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2018 (8) TMI 1129
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....(2009) 222 CTR 0086 : (2009) 313 ITR 0187 though proviso to section 209(1)(d) is introduced in the Act w.e.f. 01.04.2012. 2. Whether on the facts and in the circumstances of the case and in law, after introduction of proviso to section 209(1)(d) interest u/s. 234B is chargeable even in the cases where tax is not deducted by the person responsible for deducting tax while making payment. 3. The Appellant prays that the order of the DRP be set aside on the above grounds and the draft order of the Assessing Officer be restored." The following grounds were raised by the assessee in its appeal: "1. On facts and circumstances of the case and in law, the Hon'ble DRP erred confirming the action of the learned AO in characterising subscription revenue received by the Appellant, in the nature of 'Royalty' or 'Fees for technical services' under the Income-tax Act, 1961 ('the Act') and under the India-United Kingdom tax treaty ('the treaty'); 2. Without prejudice to the above, based on the facts and circumstances of the case and in law, the Hon'ble DRP has erred in fact and in law in not applying the provisions of Ar....
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....om its subscribers in India are in the nature of business profit and as per Article 7 of the India-UK tax treaty business profits of a tax resident of UK are taxable in India, only if it has a Permanent Establishment (PE) in India and in such case only to the extent of profits that are attributable to the PE in India. The assessee further claimed that for the year ended 31.03.2012 it has no PE in India as contemplated under Article 5 of the DTAA and accordingly its revenue is not liable to be taxed in India in terms of the provisions of the DTAA. 5. During the course of assessment proceedings the AO, after considering the submissions of the assessee and also considering the India-UK Tax Treaty, observed that the assessee is having a PE in India and the activities being carried on by the assessee in India is not squarely covered under Article 13 of the treaty between India and UK. Therefore the revenue earned by the assessee is liable for taxation as royalty. The AO further observed that though it has been held that assessee is having a PE in India, but the income is not computed as provided under Article 13(6) of the India-UK treaty as the assessee has disputed the existence of ....
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....o service only in the case where the existence of PE of non-resident is not in dispute. In this case the assessee company has contended that it has no PE in India, therefore following the order of the ITAT no directions are being issued to the AO on this ground of objection. Similarly, in so far as computing the income chargeable in India in the hands of the assessee, the AO has charged 20% tax in the draft assessment order instead of 10% as prescribed under Section 115A of the Act. Therefore directed the AO to verify the claim of the assessee in the light of the agreements submitted by the assessee and accordingly apply 10% tax. In so far as levy of interest under Section 234B of the Act the DRP, by following the decision of the Hon'ble Bombay High Court in the case of DIT vs. NGC Network Asia LLC (2009) 222 CTR 86, held that duty is cast on the payer to deduct tax at source, on failure of the payer to do so, no interest can be imposed on the payee assessee under Section 234B of the Act. Accordingly, directed the AO to modify the draft assessment order excluding interest levied under Section 234B of the Act. Aggrieved by the order of the DRP, the assessee as well as Revenue ar....
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....up with the claim that the services rendered to the Indian banks are through its PE, para 6 of Article 13 cannot be applied. Since, there is no change in the facts during the year under consideration from that of already considered by the ITAT for earlier years, there is no reason to deviate from the view taken by the Tribunal. In so far as the issue of chargeability of interest under Section 2w34B of the Act, the learned D.R. submitted that after introduction of proviso to Section 209(1)(d), interest under Section 234B is chargeable even if tax is not deducted by the person responsible for deducting tax while making payment. The DRP, without considering the proviso to section 209(1)(d) directed the AO to delete interest levied under Section 234B of the Act, which is incorrect. 10. We have heard both the parties and perused the material on record. The issue of characterising subscription revenue of the assessee whether it is in the nature of royalty or fees for technical services under the Income Tax Act or under the India-UK tax treaty and applicability of provisions of Article 13(6) of the tax treaty between India and UK has been already considered by the ITAT. The Coordinate ....
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....on are paid to the RIPL. The assessee is remunerating the RIPL for the services of marketing and installation of the equipment on behalf of the assessee to its clients. Thus though the equipments and other installation and connectivity are installed and provided through RIPL but the charges for the entire services and facility are paid by the clients to the assessee and not to the RIPL. The Ld. Counsel has also submitted that it is an integrated service rendered to the clients from its server situated in Geneva, therefore, there is no control or possession of the Indian clients to use or right to use the server of the assessee situated outside India. It is also contended that the assessee is rendering the services to the Indian clients by using its own server situated in Geneva and, therefore, in view of the decision of Hon'ble High Court of Delhi in the case of Asia Satellite Telecommunications Co. Ltd (supra), the charge/fee received by the assessee in rendering the services is not royalty. He has also strongly relied upon the decision of Hon'bld Andhra Pradesh High Court in the case of Sanofi Pasteur Holding SA (354 ITR 316)(supra). 11.1 It is pertinent to note that in ....
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....oth purchaser and seller find the respective match for the intended transaction of purchase and sale. Therefore, the decision of Hon'ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd (supra), is not applicable in the facts of the case and particularly when the said decision is based on the finding that the transponder capacity has only a media for uplinking and downlinking of signals of the broadcaster and TV operators to be transmitted to their customers without any manipulation for improvement, whereas in the case in hand, the assessee is providing not only media but also the necessary information and data which process the order of the clients and find the corresponding match to meet the order. 12. One more aspect which was involved and relevant for deciding the issue in the case of Asia Satellite Telecommunications Co. Ltd (supra) was the income deemed to accrue or arise in India on account of lease of transponder capacity to TV channels which is not in dispute in the case before us as the income in question has been received by the assessee from the Indian clients. The limited issue before us is the nature of income whether it is business i....
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....nce, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design." 13. The payment received by the assessee against the services rendered to the Indian Banks whether falls under the term royalty or fee for technical services has to be decided by considering the definition as provided under the treaty and the real nature of the service provided in terms of the various contracts entered into between the parties. The various terms of agreement are defined under clause 1 of the RTS agreement and some of the relevant terms are defined as under:- "Application Programming Interface(API) means a subscriber interface for use with the related service; Autoquote Subscriber Interface means a subscriber interface for use with the Autoquote service" Services Means the product, materials or services provided by Reuters to Subscriber from time to time purusant to the Agreement Site Means my location of subscriber to which Reuters supplies access to the services directly; Software Means software, including APIs and related documentation provided by Reuters;" ....
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.... Services priced, postitioned and packaged for users. For as long as they take the relevant service, users can: a) View, manipulate and create Derived Data fron information for their individual use: b) Store information, Manipulated Information and/or Derived Data for their individual use; c) Distribute and Redistribute limited extracts of information, Manipulated information and/or Derived Data to anyone, provided this is doen in a non systematic manner and (except for derived data) is attributed to Reuters: d) Systematically Distribute Information and Manipulated Information if you comply with paragraph 2.4; and e) Systematically Distribute and Redistribute certain derived Data if you either (i) Pay the relevant Derived Date Redistribute Service fees; or (ii) Sent the relevant Derived Data to us as Contributed Data. Provided that, in each case, you pay any related charges specified in the Contract and such Redistribution does not form part of a saleable product. The rights in the paragraph 2.1.1(e) are granted only in respect of specified sources of information and are subject t further conditions imposed by ....
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.... the need of the subscribers by providing the matching party. The entire system along with the matching system and connectivity involves processing of subscriber's business queries and orders and finding out the matching reply in the shape of counterpart demand or supply for execution of the transaction of purchase and sale of foreign exchange. This sytem of the assessee is available only to the subscribers who have been given the access to the information concerning commercial as well as processing the orders placed by the subscribers. It is the term of the contract/agreement that the subscriber is given the license to use the software running the system. 17.2 As per the terms and conditions stipulated in the agreement the Indian clients/subscribers accept the individual non-transferable and non exclusive license to use the licensed software programme for the purpose of carrying out the purchase and sale of foreign exchange. Thus, what is granted under the agreement is license to use the software for internal business of Indian clients. Further, the Assessee also permitted the Indian clients to sub-license the software with prior permission of assessee. It is pertinent to....
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....E of a non resident is not in dispute. In the case in hand the assessee has not come up with the claim that the services rendered to the Indian Banks are through its PE. Rather the assessee has vehemently contended that it has no PE in India. In these facts and circumstances, the provision of para 6 of Article -13 canot be invoked in case when the receipt is found as royalty in terms of Article - 13(3) of the DTAA and assessee has not admitted any PE in India." 11. The facts remained unchanged. The assessee failed to bring on record any evidence to prove that the finding of facts recorded by the ITAT for earlier year is incorrect. Therefore considering the facts and circumstances and also respectfully following the decision of the ITAT in assessee's own case for earlier years, we are of the considered view that subscription charges received by the assessee from the customers in India is in the nature of royalty. We further are of the opinion that once the receipt in question has been decided as royalty in nature, then there is no need to go in to the question of assessee having PE in India. Article 13(6) can be pressed into service only in the case when the existence of PE of no....