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TMI Blog2020 (1) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... arly distinguishable on facts In the facts of the present case, there is no dispute that the final assessment order has been duly signed and stamped by the Assessing Officer. That being the case, there cannot be any issue regarding the validity of the final assessment order. - Decided against assessee Income accrued in India - subscription revenue received by the assessee to be in the nature of royalty and bringing it to tax in India - Article 13(6) of the India UK Tax Treaty - HELD THAT:- While deciding the dispute relating to nature of subscription charges received by the assessee in assessee s own case for the assessment years 2008 09 and 2009 10, the Tribunal in the decision reported [ 2014 (7) TMI 899 - ITAT MUMBAI] has held that the amount received by the assessee is in the nature of royalty as per Article 13(3) of the Tax Treaty. The same view was reiterated by the Tribunal wile deciding identical issue in assessee s own case for the assessment year 2012 13 in DCIT v/s Reuters Transaction Services Ltd [ 2018 (8) TMI 1129 - ITAT MUMBAI] . Therefore, in our considered opinion, the issue whether the amount received by the assessee from the customers in India is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to determine the income of the assessee at ₹ 71,94,76,823. After receiving the draft assessment order, the assessee raised objections before learned DRP, inter alia, on the ground that the draft assessment order is invalid as the copy of the draft assessment order forwarded to the assessee has not been signed and stamped by the Assessing Officer. On the basis of the aforesaid objections raised by the assessee, learned DRP called for a factual report from the Assessing Officer. The Assessing Officer submitted a report on 29th March 2017, stating therein that the office copies of the draft assessment order kept on record are duly signed and stamped by the Assessing Officer. He further stated that the copy of the draft assessment order forwarded to the assessee was inadvertently left unsigned. After considering the report of the Assessing Officer, learned DRP observed that since the office copies of the draft assessment order have been duly stamped and signed by the Assessing Officer and the copy of the draft assessment order forwarded to the assessee has remanded unsigned inadvertently, it will not vitiate the draft assessment order. Accordingly, learned DRP rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following decisions: i) Deepak Agro Food v/s State of Rajasthan Ors., Civil Appeal no.4327 28/2008, judgment dated 11.07.2008 (SC). ii) Home Finders Housing Ltd. v/s ITO, [2018] 93 taxmann.com 371 (Mad.); and iii) Home Finders Housing Ltd. v/s ITO,, [2018] 94 taxmann.com 84 (SC). 6. In rejoinder, the leaned Sr. Counsel for the assessee submitted, that once the draft assessment order is held to be invalid, it cannot be given a fresh lease of life by restoring it to the Assessing Officer to pass a fresh order. In support of such contention, the leaned Sr. Counsel relied upon the following decisions: i) Fomento Resorts and Hospitals Ltd. v/s ACIT, ITA no.63/2007, judgment dated 30.08.2019 (Bom.); and ii) Fedex Express Transportation and Supply Chain Service (I) Pvt. Ltd. v/s DCIT, ITA no.857/Mum./2016, dated 11.07.2019. 7. We have considered rival submissions and perused the material on record. We have also carefully applied our mind to the decisions cited before us. Undisputed facts are, the Assessing Officer proposed a draft assessment order in terms of section 144C(1) of the Act and forwarded a copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss which can be prejudicial to the assessee. Considered in the light of the aforesaid statutory provisions, the draft assessment order does not carry the force of a final assessment order which results in an enforceable demand against the assessee. Thus, in strict sense of the term, the draft assessment order cannot be treated as assessment order passed under section 143(3) r/w section 144C(3) or section 144C(13) of the Act. Therefore, the non signing of the draft assessment order forwarded to the assessee would not invalidate the final assessment order passed under section 143(3) r/w section 144C(13) of the Act. In any case of the matter, the report of the Assessing Officer furnished before learned DRP clearly states that the office copies of the draft assessment order has been duly stamped and signed. Therefore, non signing of the draft assessment order forwarded to the assessee would not be that fatal to invalidate the final assessment order. The decisions relied upon by the leaned Sr. Counsel are clearly distinguishable on facts. In case of Kalyan Kumar Rai (supra), the issue was relating to an assessment order passed under section 143(3) of the Act which certainly is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed, while considering identical issue in its own case in earlier assessment year, the Tribunal has held that the subscription fee received by the assessee is in the nature of royalty, hence, taxable in India. Following the decision of the