SHELL INFORMATION TECHNOLOGY INERNATIONAL BV, MUMBAI V. DCIT (iT) 4(2)(1), MUMBAI

ITA 7428/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3090 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2014-2015
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Business income; Double taxation relief; Advance ruling; Question of law; TDS; Set aside
• Section: 143(3); 234B; 201; 144C; 207; 90

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL I B ENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, JUDICIAL MEMBER ITA NO. 7428/MUM/2017 (ASSESSMENT YEAR 2014-15) M/S SHELL INFORMATION TECHNOLOGY INTERNATIONAL BV, 5 TH FLOOR, LODHA EXCELUS, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAKSHMI, MUMBAI-400011. P AN: AAICS9091A VS. DCIT( INTERNATIONAL TAXATION),-4(2)(1), 17 TH FLOOR, ROOM NO. 1708, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. APPELLANT RESPONDENT APPELLANT BY : SHRI MADHUR AGARWAL (AR) RESPONDENT BY : SHRI V. SREEKAR (CIT-DR) DATE OF HEARING : 05.03.2019 DATE OF PRONOUNCEMEN T : 05.03.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 144C( 13) DATED 30.10.2017 PASSED IN PURSUANCE OF DIRECTION OF DISPUTE RESOLUT ION PANEL (DRP)-II, MUMBAI DATED 20.09.2017 FOR ASSESSMENT YEAR 2014-15 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, S HELL INFORMATION TECHNOLOGY INTERNATIONAL BV (HEREINAFTER REFERRED T O AS 'SITI BV' OR 'THE APPELLANT') CRAVES LEAVE TO PREFER AN APPEAL AGAINS T THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TA XATION), RANGE - 4(2)(1), MUMBAI [HEREINAFTER REFERRED TO AS THE 'LE ARNED AO'] UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 2 REFERRED TO AS THE 'ACT'), IN PURSUANCE OF THE DIRE CTIONS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL-2, (HEREINAFTER REFERRED T O AS THE 'HON'BLE DRP') ON THE FOLLOWING GROUNDS, EACH OF WHICH ARE WITHOUT PR EJUDICE TO ONE ANOTHER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO BASED ON THE DIRECTIONS OF THE HON 'BLE DRP: GENERAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT RS. 1,80, 29,88,734 AS AGAINST RS. NIL TOTAL INCOME OFFERED IN RETURN OF INCOME BY THE APP ELLANT. RECEIPTS TOWARDS ACCESS TO USE SOFTWARE AND IT SUPP ORT SERVICES DOES NOT CONSTITUTE 'INCOME' 2. ERRED IN HOLDING THAT THE PAYMENTS RECEIVED BY T HE APPELLANT CONSTITUTES 'INCOME' WITHOUT APPRECIATING THAT THE APPELLANT WO RKS ONLY ON COST - ONLY ARRANGEMENT AND THE RECEIPTS WERE REIMBURSEMENTS BE ING IN THE NATURE OF COST ALLOCATION WITHOUT MARKUP AND HENCE DOES NOT CONSTI TUTE 'INCOME' UNDER SECTION 2(24) OF THE ACT; RECEIPTS TOWARDS ACCESS TO USE SOFTWARE HELD AS 'RO YALTY' UNDER THE INDIA- NETHERLANDS DTAA 3. ERRED IN CONSTRUING THE PAYMENTS OF RS. 45,19,51 ,365 RECEIVED BY THE APPELLANT FROM KEY APPLICATION SERVICE PROVIDER AND SHELL GROUP ENTITIES FOR ACCESS TO USE COPYRIGHTED SOFTWARE AS ROYALTY TAXAB LE UNDER ARTICLE 12 OF INDIA - NETHERLANDS DOUBLE TAXATION AVOIDANCE AGREEMENT ( 'INDIA - NETHERLANDS DTAA'); 4. FAILED TO APPRECIATE THAT THE PAYMENTS RECEIVED WERE ONLY FOR THE 'USE OF COPYRIGHTED ARTICLE' AS COMPARED TO 'USE OF COPYRIG HT', 'USE OF PROCESS', 'USE OF PROPERTY SIMILAR TO PATENTS, DESIGN, TRADEMARK AND INVENTION', WHICH DOES NOT CONSTITUTE 'ROYALTY' UNDER THE INDIA-NETHERLANDS DT AA; RECEIPTS TOWARDS IT SUPPORT SERVICES HELD AS 'FEES FOR TECHNICAL SERVICES' ('FTS') UNDER THE ACT AS WELL AS INDIA-NE THERLANDS DTAA 5. ERRED IN HOLDING THAT PAYMENTS OF RS. L35,10,37, 369 RECEIVED BY THE APPELLANT FOR IT SUPPORT SERVICES CONSTITUTES 'FTS' UNDER THE PROVISIONS OF THE ACT AND UNDER ARTICLE 12 OF THE INDIA - NETHERLANDS DTAA; 6. FAILED TO APPRECIATE THAT IT SUPPORT SERVICES DO NOT 'MAKE AVAILABLE' ANY TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-BOW OR PROCESSES, ETC. TO THE ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 3 SERVICE RECIPIENT UNDER ARTICLE 12 OF THE INDIA-NET HERLANDS DT AA AND HENCE NOT SUBJECT TO TAX IN INDIA. NON-GRANTING OF CREDIT FOR TAX DEDUCTED AT SOURCE ( TDS) 7. ERRED IN NOT GRANTING THE TDS CREDIT OF RS. 20,0 9,085. INTEREST UNDER SECTION 234B OF THE ACT 8. ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT ALL THE GROUNDS OF APPEAL RAI SED BY ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CAS E FOR RIGHT FROM THE BEGINNING OF ASSESSMENT YEARS 2006-07, 2007-08, 201 0-11, 2011-12, 2012-13 & 2013-14. THE LD. AR OF THE ASSESSEE FURNI SHED THE NARRATION OF GROUNDS OF APPEAL IN A TABULATED CHART AND THE DECI SION OF TRIBUNAL WHEREIN THE GROUNDS OF APPEAL ARE COVERED. 3. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE AFTER GOING THROUGH THE DETAILS FURNISHED IN TABULATED CHART AN D GOING THROUGH THE ORDERS OF TRIBUNAL SUBMITS THAT THE PRINCIPLE OF RE S-JUDICATA IS NOT APPLICABLE ON THE PROCEEDING UNDER THE INCOME-TAX A ND THE ASSESSING OFFICER HAS DECIDED THE ISSUE ON THE BASIS OF MATER IAL AVAILABLE BEFORE HIM. THE LD. DR THUS, RELIED UPON THE ORDER OF LOWE R AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRE SENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOW ER AUTHORITIES AND THE ORDER PASSED BY COORDINATES BENCH OF THE TRIBUNAL I N EARLIER YEARS. GROUND NO.1 IS GENERAL AND DOES NOT NEED ANY SPECIF IC ADJUDICATION. ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 4 5. GROUND NO.2 RELATES TO RECEIPTS TOWARDS ACCESS TO U SE SOFTWARE AND IT SUPPORT SERVICES BEING REIMBURSEMENT OF COST. WE HA VE NOTED THAT THE ASSESSEE HAS RAISED ALTERNATIVE GROUND OF APPEAL IN GROUND NO.3 & 4 WHICH RELATES TO USE OF SOFTWARE TREATED AS ROYALTY' UN DER THE INDIA- NETHERLANDS DOUBLE TAXATION AVOIDANCE ACT (DTAA) WH ICH IS CLAIMED AS COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 2012-13 & 2013-14 ON THE BASIS OF DECISION OF TRIBUNAL IN E ARLIER ORDERS. THUS, IN OUR VIEW ONCE THE GROUND NO. 3 & 4 IS DECIDED IN FA VOUR OF ASSESSEE, HENCE, GROUND NO. 2 WOULD BECOME ACADEMIC. 6. THE LD. AR OF THE ASSESSEE SUBMITS THAT GROUND NO. 3 & 4 ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 2012-13 & 2013-14 IN ITA NO. 2192 & 2193/M/2017 DATED 24.10.2018. 7. ON THE OTHER HAND THE LD DR FOR THE REVENUE SUPPORT ED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES A ND NOTED THAT THE ASSESSEE HAS RAISED SIMILAR GROUND OF APPEAL IN APP EAL FOR A.Y. 2012-13 AND 2013-14 VIDE ITA NO. 2092& 2193/MUM/2017 AND TH E CO-ORDINATE BENCH OF TRIBUNAL BY FOLLOWING THE DECISION FOR A.Y . 2011-12 IN ITA NO. 2058/MUM/2016 PASSED THE FOLLOWING ORDER: 6. VIDE GROUND NOS. 3 AND 4 THE ASSESSEE HAS CHALL ENGED THE ACTION OF THE AO IN HOLDING THAT THE AFORESAID AMOUNT OF RS. 25,2 1,84,024/- AS ROYALTY AND TAXABLE @ 10% AS PER THE DTAA WITH THE NETHERLANDS. ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 5 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE MUMBAI BENCH OF ITAT RENDERED IN THE APPEALS FILED BY THE DEPARTMENT IN ASSESSEES CASE, ITA NO. 5051/MUM/2009 FOR THE A.Y. 2006-07 AN D ITA NO. 3818/MUM/2011 FOR THE A.Y. 2007-08 AND THE APPEAL F ILED BY THE ASSESSEE IN ITS OWN CASE ITA NO. 729/MUM/2012 FOR THE A.Y. 2008 -09. SINCE, THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE AS SESSEE, THE IMPUGNED FINDINGS OF THE AO AS PER THE DIRECTION OF THE LD. DRP IS LIABLE TO BE SET ASIDE. 8. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) RELYING ON THE ORDER PASSED BY THE AO U/S 143 (3) READ WITH SE CTION 144C (13) OF THE ACT SUBMITTED THAT SINCE THE PRINCIPLE OF RES JUDIC ATA DOES NOT APPLY TO THE PROCEEDINGS UNDER THE INCOME TAX ACT. SINCE, THE AO HAS DECIDED THE ISSUE ON MERITS, THERE IS NO INFIRMITY IN THE IMPUGNED OR DER TO INTERFERE WITH THE SAME. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL ON RECORD. THE COORDINATE BENCH OF THE TRIBUNAL HAS DE CIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CAS E FOR THE A.Y. 2006-07, 2007- 08 AND 2008-09. THE COORDINATE BENCH OF THE T RIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING AS UND ER:- 13. THUS, THE DEFINITION OF 'COPYRIGHT IN SECTION 14 IS AN EXHAUSTIVE DEFINITION AND IT REFERS TO BUNDLE OF RIGHTS. IN RE SPECT OF COMPUTER PROGRAMMING, WHICH IS RELEVANT FOR THE ISSUE UNDER CONSIDERATION BEFORE US, THE COPYRIGHT MAINLY CONSISTS OF RIGHTS AS GIVEN IN CLAUSE (B), THAT IS, TO DO ANY OF THE ACT SPECIFIED IN CLAUSE (A) FROM (I) TO (VII) AS REPRODUCED ABOVE. THUS, TO FALL WITHIN THE REALM AND AMBIT OF RIGHT T O COPYRIGHT IN THE COMPUTER SOFTWARE PROGRAMME, THE AFORESAID RIGHTS MUST BE GI VEN AND IF THE SAID RIGHTS ARE NOT GIVEN THEN, THERE IS NO COPYRIGHT IN THE CO MPUTER PROGRAMME OR SOFTWARE HERE IN THIS CASE OF THE CONDITIONS MENTIO NED IN SECTION 14 OF THE COPYRIGHT ACT IS PP1ICABLE AS HELD BY THE LEARNED CIT(A); AND IS ALSO IS EVIDENT FROM THE TERMS OF MSA, BECAUSE NO SUCH RIGH TS HAS BEEN GIVEN BY THE ASSESSEE TO THE IT SERVICE PROVIDERS. 14. FURTHER BY MAKING USE OR HAVING ACCESS TO THE C OMPUTER PROGRAMS EMBEDDED IN THE SOFTWARE, IT CANNOT BE HELD THAT EI THER WIPRO/IBM ARE USING THE PROCESS THAT HAS GONE INTO THE SOFTWARE O R THAT THEY HAVE ACQUIRED ANY RIGHTS IN RELATION TO THE PROCESS AS SUCH. THE SOFTWARE CONTINUES TO BE OWNED BY THE ASSESSEE AND WHAT WJPRO/IBM IS GETTING MERE ACCESS TO THE SOFTWARE. THE SOURCE CODE EMBEDDED IN THE SOFTWARE HAS NOT BEEN IMPARTED TO THEM. HENCE, THER E IS NO USE OR RIGHT TO USE OF ANY PROCESS AS HELD BY THE LEARNED AO. HENCE , THE FINDING OF THE ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 6 LEARNED CIT(A) THAT THE PAYMENT IN QUESTION CANNOT BE RECKONED AS 'ROYALTY' IS FACTUALLY AND LEGALLY CORRECT AND THE SAME IS UP HELD. 15. APART FROM THAT NOW THERE ARE VARIOUS DECISIONS OF HON'BLE HIGH COURT INCLUDING THAT OF HON'BLE DELHI HIGH COURT IN CASE OF DIT VS. INFRASOFT LTD., REPORTED IN [20131 39 TAXMANN.COM 88, WHEREIN HOST OF OTHER DECISIONS HAVE BEEN REFERRED AND RELIED UPON. IN THE A.Y. 200 8-09, THE LEARNED CIT (A) HAS RELIED UPON THE DECISION OF HON'BLE KARNATAKA H IGH COURT IN THE CASE CIT VS. SAMSUNG ELECTRONICS CO. LTD. [2013]345 ITR 494 AND SOME OTHER DECISIONS OF THE TRIBUNAL. WE FIND THAT THE HON'BLE DELHI HIGH COURT HAS TAKEN NOTE OF THIS FACT AND ALSO ANALYSED THE PAYME NT OF SOFTWARE WITHIN THE AMBIT OF ROYALTY AS DEFINED UNDER ARTICLE 12 OF THE INDIA US TREATY. THE RELEVANT OBSERVATION AND FINDING OF THE HON'BLE HIG H COURT IS AS UNDER: 87. IN ORDER TO QUALIFY AS ROYALTY PAYMENT, IT IS NECESSARY TO CSAL4ISH THAT THERE IS TRANSFER OF ALL OR ANY RIGHTS (INCLUDING T HE GRANTING OF ANY LICENCE) IN RESPECT OF COPYRIGHT OF A LITERARY, ARTISTIC OR SCI ENTIFIC WORK IN ORDER TO TREAT THE CONSIDERATION PAID BY THE LICENSEE AS ROYALTY, IT IS TO BE ESTABLISHED THAT THE LICENSEE, BY MAKING SUCH PAYMENTS OBTAINS ALL O R ANY OF THE COPYRIGHT RIGHTS OF SUCH LITERARY WORK DISTINCTION HAS TO BE MADE BETWEEN THE ACQUISITION OF A 'COPYRIGHT RIGHT' AND A 'COPYRIGHT ED ARTICLE'. COPYRIGHT IS DISTINCT FROM THE MATERIAL OBJECT, COPYRIGHTED. COP YRIGHT IS AN INTANGIBLE INCORPOREAL RIGHT IN THE NATURE OF A PRIVILEGE, QUI TE INDEPENDENT OF ANY MATERIAL SUBSTANCE, SUCH AS A MANUSCRIPT. JUST BECA USE ONE HAS THE COPYRIGHTED ARTICLE, IT DOES NOT FOLLOW THAT ONE HA S ALSO THE COPYRIGHT IN IT. IT DOES NOT AMOUNT TO TRANSFER OF ALL OR ANY RIGHT INC LUDING LICENCE IN RESPECT OF COPYRIGHT. COPYRIGHT OR EVEN RIGHT TO USE COPYRIGHT IS DISTINGUISHABLE FROM SALE CONSIDERATION PAID FOR 'COPYRIGHTED' ARTICLE. THIS SALE CONSIDERATION IS FOR PURCHASE OF GOODS AND IS NOT ROYALTY. 88. THE LICENSE GRANTED BY THE ASSESSEE IS LIMITED TO THOSE NECESSARY TO ENABLE THE LICENSEE TO OPERATE THE PROGRAM. THE RIG HTS TRANSFERRED ARE SPECIFIC TO THE NATURE OF COMPUTER PROGRAMS. COPYIN G THE PROGRAM ONTO THE COMPUTER'S HARD DRIVE OR RANDOM ACCESS MEMORY OR MA KING AN ARCHIVAL COPY IS AN ESSENTIAL STEP IN UTILIZING THE PROGRAM. THER EFORE, RIGHTS IN RELATION TO THESE ACTS OF COPYING, WHERE THEY DO NO MORE THAN E NABLE THE EFFECTIVE OPERATION OF THE PROGRAM BY THE USER, SHOULD BE DIS REGARDED IN ANALYZING THE CHARACTER OF THE TRANSACTION FOR TAX PURPOSES. PAYM ENTS IN THESE TYPES OF TRANSACTIONS WOULD BE DEALT WITH AS BUSINESS INCOME IN ACCORDANCE WITH ARTICLE 7. 89. THERE IS A CLEAR DISTINCTION BETWEEN ROYALTY PA ID ON TRANSFER OF COPYRIGHT RIGHTS AND CONSIDERATION FOR TRANSFER OF COPYRIGHTE D ARTICLES. RIGHT TO USE A COPYRIGHTED ARTICLE OR PRODUCT WITH THE OWNER RETAI NING HIS COPYRIGHT IS NOT THE SAME THING AS TRANSFERRING OR ASSIGNING RIGHTS IN RELATION TO THE ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 7 COPYRIGHT. THE ENJOYMENT OF SOME OR ALL THE RIGHTS WHICH THE COPYRIGHT OWNER HAS IS NECESSARY TO INVOKE THE ROYALTY DEFINITION. VIEWED FROM THIS ANGLE, A NONEXCLUSIVE AND NON-TRANSFERABLE LICENCE ENABLING THE USE OF A COPYRIGHTED PRODUCT CANNOT BE CONSTRUED AS AN AUTHORITY TO ENJO Y ANY OR ALL OF THE ENUMERATED RIGHTS INGRAINED IN ARTICLE 12 OF DTAA. WHERE THE PURPOSE OF THE LICENCE OR THE TRANSACTION IS ONLY TO RESTRICT USE OF THE COPYRIGHTED PRODUCT FOR INTERNAL BUSINESS PURPOSE, IT WOULD NOT BE LEGA LLY CORRECT TO STATE THAT THE COPYRIGHT ITSELF OR RIGHT TO USE COPYRIGHT HAS BEEN TRANSFERRED TO ANY EXTENT THE PARTING OF INTELLECTUAL PROPERTY RIGHTS INHEREN T IN AND ATTACHED TO THE SOFTWARE PERIOD IN FAVOUR OF THE LICENSEE/ CUSTOMER IS WHAT IS CONTEMPLATED BY THE TREATY. MERELY AUTHORIZING OR ENABLING A CUS TOMER TO HAVE THE BENEFIT OF DATA OR INSTRUCTIONS CONTAINED THEREIN WITHOUT A NY FURTHER RIGHT TO DEAL WITH THEM INDEPENDENTLY DOES NOT, AMOUNT TO TRANSFE R OF RIGHTS IN RELATION TO COPYRIGHT OR CONFERMENT OF THE RIGHT OF USING THE C OPYRIGHT. THE TRANSFER OF RIGHTS IN OR OVER COPYRIGHT OR THE CONFERMENT OF TH E RIGHT OF USE OF COPYRIGHT IMPLIES THAT THE TRANSFEREE/ LICENSEE SHOULD ACQUIR E RIGHTS EITHER IN ENTIRETY OR PARTIALLY CO-EXTENSIVE WITH THE OWNER/ TRANSFERO R WHO DIVESTS HIMSELF OF THE RIGHTS HE POSSESSES PRO-TANTO. 90. THE LICENSE GRANTED TO THE LICENSEE PERMITTING HIM TO DOWNLOAD THE COMPUTER PROGRAMME AND STORING IT IN THE COMPUTER F OR HIS OWN USE IS ONLY INCIDENTAL TO THE FACILITY EXTENDED TO THE LICENSEE TO MAKE USE OF THE COPYRIGHTED PRODUCT FOR HIS INTERNAL BUSINESS PURPO SE. THE SAID PROCESS IS NECESSARY TO MAKE THE PROGRAMME FUNCTIONAL AND TO H AVE ACCESS TO IT AND IS QUALITATIVELY DIFFERENT FROM THE RIGHT CONTEMPLATED BY THE SAID PARAGRAPH BECAUSE IT IS ONLY INTEGRAL TO THE USE OF COPYRIGHT ED PRODUCT. APART FROM SUCH INCIDENTAL FACILITY, THE LICENSEE HAS NO RIGHT TO D EAL WITH THE PRODUCT JUST AS THE OWNER WOULD BE IN A POSITION TO DO. 91. THERE IS NO TRANSFER OF ANY RIGHT IN RESPECT OF COPYRIGHT BY THE ASSESSEE AND IT IS A CASE OF MERE TRANSFER OF A COPYRIGHTED ARTICLE. THE PAYMENT IS FOR A COPYRIGHTED ARTICLE AND REPRESENTS THE PURCHASE P RICE OF AN ARTICLE AND CANNOT BE CONSIDERED AS ROYALTY EITHER UNDER THE IN COME TAX ACT OR UNDER THE DTAA. 92. THE LICENSEES ARE NOT ALLOWED TO EXPLOIT THE CO MPUTER SOFTWARE COMMERCIALLY, THEY HAVE ACQUIRED UNDER LICENCE AGRE EMENT, ONLY THE COPY RIGHTED SOFTWARE WHICH BY ITSELF IS AN ARTICLE AND THEY HAVE NOT ACQUIRED ANY COPYRIGHT IN THE SOFTWARE. IN THE CASE OF THE ASSES SEE COMPANY, THE LICENSEE TO WHOM THE ASSESSEE COMPANY HAS SOLD/LICENSED THE SOFTWARE WERE ALLOWED TO MAKE ONLY ONE COPY OF THE SOFTWARE AND ASSOCIATE D SUPPORT INFORMATION FOR BACKUP PURPOSES WITH A CONDITION THAT SUCH COPY RIGHT SHALL INCLUDE INFRASOFT COPYRIGHT AND ALL COPIES OF THE SOFTWARE SHALL BE EXCLUSIVE PROPERTIES OF INFRASOFT. LICENSEE WAS ALLOWED TO US E THE SOFTWARE ONLY FOR ITS OWN BUSINESS AS SPECIFICALLY IDENTIFIED AND WAS NOT PERMITTED TO ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 8 LOAN/RENT/SALE/SUB-LICENCE OR TRANSFER THE COPY OF SOFTWARE TO ANY THIRD PARTY WITHOUT THE CONSENT OF INFRASOFT. 93. THE LICENSEE HAS BEEN PROHIBITED FROM COPYING, DECOMPILING, DECOMPILING, DE-ASSEMBLING, OR REVERSE ENGINEERING THE SOFTWARE WITHOUT THE WRITTEN CONSENT OF INFRASOFT. THE LICENCE AGREEMENT BETWEEN THE ASSESSEE COMPANY AND ITS CUSTOMERS STIPULATES THAT ALL COPYR IGHTS AND INTELLECTUAL PROPERTY RIGHTS IN THE SOFTWARE AND COPIES MADE BY THE LICENSEE WERE OWNED BY INFRASOFT AND ONLY INFRASOFT HAS THE POWER TO GR ANT LICENCE RIGHTS FOR USE OF THE SOFTWARE THE LICENCE AGREEMENT STIPULATES TH AT UPON TERMINATION OF THE AGREEMENT FOR ANY REASON, THE LICENSEE SHALL RETURN THE SOFTWARE INCLUDING SUPPORTING INFORMATION AND LICENSE AUTHORIZATION DE VICE TO INFRASOFT. XX XXXX XXXXX XXW XXXXXX XXM W XXX. 94. THE INCORPOREAL RIGHT TO THE SOFTWARE I.E. COPY RIGHT REMAINS WITH THE OWNER AND THE SAME WAS NOT TRANSFERRED BY THE ASSES SEE. THE RIGHT TO USE A COPYRIGHT IN A PROGRAMME IS TOTALLY DIFFERENT FROM THE RIGHT TO USE A PROGRAMME EMBEDDED IN A CASSETTE OR A CD WHICH MAY BE A SOFTWARE AND THE PAYMENT MADE FOR THE SAME CANNOT BE SAID TO BE RECEIVED AS CONSIDERATION FOR THE USE OF OR RIGHT TO USE OF ANY COPYRIGHT TO BRING IT WITHIN THE DEFINITION OF ROYALTY AS GIVEN IN THE DTAA. WHA T THE LICENSEE HAS ACQUIRED IS ONLY A COPY OF THE COPYRIGHT ARTICLE WH EREAS THE COPYRIGHT REMAINS WITH THE OWNER AND THE LICENSEES HAVE ACQUI RED A COMPUTER PROGRAMME FOR BEING USED IN THEIR BUSINESS AND NO R IGHT IS GRANTED TO THEM TO UTILIZE THE COPYRIGHT OF A COMPUTER PROGRAMME AN D THUS THE PAYMENT FOR THE SAME IS NOT IN THE NATURE OF ROYALTY. 95. WE HAVE NOT EXAMINED THE EFFECT OF THE SUBSEQUE NT AMENDMENT TO SECTION 9 (1)(VI) OF THE ACT AND ALSO WHETHER THE AMOUNT RE CEIVED FOR USE OF SOFTWARE WOULD BE ROYALTY IN TERMS THEREOF FOR THE REASON TH AT THE ASSESSEE IS COVERED BY THE DTAA, THE PROVISIONS OF WHICH ARE MORE BENEF ICIAL. 96. THE AMOUNT RECEIVED BY THE ASSESSEE UNDER THE L ICENCE AGREEMENT FOR ALLOWING THE USE OF THE SOFTWARE IS NOT ROYALTY UND ER THE DTAA. 97. WHAT IS TRANSFERRED IS NEITHER THE COPYRIGHT I N THE SOFTWARE NOR THE USE OF THE COPYRIGHT IN THE SOFTWARE, BUT WHAT IS TRANSFER RED IS THE RIGHT TO USE THE COPYRIGHTED MATERIAL OR ARTICLE WHICH IS CLEARLY DI STINCT FROM THE RIGHTS IN A COPYRIGHT. THE RIGHT THAT IS TRANSFERRED IS NOT A R IGHT TO USE THE COPYRIGHT BUT IS ONLY LIMITED TO THE RIGHT TO USE THE COPYRIGHTED MATERIAL AND THE SAME DOES NOT GIVE RISE TO ANY ROYALTY INCOME AND WOULD BE BU SINESS INCOME. 98. WE ARE NOT IN AGREEMENT WITH THE DECISION OF TH E ANDHRA PRADESH HIGH COURT IN THE CASE OF SAMSUNG ELECTRONICS CO LTD (SU PRA) THAT RIGHT TO MAKE A COPY OF THE SOFTWARE AND STORING TH E SAME IN THE HARD DISK OF ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 9 THE DESIGNATED COMPUTER AND TAKING BACKUP COPY WOUL D AMOUNT TO COPYRIGHT WORK UNDER SECTION 14(1) OF THE COPYRIGHT ACT AND T HE PAYMENT MADE FOR THE GRANT OF THE LICENCE SAID PURPOSE WOULD CONSTITUTE ROYALTY. THE LICENSE GRANTED TO THE LICENSEE PERMITTING HIM TO DOWNLOAD THE COMPUTER PROGRAMME AND STORING IT IN THE COMPUTER FOR HIS OWN USE WAS ONLY INCIDENTAL TO THE FACILITY EXTENDED TO THE LICENSEE TO MAKE USE OF TH E COPYRIGHTED PRODUCT FOR HIS INTERNAL BUSINESS PURPOSE. THE SAID PROCESS WAS NECESSARY TO MAKE THE PROGRAMME FUNCTIONAL AND TO HAVE ACCESS TO IT AND I S QUALITATIVELY DIFFERENT FROM THE RIGHT CONTEMPLATED BY THE SAID PROVISION B ECAUSE IT IS ONLY INTEGRAL TO THE USE OF COPYRIGHTED PRODUCT. THE RIGHT TO MAK E A BACKUP COPY PURELY AS A TEMPORARY PROTECTION AGAINST LOSS, DESTRUCTION OR DAMAGE HAS BEEN HELD BY THE DELHI HIGH COURT IN DIT V. M/S NOKIA NETWORKS O Y (SUPRA) AS NOT AMOUNTING TO ACQUIRING A COPYRIGHT IN THE SOFTWARE' . THE RATIO OF THE ABOVE DECISION CLEARLY CLINCHES TH E ISSUE WHICH IS APPLICABLE IN THE CASE OF THE ASSESSEE ALSO. THIS RATIO AND PR INCIPLE HAS BEEN FOLLOWED AND REITERATED AGAIN IN THE CASE OF PRINCIPAL CIT U S M. TECH INDIA PUT LTD (SUPRA) AND AGAIN IN THE DECISIONS OF ALACATEL LUCE NT, CANADA, REPORTED [2015] 372 ITR 476, WHEREIN HON'BLE DELHI HIGH COUR T RELYING UPON ITS EARLIER TWO DECISIONS IN THE CASE OF DIT US ERICSON , [2012] 343 ITR 470 AND DIT VS M/S NOKIA NETWORKS, REPORTED IN 358 ITR 259 (DEL) CONCLUDED THAT, WHEN ASSESSEE SUPPLIES THE SOFTWARE WHICH IS INCORP ORATED ON CD, IT HAS APPLIED ONLY A TANGIBLE PROPERTY AND PAYMENT MADE F OR ACQUIRING SUCH A PROPERTY CANNOT BE REGARDED AS PAYMENT BY WAY OF RO YALTY. THE RELEVANT OBSERVATION OF THE HIGH COURT IN ALCATEL LUCENT (SU PRA) IN THIS REGARD READS AS UNDER: WE HAVE NOTICED, AT THE OUTSET, THAT THE ITAT HAD RELIED UPON THE RULING OF THIS COURT IN DIRECTOR OF INCOME TAX V. ERICSSON A. B. (2012) 343 ITR 470 WHEREIN IDENTICAL ARGUMENT WITH RESPECT TO WHETHER CONSIDERATION PAID TOWARDS SUPPLY OF SOFTWARE ALONG WITH HARDWARE - RA THER SOFTWARE EMBEDDED IN THE HARDWARE AMOUNTED TO ROYALTY. AFTER NOTICING SEVERAL CONTENTIONS OF THE REVENUE, THIS COURT HELD IN ERICSSON A.B.