earlier years, the identical issue was deliberated upon and was decided in favour of the assessee by the Tribunal(ITA.s/237-240/Mumbai/2016-AY.s2006-07to2008-09 and 2012- 13,dated 09/02/ 2017). We would like to reproduce the relevant portion of the order and it reads as under: "18. We have carefully considered the entire gamut of facts as discussed above, relevant findings given in the impugned order as well as the rival submissions made before us. The main issue involved, which has been raised vide ground no. 1.1 is, whether the payments made by Standard Chartered Bank India (SCB) to the assessee is in the nature of "royalty‟ u/s 9(1)(vi) or "fees for technical services‟. Since the assessee-company is incorporated in Hong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or not. From the perusal of the various clauses of the agreement which has been referred to extensively by both the parties at the time of hearing and discussed herein above, we find that the main objective of the "Cocteau agreement‟ is to provide SCB group all across the world, processing of data through a network of computer systems in Hong Kong. In the entire agreement there is no whisper of any technology transfer or application of technology per se to SCB. This is a kind of outsourcing activity which has been given by SCB to Atos to process its data from various branches across the country. We agree with the contention of the ld. Counsel that the reference to the various details in the agreement is merely to ensure quality, standard and various safeguards which are to be adopted in the course of processing data especially looking the volume of data required to be processed from all around the Globe. The provisions mainly contains assessee‟s responsibility to ensure adequate facility, systems and software which are located in Hong Kong and to ensure that all the hardware which is used in Hong Kong is maintained and housed in secured building space and infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of royalty and the said definition has been widened to that extent only. Thus, there is no concept of right to use of equipment here in this case. So far as applicability of Explanation 5 & 6 are concerned, we agree with the contentions of ld. Counsel, as reproduced above, that same would not be applicable at all in the case of assessee because, firstly, Explanation 6 enlarges the scope of process to include transmission by satellite cable, fibre optic, etc.; and secondly, Explanation 5 is applicable where consideration is of any right, property or information as defined in clauses (i) to (v) of Explanation 2 only and not in clause (iva) for the reason that Explanation 5 has been inserted with retrospective effect from June 1, 1976. In other words, Explanation 5 has been inserted retrospectively from the birth of Section 9(1)(vi) to clarify the intention behind the legislation. Hence, Explanation 5 is to be read with the Section 9(1)(vi) which was there on the statute as on April 1, 1976. Whereas clause (iva) to Explanation 2 was inserted from April 1, 2002. Thus, retrospective effect of clause (iva) cannot be deemed from 1.06.1976 and hence it cannot be held that Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any verification nor any analysis is carried out by the assessee on such data. The employees of the assessee-company are only required to oversee as to whether the computer systems are 44 ITA Nos. 237 to 240/MUM/2016 Atos Information Technology HK Ltd. functioning properly and performing well and if there is any breakdown or fault, then same needs to be taken care of. The human intervention if at all is mainly for repairing and monitoring the hardware and software of the assessee which are processing the raw data of SCB and there is no human involvement or endeavour for rendering any kind of technical or consultancy services in data processing. It has been stated that before us that even the faults are corrected automatically. Further, looking to the number of volume of transactions transmitted by SCB to assessee, it would be impossible for any number of humans to apply their mind and generate reports. This has been demonstrated by the ld. Counsel before us by way of an example which has been already incorporated above. Thus, the magnitude of transactions undertaken by assessee itself goes to show that the computer systems installed by the assessee in Hong Kong is standard facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feature that would distinguish / identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user of consumer who may approach the service provider for such assistance/service. It is only service of the above kind that according to us, should come within the ambit of the expression "technical services" appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act." Before us, the ld. Counsel has also pointed out that assessee is also providing similar services to other clients like Hong Kong Government and other big MNEs and there is nothing special or exclusive about the services which are being rendered to SCB. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y petition." The AO is directed to verify the claim made by the assessee and allow the credit, if due. Ground of appeal (GOA) 5 is partly allowed. 5. Next effective ground of appeal is about charging of interest u/s. 234A/B of the Act. It is found that identical issue was decided by the Tribunal in the earlier years, as under: 24. Regarding chargeability of interest u/s 234B of the Act, it is admitted that this issue is covered in favour of assessee in view of the decision of Hon'ble Bombay High Court in the case of NGC Network Asia LLC, 313 ITR 187 (Bom.). Accordingly, respectfully following the same we direct to delete the interest u/s 234B. Respectfully following the above, we direct the AO to delete interests levied under both the sections. Grounds no.6-7are allowed. 6. Ground no. 8 is admitted to be premature and accordingly, same is dismissed. ITA/6437/Mumbai/2016-AY. 2010-11: 7.Following our order for the earlier year, we decide Grounds no.1-2 in favour of the assessee. Ground no.3-4 are treated infructuous.AO is directed to verify the payment of TDS and give due credit to the assessee. Fifth ground is allowed in favour of the assessee, in part.Next three grounds ..... 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