ABB FZ-LIC, Bangalore V. Deputy Commissioner of Income Tax, Bangalore

ITA 2102/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7198 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-07-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 5(2)

Judgement Text

IT(TP)A.2102/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T(TP).A NO.2102/BANG/2016 (ASSESSMENT YEAR : 2013-14) ABB FZ-LLC, C/O. ABB INDIA LTD, 21 ST FLOOR, WORLD TRADE CENTRE, DR. RAJKUMAR ROAD, MALLESWARA (WEST), BENGALURU 560 055 .. APPELLA NT PAN : AAICA6462B V. DEPUTY COMMISSIONER OF INCOME-TAX (IT), CIRCLE -1(1), BENGALURU .. RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI. DEVA RATHAN KUMAR, CIT HEARD ON : 16.11.2017 PRONOUNCED ON : 29.11.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE DCIT (IT), CIRCLE -1(1), BENGALURU, DT.25.10.20 16, PASSED U/S.143(3) R.W.S.144C(5) OF THE IT ACT, 1961, PURSU ANT TO THE DIRECTIONS OF THE DRP, FOR THE ASSESSMENT YEAR 2012 -13. IT(TP)A.2102/BANG/2016 PAGE - 2 02. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 03. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. THE REFORE IN THE ABSENCE OF ANY ASSISTANCE, WE ARE ADJUDICATING THE ABOVE SAID GROUNDS. 04 THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUAR ELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE AS SESSEES OWN CASE IN (2017) 83 TAXMANN.COM 86. THE TRIBUNAL IN PARAS 57 TO 60 OBSERVED AS UNDER : 57. THUS RESPECTFULLY FOLLOWING THE PATH SHOWN BY THE APEX COURT ( SUPRA ), IN OUR VIEW, THE REQUIREMENT OF FIXED PLACE OF BUSINESS IS NOT APPLICABLE TO THE CLAUSES (2), (4) MID (5). CLAUSE (I) OF ARTICLE 5(2) WHICH PROVIDES THE SERVICE PE, IS NOT DEPENDENT UPON, THE FIXED PLACE OF BUSINESS AS IS O NLY DEPENDENT UPON THE CONTINUATION OF THE ACTIVITY FOR THE SAME PROJECT O R CONNECTED PROJECT FOR A PERIOD / PERIODS AGGREGATING TO MORE THAN 9 MONTHS WITHIN 12 . ACCORDINGLY WE HOLD THAT ASSESSEE IS HAVING THE SERVICE PE IN INDIA, HOWEVER THE DETERMINATION OF THIS ISSUE WILL ONLY HAVE ANY HEARING ON THE ISSUES UNDER CONS IDERATIONS IF ON EXAMINATION OF FACTS WE COME TO CONCLUSION THAT THE ACTIVITIES OF THE ASSESSEE DO NOT FALL IN ANY OF THE ARTICLE OF DTAA. 58. NOW, WE WOULD EXAMINE THE CLAIM OF THE ASSESSEE TH AT IT IS RENDERING TECHNICAL SERVICES BASED ON THE SERVICE AGREEMENT REGARDING ' REGIONAL HEADQUARTER SERVICE AGREEMENT' AND ITS VARIOUS REPLY FALLS UNDER ROYALT Y OR ANY OTHER CLAUSE OF DTAA. THE INFORMATION PROVIDED BY THE ASSESSEE TO ABB LTD , WERE ACQUIRED BY THE IT(TP)A.2102/BANG/2016 PAGE - 3 ASSESSEE OF ITS EXPERTISE, EXPERIENCE AND KNOWLEDGE BASED ON ITS ASSOCIATION WITH ABB GROUP ZURICH. THE SAID INFORMATION ARE NOT AVAI LABLE IN THE PUBLIC DOMAIN OR CANNOT BE ACQUIRED BY ABB LTD ON ITS OWN EFFORT AND THE INFORMATION WHICH ARE PROVIDED WERE IN THE NATURE OF SPECIAL KNOWLEDGE, S KILL AND EXPERTISE. AS IS CLEAR FROM THE REPLY SUBMITTED BY THE ASSESSEE, THE ASSES SEE HAS MERELY PROVIDED THE ACCESS TO SUCH SPECIALISED KNOWLEDGE, SKILL AND EXP ERTISE AND HAS NOT DONE ANYTHING MORE, FOR RENDERING THE SERVICES. FOR THE ABOVESAID PURPOSE, SOME OF THE IMPORTANT CLAUSES, WHICH WE FEEL THROW LIGHT ON THE ACTIVITIES OF THE ASSESSEE ARE AS UNDER : ( I ) DEVELOPMENT OF REGIONAL OHS STRATEGIES IN LINE WITH ABB STRATEGIES AND CONSIDERING THE RISK PROFILE OF THE IMA REGION. ( II ) PROVISION OF INFORMATION ABOUT STRATEGIES, GOALS, T ARGETS AND INSTRUCTIONS IN THE FIELD OF OHS. ( III ) COACHING AND MONITORING THE OHS ADVISORS OF THE SER VICE RECIPIENT IN IMPLEMENTATION OF ANY PROCEDURE IN LINE WITH GROUP DIRECTIVES ( IV ) ACTING AS A CONTACT POINT BETWEEN THE GROUP SAFETY ADVISOR AND THE SERVICE RECIPIENT. ( V ) PROVISION OF INFORMATION TO PROVIDE INFORMATION TO MONITOR AND REVIEW PROGRESS FROM THE MANAGERIAL, CLERICAL AND SUGGESTI ON OF CORRECTIONS IN ORDER TO PROVIDE KEY INFORMATION INDICATORS TARGETS ( VI ) SETTING UP AND MARINATING A PROJECT DEVELOPMENT BOA RD IN UAE. ( VII ) DEVELOPMENT OF A GROUP BUSINESS IN WASTE HEAT TO PO WER. ( VIII ) DEVELOPMENT OF A WORKING EXAMPLE OF JOINT VALUE PRO POSITION WITH IBM. ( IX ) MONITORING AND ASSISTANCE TO STRATEGIC ACCOUNT MANA GERS OF THE SERVICE RECIPIENT WITH RESPECT TO THE YEARLY ACCOUN T PLANS, ENSURING ALIGNMENT WITH THE BUSINESS UNIT. ( X ) SETTING UP OF SALES TARGETS, THEREBY UTILISING LOCA L BUSINESS UNIT OPPORTUNITIES WHICH SUSTAIN AND TO ENSURE MUTUAL AL IGNMENT WITH BUSINESS UNIT GOALS. ( XI ) ENSUREMENT THAT THE CUSTOMER FEEDBACKS ARE AVAILABL E TO THE SERVICE RECIPIENT THROUGH SURVEYS AND OTHER CUSTOMER SATISF ACTION TOOLS. ( XII ) GUIDANCE AND DEVELOPMENT OF STRATEGIC ACCOUNT MANAG ER TEAM TO MOVE FROM A PRODUCT SALES VIEW TO AN ACCOUNT MANAGE MENT VIEW AND TO UNDERSTAND AND EFFECTIVELY OPERATE AND NAVIGATE WITHIN EACH ORGANISATION ETC., 59. 'THE AGREEMENT GIVES ' OPPORTUNITY TO ABB LTD. OF USING THE INFORMATION PERTAINING TO INDUSTRIAL / COMMERCIAL / SCIENTIFIC EXPERIENCE BELONGING TO ASSESSEE, IT(TP)A.2102/BANG/2016 PAGE - 4 CAN ON THE BASIS OF MATERIAL AVAILABLE ON RECORD IT CAN BE CONCLUDED THAT THE ASSESSEE HAD RENDERED THE SERVICES MENTIONED IN THE AGREEMENT? IN OUR VIEW IT WOULD NOT BE POSSIBLE FOR THE ASSESSEE TO RENDER TH ESE ACTIVITIES OR SERVICES MERELY WITH THE HELP OF THREE PERSONS SENT ONLY FOR 25 DAY S TO INDIA AS THE NATURE OF ACTIVITIES SCOPE AND AMBIT OF CLAUSES IN THE AGREEM ENT IS VERY WIDE AND IT IS NOT POSSIBLE TO RENDER THESE SERVICES EITHER THROUGH 3 EMPLOYEES OR THROUGH PHONE CALL (MOREOVER THE ASSESSEE HAS NOT PROVIDED ANY EVIDENC E OF ACTUAL RENDERING OF SERVICES), THEREFORE INSTEAD OF PROVIDING THE SERVI CES BY THE ASSESSEE THROUGH IT EMPLOYEES, THE ASSESSEE HAD MERELY GIVEN THE ACCESS TO ABB LTD VARIOUS SECRET, CONFIDENTIAL, IPRS INFORMATION AND OTHER INFORMATIO N ACQUIRED BY IT FROM ITS PAST EXPERIENCE TO ABB LTD. IF THE SERVICES WERE ACTUALL Y RENDERED BY THE ASSESSEE, (AS CLAIMED BY THE ASSESSEE) THAN IT IS ESSENTIAL THAT THE ASSESSEE WOULD HAVE SENT SOME OF ITS OFFICER ON ITS PAYROLL TO ACTUALLY EXEC UTE THE SERVICES AT VARIOUS BRANCH OFFICES OF ABB LTD. IN OUR VIEW THE ASSESSEE IS REQ UIRED TO UNDERTAKE COLLECTING, ANALYSING AND DELIVERING OF SECURITY INTELLIGENCE A ND INFORMATION TO THE SERVICE RECIPIENT UNDER 'THE REGIONAL HEADQUARTER SERVICES' TO ABB LTD , THEN THE DEPLOYMENT OF MANPOWER BY THE ASSESSEE WAS NECESSAR Y AND SIMILARLY THE DEPLOYMENT OF MANPOWER IS EQUALLY NECESSARY IN CASE OF EDUCATION IN BASIC SECTOR PROCEDURE AND REGULATIONS TO NEW EMPLOYEES OF SERVI CE RECIPIENT (ABB LTD). 60. IN THE REPLY OF THE ASSESSEE TO AO, IT IS BY THE A SSESSEE, THAT COACHING AND MONITORING THE OHS ADVISORS OF ABB LTD IN IMPLEMENT ING AND DEVELOPING OHS PLANS' AND ' STRATEGIES, WERE RENDERED VIA VISITS, TELEPHONE CALLS, MEETING TRAININGS ETC BUT NO EVIDENCE WAS GIVEN BY THE ASSESSEE TO AO OR CIT OR THE TRIBUNAL. IN OUR VIEW, THESE ACTIVITIES WHICH WERE ALLEGEDLY REN DERED BY THE ASSESSEE WERE IN THE FORM OF SHARING OR PERMITTING TO USE THE SPECIA L KNOWLEDGE, EXPERTISE AND EXPERIENCE OF THE ASSESSEE,(WHICH THE ASSESSEE HAD ACQUIRED FROM ITS PARENT COMPANY,) AND WAS SHARED BY IT WITH ABB LTD. SQUARE LY FALLS WITHIN THE REALM OF 'ROYALTY', AS DEFINED IN ARTICLE 12(3) INDO -UAE DT AA AND IN THE FORM OF RENDERING THE SERVICES. THE VISITS OF THE OFFICIALS OF THE ASSESSEE TO ABB LTD WAS ONLY FOR THE PURPOSES OF PROVIDING ACCESS FOR USING THE INFORMATION PERTAINING TO INDUSTRIAL / COMMERCIAL / SCIENTIFIC EXPERIENCE BEL ONGING TO ASSESSEE AND TO HELP ABB LTD TO COMMERCIALLY EXPLOITING IT. THEREAFTER IN PARAS 75 TO 78 THE TRIBUNAL HELD AS U NDER : 75. THEREFORE ONCE PAYMENT OF ANY KIND RECEIVED AS A C ONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, INDUSTRIAL COMMERCIAL OR S CIENTIFIC EQUIPMENT BY THE ASSESSEE IT WILL FALL WITHIN THE REALM OF ROYALTY A S PER DTAA. 76. IT IS WORTHWHILE TO MENTION HERE THAT THE ASSESSEE HAS PLACED ITS RELIANCE ON THE DECISION OF ITAT, BANGALORE BENCH 'C IN ABB FZ-LLC'S CASE ( SUPRA ) IN ASSESSEES OWN CASE FOR A.Y. 2012-13. IN OUR VIEW, T HERE WAS NO QUARREL WITH RESPECT TO RESIDENCE STATUS OF THE ASSESSEE. IN THE SAID ASSESSMENT YEAR. MOREOVER, ON EXAMINATION OF THE AGREEMENT AND INFOR MATION PROVIDED BY THE IT(TP)A.2102/BANG/2016 PAGE - 5 ASSESSEE TO ABB LTD, WITH A RIGHT TO USE THE SAID I NFORMATION, WAS HELD BY US TO BE 'ROYALTY'. WE HAVE NOT EXAMINED THE CHARACTER OF THE SERVICES RENDERED BY THE ASSESSEE AS FTS OR NOT, AS HAS BEEN SO EXAMINED BY THE COORDINATE BENCH IN THE CASE CITED ABOVE. IN OUR VIEW, THIS WOULD BE OF NO USE AS MENTIONED IN PARA 31 (SUPRA). THEREFORE, EVEN ON THIS COUNT, THE DECI SION RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE. 77. BEFORE WE CONCLUDE, WE WOULD LIKE TO RECORD A NOTE OF APPRECIATION FOR THE VALUABLE EFFORTS AND CONTRIBUTION MADE BY THE LD SE NIOR DR, MR G. R, REDDY FOR THE REVENUE AND MR PERCY PARDIWALA LD SENIOR AD VOCATE FOR ASSESSEE, IN ADJUDICATION OF PRESENT APPEALS. 78. IN THE RESULT, APPEALS OF THE ASSESSEES FOR A.Y. 2 010-11 AND A. Y. 2011-12, ARE DISMISSED. 04. THUS FOLLOWING THE ORDER OF THE TRIBUNAL AS ABO VE, WE DISMISS THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER, 2017. SD/- SD/- (JASON P. BOAZ) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 29 TH NOVEMBER, 2017 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY