EDENRED PTE LIMITED , MUMBAI V. DY. CIT (IT)- 2 (2)(1), MUMBAI

ITA 6267/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5455 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2016-2017
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N. PADMANABHAN
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business income; Double taxation relief
• Section: 143(3); 195; 13; 20

Judgement Text

1 ITA 6267/MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) I.T.A. NO.6267/MUM/2019 (ASSESSMENT YEAR 2016-17) EDENRED PTE LIMITED C/O WALKER CHANDIOK & CO LLP 16 TH FLOOR, INDIABULLS FINANCE CENTRE TOWER II, SB MARG, ELPHINSTONE (WEST), MUMBAI-400 013 PAN : AACCE8636P VS DEPUTY COMMISSIONER OF INCOME-TAX, INTERNATIONAL TAXATION-2(2)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI JITENDRA SINGH, AR RESPONDENT BY SHRI. N. PADMANABHAN, DR DATE OF HEARING 09-09-2021 DATE OF PRONOUNCEMENT 22-09-2021 O R D E R PER SAKTIJIT DEY (JM) CAPTIONED APPEAL BY THE ASSESSEE IS AGAINST FINAL ASSESSMENT ORDER DATED 13-08-2019 PASSED UNDER SECTION 143(3) R.W.S. 144C( 13) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2016-17, IN PURSUANCE TO THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL (DRP). 2. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE REA D AS UNDER:- 2 ITA 6267/MUM/2019 INFRASTRUCTURE DATA CENTER CHARGES TAXED AS ROYALT Y 3. ERRED IN CONSIDERING INFRASTRUCTURE DATA CENTER CHARGES OF INR 2,16,28,003 TO BE TAXABLE AS ROYALTY UNDER THE ACT AS WELL AS UNDER T HE INDIA - SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT ('DTAA'). OTHER SERVICE CHARGES TAXED AS ROYALTY 4. ERRED IN CONSIDERING OTHER SERVICE CHARGES (REFE RRAL FEES) OF INR 1,63,710 TO BE TAXABLE AS ROYALTY UNDER THE ACT AS WELL AS UNDER T HE INDIA - SINGAPORE DTAA. MEMBER LOGIN FEE TAXED AS ROYALTY 5. ERRED IN CONSIDERING MEMBER LOGIN FEE OF INR 1 , 00,98,887 TO DE TAXABLE AS ROYALTY UNDER THE ACT AS WELL AS UNDER THE INDIA - SINGAPORE DTAA. 3. AT THE OUTSET, SHRI JITENDRA SINGH, LEARNED COUN SEL APPEARING FOR THE ASSESSEE AND SHRI N PADMANABHAN, LEARNED DEPARTMENT AL REPRESENTATIVE AGREED THAT ALL THE ISSUES ARISING IN THIS APPEAL ARE OF R ECURRING NATURE AND HAVE BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE I N PRECEDING ASSESSMENT YEARS. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE RE LIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER ( APPEALS). 4. HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED FACTS ON RECORD, WE FIND THAT THE FIRST ISSUE AS RAISED IN GROUND 3 RELATES TO TAXABILITY OF INFRASTRUCTURE DATA CENTRE (IDC) CHARGES AS ROYALTY. AS SUBMITTED BY BO TH THE PARTIES, THIS IS A RECURRING DISPUTE BETWEEN THE PARTIES SINCE ASSESSM ENT YEAR 2010-11. IN THE LATEST ORDER PASSED FOR ASSESSMENT YEARS 2014-15 AN D 2015-16, THE TRIBUNAL HAS DELETED THE ADDITION WITH THE FOLLOWING OBSERVATION S:- 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIALS ON RECORD. PERTINENTLY, IDENTICAL ISSUE RELATING TO TAXABILITY OF IDC CHARG ES AS ROYALTY CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ASSES SMENT YEARS 2010-11, 2011-12 AND 2012-13 IN ITA NO.L718/MUM/2014 & OTHERS DATED 20-0 7-2020, THE TRIBUNAL, WHILE DECIDING THE ISSUE HAS HELD, AS UNDER:- '6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BEL OW. WE FIND THAT (I) UNDER THE SAID IDC AGREEMENT, THE APPELLANT, ESSENTIALLY PROVIDES IT INFRASTRUCTURE MANAGEMENT AND MAIL BOX/WEBSITE H OSTING SERVICES TO ITS INDIA GROUP COMPANIES; THESE IDC SERVICES ARE PERFORMED B Y THE APPELLANT'S PERSONNEL IN SINGAPORE ; THE INDIAN GROUP COMPANIES DIRECTLY REMIT IDC SERVICE PAYMENTS 3 ITA 6267/MUM/2019 TOWARDS THE APPELLANT'S BANK ACCOUNT IN SINGAPORE, (IT) IDC IS AN ISO 27001 CERTIFIED DATA CENTRE OWNED BY EDENRED PTE. AND LOC ATED IN SINGAPORE ; IDC SERVICES ARE PROVIDED USING THE IDC AND IT/SECURITY TEAM IN SINGAPORE, (HI) THE SERVICES UNDER THE IDC AGREEMENT COMPRISE OF ADMINI STRATION AND SUPERVISION OF CENTRAL INFRASTRUCTURE ; MAILBOX HOSTING SERVICES A ND WEBSITE HOSTING SERVICES, (IV) IDC SERVICES ENSURE 100% UPTIME FOR CRITICAL EXTERN AL FACING APPLICATIONS WHICH NEED HIGHLY SECURED WEB ENVIRONMENT AND DEDICATED T EAM OF SECURITY EXPERTS TO ENSURE 100% UPTIME EDENRED PTE LTD. 11 ITA NOS. 171 8/M/2014 254/M/2015& 507/M/2016 OF SECURITY SYSTEMS (FIREWALL, ANTIVIRUS , ACCESS CONTROLS) WHICH ARE ALSO HOSTED ON SERVER IN SINGAPORE. WE FURTHER OBSERVE THAT EXAMPLES OF WEBSITES/APPLIC ATIONS/SOFTWARES HOSTED BY INDIAN GROUP COMPANIES ON THE DATA CENTRE IN SINGAP ORE ARE WEB ORDERING APPLICATION, CORPORATE WEBSITE, WEBSITES CREATED FO R CUSTOMERS OF EDENRED INDIA ENTITIES WHILE MAKING O LOYALTY PROGRAM FOR THEM. A PERUSAL OF THE DOCUMENTS FILED BEFORE THE AO AND DRP CLEARLY INDICATE THAT (I) APPELLANT HAS AN INFRASTRUCTURE DATA CENTRE, NOT IN FORMATION CENTRE AT SINGAPORE, (H) THE INDIAN GROUP COMPANIES NEITHER ACCESS NOR U SE CPU OF THE APPELLANT, (HI) NO CDN SYSTEM IS PROVIDED UNDER THE /DC AGREEMENT, NO SUCH USE/ACCESS IS ALLOWED, (IV) THE APPELLANT DOES NOT MAINTAIN ANY S UCH CENTRAL DATA (V) IDC IS NOT CAPABLE OF INFORMATION ANALYTICS, DATA MANAGEMENT, (VI) APPELLANT ONLY PROVIDES IDC SERVICE BY USING ITS HARDWARE/SECURITY DEVICES/ PERSONNEL ; ALL THAT THE INDIAN GROUP COMPANIES RECEIVED ARE STANDARD IDC SERVICES AND NOT USE OF ANY SOFTWARE, (VII) BANDWITH AND NETWORKING INFRASTRUCT URE IS USED BY THE APPELLANT TO RENDER IDC SERVICES ; INDIAN COMPANIES ONLY GET THE OUTPUT OF USAGES OF SUCH BANDWITH AND NETWORK AND NOT ITS USE, (VIII) CONSID ERATION IS FOR IDC SERVICES AND NOT ANY SPECIFIC PROGRAM AND (IX) NO EMBEDDED/SECRE T SOFTWARE IS DEVELOPED BY THE APPELLANT. AGAINST THE ABOVE FACTUAL BACKDROP, LET US DISCUSS BELOW THE COSE LAWS RELIED ON BOTH SIDES. 6.1 WE BEGIN WITH THE CASE LAWS RELIED ON BY THE ID . COUNSEL. A PLETHORA OF PRECEDENTS ON THE SUBJECT IN WHICH WE ARE PRESENTLY CONCERNED COMPELS US, IN ORDER TO AVOID PROLIXITY, TO REFER ONLY A FEW DECIS IONS BELOW. EDENRED PTE LTD. 12 ITA NOS. 1718/M/2014 254/M/2015 & 507/M/2016 IN THE CASE OF BHARATI AXA GENERAL INSURANCE CO. LTD. (SUP RA), THE APPELLANT, AN INDIAN COMPANY CARRYING ON BUSINESS OF GENERAL INSURANCE E NTERED INTO O SERVICE AGREEMENT WITH A SINGAPORE COMPANY AXA ARC FOR RECE IVING ASSISTANCE SUCH AS BUSINESS SUPPORT, MARKET INFORMATION, TECHNOLOGY SU PPORT SERVICES AND STRATEGY SUPPORT ETC. FROM THE TATTER. THE AAR HELD THAT (I) THOUGH THE SERVICES RENDERED BY AXA ARC MAY WEL L BE BROUGHT WITHIN THE SCOPE OF THE DEFINITION OF FTS UNDER THE IT_ACT _ AS THEY ANSWER THE DESCRIPTION OF CONSULTANCY SERVICES OR SOME OF THEM MAY BE CATEGORIZED AS TECHNICAL SERVICES BUT THE QUALIFYING WORDS 'MAK E AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, WHICH ENABL ES THE RECIPIENT OF SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN' IN ARUDE_12A OF THE DTAA MAKE MATERIAL DIFFERENCE, (II) ALL TECHNICAL O R CONSULTANCY SERVICES CANNOT BE BROUGHT WITHIN THE SCOPE OF THIS DEFINITI ON UNLESS THEY MAKE 4 ITA 6267/MUM/2019 AVAILABLE TECHNICAL KNOWLEDGE, KNOWHOW ETC. WHICH I N TURN FACILITATES THE PERSON ACQUIRING THE SERVICES TO APPLY THE TECH NOLOGY EMBEDDED THEREIN, (HI) SERVICES PROVIDED BY AXA ARC TO THE A PPLICANT DO NOT FULFILL THE REQUIREMENTS OF THE DEFINITION OF FT5 IN THE DT AA, (IV) EVEN ASSUMING THAT THEY ARE TECHNICAL OR CONSULTANCY SERVICES, IT CANNOT BE SAID THAT THE APPLICANT RECEIVING THE SERVICES IS ENABLED TO APPL Y THE TECHNOLOGY CONTAINED THEREIN, (V) ALSO THERE IS NOTHING IN THE IT SUPPORT SERVICES THAT ANSWERS THE DESCRIPTION OF TECHNICAL SERVICES AS DE FINED IN THE DTAA, (VI) THEREFORE, THE FEES PAID TO AXA ARC BY THE APPLICAN T DOES NOT AMOUNT TO FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF T HE DTAA, (VII) AS REGARDS THE PAYMENTS MADE FOR PROVIDING ACCESS TO S OFTWARE APPLICATIONS AND TO THE SERVER HARDWARE SYSTEM HOST ED IN SINGAPORE FOR INTERNAL PURPOSES AND FOR AVAILING OF RELATED SUPPO RT SERVICES UNDER THE TERMS OF THE SERVICE AGREEMENT, SAME CANNOT BE BROU GHT WITHIN THE SCOPE OF THE DEFINITION OF EDENRED PTE LTD. 13 ITA NOS. 1718/M/2014 254/M/2015& 507/M/2016 'ROYALTY' IN ARTICLE 12.3, ( VIII) THERE IS NO TRANSFER OF ANY COPYRIGHT IN THE COMPUTER SOFTWARE PROVIDED BY AXA ARC AND IT CANNOT BE SAID THAT THE APPLICANT HAS BEEN C ONFERRED ANY RIGHT OF USAGES OF THE EQUIPMENT LOCATED ABROAD, MORE SO, WH EN THE SERVER IS NOT DEDICATED TO THE APPLICANT. SIMILARLY, IN THE CASE OF STANDARD CHARTERED BANK ( SUPRA), THE ASSESSES- BANK ENTERED INTO AN AGREEMENT WITH A SINGAPORE COM PANY SPT, FOR THE PROVISION OF DATA PROCESSING SUPPORT FOR ITS BUSINE SS IN INDIA AND THAT DATA PROCESSING IS DOWN OUTSIDE INDICT. APPLICATION SOFTWARE BY WHICH DATA IS TRANSMITTED TO HARDWARE AT SINGAPORE AND PR OCESSED BY SPL AT SINGAPORE IS OWNED BY THE ASSESSEE. THUS