Hughes Escorts Communication Ltd., V. DDIT, Circle-2(2),

ITA 752/DEL/2005

• Counselvise Citation: 75220114 RSA 2005
• Duration Of Justice: 7 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 15-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: AJAY VOHRA SH NEERAJ JAIN
• Keywords: Business income; Double taxation relief; Wholly owned subsidiary
• Section: 32; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: B NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER ITA NO: 752/DEL/2005 A.Y. : N.A. M/S HUGHES ESCORT COMMUNICATIONS LTD. VS. DCIT, CI RCLE 2(2) B 25, 2 ND FLOOR, QUTUB INSTITUTIONAL AREA NEW DELHI NEW DELHI (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI AJAY VOHRA/SH.NEERAJ JAIN, ADV. RESPONDENT BY : SHRI NK CHAND, SR.D.R. O R D E R PER DIVA SINGH, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 1.11.2004 OF CIT(A)-XXIX, NEW DELHI ON THE FOLLOWI NG GROUNDS. THAT THE CITT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ACTION OF A.O. IN DIRECTING TO DEDUCT TAX @ 15% FRO M THE PAYMENT TO BE MADE TO TOWER INNOVATIVE LEARNING SOL UTIONS INC. USA (ECORNELL), HOLDING THE SAME TO BE IN THE NATUR E OF ROYALTY, IN TERMS OF ARTICLE 12 OF THE DOUBLE TAX AVOIDANCE AGREEMENT INDIA AND USA (DTAA). 2. THAT THE CITT(A) ERRED ON FACTS AND IN LAW IN H OLDING THE PAYMENT PROPOSED TO BE MADE WAS IN THE NATURE OF RO YALTY SINCE THE SAME WAS FOR THE USE OF TRADE MARKS, SERV ICE MARKS, LOGOS AND OTHER CORPORATE INDICES. 3. THAT THE CITT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE USE OF THE AFORESAID MARKS WA S FOR THE PURPOSE OF ADVERTISING FOR SOLICITING REGISTRATION FROM STUDENTS, THE BENEFIT OF WHICH WAS TO ACCRUE TO ECORNELL AND, HENCE, NO 2 CONSIDERATION COULD BE DEEMED TO HAVE BEEN PAID FOR SUCH TRADE MARKS, LOGOS ETC. 4. THAT THE CITT(A) ERRED ON FACTS AND IN LAW IN C ONTENDING THAT THE APPELLANT WAS GRANTED LIMITED, NON EXCLUSIVE, N ON TRANSFERABLE AND NON SUB LICENSABLE RIGHT IN CONNEC TION WITH THE OFFERING AND DISTRIBUTION OF COURSES BY ECORNELL AN D, HENCE, THE PAYMENT FOR THE SAME WAS IN THE NATURE OF ROYALTY A S PER ARTICLE 12 OF THE DTAA BETWEEN INDIA AND USA. 5. THAT THE CITT(A) ERRED ON FACTS AND IN LAW IN C ONFIRMING THE ACTION OF THE AO IN NOT HOLDING THAT THE PAYMENT PR OPOSED TO BE MADE WAS IN THE NATURE OB BUSINESS PROFITS AND IN TERMS OF ARTICLE 7 OF THE DTAA, IN ABSENCE OF A PERMANENT ES TABLISHMENT, THE SAME WAS NOT TAXABLE IN INDIA. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE MADE AN APPLICATION U/S 195(1) OF THE INCOME TAX ACT, 1961 ASKING FOR NIL DEDUCTION OF TAX CERTIFICATE. THE PAYEE I.E. THE TOWER INNOVATIVE LEARNING SOLUTIONS INC. USA (HEREINAFTER REFERRED TO AS TILS) ENTERED INTO AN AGREEMENT WITH HUGHES ESCORTS COMMUNICATION LTD. I.E. THE ASSESSEE (HEREINAFTER REFERRED TO AS HECL) TO GRANT THE LAT TER A LIMITED, NON - EXCLUSIVE, NON-TRANSFERABLE, NON-SUBLICENSABLE RI GHT AND LICENSE TO MARKET, PROMOTE AND PROVIDE CERTAIN ANCILLARY SERV ICES IN CONNECTION WITH THE OFFERING AND DISTRIBUTION OF ITS DISTANCE LEARNING COURSES BY ECORNELL IN THE TERRITORY. 2.1. IT WAS SUBMITTED THAT THE PROCESS INVOLVED TH E FOLLOWING TRANSACTIONS. STEP 1 : STUDENT ACCESSES HECLS WEB SITE CONTAINI NG PROMOTIONAL MATERIAL IN RELATION TO THE COURSES OFFERED BY CORN EL. STEP 2: STUDENT ENTERS INTO AN ARRANGEMENT WITH HE CL FOR OBTAINING THE BENEFICIAL FEE FOR THE COURSES OFFERED BY CARNEL L AND FOR USING THE INFRASTRUCTURE OF HECL. 3 INFRASTRUCTURE SHALL INCLUDE COMPUTERS, MODEMS ETC. ACCESS CHARGES ARE SEPARATELY PAYABLE TO THE EXTENT OF USAGE OF CONNECTIVELY (TELEPHONE CONNECTION, GATEWAY, BROAD BAND ETC.) TOTAL FEE OF RS.1,65,000 IS PAID BY THE STUDENT TO HECL IN INDIAN RUPEES OF WHICH USD 2.100 IS TO BE REMITTED BY CARN ELL FOR THE COURSE CONTENT. STEP 3: STUDENT IS REGISTERED BY CARNELL DIRECTLY UPON CONFIRMATION CASHIERING BY HECL. STEP 4: STUDENT AVAILS FACILITIES PROVIDED BY HECL S CENTRE. HECL WILL PROVIDE THE FOLLOWING FACILITIES. COMPUTERS MODEM BROADBAND ACCESS TELECOM CONNECTIVITY 2.2. THE ASSESSEE PUT FORTH THE FOLLOWING ARGUMENTS IN SUPPORT OF THE CONTENTION THAT INCOME EARNED BY TILS IS NOT TAXABL E IN INDIA NEITHER UNDER THE INCOME TAX ACT, 1961 NOR UNDER THE ACT O F INDO-US TREATY FOR THE FOLLOWING REASONS. THE MAIN CONTENTION OF THE ASSESSES IS THAT THE INC OME EARNED BY TILS IS FOR IMPARTING OF EDUCATION ONLINE I.E., FRO M THE ACTIVITY OF TEACHING AND GRANTING OF CERTIFICATE/DEGREE AND HEN CE SHALL ONLY BE IN THE NATURE OF BUSINESS INCOME. ACCORDINGLY I N THE ABSENCE OF ANY PRESENCE IN INDIA IN THE FORM OF A PERMANEN T ESTABLISHMENT OR BUSINESS CONNECTION THE INCO ME EARNED BY TILS SHALL NOT BE TAXABLE IN INDIA EITHER UNDER THE INCOME TAX ACT, 1961 OR UNDER THE INDIA US TREATY I.E. ARTICLE 7 OF THE TREATY. 2.3. CONSIDERING THE SAME THE A.O. REQUIRED THE AS SESSEE TO EXPLAIN AS TO WHY THE SAID INCOME SHOULD NOT BE TR EATED AS ROYALTY. 