REUTERS TRANSACTION SERVICES LTD, MUMBAI V. DDIT (IT) 2(1), MUMBAI

ITA 6947/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79448 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 10-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SRIVASTAVA
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Business income; Residential status; Double taxation relief; Deemed to accrue or arise in india; Permanent establishment
• Section: 143(3); 234B; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUM BAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.6947/MUM/2012 ASSESSMENT YEAR: - 2008-09 ITA NO.7211/MUM/2012 ASSESSMENT YEAR: - 2009-10 RE UTERS TRANSACTION SERVICES LTD.C/O BMR & ASSOCIATES LLP 36- B DR RK SHIRODKAR MARG, PAREL-EAST MUMBAI 400 012. VS. THE DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-2(1) 1 ST FLOOR, ROOM NO. 120 SCINDIA HOUSE, BALLARD ESTATE MUMBAI 400 038.``` PAN: - AACR0226Q APPELLANT RESPONDENT ASSESSEE BY MR. P.J PARDIWALLA AND SHRI NISHANT THAKKAR REVENUE BY SHRI AJAY KUMAR SRIVASTAVA ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE ORDER DATED 28.09.2012 OF CIT(A) AND ASSESSMENT ORDER PASSED U/ S 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT IN PURSUANCE TO THE DIRECTIONS O F DRP U/S 144C(5) OF THE ACT FOR A.Y. 2008-09 AND 2009-10 RESPECTIVELY. FOR THE A.Y. 2008-09 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE, REUT ERS TRANSACTION SERVICES LIMITED (THE 'APPELLANT') RESPECTFULLY SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ['LD CIT (A)'] HAS: DATE OF HEARING 12.06.2014 DATE OF PRONOUNCEMENT 18 .07 .2014 REUTERS TRANSACTION SERVICES 2 | P A G E 1. FAILED TO COMPREHEND THE FACTS OF THE CASE AND E RRED IN LAW AND IN FACTS IN, DISREGARDING THE CONTRACTUAL ARRANGEMENT BETWEEN THE APPELLANT, ITS CUSTOMERS AND REUTERS INDIA PRIVATE LIMITED ('RIPL') AND HOLDING THAT: A. THE CONTRACTUAL ARRANGEMENT LACKS COMMERCIAL SUB STANCE AND IS ILLUSIONARY AND IS A CAMOUFLAGE ENTERED INTO TO AVO ID PAYMENT OF LEGITIMATE TAXES; B. THE CORPORATE VEIL OF RIPL, A SEPARATE LEGAL EN TITY, BE LIFTED; AND C. THE EQUIPMENT INSTALLED AT THE PREMISES OF THE CUSTOMER OF APPELLANT IS PROVIDED BY THE APPELLANT AND NOT RIPL ; 2. FAILED TO COMPREHEND THE FACTS AND HAS ERRED IN LAW AND IN FACTS IN PRESUMING CERTAIN FACTS LISTED IN ANNEXURE 1; 3. ERRED IN LAW AND IN FACTS IN HOLDING THAT THE AP PELLANT HAS PROVIDED EQUIPMENT AND RELATED SERVICES INCLUDING C ONNECTIVITY, NETWORK ACCESS, MAINTENANCE, UPDATES AND TRAINING T O THE CUSTOMERS THROUGH RIPL AND IN HOLDING THAT THE REVENUE RECEIV ED BY APPELLANT IS FOR USE OF EQUIPMENT AND IS IN THE NATURE OF ROYALT Y INCOME UNDER ARTICLE 13(3)(B) OF THE DOUBLE TAXATION AVOIDANCE A GREEMENT BETWEEN INDIA AND THE UNITED KINGDOM ('INDIA-UK DTAA') AND UNDER CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 9(1 )(VI) OF THE INCOME-TAX ACT, 1961 ('THE ACT'); 4. ERRED IN LAW AND IN FACTS IN HOLDING THAT THE DE ALING MATCHING SERVICE PROVIDED BY THE APPELLANT TO ITS CUSTOMERS ENTAILS MATCHING OF BIDS IN A 'SECRET ENVIRONMENT' AND IN HOLDING THAT THE REVENUE RECEIVED BY THE APPELLANT IS FOR USE OF SECRET PROC ESS AND IS IN THE NATURE OF ROYALTY INCOME UNDER ARTICLE 13(3)(A) OF THE INDIA-UK DT AA AND UNDER CLAUSE (II) OF EXPLANATION 2 TO SECTION 9 ( 1 )(VI) OF THE ACT; 5. ERRED IN LAW AND IN FACTS IN HOLDING THAT PROVIS IONS OF DEALING MATCHING SERVICES ENTAILS PROVISION OF COMMERCIAL I NFORMATION TO THE CUSTOMERS OF THE APPELLANT FOR COMMERCIAL EXPLOITAT ION AND IN HOLDING THAT THE REVENUE RECEIVED BY THE APPELLANT IS FOR U SE OF COMMERCIAL INFORMATION AND IS IN THE NATURE OF ROYALTY INCOME UNDER ARTICLE 13(3)(A) OF THE INDIA-UK DTAA AND UNDER CLAUSE (IV) OF EXPLANATION TO SECTION 9(1 )(VI) OF THE ACT; 6. ERRED IN LAW AND IN FACTS IN HOLDING THAT THE D EALING MATCHING SERVICES PROVIDED BY THE APPELLANT IS ANCILLARY AND SUBSIDIARY TO THE ALLEGED PROVISION OF EQUIPMENTS AND COMMERCIAL INFO RMATION TO THE CUSTOMERS BY THE APPELLANT AND IS IN THE NATURE OF FEES FOR TECHNICAL SERVICES ('FTS') UNDER ARTICLE 13(4)(A) AND 13(4)(B ) OF INDIA-UK DTAA; REUTERS TRANSACTION SERVICES 3 | P A G E 7. ERRED IN LAW AND IN FACTS IN DISREGARDING THE AP PELLANT'S CONTENTION THAT THE DEALING MATCHING SERVICES PROVIDED BY THE APPELLANT DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE AND HOLDING THAT THE APPELLANT HAS PROVIDED TECHNICAL SERVICES TO THE CU STOMERS THROUGH RIPL AND IN CONCLUDING THAT THE PROVISIONS OF ARTIC LE 13(4)(C) OF THE INDIA-UK DTAA ARE NOT OPERATIVE; 8. WITHOUT PREJUDICE TO GROUNDS 1 TO 7 ABOVE, THE L D CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT ADJUDICATING ON ALL THE GROUNDS RAISED BY THE APPELLANT BEFORE THE LD CIT (A) ESPECIALLY DISM ISSING THE APPELLANT'S CLAIM OF CHARACTERISINQ THE INCOME AS B USINESS INCOME. FOR THE ASSESSMENT YEAR 2009-10 THE ASSESSEE HAS RA ISED FOLLOWING GROUNDS:- A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED MEMBERS OF THE DISPUTE RESOLUTION PANEL ('DRP') ERR ED IN DIRECTING THE LEARNED DEPUTY DIRECTOR OF INCOME TAX (INTERNATIONA L TAXATION), RANGE - 2(1), MUMBAI ('LD ASSESSING OFFICER') TO PROCEED ON THE LINES PROPOSED IN THE DRAFT ASSESSMENT ORDER, ON THE PREMISE THAT THE ISS UES RAISED ARE SIMILAR TO ISSUES INVOLVED IN THE EARLIER ASSESSMENT YEARS AND THE MATTER IS SUB- JUDICE. B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED MEMBERS OF THE DRP ERRED IN CONFIRMING THE DRAFT ASSESSMENT PROPOSED BY THE LD ASSESSING OFFICER AND IN DIRECTING THE LD ASSESSING OFFICER TO CONCLUDE THE ASSESSMENT ON THE FOLLOWING GROUNDS: 1. THAT THE SUBSCRIPTION REVENUE RECEIVED BY REUTER S TRANSACTION SERVICES LIMITED (,THE APPELLANT') IS IN THE NATURE OF 'ROYALTY' UNDER ARTICLE 13(3) OF THE DOUBLE TAXATION AVOIDANCE AGRE EMENT BETWEEN INDIA AND UNITED KINGDOM ('DTAA') AND UNDER SECTION 9(1)(VI) OF THE INCOME-TAX ACT, 1961 (,THE ACT'): 2. THAT THE SUBSCRIPTION REVENUE RECEIVED BY THE AP PELLANT IS IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES' ('FTS') UND ER ARTICLE 13(4)(C) OF