TaxTMI 
TaxTMI 
2024 (7) TMI 435
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.... and in law, the Ld. AO/DRP has erred in treating 'commission1 income, amounting to Rs. 5,31,86,587/-, received by the Appellant from Springer Nature India Private Limited ("SNIPL") [earlier known as Springer India Private Limited ("SIPL")] and "subscription fee" amounting to Rs. 58,39,62,432/- received by the Appellant from third-party end- customers in India on behalf of Springer Nature Group's affiliated publisher entities as fee for technical services ("FTS") both under the provisions of the Act and Article 12 of India-Germany Double Taxation Avoidance Agreement ("DTAA"). 3. That on the facts and circumstances of the case and in law, the Ld. AO/DRP failed to appreciate that the "commission income" and receipts from "subscription fee" are of a different nature and must be treated separately rather than being aggregated and collectively characterized as FTS under the Act and DTAA. 4. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in treating the commission income received from SNIPL as "consultancy of technical nature" under the Act and the DTAA without appreciating the fact that the Appellant was merely providing support services as per the ....
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....alent to Rs. 24,84,114 paid to the respondent/assessee by an Indian entity, namely, Springer India Pvt. Ltd. (in short, "SIPL"), against a Commissionaire Agreement. This addition consisted of two components. 4.2 The first component constituted a commission fee, amounting to Rs. 22,89,835. This payment, it appears, had been classified in the Form 3CEB report filed by SIPL as "production and editorial charges". The respondent/assessee‟s stand before the statutory authorities was that although this payment had been inadvertently classified as production and editorial charges, it was nothing but commission received against services rendered. 4.3 The second component of the aforementioned (first) addition was an amount equivalent to Rs. 1,94,279, which, as per the Form 3CEB report filed by SIPL, was categorized as "service charges" for the sale of "Indian journals in printed form". 4.4 The second addition made by the AO was an amount equivalent to Rs. 16,67,83,110. This amount represented the subscription fees received by the respondent/assessee against e-journals from two Indian entities, namely, Informatics Publishing Private Ltd. and ZS Associates. 4.5 The third additio....
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....d in Engineering Analysis Center of Excellence (P.) Ltd. v CIT, [2021] 432 ITR 471 (SC). 7. It is against this backdrop that the appellant/revenue has preferred the instant appeal. Submissions of Counsel 8. Arguments in support of the appeal, on behalf of the appellant/revenue, were advanced by Mr. Ruchir Bhatia, learned Senior Standing Counsel, while Mr. Himanshu Sinha made submissions on behalf of the respondent/assessee. 9. Broadly, the arguments advanced by Mr. Bhatia can be paraphrased as follows: 9.1 The addition of Rs. 22,89,835/- sustained by the CIT(A) as FTS was tenable, having regard to the terms of the Commissionaire Agreement. The services such as promotion, sale and distribution of products globally could be categorised as consultancy services. Likewise, services such as order handling, inventory management, debtor management and subscription management could be categorised as managerial services. 9.2 The services provided by the respondent/assessee were thus "wide and distinct". Therefore, the decision of the coordinate bench of this Court rendered in DIT v. Panalfa Autoelektrik Ltd., [2014] 227 taxmann.com 351 (Delhi) would have no applicability, as the ....
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....in short, "The Springer Group"] during the period under consideration. The Springer Group was engaged in the business of publishing books, and academic journals, in the field of natural sciences, technology and medicine. 12.2 As part of the Springer Group's business model, the respondent/assessee functioned as a non-exclusive sales representative globally, except in the Americas, of the Springer Group's affiliated publisher entities, which included SIPL. The Commissionaire Agreement executed between the respondent/assessee and SIPL captured the functions performed by the respondent/assessee as part of the Springer Group. 12.3 Accordingly, the respondent/assessee, pursuant to its appointment as a Commissionaire, promoted, sold and distributed, print and electronic books and journals published by SIPL. Besides this, under the very same Commissionaire Agreement, the respondent/assessee provided sales and marketing services, customer services, order handling, delivery invoicing, debtor and subscription management, and processing of return copies, amongst other services. Resultantly, the respondent/assessee collected subscription and other revenue/fees from the sale of elect....
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....respondent/assessee was to further sales and to promote and distribute books published by SIPL, in electronic form or otherwise. Besides this, the respondent/assessee also rendered support services for business operations. Thus, none of the services offered by the respondent/assessee involved an element of technical expertise or advice. Therefore, the services rendered by the respondent/assessee could not be characterised as FTS under the DTAA, or the Act. 13.6 Further, Mr Sinha submitted that the Tribunal rightly relied upon its decision in the Springer Verlagh case, wherein the following decisions and principles, articulated therein by this Court and other Courts, were examined, and addition made by the CIT(A) in that case were deleted: i) DIT v. Panalfa Autoelektrik Ltd. ii) CIT v. Group Ism (P.) Ltd. [2015] 57 taxmann.com 450 (Del) iii) Evolv Clothing Co. (P.) Ltd. v. ACIT [2018] 94 taxmann.com 449 (Mad) iv) Skycell Communications Ltd. and Anr. v. DCIT [2001] 251 ITR 53 (Mad) Reasoning and Analysis: 14. Having heard the learned counsel for the parties and perused the record, as is obvious upon perusal of the prefatory facts noted above, the appellant/revenue was agg....
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....lowing services were rendered by the respondent/assessee: (i) Global sales and marketing services (ii) Customer services (iii) Order-handling (iv) Address maintenance (v) Stock keeping and inventory management (vi) Invoicing (vii) Delivery (physical as well as online) (viii) Debtor management services (ix) Subscription management (x) Return copies processing 17. For rendering the aforementioned services, the respondent/assessee was paid a commission, at the rate of 9.9%, on the net revenue amount of "any and all" sales commissioned through the intermediary of the respondent/assessee. (See Article 4a 1 of the Commissionaire Agreement). 18. Furthermore, the respondent/assessee was empowered to retain the commission when transferring the revenue to SIPL, or via any other payment of commission agreed upon between SIPL and itself. 19. Importantly, the title in the publications remained with SIPL, which the respondent/assessee could assign "property/licenses" to third parties, albeit on behalf of SIPL. 20. There is nothing in the Commissionaire Agreement which is suggestive of the fact that the respondent/assessee was required to discover, develop, or define/e....
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....ory of technical and/or consultancy services. There were no special skills or knowledge that the respondent/assessee's personnel were required to possess to render the services that were contemplated under the Commissionaire Agreement. The respondent/assessee also did not render any professional advice, or service concerning a specialized field. As indicated above, for a service to be categorized as a technical service, it had to be concerned with applied science, i.e., using scientific knowledge for practical applications, or industrial science concerning, relating to or derived from industry. 23. Therefore, the contention of Mr. Bhatia that on account of there being human intervention, the services rendered by the respondent/assessee should be considered as technical services, is a submission, which according to us, is completely misconceived. 24. Given this position, we are not inclined to interfere with the decision arrived at by the Tribunal concerning the deletion of the addition made amounting to Rs. 22,89,835, on account of commission received by the respondent/assessee. The CIT(A)'s conclusion that the said amount received by the respondent/assessee had attribu....