Pandit Deendayal Petroleum University-PDPU, Ahmedabad V. The Income Tax Officer (Int. Taxn.)-2, Ahmedabad

ITA 3268/AHD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6749 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-03-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 06-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKARSR
• Keywords: Double taxation relief; TDS; Capital Gains
• Section: 201(1); 195; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEM BER PANDIT DEENDAYAL PETROLEUM UNIVERSITY- PDPU PAN: AABTP3856A (APPELLANT) VS ITO, INTERNATIONAL TAXATION-II, AHMEDABAD (RESPONDENT) REVENUE BY: SHRI RAJDEEP SINGH, SR. D.R. ASSESSEE BY: SHRI S.N. SOPARKAR, SR . A.R. AND PARIN SHAH, A.R. DATE OF HEARING : 21-01-2021 DATE OF PRONOUNCEMENT : 05-04-2021 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THESE TWO APPEALS FILED BY ASSESSEE FOR A.Y. 2012-1 3 & 2013-14, ARISE FROM ORDER OF THE CIT(A)-13, AHMEDABAD DATED 15-09-2016, IN PROCEEDINGS UNDER SECTION 201 AND 201(1A) R.W.S. 19 5 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. SINCE SIMILAR FACTS AND ISSUES ARE INVOLVED IN T HE AFORESAID TWO APPEALS OF THE ASSESSEE, THEREFORE, FOR THE SAKE OF CONVENIENCES, WE TAKE THE ITA NOS. 3268 & 3269/AHD/2016 ASSESSMENT YEAR 2012-13 & 2013-14 I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 2 ITA NO. 3268/AHD/2016 FOR A.Y. 2012-13 AS A LEAD CA SE FOR ADJUDICATION AND ITS FINDING WOULD BE APPLICABLE TO THE OTHER AP PEAL FILED VIDE ITA NO. 3269/AHD/2016 FOR A.Y. 2013-14. THE MAIN ISSUE CON TESTED IN THE GROUND OF APPEAL AGAINST THE DECISION OF LD. CIT(A) THAT A SSESSEE IS LIABLE FOR DEDUCTION OF TAX U/S. 195 OF THE ACT ON PAYMENT MAD E TO GEORGIA TECH RESEARCH CORPORATION TOWARDS COST REIMBURSEMENT FOR JOINT RESEARCH PROJECTS AS ROYALTY AND LEVY OF INTEREST OF RS. 2,3 1,307/- U/S. 201(1A) OF THE ACT AND LIABLE TO DEDUCTION OF TAX TDS AMOUNTING TO RS. 5,58,040/- ON PAYMENTS MADE TO GEORGIA TECH RESEARCH CORPORATION. 3. THE BRIEF FACT OF THE CASE IS THAT ASSESSEE PAND IT DEENDAYAL PETROLEUM UNIVERSITY (PDPU) IS A DEEMED UNIVERSITY AS PER NOT IFICATION OF GOVERNMENT OF GUJARAT. THE ASSESSEE HAS ENTERED INTO TWO AGRE EMENTS WITH THE GEORGIA TECH RESEARCH CORPORATION, GEORGIA, USA FOR A COLLA BORATIVE JOINT RESEARCH PROJECT TO STUDY PERMEABILITY OF TIGHT GAS SANDSTON E. THE ASSESSEE HAS MADE CERTAIN PAYMENTS TO GEORGIA TECH RESEARCH CORPORATI ON (GTRC) FOR CONDUCTING STUDY RELATED TO RESEARCH PROJECT PER MEABILITY CHARACTERIZATION AND MODELING OF TIGHT SANDSTONE RESERVOIRS THE AS SESSING OFFICER WAS OF THE VIEW THAT PAYMENT MADE TO GTRC WERE OF THE NATU RE OF ROYALTY AND HENCE TDS SHOULD HAVE BEEN MADE @ 15% FOR THE SUM S O REMITTED. THEREFORE VIDE NOTICE DATED 13 TH NOV, 2004, ASSESSEE WAS ASKED TO CLARIFY THE NATURE OF THESE REMITTANCES. THE CONTENTS OF THE N OTICE ISSUED BY THE ASSESSING OFFICER ARE REPRODUCED AS UNDER:- 'PLEASE REFER TO YOUR REPLY DATED 7/11/2014 ON THE SUBJECT OF VERIFICATION OF PAYMENTS TO NON- RESIDENTS. 2. ON VERIFICATION OF THE DETAILS FURNISHED B Y YOU, IT IS SEEN THAT THE FOLLOWING PAYMENTS WERE LIABLE TO WITHHOLDING OF TAX U/S 195 OF THE INCOME- TAX ACT:- I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 3 DATE OF PAYMENT PAYEE/REMITEE AMOUNT (RS.) TAXABLE AS 13.10.2011 GEORGIA TECH RESEARCH CORPORATION, USA 3107088 FEE FOR TECHNICAL SERVICES 03/02/2012 GEORGIA TECH RESEARCH CORPORATION, USA - 1966000 FEE FOR TECHNICAL SERVICES 08/03/2013 GEORGIA TECH RESEARCH CORPORATION, USA 12876431 FEE FOR TECHNICAL SERVICES 07/06/2013 GEOQUEST SYSTEMS B. V., NETHERIAND 7499136 ROYALTY 16/12/2013 ASPEN TECHNOLOGY INC. USA 375000 | ROYALTY 4. THE PAYMENT OF FEE FOR TECHNICAL SERVICES IS LIA BLE TO WITHHOLDING OF TAX U/S 195 AND THE REASON AS GIVEN BY YOU THAT THE 'PAYEE 'DID NOT HAV E A PE IN INDIA IS IRRELEVANT. SIMILARLY, PAYMENT FOR PURCHASE OF SOFTWARE IS COVERED UNDER ROYALTY A ND REQUIRED WITHHOLDING OF TAX U/S 195 OF THE INCOME-TAX ACT HOWEVER, NO TAX WAS WITHHELD BY YOU. THEREFORE, IT IS INTENDED TO TREAT YOU AS AN ASSESSEE IN DEFAULT WITH ALL CONSEQUENTIAL ACTIONS SUCH AS PENALTY AND CHARGING OF INTEREST ETC. 5. OBJECTION, IF ANY, MAY BE RAISED IN WRITIN G WITHIN 10 DAYS OF RECEIPT OF THIS NOTICE.' 5. THEREAFTER, IT CAME TO NOTICE THAT IN ROW NUMBER ONE, TWO AND THREE IN COLUMN FOUR OF THE TABLE ABOVE, THE NATURE OF PAYMENTS WERE TERMED ERRONEOUS LY AS 'FEE FOR TECHNICAL SERVICES'. THE MISTAKES OCCURRED DUE TO COPYING OF THE TABLE FROM OTHER ORDER. THEREFORE, THE SAID MISNOMER MISTAKE WAS CONVEYED TO THE ASSESSES VIDE LETTER DA TED 19/12/2014 WHICH IS REPRODUCED AS UNDER: 'PLEASE REFER MY NOTICE U/S 201 DATED 13/11/2014. 2. IN THE SAID NOTICE, IN COLUMN NUMBER FOUR, THE R EMITTANCES TO GEORGIA TECH RESEARCH CORPORATION, USA WERE INADVERTENTLY SHOWN AS 'FEE F OR TECHNICAL SERVICES' INSTEAD OF 'ROYALTY'. PLEASE AMEND COLUMN FOUR TO READ AS 'ROY ALTY' IN PLACE OF TEE FOR TECHNICAL SERVICERS' IN ROW NUMBER ONE, TWO AND THREE. 3. SINCE THERE IS A CHANGE IN THE CHARACTER OF REMI TTANCES AS WELL AS IN MY DESIGNATION (RE-DESIGNATED AS ITO, INTERNATIONAL TAXATION-U), T HIS IS TO GIVE YOU AGAIN AN OPPORTUNITY TO RAISE OBJECTION AGAINST THE SAID NOTICE.' IN RESPONSE TO THE AFORESAID NOTICE, THE SUBMISSIO N OF THE ASSESSEE IS REPRODUCED AS UNDER:- 6. IN RESPONSE TO THE ABOVE REFERRED TO LETTER DATE D 19/12/2014, THE ASSESSEE MADE A WRITTEN SUBMISSION. RELEVANT AND OPERATIVE PORTION OF ITS S UBMISSION IS REPRODUCED HERE BELOW: 'AS