WHAT IS US ED BY THE APPELLANT IS THE COMPUTER HARDWARE OWNED BY SPL. THE TRIBUNAL HELD THAT (I) PAYMENT IN QUESTION CAN BE SAID TO BE A PAYMENT FOR A FACILITY WHICH IS AVAILABLE TO ANY PERSON WILTING TO USE THE FACILITY , (II) SYSTEM SOFTWARE WHICH IS EMBEDDED IN THE COMPUTER HARDWARE BY WHICH THE COMPUTER HARDWARE FUNCTIONS IS NOT OWNED BY SPL AND SPL ONLY HAS A LICENSE TO USE THE SYSTEM SOFTWARE ; (IN) CONSIDERATION RECEIVED B Y SPL IS FOR USING THE COMPUTER HARDWARE WHICH DOES NOT INVOLVE USE OR RIG HT TO USE A PROCESS, (IV) THERE IS NOTHING ON RECORD TO ESTABLISH THAT T HE HARDWARE COULD BE ACCESSED AND PUT TO USE BY THE ASSESSES BY MEANS OF POSITIVE ACTS, (V) THEREFORE, IT CANNOT BE SAID THAT THE PAYMENT BY TH E ASSESSEE TO SPL IS ROYALTY WITHIN THE MEANING OF ARTICLE 12 OF THE TRE ATY. IN EXXONMOBI! COMPANY INDIA (P.) LTD. (SUPRA), THE ASSESSEE HAD PAID CERTAIN AMOUNT TO 'EMCAP', SINGAPORE TOWARDS GLOBAL SUPPORT FEES. THE AO OPINED THAT PAYMENT MADE BY THE ASSESSEE WAS IN THE NATURE OF F TS AS DEFINED IN EXPLANATION 2 TO SECTIORJ 9(1)(VII) OF THE ACT. THE TRIBUNAL OBSERVED THAT AS PER TERMS OF AGREEMENT, EMCAP HAD TO PROVIDE MANAGEMENT CONSULTING, EDENRED PTE LTD. 14 ITA NOS. 1718/M/2014 254/M/2015& 507/M/ 2016 FUNCTIONAL ADVICE, ADMINISTRATIVE, TECHNICAL, PROFESSIONAL AND OTHER S UPPORTING SERVICES TO THE ASSESSES; HOWEVER, THERE WAS NOTHING IN AGREEMENT T O CONCLUDE THAT IN COURSE OF SUCH PROVISION OF SERVICE, EMCAP HAD MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, 5 ITA 6267/MUM/2019 EXPERIENCE, SKILL, KNOWHOW OR PROCESS WHICH ENABLED OSSESSEE TO APPLY TECHNOLOGY CONTAINED THEREIN ON ITS OWN. THEREFORE, THE TRIBUNAL HELD THAT PAYMENT MADE BY THE OSSESSEE COULD NOT BE CONSIDERE D AS FTS AS DEFINED UNDER ARTICLE 12(4)(B) OF THE INDIA-SINGAPORE DTAA. IN M/S RELIANCE JIO INFOCOMM LTD. (SUPRA) FOR AY 20 16-17, THE TRIBUNAL OBSERVES THAT THOUGH THE INDIA-SINGAPORE TAX TREATY IS AMEND ED BY NOTIFICATION NO. SO 935(E) DATED 23.03.2017, HOWEVER, THE DEFINITION OF 'ROYALTY' THEREIN HAS NOT BEEN TINKERED WITH AND REMAINS AS SUCH. 6.2 NOW WE TURN TO THE CASE TAWS RELIED ON BY THE I D, DR. IN THE CASE OF CARGO COMMUNITY NETWORK (P.) LTD. (SUPRA), THE ASSESSES, A NON-RESIDENT COMPANY HAS ITS REGISTERED OFFICE AT SINGAPORE. IT IS ENGAGED I N THE BUSINESS OF PROVIDING ACCESS TO AN INTERNET BASED AIR CARGO PORTAL KNOWN AS EZYCARGO AT SINGAPORE. THE APPLICANT RECEIVED PAYMENTS FROM AN INDIAN SUBS CRIBERS FOR PROVIDING PASSWORD TO ACCESS AND USE THE PORTAL HOSTED FROM S INGAPORE. THE AAR HELD THAT PAYMENTS MADE FOR CONCURRENT ACCESS TO UTILIZE THE SOPHISTICATED SERVICES OFFERED BY THE PORTAL WOULD BE COVERED BY THE EXPRE SSION ROYALTY. WE FIND THAT SUBSEQUENTLY, AFTER CONSIDERING THE DE CISION IN CARGO COMMUNITY NETWORK (P.) LTD. (SUPRA), MUMBAI ITAT IN THE CASE OF STANDARD CHARTERED BANK 11 ITR 721 AND YAHOO INDIA PVT. 140 TTJ 195 HELD TH AT NO PART EDENRED PTE LTD. 15 ITA NOS. 1718/M/2014 254/M/2015& 507/M/2016 OF T HE PAYMENT COULD BE SAID TO BE FOR USE OF SPECIALIZED SOFTWARE ON WHICH DATA IS PROCESSED AS NO RIGHT OR PRIVILEGE WAS GRANTED TO THE COMPANY TO INDEPEND ENTLY USE THE COMPUTER. IN THE CASE IMT LABS (INDIA) (P.) LTD. (SUPRA), THE ASSESSEE, ON INDIAN COMPANY, ENTERED INTO AN AGREEMENT WITH A NON-RESIDENT AMERI CAN COMPANY FOR SECURING LICENSE OF A PARTICULAR SOFTWARE, WHICH THE APPLICA NT IS ENTITLED TO USE. THE APPLICANT HAS TO PAY LICENSE FEE FOR USAGE OF SOFTW ARE TO THE AMERICAN COMPANY. THE AAR HELD THAT 'SMARTERCHILD' APPLICATION SOFTWA RE ON THE AMERICAN COMPANY'S SERVER PLATFORM IS SCIENTIFIC EQUIPMENT L ICENSED TO BE USED FOR COMMERCIAL PURPOSES AND THEREFORE, PAYMENTS MADE FO R PRODUCING AND HOSTING 'INTERACTIVE AGENT' APPLICATIONS WOULD BE COVERED B Y THE EXPRESSION 'ROYALTIES' AS USED IN ARTJCFE_I2. HOWEVER, WE FIND THAT IN THE INSTANT CASE, APPELLAN T ONLY PROVIDES SERVICE BY USING ITS HARDWARE/SECURITY DEVICES/PERSONNEL AND N OT USE OF ANY SOFTWARE AND THEREFORE THE ABOVE CASE IS DISTINGUISHABLE FROM TH E PRESENT APPEAL. IN THOUGHTBUZZ (P.) LTD. (SUPRA), THE APPLICANT, A SINGAPORE COMPANY WAS ENGAGED IN PROVIDING SOCIAL MEDIA MONITORING SERVIC E FOR A COMPANY, BRAND OR PRODUCT. IT WAS A PLATFORM FOR USERS TO HEAR AND EN GAGE WITH THEIR CUSTOMERS, BRAND AMBASSADORS ETC. ACROSS THE INTERNET. THE APP LICANT OFFERED SERVICE ON CHARGING A SUBSCRIPTION. THE CLIENTS, WHO SUBSCRIBE , CAN LOGIN TO ITS WEBSITE TO DO A SEARCH ON WHAT IS BEING SPOKEN ABOUT VARIOUS BRAN DS AND SO ON. THE AAR HELD THAT THE AMOUNT RECEIVED FROM OFFERING THE PARTICUL AR EDENRED PTE LTD. 16 IT A NOS. 1718/M/2014 254/M/2015& 507/M/2016 SUBSCRIPTIO N BASED SERVICE IS 6 ITA 6267/MUM/2019 TAXABLE IN INDIA AS 'ROYALTY' IN TERMS OF PARAGRAPH 2 OF ARTICLE 12 OF THE DTAC BETWEEN INDIA & SINGAPORE. HOWEVER, WE FIND THAT IN THE INSTANT CASE, THE APPE LLANT IS ONLY PROVIDING IDC SERVICE WHICH INCLUDES ADMINISTRATION AND SUPERVISI ON OF CENTRAL INFRASTRUCTURE, MAILBOX HOSTING SERVICES AND WEBSITE HOSTING SERVIC ES AND THEREFORE, THE RATIO LAID DOWN IN THE ABOVE RULING IS NOT APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. 6.3 FROM THE ENUNCIATION OF LAW IN BHARATI AXA GENE RAL INSURANCE CO. LTD; EXXONMOBIL COMPANY INDIA (P.) LTD; STANDARD CHARTER ED BANK V. DOIT; DCIT V. M/S RELIANCE JIO INFOCOMM LTD NARRATED AT PARA 6.1 HEREINBEFORE, IT IS QUITE IUCULENT THAT REVENUES UNDER THE IDC AGREEMENT OUGH T NOT TO BE TAXED IN THE HANDS OF THE APPELLANT AS ROYALTY UNDER THE ACT AND /OR INDIA-SINGAPORE DTAA. THEREFORE, WE DELETE THE ADDITION OF RS.95,62,479/- MADE BY THE AO TOWARDS IDC CHARGES AND ALLOW THE 2ND GROUND OF APPEAL.' 8. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING TH E AFORESAID DECISION OF THE COORDINATE BENCH, WE HOLD THAT IDC CHARGES RECEIVED BY THE ASS ESSEE IS NOT IN THE NATURE OF ROYALTY. ACCORDINGLY, ADDITIONS ARE DELETED. GROUND 2 IN BOT H THE APPEALS ARE ALLOWED. 5. THERE BEING NO DIFFERENCE IN THE FACTUAL POSITIO N IN THE IMPUGNED ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE EARLIER DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DELETE THE ADDITION. THIS GROUND IS ALLOWED. 6. IN GROUND 3, ASSESSEE HAS CHALLENGED THE ADDITIO N OF OTHER SERVICE CHARGES (REFERRAL FEE) AS ROYALTY. AS COULD BE SEEN, IDENTI CAL ISSUE CAME UP FOR CONSIDERATION IN ASSESSEES OWN CASE IN THE PRECEDI NG ASSESSMENT YEARS. IN THE LATEST ORDER PASSED FOR THE ASSESSMENT YEARS 2014-1 5 AND 2015-16 (SUPRA), THE TRIBUNAL HAS DELETED THE ADDITION WITH THE FOLLOWIN G OBSERVATIONS:- 23. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED MATERIALS ON RECORD. IT IS OBSERVED THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFO RE THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2010-11, 2011-12 AND 2012-13. WHILE DECIDING THE ISSUE, THE TRIBUNAL, NEGATING THE STAND OF THE DEPARTMENTAL AUTHORITIES HELD AS UNDER:- '12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ORE GIVEN BELOW. IN THE INSTANT CASE, THE APPELLANT HAS RECEIVED FEE S FOR REFERRAL SERVICES/OTHER SERVICES OF RS.39,94,209/-FROM SURF GOLD IN THE YEAR UNDER CONS IDERATION. IT IS RELEVANT TO MENTION HERE THAT AS PER THE INDI A-SINGAPORE DTAA, THE SERVICES IN THE NATURE OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATU RE ARE TAXABLE AS FTS, IF SUCH SERVICES ARE 'MADE AVAILABLE' TO THE SERVICE RECIPIENT. IN T HE INSTANT CASE, REFERRAL SERVICES/OTHER 7 ITA 6267/MUM/2019 SERVICES ARE PROVIDED TO SUPPORT SURF COLD IN CARRY ING ON ITS BUSINESS. THESE SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL, KNOWHOW OR PROCESSES TO SURF GOLD BECAUSE THERE IS NO TRANSMISSION OF THE TECHNICAL K NOWLEDGE, EXPERIENCE, SKILL ETC. FROM THE APPELLANT TO SURF GOLD OR ITS CLIENTS. IN THE CASE OF CUSHMAN & WAKEFIELD (S) PTE. LTD. (S UPRA), THE APPLICANT A FOREIGN COMPANY BASED IN SINGAPORE IS ENGAGED IN THE BUSINESS OF RE NDERING REAL ESTATE SERVICES TO ITS LOCAL AND INTERNATIONAL CLIENTS. THE APPLICANT HAS DEVELO PED CERTAIN INTERNATIONAL CLIENT RELATIONSHIPS AND IN ACCORDANCE WITH EDENRED PTE LT D. 29 ITA NOS. 1718/M/2014 254/M/2015& 507/M/2016 GLOBAL POLICY OF THE GROUP, VARIOUS OFFICES PROVIDE REFERRAL SERVICES TO OTHER CUSHMAN & WAKEFIELD (C&W) OFFICES . THE APPLICANT ENTERED INTO A REFERRAL AGREEMENT WITH INDIAN GROUP COMPANY WHEREB Y THE APPLICANT REFERS/RECOMMENDS POTENTIAL CUSTOMERS DESIROUS OF OBTAINING REAL ESTA TE CONSULTING AND ASSOCIATED SERVICES IN INDIA, FURTHER THE APPLICANT WAS NOT RESPONSIBLE FO R PERSUADING THE CUSTOMERS TO AVAIL THE SERVICES OF THE INDIAN GROUP COMPANY, NOR NEGOTIATI NG OR COLLECTING FEE CHARGED BY INDIAN GROUP COMPANY FROM THE REFERRED CUSTOMERS. AS CONSI DERATION FOR SUCH REFERRAL SERVICES, A PERCENTAGE OF THE AMOUNT REALIZED FROM THE REFERRED CUSTOMERS (I.E. 30% ON GROSS AMOUNT REALIZED) WAS PAID TO THE APPLICANT. THE AAR HELD T HAT 'REFERRAL FEE RECEIVED IN SINGAPORE BY THE APPLICANT, A SINGAPOREAN COMPANY FROM AN IND IAN COMPANY FOR REFERRING CUSTOMERS TO THE LATTER IS NEITHER BUSINESS INCOME U/S 9{L)(I) NOR ROYALTY U/S 9(L)(VI) NOR FEE FOR TECHNICAL SERVICES U/S 9(L)(VII) R. W. ARTICLE 12(4 )(B) OF THE DTAA BETWEEN INDIA & SINGAPORE AND, THEREFORE, IT IS TAXABLE AS BUSINESS INCOME IN SINGAPORE ONLY AS THE APPLICANT HAS NO PE IN INDIA; IMPUGNED RECEIPT NOT BEING CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE IT ACT OR UNDER THE PROVISIONS OF DTAA, SECTION 195 IS NOT ATTRACTED'. IN REAL RESOURCING LTD. (SUPRA), THE AAR, IN THE CO NTEXT OF THE INDIA-UK DTAA, AFTER RELYING ON THE CUSHMAN & WAKEFIELD RULING (SUPRA) H ELD THAT REFERRAL FEE RECEIVED BY A UK COMPANY (APPLICANT) FROM INDIA BASED RECRUITMENT AG ENCY FOR REFERRING POTENTIAL INDIAN CLIENTS AND CANDIDATES WAS NOT ROYALTY OR FT S. THE RELEVANT OBSERVATIONS OF THE AAR IN THE CONTEXT OF ARTICLE 13 DEALING WITH R OYALTY/FTS IS AS UNDER: EDENRED PTE LTD. 30 ITA NOS. 1718/M/2014 254/M/2015 & 507/M/2016 '10. COLLECTING DATA AND ANALYZING IT AND MAKING A DATABASE FOR PRO VIDING INFORMATION ON SUITABLE CANDIDATES FOR RECRUITMENT, EVEN IF THEY ARE IN THE NATURE OF CONSULTANCY SERVICES, CANNOT BE CONSIDERED TO BE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT/APPLICATION OF THE RIGHT OR INFORMATION REFERRED TO IN PARA 3(A). MOREOVER, BY ACCESS TO THE DATABASE, IT CANNOT BE SAID THAT THE INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE WILL BE TRANSMITTED BY THE APPLICANT TO THE RECRUITING AGENCIES. IF THE CONTENTION OF REVENUE IS ACCEPTED, IT WOULD AMOUNT TO UNWARRANTED EXPANSION OF THE TERMS FTS AND ROYALTIES. CONSIDERATION FOR PROVIDIN G INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE BAS ICALLY INVOLVES THE SHARING OF TECHNICAL KNOW-HOW AND EXPERIENCE WHICH IS NOT THE CASE HERE........ WE DO NOT THINK THAT THE CRITERION ENVISAGED BY ART . 13.4(A) OF DTAA HAS BEEN SATISFIED IN THE INSTANT CASE.' IN KNIGHT FRONT (INDIA) (P.) LTD. (SUPRA), THE TRIB UNAL HELD THAT (I) WHERE REFERRAL FEES WAS RECEIVED BY FOREIGN CONCERN FOR INTRODUCING CLI ENTS TO ASSESSEE-INDIAN COMPANY, PROVIDING INTERNATIONAL REAL ESTATE ADVISORY AND MA NAGEMENT SERVICES, SINCE REFERRAL SERVICES WERE RENDERED ENTIRELY OUTSIDE INDIA, IT W OULD NOT FALL WITHIN THE SCOPE OF 'TOTAL INCOME' OF SO ID FOREIGN CONCERN AS PER SECT ION5(2) AND (II) REFERRAL FEES PAID BY ASSESSEE-INDIAN COMPANY FOR AVAILING REFERRAL SERVI CES WHICH WERE RENDERED BY FOREIGN CONCERN ENTIRELY IN USA WOULD CONSTITUTE BU SINESS PROFITS OF FOREIGN COMPANY UNDER ARTICLE 7 OF THE INDIA-USA DTAA; IN ABSENCE O F PE IN INDIA, IT WAS NOT TAXABLE IN INDIA. THE DISTILLATION OF PRECEDENTS MUST NOW BE APPLIED BY US TO THE FACTS OF THE PRESENT CASE. WE ARE OF THE CONSIDERED VIEW THAT IN THE CON TEXT OF THE ABOVE FACTUAL SCENARIO 8 ITA 6267/MUM/2019 AND POSITION OF LAW, THE REVENUES UNDER THE REFERRA L EDENRED PTE LTD. 31 ITA NOS. 1718/M/2014 254/M/2015 & 507/M/2016 AGREEMENT IS NO T TAXABLE IN THE HANDS OF THE APPELLANT AS ROYALTY UNDER THE ACT AND/OR INDIA-SIN GAPORE DTAA OR FTS UNDER THE INDIA-SINGAPORE DTAA, THEREFORE, WE DELETE THE ADDI TION OF RS.39,94,209/- MADE BY THE AO TOWARDS REFERRAL FEE AND ALLOW THE 4TH & 5TH GROUND OF APPEAL.' 24. IDENTICAL VIEW WAS EXPRESSED BY THE TRIBUNAL WH ILE DECIDING THE ISSUE AGAIN IN ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2013-14 IN I TA NO.2178/MUM/2017 DATED 23- 10-2020. 25. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING T HE DECISIONS OF THE TRIBUNAL IN ASSESSEE'S OWN CASE AS REFERRED TO ABOVE, WE HOLD T HAT REFERRAL FEE RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF ROYALTY. ACCORDING LY, ADDITION MADE IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE IS DELETED. RESPECTI VE GROUND IS ALLOWED. 7. THERE BEING NO DIFFERENCE IN FACTUAL POSITION IN THE IMPUGNED ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE EARLIER DECISION O F THE TRIBUNAL AS REFERRED TO ABOVE, WE DELETE THE ADDITION. THIS GROUND IS ALLOW ED. 8. IN GROUND 5, THE ASSESSEE HAS CHALLENGED THE ADD ITION OF MEMBER LOGIN FEE AS ROYALTY. PERTINENTLY, IDENTICAL ISSUE CAME UP FO R CONSIDERATION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2015-16. WHILE DECIDING THE ISSUE, THE TRIBUNAL DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS:- 30. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUS ED MATERIALS ON RECORD. IT IS OBSERVED THAT THE ASSESSEE MERELY PROVIDES A STANDA RD FACILITY TO THE INDIAN ENTITY WITHOUT GRANTING ANY EXCLUSIVE RIGHT IN RESPECT OF ANY COPY RIGHT, PROCESS, ETC. IT IS FURTHER RELEVANT TO OBSERVE, LEARNED DRP, WHILE DECIDING THE ISSUE H AS CLEARLY AND CATEGORICALLY OBSERVED THAT MEMBER LOGIN SERVICES ARE SIMILARLY TO IDC SER VICES. IF THAT IS THE FACTUAL POSITION, THE MEMBER LOGIN FEE CANNOT BE TREATED AS ROYALTY SINCE , WHILE DECIDING ASSESSEE'S APPEAL CHALLENGING THE TAXABILITY OF FEES RECEIVED TOWARDS IDC SERVICES, THE TRIBUNAL HAS CONSISTENTLY EXPRESSED THE VIEW THAT THE SERVICES C ANNOT BE TREATED AS ROYALTY UNDER THE INDIA-SINGAPORE TAX TREATY. IN AFORESAID VIEW OF TH E MATTER, WE HOLD THAT MEMBER LOGIN FEE IS NOT IN THE NATURE OF ROYALTY UNDER THE TREAT Y PROVISION. ACCORDINGLY, ADDITION IS DELETED. THIS GROUND IS ALLOWED. 9. THERE BEING NO DIFFERENCE IN FACTUAL POSITION IN THE IMPUGNED ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE EARLIER DECISION O F THE TRIBUNAL AS REFERRED TO ABOVE, WE DELETE THE ADDITION. THIS GROUND IS ALLOW ED. 10. GROUNDS 1, 2 AND 6 BEING GENERAL GROUNDS, ARE D ISMISSED. 11. IN THE RESULT, APPEAL IS ALLOWED, AS INDICATED ABOVE. 9 ITA 6267/MUM/2019 ORDER PRONOUNCED ON 22/09/2021. SD/- SD/- (RAJESH KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 22/09/2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI