GARTNER IRELAND LTD, MUMBAI V. ASST CIT (IT) 3(1), MUMBAI

ITA 7101/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4004 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 18-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR
• Keywords: Double taxation relief; Permanent establishment
• Section: 143(3); 2

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI .. , ! ' , # !, $ BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ITA NO.7101/MUM/2010 : ASST.YEAR 2007-2008 M/S.GARTNER IRELAND LIMITED C/O.B.S.R & CO. LODHA EXCELUS, 1 ST FLOOR APOLLO MILLS COMPOUND M.N.JOSHI MARG, MAHALAXMI MUMBAI 400 011. PAN : AACCG2919B. THE ASSTT.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) RANGE 3(1) MUMBAI. ( %& / // / APPELLANT) ( ( ( ( / VS. ( )*%&/ RESPONDENT) %& + ++ + , , , , / APPELLANT BY : SHRI FARROKH IRANI )*%& + , + , + , + , / RESPONDENT BY : SHRI NARENDER KUMAR ( + - / / / / DATE OF HEARING : 18.07.2013 ./0 + - / DATE OF PRONOUNCEMENT : 24.07.2013 !1 !1 !1 !1 / / / / O R D E R PER R.S.SYAL ( AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER (AO) ON 05.08.2010 U/S 143(3) REA D WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER A LSO CALLED `THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2007-2008. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSISTANT DIRECTOR OF INCOME-TAX (IT) 3(1) HAS ERRED IN TREATING AND THE HONBLE DISPUTE RESOLUTIO N PANEL HAS FURTHER ERRED IN CONFIRMING THE ENTIRE PAYMENTS RECEIVED BY THE APPELLANT FROM CUSTOMERS I N INDIA DURING THE CAPTIONED YEAR ARE TAXABLE AS ROY ALTY ITA NO.7101/MUM/2010. M/S.GARTNER IRELAND LIMITED. 2 UNDER SECTION 9(1)(VI) OF THE INCOME-TAX ACT, 1961 AND ARTICLE 12 OF INDIA IRELAND DOUBLE TAXATION AVOID ANCE AGREEMENT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A COMPANY INCORPORATED AND TAX RESIDENT OF REPUBLIC O F IRELAND. IT IS ENGAGED IN THE BUSINESS OF DISTRIBUTING GARTNER GRO UPS RESEARCH PRODUCTS IN THE FORM OF SUBSCRIPTIONS, BOTH IN IREL AND AND THROUGH ITS DISTRIBUTORS, IN THOSE TERRITORIES WHERE THE GARTNE R GROUP DOES NOT HAVE A LOCAL PRESENCE. THE SUBSCRIPTION RESEARCH P RODUCTS CONSIST OF QUALITATIVE RESEARCH AND ANALYSIS THAT CLARIFIES DE CISION MAKING FOR INFORMATION TECHNOLOGY BUYERS, USERS AND VENDORS. T HE ASSESSEE SELLS SUBSCRIPTION TO ITS INDIAN CUSTOMERS / SUBSCR IBERS BY PROVIDING THEM ACCESS TO ITS PRODUCTS OVER THE INTERNET FROM ITS DATA SERVER WHICH IS LOCATED OUTSIDE INDIA. THE INDIAN SUBSCRIB ERS PAY THE SUBSCRIPTION / ACCESS FEE TO THE ASSESSEE. DURING T HE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSEE RECEIVED A SUM OF ` 5.90 CRORE FROM INDIAN CUSTOMERS AS GROSS SUBSCRIPTION FEE WHICH WAS CLAIMED TO BE NOT TAXABL E IN INDIA BECAUSE OF THE ABSENCE OF ANY PERMANENT ESTABLISHMENT IN IN DIA. THE ASSESSING OFFICER HELD THE AMOUNT TO BE IN THE NATU RE OF ROYALTY AS PER ARTICLE 12 OF DOUBLE TAXATION AVOIDANCE AGREEME NT BETWEEN INDIA AND IRELAND (HEREINAFTER CALLED THE `DTAA) R EAD WITH SECTION 9(1)(VI) OF THE ACT. THE ASSESSEE REMAINED UNSUCCES SFUL BEFORE THE DISPUTE RESOLUTION PENAL (DRP) ALSO, WHO ECHOED THE VIEW TAKEN BY THE ASSESSING OFFICER IN THE DRAFT ORDER. IN THE FI NAL ORDER PASSED BY THE A.O., THE SAID AMOUNT OF ` 5.90 CRORE WAS SUBJECTED TO TAX BOTH AS ITA NO.7101/MUM/2010. M/S.GARTNER IRELAND LIMITED. 3 PER SECTION 9(1)(IV) AND THE DTAA. THE ASSESSEE IS IN APPEAL ON THIS ISSUE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. AT THE VERY OUTSET, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE JUDGMENT OF THE HONBL E KARNATAKA HIGH COURT IN THE CASE OF CIT (IT) V. WIPRO LIMITED [(2011) 203 TAXMAN 621 (KAR.)] AND SUBMITTED THAT WIPRO LIMITED, A CUSTOMER OF TH E PRESENT ASSESSEE MADE PAYMENT WITHOUT DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. WHEN THE MATTER FINALLY CAME UP BEF ORE THE HONBLE KARNATAKA HIGH COURT, IT WAS HELD THAT THE PAYMENT S MADE BY WIPRO LIMITED TO GARTNER FOR ONLINE USE OF DATABASE WAS F OR LICENCE TO USE SAID DATABASE AND HENCE THE CONSIDERATION WAS ROYAL TY, LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. 5. THE LEARNED AR COUNTERED THE SUBMISSIONS ADVANCED ON BEHALF OF THE REVENUE BY STATING THAT THE ISSUE AS TO WHE THER THE PAYMENT SHOULD BE CONSIDERED AS `ROYALTY OR `BUSINESS PROF ITS IS NOT FREE FROM DOUBT IN VIEW OF THE CONFLICTING JUDGMENTS RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF WIPRO LIMITED (S UPRA) AND THE HONBLE DELHI HIGH COURT IN THE CASE OF ERICSSON A.B. [(2012) 204 TAXMAN 192 (DEL.)] . IT WAS SUBMITTED THAT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DDIT (IT) V. M/S. SOLID WORKS CORPORATION [ITA NO.3219/MUM/2010] VIDE ITS ORDER DATED 08.01.2012 CONSIDERED BOTH THE JUDGMENTS AND THEREAFTER TOOK A VIEW IN FA VOUR OF THE ASSESSEE BY HOLDING THAT THE AMOUNT WAS IN THE NATU RE OF `BUSINESS ITA NO.7101/MUM/2010. M/S.GARTNER IRELAND LIMITED. 4 PROFITS AND NOT `ROYALTY. THE SAID DECISION OF TH E MUMBAI BENCH WAS SUBSEQUENTLY FOLLOWED BY THE MUMBAI BENCH IN AN OTHER CASE AND THE PUNE BENCH OF THE TRIBUNAL IN ALLIANZ SE V. ADIT (IT) [(2012) 51 SOT 399 (PUNE)] . IN VIEW OF THESE THREE DECISIONS GIVEN BY THE TRIBUNAL IN ASSESSEES FAVOUR, THE LEARNED AR CONTE NDED THAT THE VIEW TAKEN IN ASSESSEES FAVOUR SHOULD BE TAKEN. 6. WE ARE NOT CONVINCED WITH THE SUBMISSIONS ADVANCE D ON BEHALF OF THE ASSESSEE FOR THE OBVIOUS REASON THAT THE HON BLE KARNATAKA HIGH COURT CONSIDERED A CASE IN WHICH WIPRO LIMITED MADE PAYMENT TO THE ASSESSEE AND THE SAME HAS BEEN HELD TO BE IN THE NATURE OF `ROYALTY, LIABLE FOR DEDUCTION OF TAX AT SOURCE U/ S 195. THE HONBLE HIGH COURT NOTICED IN THE PENULTIMATE PARA OF THE J UDGMENT THAT : THE PAYMENT MADE BY THE RESPONDENT TO M/S.GARTNER, WHICH IS A NON-RESIDENT COMPANY, WOULD AMOUNT TO `ROYALTY AND WHEREFOR, THERE IS A STATUTORY OBLIGATION ON THE PART OF THE RESPONDENT TO MAKE TAX DEDUCTION . WE ARE UNABLE TO SEE AS TO HOW THE CONTRARY VIEW EXPRESSED BY THE TRIBUNAL IN THREE ORDERS CAN BE ADOPTED IN THE CASE OF THE PAYEE-ASSESSEE, WHEN THE HONBLE KARNAT AKA HIGH COURT HAS RENDERED JUDGMENT ON THE VERY SAME TRANSACTION IN THE HANDS OF THE PAYERS. IF THE ARGUMENT TENDERED BY THE LD. AR IS ACCEPTED, IT WOULD AMOUNT TO DELIVERING AN OPINION CONTRARY TO T HAT OF THE HONBLE HIGH COURT, WHICH IS OBVIOUSLY OUT OF QUESTION. WE, THEREFORE, DO NOT FIND ANY SUBSTANCE IN THE ARGUMENTS PUT FORTH B Y THE LD. AR. THE IMPUGNED ORDER IS UPHELD. ITA NO.7101/MUM/2010. M/S.GARTNER IRELAND LIMITED. 5 7. 2 -3 4 25 + 5- 67 IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF JULY, 2013. !1 + ./0 8!(3 / + 9 SD/- SD/- (VIVEK VARMA) (R.S.SYAL) # ! # ! # ! # ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 8!( DATED : 24 TH JULY, 2013. DEVDAS* !1 + )#-:' ;'0- !1 + )#-:' ;'0- !1 + )#-:' ;'0- !1 + )#-:' ;'0-/ COPY OF THE ORDER FORWARDED TO : 1. %& / THE APPELLANT 2. )*%& / THE RESPONDENT. 3. < () / THE CIT, MUMBAI. 4. < / DRP I, MUMBAI 5. '?9 )#-#( , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. !1( !1( !1( !1( / BY ORDER, *'- )#- //TRUE COPY// B B B B/ // /6 5 6 5 6 5 6 5 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI