GVK Oil & Gas Limited, Secunderabad V. The Asst. Director of Income Tax (International Taxation)-I, Hyderabad

ITA 317/HYD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6008 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHARANA
• Keywords: Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Advance ruling
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.317 & 318/HYD/2012 ASSESSMENT YEAR 2009-2010 GVK OIL & GAS LIMITED, SECUNDERABAD. PAN AADCG0718P VS. THE ADIT (INTL.TAXATION)-I, HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. DEEPAK CHOPRA & M S . MANASVINI BAJPAI FOR ASSESSEE : MR. MOHARANA DATE OF HEARING : 08.12.2015 DATE OF PRONOUNCEMENT : 09 .03.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. BOTH ARE ASSESSEES APPEALS FOR THE A.Y. 2009- 10 AGAINST THE ORDER OF THE LD. CIT(A)-V, HYDERABAD CONFIRMING THE ORDER OF THE A.O. UNDER SECTION 201( 1) AND 201(1A) OF THE I.T. ACT, 1961. THE ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 317/H/2012: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, GVK OIL & GAS LIMITED (HEREINAFTER REFERRED TO AS T HE 'APPELLANT') RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-V ('LD. CIT(A) ') DATED 2 DECEMBER, 2011 UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 (ACT') ON THE FOLLOWING GROUN DS : 2 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. 1. THE LD. CIT(A) ERRED IN FACT AND IN LAW IN HOLDING THAT THE PAYMENT TO M/S. GGS SPECTRUM LIMITED, UK, ('GGS'), FOR PURCHASE OF DATASET IS IN THE NATU RE OF ROYALTY, HENCE TAXABLE UNDER THE ACT AND INDIA UK DOUBLE TAX AVOIDANCE AGREEMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THE ASSESSEE AS AN 'ASSESSEE IN DEFAULT' FOR NOT WITHHOLDING OF TAXES ON PAYMENTS MADE TO GGS, AND TO THAT EXTENT THE ORDER OF THE LD. CIT(A) IS UNJUSTIFIED, ERRONEOUS AND UNSUSTAINABLE. THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARI NG, OF THE APPEAL, TO ENABLE THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) TO DECIDE THIS APPEAL ACCORDIN G TO LAW. 1.1. IN ITA.NO.318/H/2012, THE GROUNDS RAISED ARE AS UNDER: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, GVK OIL & GAS LIMITED (HEREINAFTER REFERRED TO AS T HE 'APPELLANT') RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-V ('LD. CIT(A) ') DATED 2 DECEMBER, 2011 UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 (ACT') ON THE FOLLOWING GROUN DS : 1. THE LD. CIT(A) ERRED IN FACT AND IN LAW IN HOLDING THAT THE PAYMENT TO GX TECHNOLOGY CORPORATION, USA (GXT), FOR PURCHASE OF DATASET IS IN THE NATURE OF ROYALTY, HENCE TAXABLE UNDER THE ACT AND INDIA US DOUBLE TAX AVOIDANCE AGREEMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THE ASSESSEE AS AN 'ASSESSEE IN DEFAULT' FOR NOT WITHHOLDING OF TAXES ON PAYMENTS MADE TO GXT, AND TO THAT EXTENT THE 3 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. ORDER OF THE LD. CIT(A) IS UNJUSTIFIED, ERRONEOUS AND UNSUSTAINABLE. THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARI NG, OF THE APPEAL, TO ENABLE THE LEARNED COMMISSIONER O F INCOME-TAX (APPEALS) TO DECIDE THIS APPEAL ACCORDIN G TO LAW. 1.2. THUS, IT CAN BE SEEN THAT EXCEPT FOR THE RECIPIENTS, THE NATURE OF THE TRANSACTION IS THE S AME AND HENCE BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER. 2. BRIEF FACTS OF THE CASE LEADING TO THE ORDERS HOLDING THE ASSESSEE TO BE AN ASSESSEE IN DEFAULT A RE AS FOLLOWS: THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF OIL AND GAS EXPLORATION. ON PERUSAL OF THE C.A. CERTIFICATE AND UNDERTAKING FURNISHED BY THE DEDUCTOR-ASSESSEE, THE ADIT (INTL. TAXATION)-1, HYD ERABAD NOTICED THAT THE ASSESSEE HAS MADE PAYMENT OF US $14,43,140.70 (= INR 6,16,92,821.78) TO M/S. GX TECHNOLOGY CORPORATION, USA (IN SHORT GXT) WITHOU T DEDUCTION OF TAX AT SOURCE AS REQUIRED UNDER SECTIO N 195 OF THE I.T. ACT AND IT WAS MENTIONED THEREIN THAT T HE PAYMENT WAS MADE TOWARDS PURCHASE OF DATASET AND THEREFORE, DEDUCTION OF TAX AT SOURCE WAS NOT NECES SARY. SIMILARLY, THE ASSESSEE HAD ALSO MADE A PAYMENT OF US $ 1,05,845.6 (EQUAL TO INR 45,42,893.15) TO M/S GGS SPECTRUM LIMITED, UK (GGS) WITHOUT DEDUCTING TAX AT SOURCE AS REQUIRED UNDER SECTION U/S195 OF THE IT A CT 4 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. AND IT WAS MENTIONED THAT THE PAYMENT WAS MADE TOWARDS PURCHASE OF DATASET. THE A.O. THEREFORE, EXAMINED THE NATURE OF THE TRANSACTIONS TO DETERMIN E THE NATURE OF THE PAYMENT AND WHETHER THE TDS PROVISION S WERE APPLICABLE OR NOT. 2.1. THE A.O. OBSERVED THAT THE ASSESSEE HAS BID FOR THE OIL AND GAS EXPLORATION BLOCK OFFERED UNDER THE NELP-VII BY THE MINISTRY OF PETROLEUM AND NATURAL G AS, GOVERNMENT OF INDIA AND DURING THE COURSE OF BIDDIN G FOR VARIOUS BLOCKS, THE COMPANY WAS REQUIRED TO UNDERST AND THE GEOLOGICAL AND SEISMIC QUALITY OF THE BLOCK IN ORDER TO OPTIMISE THE RISK OF EXPLORATION AND IN ORDER TO EV ALUATE VARIOUS BLOCKS, THE COMPANY REQUIRED AVAILABLE GEOL OGICAL AND SEISMIC DATA. THE A.O. OBSERVED THAT FOR THE AB OVE PURPOSE, THE ASSESSEE HAS ENTERED INTO AN AGREEMENT S (MASTER GEOPHYSICAL DATA USE LICENSE AND SUPPLEMENT AL AGREEMENTS) BOTH WITH GXT, WHICH IS A USA BASED CORPORATION AND A LEADING PROVIDER OF A COMPREHENSI VE RANGE OF ADVANCED SEISMIC DATA AND DERIVATIVES AND M/S. GGS, A UK BASED COMPANY AND A