TaxTMI 
TaxTMI 
2022 (3) TMI 140
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....nternational Taxation-4(1)(1) Mumbai (hereinafter referred to as ld. AO). 1.1. As identical issues are involved in both the appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. Let us take up the appeal for A.Y.2010-11 first. 2. The assessee has raised the following grounds of appeal:- 1. In holding that the amounts received by the Appellant under the Training and Computer Systems Agreement ('TCSA') on account of conducting core managerial training programs for managerial employees of the Indian hotels qualify as 'fees for technical services' under Article 12(5)(a) of the India-Netherlands tax treaty. 2. In holding that conducting core managerial training programs for managerial employees of the Indian hotels by the Appellant qualify as 'technical or consultancy services' without considering the training material submitted with the CIT(A) vide submission letter dated March 3, 2016; which evidences that the training programs conducted by the Appellant do not qualify as 'technical or consultancy services' under Article 12(5) of the India-Netherlands tax treaty. 3....
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....amongst hotels on a fair and reasonable basis. No separate fee of any other form of mark up was ever charged by or was payable to the assessee for such services. The assessee has entered into agreements with Viceroy Hotels Ltd., Hyderabad and Chalet Hotels Ltd., Mumbai "Indian Hotels" for conducting training programmes for employees of Indian Hotels and providing services to Indian Hotels. The assessee claimed that consideration received for these services from Indian Hotels are in the nature of reimbursement of expenses incurred by the assessee. Hence, the assessee has not offered any income which is taxable in India. During the year under consideration, the assessee has received the following amounts from Indian Hotels:- Indian Hotels Training and Computer Reservation Receipts (in Rs.) Chalet Hotels Limited, Mumbai 2,268.272 Viceroy Hotels Limited, Hyderabad 6,965,793 Total 92,34,065 3.1. The ld. AO show-caused the assessee to explain as to why the amount received for training and computer systems should not be treated as its income. The assessee gave a detailed reply in response to show-cause notice. The ld. AO treated the income received by the assess....
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...., had neither been dislodged before the lower authorities, nor anything has been placed on record before us by the ld. D.R, which could persuade us to hold otherwise. We find ourselves to be in agreement with the view taken by the ITAT, Bangalore in the case of Veeda Clinic Research (P.) Ltd. (supra), that in order to successfully invoke the coverage of training fees by 'make available' clause in the definition of technical services, the onus is on the revenue authorities to demonstrate that the services do involve transfer of technology. We have further perused the case laws relied upon by the ld. A.R to impress upon us to return a finding that the consideration received by the assessee from providing training services being in the nature of managerial/leadership training, thus could not have been assessed as FTS in the hands of the assessee, as under: (i) Llyods Register Industrial Services (India) P. Ltd. v. ACIT (2010) 36 SOT 293 (Mum): The Tribunal observed that the expenses incurred by the assessee which was engaged in the business of survey of ships, on the training of its employees who would inspect various mechanical and electrical equipments in t....
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....l Construction Ltd. (supra); (iv) Oberoi Hotels (India) (P.) Ltd. (supra); and (v) Dr. Sudhir Kumar Solanki (supra), to support his view that 'technical services' included 'professional services'. We find substantial force in the contention of the ld. A.R that in case training services rendered by the assessee to the Indian Hotels were to be construed as professional services, than the same would fall within the sweep of Article 14 of the India-Netherland tax treaty, which exclusively pertained to "Independent Personal Services" and would automatically be excluded from Article 12 dealing with "Fees for technical services". Still further, a perusal of Article 14 reveals that the same could be assessed in the contracting state i.e India, subject to satisfaction by the assessee of either of the two conditions therein provided, viz. (a) fixed base for performing of the professional activities in the contracting state; or (b) stay for a period or periods exceeding 183 days in the fiscal year. 12. We shall now advert to the observations of the CIT (A) that as the Training and Computer systems agreements (for short 'TCSA') entered into by the assessee with....
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....deration received by the assessee for providing training services to the Indian Hotels could not be held as FTS under Article 12(5)(a) of the India-Netherland tax treaty. We are of the considered view that in terms of our aforesaid observations, as neither the training services rendered by the assessee to the Indian Hotels could be held to be technical services, nor the same could have been characterised as "ancillary and subsidiary" services as per Article 12(5)(a), hence the consideration received by the assessee for rendering the training services could not be held as FTS in its hands. We thus, not being persuaded to subscribe to the view taken by the CIT (A) that the consideration received for providing training services to the Indian Hotels was chargeable as FTS in the hands of the assessee, set aside his order. The Ground of appeal No. 2 is allowed in terms of our aforesaid observations. 3.3. In respect of computer systems wherein the ld. AO had treated the income received thereon as "Royalty" in A.Y.2009-10, the Tribunal in A.Y.2009-10 reported in 171 ITD 381 held as under:- "13. We shall now advert to the assailing of the order of the CIT (A) by the assessee, on....
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....cessarily required to avail of to carry out trading in securities in Stock Exchange, thus such services did not amount to 'technical services' provided by Stock Exchange, as the same were not services which were specifically sought for by the user or consumer. The Hon'ble Apex Court following the aforesaid view, had thereafter observed in the case of A.P Moller Maersk A S (supra), that where the assessee, a foreign shipping company had set up a telecommunication system in order to enable its agents across globe including India to perform their role more effectively, the payment received for providing such facility was not taxable as fee for technical services. We have perused the facts of the case before us and after deliberating on the same in the backdrop of the aforesaid judicial pronouncements are of the considered view that as the access to CRS, Property Management System and Other Systems provided to the Indian Hotels by the assessee were common facilities provided to the members of the Marriott chain of hotels across the world by the assessee, and were not tailor made services to suit their specific requirements, thus the said facility could not be construed as &....
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....set aside the order of the CIT (A) holding that the consideration received by the assessee for providing of access to CRS, Property Management Services and Other Systems was chargeable as FTS in the hands of the assessee. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations. 3.4. As far as the treatment of the income received from computer reservation systems as "Royalty", this Tribunal in assessee's own case for A.Yrs. 2011-12 and 2012-13 in ITA No.5678/Mum/2016 and ITA No.764/Mum/2017 dated 09/08/2019 respectively had held as under:- 19. We have considered the submission of both the parties and perused the order of lower authorities. During the assessment the assessing officer apart from treating the treated the payment received for providing access to the computer software as FTS also treated as " software royalty" under section 9(1)(vi) as well as under Article 12(4) of India-Netherland tax treaty. The assessing officer concluded that for providing the right to use the system developed by assessee or its affiliates specifically for the Indian Hotels and also providing technical services for the maintenance and use of such system, which is anc....
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....order for assessment year 2009-10. Where further noted that the the revenue has not filed appeal against the claim of assessing officer for assessment year 2009-10 that the payments access to computer system qualify as royalty, when CIT appeal said concluded that the same qualifies as FTS. In our view the tribunal had refrain from dealing with the contention of the assessee that payment received or access to computer system could not be treated in the nature of royalty. However, during the year under consideration i.e. assessment year 2011-12, the assessing officer concluded that payment received for access to computer system qualifies as software royalty, however the learned CIT(A) concluded that such payments qualifies as brand royalty. The case of assessee throughout the proceeding either before assessing officer, landed Commissioner (appeals) as well as before the tribunal that the said receipt cannot qualify as software royalty as the amount is received to RSS to computer software/system to a copyrighted article and there is no transfer of copyright or use of copyright itself and hence cannot be taxed as royalty. Centralized regeneration system, property management system and ....
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....kia Networks OY (supra) as not amounting to acquiring a copyright in the software." 23. Further, in our view the said receipt also cannot qualify as brand royalty at the same amount is received merely access to computer software/system and such payment are clearly not related to Marriott brand. The assessing officer relied upon the order of Tribunal Six continents Hotel Inc (supra) wherein it has been held that, when, the assessee does not promote any international brand and is purely providing right to use of system and related services along with training to the Indian hotels. It is not in dispute that in relation to the services provided under the TCSA, the assessee does not undertake any brand -related activity. Therefore, any receipt to be characterised as royalty should be for the use or right to use of any intellectual property. It has to be given the meaning as per the Income tax Act and the applicable double taxation avoidance agreement. In our view each and every business receipt cannot be treated as royalty receipt. 24. Where further noted that ld. CIT-(A) while holding that payment received to access to computer system qualifies as brand royalty relied....
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....e Tribunal in assessee's own case for Assessment Year 2009- 10 on similar set of fact passed the following order: "13. We shall now advert to the assailing of the order of the CIT(A) by the assessee, on the ground that he had erred in holding that the amounts received by the assessee for providing access to the international CRS, Property Management Systems and Other Systems was ancillary and subsidiary to the enjoyment of the right "Marriott" and hence, taxable as FTS under the India-Netherland tax treaty, as well as under the Act. We find that since inception, it has been the claim of the assessee that as the providing of access to CRS, Property Management Systems and Other Systems to the Indian Hotels, were standard facilities/services, thus they could not be characterised as 'technical services' and the consideration received in lieu thereof be subjected to tax as FTS receipts. We find from a perusal of the agreement entered into between the assessee and the Indian Hotels that the assessee had made available the CRS, Property Management Systems and Other Systems for use by the Indian Hotels in their business. We find that the ld. A.R in support of his conte....
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.... the Indian Hotels by the assessee were common facilities provided to the members of the Marriott chain of hotels across the world by the assessee, and were not tailor made services to suit their specific requirements, thus the said facility could not be construed as 'technical services'. 14. We shall now advert to the observations of the CIT(A) that as the consideration received by the assessee on account of providing access to CRS, Property Management Systems and Other Systems facility was ancillary and subsidiary to the enjoyment of the right to use the brand "Marriott", thus the same would be taxable as FTS under Article 12(5)(a) of the India-Netherlands tax treaty. We are of the considered view that as observed by us hereinabove, invoking of Article 12(5)(a) and holding the consideration received by an assessee from certain "ancillary and subsidiary" technical or consultancy services rendered for the application or enjoyment of the right, property or information as FTS, itself presupposes receipt by the assessee of a consideration towards royalty as provided in Article 12(4) of the tax treaty. We are of the considered view that now when the assessee was not th....
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....ndis to A.Y.2010-11 also. Accordingly, the ground Nos. 1-3 raised by the assessee are allowed. 4. The ground Nos.4-8 raised by the assessee are supportive of ground Nos.1-3 as they are merely argumentative in nature. Accordingly, the same are also allowed. 5. The assessee has raised additional grounds on 22/10/2018. The ground No.9 raised vide additional ground was stated to be not pressed by the ld. AR at the time of hearing, as in his opinion, the same would be academic in nature. Accordingly, the said ground is hereby dismissed as not pressed. 6. The ground No.10 raised by the assessee vide additional ground is seeking direction to the ld. AO for granting correct TDS credit to the assessee. 6.1. The facts relevant for this adjudication of this additional ground are already on record before the lower authorities and hence, this additional ground raised by the assessee is hereby admitted and the ld. AO is hereby directed to grant correct TDS credit in accordance with law. Accordingly, the ground No.10 raised by the assessee is allowed for statistical purposes. 7. The ground No.11 raised by the assessee vide additional ground is for seeking deduction for primary, sec....
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....s passed by the Income-tax Appellate Tribunal, Mumbai ("ITAT) in the Appellant's own case" for AYs 2009-10, 2011-12 and 2012-13 wherein the ITAT held that the receipts are not taxable in India; 2. In holding that the receipts earned by the Appellant pursuant to the TCSA entered with the Indian hotel owners are taxable in India under the Act as well as under the India-Netherlands tax treaty; 3. In not accepting the claim of non-taxability of amounts received for conducting training programs for the employees of the Indian hotel owners; and 4. In not considering that the amounts received by the Appellant under the TCSA could at best be considered to be in the nature of business profits as per Article 7 of the India-Netherlands tax treaty and in the absence of a permanent establishment in India as per Article 5 of the India-Netherlands tax treaty, the same cannot be taxed in the hands of the Appellant. The Appellant craves leave to add, alter, vary, omit, substitute or amend any of the above grounds of appeal, at any time before or at, the time of appeal, so as to enable the Honourable Income-tax Appellate Tribunal to decide this appeal accordin....
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....er the treaty. We find that the Hon'ble Supreme Court in the case of Goetze India Ltd., reported in 284 ITR 323 had held that any claim of the assessee could be made only by way of a valid return. In the instant case, the assessee could not file a revised return within the time prescribed under the Act. It is a fact that assessee had offered the income while filing its return for A.Y.2014-15. Thereafter, during the course of assessment proceedings, in view of the subsequent development that had cropped up in assessee's own case wherein the Tribunal for A.Y.2009-10 had taken a decision in favour of the assessee on the very same taxability of receipts from training services, the assessee made a claim before the ld. AO that the said receipt should not be taxed in the hands of the assessee. We find that the decision of Goetze India categorically states in the final paragraph that the restriction of entertaining a claim otherwise than by way of valid return shall not apply to appellate authorities. Hence, we hold that the ld. CIT(A) ought to have entertained the said claim of the assessee. In any case, there is no estoppel against the statute and law is very well settled on the same. As....