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TMI Blog2017 (11) TMI 1912X X X X Extracts X X X X X X X X Extracts X X X X ..... ical payments received by the assessee, following the same, we hold that the payments received by the assessee in terms of service agreement dated 01-04- 2004 do not fall under the definition of royalty as defined in Article 12(4) of India-Netherlands DTAA. Accordingly we set aside the order passed by the assessing officer in both the years on this issue. - Decided in favour of assessee. - S.A. No. 476/Mum/2017 arising out of I.T.A. No. 6141/Mum/2017, S.A. No. 477/Mum/2017 arising out of I.T.A. No. 6140/Mum/2017, I.T.A. No. 6140/Mum/2017, I.T.A. No. 6141/Mum/2017 - - - Dated:- 10-11-2017 - S/Shri B.R. Baskaran (AM) AND Sandeep Gosain (JM) For the Assessee : Shri Nishant Thakkar Ms. Jamin Amalsadvala For the Department : Shri M.V. Rajguru ORDER Per B.R. Baskaran (AM) :- The stay applications and appeals filed by the assessee pertain to assessment year 2013-14 and 2014-15. The appeals are directed against the orders passed by the assessing officer in conformity with the directions issued by Ld Dispute Resolution Panel (DRP). 2. At the time of hearing of stay applications, the Ld A.R demonstrated that the issue contested in both the appeals are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned receipts as royalty in both the years. Aggrieved, the assessee has filed these appeals and also the stay applications. 5. We heard the parties and perused the record. We notice that the assessing officer had made identical disallowance in assessment year 2009-10 and the Tribunal, vide its order referred supra, has held that none of the services provided by the assessee in the terms of service agreement falls under the scope and ambit of royalty as defined in Article 12(4) of the DTAA. For the sake of convenience, we extract below the operative portion of the order passed by the co-ordinate bench of Tribunal in AY 2009-10:- 14. We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as material referred and relied upon before us. The first issue for our adjudication is, whether the fees received by the assessee from its Indian entity, VIOPL for management and support services is to be treated as royalty under Article 12(4) of India-Netherland-DTAA or not. The entire gamut of facts and nature of services provided by the assessee to VOIPL in the terms of service agreement dated 1st April, 2004 has already been discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle does not apply to payments for new information obtained as result of performing services at the request of the payer; In the know-how contract, one of the parties agrees to impart to the other, so that he can use them for his own account, his special knowledge and experience which remain unrevealed to the public. It is recognized that the grantor is not required to play any part himself in the application of the formulas granted to the licensee and that he does not guarantee the result thereof. This type of contract thus differs from contracts for the provision of services, in which one of the parties undertakes to use the customary skills of his calling to execute work himself for the other party. Payments made under the latter contracts generally fall under Article 7. The need to distinguish these two types of payments, i.e. payments for the supply of know-how and payments for the provision of services, sometimes gives rise to practical difficulties. The following criteria are relevant for the purpose of making that distinction: Contracts for the supply of know-how concern information of the kind described in paragraph 11 that already exists or concern the suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial or scientific experience, person must provide knowhow to the recipient, that is, a strong emphasis has been given to concept of knowhow . There is an element of imparting of knowhow to the other so that other can use or has right to use such knowhow . In case of industrial, commercial or scientific experience, if services are being rendered simply as an advisory or consultancy then it cannot be reckoned as royalty because the advisory or assistance does not connotes imparting of the skill or experience to other albeit the person is rendering the services from his own knowhow and what he is imparting is his conclusion based on his own skill and experience. The imparting of knowhow envisages that the recipient should be able to make use of such knowhow independently on its own account without recourse of the provider of the knowhow in future. For being regarded as royalty there has to be alienation or use of or right to use of any knowhow and without any transfer of any knowledge, experience or skill, it cannot be termed as royalty . In the case of GECC Asia Ltd. vs. DDIT (supra) had occasion to deal with the term information concerning to industrial, commercial or sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy; operational support; marketing; quality, health, safety and environment; estimating and engineering; and personal and organization, administration and legal services, there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific which is made available to VOIPL. For instance, information technology services are provided for use of group companies computer system where IT teams providing manual general information without providing any information or method to design or create a computer system. It is mainly kind of help desk and trouble-shooting services which are required on regular basis. For operational support system also, it mainly provides for check-list for project plans, safety work and inspection plans etc. Similarly, for marketing, the assessee provides for emarketing through its website and maintaining it, printing and publishing brochures which can be distributed to its potential clients. It also helps VOIPL to obtain the certificate of approval from the concerned organizations and obtained the contracts on the regular basis. Regarding quality health and safety environment services, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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