TaxTMI 
TaxTMI 
2023 (1) TMI 227
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....ing Officer [in short, "AO"], however, sought to tax the said receipts @ 25%, albeit, on a gross basis. Thereby, the AO denied the respondent/assessee the benefit it had sought to take by resorting to Article 12 of the India-USA Double Taxation Avoidance Agreement [in short, "DTAA"]. 3.1 The respondent/assessee, in terms of Article 12 of the DTAA, had offered the aforementioned amount for taxation @ 15% of gross receipts. 3.2. The main plank on which the AO's order is founded is that the respondent/assessee had a back-to-back arrangement of passing on the fee received to its holding company, i.e., Fujitsu Limited, Japan [in short, FL]. 4. The respondent/assessee, being aggrieved by the assessment order dated 19.12.2018 passed under Section 143(3) of the Income Tax Act, 1961 [in short, "the Act"], preferred an appeal with the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"]. 4.1 The CIT (A), after a detailed hearing and examination of the record, via order dated 13.12.2019, ruled in favour of the respondent/assessee. 5. Since the appellant/revenue was aggrieved by the order of the CIT(A), an appeal was preferred before the Tribunal, which met with same ....
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....at the assessee is only a recipient and not the beneficial owner of the said receipts, as the receipts transferred to a separate entity an [sic-on] a back-to-back basis. In other words, the assessee merely serves as a conduit or channel for the said income and the beneficial owner of the FIS is actually Fujitsu Japan. In these circumstances, the rate that shall apply to the said FIS under the DTAA shall be rate applicable for a recipient who is not a beneficial owner. This rate is determined by a reading of first sentence of para 2 of Article 12, which states that such FIS may be taxed in the source State and according to the law of that State. In the present context, it means the said receipts will be taxable in accordance with the provisions of the Income tax act, 1961. 5.2 Vide notice u/s 142(1) dated 9.12.2018, the assessee was asked "Since the entire branding fee and management fee received from Fujitsu India is transferred to Fujitsu Japan through a back-to back-agreement, why should you not be treated as a pass-through entity or conduit with respect to this receipt and not beneficial owner? Therefore, why should the rate given in India US DTAA for benefi....
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.... entity and to decide the issue of beneficial ownership. Accordingly, the appellant submitted relevant e-mail communications with FCI evidencing dissemination of services to FCI vide submission dated July 29, 2019. The detailed explanation of the emails was also submitted vide submission dated August 21, 2019. The appellant has submitted 7 emails as sample evidence in this regard which are discussed as under: A. Email dated May 15, 2014 from Your IT [email protected] (India) to [email protected] (Central ID) This email is regarding logging of high priority ticket with FAI for resolution. It is raised by Fujitsu Consulting India at the central e-mail id to report downtime of Virtual Private Network ('VPN') primary and secondary links with the Appellant which were not accessible. In the given email, downtime notification mentions about FAI support engagement. The response received by the Indian AE was that the alternate SSL VPN link provided by FAI Service Desk can be logged in during the intervening period when the primary and secondary VPN are not accessible. By way of this communication, the network service requirements of the Ind....
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.... G. Email dated May 18, 2016 from ([email protected]) (employee of - Indian AE to Arthur Nussbaum and Ken Fuse (FAI) It is a chain of emails regarding communication between Fujitsu Consulting India team (Sachin Amonkar) and FAI (Arthur Nussbaum and Ken Fuse) wherein the Indian entity informed the appellant (FAI) regarding site visit of TP authorities to the Rune Office to review the detailed working of FNA(Finance & Accounts) and in this regard requested the appellant to share the detailed calculations of the allocation charge. 5.14 It may be added that sample email submission was not the additional evidence but the material called for during the appellate proceedings as per the provisions of section 250(4) of the act. On perusal of email communications, I find that the FCI (Indian Entity) used to contact the appellant in respect of procurement of services. The appellant has played active and meaningful intervention in delivery of services. Thus, the appellant was playing the role of service provider after procuring it from other group companies. Moreover, it is a case of cost pooling where various group companies are delivering services of diff....
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.... 5.19 I find that the facts of the case strongly support the contention of the appellant that it being beneficial owner of the fee for technical services is entitled for treaty benefit. It is not a case where the appellant company is acting as a Conduit Company. Hence, in the backdrop of the above discussion, I hold that the tax rate of 25% applied by the AO does not hold good in this case." [Emphasis is ours.] 10. A perusal of the above extract would show that there are two important aspects that the CIT(A) touched upon. First, there was no back-to-back arrangement, according to him, between the respondent/assessee, as noticed above, and its holding company, FL. Second, in order to deny the respondent/assessee the status of a beneficial owner, the AO had to find that the assessee was either an agent or conduit for the holding company i.e., Fujitsu Limited, Japan. 10.1. The second proposition, as a matter of fact, flows from the findings of fact returned by the CIT(A). The CIT (A) has found as a matter of fact that the appellant was playing the role of a service provider after procuring the same from other group companies and that it had dominion over the fee....