TaxTMI 
TaxTMI 
2023 (3) TMI 1135
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....rder passed by the Deputy Commissioner of Income Tax (International Taxation), Range-4(2X1), Mumbai (hereinafter referred to as the "learned AO"] under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel-2, (hereinafter referred to as the "Hon'ble DRP) on the following grounds, each of which are without prejudice to one another. On the facts and circumstances of the case and in law, the learned AO based on the directions of the Hon'ble DRP: General 1. Erred in assessing the total income at Rs. 3,59,11,69,013 as against Rs. 8,35,360 total income as per the revised computation filed by the Appellant subsequently on being granted refund. As per return of income filed by the Appellant, the total income was NIL. Receipts towards IT support services does not constitute 'income' 2. Erred in holding that the payments received by the Appellant constitutes 'income' without appreciating that the appellant works on cost only arrangement and the receipts were reimbursements being in the na....
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....s available on record. The assessee is a tax resident of Netherlands. It is engaged in providing Information Technology Support Services to Shell Group entities as well as to Key Application Service (KAS) provider worldwide. The return of income for the A.Y.2018-19 was filed by the assessee on 29/11/2018 declaring total income of Rs.'Nil' claiming refund of Rs.7,19,25,900/-. The assessee operates in Europe, United States and Asia Pacific region. During the year ended 31/03/2018, the company provided software access and information technology support services to Indian parties. The details of Revenue earned by the company from Indian parties are as under:- Name of Payee Amount received (INR) Rate of IDS TDS Whether offered for taxation Hazira LNG Private Limited 31,634,064 10% 31,82,242 Not offered to tax in ROI as the receipts are in the nature of cost allocation. Further, the receipts are not chargeable to tax in India pursuant to India-Netherlands Double Taxation Avoidance Agreement. CGI Information Systems and Management Consultants Private Limited (Logical) 69,903,006 10% 68,23,875 IBM India Private Limited 106,190,640 10% 7....
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....spect of services of providing IT support services, helpdesk services and network access and related services provided by the assessee do not fall in the purview of "royalty" under Article 12(5)(a) of the DTAA. It was also contended that these services do not "make available" technical knowledge experience etc to Indian customers to fall in the purview of "fee for technical services" under Article 12(5)(a) of the DTAA. The ld. AO vide draft assessment order dated 13/05/2021 did not agree with the submissions of the assessee and held that the payment received by the assessee towards IT support services are in the nature of fee for technical services as well as in the nature of royalty both under the Act as well as under the DTAA. We find that the ld. DRP by placing reliance on its directions given in assessee's own case for A.Y.2017-18 held that the payments received by the assessee to be fee for technical services and not royalty both under the Act as well as under the DTAA. The ld. AO passed final assessment order u/s.143(3) r.w.s. 144 C(13) of the Act on 16/03/2022 pursuant to the directions of the ld. DRP by treating the receipts of the assessee as fee for technical services u/s....
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.... the rival submissions and perused the orders of the authorities below. We have perused the order of the Tribunal for the A.Y.2010-11 to 2011-12 in ITA No. 2058/MUM/2016 dated 28.05.2018 wherein the Tribunal following the order for the A.Y. 2009-10 to 2010-11 in ITA.No. 2204/MUM/2014 and 1203/Mum/ 2015, held as under: - "16. We have heard the rival submissions and also perused the material on record. The co-ordinate Bench has decided the identical issue in favour of the assessee in the assessee's own case ITA No. 2204/Mum/2014 for the A.Y. 2009-10 and ITA No. 1203/Mum/2015, for the A.Y. 2010-11 holding as under:- "7. The next issue common issue in both the appeals of assessee is as regards to taxability of payment received by assessee from IT support services which constitutes Fees for Technical Services ('FTS') and royalty under the India Netherlands Treaty DTAA. For this Assessee has raised following ground:- "Payments towards IT Support fees held in be Fees for Technical Services 'FTS') and royalty. 4. Erred in holding that payments received by the Appellant for IT support DTAA. 5. Failed to appreciate that IT support services do no....
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....y on the systems on their own without reference to the French Company, when the IT Agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the agreement on its expiry. We are of the view that the services provided under the IT agreement are in the nature of Fees for Technical Services and taxable under' the DTAA as well as under the Act. Though the ruling is technically not binding in the present case, the 7 ratio and logic followed by the Hon'ble Authority have very high degree of persuasive value. in any case, this technical know-how is of an enduring nature and has a direct nexus with the assessees business. 5.3.2 considering the above factual and leg& matrix we are of the opinion that the action of the AO in treating the above receipt is fee for technical services does not require any interference The alternate arguments on taxability of the receipt as royalty do not require any direction from the penal as we have already upheld the taxability of the services as "fees for included service". 10. The learned Counsel for ....
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....he Act read with the Circulars and several judicial precedents issued thereunder provide that a non-resident taxpayer is eligible to be assessed as per the provisions of the Act or as per the provisions of the relevant double taxation avoidance agreement, whichever is more beneficial. SIT! BV is a nonresident for Indian tax purposes. Accordingly, SITI BV could be assessed as per the provisions of the Actor as per the Treaty, whichever is more beneficial to SIT! By. IN view of the same, the non-taxability of the services rendered by SITI BV has been examined under the provisions of the Treaty. Article 12(4) of the Treaty defines the term. "Payments of any kind received as a consideration for the use, or the right to use, any copyright of literacy, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.' 12. From the above, it is clear that SITI BV is engaged in providing IT services to Indian entities but does not provide any right to use any copyright of literary, artistic or scientific work including cinem....
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....a) In the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which this Convention has effect; (aa) 15% of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Govern rent of the first mentioned Contracting State or a political sub-division of that State and (bb) 20% of the gross amount of such royalties or fees for technical services in all other cases; and ( ii) during subsequent years 15% of the gross amount of such royalties or fees for technical services; and (b) in the case of royalties within paragraph 3(b) of this Article and fees for technical services defined in paragraph 4(b) of this Article, 10% of the gross amount of such royalties and fees for technical services. 3** ** ** (4) For the purpose of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the ....
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....ved by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article,. 13(4)'(c) of the DTAA read with section 9(1)(vii) of the said Act. While doing so the Tribunal, inter alia, found that the assessee company was an international reinsurance intermediary (broker) and was a tax resident of United Kingdom. Further, that it was a recognized broker by the financial services authority of United Kingdom, it was also an admitted position that the assessee did not maintain any office in India and mat it had a referral relationship with J B Boda reinsurance (Broker) Pvt. Ltd of Mumbai and that J. B. Boda was duly licenced by the Insurance Regulatory & Development Authority to transact reinsurance business in India 11 The Tribunal also observed as under. - "27. In the illustrative transaction, New India Insurance Co. Ltd in India has entered into an agreement to reinsure on an Excess Loss basis the catastrophe risk arising from its primary insurance cover in conjunction with J.B. Boda and Alsford Page and gems Ltd. (the reinsurance brokers). The terms of the agreement specifies that t....
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....policy terms would then be agreed upon and the risk would be placed with the international reinsurer it was also pointed out that as per the normal industry practice, tea reinsurance premium net of brokerage al 10% as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation fee which is another word for brokerage is paid separately by the originating insurance in India to J.B. Bodo, the international reinsurance brokers like the assessee and other intermediaries, based on a mutually agreed ratio which accounts for their relative contribution in the reinsurance process. 12. Based on this manner of transacting, the Tribunal came to a conclusion that the payment received by the assessee could not be regarded as 'fees for technical services'. Further, more, the Tribunal also held that such receipts would not amount to fees for technical services as the "make available" clause contained in article 13(4)(c) had not been satisfied in the facts and circumstances of the present case. 13. In our view, the Tribunal has arrived at these conclusions purely on assessing the fa....
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....herlands convention by way of amendment on 30.08.1999, notification No. S.O. 693 (E) [reported in (1999) 239 ITR (Stat) 56]. It is evident that the Authority for Advance Rulings had not considered the said amendment." 14. In view of the above, we are of the that the concept of make available of technical services that such receipts would not amount to fee for technical services so as to the "concept of make available clause contained in Article 13(4)(c) of the treaty has not been satisfied. Accordingly, we delete the addition and allow this issue of assessee's appeal." 17. Since, the co-ordinate Bench has decided the identical issue in favour of the assessee in assessee's own appeals for the A.Y. 2009-10 and 2010-11 referred above, we respectfully following the order of the co-ordinate Bench allow Ground No. 5, 6 and 7 of this appeal. 10. Facts being identical, respectfully following the said decision of the Tribunal we allow Ground Nos. 5 and 6 of the assessee. 11. In so far as Ground No.2 is concerned the Ld. Counsel for the assessee submitted that since it was held in favour of the assessee on Royalty and FTS ground, the ground raised ....