TaxTMI 
TaxTMI 
2025 (4) TMI 1626
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....nt involved was different but the questions involved in the appeals were common and therefore heard the appeals together and disposed of the same by the common order. 2. The controversy involved in the present appeals pertains to the treatment of "commission income" and the amounts received by the Assessee as "subscription fee". 3. The Assessee had filed its returns declaring 'Nil' income for AY 2020-21 and Rs. 43,75,330/- for AY 2021-22. These returns were picked up for scrutiny. The AO held that the commission income and the subscription fee received by the Assessee from entities in India were required to be construed as fees for technical services [FTS] and were chargeable to tax under the Act and passed the draft assessment orders. 4. The Assessee had filed objections to the draft assessment orders before the Dispute Resolution Panel [DRP] which were rejected by orders dated 02.03.2023 and 22.06.2023 passed in respect of AY 2020-21 and AY 2021-22 respectively. Pursuant to the directions issued by DRP, the AO passed final assessment orders dated 27.06.2023 and 27.09.2023 for AY 2020-21 and AY 2021-22 respectively. 5. The AO assessed the income chargeable to tax under....
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....the case under consideration as the aforesaid decision was given in the context of software royalty income whereas in the instant case the transactions are related to right to use the copy rights in the books and Journals published by the assessee?" Factual Context 8. The Assessee is a company incorporated under the German laws and is a tax resident of Germany. The Assessee is a part of Springer Nature Group which is a publisher of books, journals and content relating to science and technology. It is stated that Springer Nature Group has a leading global scientific, technical and medical portfolio. 9. The Assessee has entered into a Commissionaire Agreement dated 01.01.2014 with Springer Nature India Pvt. Ltd. [SNIPL] - which is also one of the entities of the Springer Nature Group-by virtue of which the Assessee was appointed as a non-exclusive sales representative to promote, sell and distribute printed products (books and journals) and e-products (online books, journals and their archives). The Assessee earned commission income amounting to Rs. 5,31,86,587/- during financial year [FY] 2019-20 and Rs. 6,05,11,416/- during FY 2020-21. The Assessee also collected subscript....
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....ate contention before this court in the Assessee's case for AY 2013-14 but this court had not permitted the Revenue to urge the same. He referred to the following passages from the said judgment [Commissioner of Income-tax, International Taxation v. Springer Nature Customers Services Centre GMBH (supra)] in support of his contentions: "25. This brings us to the second addition. We must note that in the course of arguments, Mr Bhatia had indicated that the addition of Rs. 16,67,83,110/- received by the respondent/assessee as a subscription fee for e-journals from its affiliates, could not be treated as royalty, given the judgment of the Supreme Court rendered in Engineering Analysis. However, in the written submissions, for the first time, contrary to the submission, an argument has been advanced that the subscription fee should be treated as FTS, and in the alternative, as royalty. 25.1 We are of the opinion, the submission that subscription fee should be treated as FTS cannot be accepted, as this was not the stand of the appellant/revenue before the Tribunal. This is a flip-flop which the respondent/assessee would do well to abjure. 15. Mr. Himanshu S. Sinha, ....
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....ce, the Legislature has not set out with precision as to what would constitute "technical" service to render it "technical service". The meaning of the word "technical" as given in the New Oxford Dictionary is adjective 1. of or relating to a particular subject, art or craft or its techniques: technical terms (especially of a book or article) requiring special knowledge to be understood: a technical report. 2. of involving, or concerned with applied and industrial sciences: an important technical achievement. 3. resulting from mechanical failure: a technical fault. 4. according to a strict application or interpretation of the law or the rules: the arrest was a technical violation of the treaty. 9. Having regard to the fact that the term is required to be understood in the context in which it is used, "fee for technical services" could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with "technical" is "involving or concerning applied and industrial science". 10. In the modern day world, almost every facet of one's life is linked to scie....
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....r of such equipment does not result in the provision of technical service to the customer for a fee. 14. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as "technical service" for the purpose of section 194J of the Act. 15. The use of the internet and the world wide web is increasing by l....
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....nical services" as appearing in section 194J of the said Act has the same meaning as given to the expression in Explanation 2 to section 9 (1) (vii) of the said Act. In the said Explanation the expression "fees for technical services" means any consideration for rendering of any "managerial, technical or consultancy services". The word "technical" is preceded by the word "managerial" and succeeded by the word "consultancy". Since the expression "technical services" is in doubt and is unclear, the rule of noscitur a sociis is clearly applicable. The said rule is explained in Maxwell on the Interpretation of Statutes (Twelfth Edition) in the following words (page 289) : "Where two or more words which are susceptible of analogous meaning are coupled together, noscuntur a sociis, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general." 15. This would mean that the word "technical" would take colour from the words "managerial" and "consultancy", between which it is sandwiched. The word "managerial" has been defined in th....
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.... sophisticated technology, but that does not mean that MTNL/other companies which provide such facilities are rendering any technical services as contemplated in Explanation 2 to section 9 (1) (vii) of the said Act. This is so because the expression "technical services" takes colour from the expressions "managerial services" and "consultancy services" which necessarily involve a human element or, what is now a days fashionably called, human interface. In the facts of the present appeals, the services rendered qua interconnection/port access do not involve any human interface and, therefore, the same cannot be regarded as "technical services" as contemplated under section 194J of the said Act. *** *** *** 26. Before concluding we would also like to point out that the interconnect/ port access facility is only a facility to use the gateway and the network of MTNL/other companies. MTNL or other companies do not provide any assistance or aid or help to the respondents/assessees in managing, operating, setting up their infrastructure and networks. No doubt, the facility of interconnection and port access provided by MTNL/other companies is "technical" in the sense that....
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....her the transaction charges paid by a member of the Bombay Stock Exchange to transact business of sale and purchase of securities on the platform operated by Bombay Stock Exchange could be considered as FTS as held by the Bombay High Court. The Supreme court referred to Explanation 2 to Section 9 (1) (vii) of the Act as well as the aforementioned observations made by the Supreme Court in Commissioner of Income-Tax v. Bharti Cellular Ltd.: (2011) 330 ITR 239 and held as under: "6. What meaning should be ascribed to the word "technical services" appearing in Explanation 2 to clause (vii) to Section 9 (1) of the Act is the moot question. In Commissioner of Income-Tax Vs. Bharti Cellular Ltd. this Court has observed as follows: "Right from 1979, various judgments of the High Courts and Tribunals have taken the view that the words "technical services" have got to be read in the narrower sense by applying the rule of noscitur a sociis, particularly, because the words "technical services" in section 9 (1) (vii) read with Explanation 2 comes in between the words "managerial and consultancy services". 7. "Managerial and consultancy services" and, therefore, necess....
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....e Act." 21. A plain reading of the aforesaid observations indicate that for any income to be construed as FTS, it is necessary that fees is received for a service which is exclusive or customized and would not take into sweep standardized automated services, the access of which could be granted to all on payment of charges. 22. In Commissioner of Income-Tax, International Taxation v. Relx Inc.: [2024] 160 taxmann.com 109 (Delhi), this court considered an appeal from a decision of the learned ITAT whereby the Revenue's contention that fees received for accessing online database pertaining to legal and law related information was not chargeable to tax as FTS. In that case, the assessee was a tax resident of United States of America and was engaged in the business of maintaining online database of information relating to law including judgments, articles, information relating to patent applications before the Patent Registry and legal authorities (Lexis Nexis). The assessee had earned income in the nature of subscription fees from subscribers in India for providing access to the database (Lexis Nexis). Additionally, the persons interested in purchasing digital versions of books,....
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....lable on website would not by itself result in M/s Bloomberg rendering any consultative services. It is not the case of the revenue that specific queries raised by the respondent-assessee were answered to by M/s Bloomberg as a part of the consideration of Rs.4.34 lacs. The Information is made available to all subscribers to e- magazines/journal of M/s Bloomberg. Therefore, in no way the payments made to M/s Bloomberg can be considered to be in the nature of any consultative/professional services rendered by Bloomberg to the respondents. In any view of the matter, the findings reached by both authorities cannot be said to be perverse or arbitrary. It is a possible view and consequently Question (B) as proposed does not give rise to any substantial question of law. Accordingly, not entertained." 25. We also consider it relevant to refer to Paragraph 3 of Article 12A of the United Nations Model Double Taxation Convention - 2021 [UNMDTC-2021] which defines the terms "fees for technical services". The same is set out below: "3. The term "fees for technical services" as used in this Article means any payment in consideration for any service of a managerial, technical or consu....
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....rofessions such as law, accounting, architecture, medicine, engineering and dentistry would be fees for technical services within the meaning of paragraph 3. Thus, if an individual receives payments for professional services referred to in paragraph 2 of Article 14 from a resident of a Contracting State, those payments would be fees for technical services. If the payments arise in that Contracting State because they are made by a resident of that State or borne by a permanent establishment or fixed base in that State, the payments would be subject to tax by that State in accordance with paragraph 2 irrespective of the fact that the services are not per-formed in that State through a fixed base in that State. 65. Technical services are not limited to the professional services referred to in paragraph 2 of Article 14. Services performed by other professionals, such as pharmacists, and other occupations, such as scientists, academics, etc., may also constitute technical services if those services involve the provision of specialized knowledge skill and expertise. *** *** *** 86 The following examples illustrate the application of the definition of "fees for ....