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TMI Blog2022 (8) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act'), in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel-2, (hereinafter referred to as the Hon'ble DRP') on the following grounds, each of which are without prejudice to one another: On the facts and circumstances of the case and in law, the learned AU based on the directions of the Hon'ble DRP: General 1. Erred in assessing the total income at Rs. 2,50,20,50,998 as against Rs. NIL total income offered in return of income by the Appellant; Receipts towards IT support services does not constitute income' 2. Erred in holding that the payments received by the Appellant constitutes 'income' without appreciating that the appellant works only on cost - only arrangement and the receipts were reimbursements being in the nature of cost allocation without markup and hence does not constitute income' under section 2(24) of the Act; Receipts towards IT Support services held as 'Fees for Technical Services' ('FTS') under the Act as well as India-Netherlands DTAA 3. Erred in holding that payments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany registered in Netherlands. It operates in Europe, United States of America and Asia Pacific Region. For the year under consideration, the assessee filed its return of income on 29.11.2017, declaring total income at Rs.Nil, and claimed a refund of Rs.3,87,30,040. The assessee, inter-alia, is engaged in providing IT support services such as Help Desk Services and Network Infrastructure Services like troubleshooting, workstation support, WAN Services, LAN Services, Tele and Video Conference Services, Run and Maintenance Services to Shell Group entities worldwide. During the year under consideration, the assessee, inter-alia, received Rs.250,20,50,998, towards IT support services. During the course of assessment proceedings, the assessee was asked to show cause as to why the receipts towards IT support services should not be treated as Fee for Technical Services under the Act as well as under the DTAA, as has been done in orders for the assessment year 2009-10, till the assessment year 2015-16. In reply, the assessee submitted that it works on a "cost - only" arrangement i.e., the common cost incurred by the company for various support services are charged to Shell entities avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for the assessment year 2016-17. 8. On the other hand, Ms. Surabhi Sharma, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case in Shell Information Technology International, B.V. v/s DCIT, in ITA no.6638/Mum./2019, vide order dated 06.03.2020, for assessment year 2016-17, inter-alia, while holding that the payment received by the assessee towards IT support services does not constitute Fee for Technical Services under the provisions of the Act as well as under Article-12 of the DTAA, observed as under:- "9. We have perused the material on record including the decisions of the coordinate Benches of the Tribunal relied upon by the Ld. counsel. As pointed out by the Ld. counsel, the coordinate Benches have decided the identical issue in favour of the assessee in the assessee's appeals pertaining to the AYs 2011-12 to 2014-15. We further notice that Ground No. 5 and 6 of the present appeal are identical to the assessee's appeal for the AY 2015-16 and the coordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, first of all, took us through the findings of the DRP on the issue which is recorded in Para 53 as under: "5.3 Discussions and directions of DRP 5.3.1 We have considered the draft assessment order, submissions of assessee and material. We have seen that under the Master Services Agreement, the assessee SITI BV has furnished technical and advisory services to various clients based in India. The delineated services are significantly technical in nature and the resultant fees are liable to be treated as Fees for Technical Services. We are also in agreement with the AO that the Ruling of Hon'ble Authority for Advance Rulings in the case of ARE VA T&D India Limited (A TD/L) is applicable in the case of assessee. In this case, the Aar held as below: "We have noted that under- the IT Agreement, the French company is to provide support services through a central team in the area of Information Technology to the Applicant and to its other subsidiaries in the world. The provision of support services by the French company would 'itself make available, the technical knowledge/ experience to the Applicant. In Porfetti Van Melle Holdings B.V1 this Authority held the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort services SITI BV typically, provides helpdesk services-and network infrastructure services to Shell group companies comprising. Information Technology (II) support for solving any IT related problems faced by users i e any problem faced by users for accessing any application software c-mails, Computer repairs and maintenance etc. desktop laptop and workstation support, Services related to Wide area network ('WAN') arid Local area network ('LAN') for connection to the global servers', and Facilitating teleconferencing and video conferencing services Further, in the event Shell requires IT services from external service providers like WIPRO and IBM SITI BV is engaged in providing the necessary network access and related services as well. For this purpose, reference can be made to the scope of services to be rendered by SITI BV to WIPRO under the Services Agreement (copy of which is enclosed in the paper book of the assessee) and from the same Article 3 is reproduced below: Article 3 - Provision of Services SITI BV shall provide the IT Service Provider with the service." Further, 'Service' has been defined in Article I - Definitions as 'the comb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of copyright' encompasses exploitation of the rights embedded in a copyright but a mere user right is a limited right and consideration paid for Such user right cannot be regarded as consideration for use of or right to use a copyright. In view of the above, the learned Counsel for the assessee stated that the issue is fully covered by the decision of Hon'ble Delhi High Court in the case of DIT Vs Guy Carpenter & Co Ltd (2012) 20 taxmann.com 807 (DelHC), wherein India-UK DTAA was under consideration of Hon"ble Delhi High Court and Hon'ble High Court after considering the Article 13 of the DTAA of India-UK and also the facts of the assessee finally held the concept of 'make available' of technical services that such receipts would not amount to fee for technical services so as to the "concept of make available clause' contained in Article l3(4)() of the treaty has not been satisfied In the given facts and circumstances of the case Hon"ble Delhi High Court vide Para 8 to 13 held as under: - "8. Before we go on to examine the findings of the Tribunal it would be pertinent to refer to article 13 of the DTAA to the extent it is relevant :- "ARTICLE 13- Roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for services that are ancillary and subsidiary, as well as inextricable and essentially linked, to the sale of property, other than property described in paragraph 3 (a) of this Article; (b) For services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships, or aircraft in international traffic; (c) For teaching in or by educational institutions; (d) For services for the private use of the individual or individuals making the payment, or (e) TO an employee of the person making the payments --Or to any individual or partnership for professional services as defined in Article 15 (Independent personal services) of this Convention (6), (7), 7 and (9) ** ** 9. A plain reading of Article 13(4)(c) of the DTAA indicates that 'fees for technical services' would mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services which, inter alia, "makes available" technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process as discussed above, it is evident- to us that the assessee was rendering only intermediary services while acting as an intermediary/facilitator in getting the reinsurance cover for New India Insurance Co. There exists no material or basis on the basis of which, it Would be said that the assessee was rendering any kind of technical/consultancy service within the meaning of Article 13 of Indo-UK treaty. The consideration received by the assessee acting as an intermediary in the reinsurance process cannot, by any stretch of imagination, be qualified as a consideration received for rendering any financial analysis related consultancy services rating agency advisory services, risk based capital analysis etc. as alleged by the A.O." The Tribunal also noted the process by which the transactions takes place It has been pointed out that the originating insurer in India would contact J. B. Boda/ M, B. Boda for placing identified risks/ class of risks with international reinsurers. J.B. Boda, in turn, would contact one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Delhi High Court has considered as under: - "1. This writ petition is directed against the ruling dated 09.12.2011 in AAR NO.86912010 given by the Authority for Advance Rulings. One of the pleas raised by the petitioner was that the said authority had not considered the Double Taxation Avoidance Agreement between India and Portugal which is an OECD country. The learned counsel for the petitioner submitted that any agreement between India and an OECD country could be looked into while construing the IndoNetherlands Double Taxation Avoidance Convention. The learned counsel for the petitioner had also raised the plea that the memorandum of understanding concerning fees for included services referred in Article 12(4) of the Indo USA DTAA concerning the expression? Available? was also not considered by the Authority for Advance Rulings; It-was submitted that the said Authority refused to look into the IndoPortugese DTAA or the lndo USA DTAA and memorandum of understanding between India and USA on the ground that only the Indo Netherlands DTAC needed to be looked into. 2. The learned counsel for the respondent states that the Authority for Advance Rulings was correct in not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of coordinate Benches discussed above, we respectfully following the decision of the coordinate Bench, set aside the impugned order and allow ground No. 5 and 6 of the assessee's appeal." 10. The learned Departmental Representative could not show us any reason to deviate from the aforesaid order and no change in facts and in law was alleged in the relevant assessment year. The issue arising in present appeal is recurring in nature and has been decided in favour of the assessee by decisions of Co-ordinate Bench of the Tribunal for preceding assessment years. Thus, respectfully following the order passed by Co-ordinate Bench of the Tribunal in assessee's own case cited supra, which has also followed the judicial precedents in assessee's own case, the impugned addition made by treating payment received for IT support services as Fee for Technical Services under the provisions of the Act and under Article-12 of the DTAA, is deleted. As a result, ground nos.3, 4 and 5 raised in assessee's appeal are allowed. 11. Insofar as grounds nos.6 and 7, raised in assessee's appeal are concerned, the learned DRP has already held that the payment towards IT support services could not fall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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