9911796707
TMI Blog2025 (4) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... charges taxed as Royalty The AO has erred in considering Trade & Consumer CRM System Development charges of INR 43,31,546/- taxable as Royalty under the India - Singapore DTAA. 4. Other service charges taxed as Royalty The AO has erred in considering Other Service Charges (Referral Fees) of INR 6,86,556/- taxable as Royalty under the Act as well as under the India Singapore DTAA. 5. Management Service Fees taxed as Royalty a) The AO has erred in considering Management Service Fees of INR 85,81,894/- taxable as Royalty under the Act as well as under the India - Singapore DTAA. b) On identical facts and circumstances in previous years where Management Service Fees has been taxed as Fees for Technical Services under the India-Singapore DTAA, the AO has erred in changing his opinion with respect to the same nature of receipts. c) The Dispute Resolution Panel erred in directing the AO to follow its Directions of AY 2018-19 & AY 2019-20 for taxing Management Service fees as Royalty in view of the fact that the appellant was not in receipt of such services during AY 2018-19 & AY 2019-20. 6. Member Login Fee taxed as Royalty The AO has erred in considering Member Login F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Royalty within the meaning of section 9(1)(vi) of the Act. The DRP rejected the objections filed by the assessee and the AO passed the final assessment order following the directions of the DRP. 5. The ld. AR submitted that this is the recurring issue and that the Co-ordinate Bench has been consistently holding the issue in favour of the assessee. The ld. AR further submitted that the facts for the year under consideration being identical, the issue stands covered by the decision of earlier years. 6. The ld. DR placed reliance on the order of the lower authorities. 7. We have heard the parties and perused the material on record. We notice that the Co-ordinate Bench in assessee's own case for AY 2019-20 (ITA No. 1562/Mum/2022 dated 29.12.2022) has considered a similar issue where it has been held that "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the documents filed before the AO and DRP clearly indicate that (i) appellant has an infrastructure data centre, not information centre at Singapore, (H) the Indian group companies neither access nor use CPU of the appellant, (Hi) no CDN system is provided under the /DC agreement, no such use/access is allowed, (iv) the appellant does not maintain any such central data (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) bandwith and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such bandwith 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 compel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses bank entered into an agreement with a Singapore company SPt, for the provision of data processing support for its business in India and that data processing is down outside Indict. Application software by which data is transmitted to hardware at Singapore and processed by SPL at Singapore is owned by the assessee. Thus what is used by the appellant is the computer 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 certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware to the American company. The AAR held that 'Smarterchild' application software on the American company's server platform is scientific equipment licensed to be used for commercial purposes and therefore, payments made for producing and hosting 'Interactive Agent' applications would be covered by the expression 'royalties' as used in Artjcfe_I2. 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' i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to delete the addition made in this regard. Grounds 2 & 3 raised by the assessee are allowed. Other Services Charges taxed as Royalty 9. During the year under consideration the assessee has received Rs. 6,86,556/- as other service fees as per the agreement with M/s Accentiv (India) Pvt. Ltd. The AO treated the said amount as Royalty which is confirmed by the DRP. 10. We have heard the parties and perused the material on record. We notice that the impugned issue is recurring in nature and that the Co-ordinate Bench while considering the same for AY 2019-20 have held that "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 service charges (referral fee) as royalty. As could be seen, identical issue came up for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mers (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 making a database for providing information on suitable candidates for recruitment, even if they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. 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." 11. The Revenue did not bring any new material on record for us to deviate from the decision rendered by the Co-ordinate Bench in above case of the assessee. Thus, respectfully following the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cility to the Indian entity without granting any exclusive right in respect of any copyright, process, etc. It is further relevant to observe, learned DRP, while deciding the issue has clearly and categorically observed that member login services are similarly to IDC services. If that is the factual position, the member login fee cannot be treated as royalty since, while deciding assessee's appeal challenging the taxability of fees received towards IDC services, the Tribunal has consistently expressed 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 learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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