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TMI Blog2024 (5) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... s in USA are entered by SPI Technologies India Pvt. Ltd., and it is SPI Technology India Pvt. Ltd., who is solely responsible for undertaking and executing the e-publishing work. Here, it is to be clarified that the role of the assessee is limited to liaising with the customers, understanding their workflow requirements and communicating the same to SPI Technologies India Pvt. Ltd., who undertakes the project execution. DRP and the AO wrongly noted that the amalgamation with the assessee and SPI Technologies India Pvt. Ltd., w.e.f. 01.04.2014 whereas actual facts are that the Laser words Pvt. Ltd., merged with SPI Technologies India Pvt. Ltd., w.e.f. 01.04.2014 and McGraw-Hill Companies Inc., w.e.f. 27.04.2010, who is the end customer of SPI Technologies India Pvt. Ltd. It is not a disputed fact that assessee receives sales commission as percentage of sales from new customers as well as existing customers on monthly basis. The role of assessee is not limited to identification of prospective / new customers in USA and once customer is onboard, the assessee interacts with the customer on a regular basis to understand the customer requirements. Hence, customer acts as a front-end cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (13) of the Act, framed in lieu of directions issued by the DRP dated 12.02.2021 u/s. 144C(5) of the Act holding that the sales commission received by assessee amounting to Rs. 17,21,74,839/- as accrued to the assessee in term of section 9(1) of the Act and taxable in India and also held that the same are in the nature of fee for included services . For the above issue, the assessee has raised various grounds which are argumentative and exhaustive and hence, need not be reproduced. 4. Brief facts are that the assessee is a non-resident company in India and resident of USA. The assessee is engaged in providing services of e-publishing which falls under information technology enabled services (ITES) involving software and digital technology. The AO noticed from the return of income and from Form No.3CEB whereby note was attached giving reasons for not offering the receipts accrued in India in the computation of income for tax. Hence, the same was selected for scrutiny assessment under CASS by issuing notice u/s. 143(2) of the Act dated 13.08.2018. Notices u/s. 142(1) of the Act along with show-cause notice was issued calling for details on further dates also. During the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee and held that the marketing service includes training staff also to understand the beneficial aspect like e-publishing, data processing which include data capturing, XML data conversion, automation tools, technologies, single copy edition, style editing, etc. The AO noted that the above noted skills are essential to understand the customer requirements and then only, marketing people can convince the clients/customers and sell domain focused technical business process outsourcing like e-publishing. Further, he noted that the marketing staff of M/s. Laser Word USA Inc [SPI USA] collects the customer requirements and shares with Laser Words Pvt. Ltd., [SPI India]. This clearly indicates that the marketing staff of M/s. Laser Word US Inc [SPI USA] make available the customer requirements to Laser Words Pvt. Ltd., [SPI India] to plan the execution of project. In view of the above, he held that the nature of services are fee for included services instead of claimed by assessee as sales commission . The assessee submitted information in regard to nature of services rendered and these are claimed to be marketing services. The relevant submission submitted by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xists contract between the assessee and the client. Therefore it is held that the said sales commission paid at 15% cannot be held to be wholly attributable to the marketing services as contended by the assessee. The services rendered to the clients in USA as per the agreements made with the customers include inter alia the marketing services which cannot be separated and paid as commission. The same is treated as fees for included services and is brought to tax in India. 5. The ld.AR for the assessee took us through the DRP order and stated that the DRP only relied on the earlier order of DRP for assessment year 2015-16 and apart from that they have not carried out basic exercise and finally rejected the objection of the assessee by a non-speaking order that there is no reason to deviate from the directions already given in assessment year 2015-16. The relevant finding given in para 2.5 of DRP reads as under:- 2.5 We find no reason to deviate from the direction already given in A.Y. 2015-16 by the DRP therefore, the objections 1, 2 and 3 are rejected. Aggrieved, now assessee is in appeal before the Tribunal. 6. At the outset, the ld.AR made clear that the final assessment order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges do not come within the purview of Fees for Included Services ( FIS ) under the India-USA DTAA the connected service of sales and marketing support service also does not satisfy the make available conditions and hence, is not taxable. Accordingly, we allow grounds. No.4.5 4.6 of the assessee and delete the addition. 6.1 Now before us, the ld.AR filed copy of agreement dated 01.04.2010 entered with SPI Technologies India Pvt. Ltd., and the relevant marketing Service rendered by the assessee are depicted as under:- After going through the Transfer Pricing study submitted by the assessee, the following pots are noted:- 1 The marketing services include training of the staff also, The marketing staff must be trained to understand the beneficial aspects like e-publishing, data processing which include data capturing, AO data conversion, automation tools, technologies, single copy edition, style editing etc. 2 The above soil skills as per point I above arc essential to understand the customer requirements. Then only the marketing people can convince the clients/customers and sell domain focused technical business process outsourcing like e-publishing. 3. The marketing staff of the Ms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er going through the Marketing Service agreement between Ms Laser Words Private Limited and Ms Laser Word USA Inc submitted by the assessee and its Proprietary Information clause Marketing services Para, the following points re noted:- 7. The proprietary information clause in the marketing services agreement clearly indicate that information like intellectual property, marketing expertise, related experience, drawing blueprint, specifications, engineering marketing and cost data, engineering and design information, testing and quality control procedures, operating techniques, processes, computer and information programs, business plan and budget re shared and made available by the parties to each other. 8. The point to be noted here in case of business process outsourcing like e-publishing include engineering and design, testing and quality procedure, operating techniques, processes, computer and information programs, blueprints, specifications. 9. The marketing staff also set-up, maintain and operate the marketing network. 10. The confidentiality clause cleanly indicates that the processes (mentioned in point 7 and 8 above) made available by the parties should be kept confidential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked services. We noted from the facts of the case that the assessee has entered into a contract with SPI Technologies India Pvt. Ltd., who consequently entered into contract with end customers located in USA. However, assessee is not party to the master service agreement with the customers. All service contracts with customers in USA are entered by SPI Technologies India Pvt. Ltd., and it is SPI Technology India Pvt. Ltd., who is solely responsible for undertaking and executing the e-publishing work. Here, it is to be clarified that the role of the assessee is limited to liaising with the customers, understanding their workflow requirements and communicating the same to SPI Technologies India Pvt. Ltd., who undertakes the project execution. It is to be clarified that the DRP and the AO wrongly noted that the amalgamation with the assessee and SPI Technologies India Pvt. Ltd., w.e.f. 01.04.2014 whereas actual facts are that the Laser words Pvt. Ltd., merged with SPI Technologies India Pvt. Ltd., w.e.f. 01.04.2014 and McGraw-Hill Companies Inc., w.e.f. 27.04.2010, who is the end customer of SPI Technologies India Pvt. Ltd. We noted that it is not a disputed fact that assessee receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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