DDIT (IT) 3(2), MUMBAI V. E- BAY INTERNATIONAL AG, MUMBAI

ITA 699/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8101 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 08-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-01-2013
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHOUHAN
• Assessee Lawyers: M P LOHIA NIKHIL TIWARI
• Keywords: Double taxation relief; Permanent establishment

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHAKTIJIT DEY (JM) I.T.A. NO. 699 /MUM/ 2013 (ASSESSMENT YEAR 20 08 - 09 ) I.T.A. NO. 700/MUM/2013 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 4622/MUM/2014 (ASSESSMENT YEAR 2010 - 11) DDIT (IT) 3(2) 1 ST FLOOR SCIENDIA HOUSE BALLARD PIER N.M. ROAD MUMBAI - 400 038. VS. M/S. E - BAY INTERNATIONAL AG C/O. S.R. BATLIBOI & CO. 18 TH FLOOR, EXPRESS TOWERS NARIMAN POINT MUMBAI - 400 021. ( APPELLANT ) ( RESPONDENT ) PAN NO . AABCE43271L ASSES SEE BY S/SHRI M.P. LOHIA, NIKHIL TIWARI & JIGNESH SHAH DEPARTMENT BY SHRI JASBIR CHOUHAN DATE OF HEARING 8 .3 . 201 7 DATE OF PRONOUNCEMENT 8 .3 . 201 7 O R D E R PER B ENCH : - THE REVENUE HAS FILED THESE APPEALS CHALLENGING THE ORDERS PASSED B Y THE LEARNED CIT(A) - 10, MUMBAI AND THEY RELATE TO A.Y. 200 8 - 0 9 TO 2010 - 11. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTICAL IN NATURE , THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. GROUND S OF APPEAL AS WELL ADDITIONAL GROUNDS OF APPEAL FILED BY THE REVENUE GIVE RISE TO FOLLOWING ISSUES: - A) WHETHER THE REVENUE EARNED BY THE ASSESSEE ON PROVIDING ONLINE PLATFORM FOR FACILITATING PURCHASE AND SALE OF GOODS AND SERVICES M/S. E - BAY INTERNATIONAL AG 2 CAN BE CONSIDERED AS FEES FOR TECHNICAL SERVICES CAN BE CONSIDERED AS FEE FOR TECHNICAL SERVICES WITHIN THE MEANING OF SECTION 9(1)(VII) OF THE ACT . WHETHER THE ASSESSEE IS HAVING BUSINESS CONNECTION WITHIN THE MEANING OF SECTION 9(1)(I) OF THE ACT AND ACCORDINGLY WHETHER INCO ME ACCRUES IN INDIA. B) W HETHER THE DEPENDENT AGENT OF THE ASSESSEE CONSTITUTE PERMANENT ESTABLISHMENT OF THE ASSESSEE AND CONSEQUENTLY THE REVENUE EARNED BY THE ASSESSEE CAN BE TAXED AS BUSINESS PROFIT IN TERMS OF ARTICLE 7 OF THE INDIA - SWITZERLAND DTAA, IF THE REVENUE IS NOT CONSIDERED AS FEES FOR TECHNICAL SERVICES. 3. WE HAVE HEARD THE P ARTIES AND PERUSED THE RECORD. T HE ASSESSEE IS RESIDENT OF SWITZ ERLAND AND IS ENGAGED IN THE BUSINESS OF OPERATING WEBSITE S , WHICH PROVIDE ONLINE PLATFORM FOR FACILIT ATING PURCHASE AND SALE OF PRODUCTS WORLDWIDE. DURING THE YEARS UNDER CONSIDERATION THE ASSESSEE HAS OPERATED IN ITS INDIA SPECIFIC WEBSITES , VIZ., WWW.EBAY.IN AND WWW.B2MOTORS.E BAY.IN AND THEY PROVIDE D ONLINE PLATFORM FOR FACILITATING PURCHASE AND SALE OF GOODS AND SERVICES TO USE RS BASED IN INDIA. FURTHER THE ASSESSEE HAS ENTERED IN TO MARKING SUPPORT AGREEMENT S WITH TWO OF ITS SUBSIDIARY COMPANIES , VIZ., M/S. E - BAY INDIA PRIVAT E LIMITED AND M/S. E - BAY MOTORS PRIVATE LIMITED. THESE WEBSITES WERE OPERATED FROM SERVER S LOCATED OUTSIDE INDIA. THE MODUS OPERANDI OF ITS OPERATION WAS THAT IT SIGNS AGREEMENT WITH THE INDIAN CUSTOMERS, WHO WISH TO LIST THEIR PRODUCTS AND SERVICES ON THE IR WEBSITES. FOR LISTING THE PRODUCTS AT