9911796707
TMI Blog2023 (5) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... consolidated order. ITA no.401/Mum./2018 Assessee's Appeal - A.Y. 2013-14 3. In this appeal, the assessee has raised the following grounds:- "Aggrieved by the order passed by the Deputy Commissioner of Income-tax (International Taxation)-2(3)(2) Mumbai (AO) dated 15 November 2017, under section 143(3) read with section 144C(13) of the Act, pursuant to the directions of the Hon'ble Dispute Resolution Panel-1 (DRP), Mumbai, Goldman Sachs & Co [the Appellant] respectfully submits that the learned AO has erred in passing the order on the following grounds: 1. The learned AO erred in making an addition of Rs 180,083,986 in respect of project administration costs such as courier, binding, stationery, reprogra-phics, etc. reimbursed to the Appellant by Goldman Sachs Services Private Limited (GSSPL) in connection with the Campus" being built by the latter in Bangalore on the ground that these reimbursements are in the nature of Fees for Included Services (FIS) as per Article 12 of the India- US Double Taxation Avoidance Agreement (DTAA) and makes available technical knowledge, skills, processes, etc. 2. Without prejudice to the above, the learned AO has erred in holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 115A of the Act @ 10.30%. During the year under consideration, the assessee also received certain amounts as reimbursements from its various associated enterprises in India, including GSSPL, in respect of salary, corporate service charges, and miscellaneous expenses. However, these receipts were not offered to tax on the basis that they are in the nature of reimbursement of expenses incurred on behalf of the Indian entities. In this case, pursuant to the reference made to the Transfer Pricing Officer for computation of arm"s length price in relation to the international transaction detailed in Form No.3ECB, no adjustment was proposed to the transactions reported by the assessee. During the assessment proceedings, on the basis of details filed by the assessee, it was noticed that only an amount of Rs.42,54,10,671 from the head of "Recovery of Campus Charges" has been offered to tax, even though the total amount received under the head "Campus Charges" was Rs.60,54,94,657. In response thereto, the assessee submitted that, during the year, it has earned income amounting to Rs.42,54,10,671, on account of rendering professional services to its associated enterprise, i.e. GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or process to the parties in India executing the campus project. The learned DRP further held that receipts comprising of the reimbursable items cannot be separated from other expenses for the purpose of deciding their character. In conformity with the DRP directions, the AO passed the impugned final assessment order under section 143 (3) read with section 144C(13) of the Act on this issue. Being aggrieved, the assessee is in appeal before us. 7. We have considered the submissions of both sides and perused the material on record. In the present case, the assessee is a tax resident of the United States of America and therefore is entitled to the benefit of the India-US DTAA. The assessee's associated enterprise in India, i.e. GSSPL decided to expand its premises by setting up a new campus in Bangalore, and in this connection, GSSPL entered into an agreement with a developer for the development of a new campus. With effect from 01/04/2012, the assessee entered into Campus Project Services Agreement with GSSPL, whereby the assessee agreed to render the following Campus Project Services to GSSPL:- "A. Architectural services These services include assistance with architectural se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dispute that during the year under consideration, the assessee received an amount of Rs.60,54,94,657, from GSSPL for services provided in relation to the development of the campus. Out of the aforesaid amount, Rs.42,54,10,671, was offered to tax by the assessee as FTS/FIS, and taxes were withheld by GSSPL. However, the balance amount of Rs.18,00,83,986, was not offered for taxation on the basis that the same is mere reimbursement of expenses, which were initially incurred by the assessee on behalf of GSSPL and were subsequently cross-charged to GSSPL. In this regard, the assessee furnished the following details of services before the learned DRP:- Name of the Vendor Description of the services rendered Amount (Rs.) Reasons A. Esteben Co. Inc. Document handling charges (such as archiving documents, scanning the hard copies, etc.) and printing charges. 8,68,437 Mere document handling and printing charges do not result in any transfer of knowledge, process, know-how or make available any technical knowledge to the Applicant Copy of the agreement and invoices enclosed as Annexure-4 Turner and Townsend Assistance and support in estimating, scheduling, cost engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes it make available technical knowledge, skill, know how or processes. Copy of the invoices enclosed as Annexure 8. URS Corporation Procurement services, Project controls, financial controls. 38,41,233 These services do not consist of development and transfer of any technical plan or technical design nor does it make available technical knowledge, skill, know how or processes. Copy of the invoices enclosed as Annexure 9. Tishman Speyer Project pre-development management 12,01,96,707 Not taxable as FIS under the India US tax treaty, as would not make available any technical knowledge, skill etc and deliverables do not include any technical plan or technical design. Copy of the agreement enclosed as Annexure 10. Hines Interests Limited Partnership Project Management Service, Administration Management services 4,36,115 There is no development and transfer of a technical plan or technical design. The Cantor Seinuk Group Inc. Project administration services 58,16,460 The payment pertains to services of selection of vendor and qualification of vendor evaluation. Not taxable as FIS under the India US tax treaty, as would not make available any technical knowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the balance amount of Rs.18,00,83,986 is also taxable as FTS/FIS in India. 10. It is pertinent to note that in order to determine whether the income received by the assessee falls within the ambit of FTS/FIS, it is relevant to examine the services rendered by the assessee in respect of which said income is received and whether the said service satisfies the conditions laid down under the provisions of the Act/DTAA. We are of the considered view that merely because the assessee has accepted the amount of Rs.42,54,10,671 to be in nature of FTS/FIS, the other payment for Campus Project Services cannot be treated as FTS/FIS without the examination of each and every service, particularly when the details pertaining to same are available on record. Adoption of such a broad brush approach without examination of each and every service rendered by the assessee can also lead to a situation where overall the services may appear to be not falling within the ambit of FTS/FIS but a standalone examination of each service may lead to a different conclusion. 11. Since the assessee is a tax resident of the United States of America and is entitled to the benefit of India-US DTAA, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no contrary decision by Hon'ble jurisdictional High Court or by Hon'ble Supreme Court. In De Beers India (P.) Ltd. case (supra), their Lordships posed the question, as to "what is meaning of 'make available'", to themselves, and proceeded to deal with it as follows: '......The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, is that as long as the services rendered by the assessee are managerial or consultancy services in nature, which do not involve or transmit the technology, the same cannot be brought to tax as fees for technical services." 13. Therefore, only when the recipient of the services, by virtue of the rendition of services by the assessee, is enabled to provide the same services without recourse to the service provider, the services can be said to have been "made available" to the recipient of services. A mere incidental advantage to the recipient of service is not sufficient to fall under the category of "make available". Therefore, the technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. However, in the present case, apart from merely using the terminology "made available", the Revenue has not brought any instance on record where GSSPL was shown to have used such information without de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act treated these amounts as being in the nature of Royalty under Article 12(4) of the India-US DTAA on the basis that the receipts will be for the use of information concerning the industrial, commercial scientific experience. The assessee filed detailed objections before the learned DRP against the aforesaid addition made by the AO. The DRP vide its directions issued under section 144C(5) of the Act held that the amount represents the payment made for access to various online databases, and corresponding costs have been allocated to various associated enterprises. The learned DRP further held that the nature of fee paid to these entities from whom data access right has been obtained are such that they fall within the ambit of Royalty as per the India-US DTAA, therefore the receipt of such amounts by the assessee from the end users is also liable to be treated as Royalty and therefore requires to be taxed in India. In conformity with the DRP directions, the AO passed the impugned final assessment order under section 143(3) r/w section 144C(13) of the Act on this issue. Being aggrieved, the assessee is in appeal before us. 17. We have considered the submissions of both sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, neither the assessee nor the associated enterprise has control or physical access to the server of the vendors, and therefore, the said payments cannot qualify as the use of or right to use of software nor for making available technical knowledge, experience, skill, etc. Thus, the receipt is not in the nature of Royalty in accordance with the India-US DTAA. However, the Revenue treated the receipts are for the use of information concerning industrial, commercial, scientific experience and therefore taxable as Royalty under Article 12(4) of the India US DTAA. We find that while dealing with the issue of taxability of subscription fees received from the customers for providing market research report on the pharmaceutical sector, the coordinate bench of the Tribunal in IMS AG (now known as IQVIA AG) v/s DCIT, in ITA no.6445/Mum./2016, vide order dated 13.07.2020, for the assessment year 2013-14, held that subscription fees received is not taxable as Royalty. The relevant findings of the coordinate bench of the Tribunal, in this regard, are as under:- "3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a company inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was dismissed by the Commissioner of Income-tax (Appeals). On further appeal, the Income-tax Appellate Tribunal set aside the order passed under section 195 read with section 201 of the Act by following its decision in the assessee's own case for the assessment year 2002-03 in I.T.A. No. 1773/Mum/2006 and the decision of the Authority for Advance Rulings on identical facts in the case of Dun and S.A. Bradstreet Espana In re Authority for Advance Rulings No. 615 of 2003 [2005] 272ITR 99 (AAR)), D and B Europe Authority for Advance Rulings No. 657 of 2005, dated October 27, 2005, and D and B UK Authority for Advance Rulings No. 656 of 2005, dated October 27, 2005. In all these cases the Authority for Advance Rulings held that the sale of very same business information reports by the subsidiaries of Dun and Bradstreet US in Spain, Europe and V. K. to the assessee did not attract the provisions of section 195 of the Act. Though the decision of the Authority for Advance Rulings is not binding in the present case, since the decision of the Authority for Advance Rulings relates to the very same business information reports imported by the petitioner and no fault in