2.4. IN RESPONSE TO THE SAID QUERY IT WAS THE PLE A OF THE ASSESSEE THAT HECL IS NOT MAKING ANY PAYMENTS FOR THE USE OF , OR THE RIGHT TO USE ANY COPY RIGHT OF LITERARY, ARTISTIC, OR SCIENTIFIC WORK AND THEREFORE THE NATURE OF INCOME IN THE HANDS OF TILS WOULD NOT FAL L WITHIN THE SCOPE OF 4 ROYALTY. THE CONTENTION PUT FORTH WAS THAT HECL WA S BY AND LARGE ONLY PROVIDING ANCILLARY SERVICES TO THE PAYEE AS SUCH H ECL WOULD PROVIDE INFRASTRUCTURE I.E. COMPUTERS, BROAD BAND ACCESS, TRANSLATION ASSISTANCE, CLASS ROOM, VSAT CONNECTIVITY ETC. TO THE STUDENTS IN INDIA TO ENABLE THEM TO ACCESS THE CONTENTS OF THE COURSE ON THE WE B SITE. HECL WOULD ALSO ASSIST THE REGISTRATION PROCESS OF THE STUDENT S AND COLLECT COMBINED FEES FOR THE COURSE CONTENT AND THE SERVICES/FACILI TIES OFFERED BY IT TO THE STUDENTS. 2.5. IN THE CONTEXT OF THESE FACTS IT WAS PLEADED T HAT INCOME RECEIVED BY E-CORNELL FROM HECL THROUGH IMPARTING OF EDUCATION DOES NOT FALL IN THE AMBIT OF ROYALTY UNDER THE DTAA. ELABORATING FURT HER CLAUSE 3(A) OF ARTICLE 12 OF DTAA BETWEEN INDIA AND THE US IT WAS STATED COULD BE DIVIDED INTO THREE PARTS NAMELY CONSIDERATION FOR USE/RIGHT TO USE COPY RIGHT OF LI TERARY, ARTISTIC OR SCIENTIFIC WORK. CONSIDERATION FOR ANY PATENTS, TRADE MARKS, DESIGN, MODEL, PAN, SECRET FORMULA OR PROCESS. CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL COMMERCIAL OR SCIENTIFIC EXPERIENCE. ADDRESSING EACH OF THESE PARTS THE ASSESSEE STATED THAT NONE OF THEM WERE APPLICABLE. 3. HOWEVER NOT CONVINCED WITH THE EXPLANATION OFFER ED THE AO AFTER TAKING INTO CONSIDERATION THE COPY OF THE AGREEMENT SIGNED BETWEEN TILS WHICH WAS DOING BUSINESS AS ECORNELL AND HECL HELD THAT THE PAYMENT RECEIVED BY ECORNELL IS IN THE NATURE OF ROYALTY AN D DIRECTED THE ASSESSEE 5 TO DEDUCT TAX @ 15% AS PER ARTICLE 12 OF INDIA US D TAA BEFORE REMITTING MONEY. 3.1. IN ORDER TO ARRIVE AT THE ABOVE CONCLUSION THE SAID AUTHORITY NAMELY ADIT , CIRCLE 2(2), INTERNATIONAL TAXATION, NEW DELHI ON CONSIDERING THE PETITION AND THE COPY OF THE AGREE MENT SIGNED BETWEEN TILS AND HCEL, TOOK NOTE OF THE FACT THAT THE ASSE SSEE HAD BEEN GRANTED A LIMITED, NON EXCLUSIVE, NON TRANSFERABLE, NON S UBLICENSEABLE RIGHT AND LICENSE TO MARKET, PROMOTE, AND PROVIDE CERTAIN ANC ILLARY SERVICES IN CONNECTION WITH THE OFFERING AND DISTRIBUTION OF TH E COURSES BY ECORNELL IN THE TERRITORY. TAKING INTO CONSIDERATION CLAUSE 10 AND CLAUSE 11.2 AND EXHIBIT G OF THE AGREEMENT, IT WAS CONCLUDED THAT PAYMENTS RECEIVED BY ECORNELL WOULD BE IN THE NATURE OF ROYA LTY UNDER DTAA BETWEEN INDIA AND THE U.S. THE RELEVANT PORTION EX TRACTED FROM THE ORDER READS AS UNDER:- THE ASSESSEE WENT INTO EACH OF THESE PARTS AN D RULED THEM OUT ONE BY ONE BY ARGUING THAT ITS CASE DOES NOT FA LL WITHIN THE AMBIT OF ANY OF THESE. HOWEVER, ON GOING THROUGH THE COPY OF AGREEMENT SIG NED BETWEEN THE TILS, WHICH WAS DOING BUSINESS AS ECORN ELL AND HECL, IT IS SEEN THAT THE FORMER HAD GRANTED THE LA TTER A LIMITED, NON EXCLUSIVE, NON TRANSFERABLE, NON SUBLICENSEABL E RIGHT AND LICENSE TO MARKET, PROMOTE, AND PROVIDE CERTAIN ANC ILLARY SERVICES IN CONNECTION WITH THE OFFERING AND DISTRIBUTION OF THE COURSES BY ECORNELL IN THE TERRITORY. FURTHER HECL, AT ITS EXPENSE WAS TO REGISTER STUDENTS WISHING TO ENROLL IN THE COURSES VIA A WEB SITE DEVELOPED, HOSTED AND MAINTAINED BY ONE OR BEHALF O F HECL. MOREOVER, IT WAS AGREED UPON THAT THE CONTENT AND F UNCTIONALITY OF THE REGISTRATION SITE SHALL BE MUTUALLY AGREED U PON BY THE PARTIES IN WRITING PROVIDING HOWEVER THAT THE REGIS TRATION SITE MAY DISPLAY ECORNELL MARKS IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT. 6 REGARDING THE CLAUSE ON FEES AND PAYMENTS IT WAS ME NTIONED THAT ECORNELL ON THE 12 TH OF EACH MONTH WOULD INVOICE HECL FOR ALL COURSE REGISTRATIONS PROCESSED VIA THE REGISTRA TION SITE AT THE RATES FOR SUCH REGISTRATIONS OF THE SAID COURSES IN THE AGREEMENT. IT WAS ALSO MENTIONED THAT ECORNELL SHALL ONLY BE O BLIGATED TO COMPLETE THE REGISTRATION PROCESS AND RELEASE THE M ATERIAL REQUIRED BY STUDENTS TO ACCESS THE COURSES UPON REC EIPT OF FULL PAYMENT FROM HECL. UNDER CLAUSE 10 OF THE AGREEMENT IT WAS STATED THAT ECORNELL GRANTS TO HECL THE LIMITED RIGHT AND LICENSE TO USE THE ECORNELL TRADE MARKS, SERVICE MARKS, LOGOS AND OTHER CORPORA TE INDICIA FOR THE PURPOSES OF ADVERTISING AND PROMOTING THE COURS ES. FURTHER UNDER CLAUSE 11.2 IT WAS STATED THAT THE COURSES AR E SUBJECT TO THE WARRANTY PROVISIONS OF THE N USER AGREEMENT. E CORNELL DOES NOT WARRANT THAT THE COURSES WILL MEET AFFILIATES T HAT IS HECL REQUIREMENTS OR THOSE OF ENROLL STUDENTS, OR THAT T HE OPERATION OR VIEWS OF ANY OF THE COURSES WILL BE UNINTERRUPTED O R ERROR FREE. IN EXHIBIT G OF THE AGREEMENT WHICH DEFINES THE ROL ES AND RESPONSIBILITIES OF THE TWO PARTIES IT IS CLEARLY S TATED THAT HECL SHALL PERFORM AND BE RESPONSIBLE FOR THE MARKETING AND PROMOTION OF THE ECORNELL COURSES WITHIN THE DEFINED TERRITOR Y, CREATION OF IN COUNTRY MARKETING AND PROMOTION COLLATERAL AND SALE S CASHIERING OF ALL N USERS TRANSACTIONS FOR COURSE REGISTRATIO N AND FOR THE PURPOSE OF COURSE DELIVERY TRANSACTIONS FOR COURSE REGISTRATION AND FOR THE PURPOSE OF COURSE DELIVERY, ESTABLISHME NT, MAINTENANCE AND PROVISIONING OF THE CLASS ROOMS THA T CAN FACILITATE COURSE ACCESS FOR STUDENT IN THE TERRITO RY. ON THE PART OF ECORNELL, IT WAS RESPONSIBLE FOR PROVIDING A COBRAN DED WEB BASED REGISTRATION INTERFACE FOR HECLS USE IN MAKING REG ISTRATION REQUESTS. IT WAS ALSO SUPPOSED TO PROVIDE APPROVAL S TO HECL REGISTRATION REQUESTS WITHIN 24 HOURS OF RECEIVING PAYMENT IN FULL FOR SUCH REQUESTS. IN THE FIELD OF MARKETING ECORNELL WAS SUPPOSED TO PROVIDE THE FOLLOWING: REGISTRATION: PROVIDE A CO-BRANDED WEB BASED REGISTRATION INTERF ACE FOR AFFILIATES USE IN MAKING REGISTRATION REQUESTS. PROVIDE APPROVALS TO AFFILIATE REGISTRATION REQUEST S WITHIN 24 HOURS OF RECEIVING PAYMENT IN FULL FOR SUCH REQUEST S. MARKETING: PROVIDE US BASED SALES COLLATERAL TO BE ADAPTED AT AFFILIATES DISCRETION. 7 PROVIDE GUIDELINES FOR AFFILIATES USE OF ECORNELL S REGISTERED MARKS. PROVIDE TIMELY APPROVALS FOR ALL AFFILIATE-DEVELOPE D MARKETING COLLATERAL. FOR COURSE DELIVER ECORNELL WAS SUPPOSED TO PROVIDE FOLLOWING: PROVIDE INTERNET ACCESS TO COURSES AND SUPPORT SERV ICES TO STUDENTS FOR WHICH AFFILIATE HAS PAID ALL COURSE FE ES. PROVIDE LETTERS OF COMPLETION TO ALL STUDENTS WHO C OMPLETE COURSE REQUIREMENTS IN A SATISFACTORY MANNER. PROVIDE CERTIFICATES OR CERTIFICATIONS TO STUDENT S WHO COMPLETE SUCCESSFULLY ALL COURSES MAKING UP A CERTIFICATES O R CERTIFICATION PROGRAM. FROM THE ABOVE FACTS REFLECTED IN THE AGREEMENT SIG NED BETWEEN THE TWO PARTIES, IT IS EVIDENT THAT THE PAYMENT RECEIVED BY ECORNELL WOULD BE IN THE NATURE OF ROYALTY. UNDER THE DTAFF BETWEEN INDIA A ND US, ROYALTY HAS BEEN DEFINED AS FOLLOWS. A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OR A LITERAR Y, ARTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR W ORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONN ECTION WITH RADIO OR TELEVISION BROADCASTING ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION THEREOF; AND B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION F OR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL, OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERP RISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2 (C) OR 3 OF ARTICLE 8. THEREFORE, GENERALLY DEFINED ROYALT Y IS A PAYMENT MADE TO THE OWNERS OF CERTAIN TYPES OF RIGHTS BY THOSE W HO ARE PERMITTED BY THE OWNERS TO EXERCISE THE RIGHTS. TH E RIGHTS CONCERN ARE LITERARY, MUSICAL OR ARTISTIC COPY RIGH TS, RIGHTS IN INVENTION AND DESIGN, RIGHTS IN MINERAL DEPOSITS, I NCLUDING OIL AND NATURAL GAS. ROYALTY IS THEREFORE THUS A CONSI DERATION FOR THE TRANSFER OF ALL OR ANY RIGHT (INCLUDING GRANTIN G OF A LICENSE) IN 8 RESPECT OF COPY RIGHT, PATENT, TRADE MARK, DESIGN A ND MODEL, OR SECRET FORMULA ETC. THE VARIOUS PROVISIONS IN THE AGREEMENT SIGNED BETWEEN THE TWO PARTIES, HAS HAVE BEEN QUOTED ABOVE INDICAT E THE FACT THAT ECORNELL HAD GRANTED A LICENSE TO HECL AND THE REFORE, HAD PERMITTED THE LATTER TO EXPLOIT ITS COPY RIGHT IN T HE FORM OF DISTRIBUTION OF THE COURSES PROVIDED BY ECORNELL. FURTHER, ECORNELL HAS GRANTED TO HECL THE LIMITED RIGHT AND LICENSE TO USE THE ECORNELL TRADE MARKS, SERVICE MARKS, LOGOS ETC. IT CAN THEREFORE BE SAFELY ASSUMED THAT THE PAYMENT RECEIV ED BY ECORNELL IS IN THE NATURE OF ROYALTY, AS IT IS IN C ONSIDERATION FOR THE USE/RIGHT TO USE COPY RIGHT OF LITERARY, ARTIST IC, SCIENTIFIC OR OTHER WORK AND ALSO FOR ITS TRADE MARKS. 4. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE CIT(A) SUMMED UP THE FACTS IN PARA 2 AS UNDER:- 2. THE APPELLANT COMPANY HAD FILED AN APPLICATION ASKING FOR A NIL DEDUCTION OF TAX CERTIFICATE. THE APPELL ANT HAS ENTERED INTO AN AGREEMENT WITH TILS INC. (ECORNELL) TO MARKET, PROMOTE AND PROVIDE ANCILLARY SERVICES IN CONNECTIO N WITH PROVIDING DISTANCE LEARNING COURSES OFFERED BY ECOR NELL UNIVERSITY TO THE STUDENTS IN INDIA. THE APPELLANT STATED THAT THE PAYMENT MADE TO ECORNELL IS IN THE NATURE OF BU SINESS INCOME AND IT IS NOT LIABLE TO BE TAXED BECAUSE THE RECIPIENT DOES NOT HAVE ANY PE IN INDIA. AFTER EXAMINATION O F THE AGREEMENT THE A.O. FOUND THAT ECORNELL HAD GRANTED THE APPELLANT A LIMITED NON EXCLUSIVE, NON TRANSFERABLE , NON SUB LICENSABLE RIGHT AND LICENSE TO MARKET, PROMOTE AND PROVIDE CERTAIN SERVICES IN CONNECTION WITH THE OFFERING AN D DISTRIBUTION OF COURSES BY ECORNELL IN THE TERRITOR Y. IT WAS ALSO NOTICED BY THE A.O. THAT ECORNELL GRANTS TO HECL TH E RIGHT AND LICENSE TO USE THE ECORNELL TRADE MARKS, SERVICE MA RKS, LOGOS AND OTHER CORPORATE INDICIA FOR THE PURPOSES OF ADV ERTISING AND PROMOTING THE COURSES. IT WAS ALSO NOTICED BY THE A.O. THAT ECORNELL WAS RESPONSIBLE FOR PROVIDING A CO-BRANDE D WEB BASED REGISTRATION INTERFACE FOR HECL;S USE IN MAKI NG REGISTRATION REQUESTS. ON THE BASIS OF ABOVE MATER IAL AND AFTER ANALYZING THE PROVISIONS OF ARTICLE 12 OF IND IA USA DTAA, THE AO HELD THAT THE PAYMENT MADE BY THE ASSESSEE W AS IN THE NATURE OF ROYALTY AND THEREFORE THE ASSESSEE WA S LIABLE TO BE DEDUCTED TAX @ 15%. 9 4.1. THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESS EE ARE CULLED OUT IN PARA 3 WHICH READS AS UNDER:- THE ASSESSEE ARGUED THE ISSUE AT LENGTH AND STATED THAT THE ACTION OF AO IS NOT AS PER PROVISIONS OF ARTICLE 12 . IT WAS SUBMITTED THAT THE PAYMENT MADE BY THE ASSESSEE IS NOT IN CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE AN Y COPY RIGHT OF LITERARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING INTER LIA FOR ANY PATENT, TRADE MARK, DESIGN OR MODEL OR PLAN. T HE CONSIDERATION IS FOR IMPARTING EDUCATION REMITTED T HROUGH THE ASSESSEE TO ECORNELL, THEREFORE, IT COULD NOT BE RE GARDED AS ROYALTY IN TERMS OF ARTICLE 12 OF DTAA. IT WAS ALS O SUBMITTED THAT THE USE OF ECORNELL MARKS IS MERELY INCIDENTAL TO THE ADVERTISING FOR SOLICITING REGISTRATION FROM STUDENTS AS BENEFIT OF WHICH IS TO VEST NAMELY IN ECORNELL. IN SUCH CIRCUMSTANCES, THERE BEING NO CONSIDERATION PAID FO R USE OF ANY TRADE MARK OR ECORNELL MARKS BY THE APPELLANT. IN ABSENCE OF ANY RATIONALE AND ALSO THE STIPULATION A S TO PAYMENT OF ANY ROYALTY UNDER THE AGREEMENT BETWEEN THE PARTIES, IT WOULD BE INCONCEIVABLE AS TO HOW THE A. O. COULD ON THE BASIS OF HIS OWN WHIMS AND FANCIES ATTRIBUTE ANY PART OF PAYMENT TOWARDS USE OF TRADE MARK. IT WAS FURTHER SUBMITTED THAT THE PAYMENT MADE BY THE APPELLANT UN DER THE AFORESAID AGREEMENT WOULD NOT CONSTITUTE ROYAL TIES AS DEFINED IN ARTICLE 12 OF DTAA. THE AFORESAID PAYME NT WOULD CONSTITUTE BUSINESS PROFITS TO WHICH ARTICLE 7 WO ULD APPLY. HOWEVER, IN THE ABSENCE OF A PE OF ECORNELL IN INDI A, THE PAYMENT MADE FOR ACQUIRING MARKETING RIGHTS, AS AFO RESAID, WOULD NOT BE LIABLE TO TAX IN INDIA AND CONSEQUENTL Y THE SAME WOULD NOT BE SUBJECT TO TAX DEDUCTION AT SOURC E U/S 195 OF THE ACT. 4.2. THE ASSESSEES APPEAL WAS DISMISSED BY THE CIT (A) HOLDING AS UNDER:- I HAVE EXAMINED THE SUBMISSIONS OF THE APPELLANT AND FACTS OF THE CASE CAREFULLY. I FIND THAT A.O. HAS EXAMIN ED THE VARIOUS CLAUSES OF AGREEMENT FROM WHICH IT IS CLEAR THAT THE ECORNELL HAS GRANTED TO HECL THE RIGHT & LICENSE TO USE THE ECORNELL TRADE MARKS, SERVICE MARKS, LOGOS AND OTHE R CORPORATE INDICIA. ECORNELL HAS ALSO GRANTED LIMIT ED NON EXCLUSIVE NON TRANSFERABLE, NON SUBLICENSABLE RIGHT IN CONNECTION WITH THE OFFERING AND DISTRIBUTION OF CO URSES BY ECORNELL. THE APPELLANTS ARGUMENTS THAT THERE RIG HTS TO USE TRADE MARK ETC. ARE FREE OF CHARGE IS NEITHER COMPR EHENSIBLE 10 NOR IT IS MENTIONED IN THE AGREEMENT. AS PER CLAUS E 12 OF DTAA ANY PAYMENT FOR USE OF THE RIGHT TO USE ANY T RADE MARK OR ANY COPY RIGHT WILL BE ROYALTY. CONSIDERING THE FACTS MENTIONED BY AO, AGREEMENT OF THE APPELLANT AND PRO VISIONS OF ARTICLE 12 OF DTAA BETWEEN USA & INDIA. IT IS C LEAR THAT THE PAYMENT MADE BY THE APPELLANT IS IN THE NATURE OF R OYALTY AND IS LIABLE TO BE TAXED @ 15%. THEREFORE, AO WAS JUSTIFIED IN DIRECTING THE APPELLANT TO DEDUCT TAX AT SOURCE @ 15%. THEREFORE, AO WAS JUSTIFIED IN DIRECTING THE APPELL ANT TO DEDUCT TAX AT SOURCE @ 15% AS PER DTAA. ACCORDINGL Y, GROUND NO.1 TO 4 ARE DISMISSED. IN THE RESULT, THE APPEAL IS DISMISSED. 5. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 6. LD.A.R. REITERATED THE SUBMISSIONS ADVANCED BEFO RE THE AUTHORITIES BELOW. THE SUBMISSIONS ADVANCED BEFORE THE CIT(A) PLACED AT PAGES 1 TO 14 OF THE PAPER BOOK WERE RELIED UPON. COPY OF THE DTAA AGREEMENT BETWEEN INDIA AND US PLACED AT PAGES 53 TO 57 IN TH E PAPER BOOK WHEREIN AT PAGE 56 ARTICLE 12 HAS BEEN REPRODUCED WAS REFERRED TO. COPY OF THE AGREEMENT ENTERED INTO BETWEEN THE ASSE SSEE AND TILS PLACED AT PAGES 24 TO 34 OF THE PAPER BOOK WAS ALSO REFERRED TO. SPECIFIC ATTENTION WAS INVITED TO PAGE 30, CLAUSE 7, CLAUSE 9.3 OF THE AGREEMENT AND EXHIBIT A AT PAGE 35 OF THE PAPER BOOK WHICH IS A ECORNELL AFFILIATION AGREEMENT CONTAINING SAMPLE OF THE COURSE LIST. IT WAS SUBMITTED THAT THE ASSESSEE IS AN AFFILIATE OF ECORNEL AND PAPER B OOK PAGE NO.36 WOULD SHOW THAT THE ASSESSEE AS AN AFFILIATE HAD A SPEC IFIC TERRITORY ASSIGNED TO IT; PAGE 37 IT WAS SUBMITTED WHICH IS EXHIBIT C WOULD SHOW THAT THE ASSESSEE WAS REQUIRED TO PROVIDE INFRASTRUCTURE OF THE CLASS ROOM HAVING APPROVED FURNITURE, FIXTURES, AIR CONDITIONING, SI GN BOARD, PERSONAL COMPUTERS, VSAT WITH TRANSPORT CAPABILITY AND ADEQU ATE BACK UP IN 11 TERMS OF UPS WITH REQUIREMENTS FOR 10% EXTRA FEES L OADED WITH EXTRA SOFTWARE ETC. WHICH WERE DESCRIBED AS ANCILLARY SE RVICES, PAGES 40 TO 44 OF THE PAPER BOOK WERE REFERRED TO WHICH IS A SAMPLE END USER AGREEMENT TO BE ENTERED INTO BY THE INDIVIDUAL STUD ENTS WITH ECORNELL. ATTENTION WAS INVITED TO PAGE 45 OF THE PAPER BOOK WHICH LAID DOWN THE ROLES AND RESPONSIBILITIES WHICH WERE ASSIGNED TO WERE TO BE DISCHARGED BY THE AFFILIATE I.E. THE ASSESSEE AND E-CORNELL UN DER THE AGREEMENT. IT WAS STATED THE AGREEMENT ENTERED INTO WITH TILS CLE ARLY DEFINES THE ROLES AND RESPONSIBILITIES SPELLING OUT THE FEE SHARING R ESPONSIBILITIES AND ADDRESSES THE OBLIGATIONS CAST UPON THE PARTIES WH ICH WOULD CLEARLY SHOW THAT IT IS A CASE OF TWO PARTIES POOLING TOGET HER, THEIR RESOURCES AND AGREEING TO SHARE FEES RECEIVED/APPORTIONED IN TERM S OF THE AGREEMENT AND IT IS NOT A SITUATION WHERE ANY TRANSFER OF ANY RIGHT TO USE ANY COPY OF RIGHT OF LITERARY, ARTISTIC, SCIENTIFIC WORK OR MARKETING DESIGN, MODEL OR PLAN HAS BEEN RECEIVED FOR WHICH PAYMENTS ARE BEING MADE. 6.1. IT WAS SUBMITTED THAT THE NATURE OF AGREEM ENT IS LARGELY LIKE WHAT IS CONSIDERED IN THE CASE OF ACIT VS. NII T LTD. 112 TTJ 800 COPY OF WHICH IS PLACED AT PAGES 69 TO 73 WHICH WAS APPROVED BY HONBLE DELHI HIGH COURT IN CIT VS NIIT LTD. 318 ITR 281 DE LHI. IT WAS SUBMITTED THAT AGAINST THIS JUDGEMENT THE SLP FILED BY THE DE PARTMENT HAS BEEN DISMISSED. RELIANCE WAS ALSO PLACED UPON THE ORDE R OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF CAREER LAUNCHER LTD. VS ACIT 304 ITR 295 COPY OF WHICH IS PLACED IN THE PAPER BOOK. IT WAS ARGUED THAT THE 12 ASSESSEE HAS NOT BEEN GIVEN ANY RIGHT WHATSOEVER IN LIEU OF WHICH THE PAYMENTS ARE BEING MADE. REFERRING TO CLAUSE 3 PA GE 24 OF THE PAPER BOOK WHICH IS AFFILIATION AGREEMENT BETWEEN THE ASS ESSEE AND ECORNELL IT WAS SUBMITTED THAT THE AFFILIATE WOULD BE SOLELY RE SPONSIBLE FOR PROMOTION, MARKETING OF THE COURSES ETC. WITHIN IT S TERRITORY AND THE EXPENSES FOR THE SAME WOULD BE MET BY THE AFFILIATE AND THE AFFILIATE WOULD PROVIDE CERTAIN MARKETING MATERIALS USED TO P ROMOTE THE COURSES IN US WHICH THE AFFILIATE CAN MAKE USE OF IN INDIA OR GET IT TRANSLATED. REFERRING TO THE SAME CLAUSE IT WAS SUBMITTED THAT IT WAS DECIDED THAT THE AFFILIATE MAY REFER TO ITSELF AS AUTHORISED AF FILIATE OF ECORNELL, AS SUCH IT WAS URGED THAT ALL THESE TERMS, CONDITIONS AND RECITALS IN THE AGREEMENT DEMONSTRATE THE FACT THAT IT IS A CASE OF POOLING OF RESOURCES BY THE TWO PARTIES CONCERNED WHEREIN THE RESPONSI BILITIES AND ROLES OF EACH OF THE PARTIES ARE CLEARLY SET OUT. REFERRING TO KAMAT HOTELS 78 ITD 241 AND THE ORDER OF THE DELHI BENCH OF THE TRIBUN AL IN SHERATON INTERNATIONAL INC. VS DCIT (2006) 10 SOT 542 COPY O F WHICH IS PLACED IN THE PAPER BOOK FILED, IT WAS SUBMITTED THAT THE PR INCIPLES LAID DOWN THEREIN WOULD FULLY APPLY TO ASSESSEES CASE. THI S ORDER IT WAS SUBMITTED WAS CONFIRMED BY THE HONBLE DELHI HIGH COURT AND IS REPORTED IN 313 ITR 267 (DELHI), COPY OF THE SAME IS PLACED AT PA GES 61 TO 68. 7. THE LD.D.R. PLACED RELIANCE UPON THE ORDERS OF T HE AUTHORITIES BELOW. INVITING ATTENTION TO THE FACTS ON RECORD IT WAS SUBMITTED THAT IN THE CASE OF THE ASSESSEE A PAYMENT OF 350 US DOLLAR S HAS BEEN FIXED AS 13 REGISTRATION CHARGES PER STUDENT AND 2100 US DOLLAR S IS TO BE PAID FOR THE COURSE MATERIAL ETC. AND THE ASSESSEE IS CHARGI NG RS.1,65,000/- PER STUDENT. IT WAS ARGUED THAT THE ASSESSEE IS ABLE T O CHARGE ONLY ACCOUNT OF ITS ASSOCIATION WITH ECORNELL AND THE FACT THAT FOR THE SAME COPY RIGHTED MATERIAL OF ECORNELL IS BEING USED IS A MA TTER OF RECORD. SPECIFIC ATTENTION WAS INVITED TO CLAUSE 10, 10.1 AND 10.2. OF THE AFFILIATE AGREEMENT IT WAS ARGUED THAT THIS DEMONSTRATES THI S FACT. IT WAS SUBMITTED THAT AND THE ASSESSEE IS FREE TO CHARGE A NYTHING OVER AND ABOVE 350 US DOLLARS PER STUDENT AND IT IS ONLY ON ACCOUNT OF THE USE OF THE BRAND NAME OF ECORNELL THAT THE ASSESSEE IS IN A POSITION TO ENHANCE THE PAYMENT TO BE RECEIVED FROM THE STUDENTS. IT W AS HIS VEHEMENT STAND THAT THE PAYMENT MADE TO ECORNELL IS ROYALTY AS IT IS ONLY ON ACCOUNT OF THE USING OF THE BRAND NAME OF THE ASSESSEE ASSESSE E AS IN THIS CAPACITY, IT CAN CHARGE A HIGHER AMOUNT. RELYING ON TRANSMI SSION CORPORATION OF A.P.LTD. AND ANOTHER VS CIT 239 ITR 587 AND GE INDI A TECHNOLOGY CENTRE P.LTD. VS CIT, 327 ITR 456 IT WAS HIS SUBMIS SION THAT THE AMOUNT IS TAXABLE AND THE CIT(A) IS JUSTIFIED IN UPHOLDING THE ACTION OF THE A.O. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CASE LAW RELIED UPON BY E ITHER SIDE HAS ALSO BEEN TAKEN INTO CONSIDERATION. IT IS SEEN THAT THE A.O. AND THE CIT(A) HAVE TAKEN A CONSISTENT VIEW CONSIDERING THE PROVI SIONS IN THE AGREEMENT HOLDING THAT THE PAYMENTS MADE TO ECORNEL L BY THE ASSESSEE AMOUNTS TO ROYALTY IN TERMS OF ARTICLE 12 OF THE IN DO US DTAA ON 14 ACCOUNT OF THE FACT THAT ECORNELL HAS GRANTED TO HE CL THE RIGHT AND LICENSE TO USE THE ECORNELL TRADE MARK, SERVICE MA RK, LOGOS AND OTHER INDICIA. ECORNELL HAS ALSO GRANTED LIMITED NON EXC LUSIVE, NON TRANSFERABLE, NON SUB LICENSABLE RIGHT IN CONNECTIO N WITH THE OFFERING AND DISTRIBUTION OF COURSES BY ECORNELL. 