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2024 (9) TMI 1505
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.... case was selected for complete scrutiny under CASS and notice u/s 143(2) was issued on 21.09.2019. The assessee has claimed to be engaged in providing product analytics solutions to various businesses around the globe. Established in 2009, Mixpanel found an early customer base in the gaming industry which was working toward understanding the behavior of its customers to increase engagement over longer periods. It gives businesses the in-depth data and information it needs to make informed strategic decisions. Over the years, the company has expanded to help businesses of all sizes and in all industries analyze and interpret data to improve customer experience and ultimately retention. Mixpanel's value to the financial industry lies in the rich data it can provide to financial institutions, which can then base important strategic decisions on hard data. 2.2 Assessee has stated that it provides access to its customer in India to certain software, which can only be accessed but not downloaded by the customers. The assessee was in receipt of income from such customers on which TDS was also deducted. However, the receipts have not been offered for taxation in India. As with resp....
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....ftware payments. 4. The assessee before DRP has raised objections to draft assessment submitting that the AO has erroneously captured the facts from the extracts of the master service agreement which was provided and has erred in concluding that the Assessee maintains a database of information, provides access to it for its customers and so earns Income in nature of Royalty. Further AO has erroneously captured the facts from the extracts of mail correspondence of the Assessee with its client, which was provided, to AO. It was submitted to DRP that the AO erred in holding that Assessee divulges special knowledge as part of its services to its Customer which tantamount to transfer of right to use industrial, commercial or scientific experience as per the India-USA DTAA and so falls within the definition of Royalty under section 9(1)(vi) Explanation 2(1) of the Act and Article 12(3) of the India - USA DTAA. It was submitted that AO has erred in not recognising the differences in definition of income in nature of Royalty as per the provisions of the Act and as per the India-USA DTAA, thereby failing to appreciate that the said income does not fall under the definition of Royalty as ....
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.... and circumstances of the case and in law, the final assessment order passed by the learned AO as per the directions of the Hon'ble DRP is bad-in-law and liable to be quashed. 2. On the facts and circumstances of the case and in law, the Ld. AO has grossly erred in passing the final assessment order without considering the material available on record and is bad in law and void ab initio since it has been passed without giving sufficient opportunity to the appellant. 3 On the facts and circumstances of the case and in law, the final assessment order passed by the learned AO as per the directions of the Hon'ble DRP is bad-in-law, since absence of a show-cause notice for treating the incomes under question as fees for included services, and non-granting of any opportunity to the assessee to present its case on this issue, results in violation of principles of natural justice, making the impugned order void ab initio and liable to be quashed. 4 On the facts and circumstances of the case and in law, the Ld. AO has erred in holding that receipts of INR 9,09,42,347 earned by the Appellant from sale of software is taxable as Fees for Technical Services (....
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....es" 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 3 is received; or (b) make available technical knowledge, experience, skill, knowhow, or processes, or consist of the development and transfer of a technical plan or technical design." 11. As per plain terms of Article 12(4)(b) of the India-US Tax Treaty, following twin conditions are required to be cumulatively satisfied in order to qualify as FIS: i. such services are technical or consultancy services if they make available knowledge, experience, skill, know-how, or processes or alternatively consist of development and transfer of a plan or design ii. and such knowledge, experience, plan, design etc. is technical. 12. Relying the DRP direction the AO held in the impugned Assessment Order that report/solutions as generated from the Application and 'made available' to end users the kn....
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....lication does not constitute FIS as there is no technical design, process or plan which has been transferred to the client providing enduring benefit. 16. Ld. Sr. Counsel has also relied on the MOU dated 12 September, 1989 to India USA DTAA and we are of considered view that same also sheds light on the scope of Article 12(4)(b) in the following words: Paragraph 4(h) Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the services, technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plant or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technica....
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....the technical services rendered by them the assessees had paid consideration. The Assessing Officer treated the consideration paid to Fugro under the agreement as falling within the definition of fees for technical services under Article 12 of the Indo-Netherlands Double Tax Avoidance Agreement (DTAA) read with Section 90 of the Income-tax Act, 1961. 19.1 In aforesaid set of fact the Hon'ble Karnataka High Court, explained the phrase 'make available' as appears in the Article 12(4) of India-USA DTAA, as follows; "22. What is the meaning of "make available". The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, knowhow and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making "available", the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is n....
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....hat services was rendered was also made available to the assessees/customers is purely a question of fact which is to be gathered from the terms of the contract, the nature of services undertaken and what is transmitted in the end after rendering technical services. If along with technical services rendered, if the service provider also makes available the technology which they used in rendering services, then it falls with the definition of fee for technical services as contained in DTAA. However if the technology is not made available along with the technical services and what is rendered is only technical services and the technical knowledge is with-held, then, such a technical service would not fall within the definition of technical services in DTAA and not liable to tax." "27. In the background of the aforesaid principles and facts of this case, it is clear that assessees acknowledge the services of Fugro for conducting aerial survey, taking photographs and providing data information and maps. That is the technical services which the Fugro has rendered to the assessees. The technology adopted by Fugro in rendering that technical services is not made available to the ....