M/s Urban Ladder Home Decor Solutions Private limited, Bengaluru V. Assistant Commissioner of Income Tax, (International Taxation), Circle-2(2), Bengaluru

ITA 620/BANG/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7327 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 29-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: PADAM C KINCHA
• Keywords: Business income; Double taxation relief; Retrospective amendment; Non-deduction of tax; Capital expenditure; TDS; Set aside
• Section: 133A; 201(1); 195; 250; 201; 194J; 13; 22; 2

Judgement Text

IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER IT(IT)A NO.615 TO 620/BANG/2020 ASSESSMENT YEARS :2015-16, 2015-16, 2016-17, 2016 -2017, 2017-18 & 2017-18 RESPECTIVELY URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD. 1 ST , 2 ND & 3 RD FLOOR, NO.259 & 276 AMARJYOTHI HBCS LAYOUT DOMLUR BENGALURU 560 071 PAN NO :AABCU4143N VS. ACIT (INTERNATIONAL TAXATION) CIRCLE-2(2) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI PADAM.C. KINCHA, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF HEARING : 08.07.2021 DATE OF PRONOUNCEMENT : 17.08.2021 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THESE APPEALS CHALLENGING T HE COMMON ORDER DATED 17.3.2020 PASSED BY LD. CIT(A)-12, BENG ALURU CONFIRMING THE DEMAND RAISED U/S 201(1) OF THE INCO ME-TAX ACT,1961 ['THE ACT' FOR SHORT] AND INTEREST CHARGED U/S 201(1A) OF THE ACT5 FOR FINANCIAL YEARS 2014-15, 2015-16 & 201 6-17 RELEVANT FOR ASSESSMENT YEARS 2015-16, 2016-17 & 2017-18. I N ALL THESE APPEALS, THE ASSESSEE IS CHALLENGING THE VALIDITY O F DEMAND RAISED U/S 201(1) AND INTEREST CHARGED U/S 201(1A) OF THE ACT. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 2 OF 35 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEAL ING IN HOME DCOR PRODUCTS. IT SELLS ITS PRODUCTS MAINLY THROUG H ONLINE MARKETING. HENCE, THE ASSESSEE HAS PLACED ITS ADVE RTISEMENT IN THE PLATFORM OF FACEBOOK, IRELAND. IT HAS ALSO USED BU LK MAIL FACILITY OFFERED BY M/S ROCKET SCIENCE GROUP, USA. THE ASSE SSEE HAS ALSO USED AMAZON WEB SERVICES (AWS) OFFERED BY M/S AMAZO N INC., USA, WHICH IS IN THE NATURE OF PROVIDING INFORMATIO N TECHNOLOGY INFRASTRUCTURE ON RENTAL BASIS. ALL THE THREE PAYE ES ARE NON- RESIDENTS. 3. THE A.O. NOTICED THAT THE ASSESSEE HAS MADE PAYMENTS TO THESE NON-RESIDENTS. HENCE, HE CONDUCTED A SURVEY OPERATION U/S 133A OF THE ACT ON 27.10.2017 TO EXAMINE COMPLIANCE WITH TDS PROVISIONS. DURING THE COURSE OF SURVEY OPERATION, THE A.O. NOTICED THAT THE ASSESSEE COMPANY HAS MADE PAYMENTS TO NON- RESIDENTS TOWARDS ADVERTISEMENT AND MARKETING EXPENSES WITHOU T DEDUCTING TAX AT SOURCE. THE A.O. TOOK THE VIEW THAT THE ASS ESSEE IS LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO NON- RESIDENTS. 4. THE AO EXAMINED THE TAXABILITY OF ABOVE CITED PAYMENTS AS PER THE PROVISIONS OF SEC. 9(1)(VI) OF THE ACT, MORE PA RTICULARLY UNDER CLAUSE (III) AND (IVA) OF EXPLANATION 2 TO SEC. 9(1 )(VI) OF THE ACT. THE AO HAS ALSO OBSERVED THAT THESE PAYMENTS HAVE BEEN EXAMINED AS PER DTAA PROVISIONS. HOWEVER, THE AO HAS MADE REFE RENCE TO DTAA PROVISIONS WHILE EXAMINING THE PAYMENTS MADE TO AWS . SINCE THERE WAS FAILURE TO DEDUCT TAX AT SOURCE BY THE ASSESSEE , THE AO TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT IN ALL THE THRE E YEARS UNDER CONSIDERATION AND RAISED DEMAND U/S 201(1) OF THE A CT AND ALSO CHARGED INTEREST U/S 201(1A) OF THE ACT. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 3 OF 35 5. THE DETAILS OF PAYMENTS MADE BY THE ASSESSEE TO THREE DIFFERENT NON-RESIDENTS AND THE DEMAND RAISED BY THE A.O. DUR ING THE YEARS UNDER CONSIDERATION ARE TABULATED BELOW:- PARTICULARS FY 2014-15 (A.Y. 2015-16) F.Y. 2015-16 (A.Y. 2016-17) F.Y. 2016-17 (A.Y. 2017-18) AMOUNT AMOUNT AMOUNT FACEBOOK IRELAND LIMITED (FACEBOOK) 26,29,79,222 23,40,43,100 2,23,64,259 ROCKET SCIENCE GROUP, LLC, US (MAILCHIMP) 9,59,272 51,60,278 68,01,265 AMAZON WEB SERVICES INC., US (AWS) 18,71,643 1,91,22,481 2,36,01,356 TOTAL 26,58,10,137 25,83,25,859 5,27,66,880 DEMAND U/S 201(1) 2,65,81,013 2,58,3 2,586 52,76,689 INTEREST U/S 20(1A) 93,03,356 59,41,494 5,80,436 6. THE NATURE OF PAYMENTS MADE TO THE ABOVE CITED THREE COMPANIES AND THE DECISION TAKEN BY THE AO ARE SUMM ARIZED BELOW:- (A) PAYMENTS MADE TO FACEBOOK, IRELAND:- 6.1 THE ASSESSEE COMPANY USES FACEBOOK PLATFORM TO DISPLAY ITS PRODUCTS ON THE WALL OF FACEBOOK USERS. HENCE THE ASSESSEE MAKES PAYMENTS TO FACEBOOK FOR THE ADVERTISEMENTS HOSTED ON THE WEB FOR SEEKING ATTENTION OF FACEBOOK USERS. 6.2 THE CASE OF THE AO IS DESCRIBED IN PARAGRAPH 3.2.7 TO 3.2.9 OF THE ORDER PASSED FOR AY 2015-16. IDENTICAL REASONI NG IS GIVEN FOR OTHER TWO YEARS ALSO. THE DISCUSSION MADE BY THE A O IN AY 2015- 16 ARE EXTRACTED BELOW:- IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 4 OF 35 3.2.7 FACEBOOK PROVIDES MANY OPTIONS TO THE BUSINE SSES/ADVERTISERS TO REACH ITS DATABASE OF USERS. TO TOUCH UPON A FEW OF THE ALTERNATIVES THAT FACEBOOK PROVIDES THE BUSINESSES COULD CHOOSE THE IR TARGET MARKET BASED ON THE AGE GROUP, LOCATION, GENDER ETC. THE ADVERT ISEMENT MADE IN THE FACEBOOK PLATFORM IS NOT DORMANT OR PASSIVE OR BROA D-BASED ADVERTISEMENT AS MADE IN TVS OR NEWSPAPERS OR PUBLIC HOARDINGS. UNLIKE THE TRADITIONAL MEDIUM OF ADVERTISEMENTS, WHAT FACEBOOK OFFERS IS DYNAMIC, HIGHLY TARGET-GROUP SPECIFIC, REAL TIME MONITORED ADVERTIS ING. GIVEN THE IMMENSE SCOPE AND POSSIBILITIES THAT THE PLATFORM O FFERS, IT WOULD BE MYOPIC TO CATEGORISE THE ADVERTISEMENTS MADE ON FACEBOOK A S MERE DORMANT, REGULAR AD CAMPAIGNS OR BANNER SERVICES AS MENTIONE D IN THE SUBMISSION. 3.2.8 IT IS EVIDENT THAT FACEBOOK ADVERTISEMENTS ARE NOTH ING BUT THE USAGE OF FACEBOOK TECHNOLOGY AND PROCESS TO ADVANCE THE BUSINESS IN THE E-COMMERCE ERA. THE TECHNOLOGY, DESIGN, PROCESS AND EQUIPMENT OF FACEBOOK ARE BEING USED, IN A COMPLEX MANNER, WITH VERY HIGH EFFICIENCY LEVELS, TO REACH OUT THE TARGET AUDIENCE, WITHIN A FRACTION OF THE SECOND OF THE TARGET USER LOGGING IN HIS/HER ACCOUNT. THE AD VERTISER A1 (IN THE SCHEMATIC) COMMUNICATES ITS REQUIREMENTS (IN TERMS OF ITS TARGET MARKET, AND THE PROFILE OF THE CONSUMER IT WANTS TO SERVE) THROUGH ITS ADVERTISERS ACCOUNT WITH FACEBOOK. IN TURN, USING COMPLEX ALGO RITHMS AND ADVANCED PROCESSORS AND EQUIPMENT, THE NETWORK OF SERVERS TH AT FACEBOOK MAINTAINS THROUGHOUT THE WORLD LOCATES THE USERS THAT ARE BEI NG TARGETED BY THE ADVERTISER A1. AND AS SOON AS THE TARGET USER LOGS IN, THE ADS/BANNERS/WEB LINKS, AS DETERMINED BY A1 WILL BE DISPLAYED TO THE USER NEAR INSTANTANEOUSLY. IT CAN BE TERMED AS THE MOST EVOL VED FORM OF ONLINE, TARGET ADVERTISING. 3.2.9 IN SHORT, THE TECHNOLOGY AND/OR DESIGN AN D/OR PROCESS AND/OR EQUIPMENT OF FACEBOOK THAT ENABLE THE ADVERTISERS T O REACH THEIR TARGET AUDIENCE IN THE MOST EFFICIENT WAY IS THE CRUX OF T HE BUSINESS. THE ASSESSEE HAS BEEN USING THE SAME TO DEVELOP ITS BUSINESS. A CCORDINGLY, THE PAYMENTS MADE TO FACEBOOK GET SQUARELY COVERED UNDER THE PRO VISION EXPLANATION 2(III) TO SECTION 9(1)(VI) : THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY AND ALSO THE PROVISIONS OF EXPLANATION 2(IVA) TO SECTION 9(1)(VI ) : THE USE OR RIGHT TO USE ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT. THEREFORE, THE PAYMENTS MADE TO FACEBOOK AMOUNTING TO RS.26,29,79, 222/- IS TREATED AS ROYALTY AND HENCE TAX SHOULD HAVE BEEN DEDUCTED U/S 195 AT THE TIME OF PAYMENT/CREDIT OF ROYALTY. (B) PAYMENTS MADE TO ROCKET SCIENCE GROUP, LLC, USA (MAIL CHIMP):- 6.3 M/S ROCKET SCIENCE GROUP LLC HAS GOT MAIL CH IMP PLATFORM, WHICH ALLOWS ITS USERS TO SEND BULK EMAIL IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 5 OF 35 ADVERTISEMENTS/MARKETING CONTENT TO THEIR CUSTOMERS USING ITS MARKETING AUTOMATION TOOLS. 6.4 THE CASE OF THE AO IS STATED IN PARAGRAPHS 3.2.14 TO 3.2.15 OF THE ASSESSMENT ORDER FOR AY 2015-16. IDENTICAL REA SONING HAS BEEN GIVEN FOR OTHER YEARS ALSO. THE RELEVANT PORTION O F AOS ORDER IS EXTRACTED BELOW:- 3.2.15 FOR THE DETAILED DISCUSSIONS MADE FROM PA RAGRAPHS 2.1 TO 3.2.14, IT IS HELD THAT THE SERVICES AVAILED BY THE ASSESSE E COMPANY FROM THE NON- RESIDENTS IS IN THE NATURE OF USAGE OF TECHNOLOGY, MODEL OR PROCESS AND/OR EQUIPMENT AND THE SAME IS COVERED BY EXPLANATION 2( III) TO SECTION 9(1)(VI) : THE USE OF ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK OR SIMILAR PROPERTY AND ALSO THE PROV ISIONS OF EXPLANATION 2(IVA) TO SECTION 9(1)(VI) : THE USE OR RIGHT TO US E ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT AND THE PAYMENTS SO MADE AMOUNT TO ROYALTY PAYMENTS. THEREFORE, THE PROVISIONS TDS AR E APPLICABLE ON ROYALTY PAYMENTS TO NON-RESIDENTS, ROCKET SCIENCE GROUP, LL C, US. AS THE ASSESSEE COMPANY HAS FAILED TO DEDUCT TAX AT SOURCE AS STIPULATED U/S 195 ON THE PAYMENTS MADE TOWARDS EMAIL ADVERTISEMENT TH ROUGH MAIL CHIMPS MARKET AUTOMATION TOOL FOR THE F.Y 2014-15 RELEVANT TO ASSESSMENT YEAR 2015-16, THE ASSESSEE COMPANY IS HELD TO BE AN ASSE SSEE IN DEFAULT AS PER THE PROVISIONS OF SEC.201(1) OF THE INCOME TAX ACT, 1961 FOR NON DEDUCTION OF TAX AT SOURCE. THE ASSESSEE COMPANY SHOULD HAVE DEDUCTED TAX AT THE RATE OF 10% ON THESE PAYMENTS. HOWEVER, THE ASSESS EE COMPANY HAS FAILED TO DEDUCT TAX AT SOURCE. HENCE, THE DEFAULT FOR NO N DEDUCTION ON THE PAYMENTS MADE AND CONSEQUENTIAL INTEREST LEVIABLE U /S 201(1A) FOR THE ABOVE SAID ASSESSMENT YEAR, ARE COMPUTED AT THE LAS T PAGE OF THIS ORDER. (C) PAYMENTS MADE TO AMAZON WEB SERVICES INC., US 6.5 THE ASSESSEE COMPANY HAS AVAILED CLOUD COM PUTING SERVICES FROM AMAZON WEB SERVICES INC (AWS) FOR ITS ONLINE B USINESS NEEDS. CLOUD COMPUTING IS AN ARRANGEMENT IN WHICH THE CLOU D PROVIDER HOSTS THE SHARED COMPUTING RESOURCES SUCH AS HARDWA RE, SOFTWARE APPLICATIONS ETC., AND THE CLOUD USER ACCESSES THEM FOR STORAGE, DATA PROCESSING ETC., VIA INTERNET ON A NEED BASIS. IN VIEW OF CLOUD COMPUTING TECHNOLOGY, ENTERPRISES NEED NOT MAKE INV ESTMENT IN IT INFRASTRUCTURE (HARDWARE, STORAGE SPACE, APPLICATIO N SOFTWARES, IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 6 OF 35 OTHER IT RESOURCES ETC.) AND THEY CAN USE THE REQUI RED IT RESOURCES ON PAYMENT OF CHARGES. 6.6 THE CASE OF THE AO IS STATED IN PARAGRAPHS 4.1 .1 TO 4.1.11 & 5 OF THE ASSESSMENT ORDER FOR AY 2015-16. IDENTICAL REASONING HAS BEEN GIVEN FOR OTHER YEARS ALSO. FOR THIS PAYMENT, THE AO HAS ALSO REFERRED TO THE DEFINITION GIVEN IN INDIA US DTAA FOR ROYALTY AND FEES FOR INCLUDED SERVICES. THE RELEVANT PORTION OF AOS ORDER IS EXTRACTED BELOW:- 4.1.5 THERE WILL BE SITES OF THE ASSESSEE COMPANY , WHEREIN THE DATA CONNECTIVITY AND NETWORKING IS PROVIDED BY THE (AW S). GENERALLY, EVERY SITE HAS A ROUTER BEING PLACED IN THE PREMISES FO R THE DATA COMMUNICATION PURPOSES. IT IS CLEAR THAT THE SERVICES PROVIDED B Y (AWS) ALSO INCLUDES PROVIDING THE ROUTERS AND THE DATA CONNECTIVITY AND NETWORKING. 4.1.6 THE ASSESSEE COMPANY, BY RELYING ON THE DEC ISIONS OF THE ITATS, IS WRONG IN CLAIMING THAT THERE IS NO INVOLVEMENT OF A NY HUMAN INTERVENTION AT ANY STAGE AND THAT THE ENTIRE PROCESS IS FULLY A UTOMATED TECHNIQUE. HAD SUCH BEEN THE CASE, THERE WOULD NOT HAVE BEEN ANY S EPARATE MENTION FOR THE PROVIDER TO ENSURE THAT THE FACILITY IS ADEQUATELY STAFFED FOR THE PROVISION OF ALL SERVICES AND THAT THE PROVIDER EMPLOYEES, AGENT S AND SUBCONTRACTORS HAVE SUFFICIENT SKILL, EXPERTISE AND ABILITY TO PER FORM THEIR DUTIES IN A COMPETENT AND PROFESSIONAL MANNER. THIS SHOWS THAT THE ASSESSEE IS IN FACT NOT ONLY AWARE OF THE TECHNICAL EXPERTISE REQUIRED IN OBTAINING DATA HOSTING SERVICES, BUT ALSO APPRECIATIVE OF THE QUAL ITY OF MANPOWER TO BE EMPLOYED FOR SUCH TECHNICAL SERVICES. 4.1.8 THE AO EXTRACTS EXPLANATION 2 TO SEC. 9(1)( VI) OF INCOME TAX ACT 4.1.9 THE AO EXTRACTS THE DEFINITION OF ROYALTY AS PER PARAGRAPH 3(A) OF ARTICLE 12 OF INDIA US DTAA. 4.1.10 THE AO EXTRACTS THE DEFINITION OF FESS F OR INCLUDED SERVICES AS PER PARAGRAPH 4 OF ARTICLE 12 OF INDIA US DTAA. THEN THE AO CONCLUDES AS UNDER:- 4.1.11 IN VIEW OF THE ABOVE DISCUSSION, EVEN IF T HE CLOUD COMPUTING SERVICES ARE TAKING THE CHARACTER OF FEES FOR TECHN ICAL SERVICES (FTS), IT IS IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 7 OF 35 CHARGEABLE TO TAX IN INDIA AS PER THE IT ACT AND AL SO AS PER THE INDIA US DTAA. 5. AS ELABORATED ABOVE, THE PAYMENTS OF RS.18,7 1,643/- MADE BY THE ASSESSEE COMPANY DURING THE FY 2014-15 TO (AWS) F OR CLOUD COMPUTING SERVICES IS CLEARLY TAXABLE IN INDIA AS ROYALTY. A S THE ASSESSEE COMPANY HAS FAILED TO DEDUCT TAX AT SOURCE AS STIPULATED U/ S 195 ON THE PAYMENTS MADE TOWARDS CLOUD COMPUTING SERVICES FOR THE F.Y 2 014-15 RELEVANT TO ASSESSMENT YEAR 2015-16, THE ASSESSEE IS HELD TO BE AN ASSESSEE IN DEFAULT AS PER THE PROVISIONS OF SECTION 201(1) OF THE INCO ME TAX ACT, 1961 FOR NON- DEDUCTION OF TAX AT SOURCE. THE ASSESSEE COMPANY S HOULD HAVE DEDUCTED TAX AT THE RATE OF 10% ON THESE PAYMENTS. HOWEVER THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE. HENCE, THE DEFAULT FOR NO N DEDUCTION OF TAX ON THE PAYMENTS MADE AND CONSEQUENTIAL INTEREST LEVIABLE U /S 201(1A) FOR THE ABOVE SAID ASSESSMENT YEAR ARE COMPUTED IN THIS LAS T PAGE. THUS, THE AO HELD THAT THE PAYMENTS MADE TO ALL THE THREE COMPANIES IS IN THE NATURE OF ROYALTY LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. 7. THE LD CIT(A) HAS EXAMINED THE NATURE OF PAY MENTS MADE TO THESE THREE NON-RESIDENTS AS UNDER:- (A) IN RESPECT OF PAYMENTS MADE TO FACEBOOK, IRELA ND, THE LD CIT(A) HAS FIRST ANALYZED THE NATURE OF PAYMENTS. HE HAS EXAMINED THE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND FACEBOOK AND OBSERVED AS UNDER:- 13. THIS INVOLVES PAYMENTS BY THE APPELLANT FOR THE USE OF, OR THE RIGHT TO USE OF PATENTED SOFTWARE PROCESSES. UNDER SECTION 195 OF THE IT ACT THE INCOME OF NON-RESIDENT WHICH IS TAXABLE IN INDIA NE EDS TO BE SUBJECTED TO TAX DEDUCTION. THEREFORE, THE LIABILITY ON THE PAR T OF THE ASSESSEE TO DEDUCT TAX ON PAYMENTS MADE TO FACEBOOK IRELAND IS CLEARLY DEFINED IN THE AMBIT OF INCOME TAX LAW. THE NATURE OF PAYMENT MADE IS C ONSIDERED IN THE LATER PART OF THE ORDER ALONG WITH OTHER PAYMENTS FOR SOF TWARE AND DATA ACCESS. 14. ALSO AS PER THE EXTRACT OF THE AGREEMENT IT IS INFERRED THAT THE PROPER SPACE WILL BE GIVEN BY THE FACEBOOK TO THE APPELLAN TS COMPANY IN WHICH THEY CAN CREATE THEIR OWN COMPANYS DOMAIN AND USE THE SAME. I FIND THIS ISSUE OF ROYALTY UNDER THE IT ACT AS WELL AS UNDE R THE INDIA-IRELAND DTAA HAS BEEN DISCUSSED IN THE CASE OF GOOGLE INDIA (P) LTD BY THE HON'BLE. ITAT BANGALORE. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 8 OF 35 THEN THE LD CIT(A) HAS DISCUSSED THE OBSERVATIONS M ADE BY THE TRIBUNAL IN THE CASE OF GOGGLE INDIA (P) LTD AND TH E DETAILS OF PATENT NUMBER US20040059708A1. HE ALSO EXAMINED DIAGRAM I LLUSTRATING FUNCTIONAL ASPECTS OF ADVERTISEMENT SYSTEM CONSISTE NT WITH THE INVENTION AND OBSERVED AS UNDER:- 16. FURTHER AT THE COST OF REPETITION THE PATENT NUMBER US20040059708A1 IS EXAMINED. THE SYSTEM INCLUDES AN AD CAMPAIGN ENTRY AND MANAGE MENT COMPONENT 210, A TOOLS COMPONENT 220, A BILLING COMPONENT 230 , ONE OR MORE IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 9 OF 35 DATABASE 240, AN AD CONSUMER INTERFACE COMPONENT 25 0, AN AD SELECTION COMPONENT 260, AN AD ORDERING COMPONENT 270, AN AD SERVING COMPONENT 280, AND A STATISTICS ENGINE COMPONENT 290. IF THE PRESENT INVENTION IS TO BE USED WITH SUCH AN ADVERTISING SYSTEM, IT WILL PR IMARILY CONCERN AD SELECTION COMPONENT 260. TO HELP UNDERSTAND THE IN VENTION, OTHER COMPONENTS OF THE ADVERTISING SYSTEM WILL BE EXPLAI NED BELOW. FURTHERMORE, ALTHOUGH FIG 2 SHOWS A PARTICULAR ARRA NGEMENT OF COMPONENTS CONSTITUTING ADVERTISEMENT SYSTEM 120, T HOSE SKILLED IN THE ART WILL RECOGNIZE THAT NOT ALL COMPONENTS NEED BE ARRA NGED AS SHOWN, NOT ALL COMPONENTS ARE REQUIRED, AND THAT OTHER COMPONENTS MAY BE ADDED TO, OR REPLACE, THOSE SHOWN. 17. THE PARENT DOCUMENT, ILLUSTRATE AN EMBODIMENT OF THE INVENTION AND TOGETHER WITH THE DESCRIPTION, EXPLAIN THE INVENTIO N. IN THE DRAWINGS, IN FIG.2 IS A DIAGRAM FUNCTIONALLY ILLUSTRATING AN ADV ERTISING SYSTEM CONSISTENT WITH THE INVENTION. HERE THE AD CONSUME RS (130) AND THE ADVERTISERS (110) ARE OUTSIDE THE BOD WHEREAS THE M ANAGEMENT COMPONENT 210, A TOOLS COMPONENT 220, A BILLING COMPONENT 230 , ONE OR MORE DATA BASES 240, AN AD CONSUMER INTERFACE COMPONENT 250 A RE INSIDE THE BOD. I FIND THAT THE APPELLANT WHO IS HANDLING MANAGEMENT COMPONENT, TOOLS COMPONENT, BILLING COMPONENT AND OR ONE OR MORE DAT A BASES CERTAINLY HAS MORE PRIVILEGES AND ACCESS TO THE PROGRAMS THAN THE AD CONSUMERS (130) AND THE ADVERTISERS (110). THEN THE LD CIT(A) PROCEEDED TO DISCUSS ABOUT ANOTH ER PATENT DOCUMENTS AS UNDER:- IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 10 OF 35 IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 11 OF 35 IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 12 OF 35 IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 13 OF 35 THE LD CIT(A) HAS THEN OBSERVED AS UNDER:- 20. THUS, FROM THE DOCUMENT OF THE PATENT NUMBERS CITED SUPRA, IT IS CLEAR THAT THE APPELLANTS ROLES ARE INTERTWINED WITH THA T OF USER AND ADVERTISERS. 21. THESE INSTANCES ARE ONLY ILLUSTRATIVE AND TH ERE ARE A NUMBER OF SUCH DOCUMENTS WHICH EVIDENCE THAT THE TECHNICAL SUPPORT CANNOT BE CARRIED OUT WITHOUT ACCESS TO THESE PATENTED PROGRAMS. 22. THUS, ON EXAMINATION OF PATENTED DOCUMENTS A ND THE ITAT ORDER, THE CLAIM THAT THE APPELLANT IS NOT HAVING PRIVILEGES A ND ACCESS TO THESE PATENTED PROGRAMS IS REJECTED. THUS, THE LD CIT(A) HAS TAKEN THE VIEW THAT THE ASS ESSEE WAS GIVEN PRIVILEGE OF ACCESSING/USING VARIOUS COMPONENTS OF ADVERTISEMENT PROGRAM CREATED BY FACEBOOK IN ITS WEBSITE. (B) WITH REGARD TO PAYMENTS MADE TO MAILCHIMP, THE LD CIT(A) HAS OBSERVED AS UNDER:- 28. THE APPELLANTS COMPANY AND THE MAILCHIMP HAS ENTERED INTO AN AGREEMENT, ACCORDING TO THE SAME IT IS HEREBY AVERR ED THAT THE MAILCHIMP IS PROVIDING THE SPACE TO THE APPELLANTS COMPANY T O CREATE, SEND AND MANAGE CERTAIN MARKETING CAMPAIGNS, INCLUDING, WITH OUT LIMITATION, EMAILS AND ADVERTISEMENTS AND ALSO THE MAILCHIMP IS PROVIDING ACCESS AND USE OF MAILCHIMP DOMAIN . 29. THIS INVOLVES PAYMENTS MADE BY THE APPELLANT FOR TH E USE OF, OR THE RIGHT TO USE OF PATENTED SOFTWARE PROCESSES. UNDER SECTION 195 OF THE IT ACT THE INCOME OF NON-RESIDENT WHICH IS TAXABLE IN INDIA NEEDS TO BE SUBJECTED TO TAX DEDUCTION. THEREFORE, THE LIABILI TY ON THE PART OF THE ASSESSEE TO DEDUCT TAX ON PAYMENTS MADE TO MAILCHIM P IS CLEARLY DEFINED IN THE AMBIT OF INCOME TAX LAW. THE NATURE OF PAYMENT MADE IS CONSIDERED IN IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 14 OF 35 THE LATER PART OF THE ORDER ALONG WITH OTHER PAYMEN TS FOR SOFTWARE AND DATA ACCESS. ALSO THE ADVERTISEMENTS PAYMENTS ARE DISCU SSED AS ABOVE IN FACEBOOK IRELAND. (C) WITH REGARD TO THE PAYMENTS MADE TO AMAZON WEB SERVICES, THE LD CIT(A) HAS OBSERVED AS UNDER:- 6. AMAZON WEB SERVICES (AWS) OFFERS CLOUD SPACE W HICH IS A KIND OF WEB HOSTING SERVICES. AWS PROVIDES THE APPELLANT WITH CERTAIN SPACE OF THEIR CLOUD TO STORE THEIR DATA/APPLICATIONS AND THEY AND THEIR VENDORS CAN USE IT AS AND WHEN REQUIRED. AWS HAS PROVIDED THE APPELLA NT WITH USER IT AND PASSWORD FOR DOING THE SAME. IN PRINCIPLE WHAT HAS BEEN OFFERED BY AMAZON IS AN INFRASTRUCTURAL SPACE WITH PERMISSION TO USE BY THE ASSESSEE WITH A LOGIN ID AND PASSWORD. 7. THIS ACCESS IS PROVIDED THROUGH VARIOUS SOFTW ARE AND PROCESSES THAT ARE PATENTED. THE CLOUD SPACE AND WEB HOSTING SERVI CES ARE PRACTICE OF USING A NETWORK OF REMOTE SERVERS HOSTED ON THE INT ERNET TO STORE, MANAGE AND PROCESS DATA, RATHER THAN A LOCAL SERVER OR A P ERSONAL COMPUTER. THE APPELLANT USED THIS CLOUD SPACE AND WEB HOSTING SER VICES TO STORE ITS DATA AND OR APPLICATIONS AND SOFTWARE. USING THIS, THE APPELLANT CAN MAKE ITS SOFTWARE/PRODUCTS AVAILABLE TO ANY OF ITS USERS ANY WHERE IN THE WORLD. THE MECHANISM IS ADOPTED BY THE ASSESSEE TO AVOID INCUR RING HUGE CAPITAL EXPENDITURE IN PURCHASE OF OWN SERVERS, INSTEAD THE Y PROCURE RIGHT TO USE OF A SERVER SPACE PROVIDED BY DIFFERENT AGENCIES LI KE AMAZON WEB HOSTING SERVICES AND INCUR COMPARATIVELY A MUCH LOWER OPERA TIONAL EXPENSES. 8. THIS INVOLVES PAYMENTS BY THE APPELLANT FOR THE USE OR, OR THE RIGHT TO USE OF PATENTED SOFTWARE PROCESSES. UNDER SECTION 195 OF THE IT ACT THE INCOME OF NON-RESIDENT WHICH IS TAXABLE IN INDIA NE EDS TO BE SUBJECTED TO TAX DEDUCTION. THEREFORE, THE LIABILITY ON THE PAR T OF THE ASSESSEE TO DEDUCT TAX ON PAYMENTS MADE TO AMAZON WEB HOSTING SERVICES IS CLEARLY DEFINED IN THE AMBIT OF INCOME TAX LAW. THE NATURE OF PAYM ENT MADE IS CONSIDERED IN THE LATER PART OF THE ORDER ALONG WITH OTHER PAY MENTS FOR SOFTWARE AND DATA ACCESS. 8. THEN THE LD CIT(A) HAS REFERRED TO VARIOUS CAS E LAWS, BUT MAINLY TOOK SUPPORT OF THE DECISION RENDERED BY HON'BLE KA RNATAKA HIGH COURT IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO LTD (2011)(16 TAXMANN.COM 141)(KAR), WHEREIN IT WAS HELD THAT THE PAYMENT MADE BY INDIAN RESIDENTS TO THE NON-RESIDENT SUPPLIER F OR SOFTWARE AND IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 15 OF 35 ACCESS TO DATABASE IS ROYALTY. ACCORDINGLY, THE LD CIT(A) HELD AS UNDER AT PAGE 28 OF ITS ORDER:- 4. THE DECISION OF THE HON. KARNATAKA HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS CO LTD (CITED SUPRA) CLEARLY HOLDS THE PAYMENT MADE BY THE INDIAN RESIDENTS TO THE NON-RESIDENT SUPPLIER FOR S OFTWARE AND ACCESS TO DATABASE AS ROYALTY. 5. THE APPELLANT HAS ARGUED THAT THE TRANSACTION OF PURCHASE OF SOFTWARE AND ALLOWING THE USE OF SOFTWARE DOES NOT FALL WITH IN THE DEFINITION OF ROYALTY UNDER RESPECTIVE TREATIES. I HAVE EXAMIN ED THE SAME. VARIOUS TREATIES ARE EXAMINED ALONGWITH THE PAYMENTS MADE ( SUPRA). I FIND THAT THE TERM ROYALTIES IS DEFINED AS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERACY, ARTISTIC OR SCIENTIFIC WORK ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS OR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. I FIND THAT T HE APPELLANTS CONTENTIONS ARE NOT CORRECT. I HOLD THAT THE CONSIDERATION PAID BY THE APPELLAN T FOR THE USE OF, OR THE RIGHT TO USE OF THE SOFTWARE IS ROYA LTY AS PER VARIOUS TREATIES AND NEED TO BE TAXED IN INDIA . 9. THE LD CIT(A) ALSO HELD THAT THE PAYMENTS MA DE FOR USE OF SOFTWARE IS ROYALTY UNDER THE PROVISIONS OF INCOME TAX ACT ALSO. IN THIS REGARD, THE LD CIT(A) HAS OBSERVED AS UNDER:- 8. I FIND THAT THE DECISION OF HON'BLE KARNATAK A HIGH COURT IN THE CASE OF SAMSUNG (SUPRA) IS APPLICABLE IN THE FACTS OF TH E CASE. ACCORDINGLY, THE CLAIM THAT USE OF SOFTWARE IS NOT ROYALTY WITHIN TH E I T ACT IS REJECTED. FINALLY, THE LD CIT(A) CONCLUDED AS UNDER:- 31. IN VIEW OF THE ABOVE, THE ARGUMENT OF THE AP PELLANT THAT CONSIDERATION PAID FOR PURCHASE OF SOFTWARE, CLOUD COMPUTING, CLOUD SPACE HIRING, (INVOLVING TRANSFER OF THE RIGHT TO USE THE SOFTWARE) IS NOT ROYALTY IS NOT ACCEPTABLE. THE GROUNDS IN THIS RESPECT ARE TH EREFORE DISMISSED. AGGRIEVED BY THE ORDER PASSED BY LD CIT(A) FOR THE THREE YEARS UNDER CONSIDERATION, THE ASSESSEE HAS FILED SIX APP EALS, VIZ., THREE APPEALS FOR THE DEMAND RAISED U/S 201(1) OF THE ACT . AND THREE APPEALS FOR THE INTEREST CHARGED U/S 201(1A) OF THE ACT. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 16 OF 35 10. WE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICE THAT THE AO HAS MAINLY INVOKED THE PROVISIONS OF SEC. 9( 1)(VI) OF THE ACT IN RESPECT OF PAYMENTS MADE TO M/S FACEBOOK AND M/S ROCKET SCIENCE GROUP (MAILCHIMP) TO HOLD THAT THE SAME IS ROYALTY. IN RESPECT OF PAYMENTS MADE FOR AMAZON WEB SERVICES, T HE AO HAS ALSO REFERRED TO THE PROVISIONS OF DTAA ENTERED INT O INDIA AND USA IN ADDITION TO SEC.9(1)(VI) OF THE ACT. HOWEVER, T HE AO HAS HELD THAT THESE PAYMENTS ARE ROYALTY MAINLY CONSIDERING THE PROVISIONS OF SEC.9(1)(VI) OF THE ACT. 11. M/S FACEBOOK IS LOCATED IN IRELAND AND OTHER TWO ARE COMPANIES LOCATED IN USA. WE NOTICE THAT INDIA HAS ENTERED INTO DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) WITH REP UBLIC OF IRELAND AND ALSO WITH UNITED STATES OF AMERICA. TH E QUESTION WHETHER THE PROVISIONS OF INCOME TAX ACT COULD BE R EFERRED TO IGNORING DTAA PROVISIONS, HAS BEEN SETTLED BY HON'B LE SUPREME COURT IN THE CASE OF ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED VS. CIT (CIVIL APPEAL NOS. 8733-873 4 OF 2018 DATED MARCH 02, 2021) (125 TAXMANN.COM 42). THE HON'BLE SUPREME COURT EXAMINED THE QUESTION WHETHER THE PAYMENTS MA DE TO NON- RESIDENT SOFTWARE SUPPLIERS IS ROYALTY AND TDS U/ S 195 OF THE ACT WAS REQUIRED TO BE DEDUCTED ON THOSE PAYMENTS. THE HON'BLE SUPREME COURT EXAMINED THIS QUESTION CONSIDERING FO UR TYPES OF SITUATION, WHICH HAS BEEN NARRATED AS UNDER:- 4. THE APPEALS BEFORE US MAY BE GROUPED INTO FOUR CAT EGORIES: (I) THE FIRST CATEGORY DEALS WITH CASES IN WHICH COMPUT ER SOFTWARE IS PURCHASED DIRECTLY BY AN END -USER, RESIDENT IN INDIA, FROM A FOREIGN, NON- RESIDENT SUPPLIER OR MANUFACTURER. (II) THE SECOND CATEGORY OF CASES DEALS WITH RESIDENT IN DIAN COMPANIES THAT IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 17 OF 35 ACT AS DISTRIBUTORS OR RESELLERS, BY PURCHASING COM PUTER SOFTWARE FROM FOREIGN, NON -RESIDENT SUPPLIERS OR MANUFACTURERS AND THEN RESEL LING THE SAME TO RESIDENT INDIAN END-USERS. (III) THE THIRD CATEGORY CONCERNS CASES WHEREIN THE DISTR IBUTOR HAPPENS TO BE A FOREIGN, NON - RESIDENT VENDOR, WHO, AFTER PURCHASING SOFTWARE FRO M A FOREIGN, NON -RESIDENT SELLER, RESELLS THE SAME TO RESIDENT INDIAN DISTRIBUTORS OR END-USERS. (IV) THE FOURTH CATEGORY INCLUDES CASES WHEREIN COMPUTER SOFTWARE IS AFFIXED ONTO HARDWARE AND IS SOLD AS AN INTEGRATED UNIT/EQU IPMENT BY FOREIGN, NON-RESIDENT SUPPLIERS TO RESIDENT INDIAN DISTRIBUT ORS OR END-USERS. 12. AFTER ANALYSING THE PROVISIONS OF INCOME TA X ACT, PROVISIONS OF DTAA, THE RELEVANT AGREEMENTS ENTERED BY THE ASSESS EES WITH NON- RESIDENT SOFTWARE SUPPLIERS, PROVISIONS OF COPY RIG HT ACTS, THE CIRCULARS ISSUED BY CBDT, VARIOUS CASE LAWS RELIED UPON BY THE PARTIES, THE HON'BLE SUPREME COURT CONCLUDED AS UND ER:- CONCLUSION 168 . GIVEN THE DEFINITION OF ROYALTIES CONTAINED IN AR TICLE 12 OF THE DTAAS MENTIONED IN PARAGRAPH 41 OF THIS JUDGMENT, IT IS C LEAR THAT THERE IS NO OBLIGATION ON THE PERSONS MENTIONED IN SECTION 195 OF THE INCOME-TAX ACT TO DEDUCT TAX AT SOURCE, AS THE DISTRIBUTION AGREEMENT S/EULAS IN THE FACTS OF THESE CASES DO NOT CREATE ANY INTEREST OR RIGHT IN SUCH DISTRIBUTORS/END- USERS, WHICH WOULD AMOUNT TO THE USE OF OR RIGHT TO USE ANY COPYRIGHT. THE PROVISIONS CONTAINED IN THE INCOME-TAX ACT (SECTION 9(1)(VI), ALONG WITH EXPLANATIONS 2 AND 4 THEREOF), WHICH DEAL WITH ROYA LTY, NOT BEING MORE BENEFICIAL TO THE ASSESSEES, HAVE NO APPLICATION IN THE FACTS OF THESE CASES. 169 . OUR ANSWER TO THE QUESTION POSED BEFORE US, IS TH AT THE AMOUNTS PAID BY RESIDENT INDIAN END-USERS/DISTRIBUTORS TO NON-RE SIDENT COMPUTER SOFTWARE IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 18 OF 35 MANUFACTURERS/SUPPLIERS, AS CONSIDERATION FOR THE R ESALE/USE OF THE COMPUTER SOFTWARE THROUGH EULAS/DISTRIBUTION AGREEM ENTS, IS NOT THE PAYMENT OF ROYALTY FOR THE USE OF COPYRIGHT IN THE COMPUTER SOFTWARE, AND THAT THE SAME DOES NOT GIVE RISE TO ANY INCOME TAXA BLE IN INDIA, AS A RESULT OF WHICH THE PERSONS REFERRED TO IN SECTION 195 OF THE INCOME-TAX ACT WERE NOT LIABLE TO DEDUCT ANY TDS UNDER SECTION 195 OF T HE INCOME-TAX ACT. THE ANSWER TO THIS QUESTION WILL APPLY TO ALL FOUR CATE GORIES OF CASES ENUMERATED BY US IN PARAGRAPH 4 OF THIS JUDGMENT. 13. HENCE THE RELEVANT DTAA PROVISIONS SHOULD B E CONSIDERED IN THE CASES BEFORE US ALSO FOR DETERMINING THE QUESTI ON WHETHER THE PAYMENTS MADE BY THE ASSESSEE TO THE ABOVE SAID THR EE NON- RESIDENT COMPANIES ARE IN THE NATURE OF ROYALTY OR NOT. HENCE THERE IS NO NECESSITY TO REFER TO THE PROVISIONS OF SEC. 9(1)(VI) OF THE ACT FOR THE PAYMENTS MADE TO THE THREE NON-RESIDENT PERSONS , REFERRED ABOVE. 14. THE TERM ROYALTIES IS DEFINED AS UNDER IN ARTICLE 12(3) OF INDIA USA DTAA:- 3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEA NS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FO R THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR W ORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONN ECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, INCLUDING 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 EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERP RISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2(C) OR 3 OF ARTICLE 8. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 19 OF 35 15. WE SHALL NOW ADVERT TO THE AGREEMENTS ENTERE D BY THE ASSESSEE WITH THE THREE NON-RESIDENT COMPANIES MENT IONED ABOVE, IN ORDER TO UNDERSTAND THE NATURE OF SERVICES RENDE RED BY THESE COMPANIES AND ALSO TO UNDERSTAND WHETHER THE PAYMEN TS MADE TO THE THREE NON-RESIDENTS ARE ROYALTY OR NOT IN TERMS OF THE PROVISIONS OF DTAA. THE RELEVANT CLAUSES ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE:- (A) FACEBOOK 4. LICENSE GRANT 4.1 IN CONSIDERATION OF YOUR COMPLIANCE WITH THIS AGREEMENT FOR THE DURATION OF YOUR SUBSCRIPTION TO FACEBOOK AT WORK ( UNLESS TERMINATED EARLIER) WE HEREBY GRANT YOU AND YOUR USERS: (A) A NON-EXCLUSIVE, PERSONAL, NON-TRANSFERRABLE, LIMITED, REVOCABLE LICENSE TO ACCESS AND USE FACEBOOK AT WORK IN ACCORDANCE WI TH THIS AGREEMENT; AND (B) A NON-EXCLUSIVE, PERSONAL, NON-TRANSFERRABLE, LIMITED, REVOCABLE LICENSE TO USE ANY TOOL WE MAY MAKE AVAILABLE TO YO U TO CREATE AND MANAGE YOUR CONTENTS. 4.2 THIS LICENSE IS NOT SUB-LICENSABLE AND IS SUB JECT ALWAYS TO THIS AGREEMENT. 5. OUR CONTENT 5.1 WE OWN OR LICENSE ALL INTELLECTUAL PROPERTY RIGHTS IN FACEBOOK AT WORK AND OUR CONTENT. FACEBOOK AT WORK AND OUR CON TENT IS PROTECTED BY COPYRIGHT LAWS AND OTHER INTELLECTUAL PROPERTY L AWS. ALL SUCH RIGHTS ARE RESERVED TO US. 5.2 YOU MAY, AND YOU MUST ENSURE THAT YOUR USERS WILL; (A) ONLY USE FACEBOOK AT WORK FOR ITS INTENDED PUR POSE WITHIN THE SCOPE OF THE LICENSE. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 20 OF 35 (B) NOT MAKE ALTERATIONS, COPIES, EXTRACTIONS, MO DIFICATIONS OR ADDITIONS TO FACEBOOK AT WORK AND OUR CONTENT OR AN Y PART OF IT, OR SELL, COPY, DISCLOSE, DISTRIBUTE, DISSEMINATE OR LICENSE IT OR ANY PART OF IT OR MISUSE IT OR ANY PART OF IT IN ANY WAY OR REVERSE E NGINEER, DECOMPILE, DISASSEMBLE OR DECIPHER IT OR EVADE TECHNICAL LIMIT ATIONS ON THE USE OF FACEBOOK AT WORK; (C) NOT RE-PUBLISH, SELL, EXTRACT, REPRODUCE, DIS SEMINATE OR OTHERWISE USE FACEBOOK AT WORK AND OUR CONTENT, EXC EPT AS EXPRESSLY PERMITTED BY THIS AGREEMENT OR WITH OUR PRIOR WRITT EN PERMISSION; AND (D) NOT USE OUR COPYRIGHTS, TRADEMARKS, PROTECTED DESIGNS AND TRADE DRESS (INCLUDING BUT NOT LIMITED TO FACEBOOK, FACEB OOK AT WORK, OR ANY OF THE TRADEMARKS LISTED HERE (CURRENTLY AVAILABLE AT WWW.FACEBOOKBRAND.COM/TRADEMARKS ), OR ANY CONFUSINGLY SIMILAR MARKS, EXCEPT WITH OUR PRIOR WRITTEN PERMISSION. 5.3 YOU ACKNOWLEDGE AND AGREE THAT ANY BREACH O F THIS SECTION 5 MAY CAUSE US IRREPARABLE HARM FOR WHICH DAMAGES ARE NOT AN ADEQUATE REMEDY AND THAT WE MAY SEEK INTERIM, PRELIMINARY OR PROTEC TIVE RELIEF FROM ANY COMPETENT COURT TO RESTRAIN YOUR OR YOUR USERS ANTI CIPATED OR ACTUAL BREACH OF THIS SECTION 5. 5.4 OUR CONTENT MADE AVAILABLE ON FACEBOOK AT WO RK IS PROVIDED FOR INFORMATION PURPOSES ONLY, IS SUBJECT TO CHANGE AND WILL BE UPDATED FROM TIME TO TIME WITHOUT NOTICE TO YOU. . 17 DEFINITIONS. IN THIS AGREEMENT, UNLESS OTHERWISE STATED FACEBOOK AT WORK MEANS THE FEATURES AND SERVICES WE MAKE AVAILABLE, INCLUDING BUT NOT LIMITED TO THROUGH THE FACEBOOK A T WORKS WEBSITES, APPS, AND ONLINE SERVICES THAT WE OPERATE. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 21 OF 35 OUR CONTENT MEANS FACEBOOK AT WORK AND ITS CONTEN T INCLUDING WITHOUT LIMITATION, SOFTWARE, ITS LOOK AND FEEL, IMAGES, TEXT, GRAPHICS, ILLUSTRATIONS, TRADEMARKS, PHOTOGRAPHS, AUDIO, VIDE OS AND SOUND BUT EXCLUDING YOUR CONTENT. (B) ROCKET SCIENCE GROUP (MAILCHIMP) MAILCHIMP (MAILCHIMP,WE,ORUS) IS AN ONLINE MA RKETING PLATFORM (THE SERVICE) OFFERED THROUGH THE URL WWW.MAILCHIMP.COM (WELL REFER TO IT AS THE WEBSITE) THAT ALLOWS YOU TO, AMONG OTHER THINGS, CREATE, SEND, AND MANAGE CERTAIN MARKETING CAMPAIGNS, INCLUDING, WITHOUT LIM ITATION, EMAILS, ADVERTISEMENTS, AND MAILINGS (EACH A CAMPAIGN, AN D COLLECTIVELY, CAMPAIGNS). .. 13. PROPRIETARY RIGHTS OWNED BY US YOU WILL RESPECT OUR PROPRIETARY RIGHTS IN THE WEBS ITE AND THE SOFTWARE USED TO PROVIDE THE SERVICE (PROPRIETARY RIGHTS INCLUDE, BU T ARENT LIMITED TO, PATENTS, TRADEMARKS, SERVICE MARKS, TRADE SECRETS, COPYRIGHT S, AND OTHER INTELLECTUAL PROPERTY). YOU MAY ONLY USE OUR BRAND ASSETS ACCOR DING TO OUR BRAND GUIDELINES. .. 19. BANDWIDTH ABUSE/THROTTLING YOU MAY ONLY USE OUR BANDWIDTH FOR YOUR MAILCHIMP C AMPAIGNS. WE PROVIDE IMAGE AND DATA HOSTING ONLY FOR YOUR MAILCHIMP CAMP AIGNS, SO YOU MAY NOT HOST IMAGES ON OUR SERVERS FOR ANYTHING ELSE (LIKE A WEB SITE). WE MAY THROTTLE YOUR SENDING OR CONNECTION THROUGH OUR API AT OUR DISCRE TION. .. 30. ASSIGNMENTS YOU MAY NOT ASSIGN ANY OF YOUR RIGHTS UNDER THIS AG REEMENT TO ANYONE ELSE. WE MAY ASSIGN OUR RIGHTS TO ANY OTHER INDIVIDUAL OR EN TITY AT OUR DISCRETION. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 22 OF 35 (C) AMAZON WEB SERVICES:- 1. USE OF THE SERVICE OFFERINGS 1.1 GENERALLY, YOU MAY ACCESS AND USE THE SERVICE O FFERINGS IN ACCORDANCE WITH THIS AGREEMENT. SERVICE LEVEL AGREEMENTS AND SERVICE TERMS APPLY TO CERTAIN SERVICE OFFERINGS. YOU WILL COMPLY WITH THE TERMS OF THIS AGREEMENT AND ALL LAWS, RULES AND REGULATIONS APPLICABLE TO YOUR USE OF THE SERVICE OFFERINGS. 1.2 YOUR ACCOUNT. TO ACCESS THE SERVICES, YOU MUST HAVE AN AWS ACCOUNT ASSOCIATED WITH A VALID EMAIL ADDRESS AND A VALID F ORM OF PAYMENT. UNLESS EXPLICITLY PERMITTED BY THE SERVICE TERMS, YOU WILL ONLY CREATE ONE ACCOUNT PER EMAIL ADDRESS. 1.3 THIRD-PARTY CONTENT. THIRD-PARTY CONTENT MAY B E USED BY YOU AT YOUR ELECTION. THIRD-PARTY CONTENT IS GOVERNED BY THIS AGREEMENT AND, IF APPLICABLE, SEPARATE TERMS AND CONDITIONS ACCOMPANYING SUCH THI RD-PARTY CONTENT, WHICH TERMS AND CONDITIONS MAY INCLUDE SEPARATE FEES AND CHARGES. .. 8.3 SERVICE OFFERINGS LICENSE. WE OR OUR LICENSORS OWN ALL RIGHT, TITLE AND INTEREST IN AND TO THE SERVICE OFFERINGS, AND ALL R ELATED TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS. SUBJECT TO THE TERMS OF THIS AGRE EMENT, WE GRANT YOU A LIMITED, REVOCABLE, NON-EXCLUSIVE, NON-SUBLICENSEABLE, NON-T RANSFERRABLE LICENSE TO DO THE FOLLOWING: (A) ACCESS AND USE THE SERVICES SOLELY I N ACCORDANCE WITH THIS AGREEMENT; AND (B) COPY AND USE THE AWS CONTENT SOL ELY IN CONNECTION WITH YOUR PERMITTED USE OF THE SERVICES. EXCEPT AS PROVIDED IN THIS SECTION 8.3, YOU OBTAIN NO RIGHTS UNDER THIS AGREEMENT FROM US, OUR AFFILIATES OR OUR LICENSORS TO THE SERVICE OFFERINGS, INCLUDING ANY RELATED INTELLECTUAL PROPE RTY RIGHTS. SOME AWS CONTENT AND THIRD-PARTY CONTENT MAY BE PROVIDED TO YOU UNDE R A SEPARATE LICENSE, SUCH AS APACHE LICENSE, VERSION 2.0, OR OTHER OPEN SOURCE L ICENSE. IN THE EVENT OF A CONFLICT BETWEEN THIS AGREEMENT AND ANY SEPARATE LI CENSE, THE SEPARATE LICENSE WILL PREVAIL WITH RESPECT TO THE AWS CONTENT OR THIRD-PA RTY CONTENT THAT IS THE SUBJECT OF SUCH SEPARATE LICENSE. .. 14. DEFINITIONS. API MEANS AN APPLICATION PROGRAMME INTERFACE. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 23 OF 35 .. AWS CONTENT MEANS CONTENT WE OR ANY OF OUR AFFILI ATES MAKE AVAILABLE IN CONNECTION WITH THE SERVICES OR ON THE AWS SITE TO ALLOW ACCESS TO AND USE OF THE SERVICES, INCLUDING APIS; WSDLS; DOCUMENTATION; SAM PLE CODE; SOFTWARE LIBRARIES; COMMAND LINE TOOLS; PROOFS OF CONCEPT; T EMPLATES; AND OTHER RELATED TECHNOLOGY (INCLUDING ANY OF THE FOREGOING THAT ARE PROVIDED BY OUR PERSONNEL). AWS CONTENT DOES NOT INCLUDE THE SERVICES OR THIRD PARTY CONTENT. .. AWS MARKS MEANS ANY TRADEMARK, SERVICE MARKS, SER VICE OR TRADE NAMES, LOGOS AND OTHER DESIGNATIONS OF AWS AND ITS AFFILIATES TH AT WE MAY MAKE AVAILABLE TO YOU IN CONNECTION WITH THE AGREEMENT. .. SERVICE OFFERINGS MEANS THE SERVICES (INCLUDING A SSOCIATED APIS), THE AWS CONTENT, THE AWS MARKS, AND ANY OTHER PRODUCT OR SE RVICE PROVIDED BY US UNDER THIS AGREEMENT. SERVICE OFFERINGS DO NOT INCLUDE T HIRD-PARTY CONTENT. 16. A CAREFUL PERUSAL OF THE RELEVANT PROVISIONS OF THE AGREEMENT ENTERED BY THE ASSESSEE WITH FACEBOOK AND ROCKET SC IENCE GROUP (MAILCHIMP) WOULD SHOW THAT BOTH THESE NON-RESIDENT COMPANIES ARE ALLOWING THE ASSESSEE TO USE THE FACILITIES PRO VIDED IN THEIR SITES, WHICH INCLUDES, INTER ALIA, SOFTWARE FACILITIES ALS O. THE PURPOSE OF COMPELLING THE ASSESSEE TO USE THOSE FACILITIES, AS COULD BE INFERRED BY US, IS TO CREATE AN ENVIRONMENT OF EASE IN CREAT ING THE ADVERTISEMENT CONTENT TO SUIT THE PLATFORMS OF FA CEBOOK OR MAILCHIMP. THE ENVIRONMENT OF EASE IS BENEFICIAL A ND TIME SAVING TO BOTH THE ADVERTISER AND THE ADVERTISING PLATFORM . THUS THE FACILITIES HAVE BEEN CREATED BY THE NON-RESIDENT CO MPANIES FOR MUTUAL BENEFIT. HOWEVER, A PERSON SHALL GET THE RI GHT TO USE THOSE FACILITIES ONLY WHEN HE ENTERS INTO AN AGREEMENT WI TH THEM FOR HOSTING HIS ADVERTISEMENT OR FOR SENDING BULK MAILS , MEANING THEREBY, THE USE OF FACILITIES IS INTERTWINED WITH THE ACTIVITY OF PLACING ADVERTISEMENT IN WEB PORTAL OF FACEBOOK OR SENDING BULK IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 24 OF 35 MAILS. IN CASE OF WEB HOSTING CHARGES PAID TO AWS , THE ASSESSEE IS ALLOWED TO USE THE INFORMATION TECHNOLOGY INFRASTRU CTURE FACILITIES. 17. WE SHALL NOW REFER TO SOME OF THE DECISIONS RELIED UPON BY LD AR BEFORE US. THE KOLKATA BENCH OF TRIBUNAL, IN TH E CASE OF ITO VS. RIGHT FLORISTS (2013) (32 TAXMANN.COM 99) (KOL-TRIB .), HAS CONSIDERED AN ISSUE WHETHER THE PAYMENTS MADE TO FOREIGN SEARCH ENGINE PORTALS FOR ONLINE ADVERTISING SERVICES RESU LTED IN ACCRUAL OF INCOME IN INDIA IN THEIR HANDS IN TERMS OF SEC.9(1) OF THE ACT. THE CO-ORDINATE BENCH REFERRED TO THE FOLLOWING DECISIO NS RENDERED BY OTHER CO-ORDINATE BENCHES:- (A) PINSTORM TECHNOLOGIES (P) LTD VS. ITO (24 TAXMA NN.COM 345)(MUM) (B) YAHOO INDIA (P) LTD VS. DCIT (2011)(11 TAXMANN .COM 431)(MUM) IN THE ABOVE SAID TWO CASES, THE TRIBUNAL HELD THAT THE AMOUNT PAID BY THE ASSESSEE TO M/S GOOGLE IRELAND LTD FOR THE S ERVICES RENDERED FOR UPLOADING AND DISPLAY OF BANNER ADVERTISEMENT O N ITS PORTAL WAS IN THE NATURE OF BUSINESS PROFIT ON WHICH NO TAX IS DEDUCTIBLE AT SOURCE, SINCE THE SAME WAS NOT CHARGEABLE TO TAX IN INDIA IN THE ABSENCE OF PE OF GOOGLE IRELAND LTD IN INDIA. FINA LLY, THE CO- ORDINATE BENCH HELD AS UNDER IN THE CASE OF RIGHT F LORISTS:- 28. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE CON SIDERED VIEW, ON THE LIMITED FACTS OF THE CASE AS PRODUCED BEFORE US, THE RECEIPTS IN RESPECT OF ONLINE ADVERTISING ON GOOGLE AND YAHOO CANNOT BE BROUGHT TO TAX IN INDIA UNDER THE PROVISI ONS OF THE INCOME TAX ACT, AS ALSO UNDER THE PROVISIONS OF INDIA US AND INDIA IRELAND TAX TREATY . THIS OBSERVATION IS SUBJECT TO THE RIDER THAT SO FAR AS THE PE ISSUE IS CONCERNED, WE HAVE E XAMINED THE EXISTENCE OF PE ONLY ON THE BASIS OF WEBSITE SIMPLI CITOR, AND ON IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 25 OF 35 NO OTHER ADDITIONAL BASIS, AS NO CASE WAS MADE OUT FOR THE SAME. IN ANY CASE, REVENUE HAS NOT BROUGHT ANYTHING ON RE CORD, EITHER AT ASSESSMENT STAGE OR EVEN BEFORE US, TO SUGGEST T HAT GOOGLE OR YAHOO HAD A PE IN INDIA, AND AS HELD BY A SPECIAL B ENCH OF THIS TRIBUNAL IN THE CASE OF MOTOROLA INC V. DY. CIT [2005] 95 ITD 269/147 TAXMAN 39 (MAG.) (DELHI) 'DTAA IS ONLY AN ALTERNATE TAX REGIME AND NOT AN EXEMPTION REGIME' AND, THEREF ORE, 'THE BURDEN IS FIRST ON THE REVENUE TO SHOW THAT THE ASS ESSEE HAS A TAXABLE INCOME UNDER THE DTAA, AND THEN THE BURDEN IS ON THE ASSESSEE TO SHOW THAT THAT ITS INCOME IS EXEMPT UND ER DTAA'. NO SUCH BURDEN IS DISCHARGED BY THE REVENUE. ACCORD INGLY, THERE IS NO MATERIAL BEFORE US TO COME TO THE CONCL USION THAT GOOGLE OR YAHOO HAD A PE IN INDIA, WHICH, IN TURN, COULD CONSTITUTE THE BASIS OF THEIR TAXABILITY IN INDIA . 18. THE TAXABILITY OF WEB HOSTING CHARGES PAID T O AMAZON WEB SERVICES LLC IN ITS HANDS WAS EXAMINED BY PUNE BENC H OF TRIBUNAL IN THE CASE OF EPRSS PREPAID RECHARGE SERVICES INDI A P LTD (ITA NO.828/PUN/2016 DATED 24.10.2018) (2018) (100 TAXMA NN.COM 52) (PUNE), WHICH WAS RELIED UPON BY LD A.R. THE RELEV ANT DISCUSSIONS MADE AND DECISION TAKEN BY PUNE TRIBUNAL ARE EXTRAC TED BELOW:- 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS IN RESPECT OF CHARGES PAID BY ASSESSEE TO AWS. THE ASSESSEE WAS ENGAGED IN SALE OF RECHARG E PENS AND DID NOT HAVE THE FACILITY AVAILABLE WITH IT OF HIGH TECHNOL OGY EQUIPMENTS I.E. SERVERS. SO, IN ORDER TO CARRY ON ITS ACTIVITY OF D ISTRIBUTORSHIP OF RECHARGE PENS, IT USED SERVERS OF AMAZON, FOR WH ICH IT PAID WEB HOSTING CHARGES. BEFORE USING THE SERVICES AVAILABLE OF AMA ZON ONLINE, IT ENTERED IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 26 OF 35 INTO AN AGREEMENT, UNDER WHICH FEES STRUCTURE WAS P ROVIDED. COPY OF AGREEMENT IS PLACED AT PAGES 3 TO 22 OF PAPER BOOK. THE AGREEMENT IS CALLED AWS CUSTOMER AGREEMENT, WHICH CONTAINS THE T ERMS AND CONDITIONS THAT GOVERNS ASSESSEE'S ACCESS TO AND USE OF SERVIC E OFFERINGS. IT WAS AGREEMENT BETWEEN AMAZON WEB SERVICES, INC. AND YOU I.E. ASSESSEE. IT IS PROVIDED THAT AGREEMENT TAKES EFFECT WHEN YOU CLICK AN 'I ACCEPT' BUTTON. CLAUSE 1.1 LAYS DOWN THAT 'YOU' (ASSESSEE) MAY ACCE SS AND USE THE SERVICE OFFERINGS IN ACCORDANCE WITH AGREEMENT. IN CLAUSE 1.2, IT IS PROVIDED THAT TO ACCESS SERVICES, 'YOU' (ASSESSEE) MUST CREATE AN AWS ACCOUNT ASSOCIATED WITH A VALID E-MAIL ADDRESS. CLA USE 1.3 PROVIDES THAT IF YOU (ASSESSEE) WOULD LIKE SUPPORT FOR THE SERVICES OTHER THAN THE SUPPORT WE GENERALLY PROVIDE TO OTHER USERS OF THE SERVICES WI THOUT CHARGE, THEN YOU CAN ENROLL FOR CUSTOMER SUPPORT IN ACCORDANCE WITH THE TERMS OF AWS SUPPORT GUIDELINES. CLAUSE 2.1 LAYS DOWN THAT AMAZO N COULD CHANGE, DISCONTINUE, OR DEPRECATE ANY OF THE SERVICE OFFERI NGS OR CHANGE OR REMOVE FEATURES OR FUNCTIONALITY OF THE SERVICE OFFERINGS FROM TIME TO TIME. AS PER CLAUSE 4.1, YOU (ASSESSEE) ARE SOLELY RESPONSIBLE F OR THE DEVELOPMENT, CONTENT, OPERATION, MAINTENANCE AND USE OF YOUR CON TENT. NOW, COMING TO CLAUSE 5.5, WHICH PROVIDES THE SERVICE FEES TO BE P AID, AGREEMENT PROVIDED THAT AMAZON WOULD CALCULATE AND BILL FEES AND CHARG ES MONTHLY. IT IS FURTHER AGREED THAT YOU (ASSESSEE) HAVE TO PAY APPL ICABLE FEES AND CHARGES FOR USE OF SERVICE OFFERINGS AS DESCRIBED ON AWS SI TE USING ONE OF THE PAYMENT MODES THEY SUPPORT. WE MAY REFER TO CLAUSE 8.4 WHICH LAYS DOWN THE SERVICE OFFERINGS LICENSE, UNDER WHICH IT IS PR OVIDED THAT AMAZON OR ITS AFFILIATES OR LICENSORS OWN AND RESERVE ALL RIGHT, TITLE AND INTEREST IN AND TO THE SERVICE OFFERINGS. HOWEVER, LIMITED, REVOCABLE, NON-EXCLUSIVE, NON- SUBLICENSABLE, NON-TRANSFERRABLE LICENSE IS GRANTED TO YOU (ASSESSEE) TO DO THE FOLLOWING DURING THE TERM: (I) ACCESS AND USE THE SERVICE SOLELY IN ACCORDANCE WITH THIS AGREEMENT; AND (II) COPY AND USE THE AWS CONTENT SOLELY IN CONNECTION WITH YOUR PERMITTED USE OF THE SERVICES. IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 27 OF 35 12. IT IS FURTHER PROVIDED THAT NO RIGHTS UNDER THIS A GREEMENT ARE OBTAINED BY YOU (ASSESSEE) FROM AMAZON OR ITS LICENSOR TO TH E SERVICE OFFERINGS, INCLUDING ANY RELATED INTELLECTUAL PROPERTY RIGHTS. THE 'TERMS' BETWEEN THE PARTIES ARE DEFINED AS PER CLAUSE 14 AND THE TERMS WHICH ARE RELATABLE TO THE ISSUE RAISED ARE AS UNDER: 'AWS CONTENT' MEANS CONTENT WE OR ANY OF ITS AFFILI ATES MAKE AVAILABLE IN CONNECTION WITH THE SERVICES OR ON THE AWS SITE TO ALLOW ACCESS TO AND USE OF THE SERVICES, INCLUDING WSDLS; DOCUMENTATION; SA MPLE CODE; SOFTWARE LIBRARIES; COMMAND LINE TOOLS; AND OTHER RELATED TE CHNOLOGY. AWS CONTENT DOES NOT INCLUDE THE SERVICES. 'AWS MARKS' MEANS ANY TRADEMARKS, SERVICE MARKS, SE RVICE OR TRADE NAMES, LOGOS, AND OTHER DESIGNATIONS OR AWS AND ITS AFFILIATES THAT WE MAY MAKE AVAILABLE TO YOU IN CONNECTION WITH THIS AGREE MENT.' 13. THE ASSESSEE HAS USED SERVICES AND HAS MADE MONTHL Y PAYMENTS TO AMAZON. THE ASSESSEE HAS ATTACHED SAMPLE INVOICE OF AMAZON AT PAGES 23 TO 41 OF PAPER BOOK AND LEDGER EXTRACT OF AMAZON IN ITS BOOKS AT PAGES 1 AND 2 OF PAPER BOOK. THE ASSESSEE HAD FILED SUBMISS IONS BEFORE THE ASSESSING OFFICER GIVING DETAILED NOTE ON WEB HOSTI NG CHARGES, WHICH WAS AS UNDER: 'WEB HOSTING CHARGES: (A) PRIMARILY EPRSS REQUIRES SERVERS TO RUN THE VARIOUS ONLINE RECHARGES. DUE TO THIS THERE IS A VERY HIGH REQUIRE MENT OF SERVERS. SINCE 'PURCHASE/MAINTENANCE OF SERVERS AND ITS UPKEEP REQUIRE SKILLED MANPOWER, BPRS DOES NOT HAVE THE SAME. HENC E SERVERS ARE TAKEN ON HIRE FROM AMAZON, IN IS CLOUD UNITS. LEDGER COPY ATTACHED EXTRACT OF WEB AGREEMENT ALSO ATTACHE D.' 14. FURTHER, THE ASSESSEE HAS ALSO POINTED OUT THE NAT URE OF ITS BUSINESS VIDE WRITTEN NOTE BEFORE THE ASSESSING OFFICER AND EXPLA INED AS UNDER: '1. PRIMARILY THE 'A' REQUIRES SERVERS TO RUN THE V ARIOUS ONLINE RECHARGES. DUE TO THIS THERE IS A VERY HIGH REQUIREMENT OF SER VERS. SINCE PURCHASE/MAINTENANCE OF SERVERS AND ITS UPKEEP REQU IRE SKILLED MANPOWER, THE 'A' DOES NOT HAVE THE SAME. HENCE SERVERS ARE T AKEN ON HIRE FROM AMAZON, IN ITS CLOUD UNITS. INFORMATION ABOUT AMAZO N WEB SERVICES AND ITS IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 28 OF 35 BENEFITS AS PROVIDED ON WEBSITE HTTP://AWS.AMAZON.C OM/WHAT-IS-AWS IS ENCLOSED FOR YOUR REFERENCE.' . 18. NOW, COMING TO THE NEXT ASPECT RAISED BY ASSESSEE WHICH IS LINKED TO AS TO WHETHER RETROSPECTIVE AMENDMENT IN INCOME TAX WO ULD OVERRIDE THE TREATY LAWS WHERE NO AMENDMENT HAS BEEN MADE. IT IS CLEAR THAT RETROSPECTIVE AMENDMENT HAS CHANGED THE DEFINITION OF 'ROYALTY' FROM THE YEAR 2012 UNDER THE INCOME TAX ACT, BUT THE POSITIO N OF DTAA BETWEEN TWO COUNTRIES HAS NOT BEEN EFFECTED. NO SUCH AMENDMENT HAS BEEN MADE TO THE TREATY LAWS AND IN DTAA, POSITION SIMILAR TO EXPLAN ATION 5 IS NOT ENVISAGED AT ALL. THIS IS THE PLEA RAISED BY THE LE ARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. HE FURTHER PLEADED THAT IN ORDER TO CONSTRUE MEANING OF ROYALTY AS PER DTAA, SINCE THE PROVISIONS OF DTAA TAKES PRECEDENT OVER THE PROVISIONS OF INCOME TAX A CT, WHERE THE ASSESSEE DOES NOT POSSESS AND DOES NOT HAVE ANY CONTROL OVER THE SERVER OR SERVERS SPACE, BEING DEPLOYED BY AMAZON, WHILE PROVIDING E- SERVICES AS PER AGREEMENT, THEN THERE IS NO SCOPE TO CONSTRUE THAT E-SERVICE CHARGES PAID TO AMAZON COULD BE DESCRIBED AS ROYALTY. THERE IS MERI T IN THE PLEA OF ASSESSEE. IF WE CONSTRUE THE MEANING OF ROYALTY AS PER DTAA, THEN WE HAVE TO CONSIDER THE POSSIBILITY OF POSITION AND CONTROL OF SERVER/SERVER SPACE, WHICH ADMITTEDLY, IS NOT POSSESSED BY THE ASSESSEE. HENCE, AS PER TREATY LAWS, THE ASSESSEE CANNOT BE HELD TO HAVE PAID ROYA LTY TO AMAZON. CONSEQUENTLY, THE PAYMENT MADE BY ASSESSEE FOR WEB HOSTING SERVICES IS NOT TAXABLE IN ACCORDANCE WITH DTAA AND THE SAME CA NNOT BE HELD TO BE TAXABLE, ONLY BECAUSE THERE WAS RETROSPECTIVE AMEND MENT TO SECTION 9(1)(VI) OF THE ACT. IN ANY CASE, THE COURTS HAVE H ELD THAT WHEN THERE IS NO AMENDMENT TO THE TREATY LAWS, THEN THE SAID TREATY LAWS WOULD OVERRIDE THE AMENDMENT, IF ANY, WHETHER RETROSPECTIVE OR OTH ERWISE TO THE INCOME TAX ACT. SUCH A VIEW HAS BEEN TAKEN IN NEW SKIES SA TELITE BV (SUPRA). CONSEQUENTLY, THERE IS NO MERIT IN HOLDING THAT THE ASSESSEE WAS LIABLE TO DEDUCT WITHHOLDING TAX OUT OF SUCH PAYMENTS MADE TO AMAZON AND FOR SUCH NON-DEDUCTION OR WITHHOLDING OF TAX, THE ASSESSEE C AN BE HELD TO BE AT IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 29 OF 35 DEFAULT AND THE PAYMENT MADE BY ASSESSEE BEING NOT ALLOWED AS DEDUCTION IN ITS HANDS, IN VIEW OF PROVISIONS OF SECTION 40(A )(I) OF THE ACT. WE REVERSE THE ORDERS OF AUTHORITIES BELOW IN THIS REGARD. WE ARE NOT GOING INTO THE ISSUE RAISED BY ASSESSEE THAT AMAZON IS NOT HAVING PE IN INDIA AND HENCE, NO LIABILITY TO DEDUCT TAX IN INDIA. 19. NOW, ANOTHER ISSUE WHICH NEEDS TO BE SEEN IS WHETH ER CHARGES PAID TO AMAZON FOR VARIOUS SERVICES PROVIDED BY IT ARE IN T HE NATURE OF ROYALTY, IF ANY, OR NOT. THE ASSESSEE HAS PLACED ON RECORD THE COPY OF AGREEMENT WITH AMAZON, WHICH WE HAVE REFERRED IN THE PARAS HEREINA BOVE. HE HAS ALSO PLACED ON RECORD THE COPIES OF BILLS RAISED BY AMAZ ON ONLINE. THE PERUSAL OF DETAILS FILED BY ASSESSEE OF MONTHLY CHARGES PAI D, IT TRANSPIRES THAT THE SAME ARE FLUCTUATING FROM MONTH TO MONTH AND THERE IS NO REGULAR PAYMENT BEING MADE TO AMAZON. IN CASE OF PROVISION OF ROYAL TY TO A PERSON, THEN AS SEEN FROM THE TERMS AND CONDITIONS OF VARIOUS AGREE MENTS, THERE IS FIXATION OF PRICE TO BE PAID AND THERE MAY BE VARIATION ON A CCOUNT OF USE OF CERTAIN SERVICES BUT FIRST THERE HAS TO BE BASIC PR ICE FIXED. HOWEVER, IN THE FACTS OF PRESENT CASE, LOOKING AT THE DOCUMENTATION , THE BILLING IS SEGREGATED INTO VARIOUS SERVICES I.E. AWS SERVICES, STORAGE SERVICES, ETC. AND THE ASSESSEE BEFORE US HAS FILED A CHART OF SUM MARY OF SERVICES AVAILED. THE FIRST SUCH SERVICES ARE ON ACCOUNT OF SERVICE C HARGES FOR ELASTIC COMPUTE CLOUD. AS PER CLAUSE 1, IT IS ON ACCOUNT OF USE OF SERVICE PROVIDER LINUX; AS PER CLAUSE 1.2, WINDOWS AND AS PER CLAUSE 1.3, WINDOWS & SQL SERVER STANARD AND CLAUSE 1.4 OF BANDWIDTH. THE TOT AL SERVICE CHARGES FOR ELASTIC COMPUTE CLOUD ARE USD 40,253.17. THE MONTH- WISE DETAILS OF SAID PAYMENTS MADE BY ASSESSEE FROM SEPTEMBER, 2009 TO M ARCH, 2010 REFLECTED THAT IN THE FIRST MONTH, CHARGES TOTALED TO USD 426 9.02, IN OCTOBER AT USD 5599.36 AND THERE ON. 20. THE HON'BLE HIGH COURT OF MADRAS IN SKYCELL COMMUNICATIONS LTD. (SUPRA) HAVE HELD THAT WEB HOST ING CHARGES ARE NOT IN THE NATURE OF ROYALTY. THE SAID PRINCIPLE HAS FURTH ER BEEN APPLIED IN VARIOUS IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 30 OF 35 DECISIONS OF THE TRIBUNAL AS RELIED UPON BY THE LEA RNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. (SIC.)** 21. THE ASPECT WHICH NEEDS TO BE SEEN IS WHETHER THE A SSESSEE IS PAYING CONSIDERATION FOR GETTING ANY RIGHT IN RESPECT OF A NY PROPERTY. THE ASSESSEE CLAIMS THAT IT DOES NOT PAY FOR SUCH RIGHT BUT IT O NLY PAYS FOR THE SERVICES. THE CLAIM OF ASSESSEE BEFORE US WAS THAT IT WAS ONL Y USING SERVICES PROVIDED BY AMAZON AND WAS NOT CONCE RNED WITH THE RIGHTS IN TECHNOLOGY. THE FEES PAID BY ASSESSEE WAS FOR US E OF TECHNOLOGY AND CANNOT BE SAID TO BE FOR USE OF ROYALTY, WHICH STAN DS PROVED BY THE FACTUM OF CHARGES BEING NOT FIXED BUT VARIABLE I.E. IT VAR IES WITH THE USE OF TECHNOLOGY DRIVEN SERVICES AND ALSO USE OF SUCH SER VICES DOES NOT GIVE RISE TO ANY RIGHT IN PROPERTY OF AMAZON. 19. (**) THE DECISION IN THE CASE OF SKYCELL CO MMUNICATIONS LTD (251 ITR 53) HAS BEEN RENDERED BY HONBLE MADRAS HI GH COURT IN THE CONTEXT OF FEES FOR TECHNICAL SERVICES ON APP LICABILITY OF SEC. 194J R.W. EXPLANATION 2 TO 9(1)(VII) OF THE ACT. H OWEVER, FOLLOWING OBSERVATIONS MADE BY HONBLE MADRAS HIGH COURT ARE RELEVANT IN THIS CASE ALSO:- 7. IN THE MODERN DAY WORLD, ALMOST EVERY FACET OF ONE S LIFE IS LINKED TO SCIENCE AND TECHNOLOGY INASMUCH AS NUMEROUS THINGS USED OR RELIED UPON IN EVERY DAY LIFE IS THE RESULT OF SCIENTIFIC AND T ECHNOLOGICAL DEVELOPMENT. EVERY INSTRUMENT OR GADGET THAT IS USED TO MAKE LIF E EASIER IS THE RESULT OF SCIENTIFIC INVENTION OR DEVELOPMENT AND INVOLVES TH E USE OF TECHNOLOGY. ON THAT SCORE, EVERY PROVIDER OF EVERY INSTRUMENT OR F ACILITY USED BY A PERSON CANNOT BE REGARDED AS PROVIDING TECHNICAL SERVICE. 8. WHEN A PERSON HIRES A TAXI TO MOVE FROM ONE PLACE TO ANOTHER, HE USES A PRODUCT OF SCIENCE AND TECHNOLOGY, VIZ., AN AUTOMOB ILE. IT CANNOT ON THAT GROUND BE SAID THAT THE TAXI DRIVER WHO CONTROLS TH E VEHICLE AND MONITORS ITS MOVEMENT IS RENDERING A TECHNICAL SERVICE TO TH E PERSON WHO USES THE AUTOMOBILE. SIMILARLY, WHEN A PERSON TRAVELS BY TRA IN OR IN AN AEROPLANE, IT CANNOT BE SAID THAT THE RAILWAYS OR AIRLINES IS REN DERING A TECHNICAL SERVICE TO THE PASSENGER AND, THEREFORE, THE PASSENGER IS U NDER AN OBLIGATION TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE RA ILWAY OR THE AIRLINE FOR IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 31 OF 35 HAVING USED IT FOR TRAVELLING FROM ONE DESTINATION TO ANOTHER. WHEN A PERSON TRAVELS BY BUS, IT CANNOT BE SAID THAT THE U NDERTAKING WHICH OWNS THE BUS SERVICE IS RENDERING TECHNICAL SERVICE TO T HE PASSENGER AND, THEREFORE, THE PASSENGER MUST DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO THE BUS SERVICE PROVIDER FOR HAVING USED THE BUS. T HE ELECTRICITY SUPPLIED TO A CONSUMER CANNOT, ON THE GROUND THAT GENERATORS AR E USED TO GENERATE ELECTRICITY, TRANSMISSION LINES TO CARRY THE POWER, TRANSFORMERS TO REGULATE THE FLOW OF CURRENT, METERS TO MEASURE THE CONSUMPT ION, BE REGARDED AS AMOUNTING TO PROVISION OF TECHNICAL SERVICES TO THE CONSUMER RESULTING IN THE CONSUMER HAVING TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE FOR THE POWER CONSUMED AND REMIT THE SAME TO THE REVENUE. 9. SATELLITE TELEVISION HAS BECOME UBIQUITOUS AND IS SPREADING ITS AREA AND COVERAGE, AND COVERS MILLIONS OF HOMES. WHEN A PERS ON RECEIVES SUCH TRANSMISSION OF TELEVISION SIGNALS THROUGH THE CABL E PROVIDED BY THE CABLE OPERATOR, IT CANNOT BE SAID THAT THE HOME OWNER WHO HAS SUCH A CABLE CONNECTION IS RECEIVING A TECHNICAL SERVICE FOR WHI CH HE IS REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THE CA BLE OPERATOR. 10. INSTALLATION AND OPERATION OF SOPHISTICATED EQUIPM ENTS WITH A VIEW TO EARN INCOME BY ALLOWING CUSTOMERS TO AVAIL OF THE B ENEFIT OF THE USER OF SUCH EQUIPMENT, DOES NOT RESULT IN THE PROVISION OF TECHNICAL SERVICE TO THE CUSTOMER FOR A FEE. 11. WHEN A PERSON DECIDES TO SUBSCRIBE TO A CELLULAR T ELEPHONE SERVICE IN ORDER TO HAVE THE FACILITY OF BEING ABLE TO COMMUNI CATE WITH OTHERS, HE DOES NOT CONTRACT TO RECEIVE A TECHNICAL SERVICE. WHAT H E DOES AGREE TO IS TO PAY FOR THE USE OF THE AIRTIME FOR WHICH HE PAYS A CHAR GE. THE FACT THAT THE TELEPHONE SERVICE PROVIDER HAS INSTALLED SOPHISTICA TED TECHNICAL EQUIPMENT IN THE EXCHANGE TO ENSURE CONNECTIVITY TO ITS SUBSC RIBER, DOES NOT ON THAT SCORE, MAKE IT PROVISION OF A TECHNICAL SERVICE TO THE SUBSCRIBER. THE SUBSCRIBER IS NOT CONCERNED WITH THE COMPLEXITY OF THE EQUIPMENT INSTALLED IN THE EXCHANGE, OR THE LOCATION OF THE BASE STATIO N. ALL THAT HE WANTS IS THE FACILITY OF USING THE TELEPHONE WHEN HE WISHES TO, AND BEING ABLE TO, GET CONNECTED TO THE PERSON AT THE NUMBER TO WHICH HE D ESIRES TO BE CONNECTED. WHAT APPLIES TO CELLULAR MOBILE TELEPHONE IS ALSO A PPLICABLE TO FIXED TELEPHONE SERVICE. NEITHER SERVICE CAN BE REGARDED AS TECHNICAL SERVICE FOR THE PURPOSE OF SECTION 194J THE ABOVE SAID DECISION CLARIFIES THE POINT THAT ME RE USAGE OF A FACILITY DOES NOT GIVE RISE TO PROVISION OF ANY TEC HNICAL SERVICE. UNDER SAME ANALOGY, MERE USAGE OF FACILITY PROVIDED BY THE ABOVE SAID NON-RESIDENTS DOES NOT RENDER THE PAYMENTS AS ROYALTY IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 32 OF 35 PAYMENTS, SINCE THE CORE POINT OF PARTING OF ANY COPY RIGHT ATTACHED TO THE SAID FACILITIES DOES NOT ARISE AT A LL. 20. IN THE CASE OF ENGINEERING ANALYSIS CENTRE O F EXCELLENCE (P) LTD (SUPRA), THE ISSUE RELATED TO ISSUING OF LICEN SE TO USE SOFTWARE, I.E., THE SOFTWARE PURCHASED BY A PERSON SHALL BE U SED BY THE BUYER FOR HIS OWN BUSINESS PURPOSES. SINCE THE LICENSE W AS GRANTED WITHOUT PARTING THE COPY RIGHTS ATTACHED TO THE SOF TWARE, THE HONBLE SUPREME COURT HELD THAT THE PAYMENTS RECEIV ED BY THE NON-RESIDENT SOFTWARE COMPANIES CANNOT BE TAXED AS ROYALTY UNDER THE PROVISIONS OF DTAA AND HENCE THERE IS NO REQUIREMENT TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO THEM BY A RESIDENT ASSESSEE. 21. IN THE INSTANT CASE, THE RECIPIENTS, I.E, M/S FACEBOOK AND ROCKET SCIENCE GROUP ONLY ALLOW THE ASSESSEE TO USE THEIR FACILITIES FOR THE PURPOSE OF CREATING ADVERTISEMENT CONTENT. THE PAYMENT MADE TO AMAZON WEB SERVICES (AWS) IS ONLY FOR USING THE INFORMATION TECHNOLOGY FACILITIES PROVIDED BY IT, T HAT TOO THE BILLING WOULD DEPEND UPON THE EXTENT OF USAGE OF THOSE FACI LITIES. IN FACT, THESE NON-RESIDENT COMPANIES DO NOT GIVE ANY SPECIF IC LICENSE FOR USE OR RIGHT TO OF ANY OF THE FACILITIES (WHICH INC LUDE SOFTWARE) AND THOSE FACILITIES ARE NOT GOING TO BE USED FOR THE U SE IN THE BUSINESS OF THE ASSESSEE. THE RIGHT TO USE THOSE FACILITIES , AS STATED EARLIER, IS INTERTWINED WITH THE MAIN OBJECTIVE OF PLACING ADVE RTISEMENTS IN THE CASE OF FACEBOOK AND MAILCHIMP. IN THE CASE OF AW S, THE PAYMENT IS MADE ONLY FOR USING OF INFORMATION TECHNOLOGY IN FRASTRUCTURE FACILITIES ON RENTAL BASIS. HENCE THE QUESTION OF TRANSFERRING THE COPY RIGHT OVER THOSE FACILITIES DOES NOT ARISE AT ALL. THE AGREEMENTS EXTRACTED ABOVE ALSO MAKE IT CLEAR THAT THE COPYRIGHT OVER THOSE FACILITATING SOFTWARE IS NOT SHARED WITH THE ASSESSEE. IN IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 33 OF 35 ANY CASE, THE MAIN PURPOSE OF MAKING PAYMENT IS TO PLACE ADVERTISEMENTS ONLY AND NOT TO USE THE FACILITIES P ROVIDED BY THE NON-RESIDENT COMPANIES. THUS THE FACILITIES PROVID ED BY THE NON- RESIDENT COMPANIES ARE ONLY ENABLING FACILITIES, WH ICH HELP A PERSON TO PLACE HIS ADVERTISEMENT CONTENTS ON THE PLATFORM OF FACEBOOK OR TO USE MAILCHIMP FACILITY EFFECTIVELY. IN CASE OF AWS, THE PAYMENT IS IN THE NATURE OF RENT PAYMENTS FOR USE OF INFRAS TRUCTURE FACILITIES. 22. ACCORDINGLY, WE ARE OF THE VIEW THAT THE THESE NON-RESIDENT RECIPIENTS STAND ON A BETTER FOOTING THAN THOSE ASS ESSEES BEFORE THE HON'BLE SUPREME COURT IN THE CASE OF ENGINEERING AN ALYSIS CENTRE OF EXCELLENCE PRIVATE LTD (SUPRA). ACCORDINGLY, FO LLOWING THE RATIO LAID DOWN BY HON'BLE SUPREME COURT, WE HOLD THATTHE PAYMENTS MADE TO THE ABOVE SAID THREE NON-RESIDENT COMPANIES DO NOT FALL WITHIN THE MEANING OF ROYALTY AS DEFINED IN DTAA. THE AO HAS NOT MADE OUT AN ALTERNATIVE CASE THAT THESE PAYMENTS AR E TAXABLE AS BUSINESS INCOME IN INDIA. HENCE, THERE IS NO NECES SITY FOR US TO DEAL WITH THAT ASPECT. 23. WE HAVE NOTICED EARLIER THAT THE LD CIT(A) HAS FOLLOWED THE DECISION RENDERED BY HON'BLE KARNATAKA HIGH COURT I N THE CASE OF SAMSUNG ELECTRONICS CO LTD (SUPRA). IN THE CASE OF ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LTD (SUPRA), THE DECISION RENDERED BY HON'BLE KARNATAKA HIGH COURT IN THE ABO VE SAID CASE HAS BEEN OVERRULED BY HON'BLE SUPREME COURT. HENCE ON THIS REASONING ALSO, THE DECISION RENDERED BY LD CIT(A) WOULD FAIL. 24. IN VIEW OF THE FOREGOING DISCUSSIONS, WE AR E OF THE VIEW THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE THREE NON- RESIDENT COMPANIES REFERRED ABOVE CANNOT BE CONSIDERED AD R OYALTY PAYMENTS AND HENCE THEY DO NOT GIVE RISE ANY INCOM E CHARGEABLE IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 34 OF 35 IN INDIA UNDER INDIAN INCOME TAX ACT IN ALL THE THR EE YEARS UNDER CONSIDERATION. IN THAT VIEW OF THE MATTER, THERE I S NO REQUIREMENT TO DEDUCT TAX AT SOURCE FROM THOSE PAYMENTS U/S 195 OF THE ACT. HENCE THE ASSESSEE HEREIN CANNOT BE CONSIDERED AS A N ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT. 25. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED B Y LD CIT(A) FOR THE YEARS UNDER CONSIDERATION AND DIRECT THE AO TO DELETE THE DEMAND RAISED U/S 201(1) OF THE ACT AND ALSO THE CO NSEQUENTIAL INTEREST CHARGED U/S 201(1A) OF THE ACT IN ALL THE THREE YEARS UNDER CONSIDERATION. 26. IN THE RESULT, ALL THE APPEALS OF THE ASSESS EE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUG, 2021 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 17 TH AUG, 2021. VG/SPS IT(IT)A NO.615 TO 620/BANG/2020 M/S. URBAN LADDER HOME DCOR SOLUTIONS PVT. LTD., B ANGALORE PAGE 35 OF 35 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.