9911796707
TMI Blog2019 (10) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by concluding that the aforesaid receipt of Rs. 1,41,81,052 pertains to the IT related services being rendered by the appellant to HDPI during the year (in addition to Rs. 1,65,58,163 already offered to tax by the Appellant as fees for technical services from HDPI towards IT related services) 2. The learned CIT(A) erred in treating the fee for the corporate finance and advisory services i.e. referral fee of Rs. 3,12,93,500 received by the Appellant from HSBC Securities and Capital (India) Private Limited (HSCI) as taxable in the hands of the Appellant. 3. The learned CIT(A) erred in treating the protection fees of Rs. 1,33,36,290 received by the Appellant from HSBC Asset Management India Private Limited (AMIN) as taxable in the hands of the Appellant. 4. The learned CIT(A) erred in levying the consequential interest under section 234B of the Act." 3. Briefly put, the relevant facts are that the appellant assessee is a company incorporated in the UK and is engaged in the business of providing banking and financial services to individuals and commercial organizations across the world. The assessee also provides support services such as Information Technology (IT), rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Representative relied on the following judgments : i) DIT (IT) v. A P Moller Maersk AS, 392 ITR 186 (SC) ii) CIT v. Siemens Aktiongeselschaft, 310 ITR 320 (Bom) 6. The ld. DR appearing for the Revenue, on the other hand, relied upon the orders of the authorities below and submitted that the onus is on the assessee to produce all the evidences of expenditure and that this onus is clearly not discharged by the assessee. 7. We have carefully considered the rival submissions and perused the material on record. We are inclined to uphold the grievance of the assessee. The reimbursement received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark-up and the assessee has furnished sufficient evidence to demonstrate the incurring of said expenses. There is thus, no good reason to make any addition to the income in respect of the reimbursement of expenses. The action of the CIT(A), as the Learned Representative rightly contends, is based on pure surmises and conjectures. 8. Here, we would also like to refer to the judgment of A P Moller Maersk AS (supra). In that case, issue related to a foreign company engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abled the agents to co-ordinate cargos and ports of call for its fleet were findings of fact. Once these were accepted, by no stretch of imagination, could the payments made by the agents be treated as fees for technical services. The payments were in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. Neither the Assessing Officer nor the Commissioner (Appeals) had stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Once the character of the payment was in the nature of reimbursement of the expenses, it could not be income chargeable to tax. Moreover, freight income generated by the assessee in the assessment years in question was accepted as not chargeable to tax as it arose from the operation of ships in international waters in terms of article 9 of the DTAA. Once that was accepted and it was also found that the Maersk net system was an integral part of the shipping business which was allowed to be used by the agents of the assessee as well in order to enable them to discharge their role more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for introducing ABB Switzerland (client of Assessee) to HSCI. In other words, HSCI had paid a referral fee to assessee for introducing ABB to HSCI. Briefly, ABB Switzerland wanted to increase its equity stake in ABB Ltd. India through a voluntary offer and hence needed the services of a merchant banker in India. As per Section 9 of the Act, income earned by a non-resident is taxable in India if, inter-alia, the non-resident has a business connection in India and the income arises through or from the business connection; or it is in the nature of royalty or 'Fees for Technical Services'. Factually speaking, in relation to earning of the said referral fees, the assessee did not carry any activity in India. 14. The AAR in the case of Cushman & Wakefield (S) Pte Ltd., In Re (supra) which was subsequently relied upon in Real Resourcing Ltd. (supra), it has been held that the referral fee did not amount to "royalty" within the meaning of Explanation 2 to section 9(1)(vi) of the Act as there was no imparting of information regarding commercial knowledge or experience. Consideration for information concerning industrial, commercial and scientific experience could be regarded as "roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DTAA in light of the interpretation given as per Memorandum of Understanding concerning 'Fees for Technical Services' in Article 12 of India-USA DTAA. In view of the above discussion, we direct the Assessing Officer to delete the said addition sustained by the CIT(A), and assessee succeeds on this Ground of appeal. 17. Ground of appeal no. 3 relates to protection fee amounting to Rs. 1,33,36,290/- received from HSBC Asset Management India Pvt Ltd (AMIN) as 'Fees for Technical Services'. 18. Before us, Learned Representative for the assessee has explained that AMIN provides portfolio management and other services to its clients. The services by AMIN to its customers aim to provide personalized portfolio management services to select clientele depending on the investor's risk appetite, growth expectations and personal investment requirements. In August 2007, AMIN launched a close-ended capital guaranteed product in India from HSBC. In connection with this, AMIN appointed the assessee to provide services relating to provision, maintenance, calculation and publication of the dynamic portfolio methodology on each valuation day. In support of its contention about the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for AMIN to independently apply the methodology used by the assessee for providing the aforesaid services. Additionally, the assessee could be liable to pay AMIN an amount equal to the Gap Risk (as defined in the agreement) if at any time before the final valuation day, the Synthetic Portfolio level is less than the Reference Level. 21. In this context, we think it appropriate to refer to the decision rendered in the case of De Beers India Minerals Pvt. Ltd. (supra). In the said case, the Dutch company performed services using technical knowledge and expertise and it had given data, photographs and maps to assessee but they did not make available technical expertise, skill or knowledge in respect of collection or processing of data to assessee, which assessee could apply independently without assistance and undertake such survey independently to the exclusion of Dutch company in future. The Hon'ble High Court held that payment made for services in question could not be termed as 'Fees for Technical Services'. In fact, the Hon'ble Karnataka High Court in the case of De Beer India Minerals Pvt. Ltd. (supra) has succinctly adumbrated the position in the following discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
