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TMI Blog2024 (7) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... s involve rendering advice, with or without expertise in technology. There is nothing in the Commissionaire Agreement which is suggestive of the fact that the respondent/assessee was required to discover, develop, or define/evaluate the goals that SIPL had to reach, or even frame policies that led to these goals, or supervise or execute or change policies that were already adopted. The respondent/assessee was not performing, as it were, executive or supervisory functions. All that the respondent/assessee was obliged to do was render support to business operations. There is no reference to any special skill or knowledge that the respondent/assessee personnel brought to bear in rendering the services encapsulated in the Commissionaire Agreement. Promotion, sale, or distribution of SIPL's publications, or rendering support services of the nature referred to in Article 3 of the Commissionaire Agreement, although involving human intervention, do not, in our view, fall in the category of technical and/or consultancy services. There were no special skills or knowledge that the respondent/assessee's personnel were required to possess to render the services that were contemplated un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in India on behalf of Springer Nature Group s affiliated publisher entities as fee for technical services ( FTS ) both under the provisions of the Act and Article 12 of India-Germany Double Taxation Avoidance Agreement ( DTAA ). 3. That on the facts and circumstances of the case and in law, the Ld. AO/DRP failed to appreciate that the commission income and receipts from subscription fee are of a different nature and must be treated separately rather than being aggregated and collectively characterized as FTS under the Act and DTAA. 4. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in treating the commission income received from SNIPL as consultancy of technical nature under the Act and the DTAA without appreciating the fact that the Appellant was merely providing support services as per the Commissionaire Agreement and did not render any professional, advisory, or technical service. 5. That on the facts and circumstances of the case and in law, the Ld. AO/DRP has erred in not following the decision of this Hon ble ITAT in the Appellant s own case for AY 2013-14 (ITA No.2534 of 2019, order dated October 14, 2022), wherein it was held that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges . The respondent/assessee‟s stand before the statutory authorities was that although this payment had been inadvertently classified as production and editorial charges, it was nothing but commission received against services rendered. 4.3 The second component of the aforementioned (first) addition was an amount equivalent to Rs. 1,94,279, which, as per the Form 3CEB report filed by SIPL, was categorized as service charges for the sale of Indian journals in printed form . 4.4 The second addition made by the AO was an amount equivalent to Rs. 16,67,83,110. This amount represented the subscription fees received by the respondent/assessee against e-journals from two Indian entities, namely, Informatics Publishing Private Ltd. and ZS Associates. 4.5 The third addition is an amount equivalent to Rs. 2,62,85,504. This amount was collected by the respondent/assessee from third-party customers located in India, against the sale of online journals and/or books, on behalf of SIPL. In the Form 3CEB report of SIPL, the said amount has been categorized as gross proceeds from sale by AE (Associate Enterprise) of Indian journal in printed form . 4.6 The AO treated the aforementioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly, the arguments advanced by Mr. Bhatia can be paraphrased as follows: 9.1 The addition of Rs. 22,89,835/- sustained by the CIT(A) as FTS was tenable, having regard to the terms of the Commissionaire Agreement. The services such as promotion, sale and distribution of products globally could be categorised as consultancy services. Likewise, services such as order handling, inventory management, debtor management and subscription management could be categorised as managerial services. 9.2 The services provided by the respondent/assessee were thus wide and distinct . Therefore, the decision of the coordinate bench of this Court rendered in DIT v. Panalfa Autoelektrik Ltd., [2014] 227 taxmann.com 351 (Delhi) would have no applicability, as the service provided by the nonresident entity, in that case, concerned merely procurement of export orders. 9.3 Under the Commissionaire Agreement, both managerial and consultancy services, as also technical services, involve human intervention. [See CIT v Kotak Securities Ltd., [2016] 383 ITR 1(SC)]. The services provided by the respondent/assessee under the Commissionaire Agreement, which include order handling, inventory management, debtor mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissionaire Agreement executed between the respondent/assessee and SIPL captured the functions performed by the respondent/assessee as part of the Springer Group. 12.3 Accordingly, the respondent/assessee, pursuant to its appointment as a Commissionaire, promoted, sold and distributed, print and electronic books and journals published by SIPL. Besides this, under the very same Commissionaire Agreement, the respondent/assessee provided sales and marketing services, customer services, order handling, delivery invoicing, debtor and subscription management, and processing of return copies, amongst other services. Resultantly, the respondent/assessee collected subscription and other revenue/fees from the sale of electronic books and journals to third-party customers, which it ultimately paid to SIPL, albeit after retaining its commission, as agreed under the Commissionaire Agreement. 12.4 For the aforesaid payments to be construed as FTS, one would have to conclude that the payments were received for rendering managerial, consultancy or technical services. The CIT(A) has not indicated the head under which the services rendered by the respondent/assessee would fall. According to Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal rightly relied upon its decision in the Springer Verlagh case, wherein the following decisions and principles, articulated therein by this Court and other Courts, were examined, and addition made by the CIT(A) in that case were deleted: i) DIT v. Panalfa Autoelektrik Ltd. ii) CIT v. Group Ism (P.) Ltd. [2015] 57 taxmann.com 450 (Del) iii) Evolv Clothing Co. (P.) Ltd. v. ACIT [2018] 94 taxmann.com 449 (Mad) iv) Skycell Communications Ltd. and Anr. v. DCIT [2001] 251 ITR 53 (Mad) Reasoning and Analysis: 14. Having heard the learned counsel for the parties and perused the record, as is obvious upon perusal of the prefatory facts noted above, the appellant/revenue was aggrieved by the two (2) additions deleted by the Tribunal via the impugned order. 15. Insofar as the first deleted addition is concerned, the CIT(A) sustained one of the two components, which consisted of commission received by the respondent/assessee, by treating the same as FTS, instead of royalty. To that extent, the CIT(A) veered away from the Assessment Order. 15.1 The Tribunal reversed the conclusion arrived at by the CIT(A) in this regard. The amount involved was Rs. 22,89,835. Undoubtedly, for this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned through the intermediary of the respondent/assessee. (See Article 4a 1 of the Commissionaire Agreement). 18. Furthermore, the respondent/assessee was empowered to retain the commission when transferring the revenue to SIPL, or via any other payment of commission agreed upon between SIPL and itself. 19. Importantly, the title in the publications remained with SIPL, which the respondent/assessee could assign property/licenses to third parties, albeit on behalf of SIPL. 20. There is nothing in the Commissionaire Agreement which is suggestive of the fact that the respondent/assessee was required to discover, develop, or define/evaluate the goals that SIPL had to reach, or even frame policies that led to these goals, or supervise or execute or change policies that were already adopted. The respondent/assessee was not performing, as it were, executive or supervisory functions. All that the respondent/assessee was obliged to do was render support to business operations. 20.1 The array of obligations as adverted to in Article 12 and 33 of the Commissionaire Agreement cannot be construed as managerial services. (a) Subject to full and complete compliance by Commissionaire of its oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o or derived from industry. 23. Therefore, the contention of Mr. Bhatia that on account of there being human intervention, the services rendered by the respondent/assessee should be considered as technical services, is a submission, which according to us, is completely misconceived. 24. Given this position, we are not inclined to interfere with the decision arrived at by the Tribunal concerning the deletion of the addition made amounting to Rs. 22,89,835, on account of commission received by the respondent/assessee. The CIT(A)'s conclusion that the said amount received by the respondent/assessee had attributes of FTS was, in our view, erroneous. 24.1 The attributes of what constitutes FTS has been dealt with extensively by the coordinate bench decision of this Court in DIT vs. Panalfa Autoelektrik Ltd. In this judgment, the coordinate bench has dealt with the order of the Authority for Advance Ruling (AAR) rendered in Wallace Pharmaceuticals (P.) Ltd. The attempt of Mr. Bhatia to distinguish the judgment in DIT v. Panalfa Autoelektrik Ltd. must fail, as it misses the true ratio of the judgment. 25. This brings us to the second addition. We must note that in the course of argume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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