8.1. IT MAY NOT BE OUT OF PLACE TO REFER TO THE T ERMS RECORDED IN THE AFFILIATE AGREEMENT ENTERED INTO BY THE ASSESSEE WI TH ECORNEL.. AS PER THE WRITTEN SUBMISSIONS TITLED AS BROAD PROPOSITI ONS FILED BEFORE THE CIT(A) PLACED AT PAPER BOOK PAGES 1 TO 14 BEFORE US , CORNELL UNIVERSITY HAS BEEN DESCRIBED AS HAVING BEEN FOUNDED IN 1865 I N THE NEW YORK STATE, OFFERING COURSES IN HUMANITIES, ARTS, SCIENC E AND SOCIAL SERVICES. CORNELL UNIVERSITY OFFERS VARIETY OF DISTANCE LEARN ING COURSES THROUGH TOWER INNOVATIVE LEARNING SOLUTIONS INC. (TILS) ECO RNELL HAS BEEN DESCRIBED AS A WHOLLY OWNED SUBSIDIARY COMPANY INC ORPORATED IN USA AND ENGAGED IN THE BUSINESS OF CREATING, DISTRIBUTI NG AND MAINTAINING DISTANCE LEARNING COURSES AND PROVIDING RELATED SER VICES. ECORNELL IS FURTHER DESCRIBED AS PROVIDING DISTANCE LEARNING CO URSES TO STUDENTS ACROSS THE GLOBE INCLUDING INDIA THROUGH THE MEDIUM OF THE INTERNET. 8.2. COPY OF THE AFFILIATE AGREEMENT ENTERED INTO WITH ECORNELL ON 1 ST APRIL,2003 IS PLACED AT PAGES 23 TO 45 OF THE PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT TOWER INNOVATIVE LEARNING SOLU TIONS INC., (TILSI) IS DESCRIBED AS DOING BUSINESS AS E-CORNELL DULY ORGAN IZED AND VALIDLY EXISTING UNDER THE LAWS OF THE STATE OF NEW YORK EN TERED INTO AGREEMENT 15 WITH HUGHES ESCORTS COMMUNICATIONS LTD. (HECL) I.E . THE ASSESSEE WHICH IS DESCRIBED AS AN AFFILIATE WHICH IS STA TED TO BE A CORPORATION WHICH IS DULY ORGANIZED AND VALIDLY EXISTING UNDER THE INDIAN COMPANIES ACT, 1956. THE AFFILIATE AGREEMENT IT IS STATED IN CLUDES THE TERMS AND CONDITIONS ENTERED THEREIN ALONG WITH EXHIBITS A TO G ATTACHED THERETO. 8.3. E-CORNELL IS DESCRIBED AS AN E-LEARNING COMP ANY ESTABLISHED AND WHOLLY OWNED BY E-CORNELL UNIVERSITY DESCRIBED AS O NE OF THE WORLDS LEADING EDUCATIONAL INSTITUTIONS WHICH IS STATED TO DESIRE TO DISTRIBUTE ON LINE COURSES STATED IN EXHIBIT A TO LEGAL RE SIDENTS AND FOREIGN NATIONALS DOMICILED IN THE TERRITORY SET FORTH IN E XHIBIT B. E-CORNELL HAS ALSO BEEN DESCRIBED AS HAVING AUTHORIZED AMERICAN HIGHER EDUCATION INCORPORATION, A CORPORATION DULY ORGANIZED AND DES CRIBED TO BE VALIDLY EXISTING UNDER THE LAWS OF STATE OF DELAWARE TO SEE K AFFILIATION IN CERTAIN TERRITORIES AND TO DISTRIBUTE COURSES. THIS ECORNE LL AFFILIATION AGREEMENT REFERRED TO AS THE AGREEMENT BY THE A.O. AND THE CI T(A) FURTHER DESCRIBES THAT THE AFFILIATE DESIRES TO MARKET, PROMOTE AND P ROVIDE CERTAIN ANCILLARY SERVICES IN CONNECTION WITH THE OFFERING AND DISTRI BUTION OF THE COURSES IN THE TERRITORY. ACCORDINGLY IN TERMS OF THE AFFIL IATE AGREEMENT E-CORNELL AND THE AFFILIATE HEREIN MEANING THE ASSESSEE AGREE D TO DO THE FOLLOWING:- NOW, THEREFORE, ECORNELL AND AFFILIATE HEREBY AGRE E AS FOLLOWS: 1. AUTHORIZATION . SUBJECT TO THE TERMS OF THIS AGREEMENT, ECORNELL GRANTS TO AFFILIATE A LIMITED, NON-EXCLUSIVE, NON-T RANSFERABLE, NON- SUBLICENSEABLE RIGHT AND LICENSE TO MARKET, PROMOTE , AND PROVIDE 16 CERTAIN ANCILLARY SERVICES IN CONNECTION WITH THE O FFERING AND DISTRIBUTION OF THE COURSE(S) BY ECORNELL IN THE TE RRITORY. 2. NON-EXCLUSIVE . THE RIGHTS GRANTED TO AFFILIATE BY ECORNELL UNDE R THIS AGREEMENT ARE NON-EXCLUSIVE. NOTHING IN THIS AGREE MENT SHALL BE CONSTRUED AS LIMITING IN ANY MANNER ECORNELLS MARK ETING, PROMOTION, OR DISTRIBUTION ACTIVITIES, DIRECTLY OR INDIRECTLY , WITH RESPECT TO THE COURSE(S) IN THE TERRITORY. 3. PROMOTION . SUBJECT TO THE TERMS OF THIS AGREEMENT, AFFILIAT E SHALL BE SOLELY RESPONSIBLE, AT ITS EXPENSE, FOR THE MARKETI NG AND PROMOTION OF THE COURSE(S) WITHIN THE TERRITORY. ECORNELL WI LL PROVIDE AFFILIATE WITH CERTAIN MARKETING MATERIALS USED TO PROMOTE TH E COURSE(S) IN THE UNITED STATES, WHICH AFFILIATE; MAY USE, WHETHE R IN ENGLISH OR AS TRANSLATED BY AFFILIATE, IN ORDER TO FULFILL ITS OBLIGATIONS UNDER THIS AGREEMENT. IN CONNECTION WITH ITS MARKETING AND PR OMOTION OF THE COURSE(S), AFFILIATE MAY REFER TO ITSELF AS AN [AU THORIZED AFFILIATE OF ECORNELL,] OR SUCH OTHER DESIGNATION APPROVED IN W RITING BY ECORNELL. AFFILIATE SHALL COMPLY WITH ANY ECORNELL POLICIES AND GUIDELINES REGARDING THE TYPE, NATURE AND QUALITY O F ANY MARKETING OR PROMOTIONAL MATERIALS REGARDING THE COURSE(S) AN D/OR DISPLAYING AN ECORNELL MARK (AS DEFINED BELOW). IN THE EVENT THAT ECORNELL OBJECTS TO ANY SUCH MARKETING OR PROMOTIONAL MATERI ALS, AFFILIATE SHALL IMMEDIATELY CEASE DISTRIBUTING SUCH MATERIALS UNLESS AND UNTIL OTHERWISE NOTIFIED IN WRITING BY ECORNELL. A FFILIATE SHALL MARKET AND PROMOTE THE COURSE(S) ONLY WITHIN THE TERRITORY AND ONLY TO LEGAL RESIDENTS OF AND/OR FOREIGN NATIONALS DOMICIT ED IN THE TERRITORY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 4. REGISTRATION PROCESSING . AFFILIATE SHALL, AS ITS EXPENSE, REGISTER STUDENTS WISHING TO ENROLL IN THE COURSE(S) VIA A W EBSITE DEVELOPED, HOSTED, AND MAINTAINED BY OR ON BEHALF OF, AFFILIAT E (THE REGISTRATION SITE). AFFILIATE SHALL BE SOLELY RE SPONSIBLE FOR COLLECTING AND PROCESSING ALL TUITION FEES FOR THE COURSE(S); PROVIDED, HOWEVER, THAT AFFILIATE SHALL CHARGE A TUITION FEE OF AT LEAST $350US PER COURSE. THE CONTENT AND FUNCTIONALITY OF THE R EGISTRATION SITE SHALL BE MUTUALLY AGREED