9911796707
TMI Blog2021 (9) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment : Shri Vijay Kumar, G.Suramanyam ORDER PER SHAMIM YAHYA (AM) :- These are Assessee s appeals directed against respective orders of learned CIT(A) for respective assessment years. 2. Since the issues are common and connected and the appeals were heard together, these have been consolidated and disposed off together for the sake of convenience. 3. Since, grounds are identical, we are referring to grounds from ITA No. 6064/Mum/2019 for AY 2009-10. The grounds of appeal are read as under:- Ground No. 1: License fee for use of HR software treated as royalty under the Act / Article 12 of the India-Netherlands tax treaty 1.1 On the facts and in the circumstances of the case, the learned CIT(A) has erred on the facts and in law and erred in confirming the action of the Income Tax Officer (TDS), LTU, Mumbai('TDS Officer') in holding that the payments made by the Appellant to Shell International BV ('SIBV') towards license fee for use of HR software (pursuant to Service Order 2) constitutes 'royalty' under section 9(l)(vi) of the Act and Article 12 of India-Netherlands tax treaty. 1.2 On the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same assessee made following submissions:- In the said submissions, it is stated that assessee is in business of providing information technology enabled services in relation to scientific and technical consultancy services. SIBV is a company incorporated in and tax resident of Netherlands. It is engaged in the business of providing services globally to Shell group entities. It has neither has any control or management in India nor a business presence in India through a Permanent Establishment. Thus, as per provisions of Sec. 6(3) of the Act, SIBV is a non-resident assessee for the purposes of the Act. Assessee Company has entered into (1) Service Order 1 for Human Resource (HR) help desk support services/and (2) Service Order 2 for Shell People On-going basic charges with SIBV. 6. The AO accepted the submissions for Service Order 1. However for Service Order 2, he rejected the assessee s plea. AO concluded as under:- In the light of the above discussion, assessee's claim that it has acquired mere user right in copyrighted article and thus the payments in question are not to be considered as royalty, is not tenable. As there is transfer of copyright right betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier. But no tax had been deducted by the assessee thereon either at the time of crediting or subsequently. As the assessee has failed to discharge its obligation to deduct tax at source as stipulated u/s. 195 of the Income Tax Act, 1961, as per the provisions of Sec.201(l) of the Income Tax Act, 1961, for the Asst. Years 20O9-10 to 2012-13, I am holding the assessee as assessee in default in respect of tax not deducted at source in respect of royalty payable to the SIBV listed above. It is liable to pay to tax deductible in this regard along with the interest u/s. 201(1A). 7. Upon assessee s appeal Ld.CIT(A) confirmed the AO s action. Against the above order assessee is in appeal before us. 8. We have heard both the parties and perused the record. Ld. Counsel of the assessee submitted that issue is squarely covered by the decision of the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT 125 taxmann.com 42. 9. Per contra Ld. DR submitted that the above Hon ble Supreme Court decision may be applicable only up to AY 2009-10 to 2011-12. However, for AY 2012-13, the Hon ble Supreme Court decision is not applicable. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1.Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.] 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if I he recipient is the beneficial owner of the royalties, or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or the fees for technical services.] 3. The competent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2. [4. The term royalties as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience] 5. For purposes of this Article, fees far technical services means payments of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Ambulatory approach. The Hon Delhi High Court held as under : 50. There are therefore two sets of circumstances. First, where there exists no definition of a word in issue within the DTAA itself, regard is to be had to the laws in force in the jurisdiction of the State called upon to interpret the word. The Bombay High Court seems to accept the ambulatory approach in such a situation, thus allowing for successive amendments into the realm of laws in force . We express no opinion in this regard since it is not in issue before this Court. .................. In this regard, it is humbly submitted, that the decision of Hon. Jurisdictional High Court is binding on all the authorities below. Earlier Orders in the case of the assesse : The assessee had submitted the order of Hon. Mumbai Tribunal in ITA No 926 927/Bang/2022 dated 8.1.2018. Your honor, it is humbly submitted that this order pertains to AY 2009-10 and 2010-11 and not to post amended periods whereas the present appeal is for AY 2012-13. Decision of Hon. Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd [2021] 125 taxmann.com 42 (SC)]. Your honors may kindly see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the Id AR that in the case of the assessee that there are decisions of Mumbai Tribunal relating to post amendment period, is incorrect considering the fact that the decision as per Paper book relate to AY 2009-10 and 2010- 11. The decision of Hon. Supreme court in the case Engineering Analysis Centre of Excellence (P) Ltd [2021] 125 Taxmann.com 42(SC) is in the specific context of whether the payments would be Royalty in the pre amended period in view of the retrospective amendment of insertion of Explanation 4 to Section 9(l)(vi) of the Act and in this regard, it cannot be said that the said decision would be applicable for the post amendment period. It is humbly submitted, that the written submissions may be taken on record and may kindly be considered in the order for appeal for AY 2012-13. 10. In the rejoinder, Ld. Counsel of the assessee submitted that the decision pointed out by the Ld. DR is not at all applicable that the same has been duly considered by the Tribunal in the other cases and the same is found to be not at all tenable. The Ld. Counsel s submissions in this regard are summarized as under:- The issue in appeal relates to remittances made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision. The Amendment in the Act is retrospective and with effect from 1 April 1976 and, therefore, the decision of the Apex Court will apply even for assessment year 2012-13. The Appellant further submits that the decision of Siemens AG (supra) is not relevant in the present case. The term 'royalty' was not defined in the DTAA - the old German treaty, and, hence, reliance was placed on Article 3(2) for interpreting the term 'royalty'. However, where a term is specifically defined in the DTAA, one needs to refer to the meaning ascribed to such term as per the DTAA and not as per the Act. In case of India-Netherlands DTAA. the term royalty is defined in the DTAA and the same is required to be referred without making reference to its definition under the Act. Reliance is also placed on the decision of the Hon'ble Delhi High Court in the case of New Skies Satellite BV, wherein the court has held that unless the DTAA is amended jointly by both the parties, amendments made by the Finance Act, 2012 would not affect the meaning of the term 'royalties' as mentioned in Article 12 of India-Thai land tax treaty and India-Netherlands tax treaty. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim the treaty benefit i.e. the more beneficial provision, provisions contained in the DTAA would apply - which has also not been disputed by the Ld. DR. 11. Upon careful consideration, we find that assessee s plea that issue is squarely covered in favour of the assessee by the decision of Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT (supra) is acceptable. The Hon ble Supreme Court has elaborately examined the issue and has decided the issue in favour of the assessee. The Hon ble Supreme Court has set aside the decision of Hon ble Karnataka High Court in the case of Samsung Electronics Company Ltd. (supra), which has been relied upon by the AO. We may gainfully refer to the concluding portion of Hon ble Apex Court order in that case as under:- Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
