TaxTMI 
TaxTMI 
2025 (4) TMI 1304
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....reement ('DTAA'). 3. Trade & Consumer CRM System Development charges taxed as Royalty The AO has erred in considering Trade & Consumer CRM System Development charges of INR 43,31,546/- taxable as Royalty under the India - Singapore DTAA. 4. Other service charges taxed as Royalty The AO has erred in considering Other Service Charges (Referral Fees) of INR 6,86,556/- taxable as Royalty under the Act as well as under the India Singapore DTAA. 5. Management Service Fees taxed as Royalty a) The AO has erred in considering Management Service Fees of INR 85,81,894/- taxable as Royalty under the Act as well as under the India - Singapore DTAA. b) On identical facts and circumstances in previous years where Management Service Fees has been taxed as Fees for Technical Services under the India-Singapore DTAA, the AO has erred in changing his opinion with respect to the same nature of receipts. c) The Dispute Resolution Panel erred in directing the AO to follow its Directions of AY 2018-19 & AY 2019-20 for taxing Management Service fees as Royalty in view of the fact that the appellant was not in receipt of such se....
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....receipt as Royalty by placing reliance on the directions the DRP in assessee's own case for AY 2018-19 and 2019-20. The AO also held that the impugned receipts are to be treated as income by way of Royalty within the meaning of section 9(1)(vi) of the Act. The DRP rejected the objections filed by the assessee and the AO passed the final assessment order following the directions of the DRP. 5. The ld. AR submitted that this is the recurring issue and that the Co-ordinate Bench has been consistently holding the issue in favour of the assessee. The ld. AR further submitted that the facts for the year under consideration being identical, the issue stands covered by the decision of earlier years. 6. The ld. DR placed reliance on the order of the lower authorities. 7. We have heard the parties and perused the material on record. We notice that the Co-ordinate Bench in assessee's own case for AY 2019-20 (ITA No. 1562/Mum/2022 dated 29.12.2022) has considered a similar issue where it has been held that "9. We have considered the rival submissions and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee's own case ....
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....pplications/softwares hosted by Indian group companies on the data centre in Singapore are web ordering application, corporate website, websites created for customers of Edenred India entities while making o loyalty program for them. A perusal of the documents filed before the AO and DRP clearly indicate that (i) appellant has an infrastructure data centre, not information centre at Singapore, (H) the Indian group companies neither access nor use CPU of the appellant, (Hi) no CDN system is provided under the /DC agreement, no such use/access is allowed, (iv) the appellant does not maintain any such central data (v) IDC is not capable of information analytics, data management, (vi) appellant only provides IDC service by using its hardware/security devices/personnel ; all that the Indian group companies received are standard IDC services and not use of any software, (vii) bandwith and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such bandwith and network and not its use, (viii) consideration is for IDC services and not any specific program and (ix) no embedded/secret software is developed by the ....
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.... computer software provided by AXA ARC and it cannot be said that the applicant has been conferred any right of usages of the equipment located abroad, more so, when the server is not dedicated to the applicant. Similarly, in the case of Standard Chartered Bank (supra), the assesses bank entered into an agreement with a Singapore company SPt, for the provision of data processing support for its business in India and that data processing is down outside Indict. Application software by which data is transmitted to hardware at Singapore and processed by SPL at Singapore is owned by the assessee. Thus what is used by the appellant is the computer hardware owned by SPL. The Tribunal held that (i) payment in question can be said to be a payment for a facility which is available to any person wilting to use the facility, (ii) system software which is embedded in the computer hardware by which the computer hardware functions is not owned by SPL and SPL only has a license to use the system software ; (in) consideration received by SPL is for using the computer hardware which does not involve use or right to use a process, (iv) there is nothing on record to establish that the hardwa....
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....ependently use the computer. In the case IMT Labs (India) (P.) Ltd. (supra), the assessee, on Indian company, entered into an agreement with a non-resident American company for securing license of a particular software, which the applicant is entitled to use. The applicant has to pay license fee for usage of software to the American company. The AAR held that 'Smarterchild' application software on the American company's server platform is scientific equipment licensed to be used for commercial purposes and therefore, payments made for producing and hosting 'Interactive Agent' applications would be covered by the expression 'royalties' as used in Artjcfe_I2. However, we find that in the instant case, appellant only provides service by using its hardware/security devices/personnel and not use of any software and therefore the above case is distinguishable from the present appeal. In ThoughtBuzz (P.) Ltd. (supra), the applicant, a Singapore company was engaged in providing social media monitoring service for a company, brand or product. It was a platform for users to hear and engage with their customers, brand ambassadors etc. acr....
