ASST DIT (IT) 2(2), MUMBAI V. WNS GLOBAL SERVICES (UK) LTD, MUMBAI

ITA 1406/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1878 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 26-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-02-2014
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHA UHAN
• Assessee Lawyers: PORUS KAKA MAVISH KANTH
• Keywords: Double taxation relief; Opportunity of being heard; Retrospective amendment; Permanent establishment; Advance ruling; Onus to prove
• Section: 143(3); 234B; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6410/MUM/2012 - A.Y. 2008-09 M/S WNS NORTH AMERICA INC. C/O. WNS GLOBAL SERVICES P.LTD. GAGE 4, GODREJ & BOYCE COMPLEX, PIROJSHANAGAR, VIKHROLI(W) MUMBAI -400079 VS ADIT(IT)-2(2) SCINDIA HOUSE, N.M.RD, BALLARD ESTATE, MUMBAI-400038 PAN : AAACW5493Q (ASSESSEE) (RESPONDENT) I.T.A. NO.6411/MUM/2012 - A.Y. 2009-10 M/S WNS GLOBAL SERVICES(UK) LTD. C/O. WNS GLOBAL SERVICES P.LTD. GAGE 4, GODREJ & BOYCE COMPLEX, PIROJSHANAGAR, VIKHROLI(W) MUMBAI -400079 VS ADIT(IT)-2(2) SCINDIA HOUSE, N.M.RD, BALLARD ESTATE, MUMBAI-400038 PAN : AAACW5544Q (ASSESSEE) (RESPONDENT) I.T.A. NO.1407/MUM/2014 - A.Y. 2009-10 ADIT(IT)-2(2) R.N.116 SCINDIA HOUSE, N.M.RD, BALLARD ESTATE, MUMBAI-400038 VS M/S WNS NORTH AMERICA INC. C/O. WNS GLOBAL SERVICES P.LTD. GAGE 4, GODREJ & BOYCE COMPLEX, PIROJSHANAGAR, VIKHROLI(W) MUMBAI -400079 PAN : AAAC W5493Q (REVENUE) (RESPONDENT) I.T.A. NO.1406/MUM/2014 - A.Y. 2010-11 ADIT(IT)-2(2) R.N.116 SCINDIA HOUSE, N.M.RD, BALLARD ESTATE, MUMBAI-400038 VS M/S WNS GLOBAL SERVICES(UK) LTD. C/O. WNS GLOBAL SERVICES P.LTD. GAGE 4, GODREJ & BOYCE COMPLEX, PIROJSHANAGAR, VIKHROLI(W) MUMBAI -400079 PAN : AAAC W5544Q 2 WNS (REVENUE) (RESPONDENT) I.T.A. NO.1408/MUM/2014 - A.Y. 2010-11 ADIT(IT)-2(2) R.N.116 SCINDIA HOUSE, N.M.RD, BALLARD ESTATE, MUMBAI-400038 VS M/S WNS NORTH AMERICA INC. C/O. WNS GLOBAL SERVICES P.LTD. GAGE 4, GODREJ & BOYCE COMPLEX, PIROJSHANAGAR, VIKHROLI(W) MUMBAI -400079 PAN : AAAC W5493Q (REVENUE) (RESPONDENT) REVENUE BY SHRI JASBIR CHAUHAN ASSESSEE BY SHRI PORUS KAKA / MAVISH KANTH DATE OF HEARING : 03-11-2016 DATE OF PRONOUNCEMENT : 18 -11-2016 O R D E R PER BENCH: THESE APPEALS INVOLVE IDENTICAL ISSUES, AND THEREF ORE THESE WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER. 2. FIRST, WE SHALL TAKE UP APPEAL IN THE CASE OF M/S WNS NORTH AMERICA INC. IN ITA NO.6410/MUM/2012 FOR A.Y. 2008- 09: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT(A)- 11, MUMBAI [HEREINAFTER CALLED CIT(A)] DATED 13-07- 2012 PASSED AGAINST THE ASSESSMENT ORDER DATED 01-02-2012 U/S 144C(3) R .W.S. 143(3) OF THE ACT ON THE FOLLOWING GROUNDS: THE FOLLOWING GROUNDS OF APPEAL ARE INDEPENDENT OF , AND WITHOUT PREJUDICE TO, ONE ANOTHER: 1. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN CONFIRMING THE ACTION OF THE 3 WNS LEARNED AO OF TAXING THE RECEIPT OF REIMBURSEMENT O F INTERNATIONAL TELECOM CONNECTIVITY CHARGES OF RS.8, 25, 12,826 AS ROYALTY. 2. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO OF TAXING THE RECEIPT OF REIMBURSEMENT O F INTERNATIONAL TELECOM CONNECTIVITY CHARGES OF RS. 8 ,25, 12,826 AS ROYALTY. 3. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO OF TAXING THE RECEIPT OF REIMBURSEMENT O F OTHER EXPENSES OF RS.12,99, 13,821 AS FEES FOR TECHNICAL SERVICES. 4. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN NOT DIRECTING T HE LEARNED AO TO TAX THE RECEIPT OF REIMBURSEMENT OF EXPENSES OF RS. 12,99,13,821 AT 10% UNDER SECTION 115A OF THE INCOME-TAX ACT, 19 61 ('THE ACT'). 5. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN NOT FOLLOWING T HE ORDERS OF THE HON'BLE TRIBUNAL, MUMBAI BENCH, IN ASSESSEE'S OWN C ASE FOR AY 2003-04, AY 2004-05 AND AY 2005-06, AND CONFIRMING THE ACTION OF THE LEARNED AO OF LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 6. ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW, THE LEARNED CIT(A) LEGALLY ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO OF LEVYING INTEREST UNDER SECTION 234B O F THE ACT BY TREATING IT AS CONSEQUENTIAL IN NATURE. 3. DURING THE COURSE OF HEARING, IT WAS STATED AT THE OUTSET BY LD. COUNSEL OF THE ASSESSEE THAT ISSUES INVOLVED IN THI S APPEAL WERE COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF DECISIONS OF THE TRIBUNAL AND ASSESSEES OWN CASE FOR EARLIER YEARS; WHICH HAS NOT BEEN CONT ROVERTED OR DISPUTED BY THE LD. DR. THUS, WITH THIS UNDERSTANDING WE PR OCEED TO DISPOSE OF THIS APPEAL AS UNDER: 4. GROUND 1 & 2 : IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD.CIT(A) IN CONFIRMING THE ACTION OF TAX ING THE RECEIPT OF 4 WNS REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES DISREGARDING THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE F OR A.Y. 2003-04, 2004- 05 AND 2005-06 WHICH HAS BEEN SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL FOR A.Y. 2006-07 ALSO. 5. THE BRIEF FACTS AS CULLED OUT FROM THE ORDERS OF TH E LOWER AUTHORITIES ARE THAT THE ASSESSEE IS A FOREIGN COMPANY INCORPOR ATED IN USA. IT IS A PART OF WNS GROUP, WHICH IS INVOLVED IN THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY ENABLED BUSINESS PROCESSING OUTSOURCING (BPO) SERVICES SUCH AS DATA PROCESSING SERVICES, ACCOUNT RECONCILIATION , CALL CENTRE, ETC. TO ITS CUSTOMERS ACROSS THE GLOBE. DURING THE YEAR, THE A SSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING OUTSOURCED INFORMATION TE CHNOLOGY ENABLED SERVICES TO ITS CUSTOMERS DIRECTLY OR THROUGH SUB C ONTRACTING TO ITS ASSOCIATE ENTERPRISES LOCATED ACROSS THE GLOBE WHIC H WAS ENGAGED IN PROVIDING SIMILAR SERVICES TO THEIR CUSTOMERS. THE AO NOTED THAT THE ASSESSEE WAS REIMBURSED AN AMOUNT OF RS. 8,25,12,82 6/- TOWARDS INTERNATIONAL TELECOM CONNECTIVITY CHARGES PAID BY THE ASSESSEE TO INTERNATIONAL TELECOM OPERATORS ON BEHALF OF WNS GL OBAL SERVICES PVT. LTD. (WNS INDIA). THE AO HELD THAT SUCH REIMBURSEMENT TO WARDS INTERNATIONAL TELECOM CONNECTIVITY CHARGES OF RS.8,25,12,826/- RE CEIVED BY THE ASSESSEE WAS IN THE NATURE OF 'ROYALTY' AS DEFINED UNDER THE PROVISIONS OF THE ACT AS WELL UNDER ARTICLE 12(3)(B) OF THE INDIA - US DTAA. THE AO TAXED THE RECEIPT OF REIMBURSEMENT OF INTERNATIONAL TELECOM C ONNECTIVITY CHARGES AS ROYALTY AT 10% UNDER ARTICLE 12(3)(B) OF THE INDIA- US DTAA. 6. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE LD. CIT(A)AND SUBMITTED THAT IT USES THE SERVICES P ROVIDED BY THE INTERNATIONAL TELECOM SERVICE PROVIDERS. THE SE RVICES ARE 5 WNS AVAILED SEPARATELY FOR TRANSFER OF DATA FROM INDIA BY INTERNET SERVICE PROVIDERS BASED IN INDIA AND TRANSFER OUTSI DE INDIA BY INTERNET SERVICE PROVIDERS BASED OUTSIDE INDIA. THE INTERNATIONAL TELECOM OPERATORS, WHOSE SERVICES ARE AVAILED FOR TRANSMISSION OF DATA, RAISE AN INVOICE ON THE A SSESSEE ON A MONTHLY BASIS BASED ON THE USE OF BANDWIDTH OUTSI DE INDIA BY WNS INDIA. SINCE THE EXPENSES ARE INCURRED ON BE HALF OF WNS INDIA, THE EXPENSES IN RESPECT OF SUCH INTERNAT IONAL TELECOM CONNECTIVITY ARE REIMBURSED BY WNS INDIA TO THE ASSESSEE AT COST WITHOUT ANY PROFIT ELEMENT. THE A SSESSEE ALSO SUBMITTED THAT THE AMOUNTS RECEIVED FROM WNS I NDIA ARE MERELY IN THE NATURE OF REIMBURSEMENT FOR PAYME NTS MADE BY IT TO THE INTERNATIONAL TELECOM OPERATORS O N BEHALF OF WNS INDIA FOR USE OF INTERNATIONAL TELECOM CONNE CTIVITY FACILITY BY WNS INDIA FOR TRANSFERRING DATA TO ITS CUSTOMERS AND VICE VERSA. IT WAS FURTHER SUBMITTED THAT SINCE THE REIMBURSEMENT WAS PURELY ON COST AND DID NOT INCLUD E ANY PROFIT ELEMENT, THE RECEIPT THEREOF SHOULD NOT TO B E TAXED IN ITS HANDS. RELIANCE WAS PLACED ON FOLLOWING JUDGMEN TS DEALING WITH NON-TAXABILITY OF REIMBURSEMENT OF EXP ENSE: 1. CIT V. SIEMENS AKTIENGESELLSCHAFT (310 ITR 320) (BOM) 2. MAHINDRA & MAHINDRA LTD VS DCIT 313 ITR 263(MUM) (SB) 3. CIT V. INDUSTRIAL ENGINEERING. PROJECTS (P) LTD. 202 ITR 1014 (DEL) 4. CIT VS. DUNLOP RUBBER CO LTD 142 ITR 493 (CAL) 5. JDITVS. KRUPP UHDE GMBH[2009] 124 TIJ 219(MUM ITAT) 6. DDIT VS. TATA IRON & STEEL CO. LTD.132 TTJ 566 ( MUM ITAT) 7. CLIFFORD CHANCE VS DCIT 82 ITD 106 (MUM) 6 WNS 8. HCL INFOSYTEMS LTD VS OCIT 76 TTJ 505 (DELHI ITA T) 6.1. THE ASSESSEE ALSO RELIED UPON THE ORDER OF THE BANGALORE TRIBUNAL IN THE CASE OF WIPRO LTD. (80 TT J 191), WHEREIN THE TRIBUNAL HAD OBSERVED THAT AMOUNTS PAYA BLE BY WIPRO LTD TOWARDS PROVISION OF INTERNATIONAL CONNEC TIVITY CANNOT CONSTITUTE INCOME TAXABLE AS ROYALTY / FTS U NDER SECTION 9(L)(VI) AND (VII) OF THE INCOME-TAX ACT, 1961. 6.2. RELIANCE WAS ALSO PLACED UPON THE DELHI HIGH COURT DECISION IN THE CASE OF ASIA SATELLITE 332 LTR 340 (DELHI HC), WHEREIN HON'BIE HIGH COURT HAD HELD THAT PAYMENTS MADE FOR USING CAPACITY IN A TRANSPONDER FOR UP LINKING & DOWN LINKING DATA DO NOT CONSTITUTE 'ROYALTY' UNDER THE PROVISIONS OF THE ACT. IT WAS HELD THAT THE CUSTOMERS DID NOT MAKE PAYMENTS FOR THE USE OF ANY PROCESS OR EQUIPMENT, S INCE CONTROL OVER THE PROCESS OR EQUIPMENT WAS WITH THE EQUIPMENT COMPANY AND NOT WITH THE CUSTOMERS. IT WA S ALSO HELD THAT THE ARRANGEMENT WAS ONLY TO LEASE TRANSPO NDER CAPACITY, WHILE THE SATELLITE COMPANY ENJOYED CONTR OL OVER THE SATELLITE. THE ASSESSEE HAS, SUBMITTED THAT USE OF INTERNATIONAL TELECOM CONNECTIVITY FACILITY IS SIMI LAR TO USE OF TRANSPONDER FACILITY, WHERE THE EQUIPMENT IS NOT IN THE CONTROL OF THE ASSESSEE, BUT IT MERELY USES STANDAR D FACILITY FOR TRANSFERRING DATA FROM ONE END TO OTHER. 6.3. THE ASSESSEE HAD ALSO PLACED RELIANCE ON THE FOLLOW ING DECISIONS IN SUPPORT OF ITS PROPOSITION THAT PAYMEN T FOR USE OF INTERNATIONAL TELECOM CONNECTIVITY FACILITY IS N OT TAXABLE 7 WNS AS ROYALTY UNDER THE ACT OR THE DT AA: 1. INFOSYS TECHNOLOGIES VS DCIT [ITA NO.1140 /BANGL20 09] 2. DELL INTERNATIONAL SERVICES PVT LTD (ADVANCE RULING ) [2008]TIOL 08 3. CABLE & WIRELESS 315 ITR 72 (AAR) 4 ISRO SATELLITE CENTRE [(2008) 307 ITR 59 (AAR)] 5. PACIFIC INTERNET (INDIA) (P) LTD. VS ITO (TDS) [2009] 27 SOT 523 (MUM) 6. PEOPLE INTERACTIVE (I) P LTD [ITA NOS. 2180, 21 79, 2181, 2182, DATED 29 FEBRUARY 2012] 6.4. IT WAS ALSO SUBMITTED THAT EVEN ASSUMING WITHOUT ADMITTING, THE PAYMENT RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF ROYALTY OR FTS UNDER THE ACT, THE SAME WO ULD STILL FALL OUTSIDE THE PURVIEW OF ROYALTY OR FTS, IN VIEW OF THE SPECIFIC EXCLUSION PROVIDED IN SECTIONS 9(1)(VI)(B) AND 9(1)(VII)(B) OF THE ACT IN TERMS OF WHICH PAYMENTS IN THE NATURE OF ROYALTY / FTS INCURRED BY AN INDIAN ENTIT Y FOR THE PURPOSE OF EARNING OF ANY INCOME FROM A SOURCE OUTS IDE INDIA IS EXCLUDED FROM THE PURVIEW OF TAXATION IN I NDIA. THE ASSESSEE ALSO PLACED ON RECORD THE DECISION OF THE HON'BLE MUMBAI TRIBUNAL IN ASSESSEE'S OWN CASE, WHERE IDENT ICAL ISSUES AROSE IN ASSESSEE'S OWN CASE FOR AY 2004-05 AND AY 2005-06, WHEREIN THE TRIBUNAL RELIED ON THE DECISIO N IN THE CASE OF WIPRO LTD (SUPRA) AND INFOSYS (SUPRA) AND H ELD THAT PAYMENTS TOWARDS INTERNATIONAL TELECOM ACTIVITY FAC ILITY CANNOT BE TREATED AS ROYALTY UNDER THE ACT OR TREAT Y. 6.5. BUT THE LD. CIT(A) DID NOT AGREE WITH THE SUBMISSIO N OF THE ASSESSEE ON THE GROUND THAT THE TRIBUNAL WHILE PASSING THE ORDERS IN ASSESSEES OWN CASE DID NOT CONSIDER VARIOUS 8 WNS OTHER JUDGMENTS INCLUDING THE JUDGMENT OF CHENNAI B ENCH OF THE TRIBUNAL IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE LTD 45 SOT 263 (CHEN) AND BY RELYING UPON THE SAID JUDGMENT, LD.CIT(A) REJECTED THE SUBMISSIONS O F THE ASSESSEE BY OBSERVING AS UNDER: 3.9 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE CONTENTIONS LAID DOWN BY THE AO IN THE ASSESSMENT ORDER. THE ASSESSEE HAS RECEIVED PAYMENT FROM WNS INDIA TOWARDS INTERNATIONAL TELECOM CONNECTIVITY FACILITY USED BY WNS INDIA FOR TRANSFER OF DATA TO ITS CUSTOMERS OUTSIDE INDIA. 3.10 I DO NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE. IN VIEW OF THE RETROSPECTIVE AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT 2012 IN S. 9(1)(VI ) OF THE LT. ACT, THE DEFINITION OF ROYALTY INCLUDES CONSIDERATION IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION, WHETHER OR NOT, THE POSSESSION OR CONTROL OF SUCH RIGHT, PROPERTY OR INFORMATION IS W ITH THE PAYER, SUCH RIGHT, PROPERTY OR INFORMATION IS U SED DIRECTLY BY THE PAYER, THE LOCATION OF SUCH RIGHT, PROPERTY OR INFORMATION IS IN INDIA. 3.11 FURTHER, THE EXPRESSION 'PROCESS' HAS BEEN CLARIFIED TO INCLUDE TRANSMISSION BY SATELLITE (INCLUDING UP-LINKING, AMPLIFICATION, CONVERSION FO R DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET. 3.12 IN VIEW OF THE AFORESAID AMENDMENT, THE JUDGMENT IN THE CASE OF WIPRO AND ASIA SATELLITE (SUPRA) ARE NO LONGER APPLICABLE TO THE ASSESSEE CASE AS THE CONSIDERATION TOWARDS USE OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES ARE SPECIFICALLY COVERED UNDER THE DEFINITION OF ROYALT Y U/S 9(1)(VI) THE I.T.ACT. 3.13 FURTHER, I HAVE PERUSED THE ORDER DATED 29.02.2012 OF THE HON'BIE MUMBAI TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2004-05 AND ORDER DATED 9 WNS 14.03.2012 FOR AY 2005-06. AS OBSERVED, THE ORDER OF THE HON'BLE CHENNAI TRIBUNAL IN THE CASE OF VERIZON COMMUNICATIONS SINGAPORE PTE LTD. [2011} 45 SOT 263 (CHENNAI ITAT) DEALING WITH TAXABILITY O F LEASED LINE CHARGES HAS NOT BEEN CONSIDERED BY THE HON'BLE MUMBAI TRIBUNAL. 3.14 IN VIEW OF THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF AGARWAL WAREHOUSING- & LEASING LTD. VS. ERR (MP) 257 ITR 235 (2002), WHERE IT HAS BEEN HELD THAT CIT(A) BEIN G SUBORDINATE TO THE TRIBUNAL IS BOUND TO FOLLOW THE VIEW OF THE TRIBUNAL, I PLACE RELIANCE ON THE JUDGMENT OF THE HON'BLE CHENNAI TRIBUNAL IN THE CASE OF VERIZON (SUPRA). 3.15 THE DECISION OF THE HON'BLE CHENNAI TRIBUNAL I N THE CASE OF VERIZON (SUPRA), BEING A LATER JUDGMENT DEALING WIT.' TAXABILITY OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES IS A BINDING PRECEDENT. 3.16 THE ASSESSEE HAS MADE AN ATTEMPT TO DISTINGUISH THE JUDGMENT OF THE HON'BLE CHENNAI TRIBUNAL IN THE CASE OF VERIZON (SUPRA). THE ASSESS EE HAS SUBMITTED THAT IN THE SAID CASE BEFORE THE HON'BLE CHENNAI TRIBUNAL, VERIZON ITSELF WAS THE OWNER OF THE EQUIPMENT WHICH WAS INSTALLED IN THE PREMISES OF VSNL AND HENCE, PAYMENT FOR USE OF EQUIPMENT TO THE OWNER WAS HELD TO BE ROYALTY. 3.17 IN THIS REGARD, THE ASSESSEE SUBMITS THAT IN I TS CASE, THE ASSESSEE IS NEITHER THE OWNER OF THE EQUIPMENT NOR HAS ANY POSSESSION OR CONTROL OR DOMAIN OVER THE EQUIPMENT. THE ASSESSEE MERELY ACTS AS AN INTERMEDIARY BETWEEN INTERNATIONAL TELECOM OPERATORS VIZ. MC! WORLDCOM AND COMPATH, AND WNS INDIA WHEREBY IT RECOVERS THE LEASED LINE CHARGES PAID TO SUCH TELECOM OPERATORS ON A COST TO COST BASIS, WITHOUT RECOVERING ANY MARK-UP FROM THE INDIAN COMPANY I.E. WNS INDIA. ACCORDINGLY, THE ASSESSEE HAS SUBMITTED THAT THE AMOUNTS RECEIVED BY IT CANNOT BE TAXED AS ROYALTY UNDER THE ACT OR TREATY. 10 WNS 3.18 I DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. THOUGH THE ASSESSEE SUBMITS THAT IT IS AN INTERMEDIARY AND MERELY COORDINATES FOR INTERNATIONAL TELECOM CONNECTIVITY FACILITY BETWEEN THE INTERNATIONAL TELECOM SERVICE PROVIDERS AND WNS INDIA, THIS FACT PER SE DOES NOT CHANGE THE NATURE OF INCOME RECEIVED BY IT AS WNS INDIA HAS ACTUALLY USE D THE INTERNATIONAL TELECOM CONNECTIVITY FACILITY AND THE AMOUNTS PAID BY WNS INDIA ARE IN THE NATURE OF ROYALTY AS ENVISAGED U/S 9(1)(VI) OF THE LT. ACT AN D UNDER THE INDIA - US TAX TREATY. FURTHER, THE PAYME NT RECEIVED BY ASSESSEE FOR AND ON BEHALF OF VERIZON, IN ANY CASE IS TAXABLE IN THE HANDS OF VERIZON, HAD IT BEEN PAID DIRECTLY BY INDIAN COMPANY, AS HELD BY ITAT, CHENNAI. IN ANY CASE, LAW HAS ALSO BEEN AMENDED RETROSPECTIVELY IN THIS REGARD. NO MS HAS BEEN DONE. IF SUCH PAYMENTS IS ALLOWED AS DEDUCTIONS ON THE BASIS OF REIMBURSEMENTS, THEN ANY INDIAN COMPANY MAKING SIMILAR PAYMENTS TO A FOREIGN COMPANY, MAY PAY IT THROUGH A SUBSIDIARY OR A PARENT OR A GROUP COMPANY AS IN THE CASE, AND CLAIM DEDUCTION IN THE NAME OF REIMBURSEMENT AND BYE PASS SEC 40(A)(I) AND ALSO TDS PROVISION. THIS CANNOT BE PERMITTED AND LAW CANNOT BE APPLIED IN SUCH MANNER THAT A TAX PAYER MAY BYE PASS THE RIGORS OF THE SAME BY RESORTING TO SUCH ARTIFICIAL DEVICES. HENCE, THE TDS PROVISIONS AND ALSO 40(A)(I ) CANNOT BE HELD TO BE NON APPLICABLE IN SUCH CASES. 3.19 FOR THE REASONS MENTIONED ABOVE AND IN VIEW OF THE DECISION OF THE CHENNAI TRIBUNAL IN THE CASE OF VERIZON (SUPRA), I HOLD THAT PAYMENT RECEIVED BY TH E ASSESSEE FROM WNS INDIA TOWARDS INTERNATIONAL TELECOM CONNECTIVITY CHARGES IS IN THE NATURE OF ROYALTY FOR USE OF PROCESS UNDER SECTION 9(1)(VI) O F THE I.T. ACT, 1961 AS WELL AS THE INDIA-US TAX TREA TY. HENCE, GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 7. DURING THE COURSE OF HEARING BEFORE US IT WAS SUBMI TTED BY THE LD. COUNSEL THAT THE EARLIER YEARS DECISION S OF THE TRIBUNAL HAVE BEEN SUBSEQUENTLY FOLLOWED BY THE TRI BUNAL IN 11 WNS ASSESSEES OWN CASE EVEN IN A.Y. 2006-07. HE PLACE D BEFORE US COPY OF ORDER OF THE TRIBUNAL FOR A.Y. 2006-07 D ELIVERED VIDE ORDER DATED 14-12-2012 IN ITA NO.8621/MUM/2010 . LD. DR DID NOT MAKE ANY DISTINCTION ON LAW OR ON FACTS. 8. WE HAVE GONE THROUGH THE AFORESAID JUDGMENT. IT IS NOTED THAT IN THIS DECISION ALL THE ARGUMENTS RAISE D BY THE REVENUE HAVE BEEN DEALT WITH BY THE TRIBUNAL BEFORE DECIDING THIS GROUND IN FAVOUR OF THE ASSESSEE. WE FIND IT APPROPRIATE TO REPRODUCE RELEVANT PORTION OF THE OBSERVATIONS AND FINDINGS OF THE TRIBUNAL AS UNDER: - 3.1. SECOND ISSUE RAISED IN THIS APPEAL IS AGAINST THE REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES RECEIVED BY THE ASSESSEE FROM WNS INDIA WHICH HAVE BEEN HELD BY THE AO TO BE TAXABLE UNDER ARTICLE 12 OF THE DTA A AS ROYALTY. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE RECEIVED REIMBURSEMENT OF LEASE LINE CHARGES AMOUNTING TO RS . 6,41,87,580 FROM WNS INDIA. THE A.O. CALLED UPON TH E ASSESSEE TO EXPLAIN AS TO WHY THE REIMBURSEMENT OF SUCH EXPE NSES SHOULD NOT BE CONSIDERED AS ROYALTY LIABLE TO TAX UNDER AR TICLE 12 OF DTAA. THE ASSESSEE SUBMITTED THAT WNS INDIA IS IN T HE BUSINESS OF PROVIDING SOFTWARE AND IT ENABLED SERVICES TO CL IENTS LOCATED OUTSIDE INDIA. FOR TRANSMITTING THE DATA FROM THE U NIT OF THE WNS INDIA TO THE CUSTOMERS LOCATED OUTSIDE INDIA, WNS I NDIA AVAILED THE SERVICES OF THE DOMESTIC AS WELL AS INTERNATION AL TELECOM OPERATORS. THE ASSESSEE PAID THESE INTERNATIONAL TE LECOM CONNECTIVITY CHARGES TO THE INTERNATIONAL TELECOM O PERATORS FOR THE SERVICES UTILIZED BY WNS INDIA OUTSIDE INDIA AN D THE SAME WAS ACCORDINGLY REIMBURSED BY WNS INDIA TO THE ASSE SSEE. IT WAS STATED THAT THESE RECOVERIES REPRESENTED REIMBURSEM ENT AT COST OF THE EXPENSES INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF WNS INDIA WITHOUT ANY MARK UP. SIMILAR SUBMISSIONS WERE ALSO ADVANCED BEFORE THE DRP CONTENDING THAT THE REIMBUR SEMENT OF 12 WNS INTERNATIONAL TELECOM CONNECTIVITY CHARGES WAS WITH OUT ANY PROFIT ELEMENT AND HENCE THE SAME COULD NOT BE CONS IDERED AS ITS INCOME. NOT CONVINCED WITH THE ASSESSEES SUBMISSIO NS, THE A.O. TREATED THE PAYMENT RECEIVED FROM WNS INDIA TOWARDS REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES AMOUNTING TO RS. 6.41 CRORE AS ROYALTY TAXABLE AS P ER ARTICLE 12 OF THE DTAA. IN REACHING THIS CONCLUSION, THE A.O. FOLLOWED HIS ORDER FOR THE EARLIER YEAR ON THIS ISSUE. THE ASSES SEE IS BEFORE US ASSAILING THE TREATMENT GIVEN BY THE AUTHORITIES BE LOW TO SUCH REIMBURSEMENT OF EXPENSES AS ROYALTY. 3.2. THE LD. AR RELIED ON THE ORDER PASSED BY THE T RIBUNAL FOR THE EARLIER YEAR DECIDING SUCH ISSUE IN FAVOUR OF THE A SSESSEE. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE OPP OSED SUCH VIEW TAKEN BY THE TRIBUNAL AND INSISTED THAT THE SA ME SHOULD NOT BE FOLLOWED DUE TO INSERTION OF EXPLANATION 5 BY TH E FINANCE ACT, 2012 W.R.E.F. 1.6.1976 WHICH GIVES PROPER MEANING T O CLAUSE (IVA) TO EXPLANATION (2) BELOW SECTION 9(1)(VI). HE SUBMI TTED THAT THE CLAUSE (IVA) CLEARLY PROVIDES THAT ROYALTY MEANS AN Y CONSIDERATION FOR THE USE OR RIGHT TO USE ANY INDUS TRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT... INVITING OU R ATTENTION TOWARDS EXPLANATION (5) INSERTED BY THE FINANCE ACT , 2012 WITH RETROSPECTIVE EFFECT, THE LD. DR STATED THAT THE SA ME CLARIFIES THAT THE ROYALTY INCLUDES CONSIDERATION IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION WHETHER OR NOT -- (A) THE P OSSESSION OR CONTROL OF SUCH RIGHT, PROPERTY OR INFORMATION IS W ITH THE PAYER; (B) SUCH RIGHT, PROPERTY OR INFORMATION IS USED DIR ECTLY BY THE PAYER . IT WAS CONTENDED THAT THE INSERTION OF EX PLANATION (5) BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT ALSO COVERING THE YEAR UNDER CONSIDERATION HAS CHANGED THE ENTIRE COMPLEXION OF THE CASE AND IT HAS NECESSITATED OBSERVING DEPAR TURE FROM THE EARLIER ORDER OF THE TRIBUNAL WHICH WAS PASSED WITH OUT THE ASSISTANCE OF SUCH LEGISLATIVE AMENDMENT COMING ON THE STATUTE AFTER THE PASSING OF SUCH ORDER. THE LEARNED DEPART MENTAL REPRESENTATIVE CONTENDED THAT THE PAYMENT RECEIVED BY THE ASSESSEE IN THE INSTANT CASE IS IN RESPECT OF ALLOW ING WNS INDIA 13 WNS THE USER OF THE EQUIPMENT WITHOUT TAKING ITS PERSON AL POSSESSION AND HENCE CONSIDERATION FOR SUCH USER AMOUNTS TO RO YALTY. IT WAS, THEREFORE, SUBMITTED THAT THE ORDER PASSED BY THE T RIBUNAL FOR THE EARLIER YEAR SHOULD NOT BE FOLLOWED BECAUSE OF INSERTION OF EXPLANATION (5) BY THE FINANCE ACT, 2012 WITH RETRO SPECTIVE EFFECT COVERING THE PERIOD RELEVANT TO THE A.Y. UNDER CONS IDERATION. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. HERE AGAIN IT IS NOTIC ED THAT SIMILAR ISSUE WAS RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEAR. VIDE THE AFORE-NOTED ORDER, THE T RIBUNAL HAS HELD THAT THE REIMBURSEMENT OF LEASE LINE CHARGES R ECEIVED BY THE ASSESSEE FROM WNS INDIA IS NOT CHARGEABLE TO TA X IN INDIA AS SUCH PAYMENT WAS NOT IN RESPECT OF USE OF ANY EQUIP MENT SO AS TO BE CALLED AS ROYALTY. FURTHER THE TRIBUNAL HELD THAT IT WAS A CASE OF REIMBURSEMENT OF THE LEASE LINE CHARGES WHI CH DID NOT INCLUDE ANY MARK UP OR PROFIT AND SUCH REIMBURSEMEN T OF ACTUAL EXPENSES COULD NOT TREATED AS ROYALTY INCOME CHARGE ABLE TO TAX. 3.4. NOW WE TAKE UP THE CONTENTION OF THE LD. DR UR GING US TO DEVIATE FROM THE VIEW CANVASSED BY THE TRIBUNAL IN THE EARLIER YEAR. THE CONTENTION OF THE LD. DR IS TWO-FOLD. FIR ST, THAT ANY RETROSPECTIVE AMENDMENT TO THE PROVISIONS OF THE AC T IS RELEVANT FOR DETERMINING THE TAXABILITY OR DEDUCTIBILITY OF AN AMOUNT EVEN UNDER THE PROVISION OF THE DTAA AND SECOND, THE AMO UNT IN QUESTION, WHEN EXAMINED IN THE LIGHT OF EXPLANATION 5 TO SEC. 9(1)(VI) INSERTED RETROSPECTIVELY CLEARLY, BRINGS I T IN THE SCOPE OF `ROYALTY. 3.5. WE ESPOUSE THE FIRST SEGMENT OF THE CONTENTION OF THE LD. DR THAT THE RETROSPECTIVE AMENDMENT TO THE PROVISIONS OF THE ACT PER SE SHOULD BE CONSIDERED FOR DETERMINING THE TAX ABILITY OF THE AMOUNT EVEN UNDER THE DTAA. IT IS TRITE THAT UNDER NORMAL CIRCUMSTANCES THE RETROSPECTIVE AMENDMENT OF ANY PR OVISION OF THE ACT MANDATES IT TO BE FOLLOWED FROM THE DATE FR OM WHICH SUCH RETROSPECTIVE EFFECT IS GIVEN. IN SUCH A SITUA TION IT IS CONSIDERED AS IF FOR ALL PRACTICAL PURPOSES THE PRO VISION WAS THERE ON THE STATUTE FROM SUCH EARLIER DATE. ACCORDINGLY THE 14 WNS ASSESSMENTS AND OTHER PROCEEDINGS UNDER THE ACT HAV E TO MOVE WITH THE PRESUMPTION OF EXISTENCE OF SUCH PROVISION FROM THE EARLIER DATE. ANY ASSESSMENT ORDER, WHICH WHEN ORIG INALLY PASSED IN ACCORDANCE WITH THE LAW AS PREVAILING AT THAT PO INT OF TIME, SHALL REQUIRE AMENDMENT IF THERE IS SOME RETROSPECT IVE AMENDMENT TO THE PROVISION GERMANE TO THE ISSUE, OF COURSE, SUBJECT TO OTHER PROVISIONS OF THE ACT. 3.6. HOWEVER, POSITION IS SLIGHTLY DIFFERENT WHEN T HERE IS A DOUBLE TAXATION AVOIDANCE AGREEMENT WITH ANOTHER COUNTRY. SUB-SECTION (1) OF SECTION 90 OF THE ACT PROVIDES THAT THE CENT RAL GOVERNMENT MAY ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY OTHER COUNTRY FOR THE GRANTING OF RELIEF OF TAX IN RESPEC T OF INCOME ON WHICH TAX HAS BEEN PAID IN TWO DIFFERENT TAX JURISD ICTIONS. SUB- SECTION (2) OF SECTION 90 UNEQUIVOCALLY PROVIDES TH AT WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO AN AGREEMENT WI TH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA UNDER SUB-S ECTION (1) FOR GRANTING RELIEF OF TAX OR FOR AVOIDANCE OF DOUB LE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGRE EMENT APPLIES, RS. THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. THE CRU X OF SUB- SECTION (2) IS THAT WHERE A DTAA HAS BEEN ENTERED I NTO WITH ANOTHER COUNTRY, THEN THE PROVISIONS OF THE ACT SHA LL APPLY ONLY IF THEY ARE MORE BENEFICIAL TO THE ASSESSEE. IN SIMPLE WORDS, IF THERE IS A CONFLICT BETWEEN THE PROVISIONS UNDER THE ACT AND THE DTAA, THE ASSESSEE WILL BE SUBJECTED TO THE MORE BENEFICI AL PROVISION OUT OF THE TWO. IF THE PROVISION OF THE ACT ON A PA RTICULAR ISSUE IS MORE BENEFICIAL TO THE ASSESSEE VIS-A-VIS THAT IN T HE DTAA, THEN SUCH PROVISION OF THE ACT SHALL APPLY AND VICE VERS A. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. P.V.A.L. KULAND AGAN CHETTIAR [(2004) 267 ITR 654 (SC)] HAS HELD THAT THE PROVISI ONS OF SECTIONS 4 AND 5 ARE SUBJECT TO THE CONTRARY PROVISION, IF A NY, IN DTAA. SUCH PROVISIONS OF A DTAA SHALL PREVAIL OVER THE AC T AND WORK AS AN EXCEPTION TO OR MODIFICATION OF SECTIONS 4 AND 5 . SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONAL HIGH C OURT IN CIT V. SIEMENS AKTIONGESELLSCHAFT [(2009) 310 ITR 320 (BOM .)]