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TMI Blog2024 (11) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreements and nature of services in context to make available clause introduced by the amendment dated 30.08.1999 in India Netherlands DTAA. As we go through the decision in favour of assessee in AY 2017-18 we find that the Mumbai Bench of the Tribunal decision in SEA Hygiene Products [ 2021 (1) TMI 323 - ITAT MUMBAI ] had been relied and squarely applied without any examination of the assessee specific agreements and nature of services. It is not the case before us that the nature of services in the case of SEA Hygiene Products are similar to that of assessee. On the other hand the decision in SEA Hygiene Products (supra) was based on principles of law laid in the case of Steria India Ltd. [ 2016 (8) TMI 166 - DELHI HIGH COURT ] and accordingly in SEA Hygiene Products (supra) it was held that the provisions of Article 12(4)(b) of the Indo-Portuguese Treaty being restricted in scope vis- -vis Article 12(3)(b) of Indo-Swedish Tax Treaty will apply in the Indo-Swedish Tax Treaty as well and it was pari materia applied in the case of the assessee for Indo- Netherlands Treaty also. There was no plea on the basis of the said benefit being independently available under India Netherla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic, industrial or commercial equipment and receipts against the same was liable to be taxed as royalty. Also, provision of customized SAP/Microsoft software licenses amounted to copyright royalty and IT services which were ancillary or subsidiary to application or enjoyment of the above software amounted to FTS/FIS. AO observed that the IT services were technical in nature and the same also qualified as FTS under article 12(5)(b) of the tax treaty. 2.2 The case of assessee was that software license fee is not chargeable to tax for the following reasons: (i) That the issue has been decided in favour of the assessee by the Hon ble ITAT in AY 2017-18, 2018-19 2019-20. (ii) That the tax treaty provides a restrictive definition of royalty and use of or right to use of equipment does not constitute royalty as per tax treaty. (iii) That the possession or control of equipment is not with PVM India. 3. The AO, however, was not convinced with the plea of the assessee holding that the Tribunal decision in assessee s case was challenged before the Hon ble High Court. The AO also was of the view that judgment of the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32/-, received on account of SAP software and Microsoft license fees taxed as Royalty under section 9(1)(vi) of the Act as well as Article 12 of the India-Netherlands DTAA. 8. That the AO has erred on the facts and circumstances of the case and in law by concluding that software license fees, i.e., fees paid in lieu of SAP Software License and Microsoft License, received by the Appellant during the subject year is taxable as Royalty under clause (iii) to Explanation 2 to section 9(1)(vi) of the Act, as well as under Article 12 of the India- Netherlands Double Taxation Avoidance Agreement ( India- Netherlands DTAA ). 9. That the AO failed to appreciate that this Hon ble Tribunal in Appellant s own case for AY 2017-18 had held that reimbursement of software license fees does not partake the character of royalty for the purposes of section 9(1)(vi) of the Act, as well as under Article 12 of the India-Netherlands DTAA. 10. Without prejudice:- a. That the AO failed to appreciate that as the Appellant was not the owner of the copyrighted computer software, it could not have given the licenses for use of software and earned royalty. b. That on the facts and circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 12 of the India-Netherlands DTAA, as the restrictive definition of Fees for Technical Services as provided under Article 12(4)(b) of India-Portugal DTAA was applicable and the mandatory precondition of made available therein, had not been triggered. 13. Without prejudice a. That the AO erred on the fact and circumstances of the case and in law in not appreciating the fact that the Appellant did not make available any technical knowledge, know-how or skill and therefore, payment received in lieu of these services does not fall within the ambit of Article 12 of India-Netherlands DTAA. b. That the AO have erred on the fact and circumstances of the case and in law by holding that the services rendered by the Appellant were ancillary' and subsidiary to the application or enjoyment of the right to use copyright and therefore, were covered within the ambit of Article 12(5)(a) of the India-Netherlands DTAA. c. That the AO erred in alleging that the services rendered by the Appellant to its Indian affiliate were in the nature of management consultancy services . d. That the AO have erred in not following the High Court rulings relied upon by the Appellant, wherein on the basis of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursement of software licence fees stands covered in Assessee s favour by the Hon ble Supreme Court s decision in the case of Engineering Analysis Centre of Excellence (P.) Ltd vs CIT [2021] 125 taxmann.com 42 (SC) [Refer Para 14,15 and 16 of Order dated 28.02.2022 at page 184 to 186 of the Paper book], Further the said order has also been followed in Assessee s case for AY 2018-19 and 2019-20. In that view of the matter, the said addition deserves to be deleted. 6. Ground Nos 11 to 13(d) pertain to taxation of payment of INR 7,95,71,627, received from PVM India on account of Information Communication Technology Service Charges ( ICT Service Charges ) as FTS under Article 12 of DTAA. 7. It comes up from the impugned orders and Information and the copy of Communication Technology Services Agreement dated 28.04.2015 available at Page 228 and 229 of the Paper book that during the subject year, the assessee has provided IT support services to the Indian customer which includes user authorisation, system maintenance, interfaces with SAP, support and maintenance, office automation, LAN/WAN services, improvement projects etc. In the Draft Assessment Order, the Assessing Officer held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first nation and in such a scenario, the terms of the earlier DTAA need to be amended through a separate notification under Section 90 of the Act. 11. To defend the case of assessee, independently of decision in case of Nestle s decision and the issue as was decided in earlier years by the co-ordinate bench, the Ld. Counsel has submitted that the above decision of the Hon ble Apex Court would not pose any impediment to the case at hand and in that regard our attention is drawn to the following: a) Article 12 of the India Netherlands DTAA as originally notified vide Notification No. GSR 382(E) on 27.03.1989 ( Original India Netherlands DTAA ) defined Fee for technical services to mean payments of any kind to any person other than payments to an employee of the person making the payments and to any individual for independent personal service mentioned in Article 14 in consideration for services of managerial, technical or consultancy in nature. It was submitted that this definition would show that originally the condition of make available was not incorporated in the treaty. b) However, the Protocol to Original India Netherlands DTAA contained an MFN clause (the protocol whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herlands DTAA vide Notification No. S.O. 693(E), dated 30.08.1999, issued under section 90(1) of the Act, was raised. 12.1 In this context only we find that the final assessment order is dated 30.10.2023 and the Nestle decision (supra) is dated 29.10.2023. So most likely the AO was not aware of the law as stood changed by the Nestle decision (supra) and has not taken cognizance of this judgement of the Hon ble Supreme Court and merely for the reasons that Tribunal s decision in AY 2017-18 has not attained finality rejected the plea of assessee. 12.2 Further, the appeal in Tribunal was filed on 22.11.2023 where in still the assessee had pressed for being benefitted by the plea that as in the AY 2017-18 so this year too, the payments made in lieu of ICT Services should be construed to not be of the character of Fees for Technical Services under section 9(1)(vii) of the Act, as well as under Article 12 of the India-Netherlands DTAA, as the restrictive definition of Fees for Technical Services as provided under Article 12(4)(b) of India-Portugal DTAA was applicable and the mandatory pre-condition of made available therein, had not been triggered. 12.3 Thus, where the DRP vide order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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