THE DTAA AND UNDER SECTION 9(1)(VII) OF THE ACT; 3. THAT REUTERS INDIA PRIVATE LIMITED ('RIPL') IS A N 'AGENT' OF THE APPELLANT AND THAT RIPL CONSTITUTES A DEPENDENT AGE NT PERMANENT ESTABLISHMENT ('DAPE') OF THE APPELLANT IN INDIA UN DER ARTICLE 5(4) OF THE DTAA; 4. THAT THE SERVER OF THE APPELLANT LOCATED IN GENE VA EXTENDS TO THE EQUIPMENT PROVIDED BY RIPL TO THE SUBSCRIBERS OF TH E APPELLANT AND REUTERS TRANSACTION SERVICES 4 | P A G E HENCE THE SERVER LOCATED AT GENEVA CONSTITUTES A PE RMANENT ESTABLISHMENT ('PE') OF THE APPELLANT UNDER ARTICLE 5(1) OF THE DTAA; 5. THAT THE LD ASSESSING OFFICER MAY PLACE RELIANCE ON THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION'S ('ASIC') MA RKET ASSESSMENT REPORT ISSUED IN 2005, ON THE ACTIVITIES OF THE APP ELLANT IN AUSTRALIA TO CONCLUDE THAT THE APPELLANT CONTROLS THE NETWORK THROUGH WHICH SERVICES ARE PROVIDED TO IT SUBSCRIBERS IN INDIA; 6. THAT SECTION 44D READ WITH SECTION 115A OF THE A CT IS APPLICABLE TO THE APPELLANT WITHOUT APPRECIATING THE SUBMISSIONS MADE BY THE APPELLANT; 7. THAT INTEREST UNDER SECTION 234B OF THE ACT MAY BE LEVIED ON THE APPELLANT, AS THERE IS NO VARIATION IN THE TOTAL IN COME OF THE APPELLANT; C. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD ASSESSING OFFICER HAS ERRED IN FACTS AND IN LAW IN: 1. HOLDING THAT THE SUBSCRIPTION REVENUE RECEIVED B Y THE APPELLANT FROM ITS SUBSCRIBERS IN INDIA ARE TOWARDS THE USE O F EQUIPMENTS AND PROCESS AND HENCE IN THE NATURE OF 'ROYALTY' INCOME CHARGEABLE TO TAX IN INDIA UNDER SECTION 9(1 )(VI) OF THE ACT AND ART ICLE 13(3) OF THE DTAA; 2. HOLDING THAT THE SUBSCRIPTION REVENUE RECEIVED B Y THE APPELLANT FROM ITS SUBSCRIBERS IN INDIA ARE IN THE NATURE OF FTS CHARGEABLE TO TAX IN INDIA UNDER SECTION 9(1 )(VII) OF THE ACT AN D ARTICLE 13(4)(C) OF THE DTAA; 3. RELYING ON THE COMMUNICATION OBTAINED FROM STAND ARD CHARTERED BANK DURING THE ASSESSMENT PROCEEDINGS FOR AY 2005- 06 AND APPLYING THE SAME TO THE CURRENT YEAR AND HOLDING T HAT THE SERVER OF THE APPELLANT LOCATED IN GENEVA EXTENDS TO THE EQUI PMENT PROVIDED BY RIPL TO THE SUBSCRIBERS OF THE APPELLANT IN INDI A AND HENCE, THE SERVER LOCATED IN GENEVA CONSTITUTES A PE OF THE AP PELLANT IN INDIA UNDER ARTICLE 5(1) OF THE DTAA; 4. FOLLOWING THE ASSESSMENT ORDER OF THE PREVIOUS A SSESSMENT YEARS AND IN PLACING RELIANCE ON THE ASIC MARKET ASSESSME NT REPORT REUTERS TRANSACTION SERVICES 5 | P A G E ISSUED IN 2005 ON THE ACTIVITIES OF THE APPELLANT I N AUSTRALIA AND APPLYING THE OBSERVATIONS OF THE ASIC TO THE APPELL ANT'S CASE IN INDIA; 5. OBSERVING THAT RIPL IS AN 'AGENT' OF THE APPELLA NT IN INDIA AND THE APPELLANT IS DEPENDENT ON RIPL AND HENCE RIPL CONST ITUTES A DEPENDANT AGENT PE OF THE APPELLANT IN INDIA; 6. OBSERVING THAT SERVICES ARE SUPPLIED BY THE APPE LLANT TO ITS SUBSCRIBERS IN INDIA AND HENCE THE REVENUE RECEIVED BY THE APPELLANT FROM ITS SUBSCRIBERS ACCRUE AND ARISE IN INDIA; 7. WITHOUT PREJUDICE TO THE ABOVE, THE LD ASSESSING OFFICER ERRED IN LAW AND IN FACTS IN COMPUTING THE INCOME CHARGEABLE TO TAX IN INDIA OF THE APPELLANT AT 20 PERCENT OF THE GROSS REVENUE OF RS 65,228,026 AS BEING PROFITS ATTRIBUTABLE TO THE PE OF THE APPE LLANT IN INDIA AND IGNORING THE PRINCIPLES LAID DOWN BY THE HONOURABLE SUPREME COURT IN THE CASE OF DIT V MORGAN STANLEY (SUPRA); 8. LEVYING INTEREST UNDER SECTION 234B OF THE ACT; 2. SINCE COMMON ISSUES ARE RAISED IN BOTH THE APPEA LS, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD TO GETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER:- 3. THE ASSESSEE, M/S REUTERS TRANSACTION SERVICES L IMITED IS A COMPANY INCORPORATED UNDER THE LAWS OF ENGLAND AND IS A TAX RESIDENT OF UNITED KINGDOM. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDI NG REUTERS DEALING 2000-2 AND DEALING 3000 WHICH ARE ELECTRONIC DEAL MATCHING SY STEMS ENABLING AUTHORIZED DEALERS IN FOREIGN EXCHANGE SUCH AS BANKS, ETC TO E FFECT DEALS IN SPOT FOREIGN EXCHANGE WITH OTHER FOREIGN EXCHANGE DEALERS. THE M AIN SERVER OF THE ASSESSEE IS LOCATED IN GENEVA AND THE ASSESSEE HAS EXECUTED A D EALING SERVICES MARKETING AGREEMENT WITH M/S. REUTERS INDIA PVT. LTD (RIPL) WHEREBY RIPL WILL MARKET THE SERVICES OF THE ASSESSEE TO THE SUBSCRIBERS IN INDI A. DURING THE FINANCIAL YEAR ENDED 31 ST MARCH 2008, THE ASSESSEE EARNED REVENUE OF RS. 5,4 2,34,380/- AND FOR THE F.Y. ENDED ON 31 ST MARCH 2009, THE ASSESSEE EARNED REVENUE OF RS. 6,52,28,026/- FROM ITS CUSTOMERS IN INDIA. THE ASSE SSEE CLAIMED THAT THE REVENUE EARNED BY THE ASSESSEE FROM ITS SUBSCRIBERS IN IND IA ARE IN THE NATURE OF BUSINESS PROFIT AND AS PER ARTICLE -7 OF THE INDIA- UK DTAA, BUSINESS PROFITS OF THE REUTERS TRANSACTION SERVICES 6 | P A G E ASSESSEE ARE TAXABLE IN INDIA ONLY IF IT HAS A PERM ANENT ESTABLISHMENT (PE) IN INDIA TO THE EXTENT THE PROFITS ARE ATTRIBUTABLE T O THE PE IN INDIA. THE ASSESSEE CLAIMED THAT FOR THE A.YS UNDER CONSIDERATION, THE ASSESSEE DID NOT HAVE PE IN INDIA AS CONTEMPLATED UNDER ARTICLE-5 OF THE TREATY . THUS THE ASSESSEE CLAIMED THAT ITS REVENUE FROM THE INDIAN SUBSCRIBERS ARE NO T LIABLE TO TAX IN INDIA IN TERMS OF PROVISIONS OF DTAA. THE ASSESSEE HAS ALSO CLAIME D THAT THE REVENUE EARNED BY THE ASSESSEE ARE NOT IN THE NATURE OF ROYALTY OR FE E FOR TECHNICAL SERVICES AND ACCORDINGLY NOT LIABLE TO TAX UNDER ARTICLE -13 OF DTAA. 4. THE ASSESSING OFFICER NOTED THAT IN ORDER TO REC EIVE THE SERVICES OF THE ASSESSEE, THE SUBSCRIBERS IN INDIA HAVE ENTERED INT O TWO AGREEMENTS NAMELY (I) DOMESTIC SERVICE AGREEMENT WITH THE ASSESSEE FO R PROVIDING THE MATCHING SERVICES, AND (II) ACCESS AGREEMENT WITH M/S REUTERS INDIA PVT. LTD. FOR OBTAINING THE EQUIPMENT TO BE INSTALLED AT THE SUBSCRIBERS PREMI SES. THE ASSESSING OFFICER HAS EXAMINED AND ANALYZED THE TERMS AND CONDITIONS OF THESE AGREEMENTS AS WELL AS THE PROVISIONS OF THE A CT AND DTAA- FOR DETERMINING THE CHARACTER OF THE INCOME RECEIVED BY THE ASSESSE E AS WELL AS THE EXISTENCE OF PE OF ASSESSEE IN INDIA. THE ASSESSING OFFICER HAS HELD THAT THE REVENUE RECEIVED BY THE ASSESSEE DURING