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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 ..... his 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(2009 (1) TMI 174 - BOMBAY HIGH COURT) wherein held that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee. - ITA/6436/Mum/2016, ITA/6437/Mum/2016, ITA/6438/Mum/2016 - - - Dated:- 29-3-2017 - Sh. Rajendra, Accountant Member and C. N. Prasad, Judicial Member For The Appellant : Shri Dhanesh Bafna For The Respondent : Ms. Jasbir Chouhan PER RAJENDRA, AM Challenging the orders of the Assessing Officers(AO.s),passed, u/s. 143 (3) r.w.s.144C (13) of the Act, in pursuance of the directions of the Dispute Resolution Panel (DRP-I),Mumbai, dated 22/07/2016, the assessee has filed the appeals for the above-mentioned three AY.s (AY.s) raising various grounds of appeal. As the issues involved in all the appeals are almost similar, so we are adjudicating them by way of this consolidated order. Assessee-company is engaged in the business of providing services/facilities for processing the data through computer software and is incorporated in Hong Kong. The details of dates of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . respect of providing data processing services has already been discussed in detail in the earlier part of the order including the manner in which the entire processing activity is carried out. The Revenue ‟ s case is that first of all, it is in the nature of royalty and for coming to this conclusion, the main contention of Assessing Officer is that, firstly, the assessee is not merely providing data processing services, but also providing technology in the form of data centre, infrastructure, connectivity and application technology for its banking operations; and secondly, it has created and provided facility in the form of dedicated centres for exclusive use of SCB with disaster recovery facility and storage facility. These infrastructure facilities in the form of data centre, storage area network, disaster recovery facility and dedicated network connectivity is translated into functional process by defined service flow for the various geographic locations for various business application which would constitute process. The assessee in this process has also made available SCB use of its equipment, model, design, invention and process. After coming to the conclusion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating software owned by it to the hardware facility of assessee in Hong Kong. The assessee in Hong Kong mainly receives the data so transmitted and at this stage there is absolutely no use or right to use of any process of assessee in Hong Kong by SCB. At the second stage, the raw data transmitted by SCB is processed by the assessee in its computer system/hardware as per the requirement of SCB and at times may be using the application software owned by SCB. At this stage also, SCB does not use or have any right to use any process. At the third stage, the processed data is transmitted electronically to SCB in India and at this stage also there is no use or right to use of any process which is given or made available to SCB. Here, in this case there is absolutely no use of equipment also as alleged by the Department within the definition given in clause (iv a) of Explanation 2 to Sec. 9(1)(vi) of the Act. The said clause deals mainly with the use ‟ or right to use ‟ any industrial, commercial or scientific equipment and applies only to income from leasing of such industrial, commercial or scientific equipment. This is borne out from the Memorandum to the Finance Bill, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmula or process or trademark or any similar property by the assessee to SCB, nor there is any imparting of any information or use of any of similar nature of things. Here, the entire equipment and technology which are used for processing the data is solely for performing the activity of assessee for itself while rendering data processing services to SCB. There is absolutely no transfer of any technology, information, knowhow or any of the terms used in Explanation 2 or any kind of providing of technology in the form of data centre, infrastructure, connectivity and application technology by the assessee to SCB for SCB ‟ s banking operations. Thus, we are of the opinion that the payment made by SCB to assessee-company does not fall within the realm of royalty and hence cannot be taxed in India as royalty u/s 9(1)(vi) of the Act. 21. As regards whether the payment is in the nature of FTS or not, we find that the provision regarding services provided by assessee to SCB is mainly a standard facility and there is no constant human endeavour or human intervention which is required to provide the data servicing service. As stated earlier, raw data fed into by SCB India are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as technical services . In such a situation there is a constant human endeavour and the involvement of the human interface. On the contrary, if any technology or machine developed by human and put to operation automatically, wherein it operates without any much of human interface or intervention, then usage of such technology cannot per se be held as rendering of technical services by human skills. It is obvious that in such a situation some human involvement could be there but it is not a constant endeavour of the human in the process. Merely because certificates have been provided by the humans after a test is carried out in a Laboratory automatically by the machines, it cannot be held that services have been provided through the human skills. Even in the latest decision of Hon'ble Supreme Court in the case of M/s. Kotak Securities Ltd. (supra), (the relevant portion of which has already been reproduced above), the Hon ‟ ble Court opined that, if services are provided through fully automated standard facility, the same cannot be reckoned as rendering of technical services as contemplated u/s 9(1)(vii) of the Act. The relevant observation reads as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 3. Next two grounds deal with denying the benefit of the rate prescribed u/s. 115A of the Act. Representatives of both the sides agreed that identical issue was decided by the Tribunal in the earlier years also. We are reproducing the relevant portion of the order of the Tribunal, dated 09/ 02/2017 (supra). It reads as follow: 22. So far as the issue raised in ground no. 1.2 with regard to rate of tax u/s 115A of the Act, it has been submitted that the Assessing Officer has taken 40% of the gross amount on the ground that SCB India has no role in Cocteau agreement ‟ . The ld. Counsel pointed out that the rate applicable should be reckoned from the cut-off date of the agreement, which for the purpose of Sec. 115A of the Act is before 1.6.2005 then it is 20% and if agreement is post 1.6.2005 then it is 10%. Even, though we agree with the ld. Counsel, however this issue will become purely academic because we have already held that the amount of payment received by assessee from SCB is not taxable in India. Likewise, the issue raised in ground no. 1.3 is also being rendered infructuous. Respectfully, following the same, we hold that both the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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