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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 ..... 8-19 preferred by the order against the final assessment order passed by the Assessing Officer dated 16/03/2022 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 25/02/2022 for the A.Y.2018-19. 2. The assessee has raised the following grounds of appeal:- "Based on the facts and circumstances of the case, Shell Information Technology International BV (hereinafter referred to as 'SITI BV' or 'the Appellant') craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in levying interest under section 234B of the Act without appreciating the facts and circumstances of the case. Penalty under section 270A of the Act 9. Erred in levying penalty under section 270A of the Act for misreporting/underreporting particulars of income without appreciating the facts and circumstances of the case. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal. 3. We have heard rival submissions and perused the materials available on record. The assessee is a tax resident of Netherlands. It is engaged in providing Information Technology Support Services to Shell Group entities 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee further submitted that the costs are allocated to the entities availing the services on the basis of appropriate allocation keys depending upon the nature of costs incurred. These costs are not marked up and are charged to the cost sharers on the basis of actual costs incurred by the assessee. Without prejudice to the aforesaid submissions, the assessee further submitted that income received from Indian customers in respect of services of providing IT support services, helpdesk services and network access and related services provided by the assessee do not fall in the purview of "royalty" under Article 12(5)(a) of the DTAA. It was also contended that these services 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 placi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, Ld. Counsel for the assessee submitted that these grounds relates to receipts towards IT support services held as FTS under the Act as well as the India Netherlands DTAA, and it was decided in favour of the assessee for the A.Y.2011-12 to 2014-15 by the Tribunal. Copy of the order is placed on record. 8. Ld. DR vehemently supported the orders of the authorities below. 9. We have heard the rival submissions and perused the orders of the authorities below. We have perused the order of the Tribunal for the A.Y.2010-11 to 2011-12 in ITA No. 2058/MUM/2016 dated 28.05.2018 wherein the Tribunal following the order for the A.Y. 2009-10 to 2010-11 in ITA.No. 2204/MUM/2014 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 constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on technology relating to design, engineering, manufacturing and supply of electric equipment that help in transmission and distribution of power, commissioning and servicing of tr'1nernv ion and distribution system is provided to the Indian entity Which is applied in running the business of the Applicant and the employees of the Applicant would got equipped to carry on the systems on their own without reference to the French Company, when the IT Agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the agreement on its expiry. We are of the view that the services provided under 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 op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Personnel of access to and/or use -of GI software and/or Optional Software.... 11. Further, SITI BV is company incorporated in The Netherlands. SITI BV is a tax resident of The Netherlands eligible to claim the benefits, conferred by the Double Taxation Avoidance Agreement entered into between India and The Netherlands (Treaty'). Section 90 of the Act read with the Circulars and several judicial precedents issued thereunder provide that a non-resident taxpayer is eligible to be assessed as per the provisions of the Act or as per the provisions of the relevant double taxation avoidance agreement, whichever is more beneficial. SIT! BV is a nonresident for Indian tax purposes. Accordingly, SITI BV could be assessed as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 law of that Stale; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) In the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which this Convention has effect; (aa) 15% of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Govern rent of the first mentioned Contracting 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. - 10. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article,. 13(4)'(c) of the DTAA read with section 9(1)(vii) of the said Act. While doing so the Tribunal, inter alia, found that the assessee company was an international reinsurance intermediary (broker) and was a tax resident of United Kingdom. Further, that it was a recognized broker by the financial services authority of United 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls given by the- international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final-decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer it was also pointed out that as per the normal industry practice, tea reinsurance premium net of brokerage al 10% as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation fee which is another word for brokerage is paid separately by the originating insurance in India to J.B. Bodo, the international reinsurance 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 amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Netherlands DTAC by virtue of paragraph 5 of Article 12 of the same, whereby the very same make available clause, which is to be found in the DTAA between India and USA read with the memorandum of understanding connected therewith, has been incorporated into Indo- Netherlands convention by way of amendment on 30.08.1999, notification No. S.O. 693 (E) [reported in (1999) 239 ITR (Stat) 56]. It is evident that the Authority for Advance Rulings had not considered the said amendment." 14. In view of the above, we are of the that 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 13(4)(c) of the treaty has not been satisfied. Accordingly, we delete the addition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to follow the directions issued by the learned DRP under section 144C(5) of the Act. As a result, grounds nos.6 and 7, raised in assessee's appeal are allowed. 3.3. Respectfully following the same, the ground Nos. 3-6 raised by the assessee are allowed. 4. The ground No.1 is general in nature and does not require any specific adjudication. 5. In so far as ground No.2 raised in assessee's appeal is concerned, the same is kept open by respectfully following the order passed by the Co-ordinate Bench of the Tribunal in assessee's own case stated supra. 6. The ground No.7 raised by the assessee pertains to short grant of TDS credit. The ld. AO is directed to verify the details and grant the same in accordance with law. Accordingly, the ground No.7 is allowed for statistical purposes. 7. The ground No.8 raised by the assessee is challenging chargeability of interest u/s.234B of the Act which would be consequential in nature. 8. The ground No.9 raised by the assessee is with regard to levy of penalty u/s.270A of the Act which would be premature for adjudication at this stage, hence, dismissed. 9. In the result, appeal of the assessee is partly allowed. Order pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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