EDENRED PTE LTD, MUMBAI V. DCIT (IT) 2(2)(1), MUMBAI

ITA 2178/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2872 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 27-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; TDS; Set aside
• Section: 244A; 5(2); 195; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE S HRI SAKTIJIT DEY (JM) AND SHRI N.K. PRADHAN (AM ) ITA NO. 2178/MUM/2017 ASSESSMENT Y EAR: 2013 - 14 EDENRED PTE LIMITED, C/O SRBC ASSOCIATES & LLP, 14 TH FLOOR, THE RUBY, 29 SENAPATI BAP AT MARG, DADAR (W), MUMBAI - 400028 PAN : AACCE8636P VS. THE DY. COMMISSIONER OF INCOME TAX - (INTERNATIONAL TAXATION) 2(2)(1), ROOM NO. 1722, 17 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021 (APPELLANT) (RESPONDENT) ASSESSEE BY : S HRI RAJAN VORA/PRANAY GANDHI (AR S ) REVENUE BY : SHRI GANESH BARE ( D R) DATE OF HEARING: 14 /10/2020 DATE OF PRONOUNCEMENT: 23 / 10/2020 O R D E R PER S AKTIJIT DEY , JM CAPTIONED APPEAL BY THE ASSESSEE ARISES OUT OF ASSESSMENT ORDER DATED 31.01.2017 PASSED U/S 143 (3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2013 - 14 , IN PU RSUANCE TO THE DIRECTIONS OF LEARNED DISPUTE RESOLUTION PANEL (DRP) - I, MUMBAI. 2. WE HAV E HEARD SHRI RAJAN V OR A, LEARNED COUNSEL APPEARING FOR THE AS SESSEE AND SHRI GANESH BARE, LEARNED DEPARTMENTAL R EPRESENTATIVE. IT I S A COMMON POINT BETWEEN THE LEARNED COUNSELS APPEARING FOR THE PARTI ES THAT THE SUBSTANTIVE ISSUES, AS RAISED IN GROUND NO. 2, 3 AND 4 , ARE FULLY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR S 2010 - 11 TO 2012 - 13 VIDE ORDER DATED 20.07.2020 IN ITA NO. 1718/MUM/2014, ITA NO. 254/MUM/2015 AND ITA NO . 507/MUM/2016. KEEPING IN VIEW THE AFORESAID S UBMISSIONS OF THE PARTIES , WE PROCEED TO DISPOSE OF THE GROUNDS RAISED IN THE APPEAL. 2 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 3. GROUND NO. 1 BEING A GENERAL GROUND DOES NOT REQUIRE SPECIFIC ADJUDICATION. 4. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE TAXABILITY OF RS. 1,86,50,1 24/ - RECEIVED TOWARDS INFRASTRUCTURE AND HOSTING DATA CENTRE (IDC) CHARGES BY TREATING IT AS ROYALTY. 5. BRIEFLY THE FACTS ARE , THE ASSESSEE IS A COMPANY INCORPORATED IN SINGAPORE AND IS ALSO A TAX RESI DENT OF THAT COUNTRY. BASICALLY, THE ASSESSEE IS ENGAGED IN PROVISION OF SERVICES RELATING TO DEVELOPING, MARKETING AND IMPLEMENTING INCENTIVE BASED STRATE GIES AND TECHNOLOGIES TO BUILD L OYALTY AND TO REWARD LONG - TERM RELATIONSHIPS THROUGH THE UTILIZATION OF THE INTERNET, WIRELESS TECHNOLOGY AND OFFLINE SOLUTIONS TO ITS CLIENTS. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE , THE ASSESSEE PROVIDED THREE DIFFERENT CATEGORIES O F SERVICES TO ITS THREE INDIAN GROUP C OMPANIES ON PAYMENT BASIS, THE SERVICES PROVIDED BY THE ASSESSEE TO I TS INDIAN GROUP C OMPANIES ARE AS UNDER: - (I) INFRASTRUCTURE AND HOSTING DATA CENTRE (IDC) SERVICES. (II) MANAGEMENT SERVICES. (III) REFERRAL/OTHERS SERVICES. 6. IN THE RETURN OF INCOME FILED F OR THE IMPUGNED ASSESSMENT YEAR ON 30.11.2013, THE ASSESSEE DECLARED N IL INCOME STATING THAT THE PAYMENT RECEIVED BY IT FROM THE INDIAN GROUP C OMPANIES IS NOT TAXABLE UNDER ARTICLE 12 OF INDIA SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) . IN SO FAR AS PROVISION OF IDC SERVICES IS CONCERNED, BEFORE THE ASSESSING OFFIC ER THE ASSESSEE EXPLAINED THAT FOR PROVIDING SUCH SERVICES, ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH THE CORE COMPANIES. EXPLAINING FURTHER , IT WAS SUBMITTED , UNDER IDC SERVICES THE ASSESSEE PROVIDES INFORMATION T ECHNOLOGY , INFRASTRUCTURE MANAGEMENT AND MAIL BOX/ WEBSITE HOSTING SERVICES. IT WAS SUBMITTED , THE SERVICES ARE PERFORMED BY ASSESSEES OWN PERSONNEL IN SINGAPORE AND THE PAYMENT ON ACCOUNT OF SUCH SERVICES WERE DIRECTLY REMITTED BY THE INDIAN GROUP C OMPANIES TO ASSESSEES BANK ACCOUNT IN SINGAPO RE . T O JUST IFY ITS CLAIM OF NON TAXABILITY, T HE ASSESSEE SUBMITTED , WHILE PROVIDING IDC 3 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 SERVICES, NEITHER ANY PROCESSING IS UNDERTAKEN IN SINGAPORE NOR THE ASSESSEE MAINTAINS ANY CENTRAL DATABASE FOR INFORMATION. IT WAS SUBMITTED , INFRASTRUCTURE DATA CENTR E IS NOT CAPABLE OF INFORMATION ANALYTICS, DATA MANAGEMENT AND WEB HOSTING MAIN MANAGEMENT. IT WAS SUBMITTED , AS PART OF IDC SERVICES , INDIAN GROUP COMPANIES ONLY RECEIVE S TANDARD SERVICES AND NO LICENSES IN ANY SOFTWARE/RIGHT TO USE ANY SOFTWARE ETC. IS P ROVIDED. FURTHER, THERE IS NO SHARING OF ANY CONFIDENTIAL INFORMATION BY THE ASSESSE WITH THE INDI AN GROUP C OMPANIES. THE ASSESSING OFFICER , HOWEVER , WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED , THE ASSESSEE AND ITS INDIAN GROUP C OM PANIES ARE IN THE SAME BUSINESS OF MANAGING PREPAID CHM/PRM REWARDS, ROYALTY AND MARKETING SOLUTION FOR CORPORATE HOUSE S . HE OBSERVED , THE SERVICES OFFERED BY THE INDIAN GROUP COMPANIES NEED A SOPHISTICATED COMPUTER ISED PROGRAMME WHICH CAN MONITOR, TRACK A ND MAINTAIN SUCH TRANSACTION AND L OYALTY/REWARDS POINTS EARNED BY CUSTOMERS. HE OBSERVED , FOR THIS PURPOSE ASSESSEE IS REQUIRED TO MAINTAIN CUSTOMER S INDIVIDUAL PROFILE W H ERE THEIR PERSONAL INFORMATION A S WELL AS THEIR TRANSACTION TRACK CAN BE KEPT. TO FA CILITATE THI S , THE ASSESSEE HAS WORLDWIDE INFORMATION PROCESSING CENTRE AT SINGAPORE AND IT OWNS AND MAINTAINS THE SAID PROCESSING CENTRE WHICH REQUIRE HUGE H IGH TECH COMPUTER COMPLEX BEING MULTIPLE MAINFRAME COMPUTER S AND OTHER RELATED HARDWARE AND SOFTWA RE FA CILITIES INVOLVING SUBSTANTIAL INVESTMENT AND CAPABLE OF VERY HIGH VOLUME STORAGE AND HIGH PROCESSING OF DATA. HE OBSERVED, ON RECEIVING PAYME NT, ASSESSEE ALLOWS ITS INDIAN GROUP C OMPANIES AND THEIR APPROVED CUSTOMERS TO HAVE ACCESS AND TO USE ITS CEN TRAL PROCESSING UNIT (CPU) AT SINGAPORE. THE ASSESSING OFFICER OBSERVED , THE USE OF CPU BY THE INDIAN GROUP C OMPANIES ESTABLISHES STRONG BUSINESS CONNECTION BETWEEN THE ASSESSEE AND THE GROUP COMPANIES. HE OBSERVED , NOT ONLY THE ASSESSEE ALLOWS USE OF ITS MAINFRAME COMPUTER S AT SINGAPORE BUT ALSO ALLOWS I NCIDENTAL ELECTRONIC MAIL ACCESS, CONSOLIDATED DATA NETWORK ACCESS AND CONSOLIDATED DATA NETWORK SERVICES TO THE INDIAN G ROUP ENTITIES ON PAYMENT BASIS. THUS, HE CONCLUDED THAT THE PAYMENT RECEIVED BY THE A SSESS EE FROM IDC SERVICES IS FOR USE OF OR RIGHT TO USE DESIGN OR MODEL, 4 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 PLAN, SECRET FORMULA OR PROCESS OR FOR INFORMATION CONCERNING INDUSTRIAL COMMERCIAL OR SCIENTIFIC EXPER IENCE WITHIN THE MEANING OF THE TERM ROYALTY AS PER ARTICLE 12(3) (A) OF THE INDI A SINGAPORE (DTAA) . ALTERNATIVELY, HE HELD , THE PAYMENT RECEIVED BY THE ASSESSEE CAN A LSO BE TREATED AS ROYALTY AS IT IS FOR USE OF INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EQUIPMENT OWN ED BY THE ASSESSEE AT SINGAPORE, H ENCE, WOULD BE COVERED WITHIN THE TERM R OYALTY AS PER ARTICLE 12(3) (B) OF THE DTAA . THUS, AFTER TREATING THE PAYMENT RECEIVED BY THE ASSESSEE TOWARDS IDC SERVICES AS ROYALTY , HE BROUGHT IT TO TAX WHILE FRAMING THE DRAFT ASSESSMENT ORDER. BEING AGGRIEVED WITH THE AFORESAID DECISION OF THE ASSESSI NG OFFICER , ASSESSEE RAISED OBJECTIONS BEFORE LEARNED DRP. RELYING UPON ITS DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2012 - 13, LEARNED DRP UPHELD THE DECISION OF THE ASSESSING OFFICER. IN TERMS WITH THE DIRECTIONS OF LEARNED DRP THE ASSESSING OFFI CER PASSED THE IMPUGNED ASSESSMENT ORDER BRING ING TO TAX THE A MOUNT OF RS. 1,86,50,124/ - BY TREATING IT AS ROYALTY. 7. AS COULD BE SEEN FROM THE F ACTS DISCUSSED HEREIN BEFORE , THE ISSUE IN DISPUTE IS , WHETHER THE PAYMENT RECEIVED BY THE ASSESSEE FRO M PROVISION OF IDC SERVICES CAN BE TREATED AS ROYALTY UNDER A RTICLE 12 OF INDIA SINGAPORE DTAA. AS WE FIND, IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN C ASE FOR ASSESSMENT YEARS 2010 11 TO 2012 13. IN FACT, LEARNED DRP H AS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE BY RELYING UPON ITS DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2012 - 13. HOWEVER, WHILE DECIDING THE APPEALS OF THE ASSESSEE ON IDENTICAL ISSUE IN ASSESSMENT YEAR S 2010 - 11 TO 2012 - 13 THE TRIBUNAL , IN THE ORDER REFERRED TO EARLIER IN THE ORDER, HAS HELD THAT THE PAYMENT RECEIVED BY THE ASSESSEE FROM PROVISION OF IDC SERVICES IS NOT IN THE NATURE OF ROYALTY. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : 6. WE HAVE HEARD THE RIVAL SUBMISSIO NS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE FIND THAT (I) UNDER THE SAID IDC AGREEMENT, THE APPELLANT, ESSENTIALLY PROVIDES IT INFRASTRUCTURE MANAGEMENT AND MAIL 5 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 BOX/WEBSITE HOSTING SERVICES TO ITS IN DIA GROUP COMPANIES; THESE IDC SERVICES ARE PERFORMED BY THE APPELLANTS PERSONNEL IN SINGAPORE ; THE INDIAN GROUP COMPANIES DIRECTLY REMIT IDC SERVICE PAYMENTS TOWARDS THE APPELLANTS BANK ACCOUNT IN SINGAPORE, (II) IDC IS AN ISO 27001 CERTIFIED DATA CENT RE OWNED BY EDENRED PTE. AND LOCATED IN SINGAPORE ; IDC SERVICES ARE PROVIDED USING THE IDC AND IT/SECURITY TEAM IN SINGAPORE, (III) THE SERVICES UNDER THE IDC AGREEMENT COMPRISE OF ADMINISTRATION AND SUPERVISION OF CENTRAL INFRASTRUCTURE ; MAILBOX HOSTING SERVICES AND WEBSITE HOSTING SERVICES, (IV) IDC SERVICES ENSURE 100% UPTIME FOR CRITICAL EXTERNAL FACING APPLICATIONS WHICH NEED HIGHLY SECURED WEB ENVIRONMENT AND DEDICATED TEAM OF SECURITY EXPERTS TO ENSURE 100% UPTIME OF SECURITY SYSTEMS (FIREWALL, ANT IVIRUS, ACCESS CONTROLS) WHICH ARE ALSO HOSTED ON SERVER IN SINGAPORE. WE FURTHER OBSERVE THAT EXAMPLES OF WEBSITES/APPLICATIONS/SOFTWARES HOSTED BY INDIAN GROUP COMPANIES ON THE DATA CENTRE IN SINGAPORE ARE WEB ORDERING APPLICATION, CORPORATE WEBSITE, WE BSITES CREATED FOR CUSTOMERS OF EDENRED INDIA ENTITIES WHILE MAKING A LOYALTY PROGRAM FOR THEM. A PERUSAL OF THE DOCUMENTS FILED BEFORE THE AO AND DRP CLEARLY INDICATE THAT (I) APPELLANT HAS AN INFRASTRUCTURE DATA CENTRE, NOT INFORMATION CENTRE AT SINGAPO RE, (II) THE INDIAN GROUP COMPANIES NEITHER ACCESS NOR USE CPU OF THE APPELLANT, (III) NO CDN SYSTEM IS PROVIDED UNDER THE IDC AGREEMENT, NO SUCH USE/ACCESS IS ALLOWED, (IV) THE APPELLANT DOES NOT MAINTAIN ANY SUCH CENTRAL DATA (V) IDC IS NOT CAPABLE OF IN FORMATION ANALYTICS, DATA MANAGEMENT, (VI) APPELLANT ONLY PROVIDES IDC SERVICE BY USING ITS HARDWARE/SECURITY DEVICES/PERSONNEL ; ALL THAT THE INDIAN GROUP COMPANIES RECEIVED ARE STANDARD IDC SERVICES AND NOT USE OF ANY SOFTWARE, (VII) BANDWITH AND NETWORK ING INFRASTRUCTURE IS USED BY THE APPELLANT TO RENDER IDC SERVICES ; INDIAN COMPANIES ONLY GET THE OUTPUT OF 6 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 USAGES OF SUCH BANDWITH AND NETWORK AND NOT ITS USE, (VIII) CONSIDERATION IS FOR IDC SERVICES AND NOT ANY SPECIFIC PROGRAM AND (IX) NO EMBEDDED/SEC RET SOFTWARE IS DEVELOPED BY THE APPELLANT. AGAINST THE ABOVE FACTUAL BACKDROP, LET US DISCUSS BELOW THE CASE LAWS RELIED ON BOTH SIDES. 6.1 WE BEGIN WITH THE CASE LAWS RELIED ON BY THE LD. COUNSEL. A PLETHORA OF PRECEDENTS ON THE SUBJECT IN WHICH WE ARE PRESENTLY CONCERNED COMPELS US, IN ORDER TO AVOID PROLIXITY, TO REFER ONLY A FEW DECISIONS BELOW. IN THE CASE OF BHARATI AXA GENERAL INSURANCE CO. LTD. (SUPRA), THE APPELLANT, AN INDIAN COMPANY CARRYING ON BUSINESS OF GENERAL INSURANCE ENTERED INTO A SERV ICE AGREEMENT WITH A SINGAPORE COMPANY AXA ARC FOR RECEIVING ASSISTANCE SUCH AS BUSINESS SUPPORT, MARKET INFORMATION, TECHNOLOGY SUPPORT SERVICES AND STRATEGY SUPPORT ETC. FROM THE LATTER. THE AAR HELD THAT (I) THOUGH THE SERVICES RENDERED BY AXA ARC MAY W ELL BE BROUGHT WITHIN THE SCOPE OF THE DEFINITION OF FTS UNDER THE IT ACT AS THEY ANSWER THE DESCRIPTION OF CONSULTANCY SERVICES OR SOME OF THEM MAY BE CATEGORIZED AS TECHNICAL SERVICES BUT THE QUALIFYING WORDS MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIEN CE, SKILL, KNOW - HOW, WHICH ENABLES THE RECIPIENT OF SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN IN ARTICLE 12.4 OF THE DTAA MAKE MATERIAL DIFFERENCE, (II) ALL TECHNICAL OR CONSULTANCY SERVICES CANNOT BE BROUGHT WITHIN THE SCOPE OF THIS DEFINITION U NLESS THEY MAKE AVAILABLE TECHNICAL KNOWLEDGE, KNOWHOW ETC. WHICH IN TURN FACILITATES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY EMBEDDED THEREIN, (III) SERVICES PROVIDED BY AXA ARC TO THE APPLICANT DO NOT FULFILL THE REQUIREMENTS OF THE DEF INITION OF FTS IN THE DTAA, (IV) EVEN ASSUMING THAT THEY ARE TECHNICAL OR CONSULTANCY SERVICES, IT CANNOT BE SAID THAT THE APPLICANT RECEIVING THE SERVICES IS ENABLED TO APPLY THE TECHNOLOGY CONTAINED THEREIN, (V) ALSO THERE IS NOTHING IN THE IT 7 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 SUPPORT SE RVICES THAT ANSWERS THE DESCRIPTION OF TECHNICAL SERVICES AS DEFINED IN THE DTAA, (VI) THEREFORE, THE FEES PAID TO AXA ARC BY THE APPLICANT DOES NOT AMOUNT TO FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF THE DTAA, (VII) AS REGARDS THE PAYMENTS MADE FO R PROVIDING ACCESS TO SOFTWARE APPLICATIONS AND TO THE SERVER HARDWARE SYSTEM HOSTED IN SINGAPORE FOR INTERNAL PURPOSES AND FOR AVAILING OF RELATED SUPPORT SERVICES UNDER THE TERMS OF THE SERVICE AGREEMENT, SAME CANNOT BE BROUGHT WITHIN THE SCOPE OF THE DE FINITION OF ROYALTY IN ARTICLE 12.3, (VIII) THERE IS NO TRANSFER OF ANY COPYRIGHT IN THE COMPUTER SOFTWARE PROVIDED BY AXA ARC AND IT CANNOT BE SAID THAT THE APPLICANT HAS BEEN CONFERRED ANY RIGHT OF USAGES OF THE EQUIPMENT LOCATED ABROAD, MORE SO, WHEN THE SERVER IS NOT DEDICATED TO THE APPLICANT. SIMILARLY, IN THE CASE OF STANDARD CHARTERED BANK (SUPRA), THE ASSESSEEBANK ENTERED INTO AN AGREEMENT WITH A SINGAPORE COMPANY SPL, FOR THE PROVISION OF DATA PROCESSING SUPPORT FOR ITS BUSINESS IN INDIA AND TH AT DATA PROCESSING IS DOWN OUTSIDE INDIA. APPLICATION SOFTWARE BY WHICH DATA IS TRANSMITTED TO HARDWARE AT SINGAPORE AND PROCESSED BY SPL AT SINGAPORE IS OWNED BY THE ASSESSEE. THUS WHAT IS USED BY THE APPELLANT IS THE COMPUTER HARDWARE OWNED BY SPL. THE T RIBUNAL HELD THAT (I) PAYMENT IN QUESTION CAN BE SAID TO BE A PAYMENT FOR A FACILITY WHICH IS AVAILABLE TO ANY PERSON WILLING TO USE THE FACILITY, (II) SYSTEM SOFTWARE WHICH IS EMBEDDED IN THE COMPUTER HARDWARE BY WHICH THE COMPUTER HARDWARE FUNCTIONS IS N OT OWNED BY SPL AND SPL ONLY HAS A LICENSE TO USE THE SYSTEM SOFTWARE ; (III) CONSIDERATION RECEIVED BY SPL IS FOR USING THE COMPUTER HARDWARE WHICH DOES NOT INVOLVE USE OR RIGHT TO USE A PROCESS, (IV) THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE HARDW ARE COULD BE ACCESSED AND PUT TO USE BY THE ASSESSEE BY MEANS OF POSITIVE ACTS, (V) THEREFORE, IT CANNOT BE 8 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 SAID THAT THE PAYMENT BY THE ASSESSEE TO SPL IS ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF THE TREATY. IN EXXONMOBIL COMPANY INDIA (P.) LTD. (SUPR A), THE ASSESSEE HAD PAID CERTAIN AMOUNT TO EMCAP, SINGAPORE TOWARDS GLOBAL SUPPORT FEES. THE AO OPINED THAT PAYMENT MADE BY THE ASSESSEE WAS IN THE NATURE OF FTS AS DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. THE TRIBUNAL OBSERVED THAT AS PER TERMS OF AGREEMENT, EMCAP HAD TO PROVIDE MANAGEMENT CONSULTING, FUNCTIONAL ADVICE, ADMINISTRATIVE, TECHNICAL, PROFESSIONAL AND OTHER SUPPORTING SERVICES TO THE ASSESSEE; HOWEVER, THERE WAS NOTHING IN AGREEMENT TO CONCLUDE THAT IN COURSE OF SUCH PROVISI ON OF SERVICE, EMCAP HAD MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR PROCESS WHICH ENABLED ASSESSEE TO APPLY TECHNOLOGY CONTAINED THEREIN ON ITS OWN. THEREFORE, THE TRIBUNAL HELD THAT PAYMENT MADE BY THE ASSESSEE COULD NOT BE CONS IDERED AS FTS AS DEFINED UNDER ARTICLE 12(4)(B) OF THE INDIA - SINGAPORE DTAA. IN M/S RELIANCE JIO INFOCOMM LTD. (SUPRA) FOR AY 2016 - 17, THE TRIBUNAL OBSERVES THAT THOUGH THE INDIA - SINGAPORE TAX TREATY IS AMENDED BY NOTIFICATION NO. SO 935(E) DATED 23.03.20 17, HOWEVER, THE DEFINITION OF ROYALTY THEREIN HAS NOT BEEN TINKERED WITH AND REMAINS AS SUCH. 6.2 NOW WE TURN TO THE CASE LAWS RELIED ON BY THE LD. DR. IN THE CASE OF CARGO COMMUNITY NETWORK (P.) LTD. (SUPRA), THE ASSESSEE, A NON - RESIDENT COMPANY HAS I TS REGISTERED OFFICE AT SINGAPORE. IT IS ENGAGED IN THE BUSINESS OF PROVIDING ACCESS TO AN INTERNET BASED AIR CARGO PORTAL KNOWN AS EZYCARGO AT SINGAPORE. THE APPLICANT RECEIVED PAYMENTS FROM AN INDIAN SUBSCRIBERS FOR PROVIDING PASSWORD TO ACCESS AND USE T HE PORTAL HOSTED FROM SINGAPORE. THE AAR HELD THAT PAYMENTS MADE FOR CONCURRENT ACCESS TO UTILIZE THE SOPHISTICATED SERVICES OFFERED BY THE PORTAL WOULD BE COVERED BY THE EXPRESSION ROYALTY. 9 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 WE FIND THAT SUBSEQUENTLY, AFTER CONSIDERING THE DECISION IN CAR GO COMMUNITY NETWORK (P.) LTD. (SUPRA), MUMBAI ITAT IN THE CASE OF STANDARD CHARTERED BANK 11 ITR 721 AND YAHOO INDIA PVT. 140 TTJ 195 HELD THAT NO PART OF THE PAYMENT COULD BE SAID TO BE FOR USE OF SPECIALIZED SOFTWARE ON WHICH DATA IS PROCESSED AS NO RIG HT OR PRIVILEGE WAS GRANTED TO THE COMPANY TO INDEPENDENTLY USE THE COMPUTER. IN THE CASE IMT LABS (INDIA) (P.) LTD. (SUPRA), THE ASSESSEE, AN INDIAN COMPANY, ENTERED INTO AN AGREEMENT WITH A NON - RESIDENT AMERICAN COMPANY FOR SECURING LICENSE OF A PARTICU LAR SOFTWARE, WHICH THE APPLICANT IS ENTITLED TO USE. THE APPLICANT HAS TO PAY LICENSE FEE FOR USAGE OF SOFTWARE TO THE AMERICAN COMPANY. THE AAR HELD THAT SMARTERCHILD APPLICATION SOFTWARE ON THE AMERICAN COMPANYS SERVER PLATFORM IS SCIENTIFIC EQUIPMEN T LICENSED TO BE USED FOR COMMERCIAL PURPOSES AND THEREFORE, PAYMENTS MADE FOR PRODUCING AND HOSTING INTERACTIVE AGENT APPLICATIONS WOULD BE COVERED BY THE EXPRESSION ROYALTIES AS USED IN ARTICLE 12. HOWEVER, WE FIND THAT IN THE INSTANT CASE, APPELLAN T ONLY PROVIDES SERVICE BY USING ITS HARDWARE/SECURITY DEVICES/PERSONNEL AND NOT USE OF ANY SOFTWARE AND THEREFORE THE ABOVE CASE IS DISTINGUISHABLE FROM THE PRESENT APPEAL. IN THOUGHTBUZZ (P.) LTD. (SUPRA), THE APPLICANT, A SINGAPORE COMPANY WAS ENGAGED IN PROVIDING SOCIAL MEDIA MONITORING SERVICE FOR A COMPANY, BRAND OR PRODUCT. IT WAS A PLATFORM FOR USERS TO HEAR AND ENGAGE WITH THEIR CUSTOMERS, BRAND AMBASSADORS ETC. ACROSS THE INTERNET. THE APPLICANT OFFERED SERVICE ON CHARGING A SUBSCRIPTION. THE CLI ENTS, WHO SUBSCRIBE, CAN LOGIN TO ITS WEBSITE TO DO A SEARCH ON WHAT IS BEING SPOKEN ABOUT VARIOUS BRANDS AND SO ON. THE AAR HELD THAT THE AMOUNT RECEIVED FROM OFFERING THE PARTICULAR SUBSCRIPTION BASED SERVICE IS TAXABLE IN INDIA AS ROYALTY IN TERMS OF PARAGRAPH 2 OF ARTICLE 12 OF THE DTAC BETWEEN INDIA & 10 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 SINGAPORE. HOWEVER, WE FIND THAT IN THE INSTANT CASE, THE APPELLANT IS ONLY PROVIDING IDC SERVICE WHICH INCLUDES ADMINISTRATION AND SUPERVISION OF CENTRAL INFRASTRUCTURE, MAILBOX HOSTING SERVICES AND WE BSITE HOSTING SERVICES AND THEREFORE, THE RATIO LAID DOWN IN THE ABOVE RULING IS NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. 6.3 FROM THE ENUNCIATION OF LAW IN BHARATI AXA GENERAL INSURANCE CO. LTD; EXXONMOBIL COMPANY INDIA (P.) LTD; STANDARD CHA RTERED BANK V. DDIT; DCIT V. M/S RELIANCE JIO INFOCOMM LTD NARRATED AT PARA 6.1 HEREINBEFORE, IT IS QUITE LUCULENT THAT REVENUES UNDER THE IDC AGREEMENT OUGHT NOT TO BE TAXED IN THE HANDS OF THE APPELLANT AS ROYALTY UNDER THE ACT AND/OR INDIA - SINGAPORE DTA A. THEREFORE, WE DELETE THE ADDITION OF RS.95,62,479/ - MADE BY THE AO TOWARDS IDC CHARGES AND ALLOW THE 2ND GROUND OF APPEAL. 8. FACTS BEING IDENTICAL , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE AS REFERRED T O ABOVE, WE HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM PROVISION OF IDC SERVICES CANNOT BE TREATED AS ROYALTY EITHER UNDER THE PROVISION S OF THE ACT OR UNDER INDIA SINGAPORE DTAA, H ENCE, CANNOT BE TAXED AT THE HANDS OF THE ASSESSE. ACCORDINGLY, A D DITION OF RS. 1,86,50,124/ - DELETED. THIS GROUND IS ALLOWED. 9. IN GROUND NO. 3, THE ASSESSEE HAS CHALLENGED THE TAXABILITY OF RS. 1,31,83,758/ - RECEIVED TOWARDS MANAGEMEN T SERVICES FEE BY TREATING IT AS FEE S FOR TECHNICAL SERVICES (FTS). BRIEFLY , THE F ACTS ARE , DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 1,31,83,758/ - FROM ONE OF ITS INDIAN GROUP COMPANY I.E. M/S SURFGOLD.COM (INDIA) PVT. LTD. F OR PROVIDING MANAGEMENT AND CONSULTANCY SERVICES . A S NOTED BY THE ASSESSIN G OFFICER , THESE SERVICES BROADLY INCLUDE CONSULTANCY SERVICES IN CONNECTION WIT H THE MANAGEMENT OF THE INDIAN GROUP COMPANYS BUSINESS AND OPERATION. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT FOR PROVIDING SUCH SERVICES THE ASSESSEE H AS ENTERED INTO SPEC IFIC AGREEMENT WITH THE INDIAN GROUP C OMPANY . B Y FILING ELABORATE WRITTEN SUBMISSIONS THE ASSESSEE 11 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 SUBMITTED THAT SINCE THE SERVICES PROVIDED UNDER AGREEMENT ARE NOT OF THE NATURE AS PROVIDED U/S 9 ( 1 )(VII) OF THE ACT AS WELL AS ARTICLE 12 OF INDIA SINGAPORE DTAA, T HEY CANNOT BE TREATED AS FTS. F URTHER , IT WAS SUBMITTED , I COURSE OF PROVIDING SUCH SERVICES THE ASSESSEE HAS N OT MADE AVAILABLE ANY TECHNICAL KNOW HOW , KNOWLEDGE , SKILL ETC. T HEREFORE , IT CANNOT BE TREATED AS FTS UNDER TREATY PROVISIONS. THE ASSESSING OFFICER , HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE. HE HELD THAT AS PER THE TERMS OF THE AGREEMENT THE ASSESSEE IS REQUIRED TO EQUIP TH E EMPLOYEES AT MANAGERIAL LEVEL WITH CORE MANAGEMENT SKILLS RELEVANT TO MANAGING THE INDIAN BUSINESS. H E FURTHER OBSERVED , SUCH TRAINING/SUPPORT SERVI CES ARE SPECIFIC TO THE INDIAN GROUP C OMPANY AND ARE NOT GENERAL IN NATURE. HE OBSERVED , SUCH SERVICES ARE RENDERED TO SUPPORT THE SALE ACTIVITIES, TO PROVIDE EXPERTISE KNOWHOW IN CONNECT ION WITH BUSINESS, DEVELOPMENT OF SALES AND MARKETING STRATEGIES RELATING TO THE MARKETING OF BUSINESS AND OTHER SERVICES. THUS, HE HELD THAT SINCE THE SERVICES PROVIDED IS FOR EQUIPPING THE EMPLOYEES OF THE INDIAN GROUP COMPANY WITH CORE MANAGEMENT SKILLS AND SINCE , PRO FESSIONALISM AN D AN ELEMENT OF EXPERTISE ARE PRES ENT AT THE BACK OF SUCH SERVICES, THEY HAVE TO BE TREATED AS TECHNICAL AND CONSULTANCY SERVICES. FURTHER, HE HELD , BY PROVIDING SERVICES THE ASSESSEE HAS ALSO MADE AVAILABLE TECHNICAL EXPERIEN CE, SKILL, KNOWHOW OR PROCESSES TO THE INDIAN GROUP C OMPANY. THUS, ULTIMATELY , HE HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE FOR PROVIDING MANAGEMENT SERVICES IS IN THE NATURE OF FTS BOTH UNDER SECTION 9 ( 1 )(VII) AS WELL AS UNDER ARTICLE 12 OF INDIA SING APORE DTAA. 10. THE LEARNED DRP WHILE CONSIDERING ASSESSEES OBJECTIONS ON THE ISSUE , RELIED UPON ITS DECISION ON IDENTICAL ISSUE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2012 - 13 AND UPHELD THE DECISIONS OF THE ASSESSING OFFICER. 11. HAVING PERU SED THE MATERIAL ON RECORD , WE FIND , IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2010 - 11 TO 2012 - 13 CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ORDER REFERRED TO IN THE EARLIER PART OF THE ORDER . W HILE DECIDING THE ISSUE TH E TRIBUNAL HAS HELD AS UNDER: 12 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE FIND THAT THE SERVICES PROVIDED UNDER THE MANAGEMENT AGREEMENT BROADLY INCLUDE (I) CONS ULTANCY SERVICES TO SUPPORT THE SALES ACTIVITIES OF SURF GOLD, (II) LEGAL SERVICES, (III) FINANCIAL ADVISORY SERVICES AND (IV) HUMAN RESOURCE ASSISTANCE. THERE IS NO DISPUTE HERE THAT UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT, RENDERING OF MANAG EMENT SERVICES WILL BE TAXABLE AS FTS. HOWEVER, EDENRED, BY VIRTUE OF SECTION 90(2) OF THE ACT, IS ELIGIBLE TO RELY ON THE PROVISIONS OF THE INDIA - SINGAPORE DTAA, SHOULD THE SAME BE MORE BENEFICIAL THAN THE PROVISIONS OF THE ACT. IN THIS REGARD, WE FRUITFU LLY RELY ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NEW SKIES SATELLITE BV & ORS (ITA NO. 473/2012) WHEREIN IT IS HELD THAT PROVISIONS OF DTAA SHALL PREVAIL OVER THE PROVISIONS OF THE ACT, IF THEY MORE BENEFICIAL. AT THIS MOMENT, WE RE FER TO ARTICLE 12(4) OF THE INDIA - SINGAPORE DTAA WHICH EXPLAINS THE EXPRESSION MAKE AVAILABLE AS UNDER : ARTICLE 12(4): THE TERM 'FEES FOR TECHNICAL SERVICES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND TO ANY PERSON IN CONSIDERATION FOR SERVICE S OF A MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE (INCLUDING THE PROVISION OF SUCH SERVICES THROUGH TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES: A. ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3 IS RECEIVED; OR B. MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW - HOW OR PROCESSES, WHICH ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN; OR C. CONSIST OF THE DEVE LOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN, BUT EXCLUDES ANY SERVICE THAT DOES NOT ENABLE THE 13 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOGY CONTAINED THEREIN. THUS AS PER THE INDIA - SINGAPORE DTAA, THE SERVICES IN THE NATURE OF MA NAGERIAL, TECHNICAL OR CONSULTANCY NATURE ARE TAXABLE AS FTS IF SUCH SERVICES ARE MADE AVAILABLE TO THE SERVICE RECIPIENT. WE FIND THAT IN THE INSTANT CASE, THE MANAGEMENT SERVICES ARE PROVIDED ONLY TO SUPPORT SURFGOLD IN CARRYING ON ITS BUSINESS EFFICI ENTLY AND RUNNING THE BUSINESS IN LINE WITH THE BUSINESS MODEL, POLICIES AND BEST PRACTICES FOLLOWED BY THE EDENRED GROUP. THESE SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL, KNOWHOW OR PROCESSES TO SURFGOLD. 9.1 NOW WE DISCUSS THE CASE L AWS RELIED ON BOTH SIDES. WE BEGIN WITH THE RELIANCE PLACED BY THE LD. COUNSEL. IN THE CASE OF DE BEERS MINERAL (P.) LTD., THE HONBLE KARNATAKA HIGH COURT HAS OBSERVED AS UNDER : THE TECHNICAL OR CONSULTANCY SERVICES RENDERED SHOULD BE AIMED AT AND RESU LT IN TRANSMITTING OF TECHNICAL KNOWLEDGE ETC., SO THAT THE PAYER OF THE SERVICE COULD DERIVE AN ENDURING BENEFIT AND UTILIZE THE KNOWLEDGE OR KNOW - HOW ON HIS OWN IN FUTURE WITHOUT THE AID OF THE SERVICE PROVIDER. IN OTHER WORDS, THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER SO THAT THE RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUES IN THE FUTURE WITHOUT DEPENDING ON THE PROVIDER. IN THE CASE OF INTERTEK SERVICES (307 ITR 418), THE AAR HAS OBSER VED ON THE TERM MAKE AVAILABLE AS UNDER : 'BY MAKING AVAILABLE THE TECHNICAL SKILLS OR KNOW - HOW, THE RECIPIENT OF SERVICE WILL GET EQUIPPED WITH THAT KNOWLEDGE OR EXPERTISE AND BE ABLE TO MAKE USE OF IT IN FUTURE, INDEPENDENT OF THE SERVICE PROVIDER. IN OTHER WORDS, TO FIT INTO THE TERMINOLOGY 'MAKE AVAILABLE', THE TECHNICAL KNOWLEDGE, SKILLS ETC. MUST REMAIN WITH THE PERSON RECEIVING THE SERVICES EVEN AFTER THE PARTICULAR CONTRACT COMES TO AN 14 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 END. THE SERVICES OFFERED MAY BE THE PRODUCT OF INTENSE TECHN OLOGICAL EFFORT AND LOT OF TECHNICAL KNOWLEDGE AND EXPERIENCE OF THE SERVICE PROVIDER WOULD HAVE GONE INTO IT. BUT, THAT IS NOT ENOUGH TO FALL WITHIN THE DESCRIPTION OF SERVICES WHICH MAKE AVAILABLE THE TECHNICAL KNOWLEDGE, ETC. THE TECHNICAL KNOWLEDGE OR SKILLS OF THE PROVIDER SHOULD BE IMPARTED TO AND ABSORBED BY THE RECEIVER SO THAT THE RECEIVER CAN DEPLOY SIMILAR TECHNOLOGY OR TECHNIQUES IN FUTURE WITHOUT DEPENDING ON THE PROVIDER. IN THE CASE OF M/S BHARATI AXA GENERAL INSURANCE CO. LTD., THE AAR HAS RULED AS UNDER : '9. THE DEFINITION OF FTS AS CONTAINED IN CLAUSE (B) OF ARTICLE 12.4 IS EXPLICITLY DESIGNED TO RESTRICT THE SCOPE AND AMBIT OF THE TECHNICAL AND CONSULTANCY SERVICES. EVEN IF WE PROCEED ON THE BASIS THAT SOME OF THE SERVICES HAVE THE FLA VOUR OF IMPARTING TECHNICAL KNOWLEDGE AND EXPERIENCE TO THE RECIPIENT OF SERVICE, THE FURTHER QUESTION IS WHETHER SUCH PROVISION OF SERVICES ENABLES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. THIS TEST SPECIFICALLY LAID DO WN IN CLAUSE (B), IN OUR VIEW, IS NOT SATISFIED AND THE LEGAL POSITION CLARIFIED BY THIS AUTHORITY WHILE INTERPRETING MORE OR LESS SIMILAR TREATY PROVISIONS APPLIES WITH GREATER FORCE TO THE PRESENT CASE IN VIEW OF THE NARROW LANGUAGE EMPLOYED IN THE INDIA - SINGAPORE DTAA. PROVIDING COMMENTS AND SUGGESTIONS AFTER REVIEWING THE STRATEGIES AND PLANS DEVELOPED BY THE APPLICANT, GIVING SUGGESTIONS TO THE APPLICANT TO IMPROVE THE PRODUCT DEVELOPED BY IT SO AS TO BRING IT IN LINE WITH THE COMMON PRACTICES FOLLOWE D BY OTHER AXA ENTITIES ACROSS THE GLOBE, PROVIDING HR SUPPORT ASSISTANCE, ASSISTING THE APPLICANT IN CHOOSING COST EFFECTIVE RE - INSURANCE PARTNERS, REVIEWING THE ACTUARIAL METHODOLOGIES DEVELOPED BY THE APPLICANT AND PROVIDING SUGGESTIONS AND INPUTS TO AC HIEVE STANDARD ACTUARIAL PRACTICES AND PROCESSING GUIDELINES IN CONNECTION WITH THE SETTLEMENT OF CLAIMS, MARKETING AND RISK ANALYSIS, FALL SHORT OF THE REQUIREMENTS LAID DOWN IN THE 15 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 DEFINITION OF FEES FOR TECHNICAL SERVICES IN DTAA BETWEEN INDIA AND SINGA PORE. IT WILL BE TOO MUCH TO SAY THAT BY PROVIDING SUCH SERVICES (ASSUMING THEY ARE TECHNICAL OR CONSULTANCY SERVICES), THE APPLICANT RECEIVING THE SERVICES IS ENABLED TO APPLY THE TECHNOLOGY CONTAINED THEREIN I.E. THE TECHNOLOGY, KNOWLEDGE, SKILLS, ETC. P OSSESSED BY THE SERVICE PROVIDER OR TECHNICAL PLAN DEVELOPED BY THE SERVICE PROVIDER. WE DO NOT FIND ANYTHING IN THE IT SUPPORT SERVICES THAT ANSWER THE DESCRIPTION OF TECHNICAL SERVICES AS DEFINED IN THE TREATY. 9.2 THEN WE TURN TO THE CASE LAWS RELIED ON BY THE LD. DR. IN US TECHNOLOGY RESOURCES PVT. LTD. (SUPRA), IN TERMS OF MANAGEMENT SERVICE AGREEMENT BETWEEN THE ASSESSEE AND THE USA COMPANY, THE LATTER PROVIDES HIGHLY TECHNICAL SERVICES WHICH ARE USED BY THE ASSESSEE FOR MAKING MANAGERIAL DECISION, FINANCIAL DECISION, RISK MANAGEMENT DECISION ETC. THE SERVICE OF TECHNICAL INPUT, ADVICE, EXPERTISE ETC. RENDERED BY THE USA COMPANY ARE TECHNICAL IN NATURE AS PROVIDED IN CLAUSE 4(B) OF THE ARTICLE 12 OF THE DTAA. IT IS FOUND THAT THIS CASE IS REVERSED BY THE HONBLE KERALA HIGH COURT IN 97 TAXMANN.COM 642 DATED 09.08.2018, WHEREIN IT IS HELD THAT FEES FOR MANAGEMENT SERVICES RECEIVED BY US COMPANY WOULD NOT BE TAXABLE IN INDIA AS THERE IS NO TRANSFER OF TECHNICAL KNOWLEDGE BY US COMPANY TO INDIAN COMPANY. IN SHELL INDIA MARKETS (P.) LTD. (SUPRA), THE APPLICANT IS AN INDIAN COMPANY, IT HAS A NETWORK OF RETAIL FUEL STATIONS IN INDIA. SIPCL IS A GROUP COMPANY OF ASSESSEE INCORPORATED IN UK. IT IS IN THE BUSINESS OF PROVIDING CONSULTANCY SERVICES TO VARIOUS GR OUP COMPANIES. THE APPLICANT HAS ENTERED INTO COST CONTRIBUTION AGREEMENT (CCA) WITH SIPCL FOR PROVISIONS OF GENERAL BUSINESS SUPPORT SERVICES (BSS). WHILE PROVIDING GENERAL BSS, SIPCL WORKS CLOSELY WITH THE EMPLOYEES OF THE APPLICANT AND SUPPORTS/ADVICES THEM. THUS, GENERAL BSS IS MADE AVAILABLE TO THE APPLICANT. HOWEVER, WE FIND THAT SUBSEQUENTLY, AFTER CONSIDERING THE DECISION IN THE CASE OF SHELL INDIA (SUPRA), THE MUMBAI ITAT IN THE 16 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 CASE OF LINKLATERS LLP (ITA NO. 1690/MUM/2015) DATED 31.01.2017 HELD T HAT FROM NONE OF LEGAL ADVISORY SERVICES IT CAN BE SAID THAT TECHNICAL KNOWLEDGE, SKILL, EXPERIENCE, KNOWHOW OR PROCESS REMAINED WITH THE CLIENTS TO WHOM SERVICES WERE RENDERED BY THE ASSESSEE, EVEN AFTER THE RENDITION OF SERVICES WAS COMPLETED AND AGREEME NT CAME TO AN END. THESE SERVICES WERE OF PURELY LEGAL ADVISORY NATURE; IT CANNOT BE SAID THAT RECIPIENT OF THE SERVICES WAS IN A POSITION TO DUPLICATE SIMILAR SKILL OR TECHNOLOGY OR TECHNIQUES IN FUTURE WITHOUT THE AID OR ASSISTANCE OF THE ASSESSEE FOR CA RRYING OUT SIMILAR ASSIGNMENTS. IN THE CASE OF PERFETTI VAN MELLE HOLDINGS BV (SUPRA), THE APPLICANT IS A COMPANY BASED IN NETHERLANDS AND IT IS IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR CONFECTIONARY AND GUN. IT ALSO PROVIDES OPERATIONAL AND OTHER SUPPORT SERVICES FOR THE BENEFIT OF COMPANIES OF PERFETTI GROUP SITUATED IN VARIOUS COUNTRIES. IT HAS ENTERED INTO A SERVICE AGREEMENT WITH THE GROUP COMPANY (PERFETTI INDIA). THE AAR HELD THAT WHEN THE EXPERTISE IN RUNNING THE INDUSTRY RUN BY THE GROUP I S PROVIDED TO THE INDIAN ENTITY IN THE GROUP TO BE APPLIED IN RUNNING THE BUSINESS, THE EMPLOYEES OF THE INDIAN ENTITY GET EQUIPPED TO CARRY ON THAT BUSINESS MODEL ON THEIR OWN WITHOUT REFERENCE TO SERVICE PROVIDER, WHEN THE SERVICE AGREEMENT COMES TO AN E ND. IT IS NOT AS IF FOR MAKING AVAILABLE, THE RECIPIENT MUST ALSO BE CONVEYED SPECIALLY THE RIGHT TO CONTINUE THE PRACTICE PUT INTO EFFECT AND ADOPTED UNDER THE SERVICE AGREEMENT ON ITS EXPIRY. IT IS FOUND THAT THIS CASE IS REVERSED AND SET ASIDE FOR FRESH ADJUDICATION BY THE HONBLE DELHI HIGH COURT IN 52 TAXMANN.COM 161 DATED 30.09.2014 AND HENCE CANNOT BE MADE APPLICABLE. 9.3 WE FIND THAT IN VIEW OF THE FACTUAL MATRIX DELINEATED AT PARA 9 ABOVE, THE CASE LAWS NARRATED AT PARA 9.1 HEREINBEFORE I.E. DE BE ERS MINERAL (P.) LTD; INTERTEK SERVICES; M/S BHARATI AXA GENERAL INSURANCE CO. LTD. ARE APPLICABLE TO THE INSTANT CASE. THEREFORE, WE 17 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 DELETE THE ADDITION OF RS.73,61,951/ - MADE BY THE AO TOWARDS MANAGEMENT SERVICES FEES AND ALLOW THE 3RD GROUND OF APPEAL. 12. F ACT S BEING IDENTICAL , RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN ASSESSEES OWN CASE, AS REFERRED TO ABOVE, WE HOLD THAT THE MANAGEMENT FEE RECEIVED BY THE ASSESSEE CANNOT BE TREATED AS FTS UNDER ARTICLE 12 (4) OF THE INDIA SI NGAPORE TAX TREATY. THEREFORE, WE HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS MANAGEMENT FEE IS NOT TAXABLE AT THE HANDS OF THE ASSESSEE. THIS GROUND IS ALLOWED. 13. IN GROUND NO. 4, THE ASSESSEE HAS CHALLE NGED THE TAXABILITY OF RS. 1,08,56,405 / - RECEIVED TOW ARDS REFERRAL FEE BY TREATING IT AS ROYALTY AND FTS. 14. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSES HAD RECEIVED AN AMOUNT OF RS. 1,08,56,405/ - TO WARDS REFERRAL FEE FROM INDIAN GROUP C OMPANY M/S SURFGOLD.COM (INDIA) PRIVATE LTD. AS P E R AN AGREEMENT WITH THE INDIAN GROUP C OMPANY THE ASSESSEE REFERS ITS GLOBAL CLIENT S I NTERESTED IN AVAILING CUSTOMER RELATIONSHIP MANAGEMENT S ERVICES IN INDIA TO THE INDIAN GROUP C OMPANY. AS PER THE AGREEMENT, THE INDIAN GROUP C OMPANY IS REQUIRED TO PROVID E SERVICES TO THE REFERRED CLIENT FROM THEIR OFFICE IN INDIA. THUS, BY VIRTUE OF SUCH AGR EEMENT, THE INDIAN GROUP C OMPANY PROVIDES THE SERVICES TO GLOBAL CLIENT S AND IN TERMS OF THE AGREEMENT SHARES A PART OF THE FEE RECEIVED BY IT WITH THE ASSESSEE. T HOUG H, THE ASSESSEE CLAIMED THAT THE AMOUNT RECEIVED TOWARDS REFERRAL FEE IS NEITHER ROYALTY NOR FTS UND ER ARTICLE 12 OF THE TAX TREATY, H OWEVER, REJECTING THE CLAIM OF THE ASSESSEE , THE ASSESSING OFFICER HELD THAT THE PAYMENT RECEIVED BY THE ASSESSEE IS TOWAR DS TRAN SFER O F RIGHTS IN RESPECT OF OR THE IMPARTING OF ANY INFORMATION CONCERNING OR PROCESS OR SIMILAR PROPERTY. THUS, IT HAS TO BE TREATED AS ROYALTY. ACCORDINGLY , HE BROUGHT IT TO TAX WHILE FRAMING THE DRAFT ASSESSMENT ORDER. WHILE C ONSIDERING ASSESSEE S OBJECTIONS ON THE ISSUE , LEARNED DRP RELYING UPON ITS DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2012 - 13 HELD THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS IN THE NATURE OF ROYALTY AND FTS. 18 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 15. HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE MATERIAL ON RECORD, WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2010 - 11 TO 2012 - 13 . W HILE DECIDING THE ISSUE THE TRIBUNAL , IN THE ORDER REFERRED TO EARLIER, THE TRIBUN AL HAS RECORDED A CATEGORICAL FINDING THAT THE REFERRAL FEE IS NEITHER IN THE NATURE OF ROYALTY N OR FTS. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE REPRODUCED HERE UNDER: - 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN THE INSTANT CASE, THE APPELLANT HAS RECEIVED FEES FOR REFERRAL SERVICES/OTHER SERVICES OF RS.39,94,209/ - FROM SURF GOLD IN THE YEAR UNDER CONSIDERATION. IT IS RELEVANT TO MENTION HER E THAT AS PER THE INDIA - SINGAPORE DTAA, THE SERVICES IN THE NATURE OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE ARE TAXABLE AS FTS, IF SUCH SERVICES ARE MADE AVAILABLE TO THE SERVICE RECIPIENT. IN THE INSTANT CASE, REFERRAL SERVICES/OTHER SERVICES ARE PROVIDED TO SUPPORT SURF GOLD IN CARRYING ON ITS BUSINESS. THESE SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL, KNOWHOW OR PROCESSES TO SURFGOLD BECAUSE THERE IS NO TRANSMISSION OF THE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL ETC. FROM THE AP PELLANT TO SURFGOLD OR ITS CLIENTS. IN THE CASE OF CUSHMAN & WAKEFIELD (S) PTE. LTD. (SUPRA), THE APPLICANT A FOREIGN COMPANY BASED IN SINGAPORE IS ENGAGED IN THE BUSINESS OF RENDERING REAL ESTATE SERVICES TO ITS LOCAL AND INTERNATIONAL CLIENTS. THE APPLI CANT HAS DEVELOPED CERTAIN INTERNATIONAL CLIENT RELATIONSHIPS AND IN ACCORDANCE WITH GLOBAL POLICY OF THE GROUP, VARIOUS OFFICES PROVIDE REFERRAL SERVICES TO OTHER CUSHMAN & WAKEFIELD (C&W) OFFICES. THE APPLICANT ENTERED INTO A REFERRAL AGREEMENT WITH INDI AN GROUP COMPANY WHEREBY THE APPLICANT REFERS/RECOMMENDS POTENTIAL CUSTOMERS DESIROUS OF 19 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 OBTAINING REAL ESTATE CONSULTING AND ASSOCIATED SERVICES IN INDIA. FURTHER THE APPLICANT WAS NOT RESPONSIBLE FOR PERSUADING THE CUSTOMERS TO AVAIL THE SERVICES OF THE INDIAN GROUP COMPANY, NOR NEGOTIATING OR COLLECTING FEE CHARGED BY INDIAN GROUP COMPANY FROM THE REFERRED CUSTOMERS. AS CONSIDERATION FOR SUCH REFERRAL SERVICES, A PERCENTAGE OF THE AMOUNT REALIZED FROM THE REFERRED CUSTOMERS (I.E. 30% ON GROSS AMOUNT REAL IZED) WAS PAID TO THE APPLICANT. THE AAR HELD THAT REFERRAL FEE RECEIVED IN SINGAPORE BY THE APPLICANT, A SINGAPOREAN COMPANY FROM AN INDIAN COMPANY FOR REFERRING CUSTOMERS TO THE LATTER IS NEITHER BUSINESS INCOME U/S 9(1)(I) NOR ROYALTY U/S 9(1)(VI) NOR FEE FOR TECHNICAL SERVICES U/S 9(1)(VII) R.W. ARTICLE 12(4)(B) OF THE DTAA BETWEEN INDIA & SINGAPORE AND, THEREFORE, IT IS TAXABLE AS BUSINESS INCOME IN SINGAPORE ONLY AS THE APPLICANT HAS NO PE IN INDIA ; IMPUGNED RECEIPT NOT BEING CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE IT ACT OR UNDER THE PROVISIONS OF DTAA, SECTION 195 IS NOT ATTRACTED. IN REAL RESOURCING LTD. (SUPRA), THE AAR, IN THE CONTEXT OF THE INDIA - UK DTAA, AFTER RELYING ON THE CUSHMAN & WAKEFIELD RULING (SUPRA) HELD THAT REFERRAL FEE REC EIVED BY A UK COMPANY (APPLICANT) FROM INDIA BASED RECRUITMENT AGENCY FOR REFERRING POTENTIAL INDIAN CLIENTS AND CANDIDATES WAS NOT ROYALTY OR FTS. THE RELEVANT OBSERVATIONS OF THE AAR IN THE CONTEXT OF ARTICLE 13 DEALING WITH ROYALTY/FTS IS AS UNDER : '10 . COLLECTING DATA AND ANALYZING IT AND MAKING A DATABASE FOR PROVIDING INFORMATION ON SUITABLE CANDIDATES FOR RECRUITMENT, EVEN IF THEY ARE IN THE NATURE OF CONSULTANCY SERVICES, CANNOT BE CONSIDERED TO BE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT/APPLICAT ION OF THE RIGHT OR INFORMATION REFERRED TO IN PARA 3(A). MOREOVER, BY ACCESS TO THE DATABASE, IT CANNOT BE SAID THAT THE INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE WILL BE TRANSMITTED BY THE APPLICANT TO THE RECRUITING AGENCIES . IF THE CONTENTION OF REVENUE 20 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 IS ACCEPTED, IT WOULD AMOUNT TO UNWARRANTED EXPANSION OF THE TERMS FTS AND ROYALTIES. CONSIDERATION FOR PROVIDING INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE BASICALLY INVOLVES THE SHARING OF TECHNI CAL KNOW - HOW AND EXPERIENCE WHICH IS NOT THE CASE HERE........ WE DO NOT THINK THAT THE CRITERION ENVISAGED BY ART. 13.4(A) OF DTAA HAS BEEN SATISFIED IN THE INSTANT CASE. IN KNIGHT FRANT (INDIA) (P.) LTD. (SUPRA), THE TRIBUNAL HELD THAT (I) WHERE REFER RAL FEES WAS RECEIVED BY FOREIGN CONCERN FOR INTRODUCING CLIENTS TO ASSESSEE - INDIAN COMPANY, PROVIDING INTERNATIONAL REAL ESTATE ADVISORY AND MANAGEMENT SERVICES, SINCE REFERRAL SERVICES WERE RENDERED ENTIRELY OUTSIDE INDIA, IT WOULD NOT FALL WITHIN THE SC OPE OF TOTAL INCOME OF SAID FOREIGN CONCERN AS PER SECTION 5(2) AND (II) REFERRAL FEES PAID BY ASSESSEE - INDIAN COMPANY FOR AVAILING REFERRAL SERVICES WHICH WERE RENDERED BY FOREIGN CONCERN ENTIRELY IN USA WOULD CONSTITUTE BUSINESS PROFITS OF FOREIGN COMP ANY UNDER ARTICLE 7 OF THE INDIA - USA DTAA; IN ABSENCE OF PE IN INDIA, IT WAS NOT TAXABLE IN INDIA. THE DISTILLATION OF PRECEDENTS MUST NOW BE APPLIED BY US TO THE FACTS OF THE PRESENT CASE. WE ARE OF THE CONSIDERED VIEW THAT IN THE CONTEXT OF THE ABOVE FA CTUAL SCENARIO AND POSITION OF LAW, THE REVENUES UNDER THE REFERRAL AGREEMENT IS NOT TAXABLE IN THE HANDS OF THE APPELLANT AS ROYALTY UNDER THE ACT AND/OR INDIA - SINGAPORE DTAA OR FTS UNDER THE INDIA - SINGAPORE DTAA. THEREFORE, WE DELETE THE ADDITION OF RS.3 9,94,209/ - MADE BY THE AO TOWARDS REFERRAL FEE AND ALLOW THE 4TH & 5TH GROUND OF APPEAL. 16. FACTS BEING IDENTICAL , RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE , WE HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE NOT BEING I N THE NATURE OF ROYALTY OR FTS EI THER UNDER THE ACT OR 21 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 UNDER THE TAX TREATY , IS NOT TAXABLE AT THE HANDS OF THE ASSESSEE. THIS GROUND IS ALLOWED. 17. IN GROUND NO. 5, THE ASSESSEE HAS CHALLE NGED THE LEVY OF EDUCATION AND S ECONDARY A ND HIGHER EDUCATION CESS. IN VIEW OF OUR DECISION IN GROUND NO. 2, 3 AND 4 , HEREIN BEFORE , THIS ISSUE HAS BECOME PURELY ACADEMIC IN THE PRESENT APPEAL. THEREFORE, THERE IS NO NEED TO ADJUDICATE THE SAME. HOWEVER, THE ISSUE IS KEPT OPEN FOR DELIBERATION IF IT ARISES IN ANY OTHER APPEAL IN FUTURE. 18. IN GROUND NO. 6, THE ASSESSEE HAS RAISED THE ISSUE OF SHORT GRANT OF TDS , WHEREAS , IN GROUND NO. 7 THE ASSESSEE HAS RAISED THE ISSUE OF SHORT GRANT OF INTEREST U /S 2 44A OF THE ACT. 19. HAVING HEARD THE PARTIES, W E DIRECT THE ASSESSING OFFICER TO VERIFY THE RELEVANT FACTS AND ALLOW CREDIT FOR TDS AS WELL AS INTEREST ON REFUND U/S 244A AS PER THE PROVISIONS OF THE ACT. G ROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT , APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER , 2020 . SD/ - SD/ - ( N.K. PRADHAN ) ( S AKTIJIT DEY ) ACCOUNTANT MEMBE R JUDICIAL MEMBER MUMBAI ; DATED: 23 / 1 0 /2020 ALINDRA, PS 22 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 23 ITA NO. 2178 / MUM/2017 ASSESSMENT YEAR: 2013 - 14