Appeal Details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 6854 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2024
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
I
Next Hearing Date
11-04-2024
Assessment Year
2019-2020
Appeal Filed On
22-09-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “I” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 2460/MUM/2022 Assessment Year: 2019-2020 Gartner Ireland Ltd., 3 rd floor, Two Park Place, Hatch Street, Dublin 2, Ireland D02 NP94. Vs. DCIT-2(3)(2), 17 th floor, 1711, Air India Building, Nariman Point, Mumbai-400021. PAN No. AACCG 2919 B Appellant Respondent Assessee by : Mr. Farooq Irani Revenue by : Mr. A.K. Ambastha, Sr. DR Date of Hearing : 12/04/2024 Date of pronouncement : 30/05/2024 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against final assessment order dated 27.07.2022 , which has been passed by the Ld. Assistant Commissioner of Income-tax-International Taxation Circle 2(3)(2), Mumbai (in short ‘the Assessing Officer’) pursuant to the direction of the Ld. Dispute Resolution Panel (DRP) dated 15.06.2022 for assessment year 2019-2020. 2. The grounds raised by the assessee in its appeal are reproduced as under: Ground No. 1: Income 1.1 On the facts and circumstances of the case and in law, the Learned Deputy Commissioner of Income Mumbai (hereinafter referred to as the DRP') have erred in confirming that the entire income earned by way of sale of online subscription products amounting to Rs. 86,52,72,951 by the Appellant during the captioned year are tax tax Act, 1961 and under Article 12 of India Avoidance Agreement. 1.2 On the facts and circumstances of the case and in law, the Ld. AO and DRP have failed to appreciate that the Appellant is for non online subscription copyright nor transfer of rights to use the copyright and accordingly, erred in considering the income earned by Appellant as Royalty. 1.3 The Appellant does not have any Permanent establishment (PE") in India in accordance with Article 7 read with Article 5 of the DTAA between India and Ireland. Hence, the consideration received by A subscription / access fees for the sale of online subscription is in the nature of business income not taxable in absence of PE in India. Ground No. 2: Section 234D of th 2.1 On the facts and circumstances of the case and in law, the levy of interest under Section be deleted once the relief as sought under Appellant. Ground No. 3: of the Act 3.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. Ground No. 4: 271BA of the Act 4.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271BA of the Act. 3. Briefly stated, facts of the case are that the Ireland ltd (GIL), is a company incorporated in the republic of Ireland and is a resident of Ireland for tax purpose in terms of Ground No. 1: - Erroneous treatment of Business Income as "Royalty" 1.1 On the facts and circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax - 2(3)(2) (Ld. AO) and further the DRP Mumbai (hereinafter referred to as the DRP') have erred in confirming that income earned by way of sale of online subscription products amounting to Rs. 86,52,72,951 by the Appellant during the captioned year are taxable as Royalty under Section 9(1)(vi) of the Income tax Act, 1961 and under Article 12 of India - Ireland Double Taxation Avoidance Agreement. 1.2 On the facts and circumstances of the case and in law, the Ld. AO and DRP have failed to appreciate that the consideration received by the Appellant is for non-exclusive / non-transferable copyrighted article i.e., online subscription-based products and is neither towards any use of copyright nor transfer of rights to use the copyright and accordingly, erred in considering the income earned by Appellant as Royalty. 1.3 The Appellant does not have any Permanent establishment (PE") in India in accordance with Article 7 read with Article 5 of the DTAA between India and Ireland. Hence, the consideration received by Appellant by way of subscription / access fees for the sale of online subscription is in the nature of business income not taxable in absence of PE in India. Ground No. 2:- Erroneous levy of interest of Rs. 22,71,888 under Section 234D of the Act 2.1 On the facts and circumstances of the case and in law, the levy of interest under Section 234D of the Act is consequential in nature and should be deleted once the relief as sought under Ground No. 1 is allowed to the Ground No. 3: - Initiation of penalty proceedings under section 270A 3.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. Ground No. 4: - Initiation of penalty proceedings under section 271BA of the Act 4.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271BA of the Act. Briefly stated, facts of the case are that the assessee, is a company incorporated in the republic of Ireland and is a resident of Ireland for tax purpose in terms of Gartner Ireland Ltd. 2 ITA No. 2460/Mum/2022 Erroneous treatment of Business Income as "Royalty" 1.1 On the facts and circumstances of the case and in law, the Learned and further the DRP-1, Mumbai (hereinafter referred to as the DRP') have erred in confirming that income earned by way of sale of online subscription-based products amounting to Rs. 86,52,72,951 by the Appellant during the able as Royalty under Section 9(1)(vi) of the Income- Ireland Double Taxation 1.2 On the facts and circumstances of the case and in law, the Ld. AO and consideration received by the transferable copyrighted article i.e., based products and is neither towards any use of copyright nor transfer of rights to use the copyright and accordingly, erred in 1.3 The Appellant does not have any Permanent establishment (PE") in India in accordance with Article 7 read with Article 5 of the DTAA between India ppellant by way of subscription / access fees for the sale of online subscription-based products is in the nature of business income not taxable in absence of PE in India. Erroneous levy of interest of Rs. 22,71,888 under 2.1 On the facts and circumstances of the case and in law, the levy of 234D of the Act is consequential in nature and should Ground No. 1 is allowed to the Initiation of penalty proceedings under section 270A 3.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. ngs under section 4.1 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271BA of the Act. assessee, Gartner is a company incorporated in the republic of Ireland and is a resident of Ireland for tax purpose in terms of Article 4 of Double Taxation Avoidance Agreement (DTAA) entered into between India and Ireland. The GIL engaged in the business of sale of subscription based products and related services i.e. periodicals, reports and publications that highlight industry developments , review new products and technologies that provide independent research and insight on all aspect of a company’s business ( IT, Finance, HR, Marketing, Sales , Logistics etc). The Assessing Officer has produce business activity of the assessee “Business activity: 2. Gartner Ireland Limited (hereinafter incorporated in the Republic of Ireland (Ireland) and is a resident of Ireland for tax purposes in terms of Article 4 of the Double Taxation Avoidance Agreement (DAA') entered into between India and Ireland. the business of distributing Gartner Group's Research Products in the form of subscriptions, both in Ireland and through its distributors, in those territories where the Gartner Group does not have a Tocat presence. The aforesaid subscription research research and analysis that clarifies decision Technology buyers, users and vendors, and helps clients stay ahead of IT trends. Industry areas covered in such subscriptions include technology telecommunications including hardware, software and systems, services, IT management, market data and forecasts and vertical industry issues. Forms of research offered include statistical analysis, growth projections and market share rankings of suppl and the financial community. GIL sells subscriptions to its Indian customers / subscribers to access Gartner's research products over the internet from its data server which is located outside India. originally delivered through delivery; however; most clients now access research products over the Internet at www.gartner.com. GIL enters into a Services Agreement (hereinafter referred to as 'SA') with its each Gartner service purchased, setting out the details of the services to be provided and the subscription fee applicable. The Indian subscribers pay the subscription/access fees to GIL in accordance with the SA. During the assessee has received a gross subscription fee of Rs 86,52,72,951/ from a number of Indian clients. Article 4 of Double Taxation Avoidance Agreement (DTAA) entered into between India and Ireland. The GIL as stated ged in the business of sale of subscription based products and related services i.e. periodicals, reports and publications that highlight industry developments , review new products and technologies that provide independent research and insight on all ct of a company’s business ( IT, Finance, HR, Marketing, Sales , The Assessing Officer has produce business activity of the assessee, which is extracted as under: “Business activity: 2. Gartner Ireland Limited (hereinafter referred to as "GIL") is a Company incorporated in the Republic of Ireland (Ireland) and is a resident of Ireland for tax purposes in terms of Article 4 of the Double Taxation Avoidance Agreement (DAA') entered into between India and Ireland. GIL is engage the business of distributing Gartner Group's Research Products in the form of subscriptions, both in Ireland and through its distributors, in those territories where the Gartner Group does not have a Tocat presence. The aforesaid subscription research products stated to consist of qualitative research and analysis that clarifies decision-making for Information Technology buyers, users and vendors, and helps clients stay ahead of IT trends. Industry areas covered in such subscriptions include technology telecommunications including hardware, software and systems, services, IT management, market data and forecasts and vertical industry issues. Forms of research offered include statistical analysis, growth projections and market share rankings of suppliers and vendors of IT manufacturers and the financial community. GIL sells subscriptions to its Indian customers / subscribers to access Gartner's research products over the internet from its data server which is located outside India. Research subscripti originally delivered through print media and other physical means of delivery; however; most clients now access research products over the Internet at www.gartner.com. GIL enters into a Services Agreement (hereinafter referred to as 'SA') with its India customers/ subscription for each Gartner service purchased, setting out the details of the services to be provided and the subscription fee applicable. The Indian subscribers pay the subscription/access fees to GIL in accordance with the SA. During the assessee has received a gross subscription fee of Rs 86,52,72,951/ from a number of Indian clients.” Gartner Ireland Ltd. 3 ITA No. 2460/Mum/2022 Article 4 of Double Taxation Avoidance Agreement (DTAA) entered as stated is, inter-alia, ged in the business of sale of subscription based products and related services i.e. periodicals, reports and publications that highlight industry developments , review new products and technologies that provide independent research and insight on all ct of a company’s business ( IT, Finance, HR, Marketing, Sales , The Assessing Officer has produced a note of which is extracted as under: referred to as "GIL") is a Company incorporated in the Republic of Ireland (Ireland) and is a resident of Ireland for tax purposes in terms of Article 4 of the Double Taxation Avoidance GIL is engaged in the business of distributing Gartner Group's Research Products in the form of subscriptions, both in Ireland and through its distributors, in those territories where the Gartner Group does not have a Tocat presence. The products stated to consist of qualitative making for Information Technology buyers, users and vendors, and helps clients stay ahead of IT trends. Industry areas covered in such subscriptions include technology and telecommunications including hardware, software and systems, services, IT management, market data and forecasts and vertical industry issues. Forms of research offered include statistical analysis, growth projections iers and vendors of IT manufacturers and the financial community. GIL sells subscriptions to its Indian customers / subscribers to access Gartner's research products over the internet from Research subscriptions were print media and other physical means of delivery; however; most clients now access research products over the Internet at www.gartner.com. GIL enters into a Services Agreement India customers/ subscription for each Gartner service purchased, setting out the details of the services to be provided and the subscription fee applicable. The Indian subscribers pay the subscription/access fees to GIL in accordance with the SA. During the year the assessee has received a gross subscription fee of Rs 86,52,72,951/- 3.1 During the year under consideration, there is a slight change in the process of access of subscription products as compared to earlier years product category. From this year, t subsidiary i.e. Gartner India Research and Advisory Services Pvt. Ltd. (for short ‘Gartner India’) the ‘GIL’ product and now the Indian customers are required to buy the research product directly. The assessee has entered into Gartner India w.e.f. the year under consideration. 3.2 For the year under consideration, the assessee filed return of income electronically on 29.11.2019 declaring total income of Rs.13,660/- along with claim Rs.8,65,27,290/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act, 1961 (in short the ‘Act’) were Assessing Officer issued a draft assessment order dated 25.09.2021 wherein he proposed that the revenue generated from subscription was in the nature of the assessee as against claim of the assessee that same was in the nature of business income and not taxable in India any permanent establishment (PE) 4. The assessee filed ob DRP, but the assessee could not succeed and the Ld. DRP following uring the year under consideration, there is a slight change access of subscription products by ed to earlier years; otherwise there is no change in From this year, the assessee has introduced its Gartner India Research and Advisory Services Pvt. Ltd. (for short ‘Gartner India’) as an intermediary product and now the Indian customers are required to buy the research product from the ‘Gartner India’ rather than directly. The assessee has entered into a ‘reseller agreement Gartner India w.e.f. the year under consideration. For the year under consideration, the assessee filed return of income electronically on 29.11.2019 declaring total income of along with claim for refund . The return of income filed by the assessee was scrutiny and statutory notices under the , 1961 (in short the ‘Act’) were issued and complied with. The Assessing Officer issued a draft assessment order dated 25.09.2021 wherein he proposed that the revenue generated from scription was in the nature of ‘royalty’ income in the hands of assessee as against claim of the assessee that same was in the nature of business income and not taxable in India establishment (PE). The assessee filed objections against draft order before the assessee could not succeed and the Ld. DRP following Gartner Ireland Ltd. 4 ITA No. 2460/Mum/2022 uring the year under consideration, there is a slight change by the customers ; otherwise there is no change in he assessee has introduced its Gartner India Research and Advisory Services Pvt. an intermediary for subscribing product and now the Indian customers are required to buy rather than ‘GIL’ agreement’ with For the year under consideration, the assessee filed return of income electronically on 29.11.2019 declaring total income of refund amounting to . The return of income filed by the assessee was scrutiny and statutory notices under the Income-tax issued and complied with. The Assessing Officer issued a draft assessment order dated 25.09.2021 wherein he proposed that the revenue generated from sale of online income in the hands of assessee as against claim of the assessee that same was in the nature of business income and not taxable in India, in absence of against draft order before the Ld. the assessee could not succeed and the Ld. DRP following their predecessor in assessment year 2012 Tribunal in the case of the assessee for assessment year 2013 and 2014-15 [, wher Hon’ble Karnataka High Court in the case of CIT v. Wipro Ltd. (2011) 203 Taxman 621 (Karnataka) Rs.86,52,72,951/- proposed by the Assessing Officer the directions of the L impugned final assessment order on 27.07.2022 making the addition of subscription fees as royalty income which was to tax @ 10% on the gross basis as per Article 12 of the India Ireland DTAA. 5. Aggrieved, the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. 6. Before us, the Ld. Counsel containing pages 1 to 157 and also filed containing pages 1 to 84. 7. The sole ground of the appeal income from sale of online subscription based product been held by the lower authorities as the assessee of the same as in absence of any permanent establishment (PE) in India. The brief facts qua the issue in dispute are that during the year under consideration, the assessee has shown income from sale of their predecessor in assessment year 2012-13 and order of the Tribunal in the case of the assessee for assessment year 2013 where the Tribunal has followed the decision of Hon’ble Karnataka High Court in the case of CIT v. Wipro Ltd. (2011) 203 Taxman 621 (Karnataka) ] confirmed proposed by the Assessing Officer of the Ld. DRP, the Assessing Officer has passed impugned final assessment order on 27.07.2022 making the addition of subscription fees as royalty income which was 10% on the gross basis as per Article 12 of the India the assessee is in appeal before the Tribunal by way of raising grounds as reproduced above. Before us, the Ld. Counsel for the assessee filed a Paper Book containing pages 1 to 157 and also filed additional Paper Book 1 to 84. sole ground of the appeal of the assessee income from sale of online subscription based product held by the lower authorities as ‘royalty’ as against claim of the assessee of the same as ‘business income’, not in absence of any permanent establishment (PE) in India. The brief facts qua the issue in dispute are that during the year under consideration, the assessee has shown income from sale of Gartner Ireland Ltd. 5 ITA No. 2460/Mum/2022 13 and order of the Tribunal in the case of the assessee for assessment year 2013-14 e the Tribunal has followed the decision of Hon’ble Karnataka High Court in the case of CIT v. Wipro Ltd. the addition of proposed by the Assessing Officer. Pursuant to the Assessing Officer has passed impugned final assessment order on 27.07.2022 making the addition of subscription fees as royalty income which was subjected 10% on the gross basis as per Article 12 of the India- the assessee is in appeal before the Tribunal by way the assessee filed a Paper Book additional Paper Book of the assessee is in relation to income from sale of online subscription based product , which has as against claim of taxable in India in absence of any permanent establishment (PE) in India. The brief facts qua the issue in dispute are that during the year under consideration, the assessee has shown income from sale of subscription based ‘Gartner India’ to its basis and (ii) for sale assessee is eligible to claim the tax treaty been disputed either by the Asses During the year under consideration the assessee has sold subscription based product to Gartner India: (i) of Rs. 79,90,95,490 agreement: (ii) for Gartner India's sole with Research access 7.1 Regarding the subscription based product for resale by the Gartner Indian customers, the Ld. Counsel for the assessee su assessee has entered into w.e.f. 01.04.2014, under which, the subscription based product for resale relevant clauses of reseller agreement which Book pages 47-59 of the extracted as under: "Title - Reseller Agreement" This Reseller Agreement (the Agreement) is made as of April 1, 2014 (The Effective Date), berween Gartner Ireland Limited... Research & Advisory Services Pvt Ltd ... Background ... B) GIL desire to appoint Gartner India, and Gartner India desires to act, as non-exclusive product reseller ... of GIL's products.... subscription based research products/report for (i its customers in India on a ‘principal to principal’ and (ii) for sale to ‘Gartner India’ for its internal use assessee is eligible to claim the tax treaty benefits which have been disputed either by the Assessing Officer or by the Ld. DRP During the year under consideration the assessee has sold subscription based product to Gartner India: Rs. 79,90,95,490/- for resale by Gartner India pursuant to Reseller for Gartner India's sole internal use of Rs. 6,61,77,461 with Research access agreement. Regarding the first component of income from sale of product for resale by the Gartner he Ld. Counsel for the assessee su assessee has entered into a reseller agreement with under which, the ‘Gartner India subscription based product for resale to its clients in India. The reseller agreement which is available in 59 of the Paper Book consisting of 157 pages Reseller Agreement" This Reseller Agreement (the Agreement) is made as of April 1, 2014 (The Effective Date), berween Gartner Ireland Limited... "GIL)... and Gartner India Research & Advisory Services Pvt Ltd ... ) GIL desire to appoint Gartner India, and Gartner India desires to act, as exclusive product reseller ... of GIL's products.... Gartner Ireland Ltd. 6 ITA No. 2460/Mum/2022 for (i) resale by on a ‘principal to principal’ for its internal use . The benefits which have not sing Officer or by the Ld. DRP. During the year under consideration the assessee has sold for resale by Gartner India pursuant to Reseller . 6,61,77,461/- in accordance component of income from sale of product for resale by the Gartner India to its he Ld. Counsel for the assessee submitted that with Gartner India Gartner India’ purchases its clients in India. The available in Paper of 157 pages, are This Reseller Agreement (the Agreement) is made as of April 1, 2014 (The "GIL)... and Gartner India ) GIL desire to appoint Gartner India, and Gartner India desires to act, as II) Appointment and Authority of Gartner GIL hereby appoints Gartner India as a non Products in the Territory only VI. Trademarks, Trade names and Copyrig 6.01 No rights to Use or otherwise exploit .... Gartner India shall not have a right to exploit the copyri 6.02 Claim on Trademarks, Tradenames and shall not have any right to reproduce right, modify or adapt the copyrighted Products prior to resale 6.03 Ownership and Use of the Products: GIL retains th Products... Gartner India shall only supply the Products pursuant to this agreement... which provide that (i access to the Products will be restricted to the named individuals (each a "Named user")...; (fil) the user IDs and passwords will be issued by GIL at the request of Gartner India and sent directly to the Named users.... 7.2 The Ld. Counsel submitted that the ‘Gartner India’ merely transaction was a pure sale nature of the business income as per the beneficial provisions of the India Further, the Ld. Counsel the Paper Book consisting 84 pages and India resold the products purchased substantial profits submitted that Gartne subscription based products purchased from The Ld. Counsel referred to sample invoices raised by India’ available on page 73 pages. The Ld. Counsel Appointment and Authority of Gartner India GIL hereby appoints Gartner India as a non-exclusive reseller of the Products in the Territory only demarks, Trade names and Copyrights 6.01 No rights to Use or otherwise exploit .... Gartner India shall not have a right to exploit the copyrights embedded in the Products. 6.02 Claim on Trademarks, Tradenames and Copyrights: ..Gartner India shall not have any right to reproduce right, modify or adapt the copyrighted Products prior to resale 6.03 Ownership and Use of the Products: GIL retains the rights to supply the Gartner India shall only supply the Products pursuant to this agreement... which provide that (i access to the Products will be restricted to the named individuals (each a "Named user")...; (fil) the user IDs and s will be issued by GIL at the request of Gartner India and sent directly to the Named users....” The Ld. Counsel for the assessee referred to above clauses and submitted that the ‘GIL’ sells products to ‘Gartner India merely resells such products in India and thus the pure sale/purchase of the products and in the nature of the business income, not taxable in absence of PE in India as per the beneficial provisions of the India-Ireland Tax Treaty. Ld. Counsel referred to Paper Book pages 46 to 48 of the Paper Book consisting 84 pages and submitted that Gartner the products purchased from ‘GIL’ substantial profits on the resale. Further, the Ld. Counsel submitted that Gartner India has paid GST @ 18% on sale of subscription based products purchased from ‘GIL’ to its customers. The Ld. Counsel referred to sample invoices raised by available on page 73-74 of the Paper Book consisting of 84 The Ld. Counsel further submitted that Gartner India has Gartner Ireland Ltd. 7 ITA No. 2460/Mum/2022 exclusive reseller of the 6.01 No rights to Use or otherwise exploit .... Gartner India shall not have a : ..Gartner India shall not have any right to reproduce right, modify or adapt the copyrighted e rights to supply the Gartner India shall only supply the Products pursuant to this agreement... which provide that (i access to the Products will be restricted to the named individuals (each a "Named user")...; (fil) the user IDs and s will be issued by GIL at the request of Gartner India and sent referred to above clauses and Gartner India’ and products in India and thus the of the products and in the not taxable in absence of PE in India Ireland Tax Treaty. referred to Paper Book pages 46 to 48 of mitted that Gartner and has made the resale. Further, the Ld. Counsel r India has paid GST @ 18% on sale of to its customers. The Ld. Counsel referred to sample invoices raised by ‘Gartner 74 of the Paper Book consisting of 84 further submitted that Gartner India has also paid GST @ 18% under reverse charge of subscription based products from submitted that a transfer pricing scrutiny was made on Gartner India for AY 2020-21 ‘Gartner India’ were thoroughly scrutinized and the satisfied that transaction were at arm’s length and no adjustment was made. 8. On the other hand, the Ld. DR referred to the order of the lower authorities and submitted that in (supra), the Wipro Ltd. had the assessee and payment made by the Wipro Lt has been upheld by the Hon’ble Karnataka High Court nature of the ‘royalty He submitted that the Assessing Officer has also held the income from subscription of digital product as royalty u/s 9(1)(vi) Explanation 2(v) of Act read with Copyri relevant articles of the DTAA. The Ld. DR submitted that as per the definition of the royalty under Article 12 of India ‘use’ or ‘right to use digital products amounts to r ‘information’ concerning industrial experience also covers the case of the assessee because in the case of the assessee information has been experience in the field of industri also paid GST @ 18% under reverse charge mechanism of subscription based products from ‘GIL’. The Ld. Counsel further submitted that a transfer pricing scrutiny was made on Gartner 21 wherein transactions between assessee and were thoroughly scrutinized and the satisfied that transaction were at arm’s length and no adjustment On the other hand, the Ld. DR referred to the order of the rities and submitted that in the case of Wipro Ltd. (supra), the Wipro Ltd. had subscribed online research product of the assessee and payment made by the Wipro Ltd. to the assessee ld by the Hon’ble Karnataka High Court royalty’ income liable to be deduction of He submitted that the Assessing Officer has also held the income from subscription of digital product as royalty u/s 9(1)(vi) ation 2(v) of Act read with Copyright Act and also under the relevant articles of the DTAA. The Ld. DR submitted that as per the definition of the royalty under Article 12 of India-Ireland Tax Treaty right to use’ of copyright underlying copyright products amounts to royalty. Further concerning industrial, commercial or scientific covers the case of the assessee because in the case of the assessee information has been collected based on the past experience in the field of industrial commercial or Gartner Ireland Ltd. 8 ITA No. 2460/Mum/2022 mechanism on purchase . The Ld. Counsel further submitted that a transfer pricing scrutiny was made on Gartner wherein transactions between assessee and were thoroughly scrutinized and the Ld. TPO was satisfied that transaction were at arm’s length and no adjustment On the other hand, the Ld. DR referred to the order of the the case of Wipro Ltd. subscribed online research product of d. to the assessee ld by the Hon’ble Karnataka High Court as in the of tax at source. He submitted that the Assessing Officer has also held the income from subscription of digital product as royalty u/s 9(1)(vi) alongwith ct and also under the relevant articles of the DTAA. The Ld. DR submitted that as per the Ireland Tax Treaty of copyright underlying copyrighted urther, the word commercial or scientific covers the case of the assessee because in the case based on the past al commercial or scientific field ,therefore, the case of the assessee squarely falls under the definition of the royalty. The Ld. DR referred to the finding of the DRP wherein the Ld DRP has followed decision of the Co Bench in the case of the as assessment year 2007 decision of Co-ordinate Bench in assessee’s own case for AYs 2003 04, 2005-06, 2008-09, 2019 wherein the issue has been decided DR also referred to the decision of the Tribunal in ITA No. 6950/Mum/2017 and ITA No. 167/Mum/2018 for assessment year 2013-14 and 2014-15 wherein the Tribunal following the decision of the Hon’ble Karnataka High Court in the concluded that subscription fee paid by the Wipro Ltd. to Gartner Group for license to use Gartner Database was in the nature of the royalty both under the DTAA and domestic laws. Ld. DR submitted that issue in the Revenue, the grounds of appeal of the assessee need to be dismissed. 8.1 Regarding the subscription based product to Gartner India under research excess agreement for internal u Counsel for the assessee referred to research Gartner India entered into ‘Gartner India’ purchases subscription based product from the therefore, the case of the assessee squarely falls under the definition of the royalty. The Ld. DR referred to the finding of the DRP wherein the Ld DRP has followed decision of the Co Bench in the case of the assessee in ITA No. 7101/Mum/2010 for assessment year 2007-08. The Ld. DR further referred to the ordinate Bench in assessee’s own case for AYs 2003 09, 2019-10, 2010-11, 2011-12 and 2012 wherein the issue has been decided against the assessee. DR also referred to the decision of the Tribunal in ITA No. 6950/Mum/2017 and ITA No. 167/Mum/2018 for assessment year 15 wherein the Tribunal following the decision of the Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) concluded that subscription fee paid by the Wipro Ltd. to Gartner Group for license to use Gartner Database was in the nature of the royalty both under the DTAA and domestic laws. Accordingly, the Ld. DR submitted that issue in dispute being covered in favour of he grounds of appeal of the assessee need to be Regarding the second component of income for sale of subscription based product to Gartner India under research excess agreement for internal use by Gartner India Counsel for the assessee referred to research access agreement with entered into w.e.f. January 2011, under which the purchases subscription based product from the Gartner Ireland Ltd. 9 ITA No. 2460/Mum/2022 therefore, the case of the assessee squarely falls under the definition of the royalty. The Ld. DR referred to the finding of the DRP wherein the Ld DRP has followed decision of the Co-ordinate sessee in ITA No. 7101/Mum/2010 for 08. The Ld. DR further referred to the ordinate Bench in assessee’s own case for AYs 2003- 12 and 2012-13 against the assessee. The Ld. DR also referred to the decision of the Tribunal in ITA No. 6950/Mum/2017 and ITA No. 167/Mum/2018 for assessment year 15 wherein the Tribunal following the decision of case of Wipro Ltd. (supra) concluded that subscription fee paid by the Wipro Ltd. to Gartner Group for license to use Gartner Database was in the nature of the Accordingly, the vered in favour of he grounds of appeal of the assessee need to be second component of income for sale of subscription based product to Gartner India under research se by Gartner India, the Ld. ess agreement with under which the purchases subscription based product from the assessee for its sole internal use and paid research excess fees. The relevant clauses of the research access agreement referred by the Ld. Counsel are reproduced as under: "Title - 'Research Access Agreement" Background... C.... GIL desires to provide Gartn products and related research resources belonging to GIL or its licensors so that such information may be used by Garter India in providing consulting services to its clients. III. Access and Payment for Access to Reso 3.01 Grant of Access.... GIL grants to Gartner India non use the resources. 3.05 Restrictions on Use: Gartner India shall not have the right to transfer, license, pledge or otherwise use the Resources in a manner other than as stated in this agreement... V. Confidentiality General: Gartner India shall hold in confidence any and all information that it receives from GIL or from any affiliate of GIL or that it develops ("information") and shall neither publish, disseminate nor disclo Information to any third parties..." 8.2 The Ld. Counsel based products by assessee to their access was restricted consequently there is no copyright given to Gartner India thus the said transaction was article. The Ld. Counsel further submitted that the issue pertaining to sale of copyrighted copyright is now settled in view of the decision of the Hon’ble Supreme Court in the case of assessee for its sole internal use and paid research excess fees. The clauses of the research access agreement referred by the reproduced as under: 'Research Access Agreement" L desires to provide Gartner India access to published research products and related research resources belonging to GIL or its licensors so that such information may be used by Garter India in providing consulting services to its clients. . Access and Payment for Access to Resources Grant of Access.... GIL grants to Gartner India non-exclusive access to resources. 3.05 Restrictions on Use: Gartner India shall not have the right to transfer, license, pledge or otherwise use the Resources in a manner other than as ted in this agreement... V. Confidentiality General: Gartner India shall hold in confidence any and all information that it receives from GIL or from any affiliate of GIL or that it develops ("information") and shall neither publish, disseminate nor disclo Information to any third parties..." The Ld. Counsel for assessee submitted that the subscription based products by assessee to ‘Gartner India’ are copyright restricted for internal use by ‘Gartner India y there is no copyright given to Gartner India thus the was merely in the nature of sale of copyright rticle. The Ld. Counsel further submitted that the issue pertaining ed Article for sole internal use versus copyright is now settled in view of the decision of the Hon’ble Supreme Court in the case of Engineering Analysis and Centre of Gartner Ireland Ltd. 10 ITA No. 2460/Mum/2022 assessee for its sole internal use and paid research excess fees. The clauses of the research access agreement referred by the er India access to published research products and related research resources belonging to GIL or its licensors so that such information may be used by Garter India in providing consulting exclusive access to 3.05 Restrictions on Use: Gartner India shall not have the right to transfer, license, pledge or otherwise use the Resources in a manner other than as General: Gartner India shall hold in confidence any and all information that it receives from GIL or from any affiliate of GIL or that it develops ("information") and shall neither publish, disseminate nor disclose such submitted that the subscription are copyrighted and Gartner India’ only y there is no copyright given to Gartner India thus the merely in the nature of sale of copyrighted rticle. The Ld. Counsel further submitted that the issue pertaining Article for sole internal use versus sale of copyright is now settled in view of the decision of the Hon’ble Engineering Analysis and Centre of Excellence (2021) 125 taxmann.com 42 (SC) Hon’ble Bombay High Court in the case of v. Dun & Breadstreet Information Services Pvt. Ltd. [2012] 20 taxmann.com 695 (Bom.) 8.3 With reference to the history of the case submitted that as far as sale of subscription based product to Gartner India for resale by Gartner India t concerned, the reseller 01.04.2014 with ‘Gartner India Tribunal in earlier years would not apply in view of the change in the business model based on which in assessee on sale of subscription based products to resale. As far as the research for sale of subscription based products to be used solely by the Gartner India under re 2011, the Ld. Counsel submitted that Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) followed its own ruling in the case of Samsung Electronics Co. Ltd. [2012] 345 ITR 494 (Kar.). The Ld. Counsel submi case of Engineering Analysis and Centre of Excellence (supra) has reversed the ruling of the Hon’ble Karnataka High Court in the case of Samsung Electronics Company Ltd. (supra) and therefore, the decision of the Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) no longer apply Excellence (2021) 125 taxmann.com 42 (SC) and decision of the Hon’ble Bombay High Court in the case of Director of Income v. Dun & Breadstreet Information Services Pvt. Ltd. [2012] 20 taxmann.com 695 (Bom.). With reference to the history of the case, the Ld. Counsel submitted that as far as sale of subscription based product to Gartner India for resale by Gartner India to its customers in India is reseller agreement has been entered into from Gartner India’ and therefore, the order of the Tribunal in earlier years would not apply in view of the change in the business model based on which income has been offered by the assessee on sale of subscription based products to ‘Garner India resale. As far as the research access fee received from Gartner India for sale of subscription based products to be used solely by the Gartner India under research agreement effective from January the Ld. Counsel submitted that Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) followed its own ruling in the Samsung Electronics Co. Ltd. [2012] 345 ITR 494 (Kar.). The Ld. Counsel submitted that the Hon’ble Supreme Court in the case of Engineering Analysis and Centre of Excellence (supra) has reversed the ruling of the Hon’ble Karnataka High Court in the case of Samsung Electronics Company Ltd. (supra) and therefore, the Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) no longer apply in the case of assessee. Gartner Ireland Ltd. 11 ITA No. 2460/Mum/2022 and decision of the Director of Income-tax v. Dun & Breadstreet Information Services Pvt. Ltd. [2012] 20 the Ld. Counsel submitted that as far as sale of subscription based product to o its customers in India is agreement has been entered into from and therefore, the order of the Tribunal in earlier years would not apply in view of the change in come has been offered by the Garner India’ for ess fee received from Gartner India for sale of subscription based products to be used solely by the search agreement effective from January the Ld. Counsel submitted that Hon’ble Karnataka High Court in the case of Wipro Ltd. (supra) followed its own ruling in the Samsung Electronics Co. Ltd. [2012] 345 ITR 494 (Kar.). tted that the Hon’ble Supreme Court in the case of Engineering Analysis and Centre of Excellence (supra) has reversed the ruling of the Hon’ble Karnataka High Court in the case of Samsung Electronics Company Ltd. (supra) and therefore, the Hon’ble Karnataka High Court in the case of Wipro 8.4 In view of the above arguments, the Ld. Counsel submitted that income from sale of subscription based pr Gartner India (i) of Rs.79,90,95,490/ principle to principle basis under the income from sale of subscription based products for use of Gartner India of Rs.6,61,77,461/ agreement, are in the nature of business income Since the assessee did not have a PE in India income would not be taxable in India under the beneficial provisions of the Tax Treaty. 8.5 Regarding the research access fee from the documents the ‘Gartner India’ has further resold or provided consultancy based on the products purchased from the assessee which will be in the nature of use of the copyright in the products of the assessee and therefore, matter may be restored back for detailed verification of the use of the product or use of the copyright in those products by Gartner India. 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. dispute before us is whether the income receive from Gartner India is assessable in the hands of the assessee as business income or Royalty. The term ‘Royalty’ has been defined under the DTAA as under: In view of the above arguments, the Ld. Counsel submitted that income from sale of subscription based pr s.79,90,95,490/- for resale by Gartner India on principle to principle basis under the reseller agreement and (ii) the income from sale of subscription based products for use of Gartner India of Rs.6,61,77,461/- under research access are in the nature of business income and not royalty. ince the assessee did not have a PE in India, the said income would not be taxable in India under the beneficial provisions of the Tax Treaty. egarding the research access fee, the Ld. DR from the documents submitted, it could not be deciphered whether has further resold or provided consultancy based on the products purchased from the assessee which will be in the nature of use of the copyright in the products of the assessee and therefore, matter may be restored back for detailed verification of e of the product or use of the copyright in those products by We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. dispute before us is whether the income received by the assessee from Gartner India is assessable in the hands of the assessee as business income or Royalty. The term ‘Royalty’ has been defined under the DTAA as under: Gartner Ireland Ltd. 12 ITA No. 2460/Mum/2022 In view of the above arguments, the Ld. Counsel for assessee submitted that income from sale of subscription based products to for resale by Gartner India on agreement and (ii) the income from sale of subscription based products for sole internal under research access and not royalty. the said business income would not be taxable in India under the beneficial Ld. DR submitted that it could not be deciphered whether has further resold or provided consultancy based on the products purchased from the assessee which will be in the nature of use of the copyright in the products of the assessee and therefore, matter may be restored back for detailed verification of e of the product or use of the copyright in those products by We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in d by the assessee from Gartner India is assessable in the hands of the assessee as business income or Royalty. The term ‘Royalty’ has been defined ARTICLE 12 : Royalties and fees for technical services technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services. 3. payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes for radio o mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft, or for information concerning industrial, comm The term “fees for technical services” means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personne does not include payments for services mentioned in Articles 14 and 15 of this Convention. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base si respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the cas or fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub resident of that State. Where, however, the person payi for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection ARTICLE 12 : Royalties and fees for technical services - 1. Royalties or fees for chnical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for technical services may also be taxed in the Contracting State , and according to the laws of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services. 3. (a) The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft, or for information concerning industrial, commercial or scientific experience; (b) The term “fees for technical services” means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personne does not include payments for services mentioned in Articles 14 and 15 of this Convention. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of ing State, carries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply. 5. Royalties or fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection Gartner Ireland Ltd. 13 ITA No. 2460/Mum/2022 1. Royalties or fees for chnical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for technical services may also be taxed in the Contracting State , and according to the laws of that State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees (a) The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph r television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft, ercial or scientific experience; (b) The term “fees for technical services” means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of ing State, carries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein, or performs in that other State independent tuated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the e may be, shall apply. 5. Royalties or fees for technical services shall be deemed to arise in a Contracting State division, a local authority or a ng the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right o exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. 9.1 The term ‘Royalty’ has been defined Explanatin-2 below the section 9 Explanation 2. - For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for-(i)the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; working of, or the use process or trade-mark or similar property; model, design, secret formula or process or trade mark or similar property; imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; industrial, commercial or scientific equipment but not including the amounts referred to in section 44 1.4.2002).](v)the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, ar with which the liability to pay the royalties or fees for technical incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. ‘Royalty’ has been defined in Act under 2 below the section 9 as under: For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") he transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;(ii)the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or mark or similar property;(iii)the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;[(iv-a) the use or right to use, any industrial, commercial or scientific equipment but not including the amounts erred to in section 44-BB;] [ Inserted by Act 14 of 2001, Section 4 (w.e.f. the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or Gartner Ireland Ltd. 14 ITA No. 2460/Mum/2022 with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical r information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article e, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. in Act under For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") he transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade the imparting of any information concerning the of, a patent, invention, model, design, secret formula or the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;(iv)the imparting of any information concerning technical, industrial, commercial or a) the use or right to use, any industrial, commercial or scientific equipment but not including the amounts [ Inserted by Act 14 of 2001, Section 4 (w.e.f. the transfer of all or any rights (including the granting of a licence) tistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or connection with the activities referred to in [sub Substituted by Act 14 of 2001, Section 4, for " sub 1.4.2002).]. 9.2 Therefore, the issue in dispute transaction of the assessee under reference, characterized in the nature of business income or ‘Royalty’ income under the DTAA or under domestic law component of the income i.e. income from sale of subscription to ‘Gartner India’ for further resale to its customers the assessee has change consideration. Prior to assessment year under consideration assessee used to sale to the customers directly consideration, according to India’ as intermediary its research products to charging certain markup 9.3 We have examined the financial of ‘Gartner India’ furnished before us by the assessee vide additional paper book perusal of profit and loss account ( India’ has shown revenue from operations at Rs. 7,37,49,79,570/ Break up this revenue has been provided on PB video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or(vi)the rendering of any services in connection with the activities referred to in [sub-clauses (i) to (iv), (iva) and (v)] Substituted by Act 14 of 2001, Section 4, for " sub-clauses (i) to (v)" (w.e.f. the issue in dispute before us is whether the transaction of the assessee under reference, characterized in the nature of business income or ‘Royalty’ under the DTAA or under domestic law. As far as component of the income i.e. income from sale of subscription to for further resale to its customers, is concerned, assessee has changed its business model w.e.f. year under rior to assessment year under consideration assessee used to sale subscription of its digital research products to the customers directly, whereas in the year under according to the assessee, it has engaged as intermediary. It is submitted that the assessee is selli its research products to ‘Gartner India’ and ‘Gartner India certain markup, is further selling to customers in India. We have examined the financial of ‘Gartner India’ furnished before us by the assessee vide additional paper book perusal of profit and loss account ( PB-11). We find that has shown revenue from operations at Rs. 7,37,49,79,570/ Break up this revenue has been provided on PB-23, where revenue Gartner Ireland Ltd. 15 ITA No. 2460/Mum/2022 video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution the rendering of any services in clauses (i) to (iv), (iva) and (v)] [ clauses (i) to (v)" (w.e.f. is whether the transaction of the assessee under reference, could be characterized in the nature of business income or ‘Royalty’ As far as first component of the income i.e. income from sale of subscription to , is concerned, its business model w.e.f. year under rior to assessment year under consideration, the research products whereas in the year under has engaged ‘Gartner he assessee is selling Gartner India’ after to customers in India. We have examined the financial of ‘Gartner India’ furnished before us by the assessee vide additional paper book –III. On e find that ‘Garnter has shown revenue from operations at Rs. 7,37,49,79,570/-. 23, where revenue from sale of subscription based products has been reported at Rs. 2,52,64,68,624/-. The purchase of subscription has been reported at Rs. 35,78,90,830/ have sold the subscription based products to its Indian subsid but no stock of subscription based product is found in the books of ‘Gartner India’. In view of the assessee of sale of products to its subsidiary assessee was asked to correlate sale of e product to ‘Gartner India Gartner India to end customer. copy of the sample invoice issued by the assessee on India’. The relevant copy of the in extracted as under: from sale of subscription based products has been reported at Rs. . The purchase of subscription has been reported at Rs. 35,78,90,830/-(PB-23) . Though, the assessee claimed to have sold the subscription based products to its Indian subsid but no stock of subscription based product is found in the books of ‘Gartner India’. In view of the above doubt arose in the claim of the assessee of sale of products to its subsidiary and further resale assessee was asked to correlate sale of each subscription based Gartner India’ and further resale of the same product by Gartner India to end customer. Before us, the assessee has filed a copy of the sample invoice issued by the assessee on . The relevant copy of the invoice available on Gartner Ireland Ltd. 16 ITA No. 2460/Mum/2022 from sale of subscription based products has been reported at Rs. . The purchase of subscription has been reported . Though, the assessee claimed to have sold the subscription based products to its Indian subsidiary, but no stock of subscription based product is found in the books of doubt arose in the claim of the and further resale, the ach subscription based and further resale of the same product by Before us, the assessee has filed a copy of the sample invoice issued by the assessee on ‘Gartner voice available on PB-III/68 as 9.4 As part of schedule of above invoice, t list of periodicals (PB invoice. The list contains only product name f is noted that the assessee has raised a those products, but quantity of each product sold or sale price of each product was not provided clarification by the Bench of price for which each product was sold by the assessee to India’. In next hearing, the assessee provided a basis of charging the ‘Gartner India’ for sale of products under: Gartner Irela Statement of working of Gartner Ireland Invoices raised on Gartner India Particulars Gross Subscription-based product Revenue of Gartner India as per its P&L for the year ended 31 March 2019 Less: Direct & Indirect Operating Cost of Gartner India relating to Subscription-based product Revenues Less: Return on Subscription- based product sales to Gartner India @ 3.7% Gartner Ireland's Aggregate Billing to Gartner India in respect of the subscription- based products (excluding Research Access Fees) As part of schedule of above invoice, the assessee list of periodicals (PB-III/69-72) which were sold under the above invoice. The list contains only product name from Sr No. 1 to 179. It is noted that the assessee has raised a consolidated invoice for all se products, but quantity of each product sold or sale price of each product was not provided. Therefore, the matter by the Bench and assessee was asked to supply basis of price for which each product was sold by the assessee to . In next hearing, the assessee provided a basis of charging for sale of products, which is reproduced as Gartner Ireland Limited ('the Appellant 1 / 'GIL') AY 2019-20 Statement of working of Gartner Ireland Invoices raised on Gartner India Amount (INR) Reference to Paper Books year (A) 3,06,99,26,300 Pg No 23 as per paper book consisting of 84 pages submitted on 09 Nov 2023 Operating Cost of Gartner India (B) 2,15,78,01,737 Pg No 37 as per paper book consisting of 84 pages submitted on 09 Nov 2023 expenses (295,68,97,227) includes operating cost (215,78,01,737) + cost of goods sold (79,90,95,490) based product sales to Gartner (C) 11,30,29,072 Pg No 59 and 48 as per paper book consisting of 157 pages submitted on 10Oct2023 (D)=(A)-(B)-(C) 79,90,95,490 Pg No 23 and 45 as per paper book consisting of 84 pages submitted on 09 Nov 2023 Gartner Ireland Ltd. 17 ITA No. 2460/Mum/2022 assessee enclosed a 72) which were sold under the above m Sr No. 1 to 179. It consolidated invoice for all se products, but quantity of each product sold or sale price of matter was fixed for assessee was asked to supply basis of price for which each product was sold by the assessee to ‘Gartner . In next hearing, the assessee provided a basis of charging which is reproduced as Statement of working of Gartner Ireland Invoices raised on Gartner India Reference to Paper Books Pg No 23 as per paper book consisting of 84 pages submitted on 09 Nov 2023 No 37 as per paper book consisting of 84 pages submitted on 09 Nov 2023 -Segment expenses (295,68,97,227) includes operating cost (215,78,01,737) + cost of goods sold (79,90,95,490) Pg No 59 and 48 as per paper book consisting of 157 pages submitted on 10Oct2023 Pg No 23 and 45 as per paper book consisting of 84 pages submitted on 09 Nov 2023 9.5 Further, the assessee submitted a sample copy of consolidated invoice raised for sale of subscription for the period from 1/4/2018 to 30/6/2018 ( ), which is extracted as under: Further, the assessee submitted a sample copy of consolidated invoice raised for sale of subscription of products to od from 1/4/2018 to 30/6/2018 (one quarter of the year , which is extracted as under: Gartner Ireland Ltd. 18 ITA No. 2460/Mum/2022 Further, the assessee submitted a sample copy of consolidated products to ‘Gartner India’ one quarter of the year 9.6 A copy of the invoice raised by is available on page 73 of the Paper Book is reproduced as under 9.7 Before us, the Ld. Counsel reseller agreement and the ‘Gartner India’ for purchase product and the ‘Gartner India and the assessee provide user ID and password customers for downloading the subscription from the website of the assessee. In the entire the products to ‘Gartner India quarterly invoices raised by the assessee on Gartner India , there is copy of the invoice raised by ‘Gartner India’ to on page 73 of the Paper Book. For ready reference s under: Before us, the Ld. Counsel for the assessee has referred to the reseller agreement and submitted that Indian customers approach for purchase of subscription of the research Gartner India’ forward said request and the assessee provide user ID and password directly customers for downloading the subscription from the website of the entire process, the assessee has shown to have Gartner India’ on quarterly basis quarterly invoices raised by the assessee on Gartner India , there is Gartner Ireland Ltd. 19 ITA No. 2460/Mum/2022 to its customers ready reference same has referred to the submitted that Indian customers approach of subscription of the research request to the assessee directly to those customers for downloading the subscription from the website of the shown to have sold on quarterly basis. But in such quarterly invoices raised by the assessee on Gartner India , there is no mention of quantity of products sold that assessee has charged for one product may say that assessee i.e. GIL has Gartner India for product ‘Gartner India’ had option to resale the same product and actually sold the same product to multiple customers. T substance, the ‘Gartner India right of copying of the research product Indian customers multiple reference of sale of subscription based research to ‘Gartner India’ for all practical purposes, ‘sale of copyright’ in the database of assessee. Though the assessee has not specifically mentioned in its invoice as license fee for use of the copyright in the data substance it becomes fee in the nature in the digital product of the assessee the ld Counsel for the assessee was specifically asked to correlate each invoice of resale by invoice issued by the assessee, so as to prove the claim of the assessee that transaction of the purchase of products i.e. trading transaction, failed in substantiating that ‘Gartner India’ was equivalent to the ‘Gartner India’ to its customers. the assessee and submitted before us, it is not getting established no mention of quantity of products sold , thus it can be inferred that assessee has charged for one product only or in other words we ee i.e. GIL has charged onetime products having Sr No. 1 to 179 option to resale the same product and actually sold the same product to multiple customers. T Gartner India’ purchased not only the product but right of copying of the research products and selling the same to multiple times, thus the transaction of sale of subscription based research to ‘Gartner India’ purposes, can be characterized as in the nature of in the database of research products of the assessee has not specifically mentioned in its fee for use of the copyright in the data substance it becomes fee in the nature for the use of the copyright in the digital product of the assessee. During the course of hearing, the ld Counsel for the assessee was specifically asked to correlate each invoice of resale by ‘Gartner India’ with corresponding sale invoice issued by the assessee, so as to prove the claim of the assessee that transaction of the assessee was a pur purchase of products i.e. trading transaction, but the assessee failed in substantiating that quantity of research products equivalent to the quantity of products resold by to its customers. At least from the invoices raised by the assessee and submitted before us, it is not getting established Gartner Ireland Ltd. 20 ITA No. 2460/Mum/2022 , thus it can be inferred or in other words we onetime quarterly fee to having Sr No. 1 to 179, whereas option to resale the same product multiple times and actually sold the same product to multiple customers. Thus, in not only the product but and selling the same to the transaction under of sale of subscription based research to ‘Gartner India’, in the nature of research products of the the assessee has not specifically mentioned in its fee for use of the copyright in the database but in the use of the copyright . During the course of hearing, the ld Counsel for the assessee was specifically asked to correlate with corresponding sale invoice issued by the assessee, so as to prove the claim of the assessee was a pure sale and but the assessee research products sold to of products resold by At least from the invoices raised by the assessee and submitted before us, it is not getting established that number of subscriptions sold by the Indian entity the number of subscription sold by the assessee as number of subscription are not mentioned in the invoices raised by the assessee. The assessee was asked to provide invoices raised in subsequent years also but no such invoices have been provided. If we try to compare sale of ‘physical products’ i.e. magazine or a book in be like that the assessee had magazines to ‘Gartner those printed and sold the same multiple times hardly matters whether the user ID and password for downloading of the report has been issue been done on behalf of the assessee has sold copyrights there in, which both under Article 12 provisions of the Act 9.8 Another argument by the Revenue is that ‘information’ concerning industrial, commercial or scientific experience also covers the case of the assessee because in the case of the assessee information has been collected based on the past experience in the field of industrial commercial or scientific field ,therefore, the case of the assessee squarely falls under the definition of the royalty. But neither the assessee has filed that number of subscriptions sold by the Indian entity the number of subscription sold by the assessee as number of subscription are not mentioned in the invoices raised by the The assessee was asked to provide invoices raised in sequent years also but no such invoices have been provided. If sale of the ‘digital products’ of assessee i.e. magazine or a book in market, be like that the assessee had sold one copy of different Gartner India’, and then ‘Gartner India printed and sold the same multiple times to its customers hardly matters whether the user ID and password for downloading of the report has been issued by the assessee, because been done on behalf of ‘Gartner India’ only. Therefore the assessee has sold not only the digital product but which squarely falls in the definition of both under Article 12 of ‘DTAA’ between India Ireland (domestic law). Another argument by the Revenue is that ‘information’ concerning industrial, commercial or scientific experience also covers the case of the assessee because in the case f the assessee information has been collected based on the past experience in the field of industrial commercial or scientific field ,therefore, the case of the assessee squarely falls under the definition of the royalty. But neither the assessee has filed Gartner Ireland Ltd. 21 ITA No. 2460/Mum/2022 that number of subscriptions sold by the Indian entity are equal to the number of subscription sold by the assessee as number of subscription are not mentioned in the invoices raised by the The assessee was asked to provide invoices raised in sequent years also but no such invoices have been provided. If ’ of assessee with market, then, it may copy of different physical Gartner India’ got copies of to its customers. It hardly matters whether the user ID and password for downloading ecause same has herefore, in substance product but along with all squarely falls in the definition of ‘royalty’ between India Ireland and Another argument by the Revenue is that the word ‘information’ concerning industrial, commercial or scientific experience also covers the case of the assessee because in the case f the assessee information has been collected based on the past experience in the field of industrial commercial or scientific field ,therefore, the case of the assessee squarely falls under the definition of the royalty. But neither the assessee has filed any details of the products nor the lower authorities have examined the issue as how the research information in the industrial, commercial or scientific field, which falls under the definition of ‘Royalty’ Before us also no such information has been provided. In absence of any such information, this issue can’t be adjudicated by us. In fact and circumstances of the case, we feel it appropriate to restore the whole issue in dispute back to the fi of the transaction of sale of subscription to the Gartner India afresh keeping in view our observation above and in accordance with law. If required, the AO may also examine claim of the assessee of not having any PE in India. 9.9 As far as research access fee received from Gartner India is concerned though the assessee has claimed that same was for access of the database of the assessee for internal use by Gartner India in their business of consultancy but the Ld. DR has submitted that no enough information was filed by the assessee before the lower authorities to substantiate whether any copyright in the digital product has been exploited by Gartner India in the business of their preparation such documentation as how the Research fee paid has been utilised in each quarter, other than the was paid for self consumption. restore this issue back to the file of the Assess details of the products nor the lower authorities have examined the issue as how the research products could be characterized as information in the industrial, commercial or scientific field, which falls under the definition of ‘Royalty’ provided und Before us also no such information has been provided. In absence of any such information, this issue can’t be adjudicated by us. In fact and circumstances of the case, we feel it appropriate to restore the whole issue in dispute back to the file of the AO for verification of the transaction of sale of subscription to the Gartner India afresh keeping in view our observation above and in accordance with law. If required, the AO may also examine claim of the assessee of not having any PE in India. As far as research access fee received from Gartner India is concerned though the assessee has claimed that same was for access of the database of the assessee for internal use by Gartner India in their business of consultancy but the Ld. DR has mitted that no enough information was filed by the assessee before the lower authorities to substantiate whether any copyright in the digital product has been exploited by Gartner India in the their preparation of research papers. Before us als such documentation as how the Research fee paid has been utilised in each quarter, other than the general submission was paid for self consumption. Therefore, we feel it appropriate to restore this issue back to the file of the Assessing Officer for proper Gartner Ireland Ltd. 22 ITA No. 2460/Mum/2022 details of the products nor the lower authorities have examined the products could be characterized as information in the industrial, commercial or scientific field, which under the DTAA. Before us also no such information has been provided. In absence of any such information, this issue can’t be adjudicated by us. In fact and circumstances of the case, we feel it appropriate to restore le of the AO for verification of the transaction of sale of subscription to the Gartner India afresh keeping in view our observation above and in accordance with law. If required, the AO may also examine claim of the assessee of not As far as research access fee received from Gartner India is concerned though the assessee has claimed that same was for access of the database of the assessee for internal use by Gartner India in their business of consultancy but the Ld. DR has mitted that no enough information was filed by the assessee before the lower authorities to substantiate whether any copyright in the digital product has been exploited by Gartner India in the of research papers. Before us also no such documentation as how the Research fee paid has been utilised submission that such fee herefore, we feel it appropriate to ing Officer for proper investigation and discovery of the true facts for determination of the issue whether there was any exploitation of the copyright of the assessee in the digital products sold to Gartner India Research access fee. 9.10 The ground No.1 allowed for statistical purposes. 10. The ground No. 2 being consequential and therefore, same is dismisses as infructuous. The ground No. 3 and 4 are being premature at this stage therefore, same are dismissed as infructuous. 11. In the result, the appeal filed by the assessee is partly allo for statistical purposes. Order pronounced in the open Court on Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 30/05/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// investigation and discovery of the true facts for determination of the issue whether there was any exploitation of the copyright of the assessee in the digital products sold to Gartner India . No.1 of appeal of the assessee is accordingly partly allowed for statistical purposes. The ground No. 2 being consequential and therefore, same is dismisses as infructuous. The ground No. 3 and 4 are being premature at this stage therefore, same are dismissed as In the result, the appeal filed by the assessee is partly allo for statistical purposes. nounced in the open Court on 30/05/2024 Sd/- Sd/ KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Gartner Ireland Ltd. 23 ITA No. 2460/Mum/2022 investigation and discovery of the true facts for determination of the issue whether there was any exploitation of the copyright of the assessee in the digital products sold to Gartner India under of appeal of the assessee is accordingly partly The ground No. 2 being consequential and therefore, same is dismisses as infructuous. The ground No. 3 and 4 are being premature at this stage therefore, same are dismissed as In the result, the appeal filed by the assessee is partly allowed 4. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai
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