the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... central computer which is accessible to each constituent of the Group in each country, can a supply of such information electronically on payment of price be treated as royalty or fee for technical services ? We think not. The next case relied upon by the Commissioner is also a ruling of the Authority in Ericsson Telephone Corpn. India AB, In re [ 1997] 224ITR 2031. In that case the applicant was a company incorporated in Sweden. It provided, inter alia, services within radio and telecommunication. It entered into contracts with three Indian companies for the introduction of the cellular system of telecommunication in India and opened branch offices in India at New Delhi, Bombay and Madras. The Indian company informed applicant that while making payments under the agreement they would withhold income tax at 55% as provided in the Finance Act, 1995. According to the applicant tax deduction could not have exceeded 5,5% of the gross payments, as the net profit on the contract would not be more 10%, It was, therefore, not a case of whether the amount paid could be termed as fee for technical services. It was admittedly a case of payment of fee for technical services. For the abovem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of usage of the database of the third-party vendors, which was later on recovered by the assessee from the associated enterprises. Therefore, in view of the aforesaid decision, once the payment made for the usage of the database does not fall within the ambit of Royalty, recovery of costs by the assessee from the associated enterprises for the usage of the database cannot also result in Royalty in the hands of the assessee. In any case, in the present case, it has not been disputed by the Revenue that the payment received by the assessee is in the nature of reimbursement of cost and therefore we are of the considered opinion that the same cannot be chargeable to tax. Thus, in view of the aforesaid findings, we direct the AO to delete the addition in respect of the recovery of market data charges. As a result, ground No. 3 raised in assessee's appeal is allowed. 20. Insofar as the levy of interest under section 234A of the Act is concerned, we deem it appropriate to remand this issue to the file of the Assessing Officer for de novo adjudication after the necessary examination of the fact whether the return of income was filed by the assessee within the prescribed time under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating penalty proceedings under section 271(1)(c) of the Act. The Appellant craves leave to add, alter, vary, omit, substitute or amend any or all of the above grounds of appeal, at any time before or at the time of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law." 23. The issue arising in grounds no.1-2, raised in assessee's appeal, is pertaining to the addition in respect of project administration costs as FIS under the India-US DTAA. Since a similar issue has been decided in assessee's appeal for the assessment year 2013-14, the decision rendered therein shall apply mutatis mutandis. As a result, grounds no.1-2 raised in assessee's appeal are allowed. 24. The issue arising in grounds no.3, raised in assessee's appeal, is pertaining to addition on account of market data charges as Royalty under Article 12 of the India-US DTAA. Since a similar issue has been decided in assessee's appeal for the assessment year 2013-14, the decision rendered therein shall apply mutatis mutandis. As a result, ground no.3 raised in assessee's appeal is allowed. 25. Insofar as the levy of interest under section 234A of the Act is concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these constitute expenses allocated by the Appellant to its Associated Enterprises (AES) in India as reimbursement of expenses incurred on behalf of the AEs in India. 4. In granting short credit of withholding taxes amounting to Rs 3,50,947. 5. In levying interest under section 234A of the Act amounting to Rs 19,63,868 on the basis that Appellant has filed its return of income after the due date prescribed under the provisions of the Act. 6. In levying interest under section 2348 of the Act. 7. In not allowing brought forward short term capital loss of Rs 27,952 to be carried forward to AY 2016-17. 8. In initiating penalty proceedings under section 271(1)(c) of the Act. The Appellant craves leave to add, alter, vary, omit, substitute or amend any or all of the above grounds of appeal, at any time before or at the time of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law." 29. The issue arising in grounds no.1-2, raised in assessee's appeal, is pertaining to the addition in respect of project administration costs as FIS under the India-US DTAA. Since a similar issue has been decided in assessee's appeal for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) read with section 144C(13) of the Act, pursuant to the directions of the Hon'ble Dispute Resolution Panel-1 (West Zone) ("DRP"), Mumbai, Goldman Sachs & Co. [the Appellant] respectfully submits that the learned AO has erred in passing the order on the following grounds: 1. The learned AO erred in making an addition of Rs 43,192,502 in respect of project administration costs such as courier, binding, stationery, reprographics, etc. reimbursed to the Appellant by Goldman Sachs Services Private Limited (GSSPL) in connection with the "Campus" being built by the latter in Bangalore on the ground that these reimbursements are in the nature of Fees for Included Services (FIS) as per Article 12 of the India- US Double Taxation Avoidance Agreement (DTAA) and makes available technical knowledge, skills, processes, etc. 2. Without prejudice to the above, the learned AO has erred in holding that the Appellant is not correct in bifurcating the various components of the overall activity of rendering technical services, for the purpose of its characterization and accordingly, the entire cost of Rs 101.170,584 (including the amount of Rs 43,192,502) incurred in connection with the "Campus" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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