2025 (10) TMI 1054

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.... Member did not agree with the view taken by the Hon'ble Accountant Member and he passed a dissenting order on 28.02.2024. Consequent to the difference of opinion among the Hon'ble Members, the matter was referred before the Hon'ble President and the Hon'ble President vide order 26.04.2024 has nominated the Hon'ble Third Member to adjudicate the dispute which arose between the view of Hon'ble Accountant Member and Hon'ble Judicial Member. The questions framed by the Hon'ble Members read as follows : "Questions framed by the Hon'ble Judicial Member: 1. Whether, it is justified on law and facts to hold the "infrastructure facility falls within the specified definition of "plant", ignoring, the absence of term "scientific equipment" in comprehensive treaty, which is applicable to the present issue. Questions framed by the Hon'ble Accountant Member: 1. In given facts and circumstance and in law, what is the jurisdiction of the Tribunal in recalled order or recalled issue? 2. In given facts and circumstance of the case and in law the payment consideration made by the assessee falling within the definition of royally u/s 9(1)(vi) of the Act (a....

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....ade for IT support services received by the assessee in three broad categories and concluded on their taxability, the details of which are already given at para 5 of this order. 24. I find the Tribunal vide order dated 13.12.2021 recharacterized the entire transaction and concluded that the true nature of the payment was for the use of the IT infrastructure facility set up by NV Bekaert SA and not for availing any IT services. It further held that the DRP should not have bifurcated the payment into further categories and held that the entire consideration was taxable as Industrial royalty/equipment royalty under the Act as well as the Treaty relying on the presence of the specific phrase "for the use of, or the right to use, industrial, commercial, or scientific equipment". Thus, the Tribunal concluded that the impugned payment constituted royalty for use of equipment (Industrial Royalty/Equipment Royalty) in terms of section 9(1)(vi) of the Act as well as in terms of the definition of Royalty under the Article 12(3)(a) of the India-Belgium Treaty and thereby affirmed the addition made by the AO/DRP. 25. I find the assessee preferred a Miscellaneous Application su....

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....eads as under: MINISTRY OF FINANCE (Department of Revenue) (FOREIGN TAX DIVISION) NOTIFICATION New Delhi, the 19th January, 2001 (INCOME TAX) S. O. 54(E), - Whereas the Agreement between the Government of the Republic of India and the Kingdom of Belgium for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income came into force on the 1st day of October, 1997, after the notification by both the Contracting States to each other of the completion of the procedures required under their laws for bringing into force the said agreement ; And whereas the Central Government in exercise of the powers conferred by section 90 of the Income-tax Act, 1961 (43 of 1961), section 24A of the Companies (Profits) Surtax Act, 1964 (7 of 1964) and section 44A of the Wealth-tax Act, 1957 (27 of 1957), had directed that all the provisions of the said Agreement annexed to the notification of the Government of India in the Ministry of Finance. (Department of Revenue) (Foreign Tax Division) No. G. S. R. 632(E), dated the 31st October, 1997, shall be given effect to in the Union of India; And whereas paragraph 1 of the....

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....th effect from the 1st January, 1998, in Belgium for the existing sub-paragraph (a) of paragraph 3 of article 12 relating to 'royalties and fees for technical services', the following sub-paragraph shall be substituted, namely : "(a) The term 'royalties' as used in this article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience." [Notification No.20/F. No. 505/2/89-FTD] VIJAY MATHUR, Jt. Secy." 28. A perusal of the above Notification shows that the term 'royalty' was redefined and the expression 'use of industrial, commercial or scientific equipment' was excluded from the same. A perusal of the above would show that with effect from the 1st April, 1998, in India and with effect from the 1st January, 1998, in Belgium for the existing sub-paragraph (a) of paragraph 3 of article 12 relating to 'royalties and fees for technical services', the following sub-para....

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....wledged in the Notification SO 54 (No.20 (F.NO.505/2/89 FTD) dated 19.01.2001 (refer Pg 83 of Paper Book). Hence, we are of the considered opinion that hire charges of boreboat charter does not fall under the garb of definition Royalty and hence, not taxable as Royalty under Article 12 of India- Begins DTAA. (Emphasis supplied) 31. In view of the above discussion and in the light of the Gazette Notification No.S.O.54(E) dated 19.01.2001 I hold that the payments made for use of IT infrastructure facility do not fall within the ambit of industrial royalty / equipment royalty on account of exclusion of the expression 'use of industrial, commercial or scientific equipment' and therefore, the transaction would be out of the ambit of taxation as royalty under Article 12 of the treaty. I further hold that the payment for the "use of IT infrastructure facility" do not fall within the definition of "Plant" since the language in the Article 12(3)(a) of the India Belgium Tax Treaty contains the words 'Plan" and not "Plant". Therefore, on account of absence of the relevant clause 'for the use of or right to use industrial / commercial, scientific equipment', the payments made by th....

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