9911796707
TMI Blog2024 (6) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... w, Ld. AO, has grossly erred in determining the taxable income of the Appellant for the subject assessment year at INR 7,32,81,530/- as against nil returned income and, accordingly, the assessment order passed by the Ld. AO is bad in law and void ab-initio. 1.1. That on the facts and circumstances of the case and in law, the Ld. AO has erred in proposing addition of INR 7,32,81,530 based on mere conjunctures and surmises, ignoring the factual matrix of the case as well as the nature of the transactions undertaken by the Appellant. 1.2. That the Ld. AO has failed to appreciate the submissions made by the Appellant and further erred in making several observations and Inferences in the assessment order, which are fact fully incorrect and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing reliance on judicial precedents and clauses in agreements which are distinguishable on the facts of the case. 2.5 That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the revenue received by the Appellant is ancillary to the alleged 'Royalties' and therefore also taxable as FTS without appreciating the fact that provisions with regard to Royalties and FTS are mutually exclusive to each other and it can either be a royalty or FTS. 3. That on the facts and circumstances and in law, the Ld. AO erred in denying exemption under Section 10(50) of the Act without appreciating the factual matrix of the case. 4. That on the facts and circumstances of the case and in law, without prejudice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation services to its customers in India. 5. The assessee exempted claimed income of Rs. 7,09,35,541/- in its ITR for the relevant assessment year and the case was selected for scrutiny under CASS and the draft assessment order was passed on 23.12.2022 alleging that the background screening services provided by the Appellant falls within the purview of Royalty or FTS under the provision of Article 13 of India-USA DTAA. 6. The assessee filed its objection on 19.01.2023 before the Dispute Resolution Panel-1, Delhi against the draft Assessment Order. The direction of DRP was passed on 18.09.2023 whereby, it reiterated its stand taken for AY 2019-20 and 2020-21. Pursuant to the DRP direction, Impugned Order was passed on 30.10.2023 whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the client by the assessee while rendering its services. Income from provision of the services rendered by the assessee cannot be characterized as royalty for use of copyright in the report as the client merely has the right to use the findings in the report for its own internal consumption. The client does not have any rights to publicly display, sell/ distribute, copy, edit, modify or undertake any other commercial exploitation of the said report. It is thus evident that the consideration received by the assessee under the terms of its agreement with its client is purely towards provision of background screening services and does not include any consideration for use or right to use any copyright or a literary, artistic or scientif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional and professional details which would not amount to imparting of commercial experience etc. What is delivered to the client is validation report assuring its clients about the authenticity of information contained in the report on the basis the information collated in the process of validation. Hence it cannot tantamount to imparting of commercial experience. The screening report which is issued does not involve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le High Court vide order dated 26.02.2024 decided the aforesaid appeal in favour of the assessee and dismissed the Appeal filed by the Department holding as follows: "5. In our considered opinion, the mere undertaking of background checks of an employee or the verification of testimonials cannot possibly be recognized as entailing the use of any technical knowledge, experience or skill as provided under Article 13(4) of the India-UK DTAA. The assessee is merely verifying disclosures and which activity cannot be recognized as being imbued with any technological characteristic. There is also a complete absence of a transfer of data or information which could be described as "technical" as the word is commonly understood. In view of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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