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TMI Blog2023 (5) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... eived 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 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. Since the assessee is a tax resident of the United States of America and is entitled to the benefit of India-US DTAA, therefore before proceeding further it is relevant to examine the relevant provisions of the DTAA for deciding the issue at hand. 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 depending upon the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. - ITA No.401/Mum./2018 And ITA no.7490/Mum./2018, ITA no.6005/Mum./2019, ITA no.1264/Mum./2021 - - - Dated:- 8-5-2023 - Shri S. Rifaur Rahman, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Madhur Agarwal For the Revenue : Shri Soumendu Kumar Dash ORDER PER SANDEEP SINGH KARHAIL, J.M. The present batch of 4 appeals has been filed by the assessee challenging the separate impugned final assessment orders passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 ( the Act ), pursuant to the directions issued by the learned Dispute Resolution Panel, Mumbai ( learned DRP ) under section 144C(5) of the Act, for the assessment years 2013-14, 2014-15, 2015-16 and 2017-18. 2. Since the appeals pertain to the same assessee involving similar issues, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consoli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal to decide this appeal according to law. 4. The issue arising in grounds no.1-2, raised in assessee s appeal, is pertaining to the addition of Rs.18,00,83,986, in respect of project administration costs as Fees for Included Services ( FIS ) under the India-US Double Taxation Avoidance Agreement ( DTAA ). 5. The brief facts of the case pertaining to this issue are: The assessee was a partnership firm incorporated in and a tax resident of the United States of America. The assessee was also registered with the Securities and Exchange Board of India as a Foreign Institutional Investor. For the year under consideration, the assessee filed its return of income on 30/11/2013 declaring a total income of Rs.42,54,10,670. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. During the year under consideration, the assessee, inter-alia, earned income amounting to Rs.42,54,10,671, in respect of professional services received from Goldman Sachs Services Private Limited ( GSSPL ), its associated enterprise in India, which was offered to tax as Fees for Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have been made to the assessee. The AO further held that the assessee has failed to give a clear-cut bifurcation of the said payments, which have been offered to tax and which have not been offered to tax. The AO also held that the assessee has not given any reasoning with proper supporting as to why the balance amount has not been offered to tax. Accordingly, the AO came to the conclusion that it cannot be gathered or understood as to how the balance amount of Rs.18,00,83,986 is not FIS when the said payment is part and parcel of the total amount. Consequently, the AO treated the amount of Rs.18,00,83,986 as FIS to be taxed @ 10%. The assessee filed detailed objections before the learned DRP against the aforesaid addition made by the AO. Vide its directions dated 29/09/2017 issued under section 144C(5) of the Act, the learned DRP rejected the objections filed by the assessee and held that the agreement and details of services provided by the assessee indicate that services being in the nature of architectural services, technological services, and project administration services clearly either related to development and transfer of technical designs or make available technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed and addressed. Procurement services: Assist in the identification and selection of the various alternative vendors for supply of various materials and services etc Project and financial controls: Assist with the identification of key parameters both financial and non financial (for example - budgets, project schedules) for implementation of the project Capital management project management: Assist with the capital management for the campus project. Scheduling: Tabulate the various steps and phases involved in the development of the project along with the associated timelines for the implementation of the respective steps Legal services: Assist with legal review of the contracts to be entered into for the campus project. 8. Further, as per the aforesaid Agreement, the assessee agreed to employ or ensure the deployment of sufficient qualified personnel to ensure proper fulfilment of the Campus Project Services. As per the aforesaid Agreement, the parties agreed that GSSPL will pay service fees, including the cost of employees engaged in providing the Campus Project Service; and the cost of services provided by 3rd parties to enable the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Article 12. Copy of the agreement and invoices enclosed as Annexure 5. Cerami and Associates Review of the acoustical design (i.e. designed to absorb or control sound criteria). 1,63,185 These services involve the provision of commercial information and do not consist of development and transfer of any technical plan or technical design. As explained in Example 7 of the MoU to the India-US DTAA, consultancy services which may involves the use of substantial technical skill and expertise but does not make available to the Indian company any technical plan or design should not be regarded as taxable under Article 12. Copy of the relevant extract of the agreement and invoices enclosed as Annexure 6. Walker Parking Consultants Review of the security consultants parking area security recommendations. 16,32,104 The vendor provided parking consultancy and review services. These services do not consist of development and transfer of any technical plan or technical design nor does it make available technical knowledge, skill, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The vendor provided services in relation to review of vertical transport tation like elevators / escalators etc. These services do not consist of development and transfer of any technical plan or technical design nor does it make available technical knowledge, skill, knowhow or processes. Blank Rome LLP Legal services 2,21,10,357 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 and is covered specifically in the case of Linklaters LLP discussed below. Copy of the invoices enclosed as Annexure 12. Syska Hennessy Telecommunication services 63,67,212 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. Others 3,58,650 29,67,290 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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, therefore before proceeding further it is relevant to examine the relevant provisions of the DTAA for deciding the issue at hand. Article 12(4) of the India USA DTAA, defines the term Fees for Included Services as under:- 4. For purposes of this Article, fees for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. 12. It is not the case of the Revenue that services rendered by the assessee are ancillary and subsidiary to the application or enjoyment of the right, property, or information as referred to in Article 12(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered made available when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as fee for technical/included services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied.' 18. .. In the case of Boston Consulting Group (supra), it was stated that advising on marketing strategies is held to be outside the scope of technical services and that as for the business of rendering strategy consulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely using the terminology made available , the Revenue has not brought any instance on record where GSSPL was shown to have used such information without depending upon the assessee. The fact that the assessee continued to receive payment for similar services, on a recurring basis, under the Campus Project Services Agreement in the subsequent assessment years also justifies the claim of the assessee that no technical knowledge, experience, skill, or know-how has been made available to GSSPL. 14. Further, even if we examine the aforesaid services, in respect of which the assessee received a total payment of Rs.18,00,83,986, we find that the same pertains to document handling and printing charges; assistance and support in estimating, scheduling, cost engineering and related control functions; review of kitchen design; review of acoustical design; review of security consultants, parking area, security recommendations; preparation of work schedule; project administration services; procurement services; project pre-development management; project management services, administrative assistance and construction management services; legal services and telecommunications services, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 sides and perused the material available on record. During the year under consideration, the assessee received an amount of USD 86,18,304 from its associated enterprises in India on the allocation of expenses pursuant to the agreement dated 01/06/2007. Since Goldman Sachs Group has operations spread across various jurisdictions through its affiliates, therefore from time to time the Group incurred certain costs in respect of common communication and technology platforms for the Group companies (in and outside India), which were subsequently allocated to the relevant entities on the basis of the respective usage. During the year, the assessee received an amount of USD 32,85,994 (equivalent to Rs.17,84,29,474) from Indian entity for allowing the usage of the database of various entities. The details pertaining to the same are as under:- Particulars USD Bloomberg 983,077 Factset Research System Inc. 71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prospect News Inc. 147 Average LIBOR.com 77 Options Price Reporting Authority 17 Total 32,85,994 18. As per the assessee, firstly, this receipt is in the nature of reimbursement of expenditure incurred on behalf of the associated enterprise, and secondly, in any case, the contract with third-party vendors is on a principal-to-principal basis, and for the usage of the database, which does not involve any transfer of technology or making available any technology either to the assessee or to the associated enterprise. Further, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the applicable legal position. 5. We find that Hon'ble jurisdictional High Court, in the case of DIT Vs Dun and Breadstreet Information Services India Pvt Ltd[(2012) 20 taxmann.695 (Mum)] has, while approving and concurring with the approach of Authority for Advance Ruling in the case of this very assessee, observed as follows: The assessee had imported business information reports from Dun and Bradstreet, USA, and made remittances in respect thereof without deducting tax at source. The Assessing Officer held that the assessee was liable to deduct tax at source and accordingly passed an order under section 195 read with section 201 of the Act. The appeal filed by the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of buying a book and it is not a pre-requisite, that BIR must be downloaded by DBIS only and in fact some clients, such as Expert credit guarantee corporation, in fact, access the server themselves to download BIR. The applicant does not have any server in India for the use of DBIS. Indeed the applicant has specifically averred that the copyright in the BIR would neither be licensed nor assigned to either the DBIS or the Indian customer. From these aspects it is clear that the aforementioned ruling of the Authority is distinguishable on facts. If a group of companies collects information about the historical places and places of interest for tourists in each country and all informations are maintained on a 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 radi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt has expressed a view, it cannot be open for us to be swayed by a contrary view expressed by any other Hon'ble High Court. No decision from Hon'ble jurisdictional High Court, contrary to the above decision of Hon'ble jurisdictional High Court, was brought to our notice. 9. In view of the above discussions, as also bearing in mind entirety of the case, we delete the impugned addition of Rs 23,01,00,058 as royalty in the hands of the assessee. The assessee gets the relief accordingly. 19. We find that the term Royalty as defined in the India-US DTAA is worded similarly to India-Swiss DTAA, which was under consideration in the aforesaid decision. From the record, it is evident that the payment is in 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with the Campus is to be examined together and not in segmentation. 3. The learned AO has erred in making an addition in respect of recovery of market data charges amounting to Rs 237,564,324 on the basis that the same qualifies as Royalty under the section 9(1)(vi) of the Act and Article 12 of the India-US DTAA as well, without appreciating the fact that 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 levying interest under section 234A of the Act amounting to Rs 1,969,784 on the basis that Appellant has filed its return of income after the due date prescribed under the provisions of the Act. 5. 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. 23. The issue arising in grounds no.1-2, raised in assessee s appeal, is pertaining to the addition i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (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 11.48,96,557 (including the amount of Rs 3,55,79,013) incurred in connection with the Campus is to be examined together and not in segmentation. 3. The learned AO has erred in making an addition in respect of recovery of market data charges amounting to Rs 29,18,25,488 on the basis that the same qualifies as Royalty under the section 9(1)(vi) of the Act and Article 12 of the India-US DTAA as well, without appreciating the fact that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is pertaining to not allowing carried forward to next year of the brought forward short-term capital loss. This issue is restored to the file of the AO to be decided afresh, in accordance with the law, after conducting the necessary verification. As a result, ground no.7 raised in assessee s appeal is allowed for statistical purposes. 35. Ground no.8 is pertaining to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 36. In the result, the appeal by the assessee is partly allowed for statistical purposes. ITA no.1264/Mum./2021 Assessee s Appeal A.Y. 2017 18 37. In this appeal, the assessee has raised following grounds: Aggrieved by the order passed by the Deputy Commissioner of Income-tax (International Taxation)-2(3)(2) Mumbai (learned AO), under section 143(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 respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal are allowed. 39. 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. 40. 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 the Act. Accordingly, ground no.4, raised in assessee s appeal is allowed for statistical purposes. 41. Ground no.5, raised in assessee s appeal is pertaining to not allowing carried forward to next year of the brought forward short-term capital loss. This issue is restored to the file of the AO to be decided afresh, in accordance with the law, after conducting the necessary verification. As a result, ground no.5 raised in assessee s appeal is allowed f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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