DCIT (IT) 4(1)(1), MUMBAI V. REUTERS TRANSACTION SERVICES LTD, MUMBAI

ITA 1393/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4369 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMUAL DARSE
• Assessee Lawyers: P J PARDIWALA
• Keywords: Residential status; Double taxation relief; Deemed to accrue or arise in india
• Section: 143(3); 234B; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 1393/MUM/2016 (ASSESSMENT YEAR: 2012-13) DCIT (IT) - 4(1)(1) ROOM NO. 120, SCINDIA HOUSE BALLARD PIER, N.M. ROAD MUMBAI 400038 VS. M/S. REUTER S TRANSACTION SERVICES LTD. C/O. BMR & ASSOCIATES BMR HOUSE, 36-B DR. R.K. SHIRODKAR MARG PAREL, MUMBAI 400012 PAN AACCR0226Q APPELLANT RESPONDENT ITA NO. 2219/MUM/2016 (ASSESSMENT YEAR: 2012-13) M/S. REUTER S TRANSACTION SERVICES LTD. C/O. BMR & ASSOCIATES BMR HOUSE, 36-B DR. R.K. SHIRODKAR MARG PAREL, MUMBAI 400012 VS. DCIT (IT) - 4(1)(1) ROOM NO. 120, SCINDIA HOUSE BALLARD PIER, N.M. ROAD MUMBAI 400038 PAN AACCR0226Q APPELLANT RESPONDENT REVENUE BY: SHRI SAMUAL DARSE ASSESSEE BY: SHRI P.J. PARDIWALA & SHRI NISHANT THAKKAR DATE OF HEARING: 23.07.2018 DATE OF PRONOUNCEMENT: 03.08.2018 O R D E R PER G. MANJUNATHA, AM THESE CROSS APPEALS FILED BY REVENUE AS WELL AS THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE DISPUTE RESOLUTIO N PANEL-2, MUMBAI DATED 14.12.2015 UNDER SECTION 144C(1) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER 'THE ACT') FOR A.Y. 2012-13. SINCE THE FACTS ARE COMMON IN BOTH THE APPEALS, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 2 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN GIVING DIRECTION THAT INT EREST U/S. 234B IS NOT CHARGEABLE IN VIEW OF DECISION OF DIRECTOR O F INCOME-TAX (INTERNATIONAL TAXATION) VS. NGC NETWORK ASIA LLC ( 2009) 222 CTR 0086 : (2009) 313 ITR 0187 THOUGH PROVISO TO SE CTION 209(1)(D) IS INTRODUCED IN THE ACT W.E.F. 01.04.201 2. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, AFTER INTRODUCTION OF PROVISO TO SECTION 209(1 )(D) INTEREST U/S. 234B IS CHARGEABLE EVEN IN THE CASES WHERE TAX IS N OT DEDUCTED BY THE PERSON RESPONSIBLE FOR DEDUCTING TAX WHILE M AKING PAYMENT. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE DRP B E SET ASIDE ON THE ABOVE GROUNDS AND THE DRAFT ORDER OF THE ASSESSING OFFICER BE RESTORED.' THE FOLLOWING GROUNDS WERE RAISED BY THE ASSESSEE I N ITS APPEAL: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP ERRED CONFIRMING THE ACTION OF THE LEARNED AO I N CHARACTERISING SUBSCRIPTION REVENUE RECEIVED BY THE APPELLANT, IN THE NATURE OF 'ROYALTY' OR 'FEES FOR TECHNICAL SERV ICES' UNDER THE INCOME-TAX ACT, 1961 ('THE ACT') AND UNDER THE INDI A-UNITED KINGDOM TAX TREATY ('THE TREATY'); 2. WITHOUT PREJUDICE TO THE ABOVE, BASED ON THE FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE D RP HAS ERRED IN FACT AND IN LAW IN NOT APPLYING THE PROVISIONS O F ARTICLE 13(6) OF THE TREATY, DESPITE THE FACT THAT THE LEARNED AO HA S HIMSELF ADJUDICATED THAT THE APPELLANT HAS A PERMANENT ESTA BLISHMENT IN INDIA. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W, THE LEARNED AO HAS ERRED IN LEVYING SURCHARGE AND EDUCATION CES S ON THE SUM OF THE TAX LIABILITY, CALCULATED PURSUANT TO TH E FINAL ASSESSMENT ORDER ISSUED UNDER SECTION 143(3) READ W ITH SECTION 144C(3) OF THE ACT. 3. THROUGH THESE GROUNDS OF APPEAL, THE REVENUE HAS CH ALLENGED THE ORDER OF THE DRP DELETING INTEREST CHARGED BY THE A O UNDER SECTION 234B OF THE ACT, ON TAX COMPUTED UNDER SECTION 115A OF T HE ACT. THE ASSESSEE, THROUGH THESE GROUNDS, CHALLENGED THE DIRECTIONS OF THE DRP CONFIRMING THE ACTION OF THE AO IN CHARGING SUBSCRIPTION REVEN UE RECEIVED BY THE ASSESSEE IN THE NATURE OF ROYALTY OR FEES FOR TECHN ICAL SERVICES UNDER THE INCOME TAX ACT AND UNDER THE INDIA-UK TAX TREATY. T HE ASSESSEE ALSO ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 3 CHALLENGED THE ACTION OF THE AO IN NOT APPLYING THE PROVISIONS OF ARTICLE 13(6) OF THE INDIA-UK TREATY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, REUTERS TRANSACTION SERVICES LTD., IS A COMPANY INCORPORATE D UNDER THE LAWS OF ENGLAND AND IS A TAX RESIDENT OF UNITED KINGDOM. TH E ASSESSEE IS IN THE BUSINESS OF PROVIDING REUTERS DEALING 3000, WHICH I S AN ELECTRONIC DEAL MATCHING SYSTEM ENABLING AUTHORISED DEALERS IN FORE IGN EXCHANGE SUCH AS BANKS AND OTHER FINANCIAL INSTITUTIONS, ETC. TO EFF ECT DEALS IN SPOT FOREIGN EXCHANGE WITH OTHER FOREIGN EXCHANGE DEALERS. THE M AIN SERVER OF THE ASSESSEE IS LOCATED IN GENEVA AND THE ASSESSEE HAS EXECUTED A DEALING SERVICES MARKETING AGREEMENT WITH REUTERS INDIA PVT . LTD. WHEREBY THE REUTERS INDIA PVT. LTD. HAS UNDERTAKEN MARKETING SE RVICES OF THE ASSESSEE TO SUBSCRIBERS IN INDIA. DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2012-13 THE ASSESSEE HAS EARNED REVENUE OF ` 14,18,44,012/- FROM CUSTOMERS IN INDIA. THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING NIL INCOME. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT AS PER THE PR OVISIONS OF SECTION 90(2) OF THE ACT, IT HAS THE OPTION TO BE TAXED AS PER THE PROVISIONS OF INCOME TAX OR THE RELEVANT TAX TREATY EXECUTED BY I NDIA, WHICHEVER IS MORE BENEFICIAL TO THE ASSESSEE. SINCE IT IS A TAX RESID ENT OF UK, THE ASSESSEE HAS OPTED TO BE TAXED AS PER THE PROVISIONS OF DTAA BET WEEN INDIA AND UK. THE ASSESSEE FURTHER CLAIMED THAT THE REVENUE EARNED BY THE ASSESSEE FROM ITS SUBSCRIBERS IN INDIA ARE IN THE NATURE OF BUSINESS PROFIT AND AS PER ARTICLE 7 OF THE INDIA-UK TAX TREATY BUSINESS PROFITS OF A TAX RESIDENT OF UK ARE TAXABLE IN INDIA, ONLY IF IT HAS A PERMANENT ESTABL ISHMENT (PE) IN INDIA AND IN SUCH CASE ONLY TO THE EXTENT OF PROFITS THAT ARE ATTRIBUTABLE TO THE PE IN INDIA. THE ASSESSEE FURTHER CLAIMED THAT FOR THE YE AR ENDED 31.03.2012 IT HAS NO PE IN INDIA AS CONTEMPLATED UNDER ARTICLE 5 OF THE DTAA AND ACCORDINGLY ITS REVENUE IS NOT LIABLE TO BE TAXED I N INDIA IN TERMS OF THE PROVISIONS OF THE DTAA. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALS O CONSIDERING THE INDIA-UK TAX TREATY, OBSERVED THAT THE ASSESSEE IS HAVING A PE IN INDIA ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 4 AND THE ACTIVITIES BEING CARRIED ON BY THE ASSESSEE IN INDIA IS NOT SQUARELY COVERED UNDER ARTICLE 13 OF THE TREATY BETWEEN INDI A AND UK. THEREFORE THE REVENUE EARNED BY THE ASSESSEE IS LIABLE FOR TAXATI ON AS ROYALTY. THE AO FURTHER OBSERVED THAT THOUGH IT HAS BEEN HELD THAT ASSESSEE IS HAVING A PE IN INDIA, BUT THE INCOME IS NOT COMPUTED AS PROVIDE D UNDER ARTICLE 13(6) OF THE INDIA-UK TREATY AS THE ASSESSEE HAS DISPUTED TH E EXISTENCE OF PE ITSELF. ACCORDINGLY, THE DRAFT ORDER HAS BEEN PASSED UNDER SECTION 143(3) R.W.S. 144C(1) OF THE ACT DATED 27.03.2015 LEVYING TAX @20 % ALONG WITH SURCHARGE AND EDUCATION CESS ON TOTAL REVENUE EARNE D BY THE ASSESSEE. 6. AGGRIEVED BY THE DRAFT ASSESSMENT ORDER, THE ASSESS EE COMPANY HAS FILED OBJECTIONS BEFORE THE DRP-2, MUMBAI AND CHALL ENGED THE FINDINGS OF THE AO IN RESPECT OF PE AND ALSO LEVY OF TAX AT 20% ON GROSS REVENUE EARNED BY THE ASSESSEE. THE ASSESSEE ALSO CHALLENGE D THE FINDINGS OF THE AO IN SO FAR AS THE ISSUE OF SUBSCRIPTION REVENUE E ARNED BY THE ASSESSEE FROM ITS SUBSCRIBERS IN INDIA ARE TOWARDS THE USE O F EQUIPMENTS AND PROCESS AND HENCE IN THE NATURE OF ROYALTY INCOME C HARGEABLE TO TAX IN INDIA UNDER THE INCOME TAX ACT AND THE TAX TREATY B ETWEEN INDIA AND UK. THE ASSESSEE HAS FILED DETAILED SUBMISSIONS BEFORE THE DRP AND CONTENDED THAT THE AO WAS ERRED IN TREATING THE SUBSCRIPTION CHARGES RECEIVED FROM CUSTOMERS IN INDIA ARE IN THE NATURE OF ROYALTY OR FEES FOR TECHNICAL SERVICES WHICH IS TAXABLE UNDER THE INCOME TAX ACT AND INDIA -UK TAX TREATY. 7. THE DRP, VIDE ITS ORDER DATED 14.12.2015 ISSUED DIR ECTIONS UNDER SECTION 144C(5) OF THE ACT. THE DRP, BY FOLLOWING T HE DECISION OF ITAT MUMBAI L BENCH IN ASSESSEES OWN CASE FOR ASSESSM ENT YEARS 2008-09 AND 2009-10 VIDE ORDER DATED 18.07.2014, UPHELD THE ACTION OF THE AO IN TREATING THE REVENUE RECEIVED BY THE ASSESSEE FROM ITS CUSTOMERS IN INDIA IS TOWARDS USE OF EQUIPMENTS AND PROCESS, WHICH IS IN THE NATURE OF ROYALTY BOTH UNDER THE INCOME TAX ACT AND THE TAX TREATY BE TWEEN INDIA AND UK. THE DRP, FURTHER HELD THAT IN SO FAR AS THE ISSUE O F PE IN THE LIGHT OF THE DISCUSSIONS OF THE AO THAT THE SERVER OF THE ASSESS EE LOCATED IN GENEVA EXTENDS TO THE EQUIPMENT PROVIDED BY REUTERS INDIA PVT. LTD. TO THE SUBSCRIBERS OF THE ASSESSEE IN INDIA AND HENCE THE SERVER LOCATED IN ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 5 GENEVA CONSTITUTES AN EQUIPMENT PE OF THE ASSESSEE IN INDIA UNDER ARTICLE 5(1) OF THE TREATY HAS NOT BEEN ADJUDICATED AS THE ASSESSEE HAS NOT PRESSED THE GROUND TAKEN CHALLENGING THE EXISTENCE OF PE IN INDIA. ON APPLICABILITY OF ARTICLE 13(6) OF THE TAX TREATY BE TWEEN INDIA AND UK, THE DRP HELD THAT THOUGH IN THE ALTERNATE VIEW OF THE A O THE ASSESSEE HAS A PE IN INDIA, IN VIEW OF THE FINDINGS OF THE ITAT MU MBAI L BENCH IN ASSESSEES OWN CASE FOR EARLIER YEARS WHEREIN IT WA S HELD THAT PART 6 OF ARTICLE 13 CAN BE PRESSED INTO SERVICE ONLY IN THE CASE WHERE THE EXISTENCE OF PE OF NON-RESIDENT IS NOT IN DISPUTE. IN THIS CA SE THE ASSESSEE COMPANY HAS CONTENDED