Tribunal in assessee s own case, the Assessing Officer ultimately held that the subscription/revenue received by the assessee being in the nature of royalty is taxable in India and accordingly brought it to tax. Of course, while doing so, the Assessing Officer also held that the assessee has a PE in India. Be that as it may, against the aforesaid decision of the Assessing Officer, the assessee has raised objections before learned DRP. 10. Learned DRP, after considering the objections of the assessee, noticed that while deciding identical issue in assessee s own case for the assessment year 2013 14, it has followed the decision of the Tribunal in assessee s own case for the assessment years 2008 09 and 2009 10, wherein it is held that the sum received by the assessee from the customers in India is in the nature of royalty. Accordingly following the same learned DRP upheld the addition made by the Assessing Officer. On the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier decisions of the Tribunal. 14. We have considered rival submissions and perused the material on record. The first issue which arises is regarding the nature of subscription charges received by the assessee from the customers in India. While it is the claim of the assessee that it is not in the nature of royalty/fee for technical services and only a business profit, however, the Revenue has treated it as royalty. As could be seen from the facts on record, while deciding the dispute relating to nature of subscription charges received by the assessee in assessee s own case for the assessment years 2008 09 and 2009 10, the Tribunal in the decision reported in [2014] 47 taxmann.com 10 (Mum.) (Trib.), has held that the amount received by the assessee is in the nature of royalty as per Article 13(3) of the Tax Treaty. The same view was reiterated by the Tribunal wile deciding identical issue in assessee s own case for the assessment year 2012 13 in DCIT v/s Reuters Transaction Services Ltd., [2018] 96 taxmann.com 354. Therefore, in our considered opinion, the issue whether the amount received by the assessee from the customers in India is in the nature of royalty stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s determined the income in accordance with the provisions of Section 115A of the Act which is incorrect. The learned A.R., in response to a query from the Bench that is there any change in the facts during the current year when compared to the facts already considered by the Tribunal in the earlier years, fairly accepted that there is no change in the facts, but still reiterated his argument that once the assessee has not challenged existence of PE income shall be computed in accordance with the provisions of Article 13(6) of India-UK treaty and not under the provisions of the Income Tax Act. 16. However, even after taking note of the aforesaid submissions of the assessee, the Tribunal was not persuaded to accept it as it found that the decision rendered earlier in assessment years 2008 09 and 2009 10 are on identical facts and there is no difference in the factual position in the impugned assessment year. The same is the factual position in the impugned assessment year as well. The argument advanced by the assessee with regard to the applicability of Article 13(6) has already been dealt with by the Tribunal while deciding identical issue in assessee s own case for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Contract with the Indian clients for providing the necessary equipments, connection facility, installation and support service in order to avail the foreign exchange deal matching system provided by the assessee. Thus the Indian clients could avail the services of the assessee only through the equipments and connectivity provided by the assessee itself through its Indian subsidiary namely RIPL. The fee for providing the services is charged by the assessee from the Indian subscribers and actual uses of telecommunication are paid to the RIPL. The assessee is remunerating the RIPL for the services of marketing and installation of the equipment on behalf of the assessee to its clients. Thus though the equipments and other installation and connectivity are installed and provided through RIPL but the charges for the entire services and facility are paid by the clients to the assessee and not to the RIPL. The Ld. Counsel has also submitted that it is an integrated service rendered to the clients from its server situated in Geneva, therefore, there is no control or possession of the Indian clients to use or right to use the server of the assessee situated outside India. It is also cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .V. Channels were paid for using the transponder capacity of satellite and not for using any information or data to be provided to Indian customers. In the case in hand the assessee is rendering the services of providing foreign exchange deal matching system. This system facilitates the Indian subscribers i.e. Banks to deal in the foreign exchange with the other counterparts who are ready for the transaction of purchase and sale of foreign currency. Thus the role of the deal matching system is to provide a platform where both purchaser