TaxTMI 
TaxTMI 
2023 (12) TMI 773
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....ed 19 A 2023 under section 144C(5) of the Act, in contravention to the Circular No. 19 of 2019 by the Cen Board of Direct Taxes ('CBDT"), thus rendering such an order/direction to be invalid and never to ha been issued as per para 4 of the said circular. 2. On the facts and in the circumstances of the case and in law, the final assessment order dated 29 M 2023 passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act pursuant to inv and non-est directions passed by the Ld. DRP, is bad in law, null and void and liable to be quashed. 3. Without prejudice to Ground No.1 and 2 above, on the facts and circumstances of the c and in law, the Ld. AO and Ld. DRP erred in making an addition of INR 171,92,37,658 to the income of the Appellant on account of subscription, professional and training services without appreciat the fact that these services do not fall within the purview of fees for technical services ('FTS") une Article 12 of the India-Netherlands Double Taxation Avoidance Agreement (DTAA') and hence taxable in India. 4. On the facts and circumstances of the case and in law, the Id. AO and the Ld. DRP erred in mer assumin....
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....im. Rejecting the claim of the assessee, the AO taxed INR 171,92,37,658/- as FTS under DTAA. Remaining income of INR 63,78,464/- was taxed as per return of income. The assessee filed objections against the action of the AO before the learned DRP objecting draft order passed u/s 144C(1) of the Act. Learned DRP considered the objections and held that there was no reason to deviate from the finding of the learned DRP for A.Y. 2019-20, whereby the learned DRP had upheld that the receipts from subscription payments training and professional fees were taxable in India as FTS. However, in respect of the credit of taxes the AO was directed to verify the factual submissions of the assessee and grant credit as per law. Thereafter the AO passed the impugned order u/s 143(3) read with section 144C(13) vide order dated 29.05.2023. 4. Apropos to ground nos. 1 & 2, learned counsel for the assessee submitted that he does not wish to press the same. Therefore, ground nos. 1 & 2 are dismissed as not pressed. 5. Ground nos. 3, 4 & 5 are against addition of INR 171,92,37,658/- . Learned counsel for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in asses....
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.... enrolled in Partner Now, subject to the terms of this Agreement, when it is initially appointed to one or more Programs as evidenced by an Appointment Confirmation. 2.3. Benefits. Upon appointment to a Program, Participant may access certain ServiceNow Technology, including one or more Partner Instances, all subject to and in accordance with the Licenses and use authorizations granted under Section 4 (Licenses to Participant) below and the other terms and conditions of this Agreement. 4. LICENSES TO PARTICIPANT. Subject to the limitations set forth below in Section 4.7 (Certain Limitations) , the other terms conditions of this Agreement and the applicable Program Terms, ServiceNow hereby grants to Participant the following licenses and use authorizations with respect to ServiceNow Technology upon Participant's acceptance into any Partner Now Progam: 4.1. Partner Instances. ServiceNow grants to Participant a limited, non-exclusive right and license to access and use the Partner Instances (if any) provided by ServiceNow , solely to: (a) configure and customize the Partner Instance to develop and test Partner Applications; (b) evaluate the Partner Instances....
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....t to be treated as Fee for Technical Services (FTS). 7. It would be pertinent to examine the FTS clause in Article 12 of India Netherlands Treaty which reads as under:- ARTICLE 12 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1........ [2....... 3. ....... 1 [4........... 5. For purposes of this Article, "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 4 of this Article is received; or (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. 6 to 9. ....... 7.1. We find that Article 12(5)(a) above is not applicable in the instant case. Article 12(5)(b) insist on make available clause to fall within the ambit of FTS. In the instant case, the assessee has only ....
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....on for services of technical nature if such services make available technical knowledge, experience, skill, know how or processes, which enables the person acquiring the service to apply technology contained therein. Though this provision is not contained in India Netherlands Treaty, by virtue of Protocol in the agreement, Clause (iv) (2) reads as under:- "If after the signature of this convention under any Convention or Agreement between India and third State which is a member of the OECD India should limit its taxation at source on dividends, interests, royalties, fees for technical services or payments for the use of equipment to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of income, then as from the date on which the relevant Indian Convention or Agreement enters into force the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention." 14. Therefore the Clause in Singapore agreement which explicitly makes it clear the meaning of the word 'make available', the said clause has to be applied, and to be read into....
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....s not fall within the definition of FTS even as per the Act. In this regard, analogy could be drawn from the decision of Hon'ble Supreme Court in the case of CIT vs Kotak Securities Ltd reported in 383 ITR 1 (SC) wherein it was held that service made available by Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such services. 8. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the subscription, professional and training services rendered by the assessee does not fall within the definition of FTS both under the Act as well as under the DTAA and accordingly the same cannot be taxed in India. Accordingly, the Grounds 1 to 3 raised by the assessee are allowed. ....
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....chnical knowledge by the Appellant to the service recipient without bringing any materials on record to substantiate the same. 5. On the facts and circumstances of the case and in law, the Ld. AO and Ld. DRP erred in making an addition of INR 248,32,06,556 to the income of the Appellant on account of subscription, professional and training services without appreciating the fact that these services do not fall within the purview of FIS under Article 12 of the India-Netherlands DTAA by virtue of the Most Favored Nation (MFN') clause of the India-Netherlands DTAA read with India - Finland DTAA and hence not taxable in India. 6. Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the Ld. AO erred in not granting credit for entire taxes as appearing in Form 26AS in the impugned order as directed by the Ld. DRP though the entire receipts have been assessed to tax. 7. On the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest under section 234C/234D of the Act. 8. On the facts and circumstance of the case and in law, the interest under section 2344 and 234B of the Act a....