YOU ARE AWARE THAT REMITTANCES MADE TO GEORGIA TECH RESEARCH CORPORATION -GTRC, USA IS FOR A COLLABORATIVE JOINT RESEARCH PROJECT TO STUDY PERMEABILITY OF TIGHT SANDSTONE WHICH IS TO BE UTIL IZED BY PDPU FOR EDUCATIONAL PURPOSE AND THEREFORE THE SAME IS SPECIFICALLY EXCL UDES FROM THE DEFINITION OF 'FEES FOR INCLUDED SERVICES' AND REMAIN OUT OF THE PURVIEW OF PARS 5 (C) OF ARTICLE 12 'ROYALTIES AND FEES FOR INCLUDED SERVICE S' OF INDIA - USA TAX TREATY. THE SAME IS EXPLAINED IN DETAILED BY OUR LETTER DAT ED 12-11-2014 NOW SIR, AS YOU CAME TO KNOW THAT REMITTANCES TO G TRC ARE SPECIFICALLY EXCLUDES FROM THE DEFINITION OF 'FEES FOR INCLUDED SERVICES' AND REMAIN OUT OF THE PURVIEW OF PARA S (C) OF ARTICLE 12 'ROYALTIES AND FEES FOR INCLUDED SERVICES' OF INDIA - USA TAX TREATY, YOU HAVE CONVE NIENTLY DECIDED TO CHANGE I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 4 YOUR STAND AND WANTS TO TREAT THE REMITTANCES TO GT RC UNDER THE HEAD 'ROYALTY', WE STRONGLY OBJECT TO YOUR CHANGING THE STAND. HOWEVER WITHOUT PREJUDICE TO OUR CLAIM AND CONTENTI ONS WE HAVE TO STATE AS UNDER: WE ARE REPRODUCING HEREWITH TERM 'ROYALTIES' AS DEF INED IN PARA - 3 OF ARTICLE 12 'ROYALTIES AND FEES FOR INCLUDED SERVICES' OF IN DIA - USA TAX TREATY: '3. THE TERN 'ROYALTIES AS USED IN THIS ARTICLE MEA N: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDE RATION FOR THE USE OF, OR THE RIGHT TO USE , ANY COPYRIGHT OF 3 LITERARY, ARTISTI C, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCAS TING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, O R FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE, IN CLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY 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 EQUI PMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERPRISE DESCRIBED IN PARAGRAPH 1 O F ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2 (C) OR 3 OF ARTICLE 8.' FURTHER WE ARE A/SO REPRODUCING HEREWITH THE TERM ' ROYALTY' AS DEFINED IN EXPLANATION 2 TO SECTION 9 (1) (VI) OF THE INCOME T AX ACT, 1961: 'FOR THE PURPOSES OF THIS CLAUSE, 'ROYALTY' MEANS C ONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERAT ION 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 GR ANTING OF A LICENSE) IN RESPECT OF A PATENT, INVENTION, MODEL, DESIGN, SECR ET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; \ (II) THE IMPARTING OF ANY INFORMATION CONCERNING THE WO RKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORM ULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, S ECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TECHNI CAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC, KNOWLEDGE, EXPERIENCE OR SKILL; (V) (IVA) THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMME RCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB;] (VI) (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 CONNECTIO N WITH TELEVISION OR TAPES FOR USE IN CONNECTION WITH RADIO BROADCASTING , BUT NOT INCLUDING CONSIDERATION FOR THE SALE, DIS TRIBUTION OR EXHIBITION OF CINEMATOGRAPHIC FILMS; OR (VII) (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO-(IV), (IVA) AND] (V).' SIR, WE REQUEST YOU TO KINDLY LET US KNOW UNDER WHICH OF THE ABOVE PARA, SUB PARA/CLAUSE, SUB CLAUSE OF THE DEFINITION OF TERM 'ROYALTY' AS PER DTAA AND AS PER THE INCOME TAX ACT THE PAYMENT MADE TO GEORGIA TECH RESEARCH CORPORATION, USA IS LIABLE TO TAX IN INDIA. ON HEARING FROM YOU WE WILL BE PLEASED SUBMIT OUR D ETAILED REPLY ON THE SAME. YOUR EARLY ACTION IN THE MATTER IS SOLICI TED.' IN ITS REPLY, THE ASSESSEE HAS EXPLAINED THAT PAYME NT WAS MADE TO GEORGE TECH RESEARCH CORPORATION, USA FOR A COLLABORATIVE JOINT RESEARCH PROJECT TO I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 5 STUDY PERMEABILITY OF TIGHT GAS SANDSTONE AND RESUL T OF SUCH RESEARCH PROJECT WILL BE UTILIZED BY BOTH THE UNIVERSITIES FOR THE P URPOSE OF EDUCATIONAL AND RESEARCH ACTIVITIES ONLY. IT WAS ALSO EXPLAINED TH AT REMITTANCE TO THE GTRS WAS SPECIFICALLY EXCLUDED FROM THE DEFINITION OF FE ES FOR INCLUDED SERVICES AND REMAINED OUT OF THE PURVIEW OF PARAS 5 (C) OF ARTICLE 12 ROYALTY AND FEES FOR INCLUDED SERVICES OF INDIA-USA TAX TREATY . THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE STA TING THAT PAYMENT MADE BY THE ASSESSEE WAS NEITHER FOR TEACHING IN AN EDUC ATIONAL INSTITUTION NOR FOR TEACHING BY AN EDUCATIONAL INSTITUTION. THE ASSES SING OFFICER WAS OF THE VIEW THAT PAYMENT WAS MADE FOR DEVELOPING PROPRIETA RY INFORMATION BY THE PAYEE AND SUBSEQUENTLY ALLOWING RIGHT TO THE ASSESS EE TO ACCESS THE SAME WHICH FALL IN THE CATEGORY OF ROYALTY. THE ASSESSI NG OFFICER HAS ALSO MENTIONED THAT THE FOLLOWING FACTS MENTIONED IN THE AGREEMENT STRENGTHENED THE NATURE OF RESEARCH/KNOWLEDGE LICENSED TO PDPU A S AN INTELLECTUAL PROPERTY. A) THAT IT WAS PROPRIETARY INFORMATION BEING CREAT ION OF MIND OWNED BY THE GTRC BECAUSE OF ITS PERFORMANCE IN THE PAST OF CERTAIN RESEARCH PERTAIN ING TO TIGHT GAS SANDSTONE AND RESERVOIRS. B) THAT IT WAS NOT AVAILABLE IN INDIA AND THAT IS W HY THE PDPU HAD TO BUY THE LICENSE FOR ITS APPLICATION BY PDPU FROM GTRC, A US BASED ENTITY. C) THAT THERE ARE NON-DISCLOSURE, NON-ASSIGN, NON-T RANSFER, NO-EXPORT CLAUSES MENTIONED IN BOTH THE AGREEMENTS. D) GTRC HAS DISCLOSED TO PDPU CERTAIN TECHNICAL DAT A OR INFORMATION THAT IS COMMERCIALLY VALUABLE AND NOT GENERALLY KNOWN IN ITS INDUSTRY OF PRINCIPAL USE THEREBY MAKING AVAILABLE TECHNICAL KNOWLEDGE. IN VIEW OF THE ABOVE FACTS AND UNDERSTANDING, THE A SSESSING OFFICER OBSERVED THAT REMITTANCES MADE BY THE PDPU TO THE G TRC WAS NOTHING BUT ROYALTY AS PER THE PROVISIONS OF SECTION 9(1)(VI) O F THE INCOME TAX ACT, 1961 AS WELL AS IN TERMS OF ARTICLE 12 OF THE DTAA BETWE EN INDIA AND USA IN THE GUISE OF ACTUAL DIRECT AND INDIRECT COST. CONSEQUE NTLY, THE ASSESSING OFFICER I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 6 HAS MADE DISALLOWANCE AS PER WORKING OF TAX U/S. 20 1(1) AND INTEREST U/S. 201(1A) OF THE I.T. ACT. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REITERATING TH E FACTS REPORTED BY THE ASSESSING OFFICER. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED COPY OF DETAILED AGREEMENT EXECUTED B ETWEEN ASSESSEE AND GEORGIA TECH RESEARCH UNIVERSITY AND GONE THROUGH T HE DIFFERENT CLAUSES OF THE AGREEMENT STATING THAT NOWHERE IT IS PROVIDED T HAT PAYMENT IS MADE FOR ACQUIRING INTELLECTUAL PROPERTY BY THE ASSESSEE FRO M GTRC. THE LD. COUNSEL HAS TAKEN US TO THE DIFFERENT PAGES OF THE PAPER BO OK PERTAINING TO AGREEMENT AND COPY OF INVOICES POINTING OUT PAYMENTS MADE TO GTRC ARE NOT IN THE NATURE OF ROYALTIES BUT ARE IN THE NATURE OF COST R EIMBURSEMENT OF JOINT RESEARCH PROJECT AND ALSO REFERRED JUDICIAL PRONOUN CEMENTS IN THE CASE OF CIT VS. DUNLOP RUBBER COMPANY LTD. OF HONBLE CALCUTTA HIGH COURT 10 TAXMAN 179 (CAL) AND HIGH COURT OF GUJARAT IN THE C ASE OF CIT VS. CREATIVE INFOCITY 82 TAXMAN.COM 356 (GUJARAT). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER OF ASSESSING OFFICER AND LD. CIT(A). 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS MADE CERTAIN PAYMENTS TO THE GEORGIA TECH RESEA RCH CO-OPERATION (GTRC) CLAIMING COST FOR REIMBURSEMENT OF A JOINT R ESEARCH PROJECT. THE ASSESSING OFFICER IN THE ORDER PASSED U/S. 201(1) H AS HELD THAT REMITTANCE I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 7 MADE BY THE ASSESSEE TO THE GTRC WAS NOTHING BUT RO YALTY AS PER PROVISIONS OF SECTION 9(1)(VI) OF THE ACT AS WELL AS IN TERMS OF ARTICLE 12 OF DTAA BETWEEN INDIA AND USA. WE HAVE PERUSED THE COPY OF AGREEMENT EXECUTED ON 23 RD JULY, 2010 BETWEEN THE ASSESSEE AND GEORGIA TECH R ESEARCH CORPORATION PLACED IN THE PAPER BOOK FOR DISCLOSING INFORMATION BY THE ASSESSEE AND GSRTC COLLECTIVELY FOR THE PURPOSE OF JOINT RESEARCH PERTAINING TO TIGHT GAS SANDSTONE AND RESERVOIRS. IT IS A JO INT RESEARCH PROJECT AND BOTH THE PARTIES HAVE RIGHT ON RESULT OF RESEARCH PROJEC T. EACH PARTY SHALL USE THE PROPRIETARY INFORMATION ONLY FOR AND TO THE EXTENT REQUIRED TO ACCOMPLISH THE PURPOSE OF THE AGREEMENT. EXPLANATION TO SECTION 9(1)(VI) WHICH DEFINES ROYALTY IS REPRODUCED AS UNDER:- EXPLANATION 2.- FOR THE PURPOSE OF THIS CLAUSE, R OYALTY MEANS CONSIDERATION (INCLUDING ANY LUMP SUM CONSIDERATION BUT EXCLUDING ANY CONSIDERAT ION WHICH WOULD BE THE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD CAPITAL GAIN ) FOR- (I) THE TRANSFER OF ALL OR ANY RIGHT (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 TH E WORKING OF, OR THE USE OF, A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE M ARK OR SIMILAR PROPERTY; (III) THE USE OF ANY PATENT, INVENTION, MODEL, DESI GN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY; (IV) THE IMPARTING OF ANY INFORMATION CONCERNING TE CHNICAL, INDUSTRIAL COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE 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 TH E GRANTING OF A LICENCE) IN RESPECT OF ANY COPYRIGHT, LITERARY, ARTISTIC OR SCIENTIFIC WORK IN CLUDING 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 EXHIBITI ON OF CINEMATOGRAPHIC FILMS; OR (VI) THE RENDERING OF ANY SERVICES IN CONNECTION WI TH THE ACTIVITIES REFERRED TO IN SUB-CLAUSES (I) TO [(IV), (IVA) AND ](V) WE HAVE ALSO GONE THROUGH THE CLAUSE 3 OF ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA WHEREIN THE TERM ROYALTY IS DEFINED A S UNDER:- '3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS; (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFIC WO RK, INCLUDING CINEMATOGRAPH FILMS OR WORK ON FILM, TAPE, OR OTHER MEANS OF REPRODUCTION FOR USE IN CON NECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECR ET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, INCLUDING GAINS DERIVED FROM THE I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 8 ALIENATION OF ANY SUCH RIGHT OR PROPERTY 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, OT HER 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.' THE ASSESSING OFFICER HAS NOT ASCERTAINED THE TRUE CHARACTERS OF THE TRANSACTIONS. THE ASSESSEE HAS EXPLAINED WITH THE SUPPORT OF AGREEMENT AND COPIES OF INVOICES THAT PAYMENT MADE WAS TOWARDS CO ST REIMBURSEMENT OF JOINT RESEARCH PROJECT AND DOES NOT AMOUNT TO ROYAL TY AS PER SECTION 9(1)(VI) AND NOT COVERED WITH CLAUSE 3 OF ARTICLE 12 AS ROYA LTIES AND FEES FOR INCLUDED SERVICES OF INDIA USA DTAA. THE ASSESSEE HAS DEMON STRATED FROM THE COPIES OF AGREEMENT AND COPIES OF INVOICES THAT THE PAYMENTS TO GTRC WAS NOT IN THE NATURE OF ROYALTIES BUT WAS IN THE NATUR E OF COST REIMBURSEMENT FOR A JOINT RESEARCH PROJECT ON WHICH BOTH THE PARTIES HAVE EQUAL RIGHT TO USE. THE ASSESSING OFFICER HAS NOT SPECIFICALLY CONSIDER ED THE RELEVANT CLAUSES OF THE AGREEMENT OF JOINT RESEARCH TO BE CARRIED OUT F OR THE SUBJECT MATTER FROM SHARING OF INFORMATION FROM BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN T HE CASE OF DUNLOP RUBBER COMPANY LTD. 142 ITR 493 HOLDING THAT THE RESULT OF THE RESEARCH WAS FOR THE BENEFIT OF ALL CONCERNED INCLUDING THE HEAD OFF ICE AND SUBSIDIARY CONCERN. BUT THE VERY FACT THAT TECHNICAL DATA WA S JOINTLY OBTAINED AND THE EXPENSES WERE SHARED TOGETHER INDICATES THAT IT COU LD NOT BE TREATED AS INCOME. SIMILARLY IN THE CASE OF THE ASSESSEE (PDPU), IT IS AS PER AGREEMENT EXECUTED ON 23.07.2010 ASSESSEE (PDPU) MAY DISCLOSE TO GENERAL TECH RESEARCH CORPORATION (GTRC) AND GTRC MAY DISCLOSE T O PDP CERTAIN TECHNICAL DATA OR INFORMATION FOR THE PURPOSE OF RE SEARCH PERTAINING TO TIGHT I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 9 GAS SANDSTONE AND RESERVOIRS. THE ASSESSEE AGREED FOR REIMBURSEMENT OF COST INCURRED BY THE GTRC FOR DOING RESEARCH ACTIVITY AS A PART OF JOINT RESEARCH ON WHICH BOTH THE PARTIES HAVE EQUAL RIGHT ON RESUL T OF SUCH JOINT RESEARCH PROJECT. THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY VERIFICATION/INVESTIGATION TO DISPROVE THE CLAIM OF PURE REIMBURSEMENT OF EXPENSES MADE BY THE ASSESSEE ON THE BASIS OF RELEV ANT SUPPORTING MATERIAL AS REFLECTED IN THIS ORDER. THE LD. CIT(A) HAS ALSO NOT SPECIFICALLY CONTROVERTED THE RELATED MATERIAL REFERRED BY THE A SSESSEE AS CLAUSES OF AGREEMENT POINTING OUT THAT PAYMENT WAS MADE TO GTR C TOWARDS COST REIMBURSEMENT FOR JOINT RESEARCH PROJECT AND NOT FO R ANY ROYALTY. IT WAS NOT ESTABLISHED BY THE AUTHORITIES BELOW THAT THE AGREE MENT GRANT THE ASSESSEE THE RIGHT TO USE THE GTRCS INTELLECTUAL PROPERTY IN EX CHANGE FOR ROYALTY PAYMENTS. CONSIDERING THE AFORESAID FACTS AND FIND ING, WE CONSIDER THAT ASSESSING OFFICER HAS FAILED TO PROVE THAT PAYMENT MADE BY THE ASSESSEE TO GTRC WAS OF THE NATURE OF ROYALTY PAYMENT. THEREFOR E, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. SINCE WE HAVE ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE THAT PAYMENT OF RS. 50,73,08 8/- MADE TO GTRC WAS TOWARDS COST REIMBURSEMENT FOR JOINT RESEARCH PROJE CT AND NOT ROYALTY, THEREFORE, LEVY OF INTEREST U/S. 201(1A) IS ALSO NO T JUSTIFIED. THEREFORE, THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS ALSO ALL OWED. ITA NO. 3269/AHD/2016 A.Y. 2013-14 7. AS THE FACTS AND ISSUES INVOLVED IN GROUNDS OF APPEAL VIDE ITA NO. 3269/AHD/2016 ASSESSMENT YEAR 2013-14 ARE SIMILAR A S IN ITA NO. 3268/AHD/2016 ASSESSMENT YEAR 2012-13 THEREFORE AFTER APPLYING THE DECISION ADJUDICATED VIDE ITA NO. 3268 /AHD/2016 I.T.A NOS. 3268 & 3269/AHD/2016 A.Y. 2012-13 & 2013-14 PAGE NO PANDIT DEENDAYAL PETROLEUM UNIVERSITY VS. ITO, INTE RNATIONAL TAXATION-II 10 AS SUPRA IN THIS ORDER, THIS APPEAL OF THE ASSESSE E IS ALSO ALLOWED. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-04-2021 SD/- SD/- (RAJPAL YADAV) (AMARJIT SINGH) VICE PRESIDENT A CCOUNTANT MEMBER AHMEDABAD : DATED 05/04/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,