and seller find the respective match for the intended transaction of purchase and sale. Therefore, the decision of Hon ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd (supra), is not applicable in the facts of the case and particularly when the said decision is based on the finding that the transponder capacity has only a media for uplinking and downlinking of signals of the broadcaster and TV operators to be transmitted to their customers without any manipulation for improvement, whereas in the case in hand, the assessee is providing not only media but also the necessary information and data which process the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancilliary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received; or (b) are ancially and subsidiary to the application or enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received; or (c) make available technical knowledge, experience, skill knowhow or processes, or consist of the development and transfer of a technical plan or technical design. 13. The payment received by the assessee against the services rendered to the Indian Banks whether falls under the term royalty or fee for technical services has to be decided by considering the definition as provided under the treaty and the real nature of the service provided in terms of the various contracts entered into between the parties. The various terms of agreement are defined under clause 1 of the RTS agreement and some of the relevant terms are defined as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lletin board or those that allow interactivity between the users. Hardware / software and related documentation supplied by the assessee s group concern also includes the assessee s Application Programming Interface (API). All the services are rendered by the assessee on the site /office of the subscriber as per the clause 2.1 and 2.1.1 of the business principles as under: 2.1 Usage rights for information We classify services containing information into families sharing common business terms, as follows 2.1.1 Individual Services (listed here) Individual services are user-based Services priced, postitioned and packaged for users. For as long as they take the relevant service, users can: a) View, manipulate and create Derived Data fron information for their individual use: b) Store information, Manipulated Information and/or Derived Data for their individual use; c) Distribute and Redistribute limited extracts of information, Manipulated information and/or Derived Data to anyone, provided this is doen in a non systematic manner and (except for derived data) is attributed to Reuters: d) Systematically Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be used by clients/ subscribers for commercial purposes. The payments made by Indian clients/subscribers to the Assessee for use and right to use of such equipment and information for processing their request of purchase and sale of foreign exchange constitute royalty. 17.1 The nature of service rendered by the assessee includes the information concerning commercial use by the subscriber. Further the entire system of the assessee including the equipments and connectivity facility is provided at the site of the subscriber. Therefore, the assessee is providing the service in the form of information and solution to the need of the subscribers by providing the matching party. The entire system along with the matching system and connectivity involves processing of subscriber s business queries and orders and finding out the matching reply in the shape of counterpart demand or supply for execution of the transaction of purchase and sale of foreign exchange. This sytem of the assessee is available only to the subscribers who have been given the access to the information concerning commercial as well as processing the orders placed by the subscribers. It is the term of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee has submitted that even if the Indian subsidiary of the assessee constitute PE or otherwise the assessee has PE in India in that case para 6 of Article 13 of DTAA will apply and the royalty or fee for technical services is assessed to tax in terms of provisions of Article -7 or Article -15 of DTAA. We do not agree with the contention of the ld. Counsel for the Assessee because once the receipt in question has been decided as royalty in nature then there is no need to go into the question of assessee having PE in India. Para 6 of Article-13 can be pressed into service only in the case when the existence of PE of a non resident is not in dispute. In the case in hand the assessee has not come up with the claim that the services rendered to the Indian Banks are through its PE. Rather the assessee has vehemently contended that it has no PE in India. In these facts and circumstances, the provision of para 6 of Article -13 canot be invoked in case when the receipt is found as royalty in terms of Article 13(3) of the DTAA and assessee has not admitted any PE in India. 11. The facts remained unchanged. The assessee failed to bring on record any evidence to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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