TaxTMI 
TaxTMI 
2018 (11) TMI 1107
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....ees for technical services as per Explanation 2 to section 9(1)(vii) of the Income tax Act, 1961; and b. It is also fees for technical services as per the DTAA between India and U.K since a "process" is made available to the assessee. 2. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the assessee does not have Permanent Establishment in India (PE) without appreciating the fact that communication network in India, Reuters Dealing 2002, is owned and is at the disposal of the assessee. 3. On the facts & circumstances of the case & in law, and without prejudice, the Ld. CIT(A) has erred in holding that the payment was in the nature of "royalty". The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the A.O be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." Further, the A.O has also filed certain additional grounds of appeal, which read as under : "(1) Without prejudice to the two grounds raised earlier, on the facts and in circumstances of the case and in law, the Ld. CIT(A) should have held that the revenue earned by the assessee....
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.... are made available to the subscribers in terms of the contract. Further, the payment of fees for the aforesaid service is made directly by the subscribers to the assessee in foreign exchange. 3. During the course of the assessment proceedings, it was observed by the A.O, that the assessee had in its return of income claimed that the fees earned by it from rendering the aforesaid services was governed by the provisions of Article 7 of the India-U.K tax treaty dealing with taxability of business profit. As per Article 7 of the tax treaty, the business Profits of a resident of U.K would be taxable in India, only if the U.K resident has a "Permanent Establishment" (for short "P.E") in India and the business profits are attributable to such P.E. It was the claim of the assessee that as it was rendering the "Reuters Dealing 2000-2" services from outside India and did not have a PE in India in terms of Article 5 of the Tax Treaty, thus, the revenues earned from rendering of the services during the year under consideration were not liable to be taxed in India by virtue of Article 7 of the said India-U.K tax treaty. It was in the backdrop of the aforesaid conviction, that the assessee had....
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....vices were not in the nature of FTS and the assessee was not having a P.E in India, thus, its income would not be taxable in India. 8. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Departmental representative (for short "D.R") at the very outset of the hearing of the appeal took us through the additional grounds of appeal and sought liberty for admission of the same. It was submitted by the ld. D.R that the issue raised in the additional grounds of appeal was squarely covered by the order of the Tribunal in the assesses own case for A.Y 2008-09 and A.Y 2009-10 viz. Reuters Transaction Service Ltd. Vs. Deputy Director of Income-tax (International taxation)-2(1), Mumbai (copy placed on record); dated 18.07.2014. It was the contention of the ld. D.R that the Tribunal while disposing off the appeals of the assessee for the aforementioned years, had vide its consolidate order held that allowing the use of software and computer system to have access to the portal of the assessee for finding relevant information and matching their request for purchase and sale of foreign exchange amounted to imparting of information concernin....
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....venue for admission of the additional grounds of appeal. It was submitted by the ld. A.R that during the course of the assessment proceedings the A.O had called upon the assessee to explain as to why the fees received by it may not be characterised as "royalty" and "fees for technical services". The ld. A.R submitted that it was only after necessary deliberations that the A.O had consciously concluded that the fees received by the assessee was in the nature of FTS. In the backdrop of the aforesaid facts, it was the contention of the ld. A.R that now when the A.O had taken a view and characterised the fees received by the assessee as FTS, thereafter it would not be permissible on his part to seek recharacterisation of the same as "royalty" in the garb of an additional ground of appeal before the Tribunal. In support of his contention that raising of additional ground of appeal in an attempt to build up a new case before the Tribunal cannot be permitted, the ld. A.R relied on the order of the "Special bench" of the ITAT, Mumbai in the case of ACIT Vs. DHL Operations BV (2007) 108 TTJ 152 (SB)(Mum). Further, it was the contention of the ld. A.R that in case the order passed by the A.O....
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....submitted that the CIT(A) had rightly concluded that as the fees received by the assessee from rendering of services was not in the nature of FTS, thus, the same in the absence of a P.E of the assessee in India would not be taxable in India. 10. We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We shall first deal with the admissibility of the "additional grounds of appeal" raised by the revenue before us. The revenue by raising the "additional grounds of appeal" has assailed the order of the CIT(A) on the ground that he had erred by failing to conclude that the revenue earned by the assessee by providing Reuters Dealing 2000-2 services to its customers was to be brought to tax as "royalty", both under the provisions of the Income-tax Act and the India-U.K tax treaty. We are unable to persuade ourselves to allow the raising of the aforesaid additional grounds of appeal by the revenue. We find that the A.O during the course of the assessment proceedings by seeking to characterise the fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers as....
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....the assessee for A.Y 2008-09 and A.Y 2009-10 viz. Reuters Transaction Service Ltd. Vs. Deputy Director of Income-tax (International taxation)-2(1), Mumbai, has held that the fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers would constitute "royalty", thus the issue involved for the year under consideration viz. A.Y 2001-02 was squarely covered by the said order. We are unable to accept the aforesaid contention of the ld. D.R. The ld. A.R had placed on record a "Chart" which reveals that the "agreement" relevant to the aforesaid years viz. A.Y 2008-09 and A.Y 2009- 10 was materially different from the "agreement" prevalent for the year under consideration i.e A.Y 2001-02. We thus, are of the considered view that as the adjudication of the "additional grounds of appeal" raised by the revenue would require further investigation of facts, thus the same on the said count also cannot be admitted. 12. We shall now advert to the contentions raised by the authorised representatives of both the parties in context of characterisation of fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers as F....
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....ch as banks etc. to affect deals in spot foreign exchange with other foreign exchange dealers. The system only provides a platform for the forex dealers to affect deals with other subscribers by entering orders into the system, which may be matched directly by the system with orders entered by other subscribers. We find that the assessee which operates its business through its branch in Geneva where its main server is located does not "make available" any technical knowledge etc. to its customers by rendering the services. We thus, are in agreement with the observations of the CIT(A) that as the rendering of the services by the assessee does not "make available" any technical knowledge etc. to the customers, hence the fees received from providing of such services would not fall within the sweep of the definition of FTS as per Article 13 of the India-U.K tax treaty. The Ground of appeal No. 1 of the revenue is dismissed in terms of our aforesaid observations. 14. We shall now advert to the issue as to whether the CIT(A) is right in holding that as the assessee does not have a P.E in India during the year under consideration, thus the fees received from rendering of the Reuters Deal....
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....AY 2002-03 18. We shall now take up the appeal of the revenue for A.Y 2002-03. The revenue assailing the order of the CIT(A) has raised before us the following grounds of appeal: "1. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the payments received by the assessee from subscribers in India is not fees for technical services, without appreciating the fact that: a. It is in the nature of fees for technical services as per Explanation 2 to section 9(1)(vii) of the Income tax Act, 1961; and b. It is also fees for technical services as per the DTAA between India and U.K since a "process" is made available to the assessee. 2. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the assessee does not have Permanent Establishment in India (PE) without appreciating the fact that communication network in India, Reuters Dealing 2002, is owned and is at the disposal of the assessee. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the A.O be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." Fu....