LEADING PROVIDER OF A COMPREHENSIVE RANGE OF ADVANCED SEISMIC DATA AND DERIVATIVES. BY VIRTUE OF THESE AGREEMENTS, BOTH TH E COMPANIES AGREED TO GRANT NON-EXCLUSIVE LICENSE/RIG HT TO USE CERTAIN DATA AND DERIVATIVES IN CONSIDERATION F OR AN AGREED LICENSE FEE. THE A.O. OBSERVED THAT THE ASSE SSEE HAS MADE THE PAYMENT TO GXT, AS A CONSIDERATION/COMPENSATION FOR THE NON-EXCLUSIVE LI CENSE TO USE CERTAIN DATA AND DERIVATIVES, WHICH THE GXT 5 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. NAMED AS INDIASPAN, WHILE PAYMENT TO GGS WAS TOWARD S CONSIDERATION/COMPENSATION FOR THE NON-EXCLUSIVE LI CENSE TO USE THE DATA AND DERIVATIVES. AS REGARDS THE TRANSACTION WITH GXT, THE AO OBSERVED THAT GXT, IN 2006, HAS ACQUIRED NEW DATA USING LONG OFFSET, LONG RECOR D LENGTH AND A SPECIALLY DESIGNED SOURCE AND THAT INDIASPAN IS THE FIRST MULTI-CLIENT SEISMIC DATASET ACQUIRED BY GXT, OFF THE EAST AND WEST COASTS OF IN DIA TO PROVIDE A REGIONAL FRAMEWORK OF THE HYDROCARBON POT ENTIAL OF THE INDIAN CONTINENTAL REGION. FROM A BRIEF DES CRIPTION ABOUT THE INDIASPAN FROM A PUBLICATION ON WWW.IONGEO.COM/GXT I.E ., (THE OFFICIAL WEBSITE OF ION/GXT). A.O. OBSERVED THAT IT IS AN ULTRA-DEEP, REGIONAL 2D SEISMIC DATA PROGRAM AND GEOLOGIC STUDY COVERING ALL THE MA JOR PROSPECTIVE BASINS OFFSHORE EAST AND WEST INDIA AND THAT THIS NEW DATA IS PROVIDING BOTH THE FUNDAMENTAL BAS IS FOR EVALUATION OF INDIAS VAST OFF-SHORE MARGIN, AS WEL L AS THE REGIONAL FRAMEWORK IN DEPTH DOMAIN. HE FURTHER OBSE RVED THAT THIS HAS RESULTED IN VASTLY IMPROVED DEEP IMAG ING OF THE CRUSTAL ARCHITECTURE AND BASIN EVOLUTION OF THE REGION. THUS THE A.O. OBSERVED THAT THE INDIASPAN IS A COMPREHENSIVE INFORMATION RESOURCE WHICH PROVIDE TH E OIL AND GAS EXPLORERS (COMPANIES) THE INFORMATION ON TH E CRUSTAL ARCHITECTURE, BASIN EVOLUTION, PRESENCE OF CRETACEOUS SEDIMENTS AND OTHER CONTINENTAL MATERIAL AND STRUCTURE IN THE DEEPWATER OF EAST AND WEST COAST O F INDIA AND ALSO HAS DETAILS OF POTENTIAL SOURCE ROCK AND G OOD HYDROCARBON INDICATORS. HE OBSERVED THAT INDIASPAN NOT ONLY PROVIDES THE DATA BUT ALSO CONTAINS VARIOUS 6 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. IMAGERIES DEVELOPED THROUGH ADVANCED IMAGING TECHNIQUES AND SOFTWARE, AND OTHER INTERPRETATIONS/ ANALYSIS/DERIVATIVES AND PROVIDES COMPREHENSIVE KNOWLEDGE ON THE HYDROCARBON GEOLOGY OF EAST AND WE ST COAST OF INDIA, WHICH THE OIL AND GAS COMPANIES CAN USE TO IDENTIFY THE POTENTIAL HYDROCARBON RESERVES IN T HE REGION. THUS, HE OBSERVED THAT THE DATA ON THE INDI ASPAN IS ACQUIRED BY GXT USING ITS EXPERTISE, TECHNOLOGIE S AND MANPOWER AND THAT THE DATA SO ACQUIRED IS PROCESSED BY GXT USING ADVANCED SOFTWARE AND SEISMIC DATA IMAGIN G TOOLS TO OBTAIN PROCESSED SEISMIC PROFILES WHICH AR E INTERPRETED BY GXT BY ITS EXPERT GEOLOGISTS AND GEOPHYSICISTS. ACCORDING TO HIM, INDIASPAN IS THE KNOWLEDGE ON THE HYDROCARBON GEOLOGY OF EAST AND WE ST COAST OF INDIA, DERIVED FROM THE DOMAIN EXPERIENCE OF THE GXT IN THE FIELD OF EXPLORATION GEOLOGY/GEOPHYSICS AND HYDROCARBON EXPLORATION AND AMOUNTS TO INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE. HE FURTHER OBSERVED THAT THIS DATA IS PROPRIETARY TO AND A TRADE SECRET OF GX TECHNOLOGY CORPORATION, USA AND IS UNDIVULGED TO THE PUBLIC. H E FOUND THAT THE ABOVE INFORMATION/KNOWLEDGE IS AVAIL ABLE TO THE USER ONLY ON SECURING A VALID LICENSE FROM T HE LICENSOR I.E., GXT AND THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO GXT BY WAY OF LICENSE-FEE' AMOUNTS TO CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EXPERIENCE AND AS SUCH CONSTITUTES 'ROYALTY' BOTH AS PER INDO US DTAA AND INCOME-TAX ACT. HE, THEREFORE, ISSUED A NOTICE DATE D 7 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. 04.12.2008 TO THE ASSESSEE UNDER SECTION 201, TO SH OW- CAUSE AS TO WHY THE PAYMENT SHOULD NOT BE CONSIDERE D AS ROYALTY BOTH AS PER THE DTAA AND INCOME TAX ACT. THE ASSESSEE SUBMITTED ITS DETAILED REPLY VIDE LETTER D ATED 10.12.2008 AGAINST THE TREATMENT OF THE PAYMENT AS ROYALTY. THE A.O, AFTER CONSIDERING ASSESSEES CONTENTIONS AT LENGTH, HELD THE PAYMENT TO BE ROYA LTY BOTH UNDER THE INDIA-US DTAA AS WELL AS THE INDIAN INCOME TAX AT. FURTHER, HE OBSERVED THAT THE GXT OW NS KNOWLEDGE I.E., RIGHT ON INDIASPAN OR THE DATA AND DERIVATIVES FOR WHICH THE ASSESSEE HAS PAID THE LIC ENSE-FEE AND HELD THAT THE SAME CONSTITUTES ROYALTY. SINCE THE ASSESSEE HAS FAILED TO MAKE TDS UNDER SECTION 195 O F THE ACT BEFORE MAKING THE PAYMENT, THE AO HELD THE ASSE SSEE TO BE AN ASSESSEE-IN-DEFAULT UNDER SECTION 201(1) AND MADE THE DISALLOWANCE UNDER SECTION 201(1) AND ALSO LEVIED INTEREST UNDER SECTION 201(1A) OF THE I.T. A CT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. SIMILARLY WITH REGARD TO THE SIMILAR TRANSACTIO N WITH UK COMPANY BY NAME M/S. GGS SPECTRUM LIMITED, UK (GGS), THE A.O. OBSERVED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH M/S. GGS SPECTRUM LT D., FOR PURCHASE OF DATASET AND BY VIRTUE OF THE SAID AGREEMENT, IT WAS GRANTED NON-EXCLUSIVE LICENSE OF RIGHT TO USE CERTAIN DATA AND DERIVATIVES IN CONSIDERATION F OR AN AGREED LICENSE FEE. THE ASSESSING OFFICER OBSERVED THAT IN 8 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. THE ASSESSEES OWN CASE WHEREIN DATA AND DERIVATIVE S WAS LICENSED BY GXT, TO THE ASSESSEE, THE PAYMENT WAS H ELD TO BE IN THE NATURE OF ROYALTY AND THE TDS PROVISION S WERE MADE APPLICABLE. FOLLOWING THE SAME, THE A.O. TREAT ED THE ASSESSEE AS AN ASSESSEEIN-DEFAULT AND ALSO LEVIE D INTEREST UNDER SECTION 201(1A) OF THE I.T. ACT. AGG RIEVED, ASSESSEE PREFERRED AN APPEAL TO CIT(A) WHO CONFIRME D THE SAME. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. DEEPAK CHOPRA, REITERATED THE SUBMISSIONS MADE BY THE ASSE SSEE BEFORE THE AUTHORITIES BELOW TO JUSTIFY THE NON-DED UCTION OF TAX AT SOURCE AND SUBMITTED THAT THE DATASET INDIASPAN PROVIDED BY GXT WAS NOTHING BUT THE DATA COMPILED AND PROCESSED BY GXT ON THE DIRECTIONS OF THE GOVERNMENT OF INDIA AND NOT AT THE BEHEST OF THE ASSESSEE. HE SUBMITTED THAT THE GXT TAKES NO RESPONSIBILITY ON THE OUTCOME OF THE USAGE OF THE D ATA BY THE ASSESSEE AND THEREFORE, IT IS CLEAR THAT IT PRO VIDES ONLY THE DATA AND DOES NOT PROVIDE ANY EXPERIENCE, KNOWL EDGE OR SKILL TO THE ASSESSEE. HE HAS DRAWN OUR ATTENTIO N TO VARIOUS CLAUSES OF THE AGREEMENT TO DEMONSTRATE THA T THE PREVIOUS EXPERIENCE OF THE COMPANIES BOTH GXT OR GG S HAS NOT BEEN PASSED ON TO THE ASSESSEE BUT WHAT WAS PROVIDED IS ONLY THE DATA. HE FURTHER SUBMITTED THA T INDIASPAN IS OWNED BY THE GOVERNMENT OF INDIA AND T HE GXT IS AUTHORIZED TO ISSUE LICENSE FOR THE USE OF T HE DATA 9 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. ONLY AND THEREFORE, IT CANNOT BE TREATED AS ROYALT Y AS HELD BY THE A.O. AND THE LD. CIT(A). 5. AS REGARDS THE ALTERNATE FINDING OF THE A.O. THAT LICENSE FEE PAID BY THE ASSESSEE WAS TOWARDS T HE USE OF THE COPYRIGHT ON DATASET INDIASPAN AND THEREFORE , THE PAYMENT MADE BY THE ASSESSEE FOR USE OF SUCH A COPY RIGHT IS ALSO IN THE NATURE OF ROYALTY, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE DATASET IS NOT A TRANS FER OF THE RIGHT ITSELF BUT IT IS A COPYRIGHTED ARTICLE LI KE COMPUTER SOFTWARE OFF THE SHELF AND THEREFORE, IT CANNOT BE CONSIDERED AS USE OF A COPYRIGHT AND THE PAYMENT AS ROYALTY. HE FURTHER DREW OUR ATTENTION TO THE CLA USES IN THE AGREEMENT WHEREIN IT IS PROVIDED THAT THE ASSES SEE IS PROVIDED WITH A NON-EXCLUSIVE RIGHT TO USE DATASET AND THUS PROVES THAT THE SOFTWARE IS NOT CUSTOMIZED TO THE REQUIREMENT OF THE ASSESSEE AND FURTHER IS NOT FOR EXCLUSIVE USE OF THE ASSESSEE, WHICH MEANS THAT IT CAN BE UTILIZED BY OTHER SIMILARLY PLACED CUSTOMERS. HE FU RTHER SUBMITTED THAT ON THE EXPIRY OR TERMINATION OF THE LICENSE, THE ASSESSEE IS REQUIRED TO RETURN BACK OR DESTROY THE DATASET WHICH CLEARLY PROVES THAT KNOWHOW HAS NOT B EEN ALLOWED TO BE USED BY THE ASSESSEE. HE DREW OUR ATT ENTION TO THE OECD COMMENTARY ON THE DEFINITION OF ROYALT Y UNDER ARTICLE-12 WHEREIN THE KNOWHOW IS AN ESSENTIA L COMPONENT OF THE USAGE TO TREAT THE CONSIDERATION F OR A TRANSACTION AS ROYALTY. FURTHER, HE HAS ALSO DRAW N OUR ATTENTION TO PARA 4.3.1 AT PAGE NO.6 OF THE ORDER O F THE LD. CIT(A) TO DEMONSTRATE THAT THE RECITALS OF THE ART ICLE-2 OF 10 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. THE INDO-US DTAA IS WRONGLY QUOTED BY HIM AND HAS WRONGLY BEEN RELIED UPON TO COME TO THE CONCLUSION THAT THE CONSIDERATION PAID BY THE ASSESSEE FOR OBTAININ G THE LICENSE IS ROYALTY. HE SUBMITTED THAT THE LD. CIT(A ) HAS ERRONEOUS RELIED UPON THE DECISION RELATING TO THE NATURE OF SOFTWARE TO HOLD THE PAYMENT TO BE THE ROYALTY. HE FURTHER RELIED UPON THE FOLLOWING JUDGMENTS IN SUPP ORT OF HIS CONTENTION THAT THE PAYMENT MADE FOR OBTAINING A LICENSE IS NOT IN THE NATURE OF ROYALTY. (I) WIPRO LTD. VS.ITO (94 ITD 9) (BANGALORE); (II) DDIT VS. PREROY AG (39 SOT 187) (MUM); (III) REAL RESOURCING LTD (322 ITR 558) (AAR); (IV) DIAMOND SERVICES INTERNATIONAL VS. UOI (304 ITR 201)(BOM); (V) FACTSET RESEARCH SYSTEMS (317 ITR 169)(AAR); (VI) ANAPHARM INC. (305 ITR 394)(AAR); AND (VII) CUSHMAN AND WAKEFIELD PTE. LTD. (305 ITR 208)(AAR) 6. THE LD. D.R, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS IS EVIDENT FROM PAGE 74 OF THE PAPER BOOK, THE DATASET OBTAINED BY THE ASSESSEE UNDER A LICENSE IS HIGHLY CUSTOMIZED. HE SUBMITTED THAT THE DECISIONS ON WHIC H THE ASSESSEE HAS RELIED UPON I.E., IN THE CASE OF WIPRO AND HEG (CITED SUPRA), THE FACTS ARE DISTINGUISHABLE FR OM ASSESSEES CASE AS THEY WERE THE CASES OF THE SOFTW ARE PURCHASE OFF THE SHELF, WHEREAS IN THE CASE OF THE ASSESSEE, THE CLIENT ORDERED THE DATASET AND THEREF ORE, IT 11 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. WAS CUSTOMIZED. HE FURTHER SUBMITTED THAT IT IS NOT DISPUTED THAT THE ASSESSEE HAS NOT PURCHASED THE DA TASET FROM THE GXT AND GGS, BUT HAS ONLY OBTAINED A LICE NSE WITH A RIGHT TO USE THE DATA THEREIN AND THEREFORE, IT IS IN THE NATURE OF ROYALTY. HE HAS DRAWN OUR ATTENTION TO PAGES 21 OF THE AGREEMENT WITH GXT WHICH IS PLACED AT PAGE NO.16 OF THE PAPER BOOK TO DEMONSTRATE THAT TH E OWNERSHIP OF THE DATASET LIES WITH GXT. HE SUBMITTE D THAT WHERE THE OWNERSHIP LIES WITH THE LICENSOR AND THE RIGHT TO USE IS GIVEN TO A CUSTOMER, THEN THE PAYMENT CANNOT BUT BE CONSIDERED AS THE CONSIDERATION FOR THE USE OF T HE INTANGIBLE PROPERTY AND HENCE, IT HAS TO BE TREATED AS ROYALTY. THE LD. D.R. FURTHER SUBMITTED THAT WHE RE THE CUSTOMIZED DATA HAS BEEN MADE AVAILABLE UPON THE REQUEST OF THE ASSESSEE, IT BECOMES KNOWHOW AS IT CANNOT BE USED BY ANY OTHER PARTY. HE FURTHER RELIED UPON THE DECISION OF ITAT AT BANGALORE IN THE CASE OF ING VY SYA BANK IN SUPPORT OF HIS CONTENTION THAT THE PAYMENT MADE FOR USE OF DATA IS ROYALTY. FURTHER HE HAS ALSO REL IED UPON THE FINDINGS OF THE A.O. THAT THE DATASET PROVIDED BY GXT AND GGS ARE COPYRIGHTED DATA AND THEREFORE CONSIDER ATION FOR USE OF AN INTANGIBLE PROPERTY HAS TO BE CONSIDE RED AS ROYALTY. THUS, ACCORDING TO HIM, THE A.O. AND THE LD. CIT(A) HAVE RIGHTLY TREATED THE CONSIDERATION PAID UNDER THE LICENSE AS ROYALTY. 7. IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE, WHILE REITERATING THE SUBMISSIONS MADE EARLIER, HAS DRAWN OUR ATTENTION TO THE DISTINCTION BETWEEN THE DEFINI TION OF 12 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. ROYALTY UNDER SECTION 9(1)(VI) OF THE INCOME TAX ACT AND THE EXPLANATION (2) THEREUNDER, AND ALSO UNDER THE INDO- US DTAA, AND STATED THAT UNDER SECTION-9, THE TERM ROYALTY INCLUDES KNOWLEDGE, EXPERIENCE OR SKILL W HILE UNDER DTAA ONLY THE WORD EXPERIENCE IS USED AND FURTHER THAT WHERE THE PROVISIONS OF THE DTAA ARE BENEFICIAL TO AN ASSESSEE, THE SAME SHALL BE APPLI ED. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ONLY DISPUTE I S THE NATURE OF THE PAYMENT MADE BY THE ASSESSEE TO M/S. GX TECHNOLOGY CORPORATION, USA AND M/S. GGS SPECTRUM LIMITED, UK. IN BOTH THESE TRANSACTIONS, THE ASSESS EE HAS ACQUIRED A NON-EXCLUSIVE LICENSE TO USE THE DATA IN CONSIDERATION FOR AN AGREED LICENSE-FEE. THE LD. CO UNSEL FOR THE ASSESSEE, HAS DRAWN OUR ATTENTION TO VARIOU S CLAUSES OF THE AGREEMENT WITH M/S. GX TECHNOLOGY CORPORATION, USA. FROM THE PERUSAL OF THE SAME, WE FIND THAT THE ASSESSEE HAD OBTAINED A LICENSE TO USE THE PRODUCT INDIASPAN FOR A PERIOD OF 40 YEARS FROM M /S. GX TECHNOLOGY CORPORATION, USA. INDIASPAN IS A REGIONAL 2D SEISMIC DATA PROGRAMME AND GEOLOGICAL A ND GEOPHYSICAL STUDY COVERING ALL THE MAJOR PROSPECTIV E BASINS OFF-SHORE EAST AND WEST INDIA AND IS PROVIDI NG BOTH THE FUNDAMENTAL BASIS FOR EVALUATION OF INDIAS VAS T OFF- SHORE MARGINS AS WELL AS THE REGIONAL FRAMEWORK IN DEPTH DOMAIN. THUS, IT IS SEEN THAT THE SAID PRODUCT IS H IGHLY TECHNICAL AND COMPLICATED AND THE DATA THEREIN CAN BE ACCESSED ONLY ON THE GRANT OF A LICENSE BY THE OWNE R. 13 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. FURTHER, IT IS ALSO SEEN THAT THE LICENSE IS FOR A FIXED PERIOD AND THAT ON THE EXPIRY OF THE LICENSE, THE ASSESSEE IS REQUIRED TO RETURN THE PRODUCT OR DESTROY THE DATA ACCESSED BY THE ASSESSEE DURING THE LICENSE PERIOD BUT IS NOT REQUIRED TO DESTROY THE PRODUCT PRODUCED BY THE ASSESSEE BY USE OF SUCH DATA. THUS, IT IS CLEAR THA T ACCESS TO THE TECHNICAL KNOWLEDGE ACQUIRED BY GXT IS GRANT ED TO THE ASSESSEE IN ORDER TO ENABLE IT TO PROCESS THE S AME AND USE SUCH DATA FOR FURTHERANCE OF ITS OBJECTS. SIMIL AR IS THE TRANSACTION WITH M/S. GGS SPECTRUM LIMITED, UK. THE DEFINITION OF ROYALTY UNDER THE INCOME TAX ACT IS PROVIDED UNDER EXPLANATION (2) TO SECTION 9(1)(VI) OF THE ACT WHICH READS AS UNDER : 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 LICENSE) 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 PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) 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 SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL; 14 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. [ (IVA)] THE USE OR RIGHT TO USE ANY INDUSTRIAL COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB]. (V) THE TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTING OF A LICENSE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC 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 (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WITH THE ACTIVITIES REFERRED TO IN SUB- CLAUSES (I) TO (IV); (IVA) AND (V). 8.1. THE DEFINITION OF ROYALTY UNDER ARTICLE 12(3) OF THE DTAA BETWEEN INDIA AND US IS AS UNDER : ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. . . . . 2. . . . . 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFI C WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY 15 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION THEREOF; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL , COMMERCIAL, OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2( C) OR 3 OF ARTICLE 8. 8.2. THE DEFINITION OF ROYALTY UNDER DTAA BETWEE N INDIA AND UK IS ALSO SIMILAR TO THE DEFINITION OF ROYALTY UNDER DTAA BETWEEN INDIA AND USA. FOR READY REFEREN CE, THE DEFINITION OF ROYALTY UNDER DTAA BETWEEN INDI A AND UK IS EXTRACTED HEREUNDER. ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. . . . . 2. . . . . 3. FOR THE PURPOSE OF THIS ARTICLE, THE TERM ROYALTIES MEANS : (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILMS, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTHER THAN 16 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. INCOME DERIVED BY AN ENTERPRISE OF A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNATIONAL TRAFFIC. 8.3. FROM THE ABOVE DEFINITIONS, WE FIND THAT THE DEFINITION OF ROYALTY UNDER THE INCOME TAX ACT IS MORE EXHAUSTIVE AS COMPARED TO THE DEFINITION UNDER THE DTAA BETWEEN INDIA AND USA AND INDIA AND UK. UNDER THE INCOME TAX ACT, CONSIDERATION FOR GRANTING OF A LIC ENSE FOR THE USE OF THE PROPERTY MENTIONED THEREIN ALSO MEAN S ROYALTY, WHEREAS, THERE IS NO SUCH PROVISION UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENTS BETWEEN INDIA AND USA & UK. AS HELD BY THE COORDINATE BENCH OF TH IS TRIBUNAL AT BANGALORE IN THE CASE OF WIPRO (CITED S UPRA), THE ESTABLISHED PRINCIPLE IS THAT THE PROVISIONS OF DTAA, IF BENEFICIAL TO THE ASSESSEE, SHOULD PREVAIL OVER I.T .ACT. THEREFORE, WE PROCEED TO APPLY THE DEFINITION OF R OYALTY UNDER THE DTAA AND EXAMINE WHETHER THE TRANSACTIONS OF THE ASSESSEE FALL WITHIN THE AMBIT OF THE SAID DEFI NITIONS. IN THE CASE BEFORE US, THE ASSESSEE HAS MADE PAYMEN T FOR THE RIGHT TO USE INFORMATION EMBEDDED IN THE PRODUC T. FURTHER, THOUGH THE SAID INFORMATION IS SCIENTIFIC AS WELL AS TECHNICAL, THE ASSESSEE IS PERMITTED TO USE THE SAID INFORMATION ONLY AS A LICENSEE. 8.4. LET US, NOW SEE THE RATIO LAID DOWN BY THE COURTS IN THE CASES RELIED UPON BY THE ASSESSEE. 8.4.1. IN THE CASE OF WIPRO LIMITED VS. ITO (2005) 94 ITD ( (BANG), THE ITAT WAS DEALING WITH T HE 17 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. DEFINITION OF ROYALTY UNDER THE INCOME TAX ACT AN D THE DTAA BETWEEN INDIA AND USA AND IT WAS HELD AS UNDER : DOUBLE TAXATION RELIEF-AGREEMENT BETWEEN INDIA AND USA-ANNUAL SUBSCRIPTION FOR PROVIDING ACCESS TO DATABASE THROUGH WEB-IN-DEPTH INFORMATION COLLECTED BY GG OF USA IS MADE AVAILABLE ON SUBSCRIPTION TO ANYONE WILLING TO PAY-IT IS IN THE FORM OF PUBLICAT IONS AND IS NOT AN INFORMATION OR ADVICE GIVEN INDIVIDUALLY-PAYMENT IS FOR USE OF COPYRIGHTED ARTI CLE AND NOT FOR TRANSFER OF RIGHT IN COPYRIGHT-EVEN OTHERWISE, SINCE THE COPYRIGHT IS NOT OF A LITERARY , ARTISTIC OR SCIENTIFIC WORK, THE PAYMENT IS NOT COV ERED BY 'ROYALTY' UNDER ART. 12(3)(A) OF DTAA BETWEEN IN DIA AND USA-DATA SERVER IS INDISPUTABLY LOCATED OUTSIDE INDIA-CONSEQUENTLY, THE PROVISION OF SERVICES OF OFFERING THE DATABASE IS AN EVENT OUTSIDE THE TAXAB LE TERRITORIES OF INDIA-GG HAS NO PERMANENT ESTABLISHMENT IN INDIA-CONSEQUENTLY, SAID PAYMENTS TO GG ARE NOT AMENABLE TO TAXATION IN INDIA. 8.4.2. IN THE CASE OF DY. DIRECTOR OF INCOME TAX VS. PREROY A.G. (2010) 39 SOT 187 (MUM.) THE TRIBUN AL WAS DEALING WITH THE DEFINITION OF ROYALTY UNDER THE DTAA BETWEEN INDIA AND SWITZERLAND WHICH IS SIMILAR LY WORDED AS IN THE INDIA-UK DTAA AND HELD THAT : 25. IT IS CLEAR FROM THE ABOVE COMMENTARIES THAT CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE IS TO BE REGARDED AS ROYALTY, ONLY IF IT IS RECEIVE D FROM IMPARTING KNOW-HOW. HOWEVER, PROVIDING STRATEGIC CONSULTING SERVICES, WHICH MAY ENTAIL THE USE OF TECHNICAL SKILLS AND COMMERCIAL EXPERIENCE BY A STRATEGIC CONSULTANT, DOES NOT AMOUNT TO KNOW-HOW BEING IMPARTED TO THE BUYER OF THE STRATEGIC CONSULTING SERVICES. 18 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. 8.4.3. IN THE CASE OF REAL RESOURCING LTD., IN RE T HE AUTHORITY FOR ADVANCE RULINGS REPORTED IN (2010) 32 2 ITR 58 WAS DEALING WITH THE DEFINITION OF FTS UNDER T HE INDIA-UK DTAA AND HAS HELD AS UNDER : THOUGH THE CIT, IN HIS COMMENTS HAS ATTEMPTED TO BRING THE INCOME IN QUESTION WITHIN THE SCOPE OF CLAUSES (A) AND (C) OF ART. 13.4, THEY HAVE NO APPLICATION. THE CONTENTION THAT THE APPLICANT WILL BE RENDERING CONSULTANCY SERVICES WHICH ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OF A RIGHT OR INFORMATION OF THE NATURE DESCRIBED IN PARA 3(A) OF ART. 13 IS UNTENABLE. COLLECTING DATA AND ANALYZING IT A ND MAKING A DATABASE FOR PROVIDING INFORMATION ON SUITABLE CANDIDATES FOR RECRUITMENT, EVEN IF THEY A RE IN THE NATURE OF CONSULTANCY SERVICES, CANNOT BE CONSIDERED TO BE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT/APPLICATION OF THE RIGHT OR INFORMATION REFERRED TO IN PARA 3(A). MOREOVER, BY GIVING ACCES S TO THE DATABASE, IT CANNOT BE SAID THAT THE INFORMATIO N CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE WILL BE TRANSMITTED BY THE APPLICANT TO THE RECRUITING AGENCIES. IF THE CONTENTION OF REVENUE I S ACCEPTED, IT WOULD AMOUNT TO UNWARRANTED EXPANSION OF THE TERMS FEES FOR TECHNICAL SERVICES AND ROYALT IES. CONSIDERATION FOR PROVIDING INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE BASICALLY INVOLVES THE SHARING OF TECHNICAL KNOW-HO W AND EXPERIENCE WHICH IS NOT THE CASE HERE. SECONDLY , IT WOULD BE FAR-FETCHED TO SUGGEST THAT THE INGREDI ENT OF 'MAKING AVAILABLE' TECHNICAL KNOWLEDGE, EXPERIEN CE, SKILL, KNOW-HOW OR PROCESS IS INVOLVED IN THIS CASE . TAKING STEPS TO MAKE AVAILABLE THE EXPERIENCE AND SKILL OF CANDIDATES AVAILABLE FOR RECRUITMENT DOES NOT AT ALL FALL WITHIN THE AMBIT OF MAKING AVAILABLE TH E TECHNICAL KNOWLEDGE AND EXPERIENCE OF THE SERVICE PROVIDER. THE CRITERION ENVISAGED BY ART. 13.4(A) O F DTAA HAS NOT BEEN SATISFIED IN THE INSTANT CASE. 19 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. 8.4.4. IN THE CASE OF DIAMOND SERVICES INTERNATIONA L (P) LTD., VS. UNION OF INDIA & OTHERS (2008) 304 IT R 201, THE HONBLE BOMBAY HIGH COURT WHILE DEALING WITH TH E DEFINITION OF ROYALTY UNDER THE DTAA BETWEEN INDI A AND SINGALORE WHICH IS SIMILARLY WORDED AS IN THE DTAA BETWEEN INDIA AND UK HAS HELD AS UNDER : THE GRADING REPORT BY GIA IS A STATEMENT OF FACT A S TO THE CHARACTERISTICS OF THE DIAMOND. THE REPORT G IVES THE ATTRIBUTES OF THE DIAMOND AND INCLUDES AN ANALYSIS OF THE DIAMONDS DIMENSIONS, CLARITY, COLO UR, POLISH, SYMMETRY AND OTHER CHARACTERISTICS. THERE I S NOTHING ON RECORD TO SHOW THAT GIA THROUGH ITS GRAD E REPORT ASSIGNS OR TRANSFERS ANY INDUSTRIAL OR COMMERCIAL EXPERIENCE TO ITS CUSTOMERS. AS PER THE DICTIONARY MEANING OF THE TERM 'EXPERIENCE' IT IS C LEAR THAT 'EXPERIENCE' IS A CUMULATION OF KNOWLEDGE AND OBSERVATION GATHERED OVER A PERIOD OF TIME. THE GRADING CERTIFICATE WHICH IS ISSUED DOES NOT INVOLV E ANY TRANSFER OF COMMERCIAL INTEREST TO THE PARTY PAYING OR GETTING THE RIGHT TO USE THE EXPERIENCE O F GIA. THERE IS ALSO NO TRANSFER OF ANY SKILL OR KNOWLEDGE OF GIA TO THE CUSTOMERS IN THE ISSUANCE O F GRADING REPORTS. THE PAYMENT RECEIVED IS NOT THE ON E FOR THE USE OR THE RIGHT TO USE EXPERIENCE, BUT IS INSTEAD ONE FOR THE APPLICATION OF EXPERIENCE TO A CERTAIN FACTUAL SITUATION I.E. GIA SHALL APPLY ITS EXPERTISE TO THE DIAMONDS SUBMITTED BY THE CLIENTS AND DETERMINE ITS TRUE FEATURE. THE NATURE OF THE TRANSACTION BETWEEN GIA AND ITS CLIENT DOES NOT INV EST THE PARTY MAKING PAYMENT WITH ANY RIGHT AS REGARDS THE USE OF THE CUMULATED EXPERIENCE OF GIA. THE PAYMENT IN QUESTION DOES NOT INVOLVE A PAYMENT FOR THE USE OR THE RIGHT TO USE THE INDUSTRIAL, COMMERC IAL OR SCIENTIFIC EXPERIENCE OF GIA. THE ACTIVITY OF GR ADING OR CERTIFICATION IS MERELY THE APPLICATION OF THIS KNOWLEDGE/ EXPERIENCE IN A PROFESSIONAL STREAM AS APPLICABLE TO A PARTICULAR DIAMOND OR SET OF DIAMON DS WHICH ARE OFFERED FOR CERTIFICATION OR GRADING. THE DEFINITION OF ROYALTY UNDER THE DTAA UNDER ART. 12( 3) 20 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. AS DEFINED THEREIN, USES THE EXPRESSION 'OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE'. THERE IS NO PARTING OF INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE BY GIA WHEN IT ISSUES THE GRADING CERTIFICATE. UNDER SUB-CT. (4) THE PAYMENTS RECEIVED MUST BE IN CONSIDERATION FOR SERVICES OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE. THAT COULD INCLUDE TO THE APPLICATION OR ENJOYMENT OF TH E RIGHT, PROPERTY OR INFORMATION. THIS IS NOT THE CAS E HERE. NEITHER IS IT MAKING AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, ETC., TO ENABLE THE PERSON ACQUIRING THE SERVICE TO APPLY THE TECHNOLOG Y CONTAINED THEREIN. 8.4.5. IN THE CASE OF FACTSET RESEARCH SYSTEMS INC. , REPORTED IN (2009) 317 ITR 169, THE AUTHORITY FOR A DVANCE RULINGS WHILE DEALING WITH THE DEFINITION OF ROYAL TY UNDER THE DTAA BETWEEN INDIA AND USA, HAS HELD AS UNDER : THE DEPARTMENTAL REPRESENTATIVE THEN INVOKED C1. (IV) OF EXPLN. 2 TO S. 9(1) WHICH SPEAKS OF 'IMPART ING ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL'. THE DTAA (ART. 12.3) USES SLIGHTLY DIFFEREN T LANGUAGE. IT SPEAKS OF PAYMENT RECEIVED FOR 'INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE'. THE PAYMENT IN QUESTION CAN NOT BE BROUGHT WITHIN THE FOLD OF THIS PART OF DEFINITI ON OF 'ROYALTY'. THE CLAUSE DOES NOT CONTEMPLATE MERELY IMPARTING INFORMATION ON TECHNICAL, INDUSTRIAL OR COMMERCIAL MATTERS. THE REQUIREMENT IS IMPARTING OF INFORMATION CONCERNING TECHNICAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL. THE INFORMATION WHICH THE LICENSEE GETS THROUGH THE DATABASE DOES NOT RELATE TO THE UNDERLYING EXPERIEN CE OR SKILLS WHICH CONTRIBUTED TO THE END-PRODUCT. THE APPLICANT DOES NOT SHARE ITS EXPERIENCES, TECHNIQUE S OR METHODOLOGY EMPLOYED IN EVOLVING THE DATABASE WITH THE SUBSCRIBERS. THE APPLICANT DOES NOT IMPART 21 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. ANY INFORMATION RELATING TO THEM. THE INFORMATION O R DATA TRANSMITTED THROUGH THE DATABASE IS THE PUBLISHED INFORMATION ALREADY AVAILABLE IN PUBLIC DOMAIN AND IT IS NOT SOMETHING WHICH IS EXCLUSIVELY AVAILABLE TO THE APPLICANT. THE APPLICANT COMPILES AND PRESENTS THE INFORMATION IN PROPER FORM BY APPLYING ITS OWN METHODOLOGY. IT DOES NOT AMOUNT TO IMPARTIN G OF INFORMATION CONCERNING THE APPLICANT'S OWN KNOWLEDGE, EXPERIENCE OR SKILLS IN COMMERCIAL AND FINANCIAL MATTERS. THE CONTENTION THAT IMPARTING OF INFORMATION REGARDING ANALYSIS AND RESEARCH DONE BY THE APPLICANT IS INVOLVED HERE IS DEVOID OF MERIT.- ANAPHARM INC., IN RE (2008) 219 CTR (AAR) 209 : (2008) 305 ITR 394 (AAR) RELIED ON; WIPRO LTD. VS. ITO (2003) 80 ITJ (BANG) 191 CONCURRED WITH. 9. SIMILAR VIEW HAS BEEN EXPRESSED IN THE OTHER CASES RELIED UPON BY THE LD. COUNSEL FOR THE ASSESS EE. THUS, THE PRINCIPLE LAID DOWN IN THE ABOVE JUDGMENT S IS THAT UNLESS AND UNTIL THE LICENSE IS GIVEN TO USE T HE COPYRIGHTED PROPERTY ITSELF, THE CONSIDERATION PAID CANNOT BE TREATED AS ROYALTY. IN THE CASE BEFORE US, THE LICENSE IS GRANTED TO USE CERTAIN DATA FROM TIME TO TIME UPON THE TERMS AND CONDITIONS SET IN THE LICENSE AGREEMENT. IT IS SEEN THAT BOTH THE LICENSES ARE NON-EXCLUSIVE LICEN SES AND THEREFORE, THE INFORMATION/ DATA IS NOT CUSTOMIZED TO MEET THE ASSESSEES REQUIREMENTS EXCLUSIVELY. TO UNDERSTAND THE EXACT NATURE OF THE TRANSACTION, THE RELEVANT CLAUSES OF AGREEMENTS, ARE REPRODUCED BELO W : AGREEMENT WITH GXT :- 1.4. DATA' MEANS GEOPHYSICAL AND GEOLOGICAL INFORMATION MADE THE SUBJECT OF THIS LICENSE AND AN Y APPLICABLE SUPPLEMENT, REGARDLESS OF THE FORM OR MEDIUM ON WHICH IT IS DISPLAYED OR STORED AND WHICH LICENSOR EITHER OWNS OR FOR WHICH IT HAS THE RIGHT TO GRANT USE LICENSES. DATA ALSO INCLUDES DERIVATIVES 22 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. AND LICENSOR INTERPRETATIONS CREATED BY LICENSOR FO R NON-EXCLUSIVE LICENSE TO LICENSEE OR THIRD PARTIES. SPECIFIC DATA SUBJECT TO THIS LICENSE IS MORE PARTICULARLY DESCRIBED IN EACH SUPPLEMENT. 1.5. 'DERIVATIVE(S)' MEANS ALL PROCESSED AND REPROCESSED DATA REGARDLESS OF THE FORM OR MEDIUM ON WHICH IT IS DISPLAYED OR STORED WHETHER PRODUCED BY LICENSEE OR THIRD PARTIES. 1.8. 'LICENSEE'S CONSULTANT(S)' MEANS THIRD PARTY(- IES) WHICH ARE CONSULTANTS IN THE GEOPHYSICAL INDUSTRY FREELY SELECTED AND ENTRUSTED BY LICENSEE TO INTERPRET, REPROCESS, MAKE OTHER TECHNICAL STUDIES OR PROVIDE STORAGE OF THE DATA FOR THE SOLE USE AND BENEFIT OF LICENSEE BUT SUBJECT TO THE TERMS OF LICENSEE UNDER THIS LICENSE. LICENSEE'S CONSULTANTS MAY NOT BE PROSPECTIVE PARTNERS, PARTNERS, PROSPECTIVE ACQUIRERS OR ACQUIRERS. 1.9. 'LICENSEE INTERPRETATION(S)' MEANS PRODUCT(S) CREATED BY LICENSEE OR ITS CONSULTANTS THAT ARE BAS ED UPON SPACE AND TIME LOCATION OF THE DATA AND/OR DERIVATIVES BUT DO NOT DIRECTLY INCORPORATE ACTUAL DATA OR DERIVATIVE VALUES OR MAGNITUDES. OWNERSHIP/CONFIDENTIAL TREATMENT : 2. DATA OWNERSHIP/CONFIDENTIAL TREATMENT : OWNERSHIP/CONFIDENTIALITY : LICENSOR IS THE OWNER, OR THE DULY AUTHORIZED AGENT IF OF ITS PRINCIPAL (THE 'DATA OWNER') OF ANY AND ALL INTELLECTUAL AND/OR INDUSTRI AL PROPERTY RIGHTS. LICENSOR REPRESENTS, AND LICENSEE ACKNOWLEDGES, THAT THE DATA AND DERIVATIVES, CONSTITUTE VALUABLE AND HIGHLY CONFIDENTIAL TRADE SECRETS THAT ARE NOT GENERALLY AND PUBLICLY AVAILAB LE AND ARE THE SOLE PROPERTY AND PROPRIETARY INFORMATI ON OF LICENSOR, OR THE DATA OWNER IF OTHER THAN LICENS OR. TITLE TO AND OWNERSHIP RIGHTS IN SUCH DATA SHALL REMAIN WITH LICENSOR, OR THE DATA OWNER IF OTHER TH AN LICENSOR. 23 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. LICENSEE SHALL ACQUIRE, IN ACCORDANCE WITH THE TERM S AND CONDITIONS PROVIDED IN THIS LICENSE, ONLY THE N ON- EXCLUSIVE RIGHT TO UTILIZE SUCH DATA. LICENSEE SHAL L IN NO EVENT SHOW-OR-TRANSFER THE DATA OR DERIVATIVES EXCEPT AS SPECIFICALLY PROVIDED IN THIS LICENSE. LICENSOR SHALL HAVE THE RIGHT AT ANY TIME TO LICENS E THE DATA TO THIRD PARTIES AT SUCH PRICES AND ON SUCH TERMS AND CONDITIONS AS ARE DETERMINED BY LICENSOR. EXCEPT AS EXPRESSLY PERMITTED BY THIS LICENSE, LICENSEE AGREES (A) TO KEEP STRICTLY CONFIDENTIAL, AND SHALL ENSURE THAT ITS EMPLOYEES AND AGENTS KEEP STRICTLY CONFIDENTIAL, THE DATA AND DERIVATIVES AND (B) NOT TO SHOW, ALLOW THE USE OF, OR DISPLAY THE DATA OR DERIVATIVES TO ANY THIRD PARTY. 2.2. ORIGINAL DATA-RETENTION/LICENSING/RIGHT TO DESTROY : IT IS THE INTENT OF LICENSOR TO RETAIN THE ORIGINAL DATA (SUCH AS FIELD TAPES AND OTHER RELATE D INFORMATION OBTAINED DURING ACQUISITION); HOWEVER, LICENSEE ACKNOWLEDGES THAT ORIGINAL MEDIA CONTAINING THE ORIGINAL DATA MAY ERODE, BECOME DAMAGED, AND/OR CONTAIN DATA NOT RELEVANT TO THE GEOLOGICAL AREA COVERED BY THE DATA AND IN SUCH SITUATIONS, LICENSOR MAY BE UNABLE TO PROVIDE LICENSEE COPIES OF THE PORTION OF THE ORIGINAL DATA THEREBY AFFECTED. LICENSOR SHALL HAVE THE SOLE RIGH T TO DELETE OR DISCARD THE ORIGINAL DATA UPON MAKING REASONABLE EFFORTS TO NOTIFY LICENSEE OF ITS INTENT ION TO DO SO. 2.3. NOTICE OF RESTRICTED USE : LICENSEE MAY MAKE COPIES OF ANY DATA AND DERIVATIVES FOR THE SOLE PURPOSE OF USING SUCH COPIES PURSUANT TO THE RIGHTS GRANTED IN THIS LICENSE; PROVIDED THAT ALL SUCH COP IES SHALL HAVE THE FOLLOWING NOTICE PRINTED THEREON OR ATTACHED TO IT OR ITS MEDIUM: NOTICE 'THIS DATA IS PROPRIETARY TO AND A TRADE SECRET OF GX TECHNOLOGY CORPORATION AND/OR ITS RELATED ENTITIES ('LICENSOR'). THE USE OF THIS DATA AND DERIVATIVES IS RESTRICTED TO COMPANIES HOLDING A VALID USE LICENSE FROM LICENSOR AND IS SUBJECT TO THE CONFIDENTIALITY TERMS OF THAT LICENSE.' 24 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. THIS NOTICE SHALL NOT BE REMOVED, OBLITERATED, CONCEALED OR OTHERWISE OBSCURED BY LICENSEE OR THOSE TO WHOM THE DATA OR DERIVATIVES IS DISCLOSED, DISPLAYED OR TRANSFERRED BY LICENSEE, AS MAY BE PERMITTED IN THIS LICENSE. 4. DISCLOSURE OF DATA & DERIVATIVES : LICENSEE SHALL HAVE THE NON-EXCLUSIVE RIGHT TO USE THE DATA AND DERIVATIVES FOR ITS INTENDED USE SUBJECT TO THE TER MS AND CONDITIONS OF LICENSEE UNDER THIS LICENSE. LICENSEE SHALL NOT SHOW, TRANSFER OR OTHERWISE DISPOSE OF OR ALLOW ACCESS TO, OR USE OF ANY OR ALL , OF THE DATA OR DERIVATIVES EXCEPT AS SPECIFICALLY PROVIDED FOR IN THIS ARTICLE 3 AND THE ARTICLE 5 BE LOW. COPIES OF ANY CONFIDENTIALITY AGREEMENTS BETWEEN LICENSEE AND THIRD PARTIES AS REQUIRED BY THE TERMS AND CONDITIONS OF THIS LICENSE SHALL BE PROVIDED TO LICENSOR UPON FORMAL WRITTEN REQUEST. 3.3. LICENSEE'S CONSULTANT THE DATA AND DERIVATIVES MAY BE MADE AVAILABLE TO ANY LICENSEE'S CONSULTANT FOR THE SOLE USE AND BENEFIT OF LICENSEE , PROVIDED THAT THE CONSULTANT SIGNS A CONFIDENTIALIT Y AGREEMENT WITH LICENSEE PRIOR TO THE SERVICE. THE DATA AND DERIVATIVES SHALL REMAIN ON THE PREMISES O F LICENSEE'S CONSULTANT SOLELY FOR THE TIME PERIOD NECESSARY TO INTERPRET, REPROCESS, CONDUCT TECHNICA L STUDIES OR PROVIDE STORAGE OF THE DATA OR DERIVATIV ES. UPON COMPLETION OF THE SERVICE FOR WHICH CONSULTANT HAS BEEN ENTRUSTED BY LICENSEE, THE CONSULTANT SHAL L NOT RETAIN ANY COPIES OF THE DATA, DERIVATIVES, OR ANALYSES OR INTERPRETATIONS OF THE DATA OR DERIVATI VES AND SHALL DELIVER ALL COPIES THEREOF TO LICENSEE. 6. WARRANTIES AND DISCLAIMERS : 6.1. LICENSOR REPRESENTS AND WARRANTS ON ITS BEHALF AND ON BEHALF OF THE DATA OWNER THAT IT HAS FULL AUTHORITY AND POWER TO GRANT TO LICENSEE THE U SE RIGHTS COVERED BY IN THIS LICENSE. LICENSOR ASSUMES ALL LIABILITIES WHICH MAY ARISE OUT OF ITS ACTIVITI ES IN ACQUIRING AND PROCESSING AND LICENSING THE DATA, AN D AGREES TO INDEMNIFY, DEFEND AND HOLD LICENSEE 25 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. HARMLESS FROM ANY CLAIMS, ACTIONS, OR DAMAGES, INCLUDING ATTORNEY'S FEES, AND EXPENSES ARISING OUT OF SUCH ACTIVITIES, PROVIDED LICENSEE NOTIFIES LICENSO R PROMPTLY IN WRITING [AFTER LICENSEE HAVING WRITTEN KNOWLEDGE OF ANY CLAIMS] OF ANY SUCH CLAIMS AGAINST IT AND GIVES LICENSOR AUTHORITY, NECESSARY INFORMAT ION AND REASONABLE ASSISTANCE (AT LICENSOR'S EXPENSE) F OR THE DEFENSE OR ASSISTANCE IN THE DEFENSE OF SUCH PROCEEDINGS. 6.2. DATA DELIVERED TO LICENSEE UNDER THIS LIC ENSE AND ANY SUPPLEMENT ARE, TO THE BEST V OF THE KNOWLEDGE, INFORMATION AND BELIEF OF LICENSOR, PREPARED IN ACCORDANCE WITH ACCEPTED PRACTICES OF T HE GEOPHYSICAL PROFESSION; HOWEVER, LICENSEE ACKNOWLEDGES IT IS ACCEPTING ALL DATA SUBJECT HERETO 'AS IS' AND, EXCEPT AS PROVIDED FOR UNDER ARTICLE 6.1, LICENSOR MAKES NO REPRESENTION OR WARRANTY, EXPRESS OR IMPLIED, IN RESPECT TO THE QUALITY, ACCURACY OR USEFULNESS OF SUCH DATA OR OTHERWISE AND ANY SUCH IMPLIED WARRANTIES OR REPRESENTATIONS ARE HEREBY EXPRESSLY NEGATED. SUCH DATA ARE DELIVERED HEREUNDER WITH THE EXPLICIT UNDERSTANDING AND AGREEMENT OF LICENSEE THAT ANY ACTION TAKEN OR EXPENDITURES MADE BY LICENSEE AND ITS RELATED ENTITLES AND MEMBERS OF LTS EXPLORATION GROUPS BASED ON ITS OR THEIR EXAMINATION, EVALUATION. INTERPRETATION OR USE OF THE DATA SHALL BE AT ITS OWN RISK AND RESPONSIBILITY AND NEITHER LICENSEE NOR SUCH RELATED ENTITIES AND ACQUIRERS AND PARTNERS SHALL HAVE ANY CLAIM AGAINST AND HEREBY RELEASES LICENSOR FROM ANY LIABILITY AS A CONSEQUENCE THEREOF. 6.3. LICENSOR MAKES NO REPRESENTATION THAT OIL A ND GAS OR OTHER MINERAL LEASES WILL BE GRANTED OR OTHE R EXPLORATION AND/OR DEVELOPMENT FOR PRODUCTION ACTIVITY WILL BE AUTHORIZED FOR GEOGRAPHICAL AREAS COVERED BY THE DATA BY ANY INDIVIDUAL, , COMPANY OR 26 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. OTHER LEGAL ENTITY, GOVERNMENT AGENCY OR OTHER THIR D PARTY AND ANY IMPLIED WARRANTY OR REPRESENTATION TO THAT EFFECT IS HEREBY EXPRESSLY NEGATED. 9. EFFECTS OF TERMINATION : 9.1. RETURN OF DATA UPON EXPIRATION OR TERMINATION OF THIS LICENSE OR ANY SUPPLEMENT, REGARDLESS OF THE CAUSE, LICENSEE SHALL WITHIN 30 DAYS RETURN AND/OR DESTROY ALL RESPECTIVE DATA AND DERIVATIVES AND SHA LL WITHIN THE SAME 30 DAY PERIOD PROVIDE WRITTEN CERTIFICATION THAT ALL COPIES OF THE DATA AND DERIVATIVES, AND ANY PHYSICAL MANIFESTATIONS THEREO F, SUBJECT TO THIS LICENSE AND/OR THE AFFECTED SUPPLEMENT, HAVE BEEN RETURNED TO LICENSOR OR DESTROYED, INCLUDING REMOVAL OF SUCH DATA FROM LICENSEE'S STORAGE AND ARCHIVAL SYSTEMS, WORKSTATIONS, PROSPECT FILES, AND THAT LICENSEE HAS RETAINED NO COPIES OF SUCH DATA AND DERIVATIVES. FO R A PERIOD OF 24 MONTHS FROM THE TERMINATION OF ANY LICENSE OR SUPPLEMENT, LICENSOR SHALL HAVE THE RIGH T TO AUDIT LICENSEE'S PREMISES, SYSTEMS AND STORAGE SITES TO VERIFY THAT ALL OF THE AFFECTED DATA AND DERIVATIVES HAVE BEEN RETURNED OR DESTROYED. THE PARTIES HEREBY AGREE THAT LICENSEE INTERPRETATIONS SHALL NOT BE AFFECTED, RETURNED, OR DESTROYED AND S HALL REMAIN THE PROPERTY OF LICENSEE. 10. THE RELEVANT CLAUSES OF THE SUPPLEMENTAL AGREEMENT WITH GXT ARE AS UNDER : 2. THE DATA : THE DATA SUBJECT HERETO IS DESCRIBED IN ATTACHMENT A AND AS FOLLOWS : SURVEY : INDIASPAN UNITS : 2509.81 KILOMETERS COST PER UNIT : 575.00 USD 3. DELIVERABLES : DELIVERABLES INCLUDED IN THE LICENSE FEE ARE DESCRIBED AS ATTACHMENT B. 27 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. 11. AS SEEN FROM THE ABOVE CLAUSES, WE FIND THAT ALL THAT IS PROVIDED BY THE LICENSOR IS THE DATA RE LATING TO THE GEOPHYSICAL AND GEOLOGICAL INFORMATION ABOUT TH E EAST AND WEST COAST OF INDIA AND IS NOT RESPONSIBLE FOR THE ACCURACY OR USEFULNESS OF SUCH DATA. THUS, IT IS CL EAR THAT LICENSORS HAVE ONLY MADE AVAILABLE THE DATA ACQUIRE D BY THEM AND AVAILABLE WITH THEM BUT ARE NOT MAKING AVAILABLE ANY TECHNOLOGY AVAILABLE FOR USE OF SUCH DATA BY THE ASSESSEE HEREIN. THE DECISIONS RELIED UPON BY T HE LD. COUNSEL FOR THE ASSESSEE, FOR THE CASES DISCUSSED A BOVE ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE BEF ORE US AND THE PAYMENTS MADE BY THE ASSESSEE TO GTX AND GG S IS NOT IN THE NATURE OF ROYALTY AS PER THE RESPEC TIVE DTAAS AND THEREFORE, THE PROVISIONS OF SECTION 195 ARE NOT APPLICABLE. 12. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.03.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 09 TH MARCH, 2016 VBP/- 28 ITA.NOS.317 & 318/HYD/2012 GVK OIL & GAS LIMITED, SECUNDERABAD. COPY TO : 1. GVK OIL & GAS LIMITED, 156 - 159, PAIGAH PLAZA, S.P. ROAD, SECUNDERABAD 500 003. 2. THE ASST. COMMISSIONER OF INCOME TAX, (INTERNATIONAL TRANSACTION) - I, I.T. TOWERS, HYDERABAD. 3. CIT(A) - V, HYDERABAD 4 . DIT (INTERNATIONAL TAXATION), HYDERABAD 5 . D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE