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TMI Blog2024 (3) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... e ascertained, much less came to the conclusion that payments do not qualify as royalty . As observed that in the instant facts, no royalty payments have been made by the assessee for the use of brand name of Cambridge/IBO for the purpose of attracting students to enroll for the courses offered by overseas International educational Institutions. In our view, the students are attracted to enroll for the courses offered by overseas educational institutions on the basis of reputation carried by these overseas institutions and therefore, it cannot simply be said that the use of brand name of the educational institutions is only incidental to the payments made by the assessee to overseas education institutions and such payment is only for authorization granted by the overseas institutions to attract students to enroll with the courses offered by them via the medium of the assessee. Also the overseas education institutions have applied for registration under Trademarks Act, 1999, which is ostensibly with a view to ensure that their brand name/trademark is not exploited by any other entity/person in India and with a view to protect their trademark / brand name in India. It is important fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Shri Dhinal Shah, A.R. For the Respondent : Shri Ramesh Kumar, Sr. D.R. ORDER PER SIDDHARTHA NAUTIYAL, JM: Both the appeals have been filed by the Assessee against the orders passed by the Ld. Commissioner of Income Tax (Appeals)-13, (in short Ld. CIT(A) ), Ahmedabad vide orders dated 28.06.2019 passed for the Assessment Years 2017-18 2018-19. 2. The assessee has raised the following grounds of appeal:- ITA No. 182/Ahd/2020 (A.Y. 2017-18) 1. The Learned Commissioner of Income Tax Appeal -13 Ahmedabad has erred in charging TDS provision on Annual Payment made to the international boards through affiliation with IBO, Cambridge etc.. under the head authorization fee, fee for enrolment, license fee, registration fee as per the provision of Income Tax Act and the respective DTAA, Copy right Act 1957 and Trade Mark Act 1999, under Section 9(1)(vi) r.w.s. 195 of the act. The added TDS of Rs. 1,56,598 on the payment of Rs 15,65,984 should be deleted. 2. The Learned D.C.I.T, Intl. Tax, Ahmedabad has erred in charging interest u/s 201 and 201(1)(A) of the income tax act, 1961 on the payment made to International boards without deducting TDS u/s. 195. The added Interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of Income Tax and a prayer was made that since the assessee has a good case on merits, in the interest of justice, the delay in filing of appeal may kindly be condoned. Accordingly, looking into the facts of the case instant case, the delay of 176 days in filing of the present appeal is hereby condoned. 4. The brief facts of the case are the assessee, International Education And Research, Foundation is engaged in the running of an educational school, under the name of Mahatma Gandhi, International School . During the course of 201 proceedings, the Assessing Officer observed that foreign remittances were made by the assessee to various foreign educational institutions under different heads like evaluation fees, authorization fees, other item workshop/training charges, other item study, material, fees for enrolment/registration fees etc. Out of various payments made by the assessee, some payments are made on per student charges like evaluation fees, per teacher charges, training charges. However, other charges like annual program payments are not based on per student, rather it is a onetime payment made annually. After taking the submissions of the assessee on record, the AO obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Cambridge. The assessee represents the various foreign institutions in India. The assessee determines the fee structure, admission criteria etc. The fees received by the assessee from the students is shared by the assessee with the overseas international education institutions. The sharing of the fees with the international institutions is variable. It was submitted that the overseas International educational Institutions directly engage with the students through online medium and role of the assessee is limited only to facilitate the students in enrolling for the online courses offered by the overseas education institutions. The whole course curriculum, teaching, books etc. are all provided by the overseas International educational Institutions themselves, directly to the students and even the examinations are conducted by the overseas university itself and the degree certificate is also issued by the overseas university itself to the students directly. The assessee only determines the admission and fees criteria and the assessee is not using any services of the overseas International educational Institutions and the assessee is only acting as a facilitator between the student ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of annual payment was not submitted by the Appellant during the proceedings even though it was specifically asked for before both Appellate and Assessment proceedings. It is seen that the Appellant has right to use the trade marks for its purpose and the annual payment has been made for this purpose only, Therefore, as per Explanation 2 of section 9(1)(vi), the payment falls in the nature of royalty. The impugned payment has also been made for imparting of information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property. The AO has observed that IBO/Cambridge University is providing all materials related to teaching of students. The course materials are designed by them and study material are provided by them from time to time. To ensure the quality of teaching, training is also being organized regularly. These foreign institutions are providing services related to use and application of the trade marks. Thus, the payment also falls under Royalty as defined in explanation 2(vi) of the section 9(l)(vi) of the Act and hence taxable under the Act. Further, in the present case, the Appellant has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, any industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. Based on Article 12 of India-Swiss Confederation DTAA, the definition of royalty is pari passu to the definition as defined in the I.T. Act and includes the trade mark under the category of royalty and hence also taxable under the DTAA as well. The definitions of royalty in accordance with the Income Tax Act 1961 and the DTAA cover intangibles like trade mark. The use of trade mark between the Appellant and the foreign educational institutions has been authorized on the basis of certificate issued by them. Thus, the payment made by the Appellant falls under the category of royalty as per the provisions of income Tax act as well as DTAA. The case laws relied upon by the Appellant are distinguishable on facts. The Agreement between the Appellant and the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns qualify as business receipts in their hands and are not taxable India in the absence of a permanent establishment/business connection of the overseas educational institutions in India. Further, the Counsel for the assessee submitted that the assessee only acts as a facilitator between the overseas educational institutions and the students in India, the students in India make the payment of fees to the assessee for enrolling in the courses conducted directly by the overseas educational institutions and a part of the fees is retained by the assessee and a part of the fees is shared with the overseas education institutions. It was submitted before us that on the basis of the facts available on record, there is nothing to suggest that payments were made towards use of trademark of the overseas education institutions. The counsel for the assessee submitted that in the instant case, the payments were made by the assessee only for the authorization given by the overseas education institutions to the assessee to enroll Indian students in various courses offered by overseas International educational Institutions. The use of trademarks of Cambridge/IBO at the school premises is only incid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enroll in their courses in India. However, it was contended before us that the basis of payment is not a relevant factor in deciding whether the payment qualify as royalty under the Act/DTAA. However, we are of the considered view that it is important to analyze the basis of making payment by the assessee to overseas educational institutions and the basis on which invoice has been raised by overseas educational institutions for lump sum / annual payments, in absence of which the nature of payment cannot be ascertained, much less came to the conclusion that payments do not qualify as royalty . It is observed that in the instant facts, no royalty payments have been made by the assessee for the use of brand name of Cambridge/IBO for the purpose of attracting students to enroll for the courses offered by overseas International educational Institutions. In our view, the students are attracted to enroll for the courses offered by overseas educational institutions on the basis of reputation carried by these overseas institutions and therefore, it cannot simply be said that the use of brand name of the educational institutions is only incidental to the payments made by the assessee to ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would only be an academic exercise to discuss the judicial precedents cited by the Ld. Counsel for the assessee. This is also to be seen in light of the fact that the assessee has not made any royalty payments for use of the brand name of such reputed institution such as Cambridge/IBO for the purpose of attracting students to enroll in their courses and acting as the facilitator/mediator of equation services between the students and the overseas education institutions. 10. Accordingly, in light of the above observations, in our considered view, the interest of justice, the matter is being restored to the file of Assessing Officer to understand the basis on which lump sum fee has been charged by the overseas entities from the assessee and also the basis for allowing/affording discount to the assessee. In our view, unless and until the nature and the basis of raising invoices by the overseas education institutions is not clear to the tax authorities, it is not possible to come to the conclusion that no payments were made for use of trade name/brand of the national education institutions and the payment is only for authorizing the assessee to act as a mediator between these students ..... X X X X Extracts X X X X X X X X Extracts X X X X
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