TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1229
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.... as Royalty The AO has erred in considering Infrastructure Data Centre charges of INR 6,76,64,872/- taxable as Royalty under the India - Singapore Double Taxation Avoidance Agreement ('DTAA'). 3. Management Service Fees taxed as Royalty The AO has erred in considering Management Service Fees of INR 64,65,974/- taxable as Royalty under the Act as well as under the India - Singapore DTAA. 4. The appellant craves leave to add, alter, and supplement any ground or grounds, if necessary, at the time of hearing of the appeal." 3. The brief facts of the case are that the assessee is a tax resident of Singapore and is incorporated under the laws of Singapore. The assessee is engaged in providing services relating to developing, marketing, and implementing incentive-based strategies and technologies to build loyalty and to reward long-term relationships through the utilisation of the Internet, wireless technology, and offline solutions to its clients. For the year under consideration, the assessee filed its return of income on 09/02/2022, declaring a total income of Rs. 29,13,400. The return filed by the assessee was selected for scrutiny, and statutory notices under section....
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....s Royalty in terms of Article 12(3)(a) of the India-Singapore DTAA. In further proceedings, the learned DRP, following the directions rendered in assessee's own case for the preceding assessment years, rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 8. During the hearing, the learned Authorised Representative ("learned AR") submitted that a similar issue has been consistently decided in favour of the assessee by the coordinate bench of the Tribunal in the preceding assessment years. On the other hand, the learned Departmental Representative ("learned DR") vehemently relied upon the orders passed by the lower authorities. 9. We have considered the submissions of both sides and perused the material available on record. We find that in a recent decision, the coordinate bench of the Tribunal in assessee's own case in Edenred Pte Ltd. vs DCIT, in ITA No. 4334/Mum./2023, vide order dated 28/03/2025, for the assessment year 2021-22, decided a similar issue in favour of the assessee by following the judicial precedents rendered in the assessee's own case. T....
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....e services under the IDC agreement comprise of administration and supervision of central infrastructure; mailbox hosting services and website hosting services, (iv) IDC services ensure 100% uptime for critical external facing applications which need highly secured web environment and dedicated team of security experts to ensure 100% uptime Edenred Pte Ltd. 11 ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 of security systems (firewall, antivirus, access controls) which are also hosted on server in Singapore. We further observe that examples of websites/applications/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 cap....
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.... the description of technical services as defined in the DTAA, (vi) therefore, the fees paid to AXA ARC by the applicant does not amount to fees for technical services within the meaning of the DTAA, (vii) as regards the payments made for providing access to software applications and to the server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the service agreement, same cannot be brought within the scope of the definition of Edenred Pte Ltd. 13 ITA Nos. 1718/M/2014 254/M/2015 & 507/M/2016 'royalty' in Article 12.3, (viii) there is no transfer of any copyright in the 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 an....
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....ycargo at Singapore. The applicant received payments from an Indian subscribers for providing password to access and use the portal hosted from Singapore. The AAR held that payments made for concurrent access to utilize the sophisticated services offered by the portal would be covered by the expression royalty. We find that subsequently, after considering the decision in Cargo Community Network (P.) Ltd. (supra), Mumbai ITAT in the case of Standard Chartered Bank 11 ITR 721 and Yahoo India Pvt. 140 TTJ 195 held that no part Edenred Pte ltd. 15 ITA Nos. 1718/M/2014 254/M/2015& 507/M/2016 of the payment could be said to be for use of specialized software on which data is processed as no right or privilege was granted to the company to independently 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 platfor....
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....lly following the earlier decisions of the Tribunal in assessee's own case, we delete the addition. This ground is allowed." 10. 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 following the order passed by the coordinate bench of the Tribunal in assessee's own case cited supra, we uphold the plea of the assessee and direct the AO to delete the addition on account of IDC charges. As a result, ground No. 2 raised in assessee's appeal is 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....
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....gs, the learned DRP, following the directions rendered in the assessee's own case for the preceding assessment year, rejected the objections filed by the assessee on this issue. In conformity, the AO passed the impugned final assessment order. Being aggrieved, the assessee is in appeal before us. 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., for the assessment year 2021-22 cited supra, decided similar issue in favour of the assessee by following the judicial precedents rendered in assessee's own case. The relevant findings of the coordinate bench of the Tribunal, in the aforesaid decision, are reproduced as follows: - "Management Service Fee taxed as Royalty 12. During the year under consideration assessee has received as sum of Rs. 85,81,894/- as Management Service Fee from the Indian Group Company as per the agreement entered into by the assessee. The AO treated the impugned amount as Royalty as per section 9(1)(vi) of the Act r.w.Article-12 of the DTAA between India and Singapore. 13. We have heard the parties and perused the ma....