. IN THE 15 WNS LIGHT OF THE ABOVE DISCUSSION IT BECOMES VIVID THAT IF THE PROVISIONS OF THE TREATY ARE MORE BENEFICIAL TO THE ASSESSEE VIS-- VIS ITS COUNTERPART IN THE ACT, THEN THE ASSESSEE S HALL BE ENTITLED TO BE RULED BY THE PROVISIONS OF THE TREATY. 3.7. WE COME BACK TO THE CONTENTION OF THE LD. DR T HAT THE RETROSPECTIVE AMENDMENT TO THE PROVISIONS OF THE AC T SHOULD BE CONSIDERED FOR DETERMINING THE TAXABILITY OF THE AM OUNT EVEN UNDER THE DTAA. THIS CONTENTION, IN OUR CONSIDERED OPINION, IS PARTLY CORRECT. ANY AMENDMENT CARRIED OUT TO THE PR OVISIONS OF THE ACT WITH RETROSPECTIVE EFFECT SHALL NO DOUBT HA VE THE EFFECT OF ALTERING THE PROVISIONS OF THE ACT BUT WILL NOT PER SE HAVE THE EFFECT OF AUTOMATICALLY ALTERING THE ANALOGOUS PROV ISION OF THE TREATY. THERE ARE CERTAIN PROVISIONS IN SOME TREATI ES WHICH DIRECTLY RECOGNIZE THE PROVISIONS OF THE DOMESTIC L AW. FOR EXAMPLE, ARTICLE 7 IN CERTAIN CONVENTIONS PROVIDES THAT THE DEDUCTIBILITY OF EXPENSES OF THE PERMANENT ESTABLIS HMENT SHALL BE SUBJECT TO THE PROVISIONS OF THE DOMESTIC LAW. I N SUCH A CASE, IF ANY RETROSPECTIVE AMENDMENT IS MADE TO THE PROVISIO NS OF THE ACT GOVERNING THE DEDUCTIBILITY OF THE EXPENSES, TH E SAME SHALL APPLY UNDER THE TREATY AS WELL. 3.8. ARTICLE 23 IN CERTAIN TREATIES INCLUDING THAT OF INDIA WITH MAURITIUS IS `ELIMINATION OF DOUBLE TAXATION. PARA 1 OF ARTICLE 23 IN MAURITIUS TREATY PROVIDES THAT: THE LAWS IN FOR CE IN EITHER OF THE CONTRACTING STATES SHALL CONTINUE TO GOVERN THE TAXATION OF INCOME IN THE RESPECTIVE CONTRACTING STATES EXCEPT WHERE PROVISIONS TO THE CONTRARY ARE MADE IN THIS CONVENT ION. FIRST PART OF PARA 1 OF ARTICLE 23 MAKES OUT A GENERAL RU LE THAT IF INCOME OF THE PERMANENT ESTABLISHMENT IS TO BE COMP UTED IN INDIA, THEN THE PROVISIONS OF THE ACT SHALL GOVERN THE TAXATION OF INCOME IN INDIA. HOWEVER, THE SECOND PART OF PARA 1 OF ARTICLE 23 CONTAINS A QUALIFICATION, WHICH MAKES THE OPERATION OF THE FIRST PART OF PARA 1 OF ARTICLE 23 SUBJECT TO THE FULFILM ENT OF SUCH STIPULATION. THE WORD EXCEPT IS THE DIVIDING CONT OUR BETWEEN THE MAIN PROVISION AND THE QUALIFICATION PART. THE PORTION STARTING THEREAFTER ENUMERATES THE QUALIFICATION, W HICH IS WHERE 16 WNS PROVISIONS TO THE CONTRARY ARE MADE IN THIS CONVENT ION. WHEN WE READ FULL TEXT OF PARA 1 OF ARTICLE 23, IT BECOM ES MANIFEST THAT IF THERE IS SOME PROVISION IN THE TREATY CONTRARY T O THE DOMESTIC LAW, THEN IT IS THE PROVISION OF THE TREATY WHICH S HALL PREVAIL. THUS THE GENERAL RULE CONTAINED IN THE FIRST PART OF PAR A 1 OF ARTICLE 23, BEING THE APPLICABILITY OF THE DOMESTIC LAW, HAS CA ST A SHADOW ON ANY PROVISION TO THE CONTRARY IN THE TREATY. IN CAS E THERE IS NO CONTRARY PROVISION IN THE TREATY, THEN IT IS THE DO MESTIC LAW WHICH SHALL APPLY. IF HOWEVER, THERE IS SOME PROVISION IN THE TREATY CONTRARY TO THE DOMESTIC LAW THEN IT IS SUCH CONTRA RY PROVISION OF THE TREATY WHICH SHALL OVERRIDE THE PROVISION IN TH E DOMESTIC LAW IN THE COMPUTATION OF INCOME AS PER THE TREATY. COM ING BACK TO OUR CONTEXT, IF THE RETROSPECTIVE AMENDMENT IS IN T HE REALM OF A PROVISION OF WHICH NO CONTRARY PROVISION IS THERE I N THE TREATY, THEN SUCH AMENDMENT WILL HAVE EFFECT EVEN UNDER THE DTAA AND VICE VERSA. 3.9. ARTICLE 3(2) IN MOST OF THE TREATIES INCLUDING THE INDIA-USA DTAA PROVIDES THAT ANY TERM NOT DEFINED IN THE CONV ENTION SHALL UNLESS THE CONTEXT OTHERWISE REQUIRES, HAVE THE MEA NING WHICH IT HAS UNDER THE LAWS OF THAT STATE CONCERNING TAX TO WHICH THE CONVENTION APPLIES. THE NITTY-GRITTY OF ARTICLE 3(2 ) IN THE PRESENT CONTEXT IS THAT IF A PARTICULAR TERM HAS NOT BEEN D EFINED IN THE TREATY BUT THE SAME HAS BEEN DEFINED IN THE ACT AND FURTHER THERE IS A RETROSPECTIVE AMENDMENT TO THAT TERM UND ER THE ACT, IT IS THIS AMENDED DEFINITION OF THE TERM AS PER THE A CT, WHICH SHALL APPLY IN THE TREATY AS WELL. IF HOWEVER A PARTICULA R TERM HAS BEEN SPECIFICALLY DEFINED IN THE TREATY, THE AMENDMENT T O THE DEFINITION OF SUCH TERM UNDER THE ACT WOULD HAVE NO BEARING ON THE INTERPRETATION OF SUCH TERM IN THE CONTEXT OF T HE CONVENTION. A COUNTRY WHO IS PARTY TO A TREATY CANNOT UNILATERA LLY ALTER ITS PROVISIONS. ANY AMENDMENT TO TREATY CAN BE MADE BIL ATERALLY BY MEANS OF DELIBERATIONS BETWEEN THE TWO COUNTRIES WH O SIGNED IT. IF THERE IS NO AMENDMENT TO THE PROVISION OF THE TR EATY BUT THERE IS SOME AMENDMENT ADVERSE TO THE ASSESSEE IN THE AC T, WHICH PROVISION HAS BEEN SPECIFICALLY DEFINED IN THE TREA TY OR THERE IS NO 17 WNS REFERENCE IN THE TREATY TO THE ADOPTION OF SUCH PRO VISION FROM THE ACT, AGAIN THE MANDATE OF SECTION 90(2) SHALL A PPLY AS PER WHICH THE PROVISIONS OF THE ACT OR THE TREATY, WHIC HEVER IS MORE BENEFICIAL TO THE ASSESSEE SHALL APPLY. GOING BY SU CH RULE, THE AMENDMENT TO THE ACT SHALL HAVE NO UNFAVORABLE EFFE CT ON THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE. 3.10. REVERTING TO THE FACTS OF THE EXTANT CASE, WE OBSERVE THAT THE TERM ROYALTY HAS BEEN DEFINED IN THE DTAA AS PER ARTICLE 12(3). SUCH DEFINITION OF THE TERM ROYALTY AS PER THIS ARTICLE IS EXHAUSTIVE. PURSUANT TO THE INSERTION OF EXPLANATIO N (5) BY THE FINANCE ACT, 2012, NO AMENDMENT HAS BEEN MADE IN TH E DTAA TO BRING THE DEFINITION OF ROYALTY AT PAR WITH THAT PR OVIDED UNDER THE ACT. SUBJECT MATTER OF THE EXPLANATION IS OTHERWISE NOT A PART OF THE DEFINITION OF ROYALTY AS PER ARTICLE 12. AS SUC H, IT IS CLEAR THAT THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESEN TATIVE THAT THE RETROSPECTIVE INSERTION OF EXPLANATION 5 TO SEC TION 9(1)(VII) SHOULD BE READ IN THE DTAA ALSO, CANNOT BE COUNTENA NCED. 4.1. BE THAT AS IT MAY, WE TAKE UP THE SECOND ASPEC T OF THE CONTENTION OF THE LD. DR ON THIS ISSUE, AS PER WHIC H HE STATED THAT ON MERITS, THE EXPLANATION 5 HAS MADE THE AMOUNT IN QUESTION AS ROYALTY. WE FIND THAT THE RECEIPT OF RS.6.41 CRORE CANNOT BE CONSIDERED AS ROYALTY EVEN UNDER THE AMENDED PROVIS IONS OF THE ACT. THE FACTS ARE VERY BRIEFLY RECAPITULATED THAT THE ASSESSEE RECEIVED THE SAID SUM AS REIMBURSEMENT OF CHARGES F ROM WNS INDIA WHICH WERE PAID BY IT FOR LEASE LINE TO MCI W ORLDCOM ETC. IN OTHER WORDS, THE LEASE LINE SERVICES WERE AVAILED B Y WNS INDIA FROM MCI WORLDCOM ETC., FOR WHICH THE ASSESSEE ORIG INALLY MADE THE PAYMENT TO SUCH OPERATORS ON BEHALF OF WNS INDI A AND SUBSEQUENTLY RECOVERED THE SAME FROM WNS INDIA AT C OST WITHOUT ANY MARK UP. THE QUESTION IS WHETHER UNDER THESE CIRCUMSTANCES IT CAN BE SAID THAT THE ASSESSEE GOT THIS CONSIDERATION OF RS.6.41 CRORE IN THE NATURE OF ROY ALTY? THE CASE OF THE LEARNED DEPARTMENTAL REPRESENTATIVE RESTS ON CLAUSE (IVA) OF EXPLANATION (2) TO SECTION 9(1)(VI) ALONG WITH E XPLANATION (5). IT HAS BEEN CONTENDED THAT THE AMOUNT BE CONSIDERED AS ROYALTY 18 WNS IN THE HANDS OF THE ASSESSEE BECAUSE IT IS FOR ALLO WING THE USE OF EQUIPMENT. WE ARE UNABLE TO COMPREHEND THIS POINT O F VIEW FOR THE REASON THAT SUCH CHARGES WERE NOT RECOVERED BY THE ASSESSEE BECAUSE OF PROVIDING ANY ACCESS TO LEASE LINES OWNE D OR HELD BY IT. THE MANDATE OF CLAUSE (IVA) OF EXPLANATION 2 AL ONG WITH EXPLANATION 5 TO SECTION 9(1)(VI) IS TRIGGERED WHEN THE CONSIDERATION IS RECEIVED FOR THE USE OR RIGHT TO U SE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. THE LD. DR VIGOROUSLY ARGUED THAT THE PAYMENT RECEIVED BY THE ASSESSEE IN THE INSTANT CASE IS IN RESPECT OF ALLOWING WNS INDI A THE USER OF THE EQUIPMENT WITHOUT TAKING ITS PERSONAL POSSESSIO N AND HENCE CONSIDERATION FOR SUCH USER AMOUNTS TO ROYALTY. THE RE IS A BASIC FALLACY IN THIS CONTENTION. THE INTERNATIONAL TELEC OM OPERATORS WHO EVENTUALLY RECEIVED THE AMOUNT FOR ALLOWING THE USE OF EQUIPMENT ARE DIFFERENT PARTIES AND THE ASSESSEE SI MPLY GOT THE REIMBURSEMENT OF THE AMOUNT PAID BY IT TO SUCH TELE COM OPERATORS. THIS AMOUNT CAN BE CONSIDERED AS ROYALTY ONLY IN THE HANDS OF THE OWNER OR LESSOR OR ANY OTHER PERSON EN TITLED TO PERMIT THE USE OF EQUIPMENT AND EARNING INCOME IN H IS OWN RIGHT FROM ALLOWING THE USE OF SUCH EQUIPMENT TO OTHERS. BY NO STRETCH OF IMAGINATION AN INTERMEDIARY, WHO MAKES PAYMENT T O THE OWNER OF EQUIPMENT ON BEHALF OF SOME PERSON AND THE N GETS REIMBURSED FOR THE SAID PAYMENT, CAN BE CONSIDERED AS AN OWNER OR LESSOR ETC. OF THE EQUIPMENT SO AS TO BE CONSIDE RED U/S 9(1)(VI). THE SAID AMOUNT MAY BE CONSIDERED AS ROYALTY IN THE HANDS OF MCI WORLDCOM AND OTHER INTERNATIONAL OPERATIONS UND ER THE PROVISIONS OF THE ACT, WHO OWN THE EQUIPMENT AND AL LOWED USE OR RIGHT TO USE SUCH EQUIPMENT TO WNS INDIA. THE AS SESSEE IN THE INSTANT CASE SIMPLY PAID A SUM OF RS.6.14 CRORE TO MCI WORLDCOM ETC. IN THE FIRST INSTANCE AND THEN RECOVERED THE S AME FROM WNS INDIA. THUS IT IS EVIDENT, THE SAID SUM IS NOT ROYA LTY EVEN AS PER SECTION 9(1)(VI) OF THE ACT. 5.1. HAVING HELD THAT THE AMOUNT IS NOT IN THE NATU RE OF ROYALTY IN THE HANDS OF THE ASSESSEE, THE NEXT QUESTION WHICH ARISES FOR OUR CONSIDERATION IS AS TO WHAT IS THE CORRECT NATURE O F THIS AMOUNT 19 WNS AND WHETHER IT IS TAXABLE AS BUSINESS PROFITS AS PE R ARTICLE 7 ? THERE IS NO DISPUTE ON THE LEGAL ISSUE THAT THE REI MBURSEMENT OF EXPENSES WITHOUT ANY MARK UP CANNOT BE CONSIDERED A S INCOME IN THE HANDS OF THE ASSESSEE SO AS TO ATTRACT TAXAB ILITY. 