TaxTMI 
TaxTMI 
2026 (6) TMI 500
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....e is registered as a Foreign Portfolio Investor, (FPI), with Securities and Exchange Board of India, (SEBI) and carries on activities of making investments in securities in India. It is stated that assessee, previously known as Goldman Sachs & Co ('GS & Co') does not have any business connection/Permanent Establishment ('PE') in India in terms with India-USA Double Taxation Avoidance Agreement ('DTAA'). In the year under consideration, the assessee had received payments from various associate enterprises in India, such as Goldman Sachs Services Private Limited (GSSPL), Goldman Sachs (India) Securities Private Limited (GSISPL), Goldman Sachs (India) Alternative Investment Management Private Limited (GSIAIMPL), Goldman Sachs Assets Management (India) Private Limited (GSAM), Goldman Sachs (India) Finance Private Limited (GSIFPL) and Goldman Sachs (India) Capital Markets Private Limited (GSICMPL) for providing management services, capital goods/services, Communication and technology expenses, investment and banking services, etc. Further, the assessee had shown some receipts as recovery of employee related expenses and recovery of other expenses. Out of such expenses, the assessee has ....
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....ced that the assessee has received communication charges of Rs. 51.90 crores. Out of same, an amount of USD 32,85,994 (equivalent to Rs. 17,84,29,474) represents payment for access to various specialised online information portals like Bloomberg, Reuters, Platts, Moody"s Analytics, etc. These amounts were shown under the head "market data expenses". As per the assessee, these payments were cost allocations done to Indian parties with respect to the usage/allocation with respect to these accesses. The AO vide draft assessment order passed under section 143(3) r/w section 144C(1) of the Act treated these amounts as being in the nature of Royalty under Article 12(4) of the India-US DTAA on the basis that the receipts will be for the use of information concerning the industrial, commercial scientific experience. The assessee filed detailed objections before the learned DRP against the aforesaid addition made by the AO. The DRP vide its directions issued under section 144C(5) of the Act held that the amount represents the payment made for access to various online databases, and corresponding costs have been allocated to various associated enterprises. The learned DRP further held that t....
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.... 923 GS Execution and Clearing 729 TCB Data System, Inc. 579 Clarksons 449 Money-Media 277 Copp Clark Professional 269 Market Axess 184 Prospect News Inc. 147 Average LIBOR.com 77 Options Price Reporting Authority 17 Total 32,85,994 18. As per the assessee, firstly, this receipt is in the nature of reimbursement of expenditure incurred on behalf of the associated enterprise, and secondly, in any case, the contract with third-party vendors is on a principal-to-principal basis, and for the usage of the database, which does not involve any transfer of technology or making available any technology either to the assessee or to the associated enterprise. Further, neither the assessee nor the associated enterprise has control or physical access to the server of the vendors, and therefore, the said payments cannot qualify as the use of or right to use of software nor for making available technical knowledge, experience, skill, etc. Thus, the receipt is not in the nature of Royalty in accordance with the India-US DTAA. However, the Revenue treated the receipts are for the use of information concerning industrial, commer....
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....d and duly considered facts of the case in the light of the applicable legal position. 5. We find that Hon'ble jurisdictional High Court, in the case of DIT Vs Dun and Breadstreet Information Services India Pvt Ltd[(2012) 20 taxmann.695 (Mum)] has, while approving and concurring with the approach of Authority for Advance Ruling in the case of this very assessee, observed as follows: "The assessee had imported business information reports from Dun and Bradstreet, USA, and made remittances in respect thereof without deducting tax at source. The Assessing Officer held that the assessee was liable to deduct tax at source and accordingly passed an order under section 195 read with section 201 of the Act. The appeal filed by the assessee was dismissed by the Commissioner of Income-tax (Appeals). On further appeal, the Income-tax Appellate Tribunal set aside the order passed under section 195 read with section 201 of the Act by following its decision in the assessee's own case for the assessment year 2002-03 in I.T.A. No. 1773/Mum/2006 and the decision of the Authority for Advance Rulings on identical facts in the case of Dun and S.A. Bradstreet Espana In re Auth....
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.... is available to public at large at a price as in case of buying a book and it is not a prerequisite, that BIR must be downloaded by DBIS only and in fact some clients, such as Expert credit guarantee corporation, in fact, access the server themselves to download BIR. The applicant does not have any server in India for the use of DBIS. Indeed the applicant has specifically averred that the copyright in the BIR would neither be licensed nor assigned to either the DBIS or the Indian customer. From these aspects it is clear that the aforementioned ruling of the Authority is distinguishable on facts. If a group of companies collects information about the historical places and places of interest for tourists in each country and all informations are maintained on a central computer which is accessible to each constituent of the Group in each country, can a supply of such information electronically on payment of price be treated as royalty or fee for technical services ? We think not. The next case relied upon by the Commissioner is also a ruling of the Authority in Ericsson Telephone Corpn. India AB, In re [ 1997] 224ITR 2031. In that case the applicant was a company incorporate....
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....jurisdictional High Court. Once our Hon'ble jurisdictional High Court has expressed a view, it cannot be open for us to be swayed by a contrary view expressed by any other Hon'ble High Court. No decision from Hon'ble jurisdictional High Court, contrary to the above decision of Hon'ble jurisdictional High Court, was brought to our notice. 9. In view of the above discussions, as also bearing in mind entirety of the case, we delete the impugned addition of Rs 23,01,00,058 as royalty in the hands of the assessee. The assessee gets the relief accordingly. 19. We find that the term "Royalty" as defined in the India-US DTAA is worded similarly to India-Swiss DTAA, which was under consideration in the aforesaid decision. From the record, it is evident that the payment is in respect of usage of the database of the third-party vendors, which was later on recovered by the assessee from the associated enterprises. Therefore, in view of the aforesaid decision, once the payment made for the usage of the database does not fall within the ambit of Royalty, recovery of costs by the assessee from the associated enterprises for the usage of the database cannot also r....
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....partment and further appeals are pending before the High Court, the Assessing Officer rejected assessee's claim and brought the receipts to tax by treating as FIS/FTS. Though, the assessee objected to such addition before learned DRP. However, the addition made was upheld. Accordingly, addition made was incorporated in the final assessment order. 9. We have considered rival submissions and perused the materials on record. Undisputedly, the amount in dispute was received by the assessee from its Indian AEs towards recovery of employee-related expenses incurred by the assessee on behalf of the AEs. While examining the issue of non-withholding of tax at source on such reimbursements by the AEs to the assessee, i.e., GS & Co., in the proceedings under Section 201 of the Act, the Assessing Officer held that the payments made by the AEs are in the nature of FIS/FTS, hence, required deduction of tax at appropriate rate. The dispute ultimately reached ITAT in case of M/s GSISPL. While deciding the issue in ITA No. 362 to 369 & 345/Bang/2020, vide order dated 29-04-2022, the Coordinate Bench held that the payments are not in the nature of FIS/FTS, hence, did not require deduction of tax ....