THESE YEARS IS IN THE NATURE OF ROYALTY AS WELL AS FEE FOR TECHNICAL SERVICES(FTS) WHICH IS SUBJECTED TO TAX I N INDIA UNDER THE PROVISIONS OF INCOME TAX ACT AS WELL AS DTAA. ALTERNATIVELY THE A SSESSING OFFICER HAS ALSO HELD THAT EVEN IF THE BUSINESS PROFITS OF THE ASSESSEE I S TAXABLE IN INDIA BECAUSE THE RIPL CONSTITUTES AN AGENCY PE OF THE ASSESSEE AS W ELL AS THE ASSESSEE IS HAVING EQUIPMENT IN INDIA WHICH CONSTITUTES A FIXED BASE P E. 5. FOR THE A.Y. 2008-09, THE ASSESSEE FILED AN APPE AL BEFORE THE CIT(A), CHALLENGING THE ACTION OF THE ASSESSING OFFICER. CI T(A) HELD THAT THE SERVICE CHARGES RECEIVED BY THE ASSESSEE FROM THE INDIAN SU BSCRIBERS IS TAXABLE AS ROYALTY AND FEE FOR TECHNICAL SERVICES UNDER THE AC T AS WELL AS UNDER ARTICLE-13 REUTERS TRANSACTION SERVICES 7 | P A G E CLAUSE 4(A) AND 4(B) OF THE DTAA. THE CIT(A) WAS OF THE VIEW THAT THE CLAUSE 4(C) OF ARTICLE -13 OF THE U.K TREATY HAS NO APPLICATION IN THIS CASE AS WAS HELD BY THE ASSESSING OFFICER. SINCE THE CIT(A) HAS HELD THAT T HE INCOME OF THE ASSESSEE IS TAXABLE AS ROYALTY AND FTS, THEREFORE, THE CIT(A) D ID NOT GO INTO THE ISSUE THAT THE ASSESSEE HAS PE IN INDIA AND TAXABILITY OF THE BUSI NESS INCOME. ACCORDINGLY, THE CIT(A) HAS HELD THAT THE ROYALTY AND FEE FOR TECHNI CAL SERVICES IS TAXABLE ON GROSS BASIS IN CASE OF NON RESIDENT AND THE ASSESSING OFF ICER HAS TAXED THE SAME ON THE GROSS BASIS, AND THE PROVISIONS OF SECTION 44D ARE IRRELEVANT FOR THIS PURPOSE. 6. BEFORE US, MR. P.J PARDIWALLA, LD. SR. COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE SERVICE IS OPERATED AND PROVIDED BY THE GE NEVA BRANCH OF THE ASSESSEE. THE SERVER WHICH FACILITATES THE MEETING PLATFORM O F THE SUBSCRIBERS WHO DEALS IN THE SPOT FOREIGN EXCHANGE WITH OTHER FOREIGN EXCHAN GE DEALERS IS NOT SITUATED IN INDIA AND, THEREFORE, THE SERVICE CHARGES RECEIVED BY THE ASSESSEE FROM THE INDIAN SUBSCRIBERS IS NOT FOR USE OF ANY EQUIPMENT IN INDI A. HE HAS FURTHER SUBMITTED THAT RIPL IS PROVIDING THE EQUIPMENT BEING COMPUTER HARDWARE AND INSTALLED THE SAME AT THE LOCATION OF THE INDIAN SUBSCRIBERS TOGE THER WITH THE ACCESS/CONNECTIVITY THROUGH LEASED CONNECTION LINES FROM INDIAN SERVICE PROVIDER SUCH AS MTNL, BSNL ETC. BEYOND INDIA THE CONNECTIVI TY IS PROVIDED BY THE ASSESSEE DIRECTLY. THE ACTUAL CHARGES FOR THE CONNE CTIVITY ARE PAID BY THE CUSTOMERS SEPARATELY TO RIPL. RIPL IS MAINTAINING T HE CONNECTIVITY THROUGH THE LICENSE SERVICE PROVIDER AND THE CUSTOMER HAS NO RO LE IN MAINTAINING AND OBTAINING THE CONNECTIVITY. THE CUSTOMER WHO DEALS IN FOREIGN EXCHANGE PLACES ITS BID THROUGH PLATFORM/INTERFACE AND ONCE THE BID OF THE CUSTOMER MATCHES WITH THE BID OF THE ANOTHER CUSTOMER, THE DEAL IS STRUCK AND IT IS BINDING ON BOTH THE CUSTOMERS. THIS MATCHING FACILITY IS PROVIDED THROU GH THE SERVER OF THE ASSESSEE IN GENEVA. THE LD. COUNSEL HAS SUBMITTED THAT THE C USTOMERS DO NOT HAVE ANY USE OR RIGHT TO USE ANY OF THE COPY RIGHTS OR SOFTW ARE OF THE ASSESSEE WHICH ENABLES THE SUBSCRIBERS TO MATCH THE FOREX DEALS. T HUS THE SUBSCRIBERS ARE NOT EXPLOITING THE COPYRIGHT SUBSISTING IN THE PRODUCT S SUBSCRIBED BY THEM. THE FACILITY IS COPY RIGHTED SOFTWARE OF THE ASSESSEE. FURTHER THE PROCESS USED IN REUTERS TRANSACTION SERVICES 8 | P A G E PROVIDING THE FACILITY IS NOT SECRET BUT IT IS A ST ANDARD FACILITY PROVIDED TO THE SUBSCRIBER. THERE IS NO USE OF ANY INFORMATION CONC ERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCES INVOLVING THE TRANSFER OF KNOW HOW PROVIDED TO THE SUBSCRIBERS. THE LD. COUNSEL HAS POINTED OUT THAT T HE CIT(A) HAS PLACED RELIANCE ON THE RULING OF AAR IN THE CASE OF GROUPE INDUST RIEL MARCEL DASSAULT WHICH HAS BEEN OVERRULED BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH REPORTED IN 354 ITR 316(AP). THE LD. SR. COUNSEL HAS CONTENDED THAT RE UTERS INDIA SHALL SUPPLY THE EQUIPMENTS AS WELL AS CONNECTIVITY THROUGH LEASED C IRCUIT SERVICES TO THE CLIENTS. THE NECESSARY EQUIPMENTS WITH ACCESS TO DEALING 200 0-02 SYSTEM HAS BEEN PROVIDED BY THE LOCAL CONCERN WITH WHOM THE ASSESSE E IS HAVING A SEPARATE AGREEMENT FOR MAKING THE PROVISIONS OF INSTALLATION OF EQUIPMENTS AND CONNECTIVITY. THE CLIENTS SHALL PAY ALL THE CHARGES FOR INSTALLATION, TELECOMMUNICATION CHARGES INCLUDING RENTALS FOR LIN ES TO RIPL APART FROM THE MONTHLY PAYMENT TO ASSESSEE FOR THE SERVICES. THE A SSESSEE IN TURN PAY THE RIPL UK 1,000 PER CUSTOMER PER MONTH FOR PROVIDING MARK ETING AND SUPPORT SERVICES TO THE ASSESSEE IN INDIA. LD. COUNSEL HAS REFERRED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUN ICATIONS CO. LTD (332 ITR 340) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT WHEN THE EFFECTIVE AND GENERAL CONTROL OF THE EQUIPMENT IS NOT GIVEN TO T HE CUSTOMERS AND THE CUSTOMER HAS NO CHOICE OF SELECTING THE MANNER, TIME AND NAT URE OF USE AND ENJOYMENT, THEN IT IS NOT A TRANSFER OF RIGHT TO USE THE EQUIP MENT AND, THEREFORE THE AMOUNT IN QUESTION IS NOT ROYALTY EITHER UNDER THE PROVISI ONS OF SECTION 9(1)(VI) OR AS PER THE PROVISIONS OF TREATY. THE HONBLE DELHI HIGH CO URT HAS EXAMINED THE PROVISIONS OF SECTION 9(1)(VI) AND PARTICULARLY EXP LANATION 2 PROVIDING DEFINITION OF ROYALTY AND HELD THAT WHEN THE SATELLITE REMAINS IN THE CONTROL OF OPERATOR, IT HAD NOT LEASED OUT THE EQUIPMENTS TO THE CUSTOMERS. THE HONBLE HIGH COURT HAS ACCEPTED THE ARGUMENTS OF THE APPELLANT THAT THE EQ UIPMENT IS USED BY THE APPELLANT AND IT IS ONLY PROVIDING AND RENDERING SE RVICES TO ITS CUSTOMERS AND NOT ALLOWING THE CUSTOMER TO USE THE PROCESS. REUTERS TRANSACTION SERVICES 9 | P A G E 7. RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), THE L D. COUNSEL HAS SUBMITTED THAT WHEN THE SERVER REMAINS IN THE CONTROL OF THE ASSES SEE AND ONLY SERVICES ARE PROVIDED TO THE CUSTOMERS THEN THE PAYMENT AGAINST SUCH SERVICES CANNOT BE HELD AS ROYALTY. AS REGARDS PROVIDING THE BROAD BAND FAC ILITY FOR CONNECTIVITY TO DEALING 2000-02, THE LD. COUNSEL HAS SUBMITTED THAT THE HON BLE HIGH COURT HAS CONSIDERED THE RULING OF AAR IN CASE OF ISRO AND HE LD THAT THE APPELLANT HAD MERELY GIVEN ACCESS TO A BROADBAND AVAILABLE IN A T RANSPONDER WHICH COULD BE UTILIZED FOR THE PURPOSE OF TRANSMITTING THE SIGNAL S OF THE CUSTOMERS AND, THEREFORE THE DATA SENT BY THE TELECAST OPERATOR DO ES NOT UNDERGO ANY CHANGE OR IMPROVEMENT THROUGH THE MEDIA OF TRANSPONDER. LD. C OUNSEL HAS SUBMITTED THAT THE SERVICES PROVIDED BY THE ASSESSEE IS ONLY IN TH E NATURE OF DATA PROCESSING FOR FACILITATING THE MATCH OF THE ORDERS PLACED BY ONE CLIENT WITH THE AVAILABILITY OF THE COMMODITY FROM OTHER SIDE. THEREFORE, THE PAYMENT M ADE BY THE CLIENTS TO THE ASSESSEE IS ONLY FOR AVAILING THE SERVICE OF DATA P ROCESSING AND NOT FOR USE OF ANY SPECIALIZED SOFTWARE. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CAE OF KOTAK MAHINDRA PRIMU S LTD. VS. DEPUTY DIRECTOR OF INCOME TAX. HE HAS ALSO RELIED UPON THE FOLLOWING D ECISIONS:- 1. ISRO SATELLITE CENTRE (ISAC), IN RE (307 ITR 59) 2. CABLE & WIRELESS NETWORKS INDIA (P) LTD., ( 315 ITR 72) 3. DELL INTERNATIONAL SERVICES INDIA P. LTD. IN RE (305 ITR 37) 8. THE LD. COUNSEL HAS POINTED OUT THAT AFTER DECID ING THE ISSUE OF ROYALTY AND FEE FOR TECHNICAL SERVICES, THE CIT(A) HAS NOT GONE INTO THE ISSUE OF PERMANENT ESTABLISHMENT. FURTHER THE CIT(A) HAS HELD THAT THE AMOUNT IS TAXABLE AS FEE FOR TECHNICAL SERVICES UNDER ARTICLE -13 CLAUSE 4(A) AN D CLAUSE 4(B) OF THE TREATY AND, THEREFORE, IN VIEW OF THE CIT(A), CLAUSE 4(C) OF AR TICLE -13 OF THE INDO-UK TREATY HAS NO APPLICATION IN THIS CASE. THE LD. COUNSEL HAS SU BMITTED THAT IF THE AMOUNT RECEIVED IS TREATED AS FEE FOR TECHNICAL SERVICES U NDER CLAUSE 4(A) AND 4(B) OF ARTICLE 13 THEN THE SAME IS TAXABLE AT 15% OF THE GROSS AMOUNT OF SUCH ROYALTY OR FEE FOR TECHNICAL SERVICES WHEREAS THE CIT(A) HA S CONFIRMED THE 20% OF TAXABILITY OF THE ROYALTY ON GROSS BASIS. THE LD. C OUNSEL THEN SUBMITTED THAT REUTERS TRANSACTION SERVICES 10 | P A G E THOUGH THE CIT(A) HAS NOT DISCUSSED THE ISSUE OF P E, HOWEVER IN CASE RIPL CONSTITUTES A PE OF ASSESSEE IN INDIA THEN AS PER T HE PROVISIONS OF CLAUSE 6 OF ARTICLE - 13 SUCH ROYALTY OR FTS HAS TO BE TAXED AS PER THE PROVISIONS OF ARTICLE 7 AS BUSINEESS PROFITS AND IT WILL NOT BE SUBJECTED TO TAX UNDER THE PROVISIONS OF ARTICLE 13 (2). IN SUPPORT OF HIS CONTENTION HE H AS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF NIPPON KAIJI KYOKOI VS . INCOME-TAX OFFICER, INTERNATIONAL TAXATION, ( 47 SOT 41). THE LD. COUNS EL THEN SUBMITTED THAT IF THE AMOUNT IN QUESTION HAS TO BE ASSESSED TO TAX AS PER ARTICLE 7 OF INDO-UK DTAA THEN IT HAS TO BE TAXED UNDER THE PROVISIONS OF SEC TION 44DA AND NOT U/S 44D AS HELD BY THE ASSESSING OFFICER AND CIT(A). THE PAYM ENT IN QUESTION IS NOT FOR USE OF ANY EQUIPMENT BUT ONLY FOR THE SERVICES PROVIDED BY THE ASSESSEE USING ITS OWN EQUIPMENTS. THE CUSTOMER HAS NO DOMINION OR CONTROL OVER THE SERVER SITUATED IN GENEVA RATHER THE ASSESSEE IS USING THE SERVER FOR RENDERING THE SERVICES TO THE CUSTOMERS. 9. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE SERVICES ARE PROVIDED IN INDIA AND AT THE DOORSTEP OF THE CLIENTS. HE HAS REFERRED THE TRADING SERVICE ORDER FORM AND SUBMITTED THAT THE EQUIPMENTS ARE SU PPLIED BY THE ASSESSEE THROUGH ITS INDIAN CONCERN. THE AGREEMENT ENTERED I NTO BY THE REUTERS INDIA PVT. LTD. (RIPL) ALSO INCLUDES ALL TERMS AND CONDITIONS CONTAINED IN THE REUTERS TRADING SERVICE AGREEMENT. SUPPLY OF EQUIPMENTS IS ONLY SUBSEQUENT TO THE ASSESSEES TRADING SERVICE AGREEMENT AND ALL OTHER AGREEMENTS ARE ESSENCE OF THE UMBRELLA AGREEMENT AND, THEREFORE THE SERVICES PROV IDED THROUGH A GROUP ENTITY ARE NOT AN INDEPENDENT ACTIVITY BUT PART AND PARCEL OF THE SERVICES PROVIDED BY THE ASSESSEE TO ITS CLIENTS. HE HAS REFERRED THE DE FINITION CLAUSE OF THE AGREEMENT AND SUBMITTED THAT ENTIRE SERVICE IS PROVIDED BY RT SL THOUGH THE EQUIPMENTS WERE ARRANGED THROUGH ITS INDIAN GROUP COMPANY. RE UTER TRADING AGREEMENT IS THE MASTER AGREEMENT AND THE SERVICES PROVIDED BY T HE INDIAN SUBSIDIARY TO THE CLIENTS ARE SUBJECTED TO THE MASTER AGREEMENT NAMEL Y REUTER TRADING AGREEMENT. THUS THE REUTERS SERVICE AGREEMENT ENTERED INTO BET WEEN THE RIPL AND THE INDIAN BANKS IS NOT AN INDEPENDENT AGREEMENT BUT IT IS A PART AND PARCEL OF THE REUTERS TRANSACTION SERVICES 11 | P A G E MASTER AGREEMENT UNDER WHICH THE PRINCIPLES ARE DEF INED AND APPLICABLE TO THIS AGREEMENT. THE TERMINATION OF AGREEMENT BETWEEN RI PL AND THE INDIAN BANKS IS ALSO PROVIDED ON BREACH OF THE TERM OF REUTERS BUSI NESS PRINCIPLES. HE HAS REFERRED CLAUSE 8 OF AGREEMENT OF REUTERS SERVICE C ONTRACT BETWEEN RIPL AND INDIAN BANKS AND SUBMITTED THAT THE REUTERS BUSINES S PRINCIPLES AND ANY ORDER FORM ARE AN INTEGRAL PART OF THE AGREEMENT. THUS TH E LD. DR HAS SUBMITTED THAT THIS AGREEMENT IS NOT AN INDEPENDENT AGREEMENT BUT IS AN INTEGRAL PART OF REUTERS BUSINESS PRINCIPLES AND ORDER FORM AS CONTAINED IN THE MASTER AGREEMENT. THE ACTIVITY PERFORMED BY THE RIPL ARE INSEPARABLE FROM THE SERVICES PROVIDED BY THE ASSESSEE. THE EQUIPMENTS AND OTHER INSTALLATION PRO VIDED THROUGH RIPL WERE ON BEHALF OF THE ASSESSEE. NO CHARGES FOR USE OF EQUIP MENTS IS TO BE PAID BY THE CLIENTS TO RIPL EXCEPT THE ACTUAL USES OF THE COMMU NICATION FACILITY. THE LD. DR HAS SUBMITTED THAT THE PAYMENT HAS BEEN MADE BY THE INDIAN CLIENTS FOR USE AND RIGHT TO USE THE EQUIPMENT COMPRISING THE COMPUTER AND COMMUNICATION AND CONNECTION PROVIDED AS WELL AS THE INFORMATION AND SOFTWARE PROVIDED BY THE ASSESSEE FROM ITS SERVER. HE HAS REFERRED CLAUSE 8 OF THE RTS AGREEMENT AND SUBMITTED THAT THE ASSESSEE IS PROVIDING SOFTWARE A ND LICENSE TO THE INDIAN CLIENTS TO USE THE SOFTWARE TO INSTALL AND USE THE SOFTWARE AT THE SITE SOLELY IN THE ORDINARY COURSE OF BUSINESS AND FURTHER WITH THE PR IOR WRITTEN CONSENT, THE INDIAN SUBSCRIBER MAY SUBLICENSE ITS LICENSE TO USE DEVE LOPMENT TOOLS TO A DEVELOPER FOR THE SOLE PURPOSE OF CARRYING OUT THE DEVELOPMENT WO RK. THE SERVICES PROVIDED BY THE ASSESSEE IN THE NATURE OF SUBSCRIBER INTERFACE AND SUBSCRIBER DETAIL IS ALSO AVAILABLE IN CLAUSE 9 OF THE RTS AGREEMENT. IT IS A N