TaxTMI 
TaxTMI 
2025 (3) TMI 1163
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....and, 2) Global Communications and 3) Global technology/Knowledge Management were not for information concerning commercial experience in terms of Article 13(3) of the India-UK DTAA hence were not in the nature of royalty and is not liable for taxation in India with the meaning of Article 13(3) of the Indo US treaty? 2. "Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in directing the Assessing Officer to grant refund of taxes paid pursuant to the order u/s 195(2) dated 01.08.2018 even though the department has filed appeal against the decision of Hon'ble ITAT?" 3. At the outset, both the parties agreed that this issue stands covered by the decision of the Tribunal in assessee's own in case and other related cases and sister concerns for the A.Y.2018-19 and 2019-20 and in support, judgment and order in ITA Nos.201 to 233/Mum/2021, 4800 to 4804/Mum/2019; 4810 to 4814/Mum/2019; ITA Nos.4744, 4745 to 4782/Mum/2019 dated 27/07/2022 & ITA No.5715/Mum/2024 dated 18/02/2025 have been filed. 4. The brief facts are that assessee is a limited liability partnership firm and renders professional services to clients which include large domes....
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....itte Touche Tohmatsu India LLP) is authorized to remit the sum amounting to Rs. 78,87,85,000/- to the Payee Deloitte Global Services Holding Limited) after deducting tax at the rate of 10% on the remittance amounting to Rs. 23,66,35,500 against the three services(Global Technology/Knowledge Management, Global Communication, Global Brand). In other words, the entire remittance amounting to Rs. 78.87.85.000/- shall be subjected to tax at the rate of 3% This certificate is issued on the prima facie examination of details furnished by the applicant before the undersigned. It is purely provisional in nature and subject to final assessment. This certificate is valid for the period from 5th April 2018 to 31 MARCH 2019, unless cancelled or modified with prior intimation. This certificate is issued at the request of the applicant (Deloitte Touche Tohmatsu India LLP). It is also clarified that the issue of certificate shall not in any way prejudice the assessment of total income under the provisions of Income tax r.w. India-UK tax treaty." 5. Deloitte Touche Tohmatsu India LLP (DTTILLP') entered into a shared service agreement dated 01/08/2011 with Deloitte Global Services Ho....
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....askins & Sells LLP ("DHS") are limited liability partnership firms rendering professional services to large domestic as well as multinational corporations and are part of Deloitte network worldwide. DTTL, also known as "Global Network" of various member firms, is incorporated in, and a tax resident of, the United Kingdom and it do not per se carry out any income earning activity and has no stream of income. It has been stated before us that, Deloitte Global Holding Services Ltd. ("Holdings") is a company limited by guarantee organized and existing under the laws of England and Wales. Deloitte Global Holdings is a special purpose vehicle created by Global Network to facilitate the attainment of objectives, inter alia, to further international alignment, cooperation, cohesion and professional standards of the highest quality among its Member Firms (such as DTTI). Deloitte Global Holdings performs various activities for the common benefit of its members. Articles of Association of Deloitte Global Holdings do not permit it to perform any services for third party clients. As per Article 15 of the Articles of Association, Holdings is not permitted to distribute dividends or any other amo....
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....neral Counsel 10. Global Finance; Procurement 11. Global Corporate Responsibility 4. In continuance with the earlier years, the appellants had made application for issuance of certificate under Section 195(2) for remittance of amounts under the "Shared Services Agreement" to Holdings without deduction of tax at source. It has been brought on record before us that, the respective Assessing Officer have issued certificates for financial year 2012-13 onwards till 2016-17 authorising the remittance of amounts similar to those which has been sought to be remitted in the current year without deduction of tax at source. The copies of these orders and the certificates have been placed in the paper book before us at pages 544 to 548. However, the Assessing Officer while deciding the application filed by the appellants for the Assessment Years 2018-19 and 2019-20 held that payments to the extent they were relatable to, (1) Global brand; (2) Global Communications; and (3) Global Technology/Knowledge Management, were in the nature of royalties, being payments for use of computer software/literary work. Assessing Officer relied on the following decisions in support of....
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.... Ltd. The appellant submitted that the payment is not for right to use any copyright of literary, artistic or scientific work. The submission of the appellant is not explicit on whether the payment is for information on commercial experience under Article 11(3)(a). It is stated to be for internal purpose and not for commercial exploration. Aspect regarding Article 11(3)(b) is not relevant in the context of this case. Reading the submission of appellant along with the details available in the agreement, I find that each of the items falls within information on commercial experience and hence Article 11(3)(a) applies. 18. The shared Services Agreement is a standard business agreement. I had gone through clause 4 (Historical Services : Fees) and 5 (Service terms : Service Schedule; Revision; Notices) and 8 (Ownership and Licensing of Intellectual Property and Trademarks). The payment is undoubtedly for services. Para 8A reads as under : A. Firm and Holdings acknowledge that all Services Firms will be parties to a Shared Services Agreement pursuant to which they will receive, directly or indirectly, Services from Deloitte Services. Clause 5A also talks about ....
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....echnology/ Knowledge Management cannot be regarded as provision of copyright in computer software or any literary work as no right to use copyright is given by Holdings to the appellants. He further pointed out that before the Assessing Officer it was explained in detail vide letter dated 08.01.2018 as to how the payments cannot be regarded as Royalty, however, the Assessing Officer has simply referred to certain decisions (cited supra) and held them to be in the nature of Royalty. 7. Mr. Percy Pardiwala submitted that now the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. vs CIT, 432 ITR 471 has reversed the view taken in the various decisions which have been relied upon by the Assessing Officer in coming to the contention that the payments were in the nature of Royalty. He further submitted that the Assessing Officer has heavily relied upon decision of the AAR in the case of EY Global Services Ltd., which was heavily relied upon by the AO in coming to the conclusion that the payments are made for use of copyright, has been reversed by the Hon'ble Delhi High Court in EY Global Services Ltd. vs. ACIT, 441 ITR 54 following th....
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....e firm was only information in the form of collection of data on the subject available in the market and, therefore, the payment was not in the nature of royalty. The High Court held that any information cannot earn the status of royalty and that to have the status of royalty, the information must have some special feature. Some sort of expertise or skill is required. The matter was ultimately remitted to the Tribunal for carrying out factual verification as to whether the information in question was available in public domain. It is submitted that in the present case there is no imparting of information at all, only services are rendered and, in any event, there is no imparting of any confidential data or information. Therefore, the payments cannot be regarded as royalty. b. Marck Biosciences Ltd. vs. ITO 164 ITD 205 (Ahd) The assessee made payments to a US company on account of professional fee for global biopharmaceutical strategic counselling and advisory services rendered by this entity. The AO took the view that the services were covered by the definition of royalty since rendition of services by the US entity amounted to parting with the "information concer....
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.... His second limb of argument was that once for a similar nature of payment, certificate has been issued for non-deduction of tax in the earlier years by the Assessing Officer, then, in this year no different view can be taken in view of the principles of consistency, which ought to have been applied since there was no change in facts or in law. 9. Another contention raised by him is that Holdings is a mutual concern inasmuch as there is complete identity between its participants and contributors. Holdings do not have any dealings with third party clients but wholly deals with member firms. Its activities are wholly performed for the benefit of member firms. Costs incurred in the course of performance of such activities are recovered from member firms by way of contributions without any mark-up. It operates on a break-even basis. Therefore, it must be regarded as a mutual concern. Accordingly, the payments made by the appellants to Holdings would not constitute its income. Consequently, there would be no requirement of deduction of tax at source there from. Payments made by M/s Deloitte Touche Tohmatsu, Delhi to DTT under an arrangement which is similar to the one with whic....
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....ded in the India-UK DTAA, which is enshrined in Article 13(3), which reads as under :- "3. For the purposes of this Article, the term "royalties" means : (a) Payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) Payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic." 14. The scope of services and the terms under these heads needs to be analysed as per the definition and scope of Article 13(3), whether these services fall within the definition of Royalty. Our discussion and analysis are as under: Global Brand * Design and implement....
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....various activities for its members and its guidance is only for internal use by the member firms. Hence, in our view payment for such services cannot be considered for information concerning industrial, scientific or commercial experience. Again, there is no transfer of intellectual property by Holdings to the appellants and also there cannot be a case of giving industrial, commercial or scientific equipment. Thus, the payments made for global brand cannot be treated as in the nature of Royalty as per Article 13(3) of India-UK DTAA. Another important thing is that the payment is also not for any use of trademark/patent provided by Holdings. 16. Insofar as payments for global activities given in Global Communication, Holdings distributes the publications and reports for DTTI and support global public relations, thought leadership initiatives, events, guidance, common standards, guidelines, organising internal events, etc so that there is alignment of all the member firms for internal and external communication. It gives guidance about the media communication, distribution of newsletter, external and internal distribution. From a bare perusal of aforesaid activities, it cann....
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....ny engaged in providing technology and other support services and software licences to member firms of EY Network in various countries all over the world and all the member firms using the brand Ernst & Young (E&Y) had entered into contract with various third party vendors for procurement of software to be used by member firms. There also, the services which was rendered by Ernst & Young UK and the Memorandum of Understanding executed between itself and EYGBS India were as under : "4. The specific services mentioned in the services schedule annexed to the MOU, which are rendered by the Applicant under the service agreement and the Memorandum of Understanding between the Applicant and EYGBS India are as follows: 1. Common standards and policies 1.1 Assisting in the development of Common Standards and Policies, including accounting policies, practices, principles and procedures. 1.2 When considered appropriate by EYG Services, providing practice manuals and other reference materials and otherwise assisting in the adoption and consistent application of Common Standards and Policies. 2. IT Services 2.1 Promoting the adoption, maintenance and....
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....red by the EYGSL (UK) from the third-party software vendors are not relevant. What is relevant is the Agreement between the EYGSL (UK) and the EYGBS (India). As the same does not create any right to transfer the copyright in the software, the same would not fall within the ambit of the term "royalty" as held by the Supreme Court in Engineering Analysis Centre (supra). 15. We may also note that the learned AAR in its Impugned Order has relied upon its earlier view in Citrix Systems Asia Pacific Pty Ltd., In Re., (2012) 343 ITR 1 (AAR), which has been expressly stated to be bad law in Engineering Analysis Centre (supra)." 19. Further, the Delhi Bench of Tribunal in the case of EY Global Services Ltd. vs ACIT in ITA No. 7017/Del/2019 wherein almost similar facts were there, which have been discussed in para 4 as under :- "4. Brief facts of the case are that EY Global Services Limited (hereinafter referred to as 'the assessee') is providing technology and other support services and software licenses to the member firms of the EY Network. The assessee is said to be established as a non-profit central service provider to enable EY member firms to share ....