9911796707
TMI Blog2025 (4) TMI 1561X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellant for the subject assessment year at INR 14,60,96,010 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 14,60,96,008 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 factually incorrect and legally untenable. 2. 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 from provision of background screening and investigation services is in the nature of 'Royalty' under the provisions of Explanation 2 to Section 9(1)(vi) of the Act and Article 13 of the Double Taxation Avoidance Agreement between India and UK ("India - UK DTAA"). 2.1. That on the facts and circumstances of the case and in law, the Ld. AO erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submission made by the assessee the Assessing officer made the draft assessment order after making the following addition: (i) consideration received by the assessee was treated the royalty as per the article 12(3) of India- USA DTAA of Rs. 14,60,96,008/- 3. The assessee filed its objection before the Dispute Resolution Panel-1, Delhi ("DRP") against the draft Assessment Order dated 23-03-2024. The DRP in the direction dated 28-11- 2024 observed that the issue involved is a legacy issue and the review petition of the department is pending before the Hon'ble Delhi High Court, in this regard. Dispute Resolution Panel -1 has directed the Assessing officer to complete the assessment as per the direction dated 28-11-2024. 4. Pursuant to the DRP direction the Assessing Officer was passed the impugned Order on 20.12.2024 whereby, the total income of the assessee was determined at Rs. 14,60,96,010/-. Aggrieved the order of the Assessing Officer the assessee filed the present appeal before the Tribunal. 5. At the outset, the Ld. AR submitted that the issue raised in the present appeal already stands decided by this Hon'ble Tribunal in assessee's own case in ITA No.373/Del/2023 and ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trademark, design, model, plan, secret formula, or process or information. Thus, the impugned receipts of the assessee from its clients in India cannot be regarded as 'Royalties' under the provisions of Article 13 of the India-UK DTAA. Support may be drawn by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. vs. CIT (2021) 125 taxmann.com 42 (SC)/432 ITR 471 (SC). 13. Further the assessee does not provide access to any database to its clients but only access to reports requisition by the client in electronic form. Provision of online access of the report to its client is limited to providing access to the specific report providing relevant facts for the concerned candidates captured during the course of validation. Nothing has been brought on record by the Revenue to refute the aforesaid claim of the assessee. In the light of these facts, in our opinion online access to background screening results cannot be construed as providing access to database maintained by the assessee. 14. It is a fact on record that the information obtained by the assessee from various sources is in the nature of factual data about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITA No.373/Del/2023 vide order dated 06.09.2023 and Hon'ble High Court of Delhi vide order dated 26.02.2024 dismissed the appeal of the Revenue by observing as under: "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 aforesaid, we find no reason to take a view contrary to what has been expressed by the ITAT." 9. Thereafter, this Hon'ble Tribunal in assessee's own case for AY 2021-22, in ITA 3880/Del/2023, vide order dated 27.06.2024, while relying on aforesaid orders held that the background screening services provided by the assessee does not quality as royalty. The relevant findings reproduced as under: 8. We find that the issue raised in the present ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submissions made by the Appellant and further erred in making several observations and inferences in the assessment order, which are factually incorrect and legally untenable. 2. 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 from provision of background screening and investigation services is 'Royalty' under the provisions of Explanation 2 to Section 9(i)(vi) of the Act and Article 12 of the Double Taxation Avoidance Agreement between India and USA ("India - USA DTAA). 2.1. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that the consideration received by the Appellant for providing solutions to clients is for use of information concerning industrial, commercial, or scientific experience and same is liable to taxed as royalty. 2.2. That on the facts and circumstances of the case and in law, the Ld. AO erred in holding that Appellant maintains database and provides access to its database hosted on its servers to its clients on payment basis. Therefore, use of or right to use of server also amounts to use of equipment and the same is liable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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