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.... allowed." 8. For the year under consideration the ld. DR did not bring any new material on record for us to deviate from the above findings of the Co-ordinate Bench. Therefore, respectfully following the above order of the Co-ordinate Bench in assessee's own case, we note that the IDC and CRM Development Charges are not taxable in India and accordingly direct the AO to delete the addition made in this regard. Grounds 2 & 3 raised by the assessee are allowed. Other Services Charges taxed as Royalty 9. During the year under consideration the assessee has received Rs. 6,86,556/- as other service fees as per the agreement with M/s Accentiv (India) Pvt. Ltd. The AO treated the said amount as Royalty which is confirmed by the DRP. 10. We have heard the parties and perused the material on record. We notice that the impugned issue is recurring in nature and that the Co-ordinate Bench while considering the same for AY 2019-20 have held that "13. Having considered the submissions of both sides and perused the material available on record, we find that the coordinate bench of the Tribunal in assessee's own case in Edenred Pte Ltd. (supra), for the assessment year 201....
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....ommends potential customers desirous of obtaining real estate consulting and associated services in India, Further the applicant was not responsible for persuading the customers to avail the services of the Indian group company, nor negotiating or collecting fee charged by Indian group company from the referred customers. As consideration for such referral services, a percentage of the amount realized from the referred customers (i.e. 30% on gross amount realized) was paid to the applicant. The AAR held that "referral fee received in Singapore by the applicant, a Singaporean company from an Indian company for referring customers to the latter is neither business income u/s 9{l)(i) nor royalty u/s 9(l)(vi) nor fee for technical services u/s 9(l)(vii) r. w. Article 12(4)(b) of the DTAA between India & Singapore and, therefore, it is taxable as business income in Singapore only as the applicant has no PE in India; impugned receipt not being chargeable to tax under the provisions of the IT Act or under the provisions of DTAA, section 195 is not attracted". In Real Resourcing Ltd. (supra), the AAR, in the context of the India-UK DTAA, after relying on the Cushman & Wakefield Ru....
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....by the AO towards referral fee and allow the 4th & 5th ground of appeal." 24. Identical view was expressed by the Tribunal while deciding the issue again in assessee's own case in assessment year 2013-14 in ITA No.2178/Mum/2017 dated 23- 10-2020. 25. Facts being identical, respectfully following the decisions of the Tribunal in assessee's own case as referred to above, we hold that referral fee received by the assessee is not in the nature of royalty. Accordingly, addition made in both the assessment years under dispute is deleted. Respective ground is allowed." 7. There being no difference in factual position in the impugned assessment year, respectfully following the earlier decision of the Tribunal as referred to above, we delete the addition. This ground is allowed." 14. We find that this issue is recurring in nature and has been decided in favour of the assessee by the decision of the coordinate bench of the Tribunal for the preceding assessment years. The learned DR could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully follow....
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....f the coordinate bench of the Tribunal, in the aforesaid decision, are as under: "8. In ground 5, the assessee has challenged the addition of member login fee as royalty. Pertinently, identical issue came up for consideration in assessee's own case in assessment year 2015-16. While deciding the issue, the Tribunal deleted the addition with the following observations:- "30. We have considered rival submissions and perused materials on record. It is observed that the assessee merely provides a standard facility to the Indian entity without granting any exclusive right in respect of any copyright, process, etc. It is further relevant to observe, learned DRP, while deciding the issue has clearly and categorically observed that member login services are similarly to IDC services. If that is the factual position, the member login fee cannot be treated as royalty since, while deciding assessee's appeal challenging the taxability of fees received towards IDC services, the Tribunal has consistently expressed the view that the services cannot be treated as royalty under the India-Singapore Tax treaty. In aforesaid view of the matter, we hold that member login fee is not....