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TMI Blog2022 (3) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... see. - I.T.A. No. 7205/Mum/2018 - - - Dated:- 1-3-2022 - Shri Shamim Yahya (AM) And Ms. Kavitha Rajagopal (JM) For the Assessee : S/Shri Dhanesh Bafna, Hirali Desai Amol Mahajan For the Department : Ms. Surbhi Sharma ORDER PER SHAMIM YAHYA (AM) :- This appeal by the assessee is directed against the order of Assessing Officer dated 3.10.2018 under section 143(3) read with section 254 and 144C(13) of the I.T. Act. 2. The grounds of appeal read as under :- 1. On the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation) 1(1)(2), Mumbai ('the Learned AO') and the Dispute Resolution Panel ('the DRP') erred in holding the sum of ₹ 40,46,45,646/- as 'Royalty' under Section 9(1)(vi) of the Income-tax Act, 1961 ('the Act'). The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Royalty' u/s. 9(1)(vi) of the Act. 2. On the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in holding the sum of ₹ 40,46,45,646/- as 'Fees for Technical Services&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxes paid on regular assessment 8. On the facts and in the circumstances of the case and in law, the Learned AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. The Appellant humbly prays that the Learned AO be directed to not initiate the penalty proceedings. 3. Brief facts of the case are that this is the second round of appeal before the ITAT. In the original round ITAT has remitted the issue to the file of the Assessing Officer. Grounds of appeal before the Tribunal in the first round read as under :- 1.1 On the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation)-1(1)(2), Mumbai ('the Learned AO') and the Dispute Resolution Panel ('the DRP') erred in holding the sum of ₹ 40,46,45,646 as 'Royalty' and 'Fees for Technical Services' under Section 9(l)(vi) and 9(l)(vii) of the Income-tax Act, 1961 ('the Act'). In doing so, the Learned AO and the DRP disregarded the Contract for Provision of Computing Services entered into between the Appellant and Standard Chartered Bank, India ('SCB India') for the services re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regarding its receipts has to be re-adjudicated in the light of aforementioned retrospective amendment. The orders passed in the assessee's case by the AO, DRP and ITAT are prior to the aforementioned amendment in the Statute. Therefore, we are of the opinion that it would serve the interest of Justice if all these appeal except STA No. 6888/Mum/201 1 are restored back to the file of the AO with a direction to re-adjudicate the issues in accordance with law after giving further opportunity to the assessee and placing all the material required for adjudication of the issues raised in the present appeals. After giving opportunity the AO will readjudicate all the issues raised in the present appeals as per provisions of law. 7.1 Similar is the position in respect of Ground No. 1.3 l.4and additional ground No. 1.5 in which the assesses has raised grievances regarding rates of tax to be applied on the above receipts. All these issues on merits are to be readjudicated as per law in ITA No. 6762/Mum/2009 219/Mum/2010 being cross appeals in respect of assessment year 2006-07 against original assessment. 7.2 The other issues raised in ITA No. 6888/Mum/2011 regarding leviabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1464/Mum/2015 for the assessment year 2011-12 and restore all the issues raised by the assessee company in the ground of appeal filed with the Tribunal to the file of the A.O. for de-novo determination of all the afore-stated issues on merits in accordance with law and also keeping in view the direction given by the Tribunal hereinabove in the appeal in ITA No, 7321/Mum/2012 for the assessment year 2009-10. Needless to say, the adequate and proper opportunity of hearing will be granted by the AO to the assessee company in accordance with the principles of natural justice in accordance with law. We order accordingly. 9. In the result, the appeal filed by the assessee company in ITA No. l464/Mum/2015 for the assessment year 2011-12 is allowed for statistical purposes. Pursuant to the said remand present assessment was framed. In assessment order the Assessing Officer has noted that the ITAT in ITA No. 1464/Mum/2015 had passed an order dated 4.3.2016 in which the additions are deleted and the issue has been set aside to the file of the Assessing Officer for denova adjudication of all the issues. The Assessing Officer noted that the submissions of the assessee during assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various branches in India. Besides, the risks associated with the performance of the obligations under the Contract are assumed by the assessee in India. Therefore, a number of 'operations' are carried out by the assessee in India. The income attributable to such 'operations' is, therefore, taxable in India where it is finally adjudicated by appellate authorities that the receipts from SCB, India, do not constitute as Royalty/FTS. Since, the receipts from SCB, India, already treated as Royalty/ FTS, no attribution of profits is being made of now as the same is not required. Above order was also proposed in the draft assessment order and the appeal before the DRP. Learned DRP rejected the assessee s contention and confirmed the Assessing Officer s order. 5. Against the above order, Assessee is in appeal before us. 6. We have heard both the parties and perused the records. Learned Counsel of the assessee has submitted that as regards Ground No. 1 2 the same is covered in favour of the assessee by the ITAT s order in assessee s own case by a series of orders for seven years. He submitted that in ITA No. 237 to 240/Mum/2016 for A.Y. 2006-07 to 2012-13 vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the payment is in the nature of royalty within the scope of section 9(1)(vi), the revenue went further to hold that, since assessee has provided technical, managerial and consultancy services to SCB, therefore, it also falls in the nature of FTS‟ and for coming to this conclusion, certain clauses in the Cocteau agreement has been referred to. 19. First of all, we will deal with the issue whether the said payment falls within the realm of royalty or not. From the perusal of the various clauses of the agreement which has been referred to extensively by both the parties at the time of hearing and discussed herein above, we find that the main objective of the Cocteau agreement is to provide SCB group all across the world, processing of data through a network of computer systems in Hong Kong. In the entire agreement there is no whisper of any technology transfer or application of technology per se to SCB. This is a kind of outsourcing activity which has been given by SCB to Atos to process its data from various branches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch industrial, commercial or scientific equipment. This is borne out from the Memorandum to the Finance Bill, 2001 through which the said clause was inserted w.e.f. 1.4.2002, the relevant extract of the Memorandum has already been incorporated in the earlier part of our order and same proposition is also held by Mumbai Bench in Yahoo India P, Ltd. Vs DCIT (supra). Here, in the case of assessee, there is no income from leasing of any equipment. The legislature thus, has clearly envisaged that clause (iva) is to cover lease rent of industrial, commercial and scientific equipment in the definition of royalty and the said definition has been widened to that extent only. Thus, there is no concept of right to use of equipment here in this case. So far as applicability of Explanation 5 6 are concerned, we agree with the contentions of ld. Counsel, as reproduced above, that same would not be applicable at all in the case of assessee because, firstly, Explanation 6 enlarges the scope of process to include transmission by satellite cable, fibre optic, etc.; and secondly, Explanation 5 is applicable where consideration is of any right, property or information as defined in clauses (i) to ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to provide the data servicing service. As stated earlier, raw data fed into by SCB India are transmitted to assessee and the data so transmitted stands captured by the mainframe computers owned by assessee wherein such data are processed automatically and the final result is then transmitted to SCB India. All these transmission and processing of data is done automatically by computers and there is not much human involvement or intervention. There is no application of mind by the employees of assessee on said data because, they are processed through programmed software and neither any verification nor any analysis is carried out by the assessee on such data. The employees of the assessee-company are only required to oversee as to whether the computer systems are functioning properly and performing well and if there is any breakdown or fault, then same needs to be taken care of. The human intervention if at all is mainly for repairing and monitoring the hardware and software of the assessee which are processing the raw data of SCB and there is no human involvement or endeavour for rendering any kind of technical or consultancy services in data processing. It has been stated that be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- 8. ..... All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customized service that is rendered by the Stock Exchange. Technical services like Managerial and Consultancy service would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the latter, even if termed as a service, is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user of consumer who may approach the service provider for such assistance/service. It is only service of the above kind that according to us, should come within the ambit of the expression technical services appearing in Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the ITAT has set aside the issue for denovo consideration. Learned CIT-DR conspicuously did not mention to ITAT order itself pointing out as to where it is mentioned to be for denovo consideration. 10. Upon careful consideration in this regard, we note that the issue of taxability under section 9(1)(vi) 9(1)(vii) has been duly dealt with by the ITAT pursuant to similar remand in favour of the assessee. It is not the case that Hon'ble Jurisdictional High Court has reversed the said decision. The contention of learned Departmental Representative that the said order is erroneous is not at all sustainable, as review of the Coordinate Bench of the ITAT of the same assessee is not permissible by another Bench of the ITAT. Hence, ground No. 1 2 is allowed in favour of the assessee. 11. In ground No. 3 raised by the assessee it is urged that the issue of business connection developed by the Assessing Officer is without jurisdiction as this is a remand proceeding for specific examination and not for denovo examination. Hence, assessee s plea is that the Assessing Officer s order is not sustainable. 12. In the present case we have noted that in the remand by the ITAT the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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