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TMI Blog2024 (12) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer to verify the same and allow the same as per law. - Shri Saktijit Dey, Vice President And Shri S. Rifaur Rahman, Accountant Member For the Assessee : Shri Sachit Jolly, Adv. And Shri Aditya Rathore, Adv. For the Revenue : Shri Vijay B Vasanta, CIT DR ORDER PER S. RIFAUR RAHMAN, AM : 1. The captioned appeal preferred by the assessee is directed against the assessment order dated 28.09.2023 passed by the learned Assistant Commissioner of Income Tax, Circle Int. Tax 3(1)(2), Delhi u/s 143(3) read with section 144C(13) of the Income-tax Act, 1961 (for short the Act ) for Assessment Year 2021-22. Pursuant to directions of the Dispute Resolution Panel u/s 144C(5) of the Act. 2. Brief facts of the case are, assessee is a company registered in United States of America ( USA in short), in 2010 in Delaware. The assessee also submitted a tax resident certificate issued by the USA. 3. The assessee operates a cloud-native machine data analytics solution (Sumo Logic Solution). It offers a software platform that enables organizations to address the challenges and opportunities presented by digital transformation, modern applications and cloud computing. It enables to automate the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has reproduced the stated confidential information in his order. Further, Assessing Officer discussed the conduct of the assessee and ways in which taxable presence is adverted in digital business. 6. After elaborately discussing the method of consultancy services, the services rendered outside India, services as standard facility; taxability of income under India-USA DTAA; the issue of technical training provided by the assessee; and the issue of ownership of intellectual property, in his view the income in the hands of the assessee is in the nature of FTS and further observed that from the details of ITRs filed by the assessee that assessee has not paid any tax in India for assessment years 2019-20 to 2021-22 and further observed that tax returns filed by the assessee in USA for the years 2018 to 2020 filed during the course of assessment proceedings shows that the income received from Indian customers and end-users was not effectively taxed in USA. He observed that on perusal of Financial data of the assessee reveals that assessee has shown huge losses in all the years 2019 to 2021. Therefore, it is amply clear that the said income has not suffered tax anywhere, neither in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and it was filed before lower authorities. Further, he brought to our notice page 144 of case law paper book and he brought to our notice findings of the Hon ble Delhi High Court in the case of International Management Group (UK) Ltd. v. CIT (2024) 466 ITR 514 in which Hon ble Court has observed that as we read article 13(4)(c) of the Double Taxation Avoidance Agreement, it becomes manifest that the mere furnishing of service would not suffice and a liability of tax would be triggered only if the technical or consultancy service were coupled with a transfer of the expertise itself. The expression make available must be construed as an enablement, conferral of knowledge and which would lead to the payer becoming skilled to perform those functions independently. Therefore, he submitted that without the presence of make available there is no transfer of technology. Further, he relied on the decision of the ITAT in the case of Coursera Inc. v. ACIT in ITA nos. 2416 3646/Del/2023 dated 21.08.2024; decision of ITAT in Mixpanel Inc. v. ACIT (pages 192 to 200 of case law paper book) and he prayed that the assessee has not rendered any service to the customers in India and has not trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 75,66,52,591/-. In the return of income filed for the assessment year under dispute, the assessee had offered income of Rs. 17,98,07,270/-. 5. However, as far as the receipts of Rs. 75,66,52,591/-, the assessee claimed that such receipts are neither in the nature of royalty nor FIS, hence, not taxable in India. The Assessing Officer, however, was not convinced with the submission of the assessee. After verifying the agreements with one of the Indian customers, viz., Gandhi Institute of Technology and Management, the Assessing Officer observed that the assessee provides two types of services, such as, Content Services and User Services. He observed, under the User Services, the assessee provides (i) customized landing page featuring the Organization logo and selected courses, (ii) user engagement reports, (iii) payment solution(s) that allow users to seamlessly access premium course experiences and skip checkout, and (iv) enterprise-level user support. Whereas, Content Services means, access to assessee's course and/or Specialization certificate services, including access to course assessments and grades through online open content offerings. . . 11. We have considered rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s perused. It is seen that the observations regarding the agreement of the assessee with GITAM has been discussed in the Draft assessment order (refer to para 8.2 and 8.3). Accordingly, the final assessment order is being passed at total assessed income of Rs. 75,66,52,591/- taxable at as per provisions of the Income Tax Act, 1961 and applicable surcharge and cess. Necessary forms to be issued, applicable interest to be charged and credit of taxes, if any after verification from the ITD system are to be allowed. Penalty u/s 270A is being proposed to initiate as discussed in earlier paragraphs of the order. Detailed computation of tax payable and interest charged u/s 234A, 234B and 234C of the Act is being attached as part of the final order. Notice of demand is being issued. .. . 14. Be that as it may, Assessing Officer's findings/observations on the role of assessee are self-contradictory. While on one hand, the Assessing Officer has acknowledged the fact that the assessee is an aggregation service provider and not a content creator, in the same breath, he says that assessee's contention that it is a mere aggregator of educational courses is not correct. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon'ble Delhi High Court in the case of DIT v. Nokia Networks OY [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined as payment of any kind received as a consideration for the use of, or right to use of, any copyright of literary, artistic or scientific work and that the expression literary work , under section 2(0) of the Copyright Act, includes 'literary database' but then he fell in error of reasoning inasmuch as the payment was not for use of copyright of literary database but only for access to the literary database under limited non exclusive and non transferable licence. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the subscription fee received by the assessee. Further, the Department has not brought any material on record to demonstrate that the assessee has employed any skilled personnel having knowledge of chemical industry either to assist in collating articles from journals / magazines which are publicly available or through them the assessee provides instructions to subscribers for accessing the online database. The assessee even does not alter or modify in any manner the articles collated and stored in the database. In the aforesaid view of the matter, the subscription fee received cannot be considered as a fee for technical services as well. By way of illustration we may further observe, online databases are provided by Taxman, CTR online, etc. which are accessible on subscription not only to professionals but also any person who may be having interest in the subject of law. When a subscriber accesses the online database maintained by Taxman/CTR online etc. he only gets access to a copyrighted article or judgment and not the copyright. Similar is the case with the assessee. Therefore, in the facts of the present case, the subscription fee received by the assessee cannot be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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