5.2. REIMBURSEMENT OF EXPENSES MEANS THAT THE EXPEN SES EARLIER INCURRED BY A PERSON ON BEHALF OF ANOTHER ARE RECOV ERED AS SUCH. ORDINARILY THERE IS NO ELEMENT OF PROFIT IN SUCH RE IMBURSEMENT. SINCE THERE IS NO MARK-UP IN SUCH RECOVERY, THERE C AN BE NO QUESTION OF IMPUTING ANY INCOME ON THIS ISSUE IN TH E HANDS OF RECIPIENT. HOWEVER, THE ONUS TO PROVE THAT THERE IS NO ELEMENT OF PROFIT IN SUCH REIMBURSEMENT IS ALWAYS ON THE ASSES SEE. MERE NOMENCLATURE OF REIMBURSEMENT IS NOT RELEVANT. THE ASSESSEE IS REQUIRED TO LEAD EVIDENCE TO SHOW THAT THE EXPENSES INCURRED ARE EQUAL TO THE AMOUNT RECOVERED. IF THE AO, ON EXAMIN ATION OF THE EVIDENCE, COMES TO THE CONCLUSION THAT THE RECEIPT IS HIGHER THAN THE AMOUNT SPENT, THEN THE EXCESS IS ALWAYS TAXABLE , NOTWITHSTANDING THE FACT THAT THE ASSESSEE NAMED AN D CLAIMED IT AS REIMBURSEMENT OF EXPENSES. NOT ONLY THE REIMBURS EMENT OF EXPENSES SHOULD BE WITHOUT PROFIT ELEMENT, NO ATTEM PT SHOULD BE MADE TO BIFURCATE THE PRICE OF A CONTRACT INTO DIFF ERENT PARTS WITH THE INTENTION OF AVOIDING TAX BY SLICING AWAY A PAR T OF THE TOTAL CONSIDERATION OF A CONTRACT, WHEN THE TAXATION IS O N GROSS BASIS AS A PERCENTAGE OF CONTRACT VALUE. THE ASSESSEE CAN NOT BE ALLOWED TO SHOW SOME PART OF THE CONTRACT PRICE DIS TINCTLY AS REIMBURSEMENT OF EXPENSES, EVEN WITHOUT ANY MARK-UP , AND HENCE CLAIM EXEMPTION IN THIS REGARD, WHEN INCURRIN G OF EXPENSES FOR WHICH SUCH REIMBURSEMENT IS CLAIMED, ARE TOWARD S THE PERFORMANCE OF CONTRACT 5.3. DIFFERENT CONSEQUENCES FOLLOW IN THE HANDS OF THE PAYER AND PAYEE FOR MAKING A CLAIM OF REIMBURSEMENT OF EXPENS ES HAVING PROFIT ELEMENT; OR TREATING A PART OF CONTRACT VALU E AS REIMBURSEMENT OF EXPENSES EVEN WITHOUT ANY MARK-UP. WHEREAS IN SOME CASES SUCH CLAIM FOR REIMBURSEMENT MAY BE T AX NEUTRAL, WHILE IN OTHERS IT MAY HAVE BEARING ON TAX LIABILIT Y. FROM THE ANGLE OF PAYEE, IT WILL BE TAX NEUTRAL IF THERE IS QUESTION OF 20 WNS COMPUTING BUSINESS PROFITS AS PER ARTICLE 7 BECAUSE OF COMPUTATION OF SUCH INCOME ON NET BASIS. BUT, IT WI LL AFFECT TAX LIABILITY, IF THE TAX IS TO BE COMPUTED AS PER ARTI CLE 12 BY TREATING THE AMOUNT AS ROYALTY OR FEES FOR TECHNICAL SERVICE S WHEREIN THE TAX LIABILITY IS DETERMINED ON THE GROSS AMOUNT ITS ELF. IN THE HANDS OF NON-RESIDENT PAYER, THE CLAIM FOR TREATMEN T OF HEAD OFFICE EXPENDITURE AS REIMBURSEMENT OF EXPENSES SHA LL HAVE BEARING ON THE COMPUTATION OF DEDUCTION OF HEAD OFF ICE EXPENDITURE AS PER SECTION 44C OF THE ACT. IN THE L IKE MANNER, THERE ARE SEVERAL PROVISIONS INCLUDING CHAPTER X, W HICH AFFECT THE AMOUNT OF TOTAL INCOME OR THE TAX LIABILITY BY WRON G TREATMENT OF PAYMENT OF EXPENSES AS REIMBURSEMENT OF EXPENSES. T HE CRUX OF THE MATTER IS THAT THE PAYMENT OF EXPENSES IS TO BE DISTINGUISHED FROM AND NOT INTERMINGLED WITH THE REIMBURSEMENT OF EXPENSES IN THE HANDS OF PAYER AS WELL AS PAYEE. IN FACT, IT IS THE SUBSTANCE OF THE TRANSACTION WHICH MATTERS. THE REAL CHARACTE R OF A TRANSACTION CANNOT BE CLOAKED UNDER SOME SUPERFICIA L NAME. 5.4. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE ASSESSEE UNDERTOOK TO CARRY OUT THE MARKETING AND S ALES PROMOTION ACTIVITIES ON BEHALF OF WNS INDIA BY IDEN TIFYING THE CUSTOMERS AND ESTABLISHING CONTACT; SOLICITING INQU IRIES FROM CLIENTS AND RENDERING SUCH SERVICES AS MAY BE REQUI RED TO PRESENT AND MARKET THE BUSINESS OF WNS INDIA. ON THE OTHER HAND, THE PAYMENT CLAIMED AS REIMBURSEMENT IS ADMITTEDLY FOR THE USE OF INTERNATIONAL TELECOM CONNECTIVITY PAID BY THE ASSE SSEE TO THE INTERNATIONAL TELECOM OPERATORS, FOR TRANSMITTING T HE DATA BY WNS INDIA TO ITS CUSTOMERS LOCATED OUTSIDE INDIA. T HE INTERNATIONAL TELECOM CONNECTIVITY CHARGES ARE NOT RELATED IN ANY MANNER WITH THE RENDERING OF MARKETING AND MANAGEME NT SERVICES. BY NO STANDARD, SUCH A CLAIM FOR REIMBURS EMENT OF EXPENSES CAN BE CONSIDERED AS DIVISION OF THE CONTR ACT PRICE SO AS TO GAIN SOME TAX ADVANTAGE. 5.5. NOW LET US SEE, WHETHER THE CLAIM FOR REIMBURS EMENT OF EXPENSES IN THE HANDS OF THE ASSESSEE IS WITH OR WI THOUT ANY PROFIT COMPONENT. IT GOES WITHOUT SAYING THAT IF RE IMBURSEMENT 21 WNS INCLUDES SOME PROFIT ELEMENT, THEN THE TAX LIABILIT Y CANNOT ESCAPE. IT IS NOTICED THAT THE ASSESSEE MADE A CATE GORICAL CLAIM THAT THE INTERNATIONAL TELECOM CONNECTIVITY CHARGES WERE PAID TO THE INTERNATIONAL TELECOM OPERATORS FOR THE SERVICE S UTILIZED BY WNS INDIA OUTSIDE INDIA AND THE SAME WERE REIMBURSE D BY WNS INDIA WITHOUT ANY MARK UP. THIS CONTENTION WAS RAIS ED NOT ONLY BEFORE THE A.O. BUT THE DRP AS WELL. SUCH CONTENTIO N HAS REMAINED UNCONTROVERTED BY THE AUTHORITIES BELOW. T HIS SHOWS THAT THE ASSESSEE HAS DISCHARGED THE BURDEN CAST UP ON IT TO PROVE THAT THE LEASE LINE CHARGES RECOVERED BY IT F ROM WNS INDIA WERE WITHOUT ANY MARK UP SO AS TO ATTRACT ANY POSSI BLE TAXATION UNDER ARTICLE 7 OF THE DTAA. ONE CAN POSSIBLY CONTE ND THAT SINCE THE AO TAXED THE GROSS AMOUNT OF SUCH REIMBURSEMENT AS ROYALTY, THERE COULD HAVE BEEN NO OCCASION FOR HIM TO DEAL WITH THE CONTENTION OF THE ASSESSEE OF NOT HAVING EARNED ANY PROFIT IN SUCH REIMBURSEMENT TO FIND OUT AND THUS TAX SUCH PR OFIT ELEMENT FROM SUCH REIMBURSEMENT. HOWEVER, AN IMPORTANT FACT OR WHICH HAS PERSUADED US TO HOLD THAT THERE IS NO MARK UP I N SUCH REIMBURSEMENT IN THE PRESENT CASE IS THAT THE ASSES SING OFFICER FOLLOWED THE VIEW TAKEN BY HIM IN EARLIER YEAR ON T HIS ISSUE. WHEN HIS ORDER FOR THE EARLIER YEAR CAME UP FOR ADJ UDICATION BEFORE THE TRIBUNAL, A CATEGORICAL FINDING HAS BEEN RECORDED BY THE TRIBUNAL THAT THERE IS NO MARK UP IN REIMBURSEM ENT OF LEASE LINE CHARGES. THERE IS NOTHING ON RECORD TO SHOW TH AT EITHER THE FACTS OF THE CURRENT YEAR ARE DIFFERENT FROM THOSE OF THE PRECEDING YEAR OR THE VIEW TAKEN BY THE TRIBUNAL HA S BEEN MODIFIED OR REVERSED BY THE HONBLE HIGH COURT ON T HIS ISSUE. FURTHER, THERE IS NOTHING TO DEMONSTRATE THAT THE R EVENUE PREFERRED ANY MISCELLANEOUS APPLICATION AGAINST SUC H ORDER, IF IT WAS CONVINCED THAT THE FINDING OF THE TRIBUNAL FOR WAS INCORRECT. IN VIEW OF THESE FACTS, WE ARE NOT INCLINED TO ACCE PT THE CONTENTION OF THE LD. DR FOR REMITTING THE MATTER T O THE FILE OF AO FOR VERIFYING IF THERE IS ANY PROFIT ELEMENT IN SUC H REIMBURSEMENT AND THEN DETERMINE TAX LIABILITY ACCORDINGLY. ONCE IT IS HELD THAT THERE IS NO PROFIT ELEMENT IN SUCH REIMBURSEMENT, I T BECOMES 22 WNS MANIFEST THAT THE GROSS INCOME OF RS.6.14 CRORE REC OVERED BY THE ASSESSEE FROM WNS INDIA IS EQUAL TO THE SAME AMOUNT PAID BY IT TO MCI WORLDCOM ETC., THEREBY LEAVING NO SURPLUS LI ABLE TO TAX UNDER ARTICLE 7 OF THE DTAA. THIS ISSUE IS DECIDED IN ASSESSEES FAVOUR AND THE CONSEQUENTIAL GROUND IS ALLOWED. 9. IT IS FURTHER NOTED BY US THAT THIS JUDGMENT HAS BE EN SUBSEQUENTLY FOLLOWED BY TRIBUNAL IN A.Y. 2007-08. IT IS ALSO NOTED BY US THAT ORDERS FOR A.Y 2003-04, 2004-05, 2 005-06 AND 2006-07 REACHED BEFORE THE HONBLE BOMBAY HIGH COURT WHEREIN THE ORDERS OF THE TRIBUNAL HAVE BEEN CONFIR MED. 10. IT HAS BEEN FURTHER BROUGHT TO OUR NOTICE BY THE L D. COUNSEL THAT THE DISPUTE RESOLUTION PANEL (DRP) HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN A.Y S 2010-121, 2011-12 AND 2012-13. IT IS NOTED THAT THE ORDER OF THE DRP FOR A.Y. 2012-13 DATED 26-08-2015 READS AS FOLLOWS: 6. THE ASSESSEES SUBMISSIONS HAVE BEEN CONSIDERED. A REFERENCE TO THE DECISIONS PASSED IN ASSESSEES OWN CASE BY THE MUMBAI ITAT FOR A.YS 2005-06 AND 2006-07 AND THE DECISION OF THE BOMBAY HIGH COURT AFFIRMING THE DECISION OF THE ITAT FOR A.YRS 2003-04 AND 2004-05 CLEARLY SHOWS THAT THE IMPUGNED AMOUNTS HAVE BEEN TREATED AS PURE REIMBURSEMENT NOT LIABLE TO TAX IN INDIA. THE ITAT HAS ALSO HELD THAT THE IMPUGNED SUMS ARE NOT IN THE NATURE OF ROYALTY AS THEY DO NOT PERMIT THE USE OF OR RIGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTIFI C EQUIPMENT. RESPECTFULLY FOLLOWING THE VARIOUS DECISIONS IN ASSESSEES OWN CASE RENDERED BY THE HON'BLE ITAT AND HON'BLE BOMBAY HIGH COURT AND THE ORDER OF THE DRP FOR A.Y. 2010-11 & 2011-12 WHEREIN IT WAS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSE E ON ACCOUNT OF LEASE LINE CHARGES ARE IN THE NATURE OF REIMBURSEMENT AND THE SAME IS NEITHER TAXABLE AS ROYALTY NOR AS ANY INCOME OF THE ASSESSEE, HOWEVER, 23 WNS THE AO IS DIRECTED TO DELETE THE PROPOSED ADDITION TO ASSESSEES INCOME. 11. SIMILAR DIRECTIONS HAVE BEEN GIVEN BY DRP IN OTHER YEARS ALSO. THUS, IT IS FOUND THAT THIS ISSUE IS SETTLED AND COVERED IN FAVOUR OF THE ASSESSEE AS ON DATE. ALL THE ARGU MENTS HAVE BEEN CONSIDERED BY THE TRIBUNAL AND THE ORDERS OF T HE TRIBUNAL HAVE BEEN ACCEPTED BY THE HON'BLE BOMBAY H IGH COURT. THE DRP HAS ALSO IN SUBSEQUENT YEARS DECIDE D THIS ISSUE IN FAVOUR OF THE ASSESSEE. THUS, IT IS HELD THAT THE IMPUGNED AMOUNT IS NOT TAXABLE AS ROYALTY IN THE HA NDS OF THE ASSESSEE. GROUNDS 1 & 2 ARE ALLOWED. 12. GROUNDS 3 & 4: IN THESE GROUNDS, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMI NG THE ACTION OF THE AO IN TAXING RECEIPT OF REIMBURSEMENT OF OTHER EXPENSES AS FEE FOR TECHNICAL SERVICES. 13. THE BRIEF FACTS ARE THAT AO WAS OF THE VIEW THAT REIMBURSEMENT OF EXPENSES WAS IN RESPECT OF SERVICE S RENDERED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRI SES, VIZ. WNS INDIA & WNS MORTGAGE SERVICE PVT. LTD (WNSMS) A ND THEREFORE, IT WAS NOT FEASIBLE TO BELIEVE THAT THES E SERVICES WERE RENDERED WITHOUT ANY CONSIDERATION. UNDER THE SE CIRCUMSTANCES, IT WAS HELD BY AO THAT THE ASSESSEE HAD MADE AVAILABLE SPECIALISED KNOWLEDGE, ETC. TO THESE ASSO CIATED ENTERPRISES AND, THEREFORE, REIMBURSEMENT OF THE EX PENSES WAS HELD TAXABLE AS FIS UNDER ARTICLE 12 OF INDO-US DTAA. 14. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE CIT(A) AND SUBMITTED THAT VARIOUS DETAILS WERE NOT FURNISHED BY THE ASSESSEE TO THE AO DURING THE COURSE OF ASSE SSMENT 24 WNS PROCEEDINGS TO CLARIFY THE NATURE OF THE TRANSACTIO N. THE ASSESSEE HAD SUBMITTED VARIOUS DETAILS / SUPPORTING DEBIT NOTES TO SUBSTANTIATE ITS CLAIM THAT THESE RECEIPTS WERE PURE REIMBURSEMENT OF EXPENSES WITHOUT ANY MARK UP. IT WAS SUBMITTED THAT SINCE THE REIMBURSEMENT WAS PURELY A T COST AND DID NOT INCLUDE ANY PROFIT ELEMENT, THEREFORE, THE RECEIPT THEREOF SHOULD NOT BE TAXED IN ITS HANDS. THE ASSESSEE RELIED UPON VARIOUS JUDGMENTS IN ITS FAVOU R FOR THIS PROPOSITION AND ALSO PLACED RELIANCE ON THE INDO-US DTAA IN SUPPORT OF ITS CONTENTION THAT REIMBURSEMENT OF EXP ENSES RECEIVED BY IT WERE NOT IN THE NATURE OF FIS TAXABL E UNDER ARTICLE 12 OF THE TREATY AS THESE WERE NEITHER TOWA RDS PROVIDING ANY TECHNICAL SERVICES NOR THEY MADE AVAI LABLE ANY TECHNICAL KNOWLEDGE, SKILL, EXPERIENCE, ETC. 15. THE ASSESSEE ALSO SUBMITTED THAT EVEN ASSUMING, WITHOUT ADMITTING, THE PAYMENT RECEIVED BY THE ASSE SSEE WAS IN THE NATURE OF ROYALTY OR FIS UNDER THE ACT, THE SAME WOULD STILL FALL OUTSIDE THE PURVIEW OF ROYALTY AND FIS I N VIEW OF SPECIFIC EXCLUSION PROVIDED IN SECTION 9(1)(VI)(B) AND SECTION 9(1)(VII)(B) OF THE ACT. BUT THE LD. CIT(A) DID NO T AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND DISMISSED THESE GROUNDS BY OBSERVING AS UNDER: 4.7 I HAVE PERUSED THE DETAILS, INVOICES AND DEBIT NOTES ENCLOSED WITH THE PAPER BOOKS FILED BY THE APPELLANT DURING THE COURSE OF THE HEARINGS. THE DETAILS OF EXPENSES INVOLVE: TRAVEL EXPENSES: RS 7,67,54,621/- COMPUTER AND SOFTWARE MAINTENANCE AMC: RS 45,78,869/- 25 WNS COMMUNICATION CHARGES: RS 91,07,356/- PRINTING & POSTAGE: RS 2,80,68,578/- MEMBERSHIP & SUBSCRIPTION: RS 12,75,819/- PROFESSIONAL CHARGES: RS 54,70,959/- MISCELLANEOUS EXPENSES: RS 38,06,480/- STAFF WELFARE: RS 851,138/- 4.8 IT IS OBSERVED THAT THE INVOICES PRODUCED BY TH E APPELLANT FOR REIMBURSEMENT OF EXPENSES INVOLVE PAYMENTS AS ABOVE. HOWEVER, IT HAS NOT BEEN SHOWN THAT ALL THESE EXPENSES HAVE ACTUALLY BEEN INCURRED BY THE INDIAN COMPANY AND PAID BY APPELLANT FOR AND ON BEHALF OF TILE INDIAN COMPANY. MOREOVER, THE INDIAN COMPANY DOES NOT HAVE ANY SET UP ABROAD. SO, IT IS NOT EXPLAINED HOW COMPUTER AND SOFTWARE MAINTENANCE EXPENSES ARE INCURRED WITHOUT ANY ASSETS OVERSEAS. SIMILARLY OTHER EXPENSES ALSO ARE NOT SUBSTANTIATED. HENCE, THE ORDER OF THE AO IS UPHELD AND GROUND NO. 2 IS DISMISSED. 16. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. DURING THE COURSE OF HEARING IT HAS BEEN SUBMITTED BY THE LD. COUNSEL THAT THIS ISSUE IS ALSO COVERED IN ITS FAVO UR. IT WAS SUBMITTED THAT THE ITAT IN EARLIER YEARS HAD SENT T HIS ISSUE BACK BECAUSE THE DETAILS WERE NOT MADE AVAILABLE AT THAT TIME AND, THEREFORE, FOR PROPER EXAMINATION OF FACT S, THIS ISSUE WAS SENT BACK. BUT SUBSEQUENTLY, IN ALL THE YEARS, THE DRP ACCEPTED THE CLAIM OF THE ASSESSEE BECAUSE THE DETAILS WERE FILED. IN SUPPORT OF ITS CONTENTION, THE LD. COUNSEL PLACED BEFORE US ORDER OF THE DRP FOR A.Y. 2012-13 DATED 26- 08-2015. 17. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL FO R EARLIER YEARS. WE FIND IT RELEVANT TO REPRODUCE THE DIRECT IONS OF THE 26 WNS DRP FROM ITS ORDER DATED 26-08-2015 BELOW:- THE OBJECTION NO:2 IS AGAINST TI1E TREATMENT GIVEN BY THE AO TO A SUM OF RS.17.71,35.633/- BEING REIMBURSEMENT OF EXPENSES RECEIVED FROM VARIOUS WNS GROUP COMPANIES IN INDIA. THE AO HAS TREATED THIS SUM AS FEE FOR INCLUDED SERVICES AND BROUGHT THE SAME TO TAX UNDER ARTICLE 12(4) OF THE INDIA US A DTAA. THE ASSESSEE HAS, EXPLAINED THAT DURING THE P . Y VARIOUS EMPLOYEES OF WNS GROUP COMPANIES SITUATED IN INDIA VISITED US FROM TIME TO TIME AND EXPENSES OF THEIR TRAVEL, ACCOMMODATION, COMPUTER MAINTENANCE, TELECOMMUNICATION CHARGES, PRINTING AND STATIONERY, TELEPHONE EXPENSES ETC WERE INCURRED OUTSIDE INDIA ON BEHALF OF THESE EMPLOYEES . THE ASSESSEE HAS EXPLAINED THAT THE EXPENSES WERE INITIALLY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY RECOVERED FROM THESE WNS GROUP COMPANIES IN INDIA. IT IS SUBMITTED BY THE ASSESSEE THAT THESE ARE PURE LY IN THE NATURE OF REIMBURSEMENT OF COST WITHOUT ANY MARK-UP AND HENCE THEY DO NOT CONSTITUTE INCOME IN THE HANDS OF THE ASSESSEE. THE AO HOWEVER HAS HELD THESE AMOUNTS AS FIS UNDER THE LNDO USA DTAA AND BROUGHT THE SAME TO TAX IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED THAT THE TRANSACTIONS DID NOT AMOUNT TO FIS AS NO KNOWLEDGE SKILI OR EXPERIENCE WAS MADE AVAILABLE BY THE ASSESSEE TO THE INDIAN COMPANIES FOR WHICH THE PAYMENT WAS RECEIVED. IN THIS CONNECTION, THE ASSESSEE HERS PLACED RELIANCE UPON VARIOUS DECISION OF THE HON'BLE ITAT WHICH HAS EXPLAINED THE SCOPE O F FIS UNDER ARTICLE 1 2 OF THE INDO USA DTAA. DIRECTIONS OF DRP: 8. LDENTICAL ISSUE AROSE IN ASSESSEE'S OWN CASE FOR LAST YEAR. RESPECTFULLY FOLLOWING THE DECISION OF DRP DATED 08.12.2014 FOR A.Y.2011-12THE AO IS DIRECTED NOT TO TAX THE IMPUGNED SUM AS FIS. 18. IT IS NOTED THAT IN EARLIER YEARS THIS ISSUE HAS B EEN SENT 27 WNS BACK TO THE FILE OF THE AO FOR VERIFICATION OF FACT S. IN A.Y. 2007-08, THE TRIBUNAL HELD AS UNDER: 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL THE CITED ORDER OF THE TRIBUNAL (SUPRA) AND THE RELEVAN T MATERIAL PLACED BEFORE US. AFTER HEARING BOTH THE PARTIES, WE FIND, THE SIMILAR ISSUE WAS RAISED BEFO RE THE ITAT AND THE TRIBUNAL ADJUDICATED THE SAME VIDE PARAS 6.1 AND 6.2 OF ITS ORDER DATED 14.12.2012 (SUPRA). FOR THE SAKE OF COMPLETENESS OF THIS ORDE R, THE SAID PARAS 6.1 AND 6.2 ARE REPRODUCED HEREUNDER : 6.1 NEXT ISSUE RAISED IN THIS APPEAL AGAINST TAXABILITY OF REIMBURSEMENT OF OTHER EXPENSES AMOUNTING TO RS.4,10,70,798/- FROM WNS INDIA. THIS AMOUNT REPRESENTS REIMBURSEMENT OF EXPENSES INCURRED ON EMPLOYEES OF WNS INDIA ON THEIR VISITS ABROAD. THE ASSESSEE CLAIMED THAT SINCE THESE AMOUNTS WERE PURE REIMBURSEMENT AND HENCE NOT TAXABLE. THE AO HELD SUCH AMOUNTS TAXABLE UNDER ARTICLE 12 AS FEES FOR INCLUDED SERVICES. 6.2 HAVING HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE AND PERUSED THE RELEVANT MATERIAL ON RECORD, IT IS THE COMMON SUBMISSION BY BOTH THE SIDES THAT SIMILAR ISSUE WAS INVOLVED IN THE APPEAL FOR SOME OTHER YEARS AND THE TRIBUNAL HAS RESTORED THIS MATTER TO THE LOWER AUTHORITIES FOR DECIDING IT AFRESH AFTER VERIFYING THE RELEVANT DETAILS. AS THE ISSUE STANDS COVERED BY THE EARLIER ORDER OF THE TRIBUNAL, TO WHICH BOTH THE SIDES ARE AGREEABLE, WE SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF AO FOR DECIDING IT AFRESH AS PER THE LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 12. CONSIDERING THE SIMILARITY OF THE ISSUE INVOLVE D IN THE INSTANT GROUNDS WITH THAT OF THE ISSUE DECID ED BY THE TRIBUNAL (SUPRA), WE ARE OF THE OPINION THAT THE GROUND NOS.3 AND 4 OF THE PRESENT APPEAL SHOULD 28 WNS BE SET ASIDE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH IN THE SAME LINES AS PER THE SAID TRIBUNALS ORDER (SUPRA) AFTER AFFORDING A REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NOS.3 AND 4 ARE ALLOWED FOR STATISTICAL PURPOSES. 19. DURING THE COURSE OF HEARING, THE LD. COUNSEL FAIR LY STATED THAT IN THIS YEAR ALSO THE ISSUE MAY BE SENT BACK TO THE FILE OF THE AO WITH THE SAME DIRECTIONS AS HAVE BEEN GIVEN FOR THE EARLIER YEARS. THEREFORE, WE SEND TH IS ISSUE BACK TO THE FILE OF THE AO. THE AO AS WELL AS THE ASSESSEE SHALL FOLLOW THE ORDER OF THE TRIBUNAL FOR EARLIER YEARS. THE AO SHALL ALSO KEEP IN MIND THE DIRECTIONS GIVEN BY THE DRP IN OTHER YEARS. THUS, WITH THESE DIRECTIONS, GROUNDS 3 & 4 ARE SENT BACK TO THE FILE OF THE AO. 20. GROUNDS 5 & 6: IN THESE GROUNDS THE ASSESSEE CHALLENGED THE LEVY OF INTEREST U/S 234B OF THE ACT . 21. DURING THE COURSE OF HEARING BOTH THE PARTIES JOINT LY STATED THAT THIS ISSUE STANDS COVERED AS ON DATE WI TH THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (IT) VS NGC NETWORK ASIA LLC. 313 ITR 187 (BOM). I T WAS SUBMITTED THAT THE ASSESSEE IS A NON-RESIDENT AND T HAT THE ENTIRE INCOME OF THE ASSESSEE WAS LIABLE FOR DEDUCT ION OF TAX AT SOURCE AND, THEREFORE, NO INTEREST WAS CHARGEABL E U/S 234B. OUR ATTENTION WAS ALSO DRAWN UPON TRIBUNALS ORDER OF AY 2006-07, WHEREIN THIS ISSUE DECIDED AS UNDER: 7. THE LAST ISSUE IS ABOUT THE LEVY OF INTEREST U/ SS 234B AND 234C. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD WE FIND THAT THE ISSUE OF CHARGING OF 29 WNS INTEREST U/SS 234B AND 234C IN THE PRESENT CASE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERN ATIONAL TAXATION) V. NGC NETWORK ASIA LLC [(2009) 313 ITR 1 87 (BOM.)] IN WHICH IT HAS BEEN HELD THAT WHEN THE DUTY IS CAST O N THE PAYER TO DEDUCT TAX AT SOURCE, ON FAILURE OF THE PAYER TO DO SO, NO INTEREST CAN BE CHARGED FROM THE PAYEE ASSESSEE U/S 234B. TH E SAME VIEW HAS BEEN REITERATED IN DIT (IT) V. KRUPP UDHE GMBH [(2010) 38 DTR (BOM.) 251]. AS THE ASSESSEE BEFORE US IS A NON-RESIDENT, NATURALLY ANY AMOUNT PAYABLE TO IT WHICH IS CHARGEA BLE TO TAX UNDER THE ACT, IS OTHERWISE LIABLE FOR DEDUCTION OF TAX AT SOURCE. IN THAT VIEW OF THE MATTER AND RESPECTFULLY FOLLOWI NG THE ABOVE PRECEDENTS, WE HOLD THAT NO INTEREST CAN BE CHARGED U/SS 234B AND 234C OF THE ACT. THIS GROUND IS ALLOWED. 22. IN VIEW OF THE AFORESAID JUDGMENT OF HON'BLE BOMBA Y HIGH COURT, WE DECIDE THIS ISSUE IN FAVOUR OF THE A SSESSEE AND THE AO IS DIRECTED NOT TO LEVY INTEREST U/S 234 B OF THE ACT. THUS, GROUNDS 5 & ARE ALLOWED. AS A RESULT, THIS APPEAL IS PARTLY ALLOWED. 23. NOW WE SHALL TAKE UP THE REVENUES APPEAL IN TH E CASE OF WNS NORTH AMERICA INC FOR A.Y. 2009-10 IN ITA NO. 1407/MUM/2014: 24. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER PASSED BY DRP DATED 19-12-2013 U/S 144C (5) AS WELL AS FIN AL ORDER PASSED BY THE AO DATED 31-12-2013 U/S 144C (13) R.W.S. 143(3) OF THE ACT ON THE FOLLOWING GROUNDS:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP ERRED IN HOLDING THAT THE RECEIPT OF REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES AMOUNTING TO RS.11,54,41,385/- DOES NOT QUALIFY AS 'ROYALTY' UNDER ARTICLE 12(3)(B) OF THE INDIA USA DTAA. 30 WNS EVEN WHILE ASSUMING THE ARGUMENT SAKE WITHOUT ADMITTING THAT THE RECEIPTS OF RS. 11,54,41,385/- DOES NOT QUALIFY AS 'ROYALTY' UNDER ARTICLE 12OF IN DIA USA DTAA, THE SAME WOULD BE LIABLE TO BE TAXED AS BUSINESS PROFIT UNDER ARTICLE 7 READ WITH ARTICLE 5 OF INDIA USA DTAA IN VIEW OF THE FORCE OF ATTRACTION RULE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE DRP ERRED IN HOLDING THAT T HE RECEIPT OF REIMBURSEMENT OF EXPENSES AMOUNTING TO RS. 11,56,81,547/- DOES NOT QUALIFY AS FIS UNDER ARTICLE 12 (4)(B) OF THE INDIA-USA DTAA. EVEN WHILE ASSUMING FOR THE ARGUMENT SAKE WITHOUT ADMITTING THAT THE RECEIPTS OF SAME DOES NOT QUALIF Y AS 'FIS' UNDER ARTICLE 12 (4) (B) OF INDIA USA DTAA , THE SAME WOULD BE LIABLE TO BE TAXED AS BUSINESS PROFIT UNDER ARTICLE 7 READ WITH ARTICLE 5 OF INDIA USA DTAA IN VIEW OF THE FORCE OF ATTRACTION RULE.' 3.'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DRP HAS ERRED IN DIRECTING THE AO NOT TO CHARGE THE INTEREST U/S.234B BY RELYING O N JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF DIT (IT) V/S. NGC NETWORK ASIA LLC, 222 ITR 86 (BOM) EVEN THOUGH THE DECISION RELIED ON IS NOT APPLICABL E IN THE PRESENT CASE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE DRP BE SET ASIDE ON THE ABOVE GROUNDS AND THE DRAFT ORDER OF THE ASSESSING OFFICER BE RESTORED. 25. GROUND 1: IN THIS GROUND, THE REVENUE HAS CHALLENGED THE ACTION OF THE DRP IN HOLDING THAT RECEIPT OF REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES DOES NOT QUALIFY AS ROYALTY UNDER ARTICLE 12(3)(B) OF THE INDO US DTAA NOR THE SAME WOULD BE LIABLE TO TAX AS BUSI NESS PROFIT UNDER ARTICLE 7 R.W. ARTICLE 5 OF THE TREATY IN VIEW OF THE FORCE OF ATTRACTION RULE. IT IS NOTED THAT WIT H REGARD TO THE ACTION OF AO PROPOSING TO TREAT THE IMPUGNED AM OUNT AS 31 WNS ROYALTY, THE DRP GAVE FOLLOWING DIRECTIONS:- 7. DIRECTIONS OF THE DRP THE ASSESSEES SUBMISSIONS HAVE BEEN CONSIDERED AND THE VARIOUS DOCUMENTS SUBMITTED BY IT IN THE COURSE OF THE DRP HEARING HAVE BEEN PERUSED. ON EXAMINATION OF THE VARIOUS INVOICES AND THE DEBIT NOTES THAT HAVE BEEN SUBMITTED BY THE ASSESSEE IN RESPECT OF THE LEASE LINE CHARGES, IT IS EVIDENT TH AT THE SAME IS IN THE NATURE OF REIMBURSEMENT WITHOUT ANY MARK UP INVOLVED THEREIN. A REFERENCE TO THE DECISIONS PASSED IN ASSESSEES OWN CASE BY THE MUMBAI ITAT FOR A.YRS.2005-06 AND 2006-07 AND THE DECISION OF THE BOMBAY HIGH COURT AFFIRMING THE DECISION OF THE ITAT FOR A.YRS.2003-04 AND 2004-05 CLEARLY SHOWS THAT THE IMPUGNED AMOUNTS HAVE BEEN TREATED AS PURE REIMBURSEMENT NOT LIABLE TO TAX IN INDIA. THE ITAT HAS ALSO HELD THAT THE IMPUGNED SUM S ARE NOT IN THE NATURE OF ROYALTY AS THEY DO NOT PERMIT THE USE OF OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. RESPECTFULLY FOLLOWING THE VARIOUS DECISIONS IN ASSESSEE'S OWN CASE, RENDERED BY THE HON'BLE ITAT AND BOMBAY HIGH COURT, IT IS HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF LEASE LINE CHARGES ARE IN TH E NATURE OF REIMBURSEMENT AND THE SAME IS NEITHER TAXABLE AS ROYALTY NOR AS ANY INCOME OF THE ASSESSE E. THE AO IS HENCE DIRECTED TO DELETE THE PROPOSED ADDITION TO ASSESSEE'S INCOME. 26. SIMILARLY, WITH REGARD TO THE ACTION OF THE AO FOR BRINGING TO TAX THE AFORESAID AMOUNT AS BUSINESS PR OFIT ATTRIBUTABLE TO SERVICE PE OF ASSESSEE IN INDIA ON A WITHOUT PREJUDICE BASIS, THE DIRECTION OF DRP WAS AS UNDER: - 9. DIRECTIONS OF THE DRP: THE ASSESSEE'S CONTENTION HAS BEEN CONSIDERED AND IT IS OBVIOUS THAT THE AMOUNT RECEIVED ON ACCOUNT O F REIMBURSEMENT OF LEASE LINE CHARGES DO NOT HAVE ANY 32 WNS NEXUS WITH THE AMOUNTS RECEIVED BY THE ASSESSEE ON ACCOUNT OF MANAGERIAL SERVICES PROVIDED BY ITS EMPLOYEES TO WNS INDIA. FURTHER EVEN IF THE IMPUGNED AMOUNT IS HELD TO BE ATTRIBUTABLE TO THE SERVICE' PE, ONLY THE NET AMOUNT IS CHARGEABLE TO T AX UNDER ARTICLE 7. AS THE AMOUNT PAID AND AMOUNT RECEIVED BY THE ASSESSEE ARE THE SAME (I.E THERE IS NO MARK UP) THE AMOUNT TAXABLE IS NIL. UNDER THESE CIRCUMSTANCES, THE ASSESSEE'S CONTENTION IN THIS REGARD IS ACCEPTED. RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT IN ASSESSEE OWN CASE FOR A.Y.2006-07, THE AO ISSUED NOT TO TAX THE IMPUGNED AMOUNT AS INCOME ATTRIBUTABLE TO THE SERVICE PE. 27. THUS, FROM THE ABOVE, IT IS NOTED THAT ON BOTH THE ISSUES, THE TRIBUNAL HAS ALREADY GIVEN ITS JUDGEMENT WHICH HAVE BEEN CONFIRMED BY THE HON'BLE BOMBAY HIGH COURT. B OTH THE PARTIES UNANIMOUSLY AGREED THAT THERE IS NO CHANGE IN FACTS OR LEGAL POSITION. UNDER THESE CIRCUMSTANCES, THIS GROUND HAS ALREADY BEEN DECIDED BY US IN FAVOUR OF THE ASS ESSEE IN A.Y. 2008-09. THUS, RESPECTFULLY FOLLOWING THE ORD ER OF THE TRIBUNAL FOR EARLIER YEARS AND HON'BLE BOMBAY HIGH COURT AS WELL AS OUR ORDER FOR A.Y. 2008-09, WE FIND THAT TH ERE IS NO MERIT IN GROUND NO.1 RAISED BY THE REVENUE, AND TH EREFORE, SAME IS HEREBY DISMISSED. 28. GROUND 2: IN THIS GROUND, THE REVENUE HAS CHALLENGED ACTION OF DRP IN HOLDING THAT RECEIPT OF REIMBURSEM ENT OF EXPENSES AMOUNTING TO RS.11,56,81,547 DOES NOT QUAL IFY AS FIS UNDER ARTICLE 12(4)(B) OF INDO US DTAA AND FURT HER ERRED IN HOLDING THAT THE SAME WAS NOT LIABLE TO BE TAXED AS BUSINESS PROFIT UNDER ARTICLE 7 READ WITH ARTICLE 5 OF THE TREATY IN VIEW OF FORCE OF ATTRACTION RULE ON WITHO UT 33 WNS PREJUDICE BASIS. IT IS NOTED THAT WITH REGARD TO T HE TREATMENT OF THE AFORESAID AMOUNT AS FIS / FTS, THE DRP ISSUE D FOLLOWING DIRECTIONS: 12. DIRECTIONS OF DRP: THE ASSESSEE'S SUBMISSION AND THE VARIOUS DOCUMENTARY EVIDENCES PERTAINING TO THE REIMBURSEMENTS HAVE BEEN EXAMINED. FROM THE DOCUMENTS IT IS EVIDENT THAT THESE EXPENSES ARE IN THE NATURE OF TRAVEL EXPENSES INCURRED ON ACCOUNT O F ACCOMMODATION TELECOMMUNICATION CHARGES, PRINTING AND STATIONERY ETC. THERE IS NO ELEMENT OF ANY MARK UP OR INCOME 'EMBEDDED IN THESE ITEMS AND THESE ARE PURELY IN THE NATURE OF COST AS EVIDENT FROM THE INVOICES PRODUCED BEFORE THE DRP. FURTHER FROM THES E DOCUMENTS IT IS ALSO SEEN THAT NO KNOWLEDGE, SKILL OR EXPERIENCE HAS BEEN MADE AVAILABLE BY THE ASSESSEE UNDER THE IMPUGNED PAYMENTS. HENCE THE ASSESSEE'S ARGUMENTS THAT THE IMPUGNED PAYMENTS ARE PURELY IN THE NATURE OF REIMBURSEMENT OF ACTUAL COST WITHOUT ANY MARK UP IS ACCEPTED AS EVIDENT FROM THE RECORDS . ALSO THE ASSESSEE'S ARGUMENT THAT THE AMOUNTS ARE NOT IN THE NATURE OF FTS IS ALSO CORRECT AS THERE I S NO EVIDENCE OF ANY KNOWLEDGE, SKILL OR EXPERIENCE THAT IS MADE AVAILABLE BY THE ASSESSEE UNDER THE IMPUGNED PAYMENTS. HENCE, THE AO IS DIRECTED NOT TO THE TAX THE IMPUGNED AMOUNT WHICH ARE PURELY IN THE NATURE OF REIMBURSEMENT AS FTS. 29. SIMILARLY WITH REGARD TO ALTERNATIVE ARGUMENT OF TH E ASSESSEE THAT IT SHOULD BE TAXED AS BUSINESS PROFIT S UNDER ARTICLE 7 READ WITH ARTICLE 5 OF THE TREAT, THE DRP GAVE FOLLOWING DIRECTIONS:- DIRECTIONS OF DRP: AFTER EXAMINATION OF THE VARIOUS DOCUMENTS FURNISHED IN RESPECT OF THESE EXPENSES IT IS EVIDEN T THAT THERE IS NO INCOME ELEMENT INVOLVED IN THESE 34 WNS AMOUNTS. THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE IS PURELY ON ACCOUNT OF ACTUAL COSTS INCURRED BY IT ON BEHALF OF THE INDIAN COMPANIES. HENCE, IF EVEN ANY AMOUNT IS TO BE REGARDED AS ATTRIBUTABLE TO THE SERVICE PE AS THERE IS NO INCOME ELEMENT INVOLVED THEREIN, THE NET INCOME THAT CAN BE ATTRIBUTED TO T HE SERVICE PE WILL BE NIL. HENCE, THE AO IS DIRECTED N OT TO TAX ANY AMOUNT AS INCOME ATTRIBUTABLE TO THE SERVICE PE. 30. DURING THE COURSE OF HEARING BEFORE US, IT WAS SUBMITTED BY THE LD. COUNSEL THAT FAIRLY SPEAKING, IN THE EARLIER YEARS REQUISITE DETAILS WERE NOT ON RECORD AND THAT IS WHY BOTH THE ABOVE ISSUES ARISING IN THIS GROUND PE RTAINING TO TAXABILITY OF REIMBURSEMENT OF EXPENSES RECEIVED BY THE ASSESSEE HAD TO BE SENT BACK TO THE FILE OF AO FOR ASCERTAINING THE NATURE OF EXPENSES AND OTHER ALLIE D FACTS, BUT IN THIS YEAR, COMPLETE DETAILS AND OTHER ALLIED FACTS ARE AVAILABLE IN THIS REGARD WHICH WERE DULY VERIFIED B Y DRP AND AFTER THAT FACTUAL FINDINGS WERE RECORDED BY THE DR P THAT IT WAS A CASE OF PURE REIMBURSEMENT OF EXPENSES ON COS T TO COST BASIS AND THERE WAS NO INVOLVEMENT OF ANY PROF IT ELEMENT OR MARK UP. 31. THESE FACTS WERE NOT CONTROVERTED BY THE LD. DR. UNDER THESE CIRCUMSTANCES, WE HAVE NO OTHER OPTION BUT TO UPHOLD THE FINDINGS OF THE DRP THAT SINCE THERE WAS NO ELE MENT OF ANY MARK UP- OR INCOME EMBEDDED IN THESE ITEMS AND ALSO IN ABSENCE OF ANY EVIDENCE OF KNOWLEDGE, SKILL OR EXPE RIENCE HAVING BEEN MADE AVAILABLE BY THE ASSESSEE UNDER TH E IMPUGNED PAYMENTS, THE SAME WAS NEITHER LIABLE TO B E TAXED 35 WNS AS FTS / FIS NOR AS PROFIT ATTRIBUTABLE TO THE SERV ICE FEE. IT WAS STATED BY THE LD. COUNSEL THAT EVEN IF ANY AMOU NT WAS TO BE REGARDED AS ATTRIBUTABLE TO SERVICE FEE, THE NET INCOME THAT COULD BE ATTRIBUTED TO THE SERVICE FEE WOULD B E NIL AS THERE WAS NO INCOME ELEMENT INVOLVED THEREIN. THIS SUBMISSION WAS NOT CONTROVERTED BY THE LD. DR. UND ER THESE CIRCUMSTANCES, WE DO NOT FIND ANY FORCE IN THE GROU NDS RAISED BY THE REVENUE AND, THEREFORE, GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 32. GROUND 3: DEALS WITH CHARGING OF INTEREST U/S 234B. IT WAS JOINTLY STATED THAT THIS ISSUE STANDS COVERED I N FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (IT) VS NGC NETWORK ASIA LLC. 31 3 ITR 187 (BOM). WE HAVE ALREADY DECIDED THIS ISSUE IN FAVOU R OF THE ASSESSEE RELYING UPON THE AFORESAID JUDGMENT. ACCO RDINGLY, THIS GROUND IS DISMISSED. 33. GROUNDS 4 & 5 ARE GENERAL AND DO NOT NEED ANY SPECIFIC ADJUDICATION AND, THEREFORE, DISMISSED. 34. AS A RESULT, REVENUES APPEAL IS DISMISSED. 35. NOW WE SHALL TAKE UP REVENUES APPEAL IN THE CA SE OF WNS NORTH AMERICA INC. IN ITA NO.1408/MUM/2014 FOR A.Y. 2010-11 FILED WITH FOLLOWING GROUNDS OF APPEAL:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP ERRED IN HOLDING THAT THE RECEIPT OF REIMBURSEMENT OF INTERNATIONAL TELECOM CONNECTIVITY CHARGES AMOUNTING TO RS.10,62,04,649/- DOES NOT QUALIFY AS 'ROYALTY' UNDER ARTICLE 12(3)(B) OF THE INDIA USA DT AA. 36 WNS EVEN WHILE ASSUMING THE ARGUMENT SAKE WITHOUT ADMITTING THAT THE RECEIPTS OF RS. 10,62,04,649/- DOES NOT QUALIFY AS 'ROYALTY' UNDER ARTICLE 12 OF I NDIA USA DTAA, THE SAME WOULD BE LIABLE TO BE TAXED AS BUSINESS PROFIT UNDER ARTICLE 7 READ WITH ARTICLE 5 OF INDIA USA DTAA IN VIEW OF THE FORCE OF ATTRACTION RULE.' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE DRP ERRED IN HOLDING THAT T HE RECEIPT OF REIMBURSEMENT OF EXPENSES AMOUNTING TO RS. 6,00,94,204/- DOES NOT QUALIFY AS FIS UNDER ARTICLE 12 (4)(B) OF THE INDIA-USA DTAA. EVEN WHILE ASSUMING FOR THE ARGUMENT SAKE WITHOUT ADMITTING THAT THE RECEIPTS OF SAME DOES NOT QUALIF Y AS 'FIS' UNDER ARTICLE 12 (4) (B) OF INDIA USA DTAA , THE SAME WOULD BE LIABLE TO BE TAXED AS BUSINESS PROFIT UNDER ARTICLE 7 READ WITH ARTICLE 5 OF INDIA USA DTAA IN VIEW OF THE FORCE OF ATTRACTION RULE.' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DRP HAS ERRED IN DIRECTING THE AO NOT TO CHARGE THE INTEREST U/ S.234B BY RELYING ON JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF DIT (IT) V/S NGC NETWORK ASIA LLC, 222 ITR 86 (BOM) EVEN THOUGH THE DECISION RELIED ON IS NOT APPLICABL E IN THE PRESENT CASE. 36. IT IS NOTED THAT ALL THE GROUNDS ARE IDENTICAL TO T HE RESPECTIVE GROUNDS RAISED BY THE REVENUE IN ITS APP EAL FOR A.Y. 2009-10 IN ITA NO.1407/MUM/2014. BOTH THE PAR TIES JOINTLY STATED THAT FACTS OF THIS CASE ARE IDENTICA L TO EARLIER YEAR AND THERE IS NO CHANGE IN LEGAL POSITION. SIN CE WE HAVE DISMISSED ALL THE GROUNDS IN REVENUES APPEAL FOR A .Y. 2009- 10, THEREFORE, RELYING UPON OUR ORDER, THIS APPEAL IS ALSO HEREBY DISMISSED. 37. AS A RESULT, APPEAL FOR A.Y. 2010-11 IS DISMISSED. 38. NOW WE SHALL TAKE UP ASSESSEES APPEAL FOR A.Y. 2009- 37 WNS 10 IN THE CASE OF M/S WNS GLOBAL SERVICES (UK) LTD IN ITA NO.6411/MUM/2012. 39. IT WAS STATED THAT THE FACTS OF ALL THE ISSUES INV OLVED ARE EXACTLY IDENTICAL TO THE APPEAL OF WNS NORTH AMERIC A INC FOR A.Y. 2008-09 IN ITA NO.6410/MUM/2012. UNDER THESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING OUR ORDER FOR A.Y. 2008-09 IN THE CASE OF WNS NORTH AMERICA INC IN ITA NO. 6410/MUM/2012, WE DECIDE THE GROUNDS ON IDENTICAL L INES AS UNDER:- 40. GROUNDS 1 & 2 ARE DECIDED IN FAVOUR OF THE ASSESSEE. THE AO IS DIRECTED TO FOLLOW OUR ORDER IN ITA NO. 6410/MUM/2012. 41. GROUNDS 3 & 4: THESE GROUNDS ARE SENT BACK WITH THE SAME DIRECTIONS AS HAS BEEN GIVEN BY THE TRIBUNAL I N EARLIER YEARS AS WELL AS IN THE APPEAL IN ITA NO.6410/MUM/2 012 ABOVE. THESE GROUNDS MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 42. GROUNDS 5 & 6: THESE GROUNDS ARE WITH REGARD TO LEVY OF INTEREST U/S 234B WHICH HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE AND AO IS DIRECTED TO DELETE THE INTEREST. 43. AS A RESULT, THIS APPEAL IS PARTLY ALLOWED. 44. NOW WE SHALL TAKE UP REVENUES APPEAL IN THE CA SE OF M/S WNS GLOBAL SERVICES (UK) LTD IN ITA NO.1406/MUM/2014 AY 2010-11: 45. BOTH THE PARTIES JOINTLY STATED THAT THE ISSUES INV OLVED 38 WNS AND THE FACTS OF THE CASE ARE IDENTICAL TO REVENUE S APPEAL IN THE CASE OF GROUP COMPANY OF WNS NORTH AMERICA INC FOR A.Y. 2009-10 IN ITA NO.1407/MUM/2014. IT WAS UNANI MOUSLY AGREED THAT THESE GROUNDS ARE COVERED WITH THE AFOR ESAID APPEAL. 46. WE HAVE GONE THROUGH THE ORDERS PASSED IN BOTH THE APPEALS AND FIND THAT THE FACTS AND ISSUES INVOLVED ARE IDENTICAL. WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE IN ITA NO.1407/MUM/2014 ABOVE AND RESPECTFU LLY FOLLOWING OUR ORDER, THIS APPEAL IS ALSO DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH NOVEMBER, 2016 PK/- COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , L-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES