TaxTMI 
TaxTMI 
2019 (6) TMI 532
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....ling bandwidth services was not liable to tax in India, as Royalty as per the provisions of the Income-tax Act, 1961 ( ' the Ac t ' ) and the India - Singapore Double Taxation Agreement ('DTAA')? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) er red in conc luding that the payments made by the assessee to RJIPL for provision of bandwidth services wil l be in the nature of business prof its and cannot be classif ied as Royalty either under the Act or the India-Singapore DTAA ? 3. The Appellant prays that the- order of the CIT(A) be set aside on the above ground(s) and of the Assessing Officer be restored. 4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. Briefly stated, the assessee is a company incorporated in India and is engaged in the business of rolling out telecom services in India. In order to avail bandwith services the assessee had entered into a "bandwith services" agreement (for short "agreement") dated 01.06.2015 with Reliance Jio Infocomm Pte. Ltd. (for short "RJIPL") i.e a company incorporated and a tax resident of Singapore. R....
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....nt of a 'fee' for use of a standard facility that was provided to all those willing to pay for it, therefore, the same could not be held as fees received for rendering of technical services. In support of his aforesaid contention reliance was placed by the assessee on the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Bharti Cellular Ltd. (2010) 193 taxman 97 (SC). Alternatively, it was the contention of the assessee that as rendering of the bandwith services by RJIPL to the assessee did not "make available" any technical knowledge or experience to the assessee, thus the same on the said count also could not be brought within the sweep of the definition of FTS under Article 12 of the India- Singapore DTAA. Apart there from, it was submitted that the payment made by the assessee to RJIPL could also not be construed as "royalty" under the I-T Act, as well as under the India-Singapore DTAA. In order to buttress his aforesaid claim, it was submitted by the assessee that neither RJIPL had in any way transferred all or any rights in respect of any "process" to the assessee, nor was the assessee making use of any such "process". In sum and substance, it was the claim of the....
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....erved that as RJIPL by providing bandwith services did not "make available" any technical knowledge, experience, skill, knowhow or process to the assessee which was simply availing the said standard facility, thus the same could also not be construed as FTS under the India-Singapore tax treaty. 5. It was further observed by the CIT(A) that the assessee had only received an access to service and not any access to any equipment that was deployed by RJIPL for providing the bandwith services. Apart there from, it was observed by the CIT(A) that the assessee also did not have any access to any process which helped in providing such bandwith services. In fact, it was noticed by him that all infrastructure and process required for provision of bandwith services was always used and had remained under the control of RJIPL and was never given either to the assessee or to any person availing such services. Further, it was observed by the CIT(A) that as the process involved to provide the bandwith services was not "secret" i.e the Intellectual Property Rights (for short "IPR") in the process was not owned/registered in the name of RJIPL, but was a standard commercial process followed by the....
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..... A.R took us through the definition of 'royalty' as envisaged in Explanation 2 to Sec.9(1)(vi) of the I-T Act. It was averred by the ld. A.R that as the consideration was not paid by the assessee for the use or right to use any industrial, commercial or scientific equipment of RJIPL, thus the same was not covered by the definition of "royalty" as defined in clause (iva) to Explanation 2 of Sec.9(1)(vi) of the I-T Act. Apart there from, the ld. A.R in order to buttress his claim that the payment made by the assessee for the bandwith services also did not fell within the realm of the definition of the term 'royalty' under Article 12(3) of the India-Singapore DTAA, took us through the same. In fact, the ld. A.R in order to fortify his aforesaid contention submitted that unlike the definition of term "royalty" as used in India-Hungary DTAA wherein "transmission by satellite, cable, optic fibre or similar technology..." was specifically included within the definition of "royalty" under Article 12(3) of the said tax treaty, no such mention was available in the definition of the same as envisaged in the India-Singapore Tax Treaty. It was further submitted by the ld. A.R that though the l....
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....lecommunication network) and other sophisticated scientific apparatus was deployed and used in Indian Sea and Indian territory called 'landing points systems'. It was submitted by the ld. D.R that as RJIPL would require association of domestic companies in order to work as an intermediary for interconnecting offshore sea cable network and associated infrastructure/equipment systems in India, therefore, it could safely be concluded that it had a fixed place of business in India. In the backdrop of his aforesaid contention, it was submitted by the ld. D.R. that the observations of the CIT(A) that all infrastructure and process required for providing of bandwith services was always used under the control of RJIPL and the same was never given to the assessee or to any other person availing such services, was found to be incorrect. Apart there from, it was the contention of the ld. D.R that as the assessee company had the "right to use" and had used "the process" during the course of bandwith network transmission/receiving bandwith services, therefore, as per Article 12 of the DTAA and Explanation 5 and Explanation 6 of Sec. 9(1)(vi) of the I-T Act, the payment made by the assessee to R....
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....cientific equipment, nor towards use of (or for obtaining right to use) any secret formula or process, therefore, the same could not be classified as payment of "royalty" by the assessee. Insofar the ld. D.R had tried to press into service Explanation 6 to Sec. 9(1)(vi), in order to drive home his contention that the payment made by the assessee to RJIPL for availing the bandwith services would fall within the sweep of 'royalty' is concerned, we are unable to persuade ourselves to accept the same. In our considered view, the amendment in Sec. 9(1)(vi) will not have any bearing on the definition of 'royalty' as contemplated in the India-Singapore DTAA. Our aforesaid view is fortified by the order of the Hon'ble High Court of Bombay in the case of The Commissioner of Income-tax (IT)-4 Vs. M/s Reliance Infocomm Ltd. (ITA No, 1395 of 2016, dated 05.02.2019). The Hon'ble High Court in its aforesaid judgment had after referring to the judgments of the Hon'ble High Court of Delhi in the case of DIT Vs. New Skies Satellite BV (2016) 382 ITR 114 (Del) and CIT Vs. Aktiongesellschaft (2009) 310 ITR 320 (Del), had after deliberating on the amendment made available on the statute by the Explana....