THAT IT HAS NO PE IN INDIA, THEREFORE FOLLOWING THE ORDER OF THE ITAT NO DIRECTIONS ARE BEING ISSUED TO THE AO O N THIS GROUND OF OBJECTION. SIMILARLY, IN SO FAR AS COMPUTING THE IN COME CHARGEABLE IN INDIA IN THE HANDS OF THE ASSESSEE, THE AO HAS CHARGED 20 % TAX IN THE DRAFT ASSESSMENT ORDER INSTEAD OF 10% AS PRESCRIBED UNDER SECTION 115A OF THE ACT. THEREFORE DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE IN THE LIGHT OF THE AGREEMENTS SUBMITTED BY THE ASSESSEE A ND ACCORDINGLY APPLY 10% TAX. IN SO FAR AS LEVY OF INTEREST UNDER SECTIO N 234B OF THE ACT THE DRP, BY FOLLOWING THE DECISION OF THE HON'BLE BOMBA Y HIGH COURT IN THE CASE OF DIT VS. NGC NETWORK ASIA LLC (2009) 222 CTR 86, HELD THAT DUTY IS CAST ON THE PAYER TO DEDUCT TAX AT SOURCE, ON FA ILURE OF THE PAYER TO DO SO, NO INTEREST CAN BE IMPOSED ON THE PAYEE ASSESSEE UN DER SECTION 234B OF THE ACT. ACCORDINGLY, DIRECTED THE AO TO MODIFY THE DRA FT ASSESSMENT ORDER EXCLUDING INTEREST LEVIED UNDER SECTION 234B OF THE ACT. AGGRIEVED BY THE ORDER OF THE DRP, THE ASSESSEE AS WELL AS REVENUE A RE IN APPEAL BEFORE US. 8. THE LEARNED A.R. OF THE ASSESSEE REFERRED TO THE DE CISION OF THE ITAT MUMBAI IN ASSESSEES ON CASE FOR ASSESSMENT YEARS 2 008-09 AND 2009-10 TO SUBMIT THAT ALTHOUGH THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN SO FAR AS THE ISSUE OF PE AND NATURE OF INCOME IN T HE LIGHT OF THE SERVICES RENDERED BY THE ASSESSEE IN INDIA, YET THE FINDINGS OF THE ITAT IN SO FAR AS APPLICABILITY OF ARTICLE 13(6) OF DTAA BETWEEN INDI A AND UK IS CONTRARY TO ITS OWN FINDING THAT THE ASSESSEE IS HAVING PE IN I NDIA. THEREFORE THE DECISION REQUIRES RECONSIDERATION AND ACCORDINGLY, VEHEMENTLY ARGUED ON ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 6 THE ISSUE OF TAXABILITY INCOME. THE LEARNED A.R. FU RTHER SUBMITTED THAT ONCE THE AO HELD THAT THERE IS A PE IN INDIA, THEN THE INCOME OF THE ASSESSEE FROM REVENUE GENERATED IN INDIA SHOULD BE TAXED UNDER ARTICLE 13(6) OF THE INDIA-UK TAX TREATY, BUT THE AO HAS TA XED THE INCOME UNDER THE PROVISIONS OF SECTION 115A OF THE ACT. THEREFOR E IT WAS SUBMITTED THAT ONCE THERE IS NO DISPUTE ABOUT THE EXISTENCE OF PE AND ALSO THE FACT THAT THE ASSESSEE HAS NOT TAKEN ANY GROUND CHALLENGING T HE FINDINGS OF THE AO ON EXISTENCE OF PE, THEN THE AO OUGHT TO HAVE COMPU TED THE INCOME UNDER ARTICLE 13(6), BUT THE AO HAS DETERMINED THE INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115A OF THE ACT WHICH IS INCORRECT. THE LEARNED A.R., IN RESPONSE TO A QUERY FROM THE BENCH THAT IS THERE ANY CHANGE IN THE FACTS DURING THE CURRENT YEAR WHEN COMPARED TO THE FACTS ALREADY CONSIDERED BY THE TRIBUNAL IN THE EARLIER YEARS, FA IRLY ACCEPTED THAT THERE IS NO CHANGE IN THE FACTS, BUT STILL REITERATED HIS AR GUMENT THAT ONCE THE ASSESSEE HAS NOT CHALLENGED EXISTENCE OF PE INCOME SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 13(6) OF INDIA-UK TREATY AND NOT UNDER THE PROVISIONS OF THE INCOME TAX ACT. 9. THE LEARNED D.R. FOR THE REVENUE, ON THE OTHER HAND , SUBMITTED THAT THE ISSUE HAS BEEN DECIDED BY THE ITAT IN EARLIER Y EARS AND HELD THAT THE REVENUE EARNED BY THE ASSESSEE IN INDIA FROM ITS SU BSCRIBERS IS IN THE NATURE OF ROYALTY AND THEREFORE THE OTHER ISSUE OF FEES FOR TECHNICAL SERVICES BECOMES ACADEMIC. THE LEARNED D.R. FURTHER SUBMITTE D THAT THE ITAT FURTHER HELD THAT ONCE THE RECEIPT IN QUESTION HAS BEEN DECIDED AS ROYALTY IN NATURE THEN THERE IS NO NEED TO GO INTO THE QUES TION WHETHER THE ASSESSEE IS HAVING PE IN INDIA AND ALSO WHEN THE AS SESSEE HAS NOT COME UP WITH THE CLAIM THAT THE SERVICES RENDERED TO THE INDIAN BANKS ARE THROUGH ITS PE, PARA 6 OF ARTICLE 13 CANNOT BE APPL IED. SINCE, THERE IS NO CHANGE IN THE FACTS DURING THE YEAR UNDER CONSIDERA TION FROM THAT OF ALREADY CONSIDERED BY THE ITAT FOR EARLIER YEARS, T HERE IS NO REASON TO DEVIATE FROM THE VIEW TAKEN BY THE TRIBUNAL. IN SO FAR AS THE ISSUE OF CHARGEABILITY OF INTEREST UNDER SECTION 2W34B OF TH E ACT, THE LEARNED D.R. SUBMITTED THAT AFTER INTRODUCTION OF PROVISO TO SEC TION 209(1)(D), INTEREST ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 7 UNDER SECTION 234B IS CHARGEABLE EVEN IF TAX IS NOT DEDUCTED BY THE PERSON RESPONSIBLE FOR DEDUCTING TAX WHILE MAKING PAYMENT. THE DRP, WITHOUT CONSIDERING THE PROVISO TO SECTION 209(1)(D) DIRECT ED THE AO TO DELETE INTEREST LEVIED UNDER SECTION 234B OF THE ACT, WHIC H IS INCORRECT. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE OF CHARACTERISING SUBSCRIPTION REVENUE OF THE ASSESSEE WHETHER IT IS IN THE NATURE OF ROYALTY OR FEES FOR TECHNICAL S ERVICES UNDER THE INCOME TAX ACT OR UNDER THE INDIA-UK TAX TREATY AND APPLIC ABILITY OF PROVISIONS OF ARTICLE 13(6) OF THE TAX TREATY BETWEEN INDIA AND U K HAS BEEN ALREADY CONSIDERED BY THE ITAT. THE COORDINATE BENCH OF ITA T, IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2008-09 AND 2009-10 IN IT A NO. 6947/MUM/ 2012 AND ITA NO. 7211/ MUM/2012 VIDE ITS ORDER DATE D 18.07.2014 HAD DEALT WITH THE ISSUE AT LENGTH AFTER CONSIDERING TH E RELEVANT PROVISIONS OF INDIA-UK TAX TREATY AND NATURE OF SERVICES RENDERED BY THE ASSESSEE IN INDIA THROUGH ITS SERVER LOCATED AT GENEVA AND HELD THAT SUBSCRIPTION CHARGES RECEIVED BY THE ASSESSEE FROM ITS CUSTOMERS IN INDIA IS IN THE NATURE OF ROYALTY. THE ITAT, FURTHER HELD THAT ONCE THE RECEIPT IN QUESTION HAS BEEN DECIDED AS ROYALTY IN NATURE THEN THERE IS NO NEED TO GO INTO THE QUESTION OF ASSESSEE HAVING PE IN INDIA AND APPLYIN G ARTICLE 13(6) OF THE INDIA-UK TAX TREATY TO DETERMINE THE INCOME ATTRIBU TABLE IN INDIA. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: - 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS ENTERED INTO A CONTRACT WITH INDIAN CLIENTS FOR PROVIDING ITS FOREIGN EXCHANGE D EAL MATCHING SYSTEM SERVICES NAMELY DEALING 2000-02. THE CLIENTS OF THE ASSESSEE ARE MAINLY INDIAN BANKS. THE SERVICES ARE PROVIDED AGAI NST THE MONTHLY CHARGES AS PER THE AGREEMENT. IN ORDER TO PROVIDE T HE SERVICE AND ACCESS TO THE FOREIGN EXCHANGE DEAL MATCHING SYSTEM , THE ASSESSEE HAS ALSO ENTERED INTO AGREEMENTS WITH ITS INDIAN SU BSIDIARY NAMELY REUTERS INDIA PVT. LTD IN SHORT (RIPL). THE SAID AG REEMENTS ARE CALLED AS PROMOTION SERVICE AGREEMENT AS WELL AS ADVERTISI NG AND MARKETING SERVICE AGREEMENT BOTH DATED 20.11.2006. THE TERMS AND CONDITIONS OF THE SERVICES PROVIDED TO THE INDIAN SUBSCRIBERS ARE STIPULATED IN THE REUTERS TRADING SERVICE AGREEMENT (IN SHORT RTS AGR EEMENT). THE AGREEMENTS ARE EXECUTED IN ACCORDANCE WITH THE REUT ERS BUSINESS PRINCIPLES REDUCED IN WRITING BEING PART AND PARCEL OF THE RTS AGREEMENT. THE RIPL IN TURN ALSO ENTERED INTO REUTE RS SERVICE ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 8 CONTRACT WITH THE INDIAN CLIENTS FOR PROVIDING THE NECESSARY EQUIPMENTS, CONNECTION FACILITY, INSTALLATION AND S UPPORT SERVICE IN ORDER TO AVAIL THE FOREIGN EXCHANGE DEAL MATCHING S YSTEM PROVIDED BY THE ASSESSEE. THUS THE INDIAN CLIENTS COULD AVAIL T HE SERVICES OF THE ASSESSEE ONLY THROUGH THE EQUIPMENTS AND CONNECTIVI TY PROVIDED BY THE ASSESSEE ITSELF THROUGH ITS INDIAN SUBSIDIARY N AMELY RIPL. THE FEE FOR PROVIDING THE SERVICES IS CHARGED BY THE ASSESS EE FROM THE INDIAN SUBSCRIBERS AND ACTUAL USES OF TELECOMMUNICATION AR E PAID TO THE RIPL. THE ASSESSEE IS REMUNERATING THE RIPL FOR THE SERVICES OF MARKETING AND INSTALLATION OF THE EQUIPMENT ON BEHA LF OF THE ASSESSEE TO ITS CLIENTS. THUS THOUGH THE EQUIPMENTS AND OTHE R INSTALLATION AND CONNECTIVITY ARE INSTALLED AND PROVIDED THROUGH RIP L BUT THE CHARGES FOR THE ENTIRE SERVICES AND FACILITY ARE PAID BY TH E CLIENTS TO THE ASSESSEE AND NOT TO THE RIPL. THE LD. COUNSEL HAS A LSO SUBMITTED THAT IT IS AN INTEGRATED SERVICE RENDERED TO THE CL IENTS FROM ITS SERVER SITUATED IN GENEVA, THEREFORE, THERE IS NO CONTROL OR POSSESSION OF THE INDIAN CLIENTS TO USE OR RIGHT TO USE THE SERVER OF THE ASSESSEE SITUATED OUTSIDE INDIA. IT IS ALSO CONTENDED THAT THE ASSESS EE IS RENDERING THE SERVICES TO THE INDIAN CLIENTS BY USING ITS OWN SER VER SITUATED IN GENEVA AND, THEREFORE, IN VIEW OF THE DECISION OF H ONBLE HIGH COURT OF DELHI IN THE CASE OF ASIA SATELLITE TELECOMMUNIC ATIONS CO. LTD (SUPRA), THE CHARGE/FEE RECEIVED BY THE ASSESSEE IN RENDERING THE SERVICES IS NOT ROYALTY. HE HAS ALSO STRONGLY RELIE D UPON THE DECISION OF HONBLD ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HOLDING SA (354 ITR 316)(SUPRA). 11.1 IT IS PERTINENT TO NOTE THAT IN THE CASE OF AS IA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), THE ISSUE FELL FOR CONSIDERATION OF THE HONBLE DELHI HIGH COURT WAS WHETHER RENTAL CHA RGES FOR LEASE OF TRANSPONDER CAPACITY TO TV CHANNELS CARRYING OUT OP ERATIONS IN INDIA IS THE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA AN D WHETHER SUCH INCOME IS ROYALTY. THE INCOME TO THE NON RESIDENT W AS FOR LEASING OUT THE TRANSPONDER CAPACITY TO THE NON RESIDENT TV CHA NNELS WHO ARE PROVIDING THEIR CHANNEL SERVICES IN INDIA. THE HON BLE HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. L TD (SUPRA), AFTER CONSIDERING THE FACT THAT THE APPELLANT IS A FOREIG N COMPANY INCORPORATED IN HONGKONG AND CARRIED ON BUSINESS OF PROVIDING PRIVATE SATELLITE COMMUNICATIONS AND BROADCASTING F ACILITIES TO THE CLIENTS WITH WHOM THE APPELLANT HAD ENTERED INTO AG REEMENT ARE NOT RESIDENT OF INDIA. THE APPELLANT HAD MERELY GIVEN A CCESS TO A BROADBAND AVAILABLE WITH THE TRANSPONDER WHICH COUL D BE UTILIZED FOR THE PURPOSE OF TRANSMISSION OF SIGNALS TO THE CUSTO MERS. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT THE DATA SENT BY THE TELECAST OPERATOR DOES NOT UNDERGO ANY CHANGE FOR IMPROVEMEN T THROUGH THE MEDIA OF TRANSPONDER. SINCE THE TRANSPONDER WAS IN CONTROL AND USED BY THE APPELLANT/TRANSPONDER OWNER AND IT DOES NOT VEST WITH THE TELECAST OPERATOR/TV CHANNELS, THEREFORE, THE HONB LE HIGH COURT HAS HELD THAT THE PROCESS CARRIED ON IN THE TRANSPONDER IN RECEIVING SIGNALS AND RETRANSMITTING THE SAME, IS AN INSEPARA BLE PART OF THE PROCESS OF THE SATELLITE AND THAT PROCESS IS UTILIZ ED ONLY BY THE OWNER ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 9 OF THE TRANSPONDER WHO IS IN CONTROL THEREOF AND, T HEREFORE, THERE WAS NO USE OF PROCESS BY THE T.V. CHANNELS. MOREOVER, N O SUCH PURPORTED USE HAS TAKEN PLACE IN INDIA AS BOTH THE ASSESSEE A ND THE BROADCASTER/T.V. CHANNELS ARE SITUATED OUTSIDE INDI A. IN THE SAID CASE THE PAYMENT BY THE BROADCASTER/T.V. CHANNELS W ERE PAID FOR USING THE TRANSPONDER CAPACITY OF SATELLITE AND NOT FOR USING ANY INFORMATION OR DATA TO BE PROVIDED TO INDIAN CUSTOM ERS. IN THE CASE IN HAND THE ASSESSEE IS RENDERING THE SERVICES OF PROV IDING FOREIGN EXCHANGE DEAL MATCHING SYSTEM. THIS SYSTEM FACILITA TES THE INDIAN SUBSCRIBERS I.E. BANKS TO DEAL IN THE FOREIGN EXCHA NGE WITH THE OTHER COUNTERPARTS WHO ARE READY FOR THE TRANSACTION OF P URCHASE AND SALE OF FOREIGN CURRENCY. THUS THE ROLE OF THE DEAL MATC HING SYSTEM IS TO PROVIDE A PLATFORM WHERE BOTH PURCHASER AND SELLER FIND THE RESPECTIVE MATCH FOR THE INTENDED TRANSACTION OF PU RCHASE AND SALE. THEREFORE, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), IS NO T APPLICABLE IN THE FACTS OF THE CASE AND PARTICULARLY WHEN THE SAID DE CISION IS BASED ON THE FINDING THAT THE TRANSPONDER CAPACITY HAS ONLY A MEDIA FOR UPLINKING AND DOWNLINKING OF SIGNALS OF THE BROADCA STER AND TV OPERATORS TO BE TRANSMITTED TO THEIR CUSTOMERS WITH OUT ANY MANIPULATION FOR IMPROVEMENT, WHEREAS IN THE CASE I N HAND, THE ASSESSEE IS PROVIDING NOT ONLY MEDIA BUT ALSO THE N ECESSARY INFORMATION AND DATA WHICH PROCESS THE ORDER OF THE CLIENTS AND FIND THE CORRESPONDING MATCH TO MEET THE ORDER. 12. ONE MORE ASPECT WHICH WAS INVOLVED AND RELEVANT FOR DECIDING THE ISSUE IN THE CASE OF ASIA SATELLITE TELECOMMUNI CATIONS CO. LTD (SUPRA) WAS THE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA ON ACCOUNT OF LEASE OF TRANSPONDER CAPACITY TO TV CHANNELS WHI CH IS NOT IN DISPUTE IN THE CASE BEFORE US AS THE INCOME IN QUES TION HAS BEEN RECEIVED BY THE ASSESSEE FROM THE INDIAN CLIENTS. T HE LIMITED ISSUE BEFORE US IS THE NATURE OF INCOME WHETHER IT IS BUS INESS INCOME OR ROYALTY OR FEE FOR TECHNICAL SERVICES. THE LD. COUN SEL HAS FORCEFULLY CONTENDED THAT A UNILATERAL AMENDMENT IN THE ACT WI THOUT A CORRESPONDING CHANGE IN DTAA CANNOT TAKE AWAY THE B ENEFIT AVAILABLE IN THE TREATY. THERE IS NO DISPUTE THAT I F A PARTICULAR INCOME IS NOT TAXABLE AS PER THE PROVISIONS OF DTAA THEN A UNILATERAL AMENDMENT IN THE STATUTE OF THE CONTRACTING STATE A LONE WOULD NOT BRING THE SAID INCOME TO TAX BECAUSE AS PER THE PRO VISIONS OF SECTION 90 OF THE INCOME TAX ACT, THE BENEFICIAL PROVISIONS OF DTAA WILL HAVE THE OVERRIDING EFFECT TO THE PROVISIONS OF ACT. THU S THE QUESTION ARISES WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE IS ROYA LTY OR FTS INCOME UNDER THE PROVISIONS OF DTAA. THE DEFINITION OF ROYALTY AND FEE FOR TECHNICAL SERVICES HAS BEEN PROVIDED UNDER ARTI CLE -13(3) AND (4) AS UNDER:- 3 FOR THE PURPOSE OF THIS ARTICLE, THE TERM ROYAL TIES MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTI STIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TA PE PR OTHER MEANS ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 10 OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MOD EL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL COMMERCIAL OR SCIE NTIFIC EQUIPMENT WORK, OTHER THAN INCOME DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN IN TERNATIONAL TRAFFIC. 4. FOR THE PURPOSE OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM FEES FOR TE CHNICAL SERVICES MEANS PAYMENT OF ANY KIND OF ANY PERSON IN CONSIDER ATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF A TECHNICAL OR OTHER PERSO NNEL) WHICH: (A) ARE ANCILLIARY AND SUBSIDIARY TO THE APPLICATIO N OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED; OR (B) ARE ANCIALLY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL KNOW-HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 13. THE PAYMENT RECEIVED BY THE ASSESSEE AGAINST TH E SERVICES RENDERED TO THE INDIAN BANKS WHETHER FALLS UNDER TH E TERM ROYALTY OR FEE FOR TECHNICAL SERVICES HAS TO BE DECIDED BY CON SIDERING THE DEFINITION AS PROVIDED UNDER THE TREATY AND THE REA L NATURE OF THE SERVICE PROVIDED IN TERMS OF THE VARIOUS CONTRACTS ENTERED INTO BETWEEN THE PARTIES. THE VARIOUS TERMS OF AGREEMENT ARE DEFINED UNDER CLAUSE 1 OF THE RTS AGREEMENT AND SOME OF THE RELEVANT TERMS ARE DEFINED AS UNDER:- APPLICATION PROGRAMMING INTERFACE(API) MEANS A SUB SCRIBER INTERFACE FOR USE WITH THE RELATED SERVICE; AUTOQUOTE SUBSCRIBER INTERFACE MEANS A SUBSCRIBER I NTERFACE FOR USE WITH THE AUTOQUOTE SERVICE SERVICES MEANS THE PRODUCT, MATERIALS OR SERVICES PROVIDED B Y REUTERS TO SUBSCRIBER FROM TIME TO TIME PURUSANT TO THE AGREEM ENT SITE MEANS MY LOCATION OF SUBSCRIBER TO WHICH REUTERS SU PPLIES ACCESS TO THE SERVICES DIRECTLY; SOFTWARE MEANS SOFTWARE, INCLUDING APIS AND RELATED DOCUMENT ATION PROVIDED BY REUTERS; ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 11 SYSTEM MEANS THE REUTERS EQUIPMENT AND NETWORKS USED FOR T HE PROVISION FOR THE SERVICES: 14. THE ASSESSEE IS FACILITATING ITS CLIENTS TO USE ITS SYSTEM AND APPLICATION PROGRAMMING INTERFACE WHICH IS SUBSCRIB ER INTERFACE FOR USE WITH THE RELATED SERVICES INCLUDDING AUTOQUOTE SERVICE. THE ASSESSEE IS ALSO PROVIDING THE EQUIPMENTS WITH PRE- LOADED SOFTWARE TO ITS SUBSCRIBERS AND NETWORK USED FOR PROVISION O F THE SERVICES. THE ASSESSEE GRANTS SUBSCRIBER LIMITED LICENSE OF SOFTW ARE TO INSTALL AND USE AT THE SITE AS PER CLAUSE 8.1 OF THE AGREEMENT AS UNDER:- 8.1 REUTERS GRANTS SUBSCRIBER A NON-EXCLUSIVE, NON -TRANSFERABLE, TERMINABLE LICENSE FOR SO LONG AS SUBSCRIBER RECEIV ES THE SERVICE TO WHICH THE SOFTWARE RELATES, TO INSTALL AND USE THE SOFTWARE AT THE SITE SOLELY IN THE ORDINARY COURSE OF ITS OWN BUSINESS U NLESS OTHERWISE SET FORTH IN THIS AGREEMENT. 15. EVEN THE SAID LICENSE CAN BE SUB-LICENSED BY TH E SUBSCRIBER WITH THE PRIOR CONSENT OF THE ASSESSEE AS PER CLAUSE 9.5 AS UNDER:- 9.5 UPON REUTERS PRIOR WRITTEN CONSENT, SUBSCRIBE R MAY SUBLICENSE ITS LICENSE TO USE DEVELOPMENT TOOLS TO A DEVELOPER FOR THE SOLE PURPOSE OF CARRYING OUT THE DEVELOPMENT WORK DESCRI BED IN CLAUSE 9.2 FOR THE SUBSCRIBER AND ONLY IF SUBSCRIBER ENSURES T HAT THE DEVELOPER (A) IS MADE AWARE OF ANY COMPLIES WITH THE PROVISIO NS OF THE AGREEMENT. (B) DOES NOT RE-USE IN ANY WAY THE DEVELOPMENT WORK CARRIED OUT FOR SUBSCRIBER; (C) BECOMES A MAMBER OF REUTERS DEVELOPER PARTNER P ROGRAM (OR ANY SUCCESSOR PROGRAM) AND SIGNS THE RETUERS TRADING AP PLICATION PARTNER AGREEMENT (OR ANY SUCCESSOR AGREEMENT). 16. AS PER THE REUTERS LICENSE PRINCIPLES INTERACTI VE FEATURES OF THE SYSTEM INCLUDES MESSAGING, CHATROOM, BULLETIN BOARD OR THOSE THAT ALLOW INTERACTIVITY BETWEEN THE USERS. HARDWARE/SOF TWARE AND RELATED DOCUMENTATION SUPPLIED BY THE ASSESSEES GR OUP CONCERN ALSO INCLUDES THE ASSESSEES APPLICATION PROGRAMMING INT ERFACE (API). ALL THE SERVICES ARE RENDERED BY THE ASSESSEE ON THE SI TE /OFFICE OF THE SUBSCRIBER AS PER THE CLAUSE 2.1 AND 2.1.1 OF THE B USINESS PRINCIPLES AS UNDER: 2.1 USAGE RIGHTS FOR INFORMATION WE CLASSIFY SERVICES CONTAINING INFORMATION INTO FA MILIES SHARING COMMON BUSINESS TERMS, AS FOLLOWS 2.1.1 INDIVIDUAL SERVICES (LISTED HERE) INDIVIDUAL SERVICES ARE USER-BASED SERVICES PRICED, POSTITIONED AND PACKAGED FOR USERS. FOR AS LONG AS THEY TAKE THE RE LEVANT SERVICE, USERS CAN: ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 12 A) VIEW, MANIPULATE AND CREATE DERIVED DATA FRON IN FORMATION FOR THEIR INDIVIDUAL USE: B) STORE INFORMATION, MANIPULATED INFORMATION AND/O R DERIVED DATA FOR THEIR INDIVIDUAL USE; C) DISTRIBUTE AND REDISTRIBUTE LIMITED EXTRACTS OF INFORMATION, MANIPULATED INFORMATION AND/OR DERIVED DATA TO ANYO NE, PROVIDED THIS IS DOEN IN A NON SYSTEMATIC MANNER AND (EXCEPT FOR DERIVED DATA) IS ATTRIBUTED TO REUTERS: D) SYSTEMATICALLY DISTRIBUTE INFORMATION AND MANIPU LATED INFORMATION IF YOU COMPLY WITH PARAGRAPH 2.4; AND E) SYSTEMATICALLY DISTRIBUTE AND REDISTRIBUTE CERTA IN DERIVED DATA IF YOU EITHER (I) PAY THE RELEVANT DERIVED DATE REDISTRIBUTE SERV ICE FEES; OR (II) SENT THE RELEVANT DERIVED DATA TO US AS CONTRI BUTED DATA. PROVIDED THAT, IN EACH CASE, YOU PAY ANY RELATED CH ARGES SPECIFIED IN THE CONTRACT AND SUCH REDISTRIBUTION DOES NOT FORM PART OF A SALEABLE PRODUCT. THE RIGHTS IN THE PARAGRAPH 2.1.1(E) ARE G RANTED ONLY IN RESPECT OF SPECIFIED SOURCES OF INFORMATION AND ARE SUBJECT T FURTHER CONDITIONS IMPOSED BY THIRD PARTY PROVIDERS. 17. THEREFORE, THE SUBSCRIBER/USER CAN VIEW, MANIPU LATE AND CREATE THE DERIVED DATA FROM INFORMATION FOR THEIR INDIVID UAL USE. FURTHER THE SUBSCRIBER CAN STORE INFORMATION, MANIPULATE INFORM ATION FOR ITS USE AND ALSO TO DISTRIBUTE OR REDISTRIBUTE INFORMATION AND DRIVE DATA TO ANYONE TO A LIMITED EXTENT SO FAR AS IT IS NOT DONE IN A SYSTEMATIC MANNER. THE SUBSCRIBERS ARE ALLOWED TO USE THE INFO RMATION AND EVEN TO MANIPULATE AND DRIVE THE DATA TO ANYONE FOR THEI R INDIVIDUAL USE. THUS IT IS CLEAR FROM THE TERMS AND CONDITIONS OF T HE CONTRACT BETWEEN THE PARTIES THAT IT IS SUBSCRIBER WHO IS USING THE INFORMATION AND SYSTEM OF THE ASSESSEE FOR THEIR COMMERCIAL/BUSINES S PURPOSES. THE INFORMATION IS MADE AVAILABLE BY THE ASSESSEE THROU GH ITS SYSTEM AND OTHER EQUIPMENTS INSTALLED AT THE SITE OF THE SUBSC RIBER TO FACILITAE THE CONNECTIVITY WITH THE ASSESSEES SYSTEM/REUTER LOCA TED IN GENEVA. THE PORTAL DESIGN HAVING THE SYSTEM OF MATCHING THE REQUEST OF THE CLIENTS OF THE ASSESSEE IS HOISTED ON ITS SERVER. T HE SYSTEM WHICH IS A COMPLEX, COMMERCIAL DEVICE /APPARATUS PROVIDES A GA TEWAY FOR PROCESSING REQUEST OF THE CLIENTS AND MAKES AVAILAB LE THE MATCHING COUNTER REQUEST AND THEREBY ENSURES THE TRANSACTION S OF PURCHASE AND SALE OF FOREIGN EXCHANGE BETWEEN THE TWO COUNTE R PARTS OF THE CLIENTS. THEREFORE, THE PORTAL HAVING SYSTEM OF MAT CHING THE REQUEST ALONG WITH THE COMPUTER AND INTERNAL ACCESS TO THE CLIENTS CONSTITUTE INTEGRATED COMMERCIAL EQUIPMENT WHICH PERFORMS COMP LEX FUNCTIONS OF PROCESSING THE REQUEST, PROVIDING INFORMATION AND F ACILITATES THE TRANSACTION OF PURCHASE AND SALE OF FOREIGN EXCHANG E BY MATCHING THE DEMAND AND SUPPLY. THE PLATFORM OF TRANSACTING THE PURCHASE AND SALE IS COMMERCIAL EQUIPMENT ALLOWED TO BE USED BY CLIENTS/ SUBSCRIBERS FOR COMMERCIAL PURPOSES. THE PAYMENTS M ADE BY INDIAN ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 13 CLIENTS/SUBSCRIBERS TO THE ASSESSEE FOR USE AND RIG HT TO USE OF SUCH EQUIPMENT AND INFORMATION FOR PROCESSING THEIR REQU EST OF PURCHASE AND SALE OF FOREIGN EXCHANGE CONSTITUTE ROYALTY. 17.1 THE NATURE OF SERVICE RENDERED BY THE ASSESSEE INCLUDES THE INFORMATION CONCERNING COMMERCIAL USE BY THE SUBSCR IBER. FURTHER THE ENTIRE SYSTEM OF THE ASSESSEE INCLUDING THE EQUIPME NTS AND CONNECTIVITY FACILITY IS PROVIDED AT THE SITE OF TH E SUBSCRIBER. THEREFORE, THE ASSESSEE IS PROVIDING THE SERVICE IN THE FORM O F INFORMATION AND SOLUTION TO THE NEED OF THE SUBSCRIBERS BY PROVIDIN G THE MATCHING PARTY. THE ENTIRE SYSTEM ALONG WITH THE MATCHING SY STEM AND CONNECTIVITY INVOLVES PROCESSING OF SUBSCRIBERS BU SINESS QUERIES AND ORDERS AND FINDING OUT THE MATCHING REPLY IN THE SH APE OF COUNTERPART DEMAND OR SUPPLY FOR EXECUTION OF THE TRANSACTION O F PURCHASE AND SALE OF FOREIGN EXCHANGE. THIS SYTEM OF THE ASSESSE E IS AVAILABLE ONLY TO THE SUBSCRIBERS WHO HAVE BEEN GIVEN THE ACCESS T O THE INFORMATION CONCERNING COMMERCIAL AS WELL AS PROCESSING THE ORD ERS PLACED BY THE SUBSCRIBERS. IT IS THE TERM OF THE CONTRACT/AGREEME NT THAT THE SUBSCRIBER IS GIVEN THE LICENSE TO USE THE SOFTWARE RUNNING THE SYSTEM. 17.2 AS PER THE TERMS AND CONDITIONS STIPULATED IN THE AGREEMENT THE INDIAN CLIENTS/SUBSCRIBERS ACCEPT THE INDIVIDUAL NO N-TRANSFERABLE AND NON EXCLUSIVE LICENSE TO USE THE LICENSED SOFTWARE PROGRAMME FOR THE PURPOSE OF CARRYING OUT THE PURCHASE AND SALE OF FO REIGN EXCHANGE. THUS, WHAT IS GRANTED UNDER THE AGREEMENT IS LICENS E TO USE THE SOFTWARE FOR INTERNAL BUSINESS OF INDIAN CLIENTS. F URTHER, THE ASSESSEE ALSO PERMITTED THE INDIAN CLIENTS TO SUB-LICENSE TH E SOFTWARE WITH PRIOR PERMISSION OF ASSESSEE. IT IS PERTINENT TO NOTE THA T ITS NOT THE LICENSE TO USE THE SOFTWARE ALONE BUT THE ASSESSEE HAS MADE AV AILABLE THE COMPUTER SYSTEM ALONG WITH THE SOFTWARE. THE INDIAN CLIENTS ARE PAYING FOR USE AND RIGHT TO USE OF EQUIPMENT (SCIEN TIFIC, COMMERCIAL) ALONG WITH SOFTWARE FOR WHICH LICENSE WAS GRANTED B Y ASSESSEE. IT IS CLEAR FROM THE TERMS AND CONDITIONS OF THE AGREEMEN T AND ARRANGEMENT BETWEEN PARTIES THAT THE INDIAN CLIENTS ARE NOT PERMITTED TO ACCESS THE PORTAL OF THE ASSESSEE FROM ANY OTHER COMPUTER SYSTEM OTHER THAN THE COMPUTER PROVIDED BY THE ASSESSEE AN D BY USE OF SOFTWARE PROVIDED IN THE SAID COMPUTER SYSTEM. THER EFORE, IT IS NOT A CASE OF SIMPLICITOR PAYMENT FOR ACCESS TO THE PORTA L BY USE OF NORMAL COMPUTER AND INTERNAL FACILITY BUT THE ACCESS IS GI VEN ONLY BY USE OF COMPUTER SYSTEM AND SOFTWARE SYSTEM PROVIDED BY THE ASSESSEE UNDER LICENSE. INDIAN CLIENTS MAKE USE OF THE COPYR IGHT SOFTWARE ALONG WITH COMPUTER SYSTEM TO HAVE ACCESS TO THE REQUISIT E INFORMATION AND DATA ON THIS PORTAL HOISTING ON THE SERVER OF THE A SSESSEE. ACCORDINGLY, BY ALLOWING THE USE OF SOFTWARE AND CO MPUTER SYSTEM TO HAVE ACCESS TO THE PORTAL OF THE ASSESSEE FOR FINDI NG RELEVANT INFORMATION AND MATCHING THEIR REQUEST FOR PURCHASE AND SALE OF FOREIGN EXCHANGE AMOUNT TO IMPARTING OF INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQU IPMENT WORK AND PAYMENT MADE IN THIS RESPECT WOULD CONSTITUTE ROYAL TY. ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 14 18. AS WE HAVE GIVEN THE FINDING THAT THE INCOME RE CEIVED BY THE ASSESSEE FROM THE INDIAN BANKS IS IN THE NATURE OF ROYALTY, THEREFORE, THE OTHER ISSUES OF FEE FOR TECHNICAL SERVICES BECO MES ACADEMIC AND WE DO NOT PROPOSE TO DECIDE THE SAME. FURTHER, THOU GH THE ASSESSEE HAS NOT RAISED ANY SPECIFIC GROUND ON THE ISSUE OF PE, HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EVE N IF THE INDIAN SUBSIDIARY OF THE ASSESSEE CONSTITUTE PE OR OTHERWI SE THE ASSESSEE HAS PE IN INDIA IN THAT CASE PARA 6 OF ARTICLE 13 O F DTAA WILL APPLY AND THE ROYALTY OR FEE FOR TECHNICAL SERVICES IS AS SESSED TO TAX IN TERMS OF PROVISIONS OF ARTICLE -7 OR ARTICLE -15 OF DTAA. WE DO NOT AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR TH E ASSESSEE BECAUSE ONCE THE RECEIPT IN QUESTION HAS BEEN DECIDED AS RO YALTY IN NATURE THEN THERE IS NO NEED TO GO INTO THE QUESTION OF AS SESSEE HAVING PE IN INDIA. PARA 6 OF ARTICLE-13 CAN BE PRESSED INTO SER VICE ONLY IN THE CASE WHEN THE EXISTENCE OF PE OF A NON RESIDENT IS NOT I N DISPUTE. IN THE CASE IN HAND THE ASSESSEE HAS NOT COME UP WITH THE CLAIM THAT THE SERVICES RENDERED TO THE INDIAN BANKS ARE THROUGH I TS PE. RATHER THE ASSESSEE HAS VEHEMENTLY CONTENDED THAT IT HAS NO PE IN INDIA. IN THESE FACTS AND CIRCUMSTANCES, THE PROVISION OF PAR A 6 OF ARTICLE -13 CANOT BE INVOKED IN CASE WHEN THE RECEIPT IS FOUND AS ROYALTY IN TERMS OF ARTICLE 13(3) OF THE DTAA AND ASSESSEE HAS NOT ADMITTED ANY PE IN INDIA. 11. THE FACTS REMAINED UNCHANGED. THE ASSESSEE FAILED T O BRING ON RECORD ANY EVIDENCE TO PROVE THAT THE FINDING OF FA CTS RECORDED BY THE ITAT FOR EARLIER YEAR IS INCORRECT. THEREFORE CONSIDERIN G THE FACTS AND CIRCUMSTANCES AND ALSO RESPECTFULLY FOLLOWING THE D ECISION OF THE ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS, WE ARE OF TH E CONSIDERED VIEW THAT SUBSCRIPTION CHARGES RECEIVED BY THE ASSESSEE FROM THE CUSTOMERS IN INDIA IS IN THE NATURE OF ROYALTY. WE FURTHER ARE OF THE OPINION THAT ONCE THE RECEIPT IN QUESTION HAS BEEN DECIDED AS ROYALTY IN NATURE, THEN THERE IS NO NEED TO GO IN TO THE QUESTION OF ASSESSEE HAVING PE IN INDIA. ARTICLE 13(6) CAN BE PRESSED INTO SERVICE ONLY IN THE CASE WHEN T HE EXISTENCE OF PE OF NON-RESIDENT IS NOT IN DISPUTE. IN THIS CASE THE AS SESSEE HAS CONTENDED BEFORE THE LOWER AUTHORITIES THAT IT DOES NOT HAVE ANY PE IN INDIA AND UNDER THESE FACTS AND CIRCUMSTANCES THE PROVISIONS OF ARTICLE 13(6) CANNOT BE INVOKED IN THE CASE WHEN THE RECEIPT IS FOUND AS ROYALTY. 12. IN SO FAR AS CHARGEABILITY OF INTEREST UNDER SECTIO N 234B OF THE ACT, WE FIND THAT THE DRP HAS GIVEN A DIRECTION TO THE A O TO NOT LEVY INTEREST UNDER SECTION 234B OF THE ACT, BY FOLLOWING THE DEC ISION OF THE HON'BLE ITA NOS. 1393 & 2219/MUM/2016 M/S. REUTERS TRANSACTION SERVICES LTD. 15 HIGH COURT IN THE CASE OF NGC NETWORK ASIA LLC (SUP RA) WHEREIN IT WAS HELD THAT WHEN A DUTY IS CAST ON THE PAYER TO DEDUC T TAX AT SOURCE, ON FAILURE OF THE PAYER TO DO SO, NO INTEREST CAN BE I MPOSED ON THE PAYEE UNDER SECTION 234B OF THE ACT. THE REVENUE HAS FAI LED TO BRING ON RECORD ANY CONTRARY DECISION AGAINST THE DIRECTIONS OF THE DRP IN THE LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT. THEREFORE, WE A RE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE DIRECTIONS GIVEN BY THE DRP TO THE AO NOT TO CHARGE INTEREST UNDER SECTION 234B OF THE ACT AN D HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE DRP AND THE GROUND TAKEN BY THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEALS FILED BY REVENUE AS WEL L AS THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD AUGUST, 2018. SD/ - SD/ - (MAHAVIR SINGH) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: AUGUST, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE DRP-2, MUMBAI 4. THE CIT - CONCERNED, MUMBAI 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.