9911796707
TMI Blog2022 (12) TMI 1563X X X X Extracts X X X X X X X X Extracts X X X X ..... of INR 2,85,01,345/- taxable as Royalty under the India - Singapore Double Taxation Avoidance Agreement ('DTAA'). 3. Other service charges taxed as Royalty The AO has erred in considering Other Service Charges (Referral Fees) of INR 14,20,719/- taxable as Royalty under the Act as well as under the India - Singapore DTAA 4. Member Login Fee taxed as Royalty The AO has erred in considering Member Login Fee of INR 70,16,013/- taxable as Royalty under the Act as well as under the India - Singapore DTAA. The appellant craves leave to add, alter, and supplement any ground or grounds, if necessary at the time of hearing of the appeal." 3. The brief facts of the case are: The assessee is a tax resident of Singapore and is incorporated under the laws of Singapore. The assessee is engaged in the business of the provision of services relating to developing, marketing, and implementing incentive-based strategies and technologies to build loyalty and to reward long-term relationships through the utilisation of Internet, wireless technology, and offline solutions to its clients. For the year under consideration, the assessee filed its return of income on 29/11/2019, dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order. Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative ('learned AR') submitted that similar issue has been decided in favour of the assessee by the coordinate bench of the Tribunal in the preceding assessment years. On the other hand, the learned Departmental Representative ('learned DR") vehemently relied upon the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee's own case in Edenred Pte Ltd. vs DCIT, in ITA No. 6267/Mum./2019, vide order dated 22/09/2021, for the assessment year 2016-17, decided similar issue in favour of assessee by following the judicial precedents rendered in assessee's own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under: "4. Having considered rival submissions and perused facts on record, we find that the first issue as raised in ground 3 relates to taxability of infrastructure data centre (IDC) charges as royalty. As submitted by both the parties, this is a recurring dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) IDC is not capable of information analytics, data management, (vi) appellant only provides IDC service by using its hardware/security devices/personnel ; all that the Indian group companies received are standard IDC services and not use of any software, (vii) band with and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such band with and network and not its use, (viii) consideration is for IDC services and not any specific program and (ix) no embedded/secret software is developed by the appellant. Against the above factual backdrop, let us discuss below the case laws relied on both sides. 6.1 We begin with the case laws relied on by the id. counsel. A plethora of precedents on the subject in which we are presently concerned compels us, in order to avoid prolixity, to refer only a few decisions below. In the case of Bharati Axa General Insurance Co. Ltd. (supra), the appellant, an Indian company carrying on business of general insurance entered into o service agreement with a Singapore company AXA ARC for receiving assistance such as business support, market information, technology support serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uter hardware owned by SPL. The Tribunal held that (i) payment in question can be said to be a payment for a facility which is available to any person wilting to use the facility, (ii) system software which is embedded in the computer hardware by which the computer hardware functions is not owned by SPL and SPL only has a license to use the system software ; (in) consideration received by SPL is for using the computer hardware which does not involve use or right to use a process, (iv) there is nothing on record to establish that the hardware could be accessed and put to use by the assesses by means of positive acts, (v) therefore, it cannot be said that the payment by the assessee to SPL is royalty within the meaning of Article 12 of the treaty. In ExxonMobi! Company India (P.) Ltd. (supra), the assessee had paid certain amount to 'EMCAP', Singapore towards global support fees. The AO opined that payment made by the assessee was in the nature of FTS as defined in Explanation 2 to section 9(1)(vii) of the Act. The Tribunal observed that as per terms of agreement, EMCAP had to provide management consulting, functional advice, administrative, technical, professional and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used in Article 12. However, we find that in the instant case, appellant only provides service by using its hardware/security devices/personnel and not use of any software and therefore the above case is distinguishable from the present appeal. In ThoughtBuzz (P.) Ltd. (supra), the applicant, a Singapore company was engaged in providing social media monitoring service for a company, brand or product. It was a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. The applicant offered service on charging a subscription. The clients, who subscribe, can login to its website to do a search on what is being spoken about various brands and so on. The AAR held that the amount received from offering the particular subscription based service is taxable in India as 'royalty' in terms of paragraph 2 of Article 12 of the DTAC between India & Singapore. However, we find that in the instant case, the appellant is only providing IDC service which includes administration and supervision of central infrastructure, mailbox hosting services and website hosting services and therefore, the ratio laid down in the above ruling is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to provide services to the aforesaid referred clients from the offices in India. The AO vide draft assessment order following the directions issued by the learned DRP in assessee's own case for the assessment year 2017-18 treated the aforesaid income as royalty within the meaning of section 9(1)(vi) of the Act read with Article 12 of India Singapore DTAA. In further proceedings, the learned DRP following the directions rendered in assessee's own case for the preceding assessment year rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 13. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case in Edenred Pte Ltd. (supra), for the assessment year 2016-17, decided similar issue in favour of the assessee by following the judicial precedents rendered in assessee's own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are as under: "6. In ground 3, assessee has challenged the addition of other servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration for such referral services, a percentage of the amount realized from the referred customers (i.e. 30% on gross amount realized) was paid to the applicant. The AAR held that "referral fee received in Singapore by the applicant, a Singaporean company from an Indian company for referring customers to the latter is neither business income u/s 9{l)(i) nor royalty u/s 9(l)(vi) nor fee for technical services u/s 9(l)(vii) r. w. Article 12(4)(b) of the DTAA between India & Singapore and, therefore, it is taxable as business income in Singapore only as the applicant has no PE in India; impugned receipt not being chargeable to tax under the provisions of the IT Act or under the provisions of DTAA, section 195 is not attracted". In Real Resourcing Ltd. (supra), the AAR, in the context of the India-UK DTAA, after relying on the Cushman & Wakefield Ruling (supra) held that referral fee received by a UK company (applicant) from India based recruitment agency for referring potential Indian clients and candidates was not royalty or FTS. The relevant observations of the AAR in the context of Article 13 dealing with royalty/FTS is as under: "10. Collecting data and analyzing it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's own case as referred to above, we hold that referral fee received by the assessee is not in the nature of royalty. Accordingly, addition made in both the assessment years under dispute is deleted. Respective ground is allowed." 7. There being no difference in factual position in the impugned assessment year, respectfully following the earlier decision of the Tribunal as referred to above, we delete the addition. This ground is allowed." 14. We find that this issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee's own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of other service charges (referral fees). As a result, ground No. 3 raised in assessee's appeal is allowed. 15. The issue arising in ground No. 4, raised in assessee's appeal, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressed the view that the services cannot be treated as royalty under the India-Singapore Tax treaty. In aforesaid view of the matter, we hold that member login fee is not in the nature of royalty under the treaty provision. Accordingly, addition is deleted. This ground is allowed." 9. There being no difference in factual position in the impugned assessment year, respectfully following the earlier decision of the Tribunal as referred to above, we delete the addition. This ground is allowed." 18. We find that this issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in assessee's own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of member login fees. As a result, ground No. 4 raised in assessee's appeal is allowed. 19. In the result, the appeal by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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