PROMINENT PLACES, THE ASSESSEE CHARGED A LISTING FEE. BESIDES THE ABOVE, AS AND WHEN TRANSACTION OF SALE WA S SUCCESSFU LLY COMPLETED, TRANSACTION FEE WA S ALSO CHARGED BY THE ASSESSEE FROM THE SELLER. NO FEE IS CHARG ED FROM THE BUYERS OF THE PRODUCTS/SERVICES. THE AGREEMENT FOR PURCHASE AND SALE OF GOODS IS ENTERED DIRECTLY BETWEEN THE BUYER AND SELLER OF THE PRODUCTS/SERVICES, I.E. THE ASSESSEE NEVER ACQUIRED ANY RIGHT OR PROPERTY IN THE GOODS SOLD. 4. THE ASSESSEE HAS ALSO ENTERED INTO A MARKETING SUPPORT AGREEMENT WITH TWO COMPANIES STATED ABOVE FOR FACILITATING ONLINE PURCHASE AND SALE OF PRODUCTS OR SERVICES. THE AO TOOK THE VIEW THAT THE ASSESSEE HAS BUSINESS CONNECTION IN INDIA IN TERMS OF SEC. 9(1)(I) OF THE ACT AND ACCORDINGLY TOOK THE M/S. E - BAY INTERNATIONAL AG 3 VIEW THAT THE REVENUE GENERATED BY THE ASSESSEE HAS ACCRUED IN INDIA. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT THE SAID REVENUE FALLS IN THE CATEGORY OF FEE FOR TECHNICAL SERVICES WITHIN THE MEANING OF SEC. 9(1)(VII) OF THE ACT AND ACCORDINGLY ASSESSED THE REVENUE GENERATED BY THE ASSESSEE FROM LISTING AS WELL AS SERVICE CHARGES EARNED ON COMPLETION OF TRANSACTION AS FEES FOR TECHNICAL SERVICES IN ALL THE THREE YEARS UNDER CONSIDERATION . THE ASSESSEE CHALLENGED THE SAM E BY FOLLOWING THE APPEALS BEFORE THE LEARNED CIT(A). 5. THE FIRST APPELLATE AUTHORITY NOTICED THAT AN IDENTICAL ISSUE WAS EXAMINED BY THE ITAT IN ASSESSEES OWN CASE IN ITA NO. 6784/MUM/2010 DATED 21.9.2012 RELATING TO A.Y. 2006 - 07, WHEREIN THE TRIBUNA L HAD HELD THAT THE REVENUE EARNED BY THE ASSESSEE FORM SPECIFIC INDIAN WEBSITES ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND HENCE NOT TAXABLE IN INDIA. THE LEARNED CIT(A) FOLLOWED THE SAID DECISION AND ACCORDINGLY REVERSED THE ORDER PASSED BY THE ASSESSING OFFICER. THE LEARNED CIT(A) ALSO NOTICED THAT WHILE DISPOSING OF THE APPEAL FOR A.Y. 2006 - 07, THE THEN THE LEARNED CIT(A) HAD TAKEN THE VIEW THAT THE ASSESSEE IS HAVING PERMANENT ESTABLISHMENT IN THE FORM DEPENDENT AGENT PERMANENT ESTABLI SHMENT IN INDIA AND HENCE THE REVENUE EARNED BY THE ASSESSEE IS TAXABLE AS BUSINESS PROFIT. THE LEARNED CIT(A) NOTICED THAT THE SAID ISSUE WAS ALSO EXAMINED BY THE TRIBUNAL IN A.Y. 2006 - 07 REFERRED ABOVE AND HAS HELD THAT THE AGENTS , VIZ., M/S . E - BAY INDI A PRIVATE LIMITED AND M/S. E - BAY MOTORS PRIVATE LIMITED DO NOT CONSTITUTE A PERMANENT ESTABLISHMENT IN INDIA. ACCORDINGLY, THE TRIBUNAL HAD HELD THAT NO PROFITS CAN BE COMPUTED IN TERMS OF ARTICLE 7 OF INDIA - SWITZERLAND DTAA IN RESPECT OF REVENUE GENERATED BY THE ASSESSEE FROM INDIA. THE LD CIT(A) FOLLOWED THE ORDER OF THE TRIBUNAL IN RESPECT OF ABOVE SAID ISSUE ALSO AND A CCORDINGLY ALLOWED THE APPEAL OF THE ASSESSEE IN ALL THE THREE YEARS UNDER CONSIDERATION AND THE REVENUE HAS CHALLENGED HIS ORDER S ON BO TH THE GROUNDS STATED ABOVE. THE LD A.R SUBMITTED THAT THE REVENUE HAS RAISED THE ISSUE OF FEE FOR TECHNICAL SERVICES BY WAY OF ADDITIONAL GROUND ONLY IN AY 2008 - 09 AND 2009 - 10 AND NO ADDITIONAL GROUND WAS RAISED ON THAT ISSUE IN AY 2010 - 11. M/S. E - BAY INTERNATIONAL AG 4 6. THE LEAR NED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE WRITTEN SUB MISSIONS FURNISHED BY HIM AND CONTENDED THAT IN TERMS OF SECTION 9(1)(VII) OF THE ACT, THE SERVICES RENDERED BY THE ASSESSEE WOULD FALL IN THE CATEGORY OF FEES FOR TECHNICAL SERVICES. IN T HE ALTERNATIVE, LEARNED DR SUBMITTED THAT THE TWO MARKETING AGENTS OF THE ASSESSEE CONSTITUTE DEPENDENT AGENTS PERMANENT ESTABLISHMENT OF THE ASSESSEE AND HENCE THE REVENUE GENERATED BY THE ASSESSEE SHOULD BE ASSESSED AS BUSINESS PROFIT IN TERMS OF ARTICLE 7 OF INDIA - SWITZERLAND DTAA. 7. ON THE CONTRARY, LEARNED AR SUBMITTED THAT THERE IS NO CHANGE OF FACTS BETWEEN A.Y. 2006 - 07 AND THREE YEARS U NDER CONSIDERATION. THE LEARNED AR FURTHER SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS EXAMINED THE A PPLICABILITY OF THE PROVISION OF SECTION 9(1)(VII) OF THE ACT TO THE TRANSACTION OF THE ASSESSEE IN A DETAILED MANNER AND HAS GIVEN A CATEGORICAL FINDING THAT THE REVENUE GENERATED BY THE ASSESSEE CAN NOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES. WITH R EGARD TO THE ISSUE OF PERMANENT ESTABLISHMENT ALSO , THE LD A.R SAID THAT THE TRIBUNAL HAS EXAMINED THE FACTS AVAILABLE IN THIS CASE IN A DETAILED MANNER AND HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA. HE SUBMITTED THAT THE AO HAS ADMITTED IN THE REMAND REPORT FURNISHED TO LD CIT(A) IN AY 2006 - 07 THAT THE PROVISIONS OF INDIA - SWITZERLAND DTAA SHALL APPLY TO THE FACTS OF INSTANT CASE. ACCORDINGLY THE TRIBUNAL HAS EXAMINED TWO ALTERNATIVE CONTENTIONS OF TH E ASSESSEE IN TERMS OF DTAA. 8. WE NOTICED THAT THE COORDINATE BENCH HAS EXAMINED THE NATURE OF TRANSACTION VIS - - VIS THE TERMS TECHNICAL SERVICES, CONSULTANCY SERVICES AND FEES FOR TECHNICAL SERVICES IN AY 2006 - 07 (REFERRED SUPRA) IN PARA 9 TO 11 O F ITS ORDER AND FINALLY CAME TO THE CONCLUSION THAT FEES RECEIVED BY THE ASSESSEE CANT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES. SINCE, THE LEARNED CIT(A) HAS FOLLOWED THE DECISION GIVEN BY THE COORDINATE BENCH ON THIS ISSUE, WHICH HAVE BEEN GIVEN UN DER IDENTICAL SET OF FACTS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THIS DECISION. M/S. E - BAY INTERNATIONAL AG 5 9. WITH REGARD TO THE EXISTENCE OF THE PERMANENT ESTABLISHMENT ALSO , WE NOTICE THE COORDINATE BENCH HAS GIVEN A CATEGORICAL FINDING IN AY 2006 - 07 AFTER EXAMINING THE ART ICLE 5(2)A), ARTICLE 5(5) & 5(6) OF DTAA THAT THE TWO SUBSIDIARY COMPANIES M/S. E - BAY INDIA PRIVATE LIMITED AND M/S. E - BAY MOTORS PRIVATE LIMITED ARE DEPENDENT AGENTS OF THE ASSESSEE BUT DO NOT CONSTITUTE DEPENDENT AGENTS OF THE PERMANENT ESTABLISHMENT OF THE ASSESSEE IN TERMS OF ARTICLE 5 OF THE DTAA. ACCORDINGLY, THE TRIBUNAL HAS HELD THAT THE QUESTION OF COMPUTING BUSINESS PROFIT OF THE ASSESSEE AS PER ARTICLE 7 OF DTAA DOES NOT ARISE , SINCE THE ASSESSEE HAS NO PE AS PER ARTICLE 5 OF THE DTAA. WE NOTICED THAT THE LEARNED CIT(A) HAS FOLLOWED THE DECISION OF THE COORDINATE BENCH ON THIS ISSUE ALSO AND HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER PASSED ON THIS ISSUE. 10. IN THE RESULT, ALL THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 8 .3. 201 7. SD/ - SD/ - (SHAKTIJIT DEY ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 08 / 3 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI