TaxTMI 
TaxTMI 
2022 (3) TMI 1012
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the circumstances of the case and in law, the Learned AO and the DRP erred in holding the sum of Rs. 40,46,45,646/- as 'Fees for Technical Services' under Section 9(1)(vii) of the Act. The Appellant humbly prays that the Learned AO be directed to not treat the aforesaid receipts as 'Fees for Technical Services' u/s. 9(1)(vii) of the Act. 3. On the facts an in the circumstances of the case and in law, the Learned AO erred in considering business connection issue for the first time, which was not a subject matter at the time of appellate proceedings before the Hon'ble ITAT. While doing so, the Learned AO has not appreciated that no directions were provided by the Hon'ble ITAT with respect to the same. The Appellant humbly prays that the action of the Learned AO in considering the business connection issue be held as bad in law since remand proceedings are conducted beyond the directions provided by the Honourable ITAT. 4. Without prejudice to the above Ground, the Learned AO and DRP erred in holding the sum of Rs. 40,46,45,646/- by SCB India to the Appellant as 'Business Income' under Section 9(1)(i) of the Act. The Appellant humbly prays that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices entered into between the Appellant and Standard Chartered Bank, India ('SCB India') for the services rendered by the Appellant to SCB India. The Appellant humbly prays that the aforesaid receipts should not be taxed in India and the Learned AO be directed accordingly. 1.2 Without prejudice to above Ground No. 1.1, the Learned AO and the DRP erred in denying the benefit of the rate prescribed under section 1 ISA of the Act. In doing so, the Learned AO and the DRP held that SCB India being a non resident company does not fall within the ambit of the term 'Indian concern' as per the provisions of section 1 ISA of the Act and accordingly, the provisions of section 1 ISA of the Act do not apply to the payments made by SCB India. The Appellant humbly prays that the Learned AO be directed to apply the rate as prescribed under section 115A of the Act. 1.3 Without prejudice to Ground Nos. 1.1 to 1.2, on the facts and in the circumstances of the case and in law, while calculating the tax liability of the Appellant, the Learned AO has erred in taxing income on gross receipts instead of net receipts received by the Appellant, (i.e. after deducting the expenses at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t original assessment. 7.2 The other issues raised in ITA No. 6888/Mum/2011 regarding leviability of interest under section 234B which was admitted to be consequential and with a rider that assessee has liberty to show before AO why it is not liable for levy of interest under section 234B, the matter would be re-adjudicated in original assessment proceedings as discussed in para 5.3 of this order". 10. Based on the above decision of the ITAT in the preceding year(s), the AR submitted that for the sake of consistency, the issue, in the current years, deserved to be restored to the file of the AO. 11. The DR did not object to the submission of the AR for restoration of the issue to the file of the AO. 12. On hearing both the sides, we are of the view that since the preceding years were awaiting adjudication at the AO stage, it would be inappropriate for us, to come to any conclusion. We, therefore, set aside the orders of the revenue authorities and restore the issue to the file of the AO for afresh adjudication, in line with the decision taken by the AO in the preceding years(s). Needless to mention, adequate and reasonable opportunity shall be given to the assessee, to pres....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessing Officer noted that the submissions of the assessee during assessment proceedings were same as in A.Y. 2009-10. That contention of the assessee was already rejected by the Department and it has been held that the receipts from SCB, India are Royalty/FTS specially after the retrospective amendments section 9 of the Act. Without prejudice to the above the Assessing Officer held that :- "15. Without prejudice to the assessee's submission and, further, without prejudice to the stand of the Department that the payments by SCB India to the assessee can be taxed in India as royalty and/or FTS, it is also held that the said payments can also be taxed as 'business income' under section 9(l)(i) of the Act. Section 9(l)(i) of the Act is reproduced hereunder : Income deemed to accrue or arise in India. 9. (1) The following incomes shall be deemed to accrue or arise in India '- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. Explanation....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITA No. 237 to 240/Mum/2016 for A.Y. 2006-07 to 2012-13 vide order dated 9.2.2017 the matter was identically remanded to the Assessing Officer and subsequent to that remand the ITAT has held as under :- 7. The ITAT's order for taxability of payment received from assessee from SCB India read as under :- 18. We have carefully considered the entire gamut of facts as discussed above, relevant findings given in the impugned order as well as the rival submissions made before us. The main issue involved, which has been raised vide ground no. 1.1 is, whether the payments made by Standard Chartered Bank India (SCB) to the assessee is in the nature of 'royalty' u/s 9(1)(vi) or 'fees for technical services'. Since the assessee-company is incorporated in Hong Kong and is providing services/facilities for processing data to SCB from Hong Kong, therefore, the payment made by SCB India to assessee has to be seen from the perspective of domestic law, i.e. Income-tax Act and not under any treaty. The assessee-company is mainly engaged in the business of providing services/facilities for data processing through computer hardware and software to banking entities. It had entered into an agreement ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en by SCB to Atos to process its data from various branches across the country. We agree with the contention of the ld. Counsel that the reference to the various details in the agreement is merely to ensure quality, standard and various safeguards which are to be adopted in the course of processing data especially looking the volume of data required to be processed from all around the Globe. The provisions mainly contains assessee's responsibility to ensure adequate facility, systems and software which are located in Hong Kong and to ensure that all the hardware which is used in Hong Kong is maintained and housed in secured building space and infrastructure, manage proper performance of the hardware and operating systems, ensure adequate technical support of operating systems, to ensure system performance, maintain adequate security measures and effective internal control environment and also put in place appropriate disaster recovery plan. All these are to be maintained by the assessee to conduct the processing of data through computers. There is no providing or giving any use or right to use of any process to SCB. The technology, infrastructure, data centre, connectivity, etc. is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ight, property or information as defined in clauses (i) to (v) of Explanation 2 only and not in clause (iva) for the reason that Explanation 5 has been inserted with retrospective effect from June 1, 1976. In other words, Explanation 5 has been inserted retrospectively from the birth of Section 9(1)(vi) to clarify the intention behind the legislation. Hence, Explanation 5 is to be read with the Section 9(1)(vi) which was there on the statute as on April 1, 1976. Whereas clause (iva) to Explanation 2 was inserted from April 1, 2002. Thus, retrospective effect of clause (iva) cannot be deemed from 1.06.1976 and hence it cannot be held that Explanation 5 also applies to the said clause as this clause never existed as on April 1, 1976 and accordingly, the legislation cannot clarify the intention of the clause which never existed on the said date. Hence Explanation 5 & 6 would not be applicable in the case of assessee. 20. Further, for any payment to fall within the term of "royalty" it is sine qua non that there should be some kind of a transfer of any right in respect of various items as given in Explanation - 2 or any imparting of any information or use of any patent, invention, mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cy services in data processing. It has been stated that before us that even the faults are corrected automatically. Further, looking to the number of volume of transactions transmitted by SCB to assessee, it would be impossible for any number of humans to apply their mind and generate reports. This has been demonstrated by the ld. Counsel before us by way of an example which has been already incorporated above. Thus, the magnitude of transactions undertaken by assessee itself goes to show that the computer systems installed by the assessee in Hong Kong is standard facility through which data is processed. In this regard, strong reliance was placed on the decision of ITAT, Mumbai Bench in the case of Siemens Limited (supra), wherein the Tribunal has emphasised upon the element of human intervention for rendering of technical services. The relevant observation in this regard reads as under:- "------------------------In our opinion, this cannot be the criteria for understanding the term "technical services" as contemplated in Explanation 2 to section 9 (1)(vii). If any person delivers any technical skills or services or make available any such services through aid of any machine, eq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e expression "technical services" appearing in Explanation 2 of Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act." Before us, the ld. Counsel has also pointed out that assessee is also providing similar services to other clients like Hong Kong Government and other big MNEs and there is nothing special or exclusive about the services which are being rendered to SCB. In view of the entire gamut of facts as discussed above, we are of the opinion that the payment made by SCB to assessee- company does not fall within the realm of 'fees for technical services' as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention. Accordingly, we hold that the said payment is not taxable in India as 'fees for technical services' in terms of Sec. 9(1)(vii) of the Act. Thus, the issue raised in ground no. 1.1 is decided in favour of the assessee." 8. As regards ground No 3&4, learned Counsel of the assessee stated that this issue was ....