(SUPRA ) AS FOLLOWS: 54. IT IS DIFFICULT TO ACCEPT THE AFORESAID SUBMISS IONS IN THE FACTS OF THE PRESENT CASE. WE HAVE ALREADY HELD ABOVE THAT 1,4EI FTSSESSEE DID NOT HAVE ANY BUSINESS CONNECTION. IN INDIA. HAVE ALSO HELD T HAT THE SUPPLY OF EQUIPMENT IN QUESTION WAS IN THE NATURE OF SUPPLY O F GOODS. THEREFORE, THIS ISSUE IS TO T EXAMINED KEEPING IN VIEW THESE FINDIN GS. MOREOVER, ANOTHER FINDING OF FACT IS RECORDED BY THE TRIBUNAL THAT TH E CELLULAR OPERATOR DID NOT ACQUIRE ANY OF THE COPYRIGHTS REFERRED TO IN SECTIO N 14 (B) OF THE COPYRIGHT ACT, 1957. ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 10 55. ONCE WE PROCEED ON THE BASIS OF AFORESAID FACTU AL FINDINGS, IT IS DIFFICULT TO HOLD THAT PAYMENT MADE TO THE ASSESSEE WAS IN TH E NATURE OF ROYALTY EITHER UNDER THE INCOME -TAX ACT OR UNDER THE DTAA. WE HAV E TO KEEP IN MIND WHAT WAS SOLD BY THE ASSESSEE TO THE INDIAN CUSTOME RS WAS A GSM WHICH CONSISTED BOTH OF THE HARDWARE AS WELL AS THE SOFTW ARE, THEREFORE, THE TRIBUNAL IS RIGHT IN HOLDING THAT IT WAS NOT PERMIS SIBLE FOR THE REVENUE TO ASSESS THE SAME UNDER TWO DIFFERENT ARTICLES. THE S OFTWARE THAT WAS LOADED ON THE HARDWARE DID NOT HAVE ANY INDEPENDENT EXISTENCE . THE SOFTWARE SUPPLY IS AN INTEGRAL PART OF THE GSM MOBILE TELEPHONE SYSTEM AND IS USED BY THE CELLULAR OPERATOR FOR PROVIDING THE CELLULAR SERVIC ES TO ITS CUSTOMERS. THERE COULD NOT BE ANY INDEPENDENT USE OF SUCH SOFTWARE. THE SOFTWARE IS EMBODIED IN THE SYSTEM AND THE REVENUE ACCEPTS THAT IT COULD NOT BE USED INDEPENDENTLY. THIS SOFTWARE MERELY FACILITATES THE FUNCTIONING OF THE EQUIPMENT AND IS AN INTEGRAL PART THEREOF ON THESE FACTS, IT WOULD BE USEFUL TO REFER TO THE JUDGMENT OF THE SUPREME COURT IN TATA CONSULTANCY SERVICES VS. STATE OF ANDHRA PRADESH (2004) 271 ITR 401 (SC) , WHEREIN THE APEX COURT HELD THAT SOFTWARE WHICH IS INCORPORATED ON A MEDIA WOULD BE GOODS AND, THEREFORE, LIABLE TO SALES TAX. FOLLOWING DISC USSION IN THIS BEHALF IS REQUIRED TO BE NOTED: - 'IN OUR VIEW, THE TERM 'GOO DS' AS USED IN ARTICLE 366(12) OF THE CONSTITUTION OF INDIA AND AS DEFINED UNDER THE SAID ACT ARE VERY WIDE AND INCLUDE ALL TYPES OF MOVABLE PROPERTI ES, WHETHER THOSE PROPERTIES BE TANGIBLE OR INTANGIBLE. WE ARE IN COM PLETE AGREEMENT WITH THE OBSERVATIONS MADE BY THIS COURT IN ASSOCIATED CEMEN T COMPANIES LTD. (SUPRA). A SOFTWARE PROGRAMME MAY CONSIST OF VARIOU S COMMANDS WHICH ENABLE THE COMPUTER TO PERFORM A DESIGNATED TASK. T HE COPYRIGHT IN THAT PROGRAMME MAY REMAIN WITH THE ORIGINATOR OF THE PRO GRAMME. BUT THE MOMENT COPIES ARE MADE AND MARKETED, IT BECOMES GOO DS, WHICH ARE SUSCEPTIBLE TO SALES TAX. EVEN INTELLECTUAL PROPERT Y, ONCE IT IS PUT ON TO A MEDIA, WHETHER IT BE IN THE FORM OF BOOKS OR (IN CA SE OF PAINTING) OR COMPUTER DISCS OR CASSETTES, MARKETED WOULD BECOME 'GOODS'. WE SEE NO DIFFERENCE 4DVEEN A SALE OF A SOFTWARE PROGRAMME ON A CD/FLOPPY DISC FROM A SALE OF MUSIC ON A CASSETTE/CD OR A SALE OF A FIL M ON A VIDEO CASSETTE/CD. IN ALL SUCH CASES, THE INTELLECTUAL PROPERTY HAS BE EN INCORPORATED ON A MEDIA FOR PURPOSES OF TRANSFER. TAXPUNDIT.ORG SALE IS NOT JUST OF THE MEDIA WHICH BY ITSELF HAS VERY LITTLE VALUE. THE SOFTWARE AND THE MEDIA AND CASE LAWS IN FAVOUR OF THE ASSESSEE INCLUDING THAT OF TH E DELHI HIGH COURT ON SEVERAL OCCASIONS, WE ARE INCLINED TO FOLLOW THE DE CISION AND PROPOSITION LAID DOWN BY THE HONBLE DELHI HIGH COURT. THUS, IN VIEW OF THE FINDING GIVEN ABOVE, WE UPHOLD THE ORDER OF THE CIT(A) THAT THE P AYMENT RECEIVED BY THE ASSESSEE FOR SUMS AMOUNTING TO RS. 3,75,25,2911- DO ES NOT AMOUNT TO 'ROYALTY' WITHIN THE MEANING OF ARTICLE 12(4) OF IN DO-NETHERLAND DTAA AND ACCORDINGLY, THE SAME IS NOT TAXABLE IN INDIA. SINC E, ADMITTEDLY, THE ASSESSEE HAS NO PE IN INDIA; THEREFORE, SAME CANNOT BE TAXED AS BUSINESS INCOME ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 11 UNDER ARTICLE 7. ACCORDINGLY, GROUND RAISED BY THE REVENUE STANDS DISMISSED.' THE AFORESAID DECISION CLEARLY CLINCHES THE ISSUES IN FAVOUR OF THE ASSESSEE. 16. SO FAR AS THE READING OF AMENDED DEFINITION OF 'ROYALTY' AS GIVEN IN SECTION 9(1)(VI) INTO TREATY AS CONTENDED AND ARGUE D BY ID. CIT DR, WE FIND THAT, HON'BLE DELHI HIGH COURT IN ITS LATEST JUDGME NT IN THE CASE OF DIT VS. NEW SKIES SATELLITE, REPORTED IN [2016] 95 CCH 0032 , WHEREIN THEIR LORDSHIPS SHAVE DISCUSSED THE ISSUE THREADBARE AND CAME TO THE CONCLUSION IN THE FOLLOWING MANNER:- '60. CONSEQUENTLY, SINCE WE HAVE HELD THAT THE FIN ANCE ACT, 2012 WILL NOT AFFECT ARTICLE 12 OF THE DTAAS, IT WOULD FOLLOW THA T THE FIRST DETERMINATIVE INTERPRETATION GIVEN TO THE WORD 'ROYALTY' IN ASIA SATELLITE, SUPRA NOTE 1, WHEN THE DEFINITIONS WERE IN FACT PARI MATERIAL (IN THE ABSENCE OF ANY CONTOURING EXPLANATIONS), WILL CONTINUE TO HOLD THE FILED FOR THE PURPOSE OF ASSESSMENT YEARS PRECEDING THE FINANCE ACT, 2012 AN D IN ALL CASES WHICH INVOLVE A DOUBLE TAX AVOIDANCE AGREEMENT, UNLESS TH E SAID DTAAS ARE AMENDED JOINTLY BY BOTH PARTNERS TO INCORPORATE INC OME FROM DATA TRANSMISSION SERVICES AS PARTAKING OF THE NATURE OF ROYALTY, OR AMEND THE DEFINITION IN A MANNER SO THAT SUCH INCOME AUTOMATI CALLY BECOMES ROYALTY IT IS REITERATED THAT THE COURT HAS NOT RETURNED A FIN DING ON WHETHER THE AMENDMENT IS IN FACT RETROSPECTIVE AND APPLICABLE T O CASES PRECEDING THE FINANCE ACT OF 2012 WHERE THERE EXISTS NO DOUBLE TA X AVOIDANCE AGREEMENT'. THE AFORESAID DECISION ALSO TAKES CARE OF ALL THE ARGUMENTS RELIED UPON BY THE ID. CIT DR INCLUDING THAT OF THE VERIZON COMMUNICATIONS SINGAPORE PTE. LTD. THE HON'BLE HIGH COURT HAS SPEC IFICALLY CLARIFIED AS TO WHY THE SAID JUDGMENT OF MADRAS HIGH COURT CANNOT B E APPLIED IN SUCH CASES AFTER OBSERVING AS UNDER:- '31. IN A JUDGMENT BY THE MADRAS HIGH COURT IN VERI ZON COMMUNICATIONS SINGAPORE PTE LTD. V. THE INCOME TAX OFFICER, INTER NATIONAL TAXATION 1, /2014] 361 ITR 575 (MAD), THE COURT HELD THE EXPLAN ATIONS TO BE APPLICABLE TO NOT ONLY THE DOMESTIC DEFINITION BUT ALSO CARRIE D THEM TO INFLUENCE THE MEANING OF ROYALTY UNDER ARTICLE 12. NOTABLY, IN BO TH CASES, THE CLARIFICATORY NATURE OF THE AMENDMENT WAS NOT QUESTIONED, BUT WAS INSTEAD APPLIED SQUARELY TO ASSESSMENT YEARS PREDATING THE AMENDMEN T. THE CRUCIAL DIFFERENCE BETWEEN THE JUDGMENTS HOWEVER LIES IN TH E APPLICATION OF THE AMENDMENTS TO THE DTAA. WHILE TV TODAY, SUPRA NOTE 22 RECOGNIZES THAT THE QUESTION WILL HAVE TO BE DECIDED AND THE SUBMIS SION ARGUED, VERIZON, SUPRA NOTE 23 CITES NO REASON FOR THE EXTENSION OF THE AMENDMENTS TO THE DTAA. ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 12 AS REGARD THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SIEMENS AKTIONGESELLSCHAFT (SUPRA), REFERRED TO BY D CIT DR, THE KMB1E DELHI HIGH COURT HAS ALSO DEALT WITH THIS POINT AND MADE DISTINCTION THAT THE ISSUE AND SITUATION BEFORE THE HON'BLE BOMBAY HIGH COURT WAS MATERIALLY DIFFERENT AND ALSO THE TERM 'ROYALTY' WAS NOT DEFIN ED IN THE GERMAN DTAA. 17. THUS, WE HOLD THAT FOR ALL THE YEARS THE PAYMEN TS RECEIVED BY THE ASSESSEE FROM WIPRO/IBM IN PURSUANCE TO THE MSA CANNOT BE TR EATED AS 'ROYALTY' UNDER ARTICLE 12(4) OF THE INDIA-NETHERLAND DTAA. T HUS, THE MATTER IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. 10. SINCE, THE COORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN C ASE FOR THE A.YS. 2006-07, 2007-08 AND 2008-09 DISCUSSED ABOVE, WE RESPECTFULL Y FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH DECIDE THIS ISSUE IN FAVOU R OF THE ASSESSEE. ACCORDINGLY, GROUND NO. 3 AND 4 OF THE ASSESSEES A PPEAL IS ALLOWED. 7. WE HAD CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER PASSED BY TRIBUNAL IN ASSESSEES OWN CASE AS NARRATED ABOVE. AS THE FACTS AND CIRCUMSTANCES DURING THE YEARS UNDER CONSIDERAT ION ARE PARIMATERIA, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES F OR HOLDING THAT PAYMENT RECEIVED BY ASSESSEE CONSTITUTES INCOME OR ALTERNATIVELY TRE ATING THE SAME AS ROYALTY UNDER ARTICLE 12(4) OF INDIA-NETHERLAND DTAA. 9. CONSIDERING THE DECISION OF TRIBUNAL WHEREIN CONSIS TENT VIEW HAS BEEN TAKEN ON IDENTICAL GROUNDS OF APPEAL AND NO MATERIA L CHANGE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION IS BROUGHT TO OUR NOTICE, THEREFORE, RESPECTIVELY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, THE GROUND NO.3 & 4 ARE ALLOWED IN FAVOUR OF ASSESSEE. 10. GROUND NO.5 & 6 RELATES TO IT SUPPORT SERVICES TREA TED AS FEES FOR TECHNICAL SERVICES (FTS) UNDER THE INCOME-TAX ACT A S WELL AS IN INDIA- NETHERLANDS DTAA. THE LD. AR OF THE ASSESSEE SUBMIT S THAT THIS GROUND OF APPEAL IS ALSO COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE BY ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 13 THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2009-10 & 2010-11 AND IN A.Y. 2012-13 & 2014-15. THE LD DR SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 11. WE HAVE CONSIDERED THE SUBMISSION OF REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. WE HAVE NOTED THAT SIMILAR GROU ND OF APPEAL WAS RAISED BY ASSESSEE IN APPEAL FOR A.Y. 2012-13 & 201 3-14 AND THE CO- ORDINATE BENCH OF TRIBUNAL IN ITA NO. 2192 & 2193/M UM/2017 DATED 24/10/2018 BY FOLLOWING THE DECISION OF A.Y. 2011-1 2 IN ITA NO. 2058/MUM/2016 PASSED THE FOLLOWING ORDER: 8. NEXT GRIEVANCE OF ASSESSEE RELATES TO TREATING THE RECEIPTS AS FEES FOR TECHNICAL SERVICES UNDER THE ACT AS WELL AS INDIAN- NETHERLAND DTAA. WE FOUND THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ABOVE ASSESSMENT YEARS. PRECISE OBSERVATION OF THE TRIBUNAL DATED 28/05/2018 FOR THE A.Y.2011-12 WAS AS UNDER:- 11. THE ASSESSEE DURING THE FINANCIAL YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER CONSIDERATION RECEIVED FEES FOR PROVISION OF INFORM ATION TECHNOLOGY SUPPORT SERVICES FOR THE SEVERAL CUSTOMERS BASED IN INDIA. THE DETAILS OF PAYMENT RECEIVED BY THE ASSESSEE ARE AS UNDER:- S.NO. NAME OF ENTITY TOTAL INVOICE AMOUNT (INK) 1 ACCENTURE SERVICE 35,28,131 2 HAZIRA LNG PRIVATE LIMITED 5,30,186 3 IBM INDIA PVT. LTD. 3,56,55,244 4 LOGICA CMG PVT. LTD. 26,68,790 5 SHEEL INDIA MARKETS PRIVATE LIMITED 19,45,00,903 6 SHELL MRPL AVIATION FUELS & 32,88,714 7 WIPRO TECHNOLOGIES 9,45,19,881 GRAND TOTAL 33,46,91,849 12. THE AO HELD THAT THE USE OF TECHNOLOGICAL KNOWH OW AND SOFTWARE ARE COVERED UNDER THE PROVISIONS OF SECTION 9(1)(VI) OF THE INC OME TAX ACT AND ALSO UNDER ARTICLE 12(4) OF THE ACT INDIA-NETHERLANDS DTAA. THE AO FUR THER HELD THAT THE PAYMENTS ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 14 HAVE BEEN RECEIVED FOR PROVIDING SPECIALIZED TECHNI CAL INPUTS AND SERVICES RENDERED BY THE ASSESSEE WILL BE COVERED UNDER THE DEFINITIO N OF FEES FOR TECHNICAL SERVICES AND ACCORDINGLY ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. 13. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BY RAISING GROUND NOS. 5, 6 AND 7. 14. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT MUMBAI BENCH OF THE ITAT HAS DECIDED THE ISSUES RAISED VIDE GROUND NO. 5, 6 AND 7 OF THE APPEAL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE A.Y. 2009- 10 AND 2011-12. SINCE, THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, THE IMPUGNED FINDINGS OF THE AO IS LIABLE TO BE SET ASI DE. 15. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ER PASSED BY THE AO. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE MATERIAL ON RECORD. THE CO-ORDINATE BENCH HAS DECIDED THE IDENTICAL ISS UE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE ITA NO. 2204/MUM/2014 FOR THE A .Y. 2009-10 AND ITA NO. 1203/MUM/2015 FOR THE A.Y. 2010-11 HOLDING AS UNDER :- 7. THE NEXT ISSUE COMMON ISSUE IN BOTH THE APPEALS OF ASSESSEE IS AS REGARDS TO TAXABILITY OF PAYMENT RECEIVED BY ASSESSEE FROM IT SUPPORT SERVICES WHICH CONSTITUTES FEES FOR TECHNICAL SERVICES ('FTS') AND ROYALTY UNDER THE INDIA- NETHERLANDS TREATY DTAA. FOR THIS ASSESSEE HAS RAIS ED FOLLOWING GROUND:- 'PAYMENTS TOWARDS IT SUPPORT FEES HELD IN BE FEES F OR TECHNICAL SERVICES 'FTS') AND ROYALTY. 4. ERRED IN HOLDING THAT PAYMENTS RECE IVED BY THE APPELLANT FOR IT SUPPORT DTAA 5. FAILED TO APPRECIATE THAT IT SUPPOR T SERVICES DO NOT 'MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE, SKILL, EXPERIENC E ETC. TO THE SERVICES RECIPIENT UNDER ARTICLE 12 OF THE INDIA NETHERLANDS DTAA AND HENCE NOT SUBJECT TO TAX IN INDIA. 6. ERRED IN ALTERNATIVELY HOLDING THAT THE RECEIPT FROM IT - SUPPORT SERVICES QUALIFY AS ROYALTY' UNDER THE INDIANETHERLANDS DTAA.' 8. THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICA L IN BOTH THE AYRS I.E. 2009-10 AND 2010-11 AND ALSO THE GROUNDS RAISED ARE IDENTICALLY WORDED HENCE, WE WILL TAKE- THE FACTS FROM 2009-10. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, FIRST OF A LL, TOOK US THROUGH THE FINDINGS OF THE DRP ON THE ISSUE WHICH IS RECORDED IN PARA 53 A S UNDER: ' 5.3 DISCUSSIONS AND DIRECTIONS OF DRP 5.3.1 WE HAVE CONSIDERED THE DRAFT ASSESSMENT ORDER , SUBMISSIONS OF ASSESSEE AND MATERIAL. WE HAVE SEEN THAT UNDER THE MASTER SERVIC ES AGREEMENT, THE ASSESSEE SITI BV HAS FURNISHED TECHNICAL AND ADVISORY SERVICES TO VARIOUS CLIENTS BASED IN INDIA. THE DELINEATED SERVICES ARE SIGNIFICANTLY TECHNICAL IN NATURE AND THE RESULTANT FEES ARE LIABLE TO BE TREATED AS FEES FOR TECHNICAL SERV ICES. WE ARE ALSO IN AGREEMENT WITH THE AO THAT THE RULING OF HON'BLE AUTHORITY FO R ADVANCE RULINGS IN THE CASE OF ARE VA T&D INDIA LIMITED (A TD/L) IS APPLICABLE IN THE CASE OF ASSESSEE. IN THIS CASE, THE AAR HELD AS BELOW: ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 15 'WE HAVE NOTED THAT UNDER- THE IT AGREEMENT, THE FR ENCH COMPANY IS TO PROVIDE SUPPORT SERVICES THROUGH A CENTRAL TEAM IN THE AREA OF INFORMATION TECHNOLOGY TO THE APPLICANT AND TO ITS OTHER SUBSIDIARIES IN THE WORLD. THE PROVISION OF SUPPORT SERVICES BY THE FRENCH COMPANY WOULD 'ITSELF MAKE A VAILABLE, THE TECHNICAL KNOWLEDGE/ EXPERIENCE TO THE APPLICANT. IN PORFETTI VAN MELLE HOLDINGS B.V1 THIS AUTHORITY HELD THE VIEW THAT THE EXPRESSION 'IN AVAILABLE ONLY MEANS THAT THE RECIPI ENT OF THE SERVICE SHOULD BE IN A POSITION TO DERIVE AN ENDURING BENEFIT AND BE IN A POSITION TO UTILIZE THE KNOWLEDGE OR KNOWHOW IN FUTURE ON HIS OWN'. HERE, INFORMATION TECHNOLOGY RELATING TO DESIGN, ENGINEERING, MANUFACTURING AND SUPPLY OF EL ECTRIC EQUIPMENT THAT HELP IN TRANSMISSION AND DISTRIBUTION OF POWER, COMMISSIONI NG AND SERVICING OF DISTRIBUTION SYSTEM IS PROVIDED TO THE INDIAN ENTIT Y WHICH IS APPLIED IN RUNNING THE BUSINESS OF THE APPLICANT AND THE EMPLOYEES OF THE APPLICANT WOULD GOT EQUIPPED TO CARRY ON THE SYSTEMS ON THEIR OWN WITHOUT REFERE NCE TO THE FRENCH COMPANY, WHEN THE IT AGREEMENT COMES TO AN END. IT IS NOT AS IF FOR MAKING AVAILABLE, THE RECIPIENT MUST ALSO BE CONVEYED SPECIFICALLY THE RI GHT TO CONTINUE THE PRACTICE PUT INTO EFFECT AND ADOPTED UNDER THE AGREEMENT ON ITS EXPIRY. WE ARE OF THE VIEW THAT THE SERVICES PROVIDED UNDER THE IT AGREEMENT ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND TAXABLE UNDER' THE DTAA AS W ELL AS UNDER THE ACT. THOUGH THE RULING IS TECHNICALLY NOT BINDING IN TH E PRESENT CASE, THE 7 RATIO AND LOGIC FOLLOWED BY THE HON'BLE AUTHORITY HAVE VERY H IGH DEGREE OF PERSUASIVE VALUE. IN ANY CASE, THIS TECHNICAL KNOW-HOW IS OF AN ENDUR ING NATURE AND HAS A DIRECT NEXUS WITH THE ASSESSEES BUSINESS. 5.3.2 CONSIDERING THE ABOVE FACTUAL AND LEG& MATRIX WE ARE OF THE OPINION THAT THE ACTION OF THE AO IN TREATING THE ABOVE RECEIPT IS F EE FOR TECHNICAL SERVICES DOES NOT REQUIRE ANY INTERFERENCE THE ALTERNATE ARGUMENTS ON TAXABILITY OF THE RECEIPT AS ROYALTY DO NOT REQUIRE ANY DIRECTION FROM THE PENAL AS WE HAVE ALREADY UPHELD THE TAXABILITY OF THE SERVICES AS 'FEES FOR INCLUDED SE RVICE. 10. THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THE FACTS THAT THE SITI BV IS A COMPANY REGISTERED IN THE NETHERLANDS. SIT! BV IS I N THE BUSINESS OF PROVIDING INFORMATION TECHNOLOGY (IT') SUPPORT SERVICES. DURI NG THE FINANCIAL YEAR ENDED 31.03.2006 SIT! BV PROVIDED IT (MOBILE OFFICE) SUPP ORT SERVICES, IT HELPDESK AND NETWORK INFRASTRUCTURE RELATED SERVICES TO: INDIAN CUSTOMERS. SITI BV IS A TAX RESIDENT OF THE NETHERIAND AND IS ELIGIBLE TO CLAIM BENEFITS UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BETWEEN INDIA AND THE NETHERLANDS. HE EXPLAINED THAT SITI BV IS IN THE BUSINESS OF PROVIDING INFORM ATION TECHNOLOGY SUPPORT SERVICES SITI BV TYPICALLY, PROVIDES HELPDESK SERVICES-AND N ETWORK INFRASTRUCTURE SERVICES TO SHELL GROUP COMPANIES COMPRISING. INFORMATION TECHN OLOGY (II) SUPPORT FOR SOLVING ANY IT RELATED PROBLEMS FACED BY USERS I E ANY PROB LEM FACED BY USERS FOR ACCESSING ANY APPLICATION SOFTWARE C-MAILS, COMPUTER REPAIRS AND MAINTENANCE ETC. DESKTOP LAPTOP AND WORKSTATION SUPPORT, SERVICES RELATED TO WIDE AREA NETWORK ('WAN') ARID LOCAL AREA NETWORK ('LAN') FOR CONNECTION TO THE GL OBAL SERVERS', AND FACILITATING TELECONFERENCING AND VIDEO CONFERENCING SERVICES FU RTHER, IN THE EVENT SHELL REQUIRES ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 16 IT SERVICES FROM EXTERNAL SERVICE PROVIDERS LIKE WI PRO AND IBM SITI BV IS ENGAGED IN PROVIDING THE NECESSARY NETWORK ACCESS AND RELAT ED SERVICES AS WELL. FOR THIS PURPOSE, REFERENCE CAN BE MADE TO THE SCOPE OF SERV ICES TO BE RENDERED BY SITI BV TO WIPRO UNDER THE SERVICES AGREEMENT (COPY OF WHICH I S ENCLOSED IN THE PAPER BOOK OF THE ASSESSEE) AND FROM THE SAME ARTICLE 3 IS REP RODUCED BELOW: ARTICLE 3 - PROVISION OF SERVICES SITI BV SHALL PROVIDE THE IT SERVICE PROVIDER WITH THE SERVICE.' FURTHER, 'SERVICE' HAS BEEN DEFINED IN ARTICLE I - DEFINITIONS AS 'THE COMBINED SUB- SERVICES PROVIDED BY S/TI BV TO THE IT SERVICES PRO VIDER WIDER THIS AGREEMENT, WHICH SUB-SERVICES INCLUDE THE (IF SERVICES, THE STO SERV ICES AND SHE PROVISION BY S/TI BV TO THE IT SERVICE PROVIDER AND SERVICE PERSONNEL OF ACCESS TO AND/OR USE -OF GI SOFTWARE AND/OR OPTIONAL SOFTWARE. 11. FURTHER, SITI BV IS COMPANY INCORPORATED IN TH E NETHERLANDS. SITI BV IS A TAX RESIDENT OF THE NETHERLANDS ELIGIBLE TO CLAIM THE B ENEFITS, CONFERRED BY THE DOUBLE TAXATION AVOIDANCE AGREEMENT ENTERED INTO BETWEEN I NDIA AND THE NETHERLANDS (TREATY'). SECTION 90 OF THE ACT READ WITH THE CIRC ULARS AND SEVERAL JUDICIAL PRECEDENTS ISSUED THEREUNDER PROVIDE THAT A NON-RES IDENT TAXPAYER IS ELIGIBLE TO BE ASSESSED AS PER THE PROVISIONS OF THE ACT OR AS PER THE PROVISIONS OF THE RELEVANT DOUBLE TAXATION AVOIDANCE AGREEMENT, WHICHEVER IS M ORE BENEFICIAL. SIT! BV IS A NON-RESIDENT FOR INDIAN TAX PURPOSES. ACCORDINGLY, SITI BV COULD BE ASSESSED AS PER THE PROVISIONS OF THE ACTOR AS PER THE TREATY, WHIC HEVER IS MORE BENEFICIAL TO SITI BV. IN VIEW OF THE SAME, THE NON-TAXABILITY OF THE SERVICES RENDERED BY SITI BV HAS BEEN EXAMINED UNDER THE PROVISIONS OF THE TREATY. A RTICLE 12(4) OF THE TREATY DEFINES THE TERM. 'PAYMENTS OF ANY KIND RECEIVED AS A CONSI DERATION FOR THE USE, OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERACY, ARTISTIC OR SCIE NTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLA N, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE.' 12. FROM THE ABOVE, IT IS CLEAR THAT SITI BV IS ENG AGED IN PROVIDING IT SERVICES TO INDIAN ENTITIES BUT DOES NOT PROVIDE ANY RIGHT TO U SE ANY COPYRIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS, A NY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFO RMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE. EVEN UNDER THE AGREEMENTS ENTERED INTO WITH WIPRO AND IBM, SITI BV ONLY PROVIDES THEM ACCESS TO THE SOFTWARE I.E. COMPUTER PROGRAMME. SITI BV DOES NOT PROVIDE THEM THE RIGHT TO USE THE COPYRIGHT EMBEDDED IN THE SOFTWARE. IN OTHER WORDS, WIPRO, IBM ARE NOT PERMITTED TO MAKE COPIES AND SELL THE SOFTWARE. UNDER THE SERVICES AGREEMENTS, W IPRO AND IBM-HAVE BEEN GRANTED THE MERE UNDER THE RIGHT IN THE COPYRIGHTED SOFTWARE AND NOT THE RIGHT OF, USE OF-COPYRIGHT'. WHEREAS USE OF COPYRIGHT' ENCOMPASSE S EXPLOITATION OF THE RIGHTS EMBEDDED IN A COPYRIGHT BUT A MERE USER RIGHT IS A LIMITED RIGHT AND CONSIDERATION PAID FOR SUCH USER RIGHT CANNOT BE REGARDED AS CONS IDERATION FOR USE OF OR RIGHT TO USE A COPYRIGHT. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS FULLY COVERED BY THE DECISION OF HON'B LE DELHI HIGH COURT IN THE CASE OF DIT VS GUY CARPENTER & CO LTD (2012) 20 TAXMANN.COM 807 (DEL-HC), WHEREIN INDIA-UK DTAA WAS UNDER CONSIDERATION OF HONBLE DE LHI HIGH COURT AND HON'BLE ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 17 HIGH COURT AFTER CONSIDERING THE ARTICLE 13 OF THE DTAA OF INDIA-UK AND ALSO THE FACTS OF THE ASSESSEE FINALLY HELD THE CONCEPT OF ' MAKE AVAILABLE' OF TECHNICAL SERVICES THAT SUCH RECEIPTS WOULD NOT AMOUNT TO FEE FOR TECH NICAL SERVICES SO AS TO THE 'CONCEPT OF MAKE AVAILABLE CLAUSE' CONTAINED IN ARTICLE L3(4 )(C) OF THE TREATY HAS NOT BEEN SATISFIED IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE HONBLE DELHI HIGH COURT VIDE PARA 8 TO 13 HELD AS UNDER: - '8. BEFORE WE GO ON TO EXAMINE THE FINDINGS OF THE TRIBUNAL IT WOULD BE PERTINENT TO REFER TO ARTICLE 13 OF THE DTAA TO THE EXTENT IT IS RELEVANT :- 'ARTICLE 13- ROYALTIES AND FEES FOR TECHNICAL SERVICES- 1. ROYALTIES AND FEES FOR TECHNICAL SERVICES ARISIN G IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TA XED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES AND FEES FOR TECHNICAL S ERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAW OF THAT STALE; BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR T ECHNICAL SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL N OT EXCEED: (A) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(A) OF THIS ARTICLES, AND FEES FOR TECHNICAL SERV ICES WITHIN PARAGRAPHS 4 (A) AND (C) OF THIS ARTICLE,- (I) DURING THE FIRST FIVE YEARS FOR WHICH THIS CONV ENTION HAS EFFECT; (AA) 15% OF THE GROSS AMOUNT OF SUCH ROYALTIES OR F EES FOR TECHNICAL SERVICES WHEN THE PAYER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVIC ES IS THE GOVERN RENT OF THE FIRST MENTIONED CONTRACTING STATE OR A POLITICAL SUB-DIVI SION OF THAT STATE AND (BB) 20% OF THE GROSS AMOUNT OF SUCH ROYALTIES OR F EES FOR TECHNIAL SERVICES IN ALL OTHER CASES; AND (II) DURING SUBSEQUENT YEARS 15% OF THE GROSS AMOUN T OF SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES; AND (B) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(B) OF THIS ARTICLE AND FEES FOR TECHNICAL SERVICES DEFINED IN PARAGRAPH 4(B) OF THIS ARTICLE, 10% OF THE GROSS AMOUNT OF SUCH ROYALTIES AND FEES FOR TECHNICAL SERVICES. 3** ** ** (4) FOR THE PURPOSE OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM 'FEES FOR TECHNICAL SERVICES' MEA NS PAYMENTS OF ANY KIND OF ANY PERSON IN CONSIDERATION FOR THE RENDERING OF ANY TE CHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF A TECHNICAL OR OTHER PERSONNEL) WHICH: (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OF ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PAR AGRAPH 3(A) OF THIS ARTICLE IS RECEIVED; OR B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT OF THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF THIS ARTICLE IS RECE IVED, OR MAKE AVAILABLE TECHNICAL ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 18 KNOWLEDGE, EXPERIENCE. SKILL, KNOWHOW OR PROCESSES, OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIG N. 5. THE DEFINITION OF FEES FOR TECHNICAL SERVICES IN PARAGRAPH 4 OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. ACCORDING TO TH E TRIBUNAL THIS MAKE AVAILABLE CONDITION HAS NOT BEEN SATISFIED INASMUCH AS NO TEC HNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, PROCESSES, HAVE BEEN MADE DYE/LAB/ C BY THE ASSESSEE TO THE INSURANCE COMPANIES OPERATING IN INDIA. IT ALSO DOE S NOT CONSIST OF THE DEVELOPMENT AND TRANSFER OF ANY TECHNICAL PLAN OR TECHNICAL DES IGN. 10. THE TRIBUNAL EXAMINED THE EVIDENCE AVAILABLE ON RECORD IN ORDER TO RETURN A FINDING ON THE ISSUE AS TO WHETHER THE PAYMENTS REC EIVED BY THE ASSESSEE FROM THE INSURANCE COMPANIES OPERATING IN INDIA WOULD FALL W ITHIN THE EXPRESSION 'FEES FOR TECHNICAL SERVICES' AS APPEARING IN ARTICLE,. 13(4) '(C) OF THE DTAA READ WITH SECTION 9(1)(VII) OF THE SAID ACT. WHILE DOING SO THE TRIBU NAL, INTER ALIA, FOUND THAT THE ASSESSEE COMPANY WAS AN INTERNATIONAL REINSURANCE I NTERMEDIARY (BROKER) AND WAS A TAX RESIDENT OF UNITED KINGDOM. FURTHER, THAT IT WA S A RECOGNIZED BROKER BY THE FINANCIAL SERVICES AUTHORITY OF UNITED KINGDOM, IT WAS ALSO AN ADMITTED POSITION THAT THE ASSESSEE DID NOT MAINTAIN ANY OFFICE IN INDIA A ND MAT IT HAD A REFERRAL RELATIONSHIP WITH J B BODA REINSURANCE (BROKER) PVT . LTD OF MUMBAI AND THAT J B. BODA WAS DULY LICENCED BY THE INSURANCE REGULATORY & DEVELOPMENT AUTHORITY TO TRANSACT REINSURANCE BUSINESS IN INDIA 11 THE TRIBUNAL ALSO OBSERVED AS UNDER. 27. IN THE ILLUSTRATIVE TRANSACTION, NEW INDIA INS URANCE CO. LTD IN INDIA HAS ENTERED INTO AN AGREEMENT TO REINSURE ON AN EXCESS LOSS BAS IS THE CATASTROPHE RISK ARISING FROM ITS PRIMARY INSURANCE COVER IN CONJUNCTION WIT H J.B. BODA AND ALSFORD PAGE AND GEMS LTD. (THE REINSURANCE BROKERS). THE TERMS OF T HE AGREEMENT SPECIFIES THAT THE ASSESSEE IN CONJUNCTION WITH J.B. BODE ARE RECOGNIZ ED AS INTERMEDIARY, THROUGH WHOM ALL COMMUNICATIONS RELATING TO THIS AGREEMENT SHALL PASS. THE TERMS OF THE AGREEMENT FURTHER PROVIDES THAT THE ASSESSEE WILL P ROVIDE ALL THE DETAILS OF AGREED ENDORSEMENTS TO THE REINSURERS BY E-MAIL OR FACSIMI LE AND SHALL SUBMIT THE SLIP POLICY TO XIS (LLOYD'S PROCESSING MARKET) FOR SIGNING. THE ASSESSEE WILL ACT AS A CLAIM ADMINISTRATOR AND WILL SUBMIT CLAIMS ADVICES TO REL EVANT MARKET SYSTEMS. FOR THE SERVICES RENDERED, THE ASSESSEE ALONG WITH THE OTHE R REINSURANCE BROKERS ACTING AS AN INTERMEDIARY IN THE REINSURANCE PROCESS FOR NEW IND IA ASSURANCE CO. WILL BE ENTITLED TO 10% BROKERAGE. FROM THE ROLE PLAYED BY THE ASSES SEE IN THE REINSURANCE PROCESS AS DISCUSSED ABOVE, IT IS EVIDENT- TO US THAT THE A SSESSEE WAS RENDERING ONLY INTERMEDIARY SERVICES WHILE ACTING AS AN INTERMEDIA RY/FACILITATOR IN GETTING THE REINSURANCE COVER FOR NEW INDIA INSURANCE CO. THERE EXISTS NO MATERIAL OR BASIS ON THE BASIS OF WHICH, IT WOULD BE SAID THAT THE ASSES SEE WAS RENDERING ANY KIND OF TECHNICAL/CONSULTANCY SERVICE WITHIN THE MEANING OF ARTICLE 13 OF INDO-UK TREATY. THE CONSIDERATION RECEIVED BY THE ASSESSEE ACTING A S AN INTERMEDIARY IN THE REINSURANCE PROCESS CANNOT, BY ANY STRETCH OF IMAGI NATION, BE QUALIFIED AS A CONSIDERATION RECEIVED FOR RENDERING ANY FINANCIAL ANALYSIS RELATED CONSULTANCY SERVICES RATING AGENCY ADVISORY SERVICES, RISK BASE D CAPITAL ANALYSIS ETC. AS ALLEGED BY THE A.O.' ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 19 THE TRIBUNAL ALSO NOTED THE PROCESS BY WHICH THE T RANSACTIONS TAKES PLACE IT HAS BEEN POINTED OUT THAT THE ORIGINATING INSURER IN IN DIA WOULD CONTACT J. B. BODA/ M, B. BODA FOR PLACING IDENTIFIED RISKS/ CLASS OF RISKS W ITH INTERNATIONAL REINSURERS. J.B. BODA, IN TURN, WOULD CONTACT ONE OR MORE INTERNATIO NAL FIRM(S) OF REINSURANCE BROKER(S) LIKE THE ASSESSEE FOR COMPETITIVE PROPOSA LS FROM THE INTERNATIONAL REINSURER. THEN, THE INTERNATIONAL REINSURANCE BROKERS LIKE TH E ASSESSEE WOULD CONTACT OTHER PRIMARY BROKERS AND VARIOUS SYNDICATES IN THE LLOYD S MARKET FOR COMPETITIVE PROPOSALS. BASED ON THE VARIOUS OFFERS OR PROPOSALS GIVEN BY THE- INTERNATIONAL REINSURANCE BROKERS, LIKE THE ASSESSEE, TO J.B. BOD A, THE LATTER WOULD PRESENT VARIOUS OPTIONS TO THE ORIGINATING INSURER IN INDIA, WHICH WOULD TAKE A FINAL-DECISION IN THE MATTER. BASED ON THE DECISION OF THE ORIGINATING IN SURER IN INDIA, THE POLICY TERMS WOULD THEN BE AGREED UPON AND THE RISK WOULD BE PLA CED WITH THE INTERNATIONAL REINSURER IT WAS ALSO POINTED OUT THAT AS PER THE N ORMAL INDUSTRY PRACTICE, TEA REINSURANCE PREMIUM NET OF BROKERAGE AL 10% AS PER THE POLICY CONTRACT IS REMITTED TO THE ASSESSEE, I.E., REINSURANCE BROKERS, FOR ONW ARD TRANSMISSION TO INTERNATIONAL REINSURERS. THE INTERMEDIATION FEE WHICH IS ANOTHER WORD FOR BROKERAGE IS PAID SEPARATELY BY THE ORIGINATING INSURANCE IN INDIA TO J.B. BODO, THE INTERNATIONAL REINSURANCE BROKERS LIKE THE ASSESSEE AND OTHER INT ERMEDIARIES, BASED ON A MUTUALLY AGREED RATIO WHICH ACCOUNTS FOR THEIR RELATIVE CONT RIBUTION IN THE REINSURANCE PROCESS. 12. BASED ON THIS MANNER OF TRANSACTING, THE TRIBUN AL CAME TO A CONCLUSION THAT THE PAYMENT RECEIVED BY THE ASSESSEE COULD NOT BE REGAR DED AS 'FEES FOR TECHNICAL SERVICES'. FURTHER, MORE, THE TRIBUNAL ALSO HELD TH AT SUCH RECEIPTS WOULD NOT AMOUNT TO FEES FOR TECHNICAL SERVICES AS THE 'MAKE AVAILAB LE' CLAUSE CONTAINED IN ARTICLE 13(4)(C) HAD NOT BEEN SATISFIED IN THE FACTS AND CI RCUMSTANCES OF THE PRESENT CASE. 13. IN OUR VIEW, THE TRIBUNAL HAS ARRIVED AT THESE CONCLUSIONS PURELY ON ASSESSING THE FACTUAL MATRIX OF THE CASE AT HAND. THE FINDINGS AR E IN, THE NATURE OF FACTUAL FINDINGS AND, THEREFORE, ACCORDING TO US, NO SUBSTANTIAL QUE STION OF LAW ARISES FOR OUR CONSIDERATION, PARTICULARLY, BECAUSE THE LEARNED CO UNSEL FOR THE REVENUE WAS UNABLE TO POINT OUT ANY PERVERSITY IN THE RECORDING OF SUC H FINDINGS. AS SUCH NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. THE A PPEAL IS DISMISSED. THERE SHALL BE. NO ORDER AS TO COSTS.' 13. FURTHER, THE LEARNED COUNSEL FOR THE ASSSSEE S TATED THAT THE RELIANCE PLACED BY DRP IN AREVAY T AND D INDIA LIMITED OF PERFETI VAN MELLE HOLDINGS B.V. IN RE [2011] 16 TAXMANN.COM 207 (AAR - NEW DELHI) WAS REV ERSED BY HON'BLE DELHI HIGH COURT AND REPORTED IN 2014 52 TAXMANN.COM 161 (DELH I), WHEREIN HON'BLE DELHI HIGH COURT HAS CONSIDERED AS UNDER: - '1. THIS WRIT PETITION IS DIRECTED AGAINST THE RULI NG DATED 09.12.2011 IN AAR NO.86912010 GIVEN BY THE AUTHORITY FOR ADVANCE RULI NGS. ONE OF THE PLEAS RAISED BY THE PETITIONER WAS THAT THE SAID AUTHORITY HAD NOT CONSIDERED THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND PORTUGAL WHIC H IS AN OECD COUNTRY. THE LEARNED COUNSEL FOR THE PETITIONER SUBMITTED THAT A NY AGREEMENT BETWEEN INDIA AND AN OECD COUNTRY COULD BE LOOKED INTO WHILE CONSTRUI NG THE INDO-NETHERLANDS DOUBLE TAXATION AVOIDANCE CONVENTION. THE LEARNED C OUNSEL FOR THE PETITIONER HAD ALSO RAISED THE PLEA THAT THE MEMORANDUM OF UNDERST ANDING CONCERNING FEES FOR ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 20 INCLUDED SERVICES REFERRED IN ARTICLE 12(4) OF THE INDO USA DTAA CONCERNING THE EXPRESSION? AVAILABLE? WAS ALSO NOT CONSIDERED BY T HE AUTHORITY FOR ADVANCE RULINGS; IT-WAS SUBMITTED THAT THE SAID AUTHORITY R EFUSED TO LOOK INTO THE INDO- PORTUGESE DTAA OR THE LNDO USA DTAA AND MEMORANDUM OF UNDERSTANDING BETWEEN INDIA AND USA ON THE GROUND THAT ONLY THE INDO NETH ERLANDS DTAC NEEDED TO BE LOOKED INTO. 2. THE LEARNED COUNSEL FOR THE RESPONDENT STATES TH AT THE AUTHORITY FOR ADVANCE RULINGS WAS CORRECT IN NOT LOOKING, INTO THE LNDO - PORTUGESE DTAA, BUT INSOFAR AS THE INDO-USA DTAA IS CONCERNED A PROVISION SIMILAR TO THAT DTAA HAS BEEN INCORPORATED IN THE INDO-NETHERLANDS DTAC BY VIRTUE OF PARAGRAPH 5 OF ARTICLE 12 OF THE SAME, WHEREBY THE VERY SAME MAKE AVAILABLE CLAU SE, WHICH IS TO BE FOUND IN THE DTAA BETWEEN INDIA AND USA READ WITH THE MEMORANDUM OF UNDERSTANDING CONNECTED THEREWITH, HAS BEEN INCORPORATED INTO IND O-NETHERLANDS CONVENTION BY WAY OF AMENDMENT ON 30.08.1999, NOTIFICATION NO. S. O. 693 (E) [REPORTED IN (1999) 239 ITR (STAT) 56]. IT IS EVIDENT THAT THE AUTHORIT Y FOR ADVANCE RULINGS HAD NOT CONSIDERED THE SAID AMENDMENT. 14. IN VIEW OF THE ABOVE, WE ARE OF THE THAT THE CO NCEPT OF MAKE AVAILABLE OF TECHNICAL SERVICES THAT SUCH RECEIPTS WOULD NOT AMOUNT TO FEE FOR TECHNICAL SERVICES SO AS TO THE CONCEPT OF MAKE AVAILABLE CLAUSE CONTAINED IN ARTI CLE 13(4)(C) OF THE TREATY HAS NOT BEEN SATISFIED. ACCORDINGLY, WE DELETE THE ADDITION AND ALLOW THIS ISSUE OF ASSESSEES APPEAL. 17. SINCE, THE CO-ORDINATE BENCH HAS DECID ED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN APPEALS FOR THE A.Y. 2009-10 AND 2010-11 27 REFERRED ABOVE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE C O-ORDINATE BENCH ALLOW GROUND NO. 5, 6 AND 7 OF THIS APPEAL. 9. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR U NDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MERIT IN THE ACTION OF LOWER AUTHORITIES F OR TREATING THE RECEIPT AS FEES FOR TECHNICAL SERVICES DESPITE THE CONCEPT OF MAKE AVA ILABLE CLAUSE CONTAINED IN ARTICLE 13(4)(C) OF THE TREATY. ACCORDINGLY, AO IS DIRECTED TO DELETE THE ADDITION SO MADE. 12. WE HAVE NOTED THAT THE FACTS FOR THE YEAR UNDER CO NSIDERATION ARE SIMILAR. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF TRIB UNAL ON SIMILAR FACTS, AND ON IDENTICAL GROUNDS THE GROUND NO. 5 & 6 OF TH E APPEAL ARE ALLOWED IN FAVOUR OF ASSESSEE. NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE FOR TAKING OTHER VIEW. ITA NO. 7428 MU M 2017-M/S SHELL INFORMATION TECHNOLOGY INTERNATION AL BV 21 13. GROUND NO.7 RELATES TO NON-GRANTING OF CREDIT FOR T AX DEDUCTED AT SOURCE. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSEE FILED RECTIFICATION APPLICATION BEFORE THE LOWER AUTHORIT IES AND HAS RECEIVED THE ORDER GRANTING APPROPRIATE CREDIT OF TDS, THEREFORE , THIS GROUND OF APPEAL IS NOT PRESSED. CONSIDERING THE SUBMISSION OF LD. A R OF THE ASSESSEE, GROUND NO.7 OF THE APPEAL BEING NOT PRESSED. 14. GROUND NO.8 RELATES TO INTEREST UNDER SECTION 234A OF THE ACT. THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND NEE D NO ADJUDICATION. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/ 03/2019. SD/- SD/- N.K. PRADHAN PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 05.03.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR I BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI