EDUNXT GLOBAL SDN. BHD,BANGALROE V. DCIT, INTERNATIONAL TAXATION, CIRCLE-1(1), BANGALORE

ITITA 587/BANG/2025

AI Insights

The case involves EDUNXT GLOBAL SDN. BHD., a Malaysian company, which appealed against the assessment order for the assessment year 2016-17. The primary contention was the reclassification of income received from Indian clients, initially treated as royalty, to 'fees for technical services' by the Assessing Officer (AO) during remand proceedings. The Tribunal had previously remanded the issue to the AO to determine the taxability of the income as royalty, following the Supreme Court's decision in Engineering Analysis Centre of Excellence P. Ltd. The AO's decision to classify the income as fees for technical services was challenged by the assessee, leading to this appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791270 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 20 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 20-03-2025
• Other Referred Cases: Engineering Analysis Centre of Excellence P. Ltd. vs CIT [2012] 432 ITR 471
• Laws Referred To: Income Tax Act, India-Malaysia DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Set aside; Business income; Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER IT(IT)A No.587/Bang/2025 Assessment year : 2016-17 EDUNXT GLOBAL SDN. BHD. Unit A(II) Level 5, Menara Shell, 211 Jalan Tun Sambathan, Kuala Lumpur. MY – 50470. Malaysia. C/o. Manipal Global Education Services Pvt. Ltd., Manipal Towers, 14, Old Airport Road, Bangalore – 560 008. PAN: AADCE 6923A Vs. The Deputy Commissioner of Income Tax, International Taxation, Circle 1(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Padam Chand Khincha, CA Respondent by : Shri Shashi Saklani, CIT(DR)(ITAT), Bengaluru. Date of hearing : 18.09.2025 Date of Pronouncement : 10.12.2025 O R D E R Per Prashant Maharishi, Vice President 1. This appeal is filed by EDUNXT GLOBAL SDN. BHD. (the assessee/appellant) for the assessment year 2016-17 wherein the Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 2 of 7 assessee has raised the issue of assumption of excess jurisdiction by the ld. AO. It is the claim of the assessee that the ld. AO has erred in passing the assessment order in remand proceedings in contradiction of the directions issued by the ITAT, Bangalore in its order dated 30.8.2022 in IT(IT)A No.2529/Bang/2019 for AY 2016-17. According to the assessee, the issue of treating the income as 'fees for technical services' was not the subject matter of appeal and therefore the conclusion of the ld. AO holding that the impugned income of Rs.3,59,11,128 received by the assessee from its clients is fees for technical services chargeable to tax u/s. 9(1)(vii) of the Act is not correct. The assessee challenges that the assessment order passed by the ld. DCIT, Circle 1(1)(1), Bengaluru dated 30.1.2025 for the impugned AY 2016-17 is not sustainable. 2. The brief facts of the case show that assessee is a Malaysian company engaged in the business of provision of distant education courses to individuals for post-graduation courses. The assessee has provided services to several Indian companies. The services are in the form of distant education in MBA course to various employees of its clients. The assessee has received a sum of Rs.3,59,11,128. On receipt, the client companies have deducted tax at source of Rs.40,70,116. The assessee while filing its return of income did not declare any income, but claimed the entire tax deduction at source as refund. The case of the assessee was taken up for scrutiny and the above sum was treated as royalty u/s. 9 of the Act and the entire sum has been tax @ 10% as per Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 3 of 7 the provisions of DTAA. When the issue was challenged before the ld. DRP, it was held to be royalty. 3. The assessee approached the coordinate Bench wherein the order was passed in IT(IT)A No.2529/Bang/2019 on 30.8.2022 wherein the issue was remitted to the file of the AO to decide it in the light of the judgment of the Hon’ble Supreme court in the case of Engineering Analysis Centre of Excellence P. Ltd. [2012] 432 ITR 471. On remand, the ld. AO found that the above amount is chargeable to tax as 'fees for technical services' and therefore the ld. TPO held that the above receipt constitutes fees for technical services as per section 9 of the Act as well as India-Malaysia DTAA. He taxed it @ 10%. The assessment order was passed on 30.1.2.2025 treating the above sum as fees for technical services. 4. Therefore assessee is aggrieved and submitted that the coordinate Bench has restored the issue back to the file of the ld. AO merely to decide the taxability of royalty income, but the ld. AO has not taxed the same as royalty income, but has taxed the same as fees for technical services, thus he has exceeded the jurisdiction and therefore the addition deserves to be deleted. The ld. AR, Shri Padam Chand Khincha, CA state that in the remand, the AO has assumed excess jurisdiction which is not permitted. 5. The ld. CIT(DR), Shri Shashi Saklani, vehemently supported the order of the AO and submitted that the remand is made by the coordinate Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 4 of 7 Bench for fresh decision and therefore there is nothing wrong in the AO taxing the impugned sum as fees for technical services. 6. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. Undoubtedly this is a set aside proceeding in IT(IT)A No.2529/Bang/2019 for AY 2016-17 wherein the original issue was decided by the order dated 30.8.2022. Therein, The submission of the assessee was that the subscription fees received by the assessee is not in the nature of royalty, but is in the nature of business income and in the absence of Permanent Establishment in India, the amount received is not taxable as per the provisions of DTAA. It was further stated that the subscription fee received for providing publicly available information cannot be treated as royalty. The claim of the ld. CIT (DR) was that the data provided by the assessee are customised data catering to the specific need of the customer, therefore such fee is in the nature of royalty. Based on the above arguments, the coordinate Bench in para 5 has held as under:- “5. We have perused the submission advanced by both sides in light of records placed before us. The Ld.AR submitted that under India Malayasia DTAA as per Article 12(3) of the \"Royalty\" is defined as \"payments of any kind received as a consideration for the, “use of”, or the “right to use”, any copyright of a literary, artistic, or scientific work, including cinematographic films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or information concerning industrial, commercial, or scientific experience. The relevant article reads as under:- Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 5 of 7 “12. Royalty ……… 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, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information (know-how) concerning industrial, commercial or scientific experience.” 5.1 A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd. vs CIT reported in (2012) 432 ITR 471 has analysed the provisions of Income tax Act vis-a-vis provisions of DTAA. 5.2 We note that the details that were filed before the DRP were neither remanded nor has been verified by the DRP themselves and observes that assessee could not furnish any documents in para 2.1.3 which has been reproduced hereinabove in the preceding paras. 5.3 We note that the various agreements / documents that has been filed in piece meal before the Ld.AO and the DRP has not thoroughly verified the materials / document that were filed by the assessee. Infact before the DRP, various documents filed by the assessee has not been considered. As has been submitted by Ld.CIT.DR that identical issue has been remanded to the Ld.AO for fresh consideration for A.Y. 2014- 15 in IT(IT)A No. 2496/Bang/2017 vide order dated 30/03/2022, we do not wish to express our opinion in the present facts as it would prejudice the rights of assessee as well as the revenue. In the interest of justice, we deem it proper to remand this issue back to Ld.AO to be decided along with A.Y. 2014- 15 as there are voluminous details available in the present assessment year under consideration before us. 5.4 In the interest of justice it is appropriate to remit the issue in dispute to the file of the Ld.AO for deciding the comparability of these transactions in the light of the judgment of the Hon’ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited (supra) and the decisions relied by the Ld.AR reproduced herein above. Accordingly, the issue in dispute is remitted to the Ld.AO for fresh decision with the above directions.” Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 6 of 7 7. We find that there is no dispute with respect to the above finding. The coordinate Bench further referred to the decision of Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. in 432 ITR 471 and then the ld. AR was called upon by the Bench to produce the agreement if any in order to understand the right that the Indian customers held on the database shared by the assessee. This agreement was provided which was not filed before the lower authorities below. It was further noted that except for the invoices, nothing was produced by the assessee. Therefore the coordinate Bench restored the issue back to the file of the AO to examine the issue in view of the decision of the Hon’ble Supreme Court. Thus as what we understand, when the coordinate Bench restored the issue back to the file of the ld. AO to look at the agreement and the invoices and compare the same and decide whether it can be charged to tax as royalty income in view of the decision of the Hon’ble Supreme court. There is no doubt about the issue and to what extent it is remitted to the file of the AO. 8. On a query that whether there is any Miscellaneous Petition filed by the AO, it was denied. We also do not find any such application pending before us. Thus, we do find that the approach of the ld. AO in determining the character of such receipt as fees for technical services has indeed exceeded the jurisdiction where the issue was remitted only to examine whether the impugned receipt is royalty or not. Further it is not the case of the AO that some new facts have come to his knowledge, but he has applied his mind to the same set of facts. He has Printed from counselvise.com IT(IT)A No.587/Bang/2025 Page 7 of 7 merely relied upon some decisions to hold that the impugned receipt is not a royalty, but fees for technical services. Accordingly we are of the view that the ld. AO has exceeded his jurisdiction in the remand proceedings without first obtaining the rectification of the order of the coordinate Bench. We do not hold that impugned receipt is either the royalty or fees for technical services, because both the parties did not argue on this issue at all. Accordingly ground No.2 of the appeal of the assessee is allowed and the impugned assessment order passed u/s. 143(3) r.w.s. 254 of the Act on 30.1.2025 is quashed. 9. In the result, the appeal filed by the assessee is allowed. Pronounced in the open court on this 10th day of December, 2025. Sd/- Sd/- ( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 10th December, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "