TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 432
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....s a tax resident of USA. It belongs to AC Nielson Group, which is one of the world's leading business, management & market research companies. The AC Neilson group also offers other marketing information services tailored to the needs of industries like pharmaceuticals, financial services, telecommunications etc. The AC Neilson group is represented in India through its two legal entities viz., M/s ACNielson Org-Marg Private Ltd ("ACNOM") for customized research services & retail measurement services and M/s ACNielson Research Services Pvt Ltd ("ACNRS") for customized market research services. The assessee herein entered into a General Service Agreement (GSA) in the year 2003 with both the Indian entities cited above. The nature of services to be provided are described as under in the agreement:- "Group Services and Regional Group Services, as they may be amended from time to time , include but are not limited to : a. Development and determination of short and long term business strategies; b. Overall management and coordination in relation to general policies and strategies per country and per division ; c. maintenances of external relationships, to the extent that these servic....
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....ion. However, the assessee is not having a permanent establishment in India as defined in Article 5 of the Indo-USA Tax Treaty and therefore its income is not taxable in India by virtue of Article 7 of the Indo-USA Tax Treaty. In view of the above, the Mark-up of 10% on the reimbursement of expense would also be not taxable". 3.2 However, the AO did not agree with the contentions of the assessee. The view expressed by the AO in AY 2004-05 are discussed hereunder. The AO noticed that the assessee company calls for certain copyrighted products from the US Company, viz., Questionnaires etc to do the job for the client. Further the assessee company also gets the benefit of on-going research conducted and also the research products of US company in the field of financial management, HR management etc. He further observed that the products supplied by US company are copyright protected and they are provided for non-exclusive usage by the assessee herein for the purposes for which they are provided. In this connection, the AO referred to certain definitions given under Copyright Act, 1957. The AO further referred to the decision rendered in the case of E.P.W.Da Costa Vs. Union of India....
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....he parties, we notice that there is no dispute between the parties with regard to the fact that the question taxability of the consideration received by the assessee needs to be examined in terms of DTAA entered between India and USA. However, from the discussions made supra, it may be noticed that the assessing officer has proceeded to examine the taxability of the impugned consideration by referring to the provisions of sec. 9(1)(vi) of the Income tax Act, Copyright Act and certain decisions rendered in some other context. In fact, the AO took the view that the entire consideration is taxable as "Royalty" in AY 2004-05, but changed his view in the subsequent two years. In respect of the assessment year 2004-05 also, the assessing officer has furnished a remand report before the Ld CIT(A), wherein he had suggested that the impugned receipt is required to be treated as both "Royalty" and "Fees for included services". 6.1 The Ld CIT(A) has, however, tried to examine the nature of receipt in terms of Indo-US treaty, but he again ended with confusion by expressing different views. For the sake of convenience, we extract below the observations made by the Ld CIT(A) in his order passed....
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....he India-USA DTAA. Reliance is placed on recent decision of Delhi High Court in DR Hutarew & Partner (I) Pvt Ltd. vs. ITO Ward-10(4), New Delhi (ITA NO. 2797/De1/2004) (AY-2001-02) (dtd 5.9.2008) wherein Held, since the non-resident was providing a client-oriented specific technical solution after analyzing data with the aid of high-end software, it cannot be equated with any other general services provided by any service provider. Then an explanation has been appended to clause (vii) of section 9(1) of the Act with retrospective effect that if services have been used by the assessee within India, then it is immaterial whether the nonresident has a residence or place of business or business connection in India as the sum paid to non-resident would be included in the income, which will be deemed to have accrued to the non-resident. And it will be subject to TDS provisions - Assessee's appeal dismissed. This ratio of this decision is squarely applicable in the case of assessee as the appellant. 1.3.5. During the Assessment Year under consideration, the GSA expenses charged to Indian companies comprised of the following broad expenseheads, which has been recovered from the Indian....
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....subject:- * DDIT v/s. Preroy A.G. [(2010) 39 SOT 187 (Mum.)] wherein it was held that provision of strategic consultancy services would not amount to provision of 'know-how' services accordingly the receipt could not be termed in the term of royalty. * DCIT v/s. Hyderabad Industries Ltd. [(2008) 24 SOT 98 (Hyd.)] wherein it was held that obtaining of market information would not amount to royalty as there is not exclusive right over such information. * Cushman & Wakefield(S) Pte. Ltd. [(2008) 305 ITR 179 (AAR- New Delhi)] wherein it was held that referral fees received for provision of information of potential customers would not be term as "royalty' or 'fees for technical services'. * KPMG v/s. JCIT 1(2013) 142 ITD 323 (Mum-Trib.) wherein it was held that fees paid to professionals who did not have any permanent establishment in India and whose services were not in the nature of make available, technical knowledge, experience, know-how or process would not be taxable in India. Arguments on payments not being in the nature of "fees for included services" * The receipts cannot be regarded as 'fees for included services' as defined in Article 12(4) o....