M/s. Stonehill Education Foundation, Bengaluru V. Commissioner Of Income Tax(Appeal)-12, Bengaluru

ITA 2061/BANG/2019

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1589 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 24-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: AJAY ROTI
• Keywords: Double taxation relief
• Section: 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA Nos. 2060 & 2061/Bang/2019 Assessment Years : 2016-17 & 2017-18 M/s. Stonehill Education Foundation, No. 150, 1 st Floor, Embassy point, Infantry Road, Bangalore – 560 001. PAN: AALCS9631D Vs. The Deputy Commissioner of Income-tax (International Taxation), Circle – 2 (1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Ajay Roti, CA Revenue by : Shri Priyadarshi Mishra, Addl. CIT (DR) Date of Hearing : 31-03-2022 Date of Pronouncement : 01-06-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed against common order dated 25.07.2019 passed by Ld.CIT(A)-12, Bangalore for A.Ys. 2016-17 & 2017-18. 2. Brief facts of the case are as under: 2.1 The assessee company M/s. Stonehill Education Foundation is an IB world school and offers all the three IB Programmes – the PYP, MYP and DP. During the years under consideration the assessee company has made certain payments to International Baccalaureate for use of registered trade mark and also for the use of copyright, Page 2 of 6 ITA Nos. 2060 & 2061/Bang/2019 literary work without deducting tax at source on such payments as per provisions of section 195. 2.2 The Ld.AO held the assessee to be “assessee in default” u/s. 201(1) r.w.s. 195 of the Act. The Ld.AO also levied interest u/s. 201(1A). 2.3 The Ld.AO noted that following payments were made by the assessee to the US entity during the years under consideration. AY 2016-17 S.No. Recipient’s name Foreign Currency Amount paid Paid date Nature of Transactions 1. International Baccalaureate Organization – USA USD 10,692 4,96,278 November 30,2015 IB Grade 12 Examination Fees AY 2017-18 S.No. Recipient’s name Foreign Currency Amount paid Paid date Nature of Transactions 1. International Baccalaureate Organization – USA USD 2,088 1,38,503 June 13,2016 Submission for Unit Planners – International Baccalaureate Americans Online Registration 2.4 He also noted that payments were made by assessee to Singapore branch of Swiss entity, the details of which are as under: AY 2016-17 S.No. Recipient’s name Foreign Currency Amount paid Paid date Nature of Transactions 1. International Baccalaureate Organization – (SG BR) SGD 31,182 14,75,186 September 15,2015 Annual Membership charges paid to accreditation body towards Middle Year Programs (MYP), Page 3 of 6 ITA Nos. 2060 & 2061/Bang/2019 Primary year (PYP) & Diploma Programs (DP) Annual Programme Fee for the period 01.09.2015 to 31.08.2016 2. International Baccalaureate Organization (SG BR) SGD 2,400 1,14,272 January 28,2016 IB Asia Pacific annual conference registration fee AY 2017-18 S.No. Recipient’s name Foreign Currency Amount paid Paid date Nature of Transactions 1. International Baccalaureate Organization – (SG BR) SGD 18,390 8,59,796 May 18,2016 Registration fee for IBO workshops for Teachers 2. International Baccalaureate Organization (SG BR) SGD 32,587 16,21,608 August 25,2016 Primary Year Program (‘PYP’), Middle Year Programs (MYP) & Diploma Programs (DP) Annual School Fee for membership and accreditation for Academic Year 2016-17 3. International Baccalaureate Organization (SG BR) SGD 970 48,331 September 07,2016 Workshop registration charges for MYP Languages workshop for Stonehill Staff Page 4 of 6 ITA Nos. 2060 & 2061/Bang/2019 4. International Baccalaureate Organization (SG BR) SGD 3,800 1,86,274 November 19,2016 Workshop & Conference registration fee for PYP & MYP Stonehill Staff 2.5 Before the Ld.AO, assessee claimed that the payments made by assessee to the US as well as Singapore branch is not in the nature of ‘royalty’ or ‘FTS’, and therefore the DTAA with India and DTAA with USA and Switzerland, would be applicable in the present facts. 3. The Ld.AR at the outset submitted that the Ld.CIT(A) relied on the principles laid down by Hon'ble Karnataka High Court in case of CIT vs. Samsung Electronics Co. Ltd. reported in (2011) 203 taxman 477 in support that, the payments made by the assessee is in the nature of royalty. The Ld.CIT(A) also relied on the decision of Hon'ble Karnataka High Court in case of CIT vs. Wipro Ltd., reported in (2011) 16 taxmann.com 275 to hold that the payment made by assessee to the US entity and swiss entity is towards license to use the database maintained by the non-resident entity, and therefore, is to be regarded as ‘royalty’. Before us the Ld.AR placed reliance on the recent decision of Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd., reported in (2021) 125 taxmann.com 42 in support of the contention that the transactions has to be looked into based on the DTAA with USA and Singapore. 4. We note that Hon’ble Supreme Court, while considering the issue of sale of software to be in the nature of ‘royalty’ dwelled on various aspects of Copyrights Act, wherein, difference has been drawn between “right to use” and “ownership” of intellectual properties. We also note that, the authorities below have not considered the agreement entered into by the assessee with these entities for which Page 5 of 6 ITA Nos. 2060 & 2061/Bang/2019 the payments were made, by the assessee in lieu of the services rendered. The services rendered by the non-residents are to be analysed based on the DTAA with respective countries. 5. Taking a considered view, we deem it appropriate to remit this issue back to the Ld.AO, to verify all the agreements and the terms and conditions agreed upon by the assessee. The Ld.AO is directed to analyse the terms and conditions under the agreement in the light of various principles laid down by Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd. (supra). He may call upon all relevant information in order to come to a conclusion, in accordance with law. 6. Needless to say that proper opportunity of being heard is to be granted to assessee. Accordingly, the issue of taxability of the payments made by assessee has to be decided prior to coming to the conclusion, as to whether the assessee could be termed to be assessee in default. We therefore remit the issues to the Ld.AO for a denovo verification in accordance with law. In the result, appeals filed by the assessee for both the years under consideration partly stands allowed for statistical purposes. Order pronounced in open court on 01 st June, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 1 st June, 2022. /MS / Page 6 of 6 ITA Nos. 2060 & 2061/Bang/2019 Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore