AC NIELSEN CORPORATION, MUMBAI V. DDIT (IT) 1(1), MUMBAI

ITA 1203/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3573 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESHWAR YADAV
• Assessee Lawyers: K K VED
• Keywords: Double taxation relief

Judgement Text

1 , , , , INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMBAI , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMIT SHUKLA,JUDICIAL MEMBER ./ I.T.A. NO.1203/MUM/2014 / ASSESSMENT YEAR: 2007-08 ./ I.T.A. NO.1204/MUM/2014 / ASSESSMENT YEAR: 2008-09 ./ I.T.A. NO.5234/MUM/2014 / ASSESSMENT YEAR: 2009-10 M/S.AC NIELSEN CORPORATION C/O., NIELSEN (INDIA) PRIVATE LIMITED 6 TH FLOOR, BLOCK C, GODREJ IT PARK, 02, GODREJ BUSINESS DIST. PHIROJSHANAGAR,LBS MARG,MUMBAI-79. PAN:AAECA 8632 R VS. DY. DIRECTOR OF INCOME TAX (INTL. TAX)- 1(1), AAYAKAR BHAVAN MAHARSHI KARVE MARG MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVE NUE BY: SHRI RAJESHWAR YADAV A SSESSEE BY: SHRI K.K. VED / DATE OF HEARING:02.03.2016 / DATE OF PRONOUNCEMENT: 02.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !' PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 30.9.2009 AND 27.2.201 4 OF THE CIT(A)-10,MUMBAI,THE ASSESSEE HAS FILED APPEALS FOR THE ABOVE MENTIONED THREE YEA RS.SINCE THE ISSUE RAISED BY THE ASSESSEE ARE IDENTICAL IN NATURE,WE ARE ADJUDICATING THEM BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MARK ET RESEARCH INFORMATION AND ANALYSIS.DETAILS OF DATES OF FILING OF RETURNS OF I NCOME, RETURNED INCOME, DATES OF ASSESSMENT AND THE ASSESSED INCOME CAN BE SUMMARISED AS UNDER :- A.Y. ROI FILED ON RETURNED INCOME(RS.) ASSESSMENT DT. ASSESSED INCOME(RS.) DT. OF ORDERS OF CIT(A) 2007-08 24.10.2007 NIL 28/01/2011 15,06,52,986/- 30 .09.2013 2008-09 17.09.2008 NIL 30.01.2012 12,94,91,336/- 30 .09.2013 2009-10 14.09.2009 NIL 20.05.2013 13,90,00,630/- 27 .02.2014 2.1. DURING THE COURSE OF HEARING BEFORE US REPRESENTATI VES OF BOTH THE SIDES AGREED THAT SIMILAR ISSUE HAVA BEEN DEALT BY THE TRIBUNAL, WHIL E DECIDING THE APPEAL FOR THE A.Y.S 2004- 05 TO 2006-07 (ITA NOS.1901-1903/MUM/2010 DATED 8.8 .14).WE FIND THAT IN PARA-3 OF THE ORDER, THE TRIBUNAL HAS NARRATED THE FACTS OF THE CASE AS UNDER :- 3.THE FACTS RELATING TO THE CASE ARE STATED IN BRIE F. THE ASSESSEE HEREIN IS A TAX RESIDENT OF USA. IT BELONGS TO AC NIELSON GROUP,WHICH IS ONE OF THE WORLDS LEADING BUSINESS, MANAGEMENT & MARKET RESEARCH COMPANIES. THE AC NEIL SON GROUP ALSO OFFERS OTHER MARKETING INFORMATION SERVICES TAILORED TO THE NEED S OF INDUSTRIES LIKE PHARMACEUTICALS, FINANCIAL SERVICES, TELECOMMUNICATIONS ETC. THE AC NEILSON GROUP IS REPRESENTED IN INDIA THROUGH ITS TWO LEGAL ENTITIES VIZ., M/S ACNIELSON ORG-MARG PRIVATE LTD (ACNOM) FOR CUSTOMIZED RESEARCH SERVICES & RETAIL MEASUREMENT S ERVICES AND M/S ACNIELSON RESEARCH SERVICES PVT LTD (ACNRS) FOR CUSTOMIZED MARKET RE SEARCH SERVICES. THE ASSESSEE HEREIN 1203-04/14;5234/14-ACNIELSEN 2 ENTERED INTO A GENERAL SERVICE AGREEMENT (GSA) IN T HE YEAR 2003 WITH BOTH THE INDIAN ENTITIES CITED ABOVE. THE NATURE OF SERVICES TO BE PROVIDED ARE DESCRIBED AS UNDER IN THE AGREEMENT:- GROUP SERVICES AND REGIONAL GROUP SERVICES, AS TH EY MAY BE AMENDED FROM TIME TO TIME , INCLUDE BUT ARE NOT LIMITED TO : A. DEVELOPMENT AND DETERMINATION OF SHORT AND LONG TERM BUSINESS STRATEGIES; B. OVERALL MANAGEMENT AND COORDINATION IN RELATION TO GENERAL POLICIES AND STRATEGIES PER COUNTRY AND PER DIVISION ; C. MAINTENANCES OF EXTERNAL RELATIONSHIPS, TO THE EXTENT THAT THESE SERVICES DO NOT COMPRISE SHAREHOLDER SERVICES; D. HUMAN RESOURCES SERVICES REGARDING GROUP POLICI ES; E. LEGAL SERVICES; F. INSURANCE SERVICES; G. DEVELOPMENT, CONTROL AND MAINTENANCE OF MANAGEME NT INFORMATION SYSTEMS; H. ADMINISTRATIVE SUPPORT TO GROUP COMPANIES, INCLU DING ANALYSIS OF MANAGEMENT INFORMATION; I. DEVELOPMENT SHORT AND LONG TERM IT POLICIES AND STRATEGIES; J. MANAGEMENT AND CO-ORDINATION OF IT POLICIES BET WEEN GROUP COMPANIES; K. TAX SERVICES; L. FINANCIAL RISK MANAGEMENT SERVICES, TO THE EXTE NT THESE SERVICES DO NOT COMPRISE FINANCING SERVICES. M. SUPPORT IN THE AREA OF INTERNATIONAL STAFFING, C AREER DEVELOPMENT AND INTERNATIONAL JOB ROTATION AND N. MARKET RESEARCH, TARGET RESEARCH AND COMPETITOR RESEARCH FOR PROVIDING THE SERVICES ENUMERATED ABOVE, THE A SSESSEE HEREIN IS COMPENSATED BY THE INDIAN ENTITIES CITED ABOVE. ACCORDING TO THE A SSESSEE, IT RECEIVED AMOUNTS FROM THE ABOVE SAID INDIAN ENTITIES AT THE RATES COMPUTE D AT COST PLUS 10% MARK UP. ACCORDING TO GSA AGREEMENT, THERE WILL NOT BE ANY M ARK UP IN RESPECT OF THIRD PARTY EXPENSES. THUS, THE MARK UP OF 10% IS CHARGED IN RE SPECT OF COSTS INCURRED BY THE ASSESSEE COMPANY ONLY. 3. FOR ALL THE THREE YEARS THE ASSESSEE CLAIMED THAT T HE AMOUNT RECEIVED BY IT FROM THE INDIAN ENTITIES WAS NOT TAXABLE.HOWEVER,THE AO DID NOT AGR EE WITH THE CONTENTION OF THE ASSESSEE AND HELD THAT IMPUGNED RECEIPTS WERE TAXABLE AS ROY ALTY WITHIN THE MEANING OF SECTION 9(1) (VI)OF THE ACT AS WELL AS ARTICLE-12OF THE INDO-US DTAA.IN THE APPELLATE PROCEEDINGS THE FAA HELD THAT CONSIDERATION RECEIVED BY THE ASSESSE E IN ALL THE THREE YEARS WAS IN NATURE OF ROYALTY AS WELL AS FEE FOR INCLUDED SERVICE. THE TR IBUNAL DECIDED THE ISSUE AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. FROM THE ARGUMENTS ADVANCED BY BOTH THE PARTIES, WE NOTICE THAT THERE IS NO DISPUTE BETWEEN THE PARTIES WITH REGARD TO THE FACT THAT THE QUESTION TAXABILITY OF THE CONSIDERATION RECEIVED BY THE ASSESSEE NEEDS TO BE EXAMINED IN TERMS OF DTAA ENTERED BETWE EN INDIA AND USA. HOWEVER, FROM THE DISCUSSIONS MADE SUPRA, IT MAY BE NOTICED THAT THE ASSESSING OFFICER HAS PROCEEDED TO EXAMINE THE TAXABILITY OF THE IMPUGNED CONSIDERATION BY REF ERRING TO THE PROVISIONS OF SEC. 9(1)(VI) OF THE INCOME TAX ACT, COPYRIGHT ACT AND CERTAIN DECIS IONS RENDERED IN SOME OTHER CONTEXT. IN FACT, THE AO TOOK THE VIEW THAT THE ENTIRE CONSIDER ATION IS TAXABLE AS ROYALTY IN AY 2004- 05, BUT CHANGED HIS VIEW IN THE SUBSEQUENT TWO YEAR S. IN RESPECT OF THE ASSESSMENT YEAR 2004- 05 ALSO, THE ASSESSING OFFICER HAS FURNISHED A REMA ND REPORT BEFORE THE LD CIT(A), WHEREIN HE HAD SUGGESTED THAT THE IMPUGNED RECEIPT IS REQUIRED TO BE TREATED AS BOTH ROYALTY AND FEES FOR INCLUDED SERVICES. 8. THE EXPRESSIONS ROYALTY AND FEES FOR INCLUDED SERVICES HAVE BEEN GIVEN DISTINCT MEANING IN THE INDO US TREATY. WE HAVE ALREADY NOTI CED THAT THE TAX AUTHORITIES WERE NOT ABLE TO COME TO A CONCLUSION AS TO WHETHER THE CONSIDERA TION RECEIVED BY THE ASSESSEE COMPANY WOULD FALL WITHIN THE MEANING OF ROYALTY OR FEES FOR INCLUDED SERVICES, EVEN THOUGH THERE ARE PLETHORA OF CASE LAWS EXPLAINING BOTH THE TERMS. HENCE, FROM THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE TAX AUTHOR ITIES HAVE NOT EXAMINED THE IMPUGNED ISSUE 1203-04/14;5234/14-ACNIELSEN 3 IN PROPER PERSPECTIVE, I.E., THE MATTER HAS NOT BEE N EXAMINED IN THE CONTEXT OF INDO-US TREATY BY CONSIDERING THE MEANING OF VARIOUS TERMS USED TH EREIN. AS STATED EARLIER, THE MEANING TO BE ASCRIBED TO VARIOUS TERMS USED IN THE TREATY HAS BE EN THE BONE OF CONTENTION IN VARIOUS CASE LAWS AND WE NOTICE THAT THE TAX AUTHORITIES HAVE NO T CONSIDERED THE APPLICABLE CASE LAWS. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE IMPUGNED MATTER REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. WH EN WE EXPRESSED OUR VIEW TO BOTH THE PARTIES, THEY ALSO ACCEPTED THE FACT THAT THE MATTE R HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES IN PROPER PERSPECTIVE AND ACCORDINGLY A GREED THAT THE MATTER REQUIRES FRESH CONSIDERATION AT THE END OF THE ASSESSING OFFICER. 9. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) IN ALL THE THREE YEARS AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WIT H THE DIRECTION TO EXAMINE THE ISSUE AFRESH BY DULY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESS EE, RELEVANT CASE LAWS AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 4. AS STATED EARLIER, THE FACTS OF THE CASES UNDER CON SIDERATION ARE IDENTICAL TO THE FACTS OF THE ABOVE MENTIONED THREE YEARS.THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DATED 8.8.2014 (SUPRA), WE, RESTORE THE MATTER TO THE FIL E OF THE AO FOR FRESH ADJUDICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE .GROUND NOS. 1 TO 3 ARE ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. AS A RESULT, APPEALS FILED BY THE ASSESSEE FOR ALL THE THREE AY.S STAND PARTLY ALLOWED. !)* + , / . . . ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND MARCH, 2016. 2 , 2016 SD/- SD/- ( / AMIT SHUKLA ) / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, DATE: 02.03.2016 . . . .. . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR D BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.