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TMI Blog2023 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (International Taxation), Range-4(2X1), Mumbai (hereinafter referred to as the "learned AO"] under section 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 AO based on the directions of the Hon'ble DRP: General 1. Erred in assessing the total income at Rs. 3,59,11,69,013 as against Rs. 8,35,360 total income as per the revised computation filed by the Appellant subsequently on being granted refund. As per return of income filed by the Appellant, the total income was NIL. 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 on cost only arrangement and the receipts were reimbursements being in the nature of cost allocation without markup and hence does not constitute 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as to Key Application Service (KAS) provider worldwide. The return of income for the A.Y.2018-19 was filed by the assessee on 29/11/2018 declaring total income of Rs.'Nil' claiming refund of Rs.7,19,25,900/-. The assessee operates in Europe, United States and Asia Pacific region. During the year ended 31/03/2018, the company provided software access and information technology support services to Indian parties. The details of Revenue earned by the company from Indian parties are as under:- Name of Payee Amount received (INR) Rate of IDS TDS Whether offered for taxation Hazira LNG Private Limited 31,634,064 10% 31,82,242 Not offered to tax in ROI as the receipts are in the nature of cost allocation. Further, the receipts are not chargeable to tax in India pursuant to India-Netherlands Double Taxation Avoidance Agreement. CGI Information Systems and Management Consultants Private Limited (Logical) 69,903,006 10% 68,23,875 IBM India Private Limited 106,190,640 10% 76,79,227 Accenture Services Private Limited 137,579,694 10% 1,02,95,018 Shell India Markets Private Limited - ('SIMPL1) 1,587,534,733 - - Wipro Limited 1,454,986,629 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices do not "make available" technical knowledge experience etc to Indian customers to fall in the purview of "fee for technical services" under Article 12(5)(a) of the DTAA. The ld. AO vide draft assessment order dated 13/05/2021 did not agree with the submissions of the assessee and held that the payment received by the assessee towards IT support services are in the nature of fee for technical services as well as in the nature of royalty both under the Act as well as under the DTAA. We find that the ld. DRP by placing reliance on its directions given in assessee's own case for A.Y.2017-18 held that the payments received by the assessee to be fee for technical services and not royalty both under the Act as well as under the DTAA. The ld. AO passed final assessment order u/s.143(3) r.w.s. 144 C(13) of the Act on 16/03/2022 pursuant to the directions of the ld. DRP by treating the receipts of the assessee as fee for technical services u/s.9(1)(vii) of the Act and also under Article 12(5)(a) and 12(5)(b) of the India Netherlands DTAA. 3.2. We find that the lower authorities had relied on the orders passed by them for A.Y.2017-18 in assessee's own case. This Tribunal for A.Y.2017-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 and 1203/Mum/ 2015, held as under: - "16. We have heard the rival submissions and also perused the material on record. The co-ordinate Bench has decided the identical issue in favour of the assessee in the assessee's own case ITA No. 2204/Mum/2014 for the A.Y. 2009-10 and ITA No. 1203/Mum/2015, for the A.Y. 2010-11 holding as under:- "7. The next issue common issue in both the appeals of assessee is as regards to taxability of payment received by assessee from IT support services which constitutes Fees for Technical Services ('FTS') and royalty under the India Netherlands Treaty DTAA. For this Assessee has raised following ground:- "Payments towards IT Support fees held in be Fees for Technical Services 'FTS') and royalty. 4. Erred in holding that payments received by the Appellant for IT support DTAA. 5. Failed to appreciate that IT support services do not 'make available any technical knowledge, skill, experience etc.to the services recipient under Article 12 of the India-Netherlands DTAA and hence not subject to tax in India. 6. Erred in alternatively holding that the receipt from IT - support services qualify as Royalty' under the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the IT agreement are in the nature of Fees for Technical Services and taxable under' the DTAA as well as under the Act. Though the ruling is technically not binding in the present case, the 7 ratio and logic followed by the Hon'ble Authority have very high degree of persuasive value. in any case, this technical know-how is of an enduring nature and has a direct nexus with the assessees business. 5.3.2 considering the above factual and leg& matrix we are of the opinion that the action of the AO in treating the above receipt is fee for technical services does not require any interference The alternate arguments on taxability of the receipt as royalty do not require any direction from the penal as we have already upheld the taxability of the services as "fees for included service". 10. The learned Counsel for the assessee explained the facts that the SITI BV is a company registered in the Netherlands. SIT! BV is in the business of providing information technology (IT') support services. During the financial year ended 31.03.2006 SIT! BV provided IT (mobile office) support services, IT helpdesk and network infrastructure related services to: Indian customers. SI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the provisions of the Actor as per the Treaty, whichever is more beneficial to SIT! By. IN view of the same, the non-taxability of the services rendered by SITI BV has been examined under the provisions of the Treaty. Article 12(4) of the Treaty defines the term. "Payments of any kind received as a consideration for the use, or the right to use, any copyright of literacy, 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.' 12. From the above, it is clear that SITI BV is engaged in providing IT services to Indian entities but does not provide any 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. Even under the agreements entered into with WIPRO and IBM, SITI BV only provides them access to the software i.e. computer Programme. SITI BV does not provide them the right to use the copyright embedded in the software. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracting State or a political sub-division of that State and (bb) 20% of the gross amount of such royalties or fees for technical services in all other cases; and ( ii) during subsequent years 15% of the gross amount of such royalties or fees for technical services; and (b) in the case of royalties within paragraph 3(b) of this Article and fees for technical services defined in paragraph 4(b) of this Article, 10% of the gross amount of such royalties and fees for technical services. 3** ** ** (4) For the purpose of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of 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 ancillary and subsidiary to the application of enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received; or b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received, or Make available technical knowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Kingdom, it was also an admitted position that the assessee did not maintain any office in India and mat it had a referral relationship with J B Boda reinsurance (Broker) Pvt. Ltd of Mumbai and that J. B. Boda was duly licenced by the Insurance Regulatory & Development Authority to transact reinsurance business in India 11 The Tribunal also observed as under. - "27. In the illustrative transaction, New India Insurance Co. Ltd in India has entered into an agreement to reinsure on an Excess Loss basis the catastrophe risk arising from its primary insurance cover in conjunction with J.B. Boda and Alsford Page and gems Ltd. (the reinsurance brokers). The terms of the agreement specifies that the assessee in conjunction with J.B. Bode are recognized as intermediary, through whom all communications relating to this agreement shall pass. The terms of the agreement further provides that the assessee will provide all the details of agreed endorsements to the reinsurers by e-mail or facsimile and shall submit the slip policy to XIS (Lloyd's processing market) for signing. The assessee will act as a claim administrator and Will submit claims advices to relevant market systems. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance brokers like the assessee and other intermediaries, based on a mutually agreed ratio which accounts for their relative contribution in the reinsurance process. 12. Based on this manner of transacting, the Tribunal came to a conclusion that the payment received by the assessee could not be regarded as 'fees for technical services'. Further, more, the Tribunal also held that such receipts would not amount to fees for technical services as the "make available" clause contained in article 13(4)(c) had not been satisfied in the facts and circumstances of the present case. 13. In our view, the Tribunal has arrived at these conclusions purely on assessing the factual matrix of the case at hand. The findings are in, the nature of factual findings and, therefore, according to us, no substantial question of law arises for our consideration, particularly, because the learned counsel for the Revenue was unable to point out any perversity in the recording of such findings. As such no substantial question of law arises for our consideration. The appeal is dismissed. There shall be. no order as to costs." 13. Further, the learned Counsel for the asséssee stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and allow this issue of assessee's appeal." 17. Since, the co-ordinate Bench has decided the identical issue in favour of the assessee in assessee's own appeals for the A.Y. 2009-10 and 2010-11 referred above, we respectfully following the order of the co-ordinate Bench allow Ground No. 5, 6 and 7 of this appeal. 10. Facts being identical, respectfully following the said decision of the Tribunal we allow Ground Nos. 5 and 6 of the assessee. 11. In so far as Ground No.2 is concerned the Ld. Counsel for the assessee submitted that since it was held in favour of the assessee on Royalty and FTS ground, the ground raised by the assessee in respect of receipts towards access to use software and IT support services does not constitute "income" may be kept open. Accordingly, this ground is kept open which may be contested as and when the situation arises. 12. The rest of the grounds are only consequential in nature and the same are restored to the file of the Assessing Officer for adjudication in accordance with law." 10. The coordinate Bench has decided the identical issue in favour of the assessee in assessee's own appeal ITA No. 7283/Mum/2018 AY 2015-16 by f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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