INTERACTIVE SERVICE AND NOT ONE TIME AGREEMENT. THE LD. DR HAS REFERRED THE DEFINIT ION OF SOFTWARE UNDER EXPLANATION 2 OF SECTION 9(1)(VI) OF THE ACT AND SU BMITTED THAT THE SERVICES PROVIDED BY THE ASSESSEE IS A DESIGN INVOLVING THE TECHNOLOGY TO DELIVER THE SERVICE TO THE SUBSCRIBER THROUGH SCIENTIFIC EQUIPMENTS/COM MERCIAL EQUIPMENTS. SCIENTIFIC AND COMMERCIAL EQUIPMENT ARE USED FOR PR OVIDING COMMERCIAL INFORMATION. SUBSCRIBERS IN TURN USE THE SERVICES T O MANIPULATE AND CREATE DRIVEN DATA AND INFORMATION FOR THEIR INDIVIDUAL USE. THE SERVICES RECEIVED BY THE CLIENTS ARE MANIPULATED INFORMATION WHICH INVOLVES THE PROC ESSING, THEREFORE, IT IS ALSO A REUTERS TRANSACTION SERVICES 12 | P A G E BUSINESS SUPPORT SERVICE. HE HAS RELIED UPON THE D ECISION OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF VERIZON COMMUNICATIONS SIN GAPORE PTE LTD. (361 ITR 575) AS WELL AS IN THE CASE OF POOMPUHAR SHIPPING C ORPORATION LTD. (360 ITR 257). THE LD. DR HAS ALSO RELIED UPON THE DECISION OF HYDERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF FRONTLINE SOFT LTD VS. DCIT (12 DTR (HYD.) (TRIB) 131) AND SUBMITTED THAT THE HONBLE MADRAS HIGH COURT HAS CO NSIDERED THE AMENDMENT IN SECTION 9(1)(VI) WHEREBY EXPLANATION 4 AND 6 HAS BE EN INSERTED AND HELD THAT THE EXPRESSION USE OR RIGHT TO USE HAS TO BE UNDERS TOOD IN THE LIGHT OF THE MEANING OF TERM ROYALTY PROVIDED IN EXPLANATION 5 AND, TH EREFORE, WHEN THE SERVICES ARE RENDERED IN INDIA AND CONSIDERATION RECEIVED FROM I NDIAN CLIENTS THE SAME ATTRACTS INCIDENTS OF TAXATION IN INDIA AS ROYALTY. THE POSSESSION, CONTROL OF SUCH RIGHT PURPORTED OR INFORMATION USED DIRECTLY BY THE PAYER AND LOCATION OF THE RIGHT ARE NOT RELEVANT IN DECIDING THE CHARACTER OF PAYME NT AS ROYALTY AFTER INSERTION OF EXPLANATION 5 TO SECTION 9(1)(VI). THE LD. DR HAS A LSO RELIED UPON THE RULING OF AAR IN THE CASE OF CARGO COMMUNITY NETWORK (P.) LTD ., IN RE (289 ITR 355) AND SUBMITTED THAT IT HAS BEEN HELD THAT ROYALTY MEANS A CONSIDERATION PAID FOR THE USE OR RIGHT TO USE THE EQUIPMENT SIMPLICITOR IS SU FFICIENT BEING CALLED AS ROYALTY. THE AUTHORITY HAS DISCUSSED THE TERM PLANT WHICH WOULD INCLUDE ANY ARTICLE OR OBJECT FIXED OR MOVABLE, LIVE OR DEAD USED BY BUSIN ESSMEN FOR CARRYING ON HIS BUSINESS AND IT IS NOT NECESSARY TO CONFINED TO AN APPARATUS WHICH IS USED FOR MECHANICAL AND INDUSTRIAL BUSINESS. THE AAR HAS HEL D THAT THE WORD EQUIPMENT CONSTRUED IN THE LIGHT OF SECTION 9(1)(VI) (C) THUS EXPAND THE NORMAL MEANING OF WORD TO COVER EVEN THIS SPECIFIED CATEGORIES OF MAC HINERY OR PLANT THAT WOULD NOT CONSTITUTE WITHIN ITS PLAIN AND ORDINARY MEANING. T HE LD. DR THEN RELIED UPON THE DECISION OF THIS TRIBUNAL DATED 28.03.2014 IN THE C ASE OF VIACOM 18 MEDIA PVT. LTD. VS. ACIT IN ITA NO. 1584/MUM/2010 AND SUBMITTE D THAT THE TRIBUNAL AFTER CONSIDERING THE AMENDED PROVISIONS OF SECTION 9(1)( VI) HELD THAT THE TRANSMISSION OF SATELLITE INCLUDING UPLINKING, AMPLIFICATION, CO NVERSION FOR DOWNLINKING OF ANY SIGNAL) FALLS UNDER THE EXPRESSION PROCESS. THE L D. DR HAS SUBMITTED THAT THE TRIBUNAL WHILE DECIDING THE ISSUE OF ROYALTY HAS AL SO CONSIDERED THE DECISIONS, REUTERS TRANSACTION SERVICES 13 | P A G E RELIED UPON BY THE LD. COUNSEL, IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD AS WELL AS OTHER CASES. 10. IN REBUTTAL, THE LD. COUNSEL HAS SUBMITTED THAT EXPLANATION 5 OF SECTION 9(1)(VI) HAS EXPANDED THE DEFINITION OF ROYALTY WHI CH IS NOT PARI MATERIA WITH THE DEFINITION PROVIDED UNDER ARTICLE 13(3) OF THE I NDO-U.K TREATY. HE HAS THUS SUBMITTED THAT A UNILATERAL AMENDMENT IN THE ACT, C ANNOT TAKE AWAY THE BENEFIT PROVIDED UNDER THE TREATY WHEN THE DEFINITION OF RO YALTY HAS BEEN PROVIDED UNDER THE TREATY. IN SUPPORT OF HIS CONTENTION HE HAS REL IED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SI EMENS AKTIONGESELLSCHAFT (310 ITR 320) AS WELL AS THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS. NOKIA NETWORKS OY ( 212 TAXMAN 68) (DEL). THE LD. COUNSEL HAS ALSO RELIED UPON THE DECISION OF THIS T RIBUNAL IN THE CASE OF WNS NORTH AMERICA INC. VS. ADIT (INTL. TAXATION) 28 TAX MANN.COM 173 (MUMBAI) AND SUBMITTED THAT IT HAS BEEN HELD THAT ANY RETROSPECT IVE AMENDMENT TO THE PROVISIONS OF ACT WILL NOT PER SE HAVE THE EFFECT OF AUTOMATICALLY ALTERING THE ANALOGOUS PROVISIONS OF THE TREATY. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS ENTERED INTO A CONTRACT W ITH INDIAN CLIENTS FOR PROVIDING ITS FOREIGN EXCHANGE DEAL MATCHING SYSTEM SERVICES NAMELY DEALING 2000-02. THE CLIENTS OF THE ASSESSEE ARE MAINLY INDIAN BANKS. TH E SERVICES ARE PROVIDED AGAINST THE MONTHLY CHARGES AS PER THE AGREEMENT. IN ORDER TO PROVIDE THE SERVICE AND ACCESS TO THE FOREIGN EXCHANGE DEAL MATCHING SYSTEM , THE ASSESSEE HAS ALSO ENTERED INTO AGREEMENTS WITH ITS INDIAN SUBSIDIARY NAMELY REUTERS INDIA PVT. LTD IN SHORT (RIPL). THE SAID AGREEMENTS ARE CALLED AS PROMOTION SERVICE AGREEMENT AS WELL AS ADVERTISING AND MARKETING SERVICE AGREEMENT BOTH DATED 20.11.2006. THE TERMS AND CONDITIONS OF THE SERVICES PROVIDED TO TH E INDIAN SUBSCRIBERS ARE STIPULATED IN THE REUTERS TRADING SERVICE AGREEMENT (IN SHORT RTS AGREEMENT). THE AGREEMENTS ARE EXECUTED IN ACCORDANCE WITH THE REUTERS BUSINESS PRINCIPLES REDUCED IN WRITING BEING PART AND PARCEL OF THE RTS AGREEMENT. THE RIPL IN TURN REUTERS TRANSACTION SERVICES 14 | P A G E ALSO ENTERED INTO REUTERS SERVICE CONTRACT WITH THE INDIAN CLIENTS FOR PROVIDING THE NECESSARY EQUIPMENTS, CONNECTION FACILITY, INST ALLATION AND SUPPORT SERVICE IN ORDER TO AVAIL THE FOREIGN EXCHANGE DEAL MATCHING S YSTEM PROVIDED BY THE ASSESSEE. THUS THE INDIAN CLIENTS COULD AVAIL THE S ERVICES OF THE ASSESSEE ONLY THROUGH THE EQUIPMENTS AND CONNECTIVITY PROVIDED BY THE ASSESSEE ITSELF THROUGH ITS INDIAN SUBSIDIARY NAMELY RIPL. THE FEE FOR PROV IDING THE SERVICES IS CHARGED BY THE ASSESSEE FROM THE INDIAN SUBSCRIBERS AND ACTUAL USES OF TELECOMMUNICATION ARE PAID TO THE RIPL. THE ASSESSEE IS REMUNERATING THE RIPL FOR THE SERVICES OF MARKETING AND INSTALLATION OF THE EQUIPMENT ON BEHA LF OF THE ASSESSEE TO ITS CLIENTS. THUS THOUGH THE EQUIPMENTS AND OTHER INSTA LLATION AND CONNECTIVITY ARE INSTALLED AND PROVIDED THROUGH RIPL BUT THE CHARGES FOR THE ENTIRE SERVICES AND FACILITY ARE PAID BY THE CLIENTS TO THE ASSESSEE A ND NOT TO THE RIPL. THE LD. COUNSEL HAS ALSO SUBMITTED THAT IT IS AN INTEGRATED SERVICE RENDERED TO THE CLIENTS FROM ITS SERVER SITUATED IN GENEVA, THEREFORE, THER E IS NO CONTROL OR POSSESSION OF THE INDIAN CLIENTS TO USE OR RIGHT TO USE THE SERVE R OF THE ASSESSEE SITUATED OUTSIDE INDIA. IT IS ALSO CONTENDED THAT THE ASSESSEE IS RE NDERING THE SERVICES TO THE INDIAN CLIENTS BY USING ITS OWN SERVER SITUATED IN GENEVA AND, THEREFORE, IN VIEW OF THE DECISION OF HONBLE HIGH COURT OF DELHI IN T HE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), THE CHARGE/FEE RECEIVED BY THE ASSESSEE IN RENDERING THE SERVICES IS NOT ROYALTY. HE HAS ALSO STRONGLY RELIED UPON THE DECISION OF HONBLD ANDHRA PRADESH HIGH COURT IN THE CASE O F SANOFI PASTEUR HOLDING SA (354 ITR 316)(SUPRA). 11.1 IT IS PERTINENT TO NOTE THAT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), THE ISSUE FELL FOR CONSIDERATION O F THE HONBLE DELHI HIGH COURT WAS WHETHER RENTAL CHARGES FOR LEASE OF TRANSPONDER CAPACITY TO TV CHANNELS CARRYING OUT OPERATIONS IN INDIA IS THE INCOME DEEM ED TO ACCRUE OR ARISE IN INDIA AND WHETHER SUCH INCOME IS ROYALTY. THE INCOME TO T HE NON RESIDENT WAS FOR LEASING OUT THE TRANSPONDER CAPACITY TO THE NON RES IDENT TV CHANNELS WHO ARE PROVIDING THEIR CHANNEL SERVICES IN INDIA. THE HON BLE HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (SUPRA), AFTER CONSIDERING THE FACT THAT REUTERS TRANSACTION SERVICES 15 | P A G E THE APPELLANT IS A FOREIGN COMPANY INCORPORATED IN HONGKONG AND CARRIED ON BUSINESS OF PROVIDING PRIVATE SATELLITE COMMUNICATI ONS AND BROADCASTING FACILITIES TO THE CLIENTS WITH WHOM THE APPELLANT HAD ENTERED INTO AGREEMENT ARE NOT RESIDENT OF INDIA. THE APPELLANT HAD MERELY GIVEN ACCESS TO A BROADBAND AVAILABLE WITH THE TRANSPONDER WHICH COULD BE UTILIZED FOR TH E PURPOSE OF TRANSMISSION OF SIGNALS TO THE CUSTOMERS. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT THE DATA SENT BY THE TELECAST OPERATOR DOES NOT UNDERGO ANY CHANGE FOR IMPROVEMENT THROUGH THE MEDIA OF TRANSPONDER. SINCE THE TRANSPO NDER WAS IN CONTROL AND USED BY THE APPELLANT/TRANSPONDER OWNER AND IT DOES NOT VEST WITH THE TELECAST OPERATOR/TV CHANNELS, THEREFORE, THE HONBLE HIGH C OURT HAS HELD THAT THE PROCESS CARRIED ON IN THE TRANSPONDER IN RECEIVING SIGNALS AND RETRANSMITTING THE SAME, IS AN INSEPARABLE PART OF THE PROCESS OF THE SATELLITE AND THAT PROCESS IS UTILIZED ONLY BY THE OWNER OF THE TRANSPONDER WHO I S IN CONTROL THEREOF AND, THEREFORE, THERE WAS NO USE OF PROCESS BY THE T.V. CHANNELS. MOREOVER, NO SUCH PURPORTED USE HAS TAKEN PLACE IN INDIA AS BOTH THE ASSESSEE AND THE BROADCASTER/T.V. CHANNELS ARE SITUATED OUTSIDE INDI A. IN THE SAID CASE THE PAYMENT BY THE BROADCASTER/T.V. CHANNELS WERE PAID FOR USING THE TRANSPONDER CAPACITY OF SATELLITE AND NOT FOR USING ANY INFORMA TION OR DATA TO BE PROVIDED TO INDIAN CUSTOMERS. IN THE CASE IN HAND THE ASSESSEE IS RENDERING THE SERVICES OF PROVIDING FOREIGN EXCHANGE DEAL MATCHING SYSTEM. TH IS SYSTEM FACILITATES THE INDIAN SUBSCRIBERS I.E. BANKS TO DEAL IN THE FOREIG N EXCHANGE WITH THE OTHER COUNTERPARTS WHO ARE READY FOR THE TRANSACTION OF P URCHASE AND SALE OF FOREIGN CURRENCY. THUS THE ROLE OF THE DEAL MATCHING SYSTEM IS TO PROVIDE A PLATFORM WHERE BOTH PURCHASER AND SELLER FIND THE RESPECTIVE MATCH FOR THE INTENDED TRANSACTION OF PURCHASE AND SALE. THEREFORE, THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATI ONS CO. LTD (SUPRA), IS NOT APPLICABLE IN THE FACTS OF THE CASE AND PARTICULARL Y WHEN THE SAID DECISION IS BASED ON THE FINDING THAT THE TRANSPONDER CAPACITY HAS ONLY A MEDIA FOR UPLINKING AND DOWNLINKING OF SIGNALS OF THE BROADCASTER AND T V OPERATORS TO BE TRANSMITTED TO THEIR CUSTOMERS WITHOUT ANY MANIPULATION FOR IMP ROVEMENT, WHEREAS IN THE CASE IN HAND, THE ASSESSEE IS PROVIDING NOT ONLY ME DIA BUT ALSO THE NECESSARY REUTERS TRANSACTION SERVICES 16 | P A G E INFORMATION AND DATA WHICH PROCESS THE ORDER OF THE CLIENTS AND FIND THE CORRESPONDING MATCH TO MEET THE ORDER. 12. ONE MORE ASPECT WHICH WAS INVOLVED AND RELEVAN T FOR DECIDING THE ISSUE IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. L TD (SUPRA) WAS THE INCOME DEEMED TO ACCRUE OR ARISE IN INDIA ON ACCOUNT OF LE ASE OF TRANSPONDER CAPACITY TO TV CHANNELS WHICH IS NOT IN DISPUTE IN THE CASE BEF ORE US AS THE INCOME IN QUESTION HAS BEEN RECEIVED BY THE ASSESSEE FROM THE INDIAN CLIENTS. THE LIMITED ISSUE BEFORE US IS THE NATURE OF INCOME WHETHER IT IS BUSINESS INCOME OR ROYALTY OR FEE FOR TECHNICAL SERVICES. THE LD. COUNSEL HAS FOR CEFULLY CONTENDED THAT A UNILATERAL AMENDMENT IN THE ACT WITHOUT A CORRESPON DING CHANGE IN DTAA CANNOT TAKE AWAY THE BENEFIT AVAILABLE IN THE TREATY. THER E IS NO DISPUTE THAT IF A PARTICULAR INCOME IS NOT TAXABLE AS PER THE PROVISI ONS OF DTAA THEN A UNILATERAL AMENDMENT IN THE STATUTE OF THE CONTRACTING STATE A LONE WOULD NOT BRING THE SAID INCOME TO TAX BECAUSE AS PER THE PROVISIONS OF SECT ION 90 OF THE INCOME TAX ACT, THE BENEFICIAL PROVISIONS OF DTAA WILL HAVE THE OVE RRIDING EFFECT TO THE PROVISIONS OF ACT. THUS THE QUESTION ARISES WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE IS ROYALTY OR FTS INCOME UNDER THE PROVISIONS OF DTAA. THE DEFINITION OF ROYALTY AND FEE FOR TECHNICAL SERVICES HAS BEEN PROVIDED UNDER ARTICLE -13(3) AND (4) AS UNDER:- 3 FOR THE PURPOSE OF THIS ARTICLE, THE TERM ROYALTIES MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTI STIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TA PE PR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MOD EL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL COMMERCIAL OR SCIE NTIFIC EQUIPMENT WORK, OTHER THAN INCOME DERIVED BY AN ENTERPRISE O F A CONTRACTING STATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN IN TERNATIONAL TRAFFIC. REUTERS TRANSACTION SERVICES 17 | P A G E 4. FOR THE PURPSOE OF PARAGRAPHE 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM FEES FOR TE CHNICAL SERVICES MEANS PAYMENT OF ANY KIND OF ANY PERSON IN CONSIDER ATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF A TECHNICAL OR OTHER PERSO NNEL) WHICH: (A) ARE ANCILLIARY AND SUBSIDIARY TO THE APPLICATI ON OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED;OR (B) ARE ANCIALLY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECEIVED; OR (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE , SKILL KNOW-HOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 13. THE PAYMENT RECEIVED BY THE ASSESSEE AGAINST TH E SERVICES RENDERED TO THE INDIAN BANKS WHETHER FALLS UNDER THE TERM ROYALTY O R FEE FOR TECHNICAL SERVICES HAS TO BE DECIDED BY CONSIDERING THE DEFINITION AS PROVIDED UNDER THE TREATY AND THE REAL NATURE OF THE SERVICE PROVIDED IN TERMS OF THE VARIOUS CONTRACTS ENTERED INTO BETWEEN THE PARTIES. THE VARIOUS TERMS OF AGRE EMENT ARE DEFINED UNDER CLAUSE 1 OF THE RTS AGREEMENT AND SOME OF THE RELE VANT TERMS ARE DEFINED AS UNDER:- APPLICATION PROGRAMMING INTERFACE(API) MEANS A SUB SCRIBER INTERFACE FOR USE WITH THE RELATED SERVICE; AUTOQUOTE SUBSCRIBER INTERFACE MEANS A SUBSCRIBER INTERFACE FOR USE WITH THE AUTOQUOTE SERVICE SERVICES MEANS THE PRODUCT, MATERIALS OR SERVICES PROVIDED B Y REUTERS TO SUBSCRIBER FROM TIME TO TIME PURUSANT TO THE AGREEMENT SITE MEANS MY LOCATION OF SUBSCRIBER TO WHICH REUTERS SU PPLIES ACCESS TO THE SERVICES DIRECTLY; SOFTWARE MEANS SOFTWARE, INCLUDING APIS AND RELATED DOCUMENT ATION PROVIDED BY REUTERS; SYSTEM REUTERS TRANSACTION SERVICES 18 | P A G E MEANS THE REUTERS EQUIPMENT AND NETWORKS USED FOR T HE PROVISION FOR THE SERVICES: 14. THE ASSESSEE IS FACILITATING ITS CLIENTS TO USE ITS SYSTEM AND APPLICATION PROGRAMMING INTERFACE WHICH IS SUBSCRIBER INTERFACE FOR USE WITH THE RELATED SERVICES INCLUDDING AUTOQUOTE SERVICE. THE ASSESSEE IS ALSO PROVIDING THE EQUIPMENTS WITH PRE-LOADED SOFTWARE TO ITS SUBSCRIB ERS AND NETWORK USED FOR PROVISION OF THE SERVICES. THE ASSESSEE GRANTS SUBS CRIBER LIMITED LICENSE OF SOFTWARE TO INSTALL AND USE AT THE SITE AS PER CLAU SE 8.1 OF THE AGREEMENT AS UNDER:- 8.1 REUTERS GRANTS SUBSCRIBER A NON-EXCLUSIVE, NON -TRANSFERABLE, TERMINABLE LICENSE FOR SO LONG AS SUBSCRIBER RECEIV ES THE SERVICE TO WHICH THE SOFTWARE RELATES, TO INSTALL AND USE THE SOFTWARE AT THE SITE SOLELY IN THE ORDINARY COURSE OF ITS OWN BUSINESS U NLESS OTHERWISE SET FORTH IN THIS AGREEMENT. 15. EVEN THE SAID LICENSE CAN BE SUB-LICENSED BY TH E SUBSCRIBER WITH THE PRIOR CONSENT OF THE ASSESSEE AS PER CLAUSE 9.5 AS UNDER: - 9.5 UPON REUTERS PRIOR WRITTEN CONSENT, SUBSCRIB ER MAY SUBLICENSE ITS LICENSE TO USE DEVELOPMENT TOOLS TO A DEVELOPER FOR THE SOLE PURPOSE OF CARRYING OUT THE DEVELOPMENT WORK DESCRIBED IN CLAU SE 9.2 FOR THE SUBSCRIBER AND ONLY IF SUBSCRIBER ENSURES THAT THE DEVELOPER (A) IS MADE AWARE OF ANY COMPLIES WITH THE PROVISIONS O F THE AGREEMENT. (B) DOES NOT RE-USE IN ANY WAY THE DEVELOPMENT WORK CAR RIED OUT FOR SUBSCRIBER; (C) BECOMES A MAMBER OF REUTERS DEVELOPER PARTNER PROG RAM (OR ANY SUCCESSOR PROGRAM) AND SIGNS THE RETUERS TRADING AP PLICATION PARTNER AGREEMENT (OR ANY SUCCESSOR AGREEMENT). 16. AS PER THE REUTERS LICENSE PRINCIPLES INTERACTI VE FEATURES OF THE SYSTEM INCLUDES MESSAGING, CHATROOM, BULLETIN BOARD OR THO SE THAT ALLOW INTERACTIVITY BETWEEN THE USERS. HARDWARE/SOFTWARE AND RELATED DO CUMENTATION SUPPLIED BY THE ASSESSEES GROUP CONCERN ALSO INCLUDES THE ASSE SSEES APPLICATION PROGRAMMING INTERFACE (API). ALL THE SERVICES ARE R ENDERED BY THE ASSESSEE ON THE REUTERS TRANSACTION SERVICES 19 | P A G E SITE /OFFICE OF THE SUBSCRIBER AS PER THE CLAUSE 2. 1 AND 2.1.1 OF THE BUSINESS PRINCIPLES AS UNDER: 2.1 USAGE RIGHTS FOR INFORMATION WE CLASSIFY SERVICES CONTAINING INFORMATION INTO FA MILIES SHARING COMMON BUSINESS TERMS, AS FOLLOWS 2.1.1 INDIVIDUAL SERVICES (LISTED HERE) INDIVIDUAL SERVICES ARE USER-BASED SERVICES PRICED, POSTITIONED AND PACKAGED FOR USERS. FOR AS LONG AS THEY TAKE THE RE LEVANT SERVICE, USERS CAN: A) VIEW, MANIPULATE AND CREATE DERIVED DATA FRON INFOR MATION FOR THEIR INDIVIDUAL USE: B) STORE INFORMATIION, MANIPULATED INFORMATION AND/OR DERIVED DATA FOR THEIR INDIVIDUAL USE; C) DISTRIBUTE AND REDISTRIBUTE LIMITED EXTRACTS OF INF ORMATION, MANIPULATED INFORMATION AND/OR DERIVED DATA TO ANYO NE, PROVIDED THIS IS DOEN IN A NON SYSTEMATIC MANNER AND (EXCEPT FOR DERIVED DATA) IS ATTRIBUTED TO REUTERS: D) SYSTEMATICALLY DISTRIBUTE INFORMATION AND MANIPULAT ED INFORMATION IF YOU COMPLY WITH PARAGRAPH 2.4; AND E) SYSTEMATICALLY DISTRIBUTE AND REDISTRIBUTE CERTAIN DERIVED DATA IF YOU EITHER (I) PAY THE RELEVANT DERIVED DATE REDISTRIBUTE SERVICE FEES; OR (II) SENT THE RELEVANT DERIVED DATA TO US AS CONTRIBUTED DATA. PROVIDED THAT, IN EACH CASE, YOU PAY ANY RELATED CH ARGES SPECIFIED IN THE CONTRACT AND SUCH REDISTRIBUTION DOES NOT FORM PART OF A SALEABLE PRODUCT. THE RIGHTS IN THE PARAGRAPH 2.1.1(E) ARE G RANTED ONLY IN RESPECT OF SPECIFIED SOURCES OF INFORMATION AND ARE SUBJECT T FURTHER CONDITIONS IMPOSED BY THIRD PARTY PROVIDERS. 17. THEREFORE, THE SUBSCRIBER/USER CAN VIEW, MANIPU LATE AND CREATE THE DERIVED DATA FROM INFORMATION FOR THEIR INDIVIDUAL USE. FUR THER THE SUBSCRIBER CAN STORE INFORMATION, MANIPULATE INFORMATION FOR ITS USE AND ALSO TO DISTRIBUTE OR REDISTRIBUTE INFORMATION AND DRIVE DATA TO ANYONE T O A LIMITED EXTENT SO FAR AS IT IS NOT DONE IN A SYTEMATIC MANNER. THE SUBSCRIBERS ARE ALLOWED TO USE THE INFORMATION AND EVEN TO MANIPULATE AND DRIVE THE D ATA TO ANYONE FOR THEIR INDIVIDUAL USE. THUS IT IS CLEAR FROM THE TERMS AND CONDITIONS OF THE CONTRACT BETWEEN THE PARTIES THAT IT IS SUBSCRIBER WHO IS US ING THE INFORMATION AND SYSTEM OF THE ASSESSEE FOR THEIR COMMERCIAL/BUSINESS PURPO SES. THE INFORMATION IS MADE REUTERS TRANSACTION SERVICES 20 | P A G E AVAILABLE BY THE ASSESSEE THROUGH ITS SYSTEM AND O THER EQUIPMENTS INSTALLED AT THE SITE OF THE SUBSCRIBER TO FACILITAE THE CONNECT IVITY WITH THE ASSESSEES SYSTEM/REUTER LOCATED IN GENEVA. THE PORTAL DESIGN HAVING THE SYSTEM OF MATCHING THE REQUEST OF THE CLIENTS OF THE ASSESSEE IS HOISTED ON ITS SERVER. THE SYSTEM WHICH IS A COMPLEX, COMMERCIAL DEVICE /APPAR ATUS PROVIDES A GATEWAY FOR PROCESSING REQUEST OF THE CLIENTS AND MAKES AVAILAB LE THE MATCHING COUNTER REQUEST AND THEREBY ENSURES THE TRANSACTIONS OF PUR CHASE AND SALE OF FOREIGN EXCHANGE BETWEEN THE TWO COUNTER PARTS OF THE CLIEN TS. THEREFORE, THE PORTAL HAVING SYSTEM OF MATCHING THE REQUEST ALONG WITH TH E COMPUTER AND INTERNAL ACCESS TO THE CLIENTS CONSTITUTE INTEGRATED COMMERC IAL EQUIPMENT WHICH PERFORMS COMPLEX FUNCTIONS OF PROCESSING THE REQUEST, PROVID ING INFORMATION AND FACILITATES THE TRANSACTION OF PURCHASE AND SALE OF FOREIGN EXC HANGE BY MATCHING THE DEMAND AND SUPPLY. THE PLATFORM OF TRANSACTING THE PURCHAS E AND SALE IS COMMERCIAL EQUIPMENT ALLOWED TO BE USED BY CLIENTS/SUBSCRIBERS FOR COMMERCIAL PURPOSES. THE PAYMENTS MADE BY INDIAN CLIENTS/SUBSCRIBERS TO THE ASSESSEE FOR USE AND RIGHT TO USE OF SUCH EQUIPMENT AND INFORMATION FOR PROCESSING THEIR REQUEST OF PURCHASE AND SALE OF FOREIGN EXCHANGE CONSTITUTE RO YALTY. 17.1 THE NATURE OF SERVICE RENDERED BY THE ASSESSEE INCLUDES THE INFORMATION CONCERNING COMMERCIAL USE BY THE SUBSCRIBER. FURTHE R THE ENTIRE SYSTEM OF THE ASSESSEE INCLUDING THE EQUIPMENTS AND CONNECTIVITY FACILITY IS PROVIDED AT THE SITE OF THE SUBSCRIBER. THEREFORE, THE ASSESSEE IS PROVI DING THE SERVICE IN THE FORM OF INFORMATION AND SOLUTION TO THE NEED OF THE SUBSCRI BERS BY PROVIDING THE MATCHING PARTY. THE ENTIRE SYSTEM ALONG WITH THE MA TCHING SYSTEM AND CONNECTIVITY INVOLVES PROCESSING OF SUBSCRIBERS BU SINESS QUERIES AND ORDERS AND FINDING OUT THE MATCHING REPLY IN THE SHAPE OF COUN TERPART DEMAND OR SUPPLY FOR EXECUTION OF THE TRANSACTION OF PURCHASE AND SALE O F FOREIGN EXCHANGE. THIS SYTEM OF THE ASSESSEE IS AVAILABLE ONLY TO THE SUBSCRIBER S WHO HAVE BEEN GIVEN THE ACCESS TO THE INFORMATION CONCERNING COMMERCIAL AS WELL AS PROCESSING THE ORDERS REUTERS TRANSACTION SERVICES 21 | P A G E PLACED BY THE SUBSCRIBERS. IT IS THE TERM OF THE CO NTRACT/AGREEMENT THAT THE SUBSCRIBER IS GIVEN THE LICENSE TO USE THE SOFTWAR E RUNNING THE SYSTEM. 17.2 AS PER THE TERMS AND CONDITIONS STIPULATED IN THE AGREEMENT THE INDIAN CLIENTS/SUBSCRIBERS ACCEPT THE INDIVIDUAL NON-TRANS FERABLE AND NON EXCLUSIVE LICENSE TO USE THE LICENSED SOFTWARE PROGRAMME FOR THE PURPOSE OF CARRYING OUT THE PURCHASE AND SALE OF FOREIGN EXCHANGE. THUS, WH AT IS GRANTED UNDER THE AGREEMENT IS LICENSE TO USE THE SOFTWARE FOR INTERN AL BUSINESS OF INDIAN CLIENTS. FURTHER, THE ASSESSEE ALSO PERMITTED THE INDIAN CLI ENTS TO SUB-LICENSE THE SOFTWARE WITH PRIOR PERMISSION OF ASSESSEE. IT IS P ERTINENT TO NOTE THAT ITS NOT THE LICENSE TO USE THE SOFTWARE ALONE BUT THE ASSESSEE HAS MADE AVAILABLE THE COMPUTER SYSTEM ALONG WITH THE SOFTWARE. THE INDIAN CLIENTS ARE PAYING FOR USE AND RIGHT TO USE OF EQUIPMENT (SCIENTIFIC, COMMERCI AL) ALONG WITH SOFTWARE FOR WHICH LICENSE WAS GRANTED BY ASSESSEE. IT IS CLEAR FROM THE TERMS AND CONDITIONS OF THE AGREEMENT AND ARRANGEMENT BETWEEN PARTIES TH AT THE INDIAN CLIENTS ARE NOT PERMITTED TO ACCESS THE PORTAL OF THE ASSESSEE FROM ANY OTHER COMPUTER SYSTEM OTHER THAN THE COMPUTER PROVIDED BY THE ASSESSEE AN D BY USE OF SOFTWARE PROVIDED IN THE SAID COMPUTER SYSTEM. THEREFORE, IT IS NOT A CASE OF SIMPLICITOR PAYMENT FOR ACCESS TO THE PORTAL BY USE OF NORMAL COMPUTER AND INTERNAL FACILITY BUT THE ACCESS IS GIVEN ONLY BY USE OF COMPUTER SYS TEM AND SOFTWARE SYSTEM PROVIDED BY THE ASSESSEE UNDER LICENSE. INDIAN CLIE NTS MAKE USE OF THE COPYRIGHT SOFTWARE ALONG WITH COMPUTER SYSTEM TO HAVE ACCESS TO THE REQUISITE INFORMATION AND DATA ON THIS PORTAL HOISTING ON THE SERVER OF T HE ASSESSEE . ACCORDINGLY, BY ALLOWING THE USE OF SOFTWARE AND COMPUTER SYSTEM TO HAVE ACCESS TO THE PORTAL OF THE ASSESSEE FOR FINDING RELEVANT INFORMATION AND M ATCHING THEIR REQUEST FOR PURCHASE AND SALE OF FOREIGN EXCHANGE AMOUNT TO IMP ARTING OF INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCI ENTIFIC EQUIPMENT WORK AND PAYMENT MADE IN THIS RESPECT WOULD CONSTITUTE ROYAL TY. REUTERS TRANSACTION SERVICES 22 | P A G E 18. AS WE HAVE GIVEN THE FINDING THAT THE INCOME RE CEIVED BY THE ASSESSEE FROM THE INDIAN BANKS IS IN THE NATURE OF ROYALTY, THERE FORE, THE OTHER ISSUES OF FEE FOR TECHNICAL SERVICES BECOMES ACADEMIC AND WE DO NOT P ROPOSE TO DECIDE THE SAME. FURTHER, THOUGH THE ASSESSEE HAS NOT RAISED ANY SP ECIFIC GROUND ON THE ISSUE OF PE, HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT EVEN IF THE INDIAN SUBSIDIARY OF THE ASSESSEE CONSTITUTE PE OR OTHERWISE THE ASSESSEE HAS PE IN INDIA IN THAT CASE PARA 6 OF ARTICLE 13 OF DTAA WILL APPLY AND THE ROYALTY OR FEE FOR TECHNICAL SERVICES IS ASSESSED TO TAX IN TERMS OF PROVISIONS OF ARTICLE -7 OR ARTICLE -15 OF DTAA. WE DO NOT AGREEWITH THE CONTEN TION OF THE LD. COUNSEL FOR THE ASSESSEE BECAUSE ONCE THE RECEIPT IN QUESTION HAS B EEN DECIDED AS ROYALTY IN NATURE THEN THERE IS NO NEED TO GO INTO THE QUESTIO N OF ASSESSEE HAVING PE IN INDIA. PARA 6 OF ARTICLE-13 CAN BE PRESSED INTO SER VICE ONLY IN THE CASE WHEN THE EXISTENCE OF PE OF A NON RESIDENT IS NOT IN DISPUTE . IN THE CASE IN HAND THE ASSESSEE HAS NOT COME UP WITH THE CLAIM THAT THE SE RVICES RENDERED TO THE INDIAN BANKS ARE THROUGH ITS PE. RATHER THE ASSESSEE HAS V EHEMENTLY CONTENDED THAT IT HAS NO PE IN INDIA. IN THESE FACTS AND CIRCUMSTANCE S, THE PROVISION OF PARA 6 OF ARTICLE -13 CANOT BE INVOKED IN CASE WHEN THE RECEI PT IS FOUND AS ROYALTY IN TERMS OF ARTICLE 13(3) OF THE DTAA AND ASSESSEE HAS NOT ADMITTED ANY PE IN INDIA. 19. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 18-7- 2014. SD/- SD/- (P.M. JAGTAP) (VIJAY PAL RAO) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) MUMBAI DATED 18-7-2014 SKS SR. P.S, AND JV. SR.PS REUTERS TRANSACTION SERVICES 23 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI