ONGC Videsh Ltd, New Delhi V. ITO, New Delhi

ITA 3181/DEL/2009

• Counselvise Citation: 318120114 RSA 2009
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JASDEEP SINGH SENIOR
• Assessee Lawyers: RAVI SHARMA CAS
• Keywords: Double taxation relief; Permanent establishment
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 (ASSESSMENT YEARS : 2007-08, 2008-09, 2008-09, 2009 -10) ITA NO.3394/DEL./2011 (ASSESSMENT YEAR : 2009-10) ONGC VIDESH LIMITED, VS. ITO, INTERNATIONAL TAXAT ION, 26, KG MARG, 6 TH FLOOR, TDS, WARD 2 (1), KAILASH BUILDING, NEW DELHI. NEW DELHI. (PAN : AAACO1230F) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI PAWAN KUMAR & RAVI SHARMA, CA S REVENUE BY : SHRI JASDEEP SINGH, SENIOR DR ORDER PER JOGINDER SINGH, JUDICIAL MEMBER : THIS BUNCH OF FIVE APPEALS IS BY THE ASSESSEE FOR A SSESSMENT YEARS 2007-08 TO 2009-10 ON THE GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. FIRST APPELLATE AUTHORITY ERRED IN LAW AND IN FACT IN UPHOLDING THE ASSESSMENT ORDER UNDER SECTION 195 / 197 OF THE ACT IGNORING THE AGREEMENT, DEFINITION OF ROYALTY, AND FURTHER ERRED IN HOLDING THAT IN THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND WOO D MACKENZIE, THE ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 2 ASSESSEE GOT A LICENCE TO USE / ACCESS TO SCIENTIFI C WORK WITHOUT APPRECIATING THE NATURE OF INFORMATION RECEIVED BY THE ASSESSEE ON PAYMENT OF ACCESS FEE. 2. DURING HEARING OF THESE APPEALS, WE HAVE HEARD S HRI PAWAN KUMAR ALONG WITH SHRI RAVI SHARMA, LD. COUNSELS FOR THE A SSESSEE AND SHRI JASDEEP SINGH, LD. SENIOR DR. THE ASSESSEE HAS ALSO FILED SYNOPSIS. THE CRUX OF ARGUMENT IS THAT THE SUBSCRIPTION FEES PAID BY THE ASSESSEE TO WOOD MACKENZIE (IN SHORT HEREINAFTER, WM) IS NOT IN THE NATURE OF ROYALTY FOR INFORMATION CONFORMING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE BECAUSE WM IS NOT IMPORTING ANY INFORMATION, KNOWLE DGE OR SKILL FROM ITS EXPERIENCE ACQUIRED OVER A PERIOD OF TIME. IT WAS SUBMITTED THAT THE INDUSTRIAL EXPERIENCE, THAT FROM THE OTHER PARTIES FROM WHOM I NFORMATION HAS BEEN OBTAINED, IS SIMPLY PUT ON WEBSITE, THEREFORE, IT C ANNOT BE TERMED AS ROYALTY BECAUSE IT IS MERELY GENERAL INFORMATION CONCERNING COMMERCIAL ASPECT OF UPSTREAM SECTOR OF VARIOUS COUNTRIES RATHER THAN TH E COMMERCIAL EXPERIENCE OF WM. THEREFORE, THE SUBSCRIPTION FEES PAID FOR SUPP LY OF SUCH INFORMATION, ELECTRONICALLY, CANNOT BE TREATED AS ROYALTY. THE LD. COUNSEL RELIED UPON THE DECISIONS IN FACTSET RESEARCH SYSTEMS INC. VS. DIT (2009) 182 TAXMAN 268 (AAR), WIPRO LIMITED VS. ITO (2005) 278 ITR ( AT) 57 (BANGALORE), DUN AND BRADSTREET ESPANA S.A. (2005) 272 ITR 99, AND THE DECISION FROM HON'BLE MADHYA PRADESH HIGH COURT IN CIT VS. HEG LI MITED (2003) 182 CTR 0353 (MP). OUR ATTENTION WAS ALSO INVITED TO T HE DECISION IN GARTNER ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 3 IRELAND LIMITED VS. DDIT (INTERNATIONAL TAXATION) (2010) (TII) 111 ITAT (MUM.) ALONG WITH THE DECISION IN INFOSYS TECHNOLOG IES LTD. VS. DCIT (2011) 45 SOT 157 (BANG). THE LD. COUNSEL FURTHER CONTEND ED THAT THE CLAUSES IN RESEARCH AGREEMENT DATED 14.06.2006 DOES NOT MAKE A NY SUBSTANTIAL DIFFERENCE TO THE PAYMENT MADE BY OVL BECAUSE IN EV ERY SUCH AGREEMENT / SUCH CONTRACT IT CONTAINS DISCLOSURE CLAUSE REGARDI NG NON-USE / NON-SHARING OF INFORMATION SO DOWNLOADED. ON THE OTHER HAND, THE LD. SENIOR DR STRONGLY DEFENDED THE CONCLUSION DRAWN IN THE ASSESSMENT ORD ER AND IMPUGNED ORDER BY STATING THAT THE NATURE OF THE PAYMENT HAS TO BE SEEN AND EVEN THE ASSESSEE WAS ALSO NOT SURE ABOUT THE NATURE OF SUCH PAYMENT. LD. SENIOR DR INVITED OUR ATTENTION TO PAGE 34 OF PAPERBOOK-1 BY SUBMITTI NG THAT IT IS PAYMENT FOR TECHNICAL CONSULTANCY, THEREFORE, TDS HAS TO BE DED UCTED. IT WAS EMPHATICALLY ARGUED THAT OIL AND NATURAL GAS IS A S PECIALIZED SECTOR, THEREFORE, IT CANNOT BE TERMED AS A GENERAL INFORMATION. MORE SPECIFICALLY, THE ASSESSEE ENGAGED WM AS AN EXPERT ADVISER AND IT WAS A RESEAR CH AGREEMENT. THE PLEA WAS ALSO RAISED THAT SPECIALIZED TRAINING ALONG WIT H PASSWORD ARE REQUIRED FOR SUCH USE AND ACCESS TO THE SYSTEM IS VERY SPECIALIZ ED. OUR ATTENTION WAS INVITED TO PAGE 23 OF THE PAPER-BOOK TO THE EFFECT THAT EVEN THE PASSWORDS WERE PROVIDED BY WM. FURTHER ATTENTION WAS DRAWN T O PAGE 27 OF THE PAPER BOOK CONTAINING PARAS 1.5 AND 1.6. THE CRUX OF THE ARGUMENT IS THAT IT IS PURE TECHNICAL INFORMATION, SO TDS WAS REQUIRED TO BE DE DUCTED. ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 4 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IN THE CAPTIONED APPEALS, SIN CE THE ISSUES ARE IDENTICAL, THEREFORE, THESE APPEALS WERE HEARD TOGETHER, CONSE QUENTLY CAN BE DISPOSED OFF BY THIS COMMON AND CONSOLIDATED ORDER FOR THE S AKE OF BREVITY. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF EXPLORATION AND DEVELOPMENT OF HYDRO CARBON TO AUGMENT THE OIL SECU RITY OF THE COUNTRY. DURING THE COURSE OF ITS ACTIVITIES, THE ASSESSEE A CQUIRED PARTICIPATING INTEREST IN OIL AND GAS PROJECTS OUTSIDE INDIA AND PARTICIPA TED IN OIL EXPLORATION, PRODUCTION AND DEVELOPMENT AND THE ACTIVITIES OF IT S PROJECT. FOR THE PURPOSES OF THEIR OVERSEAS BUSINESS, ONGC VIDESH LIMITED (IN SHORT, OVL) NEEDED INFORMATION IN RELATION TO ECONOMIC CONDITIONS ALON G WITH OTHER ASPECTS, SPECIALLY OVERVIEW OF OIL AND GAS INDUSTRY IN DIFFE RENT COUNTRIES. ACCORDINGLY, OVL SUBSCRIBED A WEBSITE OF A COMPANY, WM, WHICH IS A GLOBAL ENERGY AND MINING RESEARCH UNIT BY WAY OF A RESEARCH AGREEMENT DATED 14.06.2006. WM COLLECTS AND COMPILES VARIOUS INFORMATIONS IN THE F IELD OF OIL AND GAS EXPLORATION AND PRODUCTS THEREOF AND SUCH INFORMATI ONS ARE PUT ON THE WEBSITE. SUCH INFORMATIONS CAN BE OBTAINED ON PAYM ENT OF CERTAIN FEES BY ENTERING INTO AN AGREEMENT. UNDER THE AGREEMENT, T HE ASSESSEE PAID CHARGES / SUBSCRIPTION FEES TO WM FOR OBTAINING SUCH INFORMAT IONS. IN TURN, WM GRANTED NON-TRANSFERABLE LICENCE TO THE ASSESSEE FO R DOWNLOADING SUCH INFORMATION FROM ITS WEBSITES AND SUCH DOWNLOADED I NFORMATION WAS TO BE ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 5 USED ONLY BY THE ASSESSEE FOR ITS PURPOSES. FURTHE R, THE AGREEMENT DOES NOT GRANT ANY RIGHT OR SUB-LICENSING ETC. AND ALSO NOT TO DEVIATE FROM THE TERMS AND CONDITIONS OF THE AGREEMENT UNLESS EXPRESSLY PROVID ED IN THE AGREEMENT (AGREEMENT IS AVAILABLE ON PAGES 21 TO 31 OF THE PA PER-BOOK). TO DETERMINE THE TAXABILITY OF THE SUBSCRIPTION FEE PAID BY THE ASSESSEE TO WM, AN APPLICATION WAS FILED BEFORE THE DDIT (INTERNATIONA L TAXATION) (PAGES 32 TO 35 OF THE PAPER BOOK). THE ASSESSING OFFICER WAS O F THE VIEW THAT SUCH PAYMENT IS IN THE NATURE OF ROYALTY UNDER SECTION 1 9(1)(IV) OF THE ACT AS WELL AS ARTICLE 13 (3) OF THE INDIA UK TAX TREATY, THERE FORE, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. C IT (A) WHO ALSO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT SINCE THE ASSESSEE IS ACCESSING TO A SCIENTIFIC WORK WHICH IS IN THE NATU RE OF INTELLECTUAL PROPERTY AND THE INFORMATION COMPILED ON THE WEBSITES IS FOR THE PURPOSES OF PERSONS OF OIL AND EXPLORATION / PRODUCTION, THE INFORMATION D OWNLOADED BY THE ASSESSEE IS HAVING NO RIGHT TO SUB-LICENCE, THEREFORE, IT IS COVERED UNDER THE DEFINITION OF ROYALTY UNDER DOMESTIC LAW UNDER SECTION 19(1)(V I) AS WELL AS ARTICLE 13(3) OF DTAA WITH UK. CONSEQUENTLY, THE STAND OF THE AS SESSING OFFICER WAS AFFIRMED. 5. NOW, THE QUESTION TO BE ADJUDICATED BY US IS WHE THER THE SUBSCRIPTION FEES PAID BY THE ASSESSEE TO WM CONSTITUTE ROYALTY FOR INFORMATION CONCERNING ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 6 INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE AND SAME IS TAXABLE UNDER SECTION 19(1)(VI) AND ARTICLE 13(3) OF THE DTAA WIT H UK? THE STAND OF THE ASSESSEE IS THAT IT IS MERELY A SUBSCRIPTION FEES A ND CAN BE USED BY ANY PERSON AFTER GOING TO THE WEBSITE OF WM AND IT IS MERELY A GENERAL INFORMATION WHEREAS THE STAND OF THE REVENUE IS THAT IT IS A RO YALTY PAID FOR GETTING SUCH INFORMATION FOR WHICH PASSWORD ARE SUPPLIED BY WM, SPECIALIZED SKILL IS REQUIRED FOR ACCESSING AND THAT TOO THROUGH AN AGRE EMENT. STILL FOR BETTER APPRECIATION, WE ARE REPRODUCING HEREUNDER SECTION 9(1)(VI) OF THE ACT REGARDING ROYALTIES :- (VI) INCOME BY WAY OF ROYALTY PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE R OYALTY IS PAYABLE IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION USED OR SERVICES UTILISED FOR THE PURPO SES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERS ON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE ROYA LTY IS PAYABLE IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION USED OR SERVICES UTILISED FOR THE PURPO SES OF A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERS ON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING A NY INCOME FROM ANY SOURCE IN INDIA : PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY OF ROYALTY AS CONSISTS OF LUMP SUM CONSIDERATION FOR THE TRANSFER OUTSIDE INDIA OF, OR THE IMPARTING OF INFORMATION OUTSIDE INDIA IN RESPE CT OF, ANY DATA, DOCUMENTATION, DRAWING OR SPECIFICATION RELAT ING TO ANY ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 7 PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY, IF SUCH INCOME IS P AYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE THE 1ST DAY O F APRIL, 1976, AND THE AGREEMENT IS APPROVED BY THE CENTRAL GOVERNMENT: [ PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO SO MUCH OF THE INCOME BY WAY O F ROYALTY AS CONSISTS OF LUMP SUM PAYMENT MADE BY A PERSON, WHO IS A RESIDENT, FOR THE TRANSFER OF ALL OR ANY RIGHTS (IN CLUDING THE GRANTING OF A LICENCE) IN RESPECT OF COMPUTER SOFTW ARE SUPPLIED BY A NON-RESIDENT MANUFACTURER ALONG WITH A COMPUTE R OR COMPUTER-BASED EQUIPMENT UNDER ANY SCHEME APPROVED UNDER THE POLICY ON COMPUTER SOFTWARE EXPORT, SOFTWARE DEVELOPMENT AND TRAINING, 1986 OF THE GOVERNMENT OF INDIA.] EXPLANATION 1.FOR THE PURPOSES OF THE [FIRST] PROV ISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 19 76, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AG REEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE C ENTRAL GOVERNMENT BEFORE THAT DATE; SO, HOWEVER, THAT, WHE RE THE RECIPIENT OF THE INCOME BY WAY OF ROYALTY IS A FORE IGN COMPANY, THE AGREEMENT SHALL NOT BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE UNLESS, BEFORE THE EXPIRY OF THE TIME ALL OWED UNDER SUB- SECTION (1) OR SUB-SECTION (2) OF SECTION 139 (WHET HER FIXED ORIGINALLY OR ON EXTENSION) FOR FURNISHING THE RETU RN OF INCOME FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY O F APRIL, 1977, OR THE ASSESSMENT YEAR IN RESPECT OF WHICH SU CH INCOME FIRST BECOMES CHARGEABLE TO TAX UNDER THIS ACT, WHI CHEVER ASSESSMENT YEAR IS LATER, THE COMPANY EXERCISES AN OPTION BY FURNISHING A DECLARATION IN WRITING TO THE [ASSESSI NG] OFFICER (SUCH OPTION BEING FINAL FOR THAT ASSESSMENT YEAR A ND FOR EVERY SUBSEQUENT ASSESSMENT YEAR) THAT THE AGREEMENT MAY BE REGARDED AS AN AGREEMENT MADE BEFORE THE 1ST DAY OF APRIL, 1 976. EXPLANATION 2.FOR THE PURPOSES OF THIS CLAUSE, 'RO YALTY' MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERATION WHICH WOULD BE THE INCO ME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' ) FOR ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 8 (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 ; (II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y ; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DES IGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERT Y ; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING T ECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXP ERIENCE OR SKILL ; [(IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMM ERCIAL 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 LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ART ISTIC OR SCIENTIFIC WORK INCLUDING FILMS OR VIDEO TAPES FOR USE IN CONNECTION WITH TELEVISION OR TAPES FOR USE IN CONN ECTION WITH RADIO BROADCASTING, BUT NOT INCLUDING CONSIDER ATION FOR THE SALE, DISTRIBUTION OR EXHIBITION OF CINEMATOGRA PHIC FILMS ; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION W ITH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO [(IV), (IVA) AND] (V). [EXPLANATION 3.FOR THE PURPOSES OF THIS CLAUSE, 'C OMPUTER SOFTWARE' MEANS ANY COMPUTER PROGRAMME RECORDED ON ANY DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE AND INCLUDES ANY SUCH PROGRAMME OR ANY CUSTOMIZED ELECT RONIC DATA.] [ EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE TRANSFER OF ALL OR ANY RIGHTS IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION INCLUDES AND HAS ALW AYS INCLUDED TRANSFER OF ALL OR ANY RIGHT FOR USE OR RIGHT TO US E A COMPUTER ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 9 SOFTWARE (INCLUDING GRANTING OF A LICENCE) IRRESPEC TIVE OF THE MEDIUM THROUGH WHICH SUCH RIGHT IS TRANSFERRED. EXPLANATION 5.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE ROYALTY INCLUDES AND HAS ALWAYS INCLUDED C ONSIDERATION IN RESPECT OF ANY RIGHT, PROPERTY OR INFORMATION, W HETHER OR NOT (A) THE POSSESSION OR CONTROL OF SUCH RIGHT, PROPE RTY OR INFORMATION IS WITH THE PAYER; (B) SUCH RIGHT, PROPERTY OR INFORMATION IS USED DI RECTLY BY THE PAYER; (C) THE LOCATION OF SUCH RIGHT, PROPERTY OR INFORM ATION IS IN INDIA. EXPLANATION 6.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE EXPRESSION 'PROCESS' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INC LUDING UP- LINKING, AMPLIFICATION, CONVERSION FOR DOWN-LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH PROCESS IS SECRET; ] (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY (A) THE GOVERNMENT ; OR (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE F EES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE IND IA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA ; OR (C) A PERSON WHO IS A NON-RESIDENT, WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINE SS OR PROFESSION CARRIED ON BY SUCH PERSON IN INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA : [ PROVIDED THAT NOTHING CONTAINED IN THIS CLAUSE SHALL APPLY IN RELATION TO ANY INCOME BY WAY OF FEES FOR TECHNICAL SERVICES ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 10 PAYABLE IN PURSUANCE OF AN AGREEMENT MADE BEFORE TH E 1ST DAY OF APRIL, 1976, AND APPROVED BY THE CENTRAL GOVERNMENT .] [EXPLANATION 1.FOR THE PURPOSES OF THE FOREGOING P ROVISO, AN AGREEMENT MADE ON OR AFTER THE 1ST DAY OF APRIL, 19 76, SHALL BE DEEMED TO HAVE BEEN MADE BEFORE THAT DATE IF THE AG REEMENT IS MADE IN ACCORDANCE WITH PROPOSALS APPROVED BY THE C ENTRAL GOVERNMENT BEFORE THAT DATE.] EXPLANATION [2].FOR THE PURPOSES OF THIS CLAUSE, ' FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUD ING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGER IAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PR OVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MININ G OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATIO N WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD 'SALARIES'.] IF THE AFORESAID SECTION IS ANALYZED, IT SPEAKS ABO UT INCOME BY WAY OF ROYALTY PAYABLE BY GOVERNMENT, A PERSON RESIDENT AND A PERS ON NON-RESIDENT. EXPLANATION 2 SPEAKS ABOUT ROYALTY MEANS A CONSIDER ATION FOR TRANSFER OF ALL OR ANY RIGHT (INCLUDING GRANTING OF A LICENCE) WHEREAS SUB-CLAUSE (IV) CLEARLY SPEAKS ABOUT IMPARTING OF ANY INFORMATION CONCERNIN G TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR S KILL. THE AFORESAID PROVISION OF THE ACT IS TO BE READ BY KEEPING THE A GREEMENT BETWEEN THE PARTIES IN JUXTAPOSITION. THE TERM ROYALTIES AS USED IN ARTICLE 12.3 OF THE DTAA MEANS PAYMENT OF ANY KIND RECEIVED AS A CONSID ERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, A RTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS, OR WORK ON FILMS, TA PE OR OTHER MEANS OF ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 11 REPRODUCTION FOR USE IN CONNECTION WITH RADIO, TELE VISION, BROADCASTING, ANY PATENT, TRADEMARK, DESIGN OR MODEL, PLAN, SECRET FO RMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVE USE OR DISPO SITION THEREOF, AND PAYMENT OF ANY KIND AS CONSIDERATION FOR THE USE OF , OR THE RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTH ER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 OF ARTICL E 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARA 2(C) O F ARTICLE 8. IF THIS PROVISION OF THE ACT IS ANALYZED WITH RESPECT TO RESEARCH AGR EEMENT WITH OVL DATED 14.06.2006 (AVAILABLE AT PAGES 21 TO 31 OF THE PAPE R BOOK) FIRSTLY, AS IS EVIDENT FROM THE NOMENCLATURE ITSELF, RESEARCH AGRE EMENT AND PURSUANT TO THE AGREEMENT, THE WM HAS GRANTED CERTAIN RIGHTS REGARD ING ITS PROPRIETARY INFORMATION AND ITS SERVICES SUBJECT TO CERTAIN TER MS AND CONDITIONS AS ATTACHED IN APPENDIX Z. WM AGREED TO PROVIDE THE S ERVICES AS PER TERMS AND THIS AGREEMENT ACCESSIBLE FOR FURTHER PERIOD AS PER TERMS SET FURTHER. IN APPENDIX Y, THERE WAS A LIST OF RESEARCH AND OTHER PRODUCTS TO WHICH THE ASSESSEE SUBSCRIBED. THE WEBSITE IS AVAILABLE TO T HE LIMITED OFFICIALS OF THE ASSESSEE. THE FEE HAS ALSO BEEN SPECIFIED FOR EACH PRODUCT WHICH WILL BE TREATED AS ACCESS FEE AND THE FEES FOR UPSTREAM SER VICES IN 2006 WAS AMOUNTING TO $ 9,56,250 (NINE HUNDRED FIFTY-SIX THO USAND TWO HUNDRED AND ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 12 FIFTY POUNDS STERLING) AND 3% AVERAGE INCREASE IN F EES FOR THE PRODUCT FOR THE SECOND AND THIRD YEAR OF THE TERM. THUS, THE OVERA LL FEE, AS PER THE AGREEMENT, WAS $ 1,025,662 (ONE MILLION AND TWENTY FIVE THOUSA ND SIX HUNDRED AND SIXTY TWO POUNDS STERLING). CERTAIN CORPORATE INCENTIVES WERE ALSO OFFERED (PAGE 22 OF THE PAPER BOOK). IT IS PERTINENT TO MENTION HER EIN THAT WM AGREED TO PROVIDE TWO DAYS TRAINING PROGRAMME PER ANNUM ON UP STREAM SERVICES DURING THE PERIOD OF CONTRACT (FIRST YEAR) FOR 20 INDIVIDU ALS. FOR GETTING SUCH SERVICES FOR THE RESEARCH, THE TELEPHONE AND E.MAIL ACCESS T O THE INDUSTRY ANALYZED WAS ALSO REQUIRED. A SPECIFIC FEE (PAGE 25 OF THE AGRE EMENT) HAS BEEN MENTIONED AS ACCESS FEE SUBJECT TO THE LIABILITIES / TERMS AN D CONDITIONS. WE ARE USEFULLY REPRODUCING HEREUNDER THE RESTRICTIVE CLAUSE (PAGE 27 OF THE PAPER BOOK) :- 1.5 THE USER NAMES AND PASSWORDS PROVIDED TO YOU CONSTITUTE TRADE SECRETS AND PROPRIETARY AND CONFID ENTIAL INFORMATION OF WOOD MACKENZIE, AND YOU AND YOUR OFF ICIALS SHALL PROTECT EACH SUCH USER NAME AND PASSWORD AS A TRADE SECRET. WOOD MACKENZIE SHALL HAVE THE RIGHT TO AUD IT YOUR USE OF ITS USER NAMES AND PASSWORDS TO VERIFY YOUR COMP LIANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND YOU WILL MAINTAIN SUCH RECORDS REGARDING THE USE OF USER NAMES AND PA SSWORDS, INCLUDING, EXCEPT IN THE CASE OF A GLOBAL LICENCE, LOGS OF THE USER NAMES AND PASSWORDS AND OF THE INDIVIDUALS TO WHOM THEY ARE ASSIGNED FROM TIME TO TIME, AS MAY BE APPROPRIA TE TO ENABLE SUCH AUDIT TO BE MADE. YOU MAY NOT PERMIT U SER NAMES AND PASSWORDS TO BE DISCLOSED TO UNAUTHORIZED PERSO NS OR USED SO AS TO ALLOW UNAUTHORIZED PERSONS TO GAIN ACCESS TO THE WEB SITE OR ANY PRODUCT. YOU MAY NOT COPY OR DISTRIBUT E ANY USER NAME OR PASSWORD EXCEPT IN ACCORDANCE WITH THIS AGR EEMENT. 1.6 EACH PRODUCT PROVIDED TO YOU IS PROPRIETARY AND CONFIDENTIAL TO WOOD MACKENZIE, AND YOU AND YOUR OF FICIALS SHALL PROTECT EACH PRODUCT AS A TRADE SECRET. WOOD MACKENZIE ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 13 SHALL HAVE THE RIGHT TO AUDIT YOUR USE OF ANY PRODU CT TO VERIFY YOUR COMPLIANCE WITH THE PROVISIONS OF THIS AGREEME NT. YOU MAY NOT PERMIT ANY PRODUCT OR ANY INFORMATION OR DA TA CONTAINED IN OR DERIVED FORM ANY PRODUCT TO BE DISC LOSED TO UNAUTHORIZED PERSONS OR ALLOW UNAUTHORIZED PERSONS TO GAIN ACCESS TO ANY PRODUCT OR ANY OF SUCH INFORMATION OR DATA. YOU MAY NOT COPY OR DISTRIBUTE ALL OR ANY PORTION OF A PRODUCT EXCEPT IN ACCORDANCE WITH THE AGREEMENT. IF THE AFORESAID RESTRICTIVE CLAUSE IS ANALYZED, US ER NAMES AND PASSWORDS WERE PROVIDED TO THE ASSESSEE WHICH WERE CONSIDERED AS T RADE SECRETS AND PROPRIETARY AND CONFIDENTIAL INFORMATION OF WM. TH E USE OF SUCH PASSWORD OR INFORMATION WAS OF RESTRICTIVE USE OF THE ASSESS EE. THE ASSESSEE WAS SPECIFICALLY DENIED OF DISCLOSING TO UNAUTHORIZED P ERSON AND EVEN THE ASSESSEE IS NOT AUTHORIZED TO COPY THE SAME OR TO DISTRIBUTE TO THE UNAUTHORIZED PERSONS AS PER THE TERMS OF THE AGREEMENT. EVEN ACCESS OF THE SAME TO THE UNAUTHORIZED PERSONS HAS BEEN SPECIFICALLY DENIED M EANING THEREBY THE USE OF THE INFORMATION IS CONFINED TO THE ASSESSEE, THEREF ORE, IT CANNOT BE SAID TO BE GENERAL INFORMATION AS CANVASSED BY THE LD. COUNSE L FOR THE ASSESSEE. SO FAR AS THE JURISDICTION OF THE AGREEMENT IS CONCERNED I T IS GOVERNMENT BY THE LAWS OF ENGLAND. IF THE TOTALITY OF THE FACTS ARE ANALY ZED ALONG WITH TERMS AND CONDITIONS OF THE AGREEMENT, WE ARE CONVINCED THAT THE INFORMATION CONTAINED IN THE AGREEMENT IS NOT FOR THE PUBLIC AT LARGE, RA THER SUCH INFORMATION, KNOWLEDGE OR SKILL CAN BE USED IN TERMS OF THE AGRE EMENT ONLY. IT IS NOT THE CASE THAT ANY PERSON FROM THE PUBLIC CAN ACCESS THI S FACILITY WITHOUT AN ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 14 AGREEMENT OR WITHOUT MAKING ANY PAYMENT. THEREFORE , NATURE OF THE PAYMENT HAS TO BE SEEN. IN OUR CONSIDERED VIEW, CERTAINLY THE PAYMENT IS IN THE NATURE OF TECHNICAL CONSULTANCY. OIL AND NATURAL GAS AND ITS EXPLORATION ARE A FIELD OF SPECIALIZED TECHNICAL KNOWLEDGE AND NOT FOR THE USE OF PUBLIC AT LARGE. A SPECIFIC TRAINING IS REQUIRED IN THE FIELD. THE IN FORMATION OBTAINED BY THE ASSESSEE ARE ALSO OF TECHNICAL NATURE. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT IT CONTAINS GENERAL INFORMATION IS WI THOUT ANY JUSTIFICATION. 6. SO FAR AS THE RELIANCE UPON THE DECISION OF WIP RO LIMITED AND OTHER CASES ARE CONCERNED, IN THE CASE OF DUN AND BRADSTR EET ESPANA S.A. SUPRA) IS CONCERNED, THE INFORMATION PROVIDED IN BUSINESS INF ORMATION REPORTS (BIRS) WAS PUBLICLY AVAILABLE AND IT WAS ONLY BEING COMPIL ED BY D & B ASSOCIATES. HOWEVER, IN THE PRESENT CASE, WHAT IS BEING ASSESSE D BY THE ASSESSEE WAS A SCIENTIFIC WORK WHICH HAS A CHARACTER OF INTELLECTU AL PROPERTY COMPILED ON THE WEBSITE FOR THE PURPOSES OF THE PERSONS IN THE FIEL D OF OIL AND GAS EXPLORATION AND PRODUCTION THEREOF. IT IS A SEGMENTED INFORMAT ION AND THE PRODUCT IS IN RESPECT OF PARTICULAR COUNTRY OR REGION. AT THE SA ME TIME, AS MENTIONED EARLIER, THE ASSESSEE HAS BEEN SPECIFICALLY DENIED TO SUB-LICENCE, RENT OR LOAN OF ANY PRODUCT, NOR THE ASSESSEE IS AUTHORIZED TO C REATE A DERIVATIVE WORK BASED UPON ANY PROJECT EXCEPT AS OTHERWISE EXPRESSL Y PROVIDED IN THE AGREEMENT. WM HAS GRANTED A NON-TRANSFERABLE AND N ON-INCLUSIVE LICENCE TO USE THE CONFIDENTIAL NAME AND PASSWORDS, IF ANY, SU BJECT TO THE CONDITION TO ITA NOS.3179, 3180, 3181 & 3182/DEL./2009 ITA NO.3394/DEL./2011 15 ENTER THE RESTRICTED PORTION OF THE WEBSITE FOR THE SALE PURPOSE OF DOWNLOADED TO A PERMITTED COMPUTER AND REPRODUCING IN STORAGE MEDIA OF A PERMITTED COMPUTER COPIES. THE TERMS OF THE AGREEMENT SHALL END AT 00.01 GM ON THE LAST OF THE THEN CURRENT TERMS UNLESS SUCH TERMS AR E EXTENDED OR TERMINATED. IF THE TOTALITY OF THE FACTS ARE ANALYZED THE INFORMAT ION / KNOWLEDGE AVAILABLE TO THE ASSESSEE WAS MADE THROUGH A LICENCE, CONSEQUENT LY IT IS COVERED UNDER THE DEFINITION OF ROYALTY UNDER THE DOMESTIC LAW U/S 19 (1)(IV) AND (VI) ALONG WITH ARTICLE 13(3) OF THE DTAA WITH UK, THEREFORE, THE CASES RELIED UPON BY THE ASSESSEE ARE NOT OF MUCH HELP, BEING ON DIFFERENT F ACTS. SO FAR AS THE EXACT NATURE OF PERMANENT ESTABLISHMENT IS CONCERNED, IT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER IN THE CASE OF THE RECIPIENTS . EVEN OTHERWISE, THIS IS NOT AN ISSUE BEFORE US. IN VIEW OF THESE FACTS, WE FIN D NO INFIRMITY WITH THE ORDER OF THE LD. CIT (A), CONSEQUENTLY AFFIRMED. 7. FINALLY, WHOLE OF THE APPEALS OF THE ASSESSEE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF NOVEMBER, 2012. SD/- SD/- (S.V. MEHROTRA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF NOVEMBER, 2012/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXIX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.