TaxTMI 
TaxTMI 
2025 (5) TMI 1963
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....ates to ITA No.2416/Del/2023 in respect of AY 2020-21. In terms of the impugned order, the learned ITAT allowed the appeal of the Assessee, inter alia, impugning the final assessment order dated 28.06.2023 passed by the AO under Section 143 (3) read with Section 144C (13) of the Act. 3. The Assessee is a company incorporated in United States of America and is a tax resident of the said country. The Assessee operates a global online learning platform providing online courses and degrees from leading universities and companies. The AO sought to tax the receipts from provision of said services as fees for technical services [FTS] within the meaning of Section 9 (1) (vii) of the Act and fees for included services [FIS] within the meaning of paragraph 4 of Article 12 of India USA Double Taxation Avoidance Agreement [Indo-US DTAA]. 4. The learned ITAT accepted the Assessee's contention that the receipts from the services rendered are neither in the nature of royalty nor FTS (as it did not entail any included services) which are chargeable to tax under the Act. 5. In the aforesaid context, the Revenue has projected the following question of law for consideration of this Court:- "A. W....
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.... and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article [other than services described in sub-paragraph (b) of this paragraph]: (i) during the first five taxable years for which this Convention has effect, (a) 15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company; and (b) 20 per cent of the gross amount of the royalties or fees for included services in all other cases ; and (ii) during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services ; and (b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this....
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....vices: content services and user services. Insofar as the user services are concerned, the Assessee provided services for; (i) preparing customised landing page featuring the organization logo and selected courses; (ii) generating user engagement reports; (iii) providing payment solution(s) to allow users to seamlessly access premium course experiences and skip checkout; and (iv) rendering enterprise-level user support. The AO also noticed that the agreement included additional services which, inter alia, provided for training for using the platform. On the aforesaid basis, the AO concluded that the Assessee was not merely providing content services but was providing a whole range of user services, which is specific to a particular user. Additionally, the AO observed that such services also involved a high degree of human intervention and no separate consideration for such user services was received by the Assessee. The AO thus, proceeded to propose an addition of Rs. 75,66,52,591/- to the Assessee's returned income (which was nil). 11. The Assessee filed his objections before the Dispute Resolution Panel [DRP]. The DRP considered the Assessee's objections. The DRP wa....
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....hall place a copy of these directions as annexure to the final order, to be read as a part of the order. While passing the final order, the Assessing Officer shall incorporate the reasons given by the Dispute Resolution Panel in respect of various objections, at appropriate places. The Grounds of Objections are decided as above." [emphasis added] 12. However, it does not appear that the AO undertook any fresh exercise. The AO reiterated its earlier observations and proceeded to pass the final assessment order dated 28.06.2023. 13. The learned ITAT did not find merit in the Revenue's contention that the Assessee had provided any technical services, especially the once which involved human intervention. Accordingly, the learned ITAT rejected the contention that the Assessee's receipts were chargeable to tax under the Indo-US DTAA as FIS. The relevant extract of the learned ITAT's decision is set out below: "11. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. Insofar as the activity of the assessee is concerned, it is established on record that the assessee provides a global online learning platform, wherein, vario....
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....sessed income of Rs. 75,66,52,591/- taxable at as per provisions of the Income Tax Act, 1961 and applicable surcharge and cess. Necessary forms to be issued, applicable interest to be charged and credit of taxes, if any after verification from the ITD system are to be allowed. Penalty u/s 270A is being proposed to initiate as discussed in earlier paragraphs of the order. Detailed computation of tax payable and interest charged u/s 234A, 234B and 234C of the Act is being attached as part of the final order. Notice of demand is being issued." 13. As could be seen from the highlighted portion of the observation of Assessing Officer, without properly implementing the directions of learned DRP, he has merely stated that the agreement with Gandhi Institute of Technology and Management has been discussed in the draft assessment order. By these observations what the Assessing Officer implies is, learned DRP has issued directions without proper application of mind. This, in our view, is highly objectionable and against the provision contained under section 144C (13) of the Act. 14. Be that as it may, Assessing Officer's findings/observations on the role of assessee are selfcontradicto....