TaxTMI 
TaxTMI 
2026 (6) TMI 873
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....nder Article 12(3)(a) and Article 12(4)(a) of the India- Singapore DTAA. 1.1 While doing so, the Ld. AO/ Ld. DRP has failed to consider and apply the judgments relied upon by the Appellant and to that extent, the impugned order and the directions issued by the DRP are laconic and hence vitiated in law. 2. That, the Ld. AO has erred in characterizing the receipts from provision of credit rating services as royalty under Article 12(3)(a) of the India-Singapore DTAA by holding that the said services involve provision of information concerning "commercial experience". 2.1 Without prejudice to the above, the Ld. AO/ DRP has not established or even remotely discussed as to how the test of "use" or "right to use" embedded in Article 12(3)(a) of the India-Singapore DTAA stands satisfied in the instant case, and hence the impugned order is arbitrary and is thus vitiated in law. 3. That, the Ld. AO has erred in characterizing the receipts from provision of annual surveillance services as fee for technical services under Article 12(4)(a) of the India- Singapore DTAA. 4 That, on the facts and circumstances of the case and in law, the Ld. AO has erre....
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.... be safely concluded that the credit rating certificate is commercial information because it is mandatorily required in raising resources from the international markets. It indicates the level of safety for the potential investors, thus facilitates the marketing/resource mobilisation exercise of the rated company. It also enables the rated company to reduce its cost of borrowing. For the period for which it is issued the company has got absolute rights to utilize it for the intended purposes unless such rating is changed by the rating institution depending upon developments subsequent to the issue of credit rating certificate. Thus, credit rating certificate can also be viewed as rights acquired by the company which can be used for mobilisation of higher resources at an appropriate cost, Accordingly, in the instant case, the annual surveillance fee falls within the category of ancillary services under sub-para (a) of para (4) provided in connection with the use of commercial information under sub-para (a) of para (3) of the Article 12 of India- Singapore DTAA and accordingly, the assessee's receipts are liable to be taxed as FTS. 11. Taxability of Income under Income-t....
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...., the DRP rejected the objections of the assessee and thereafter final assessment order was passed u/s 143(3) r.w.s. 144C(13) dated 09.01.2025, assessing income at Rs. 73,22,67,191/- to be taxed as FTS @ 10%. 4. Aggrieved with this order, the assessee has filed an appeal before the Tribunal. 5. Before us, the Ld. Counsel for the assessee has made elaborate arguments and has also filed written submissions, which are reproduced as under: "LEGAL SUBMISSIONS ON NON-TAXABILITY OF CREDIT RATINGS SERVICEWS 9. Article 12(3) of India-Singapore DTAA provides as under: "(3) 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: (a) any copyright of a literary, artistic or scientific work, including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial. commercial or scientific experience, including gains derived from the alienation of any such right, property or information: (b) any industrial, commercial, or scientific equi....
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.... Where the recipient merely avails a service, without having any insight into the experience of the service provider, the same may not satisfy the test of royalty. 12. The Hon'ble Bombay High Court in Diamond Services International (P.) Ltd. v. UOI [2008] 169 Taxman 201 (Bombay) has elucidated the meaning of the expressions/phrase "experience" and "right to use" or "impart" in the context of Article 12 of the India- Singapore DTAA. It has been held that, in order to qualify as royalty under Article 12(3)(a), the payment should be for transfer of "industrial or commercial experience" from assignor to the assignee for a consideration - it must envisage the person who is the owner of any intellectual property right, designs or model, plan, secret formula or process, etc. to retain the property in them and permit the use or allow the right to use such patents, designs or models, plans, secret formula, etc. to another person. Where there is no transfer of the right to use, payment made cannot be treated as royalty. In the instant case, there is no transfer of any experience or secrets and hence the receipts of the assessee from provision of credit rating and annual....
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....mount to imparting of commercial experience as: a) the rating is required to be done as per international practices for the benefit of investors and no technical skill or process or expertise gets transferred to the clients; b) lenders/clients do not get right to use the experience and they are only given access to findings of the in the form of a report of the 's research and evaluation c) the assessee merely grants ratings to its clients and provides a report of its research/ evaluation without providing/ parting with its underlying know-how/technical expertise involved in arriving at such rating d) the merely issues credit certificates which do not impart any technical knowhow/ technical information or the technology on the basis of which they are prepared. LEGAL SUBMISSIONS ON TAXABILITY OF ANNUAL SURVEILLANCE SERVICES 18. Article 12(3) of India-Singapore DTAA provides as under. "(4) The term "fees for technical services" as used in this Article means payments of ary kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through....
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....ing with NHPC Ltd. at regular intervals to understand developments and trends in performance to help analysts compare company performance against their own and the company's expectations, as well as against peers. Checking the status of issues that may affect the credit quality of NHPC, exploring the probability of such issues arising in the near future, and assessing the management's perspective on such issues. Discussing financial performance with the entity on the declaration of interim financial results. Understanding strategic plans or new initiatives that could have rating implications. The credit rating agency shall publish the rating, at least annually along g with the methodology used for the issue of rating and validity of the rating should also be stated up front. The credit rating agency shall maintain internal records to support its credit opinions for a reasonable period of time or in accordance with applicable law. The credit rating agency should also seek feedback from market participants whenever it contemplates major changes in its rating criteria or key rating policies and shall also provide some indication, such as a rating outlook, of ....