TaxTMI 
TaxTMI 
2020 (1) TMI 124
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....nces of the case and in law, the DRP erred in confirming the action of the Assessing Officer in characterizing subscription revenue received by the appellant in the nature of royalty or fee for technical services under the Act and under the Indian-United Kingdom Tax Treaty. Without prejudice to the above, based on the facts and circumstances of the case and in law, the DRP has erred in facts and in law in not applying the provisions of the Article-13(6) of the treaty, despite the fact that the Assessing Officer has himself adjudicated that the appellant has a Permanent Establishment in India." 4. As could be seen from the grounds raised, the issue involved in these grounds pertain to the nature and character of subscription revenue received by the assessee from the customers in India and without prejudice claim of the assessee regarding applicability of Article-13(6) of the India-United Kingdom (UK) Tax Treaty to such revenue insofar as to bring to tax only the royalty income attributable to the Permanent Establishment (PE) in India. 5. We have heard the rival contentions and perused the material on record. Identical issues arising in assessee's own case in assessment year 2014....
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.... In this context, it is necessary to reproduce the submissions made on behalf of the assessee in this regard. "8. The learned A.R. of the assessee referred to the decision of the ITAT Mumbai in assessee's on case for assessment years 2008-09 and 2009-10 to submit that although the issue has been decided against the assessee in so far as the issue of PE and nature of income in the light of the services rendered by the assessee in India, yet the findings of the ITAT in so far as applicability of Article 13(6) of DTAA between India and UK is contrary to its own finding that the assessee is having PE in India. Therefore the decision requires reconsideration and accordingly, vehemently argued on the issue of taxability income. The learned A.R. further submitted that once the AO held that there is a PE in India, then the income of the assessee from revenue generated in India should be taxed under Article 13(6) of the India-UK tax treaty, but the AO has taxed the income under the provisions of Section 115A of the Act. Therefore it was submitted that once there is no dispute about the existence of PE and also the fact that the assessee has not taken any ground challenging the findings of....
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....no need to go into the question of assessee having PE in India and applying Article 13(6) of the India-UK Tax Treaty to determine the income attributable in India. The relevant portion of the order is extracted below: - "11. We have considered the rival submissions as well as relevant material on record. The assessee has entered into a contract with Indian clients for providing its foreign exchange deal matching system services namely dealing 2000-02. The clients of the assessee are mainly Indian Banks. The services are provided against the monthly charges as per the agreement. In order to provide the service and access to the foreign exchange deal matching system, the assessee has also entered into agreements with its Indian Subsidiary namely Reuters India Pvt. Ltd in short (RIPL). The said agreements are called as promotion service agreement as well as advertising and marketing service agreement both dated 20.11.2006. The terms and conditions of the services provided to the Indian subscribers are stipulated in the Reuters Trading Service agreement (in short RTS agreement). The agreements are executed in accordance with the Reuters Business Principles reduced in writing being ....
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.... that the appellant is a foreign company incorporated in Hongkong and carried on business of providing private satellite communications and broadcasting facilities to the clients with whom the appellant had entered into agreement are not resident of India. The appellant had merely given access to a broadband available with the transponder which could be utilized for the purpose of transmission of signals to the customers. Thus it was found by the Hon'ble High Court that the data sent by the telecast operator does not undergo any change for improvement through the media of transponder. Since the transponder was in control and used by the appellant/transponder owner and it does not vest with the telecast operator/TV channels, therefore, the Hon'ble High Court has held that the process carried on in the transponder in receiving signals and retransmitting the same, is an inseparable part of the process of the satellite and that process is utilized only by the owner of the transponder who is in control thereof and, therefore, there was no use of process by the T.V. channels. Moreover, no such purported use has taken place in India as both the assessee and the broadcaster/T.V. channels a....
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....n arises whether the amount received by the assessee is Royalty or FTS income under the provisions of DTAA. The definition of royalty and fee for technical services has been provided under Article -13(3) and (4) as under:- 3 "For the purpose of this Article, the term "royalties" means: (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, tape pr other means ITA Nos. 1393 & 2219/Mum/2016 M/s. Reuters Transaction Services Ltd. 10 of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial commercial or scientific equipment work, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. 4. For the purpose of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "....
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....so long as Subscriber receives the service to which the software relates, to install and use the software at the site solely in the ordinary course of its own business unless otherwise set forth in this Agreement." 15. Even the said license can be sub-licensed by the subscriber with the prior consent of the assessee as per clause 9.5 as under:- "9.5 Upon Reuters' prior written consent, subscriber may sublicense its license to use Development Tools to a Developer for the sole purpose of carrying out the development work described in clause 9.2 for the subscriber and only if subscriber ensures that the developer (a) Is made aware of any complies with the provisions of the agreement. (b) Does not re-use in any way the development work carried out for subscriber; (c) becomes a mamber of Reuters Developer Partner Program (or any successor program) and signs the Retuers Trading Application Partner Agreement (or any successor agreement)." 16. As per the Reuters license principles interactive features of the system includes messaging, chatroom, bulletin board or those that allow interactivity between the users. Hardware / software and related documentation supplied by the asses....
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....stalled at the site of the subscriber to facilitae the connectivity with the assessee's system/reuter located in Geneva. The portal design having the system of matching the request of the clients of the Assessee is hoisted on its server. The system which is a complex, commercial device /apparatus provides a gateway for processing request of the clients and makes available the matching counter request and thereby ensures the transactions of purchase and sale of foreign exchange between the two counter parts of the clients. Therefore, the portal having system of matching the request along with the computer and internal access to the clients constitute integrated commercial equipment which performs complex functions of processing the request, providing information and facilitates the transaction of purchase and sale of foreign exchange by matching the demand and supply. The platform of transacting the purchase and sale is commercial equipment allowed to be used by clients/ subscribers for commercial purposes. The payments made by Indian clients/subscribers to the Assessee for use and right to use of such equipment and information for processing their request of purchase and sale of fo....
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.... the Assessee under license. Indian clients make use of the copyright software along with computer system to have access to the requisite information and data on this portal hoisting on the server of the Assessee. Accordingly, by 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 amount to imparting of information concerning technical, industrial, commercial or scientific equipment work and payment made in this respect would constitute royalty. 18. As we have given the finding that the income received by the assessee from the Indian Banks is in the nature of royalty, therefore, the other issues of fee for technical services becomes academic and we do not propose to decide the same. Further, though the assessee has not raised any specific ground on the issue of PE, however, the Ld. Counsel for the assessee has submitted that even if the Indian subsidiary of the assessee constitute PE or otherwise the assessee has PE in India in that case para 6 of Article 13 of DTAA will apply and the royalty or fee for technical services is assessed ....