UPON BY THE PARTIES IN WRI TING; PROVIDED, HOWEVER, THAT THE REGISTRATION SITE MAY DISPLAY ECO RNELL MARKS IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. THE P ARTIES SHALL WORK TOGETHER IN GOOD FAITH TO INTEGRATE CERTAIN FU NCTIONS OF THE REGISTRATION SITE WITH THE DISTANCE LEARNING PLATFO RM USED BY ECORNELL TO DISTRIBUTE THE COURSE(S) SO THAT ECORNE LL RECEIVES ALL NECESSARY ENROLLMENT INFORMATION FROM THE REGISTRAT ION SITE REGARDING STUDENTS AND PROSPECTIVE STUDENTS. AFFIL IATE WILL HOST, OR ARRANGE FOR THE HOSTING OF, THE REGISTRATION SITE I N A MANNER THAT PROVIDES NINETY-NINE AND FIVE-TENTHS PERCENT (99.5% ) UPTIME DURING THE TERM. (UPTIME MEANS THE ABSENCE ANY INTERRUP TION GREATER 17 THAN SIXTY (60) SECONDS IN THE AVAILABILITY OF THE COURSE, OTHER THAN DUE TO SCHEDULED MAINTENANCE, OF WHICH AFFILIATE PR OVIDES ECORNELL WITH REASONABLE PRIOR WRITTEN NOTICE.) NOTWITHSTAN DING ANYTHING HEREIN TO THE CONTRARY, AFFILIATE ACKNOWLEDGES AND AGREES THAT THE COURSE(S) ARE PROVIDED ONLY FOR USE BY LEGAL RESIDE NTS OF OR FOREIGN NATIONALS DOMICILED IN THE TERRITORY. AFFILIATE SH ALL NOT CAUSE OR PERMIT THE COURSE(S) TO BE DISTRIBUTED OR PROMOTED OUTSIDE OF THE TERRITORY. 4.1. SHARING ENROLLMENT INFORMATION . SUBJECT TO APPLICABLE LAWS, RULES, AND REGULATIONS, ECORNELL MAY, IN ITS DISCRE TION, PROVIDE AHED WITH THE NAME, ADDRESS, AND PHONE NUMBERS OF STUDEN TS THAT REGISTER THROUGH THE REGISTRATION SITE. 5. AFFILIATE OBLIGATIONS . AFFILIATE WILL, AT ITS EXPENSE, PROVIDE PROSPECTIVE STUDENTS AND STUDENTS WHO ENROLL IN THE COURSE(S) WITH ACCESS TO FACILITIES CAPABLE OF PROVIDING REASONABL Y ACCEPTABLE ACCESS TO THE COURSE(S). SUCH FACILITIES SHALL PRO VIDE: (I) A REASONABLE NUMBER OF COMPUTERS EQUIPPED WITH BROADB AND CONNECTIONS TO THE INTERNET; AND (II) A REASONABLE NUMBER OF PERSONNEL CAPABLE OF PROVIDING ENROLLED STUDENTS AN D PROSPECTIVE STUDENTS WITH ENGLISH-LANGUAGE SUPPORT TO ASSIST SU CH STUDENTS IN ENROLLING AND PARTICIPATING IN THE COURSE(S). AFFI LIATE SHALL PROMPTLY REPORT TO ECORNELL ANY SUSPECTED OR ACTUAL PERFORMA NCE ISSUES RELATING TO THE COURSE(S) OF WHICH IT BECOMES AWARE , REGARDLESS OF WHETHER SUCH PERFORMANCE ISSUE IS MATERIAL OR IMMAT ERIAL OR WHETHER DISCOVERED BY AFFILIATE OR A STUDENT. WITH OUT LIMITING THE FOREGOING, AFFILIATE SHALL ALSO FURNISH THE MUTUALL Y AGREED UPON ANCILLARY SERVICES SET FORTH IN EXHIBIT C IN CONNEC TION WITH THE COURSE(S). 5.2 ECORNELL OBLIGATIONS . ECORNELL WILL PROVIDE STUDENTS AND PROSPECTIVE STUDENTS WITH SUPPORT SERVICES THAT ARE SUBSTANTIALLY SIMILAR IN ALL MATERIAL RESPECTS TO THE SUPPORT SER VICES PROVIDED TO STUDENTS ENROLLED IN OTHER ONLINE COURSES MADE AVAI LABLE BY ECORNELL (EXCEPT AS ECORNELLS PROVISION OF ANY SUCH SERVICE S MAY BE AFFECTED BY ANY TRANSLATION ASSISTANCE THAT ECORNELL MAY REQ UIRE). 6. FEES AND PAYMENT . 6.1. INVOICE . ON THE 12 TH OF EACH MONTH DURING THE TERM OF THIS AGREEMENT, ECORNELL WILL INVOICE AFFILIATE FOR ALL COURSE REGISTRATIONS PROCESSED VIA THE REGISTRATION SITE, AT THE RATES F OR SUCH REGISTRATIONS SET FORTH ON EXHIBIT D TO THIS AGREEMENT, WHICH ECORNEL L MAY MODIFY UPON NINETY (90) DAYS PRIOR WRITTEN NOTICE. AFFILIATE S HALL PAY ECORNELL THE AMOUNTS SET FORTH IN SUCH INVOICES, IN U.S. FUNDS, WITHIN TEN (10) BUSINESS DAYS OF ITS RECEIPT OF EACH SUCH INVOICE. NOTWITHS TANDING ANYTHING HEREIN 18 TO THE CONTRARY, ECORNELL SHALL ONLY BE OBLIGATED T O COMPLETE THE REGISTRATION PROCESS AND RELEASE THE MATERIALS REQUIRED BY STUDE NTS TO ACCESS THE COURSES UPON RECEIPT OF FULL PAYMENT FROM AFFILIATE . MANNER OF PAYMENT . ANY AND ALL FEES, CHARGES OR OTHER PAYMENTS TO B E MADE PURSUANT TO THE AGREEMENT SHALL BE MADE IN UNI TED STATES DOLLARS AND SHALL BE PAID BY WIRE TRANSFER OF IMMEDIATELY A VAILABLE FUNDS OR BY SUCH OTHER METHOD ACCEPTABLE TO ECORNELL IN ITS SOL E DISCRETION. INTEREST . ANY AND ALL FESS, CHARGES AND OTHER PAYMENTS TO BE MADE PURSUANT TO THIS AGREEMENT THAT ARE NOT PAID WHEN D UE, AND THAT REMAIN OUTSTANDING FOR A PERIOD OF TEN (10) BUSINESS DAYS FOLLOWING AFFILIATES RECEIPT OF WRITTEN NOTICE THEREOF, SHALL ACCRUE INT EREST AT THE RATE OF 1.5% PER MONTH, OR THE HIGHEST RATE ALLOWED BY LAW, WHICHEVE R IS LESS. NON-REFUNDABLE . ANY AND ALL FEES, CHARGES AND OTHER PAYMENTS MAD E PURSUANT TO THIS AGREEMENT TO ECORNELL BY AFFILIATE ARE NON-REFUNDABLE AND SHALL NOT BE RETURNED OR REPAID TO AFFILIATE UNDER ANY CIRCUMSTANCES. 8.4. PARA 6.5 REFERS TO THE RESPONSIBILITIES AND OB LIGATIONS. 8.5. FURTHER CLAUSES OF THE AFFILIATION AGREEMENT READS AS UNDER. 7. END USER AGREEMENT . AFFILIATE ACKNOWLEDGES AND AGREES THAT ENROLLED STUDENTS SHALL BE REQUIRED TO ENTER INTO A N END USER AGREEMENT PROVIDED BY ECORNELL (THE CURRENT VERSION OF WHICH IS ATTACHED AS EXHIBIT F). ECORNELL MAY MODIFY THE TE RMS OF THE END USER AGREEMENT IN ITS DISCRETION AT ANY TIME UP ON WRITTEN NOTICE. AFFILIATE SHALL NOT MAKE ANY REPRESENTATIO N OR WARRANTY OR GIVE ANY ASSURANCE TO ANY THIRD PARTY (INCLUDING ENROLLED STUDENTS AND PROSPECTIVE STUDENTS) THAT EXCEEDS, EX PANDS, OR DIFFERS FROM THE TERMS SET FORTH IN THIS AGREEMENT OR THE END USER AGREEMENT. 8. OWNERSHIP . AFFILIATE ACKNOWLEDGES AND AGREES THAT, AS BETWEEN THE PARTIES, ECORNELL OWNS ALL RIGHT, TITLE , AND INTEREST IN AND TO: (I) THE COURSE(S) AND THE ECORNELL MARKS ; AND (II) ALL COPYRIGHT, PATENT, TRADEMARK, SERVICE MARK, TRADE S ECRET, AND OTHER INTELLECTUAL PROPERTY OR PROPRIETARY RIGHTS R ELATING THERETO. AFFILIATE ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE LIMITED RIGHTS GRANTED UNDER THIS AGREEMENT, NOTHING HEREIN AFFECTS ANY TRANSFER OF ANY RIGHT, TITLE OR INTEREST IN OR TO T HE COURSE(S) OR ECORNELL MARKS FROM ECORNELL TO AFFILIATE OR ANY TH IRD PARTY. AFFILIATE SHALL NOT REMOVE ANY COPYRIGHT NOTICE, TR ADEMARK NOTICE, OR OTHER PROPRIETARY LEGEND DISPLAYED ON OR IN CONNECTION WITH THE COURSE(S) OR ECORNELL MARKS. AFFILIATE SH ALL USE BEST EFFORTS TO PROTECT ECORNELLS RIGHTS IN AND TO THE COURSE(S) AND ECORNELL MARKS AND SHALL COOPERATE WITH ECORNELL IN ORDER TO PROTECT SUCH RIGHTS. AFFILIATE SHALL ALSO PROMPTLY REPORT ANY 19 INFRINGEMENTS OR POTENTIAL INFRINGEMENTS OF THE COU RSE(S) AND ECORNELL MARKS OF WHICH IT IS AWARE. 9. TERM AND TERMINATION . TERM . THIS AGREEMENT SHALL BE IN EFFECT AS OF THE EFFE CTIVE DATE AND, UNLESS OTHERWISE TERMINATED IN ACCORDANCE WITH THE TERMS OF THIS SECTION 9, SHALL REMAIN IN EFFECT FOR A PERIOD OF TWO (2) YEARS THEREAFTER (THE TERM). EACH PARTY SHAL L CONSULT WITH AHED REGARDING ANY RENEWALS OF THIS AGREEMENT. TERMINATION . EITHER PARTY MAY TERMINATE THIS AGREEMENT UPON WRITTEN NOTICE IF THE OTHER PARTY MATERIALLY BREACH ES ANY TERM OR CONDITION HEREIN (EXCEPT FOR AFFILIATES OBLIGATION TO TIMELY PAY INVOICES WHEN DUE) AND FAILS TO CURE SUCH BREACH WI THIN THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE THEREOF; PROVIDED, HOWEVER, THAT ECORNELL MAY TERMINATE THIS AGREEMENT UPON WRITTEN NOTICE IF AFFILIATE FAILS TO PAY ANY INVOIC E WHEN DUE AND SUCH FAILURE CONTINUES FOR A PERIOD OF TEN (10) BUS INESS DAYS FOLLOWING RECEIPT OF WRITTEN NOTICE THEREOF. RESPONSIBILITIES UPON TERMINATION . UPON THE EXPIRATION OR TERMINATION OF THIS AGREEMENT: (I) AFFILIATE SHALL IMMEDIATELY CEASE TO PROCESS REGISTRATIONS FOR STUDENTS WISHING TO ENROLL IN THE COURSE(S); EACH PARTY SHALL FOLLOW REASONABLE I NSTRUCTIONS FROM THE OTHER PARTY AS TO THE TIME, PLACE, AND MAN NER FOR RETURN OR DESTRUCTION OF THE OTHER PARTYS CONFIDENTIAL IN FORMATION (AS DEFINED BELOW); (III) ALL LICENSES GRANTED PURSUANT TO THIS AGREEMENT (INCLUDING THE RIGHT TO PROMOTE THE COURS E(S) AND TO USE THE ECORNELL MARKS) WILL IMMEDIATELY TERMINATE AND AFFILIATE SHALL CEASE TO REFER TO ITSELF AS OR USE ANY MATERI ALS, WHETHER TANGIBLE OR INTANGIBLE, IN WHICH AFFILIATE IS REFER RED TO AS AN [AUTHORIZED AFFILIATE OF ECORNELL,] (OR ANY OTHER DESIGNATION PERMITTED BY THIS AGREEMENT); (IV) AFFILIATE SHALL PROMPTLY RETURN TO ECORNELL ALL MARKETING AND PROMOTIONAL MATERIALS , WHETHER TANGIBLE OR INTANGIBLE, FURNISHED BY ECORNELL PURSU ANT TO THIS AGREEMENT; AND (V) ECORNELL SHALL PERMIT STUDENTS W HO ARE THEN- REGISTERED IN ANY COURSE(S) OR ANY SET OF COURSES T HAT WOULD RESULT IN THE AWARD OF A CERTIFICATE (CERTIFICATE PROGRAM) TO COMPLETE ANY SUCH COURSE OR CERTIFICATE PROGRAM, PR OVIDED, HOWEVER, THAT ECORNELL HAS RECEIVED PAYMENT IN FULL FOR SUCH COURSES OR CERTIFICATE PROGRAM. 20 SURVIVAL . THE FOLLOWING PROVISIONS SHALL SURVIVE ANY EXPIR ATION OR TERMINATION OF THIS AGREEMENT: 6, 8, 9.3, 10.2, 11, 12, 13, AND 14. 10 ECORNELL MARKS. 10.1 CERTAIN PERMITTED USES. E-CORNELL GRANTS TO AFFILIATE THE LIMITED RIGHT AND LICENSE TO USE THE E-CORNELL TRADE MARKS, SERVICE MARKS, LOGOS AND OTHER CORPORATE INDICIA (COLLECTIVELY E- CORNELL MARKS) FOR THE PURPOSES OF ADVERTISING AND PROMOTING THE COURS ES AS SET FORTH IN THIS AGREEMENT AND FOR NO OTHER PURPOSE. AFFILIATE ONLY SHALL USE THE ECORNELL MARKS IN ACCORDANCE WITH E-CORNELLS WRITT EN GUIDELINES AND POLICIES RELATING TO THE USE OF SUCH MARKS WHIC H E-CORNELL SHALL PROVIDE TO AFFILIATE FROM TIME TO TIME. AFFILIATE SHALL NOT USE ANY E- CORNELL MARKS IN ANY MANNER LIKELY TO CONFUSE, MISL EAD, OR DECEIVE THE PUBLIC, OR TO BE ADVERSE TO THE INTERESTS OF E- CORNELL. AFFILIATE WILL CEASE USING ANY E-CORNELL MARK ON ANY MATERIALS, WH ETHER TANGIBLE, OR INTANGIBLE, IMMEDIATELY UPON RECEIPT OF WRITTEN NOTICE FROM E- CORNELL TO CEASE SUCH USE. 10.2 OWNERSHIP. AFFILIATE ACKNOWLEDGES THAT E-COR NELL AND ITS LICENSORS ARE THE EXCLUSIVE OWNERS OF THE ECORNELL MARKS, ANY TRADE MARK INCORPORATING ALL OR ANY PART OF ANY ECORNELL MARK, AND THE TRADE MARK RIGHTS CREATED BY THE USE OF THE ECORNEL L MARKS. ALL USES OF THE VALIDITY OR OWNERSHIP OF ANY OF THE ECORNELL MARKS. 10.3. ADDITIONAL RESTRICTIONS. EXCEPT AS OTHERWI SE EXPRESSLY PERMITTED BY THIS AGREEMENT OR WITH THE PRIOR WRITT EN CONSENT OF ECORNELL IN EACH INSTANCE: (I) AFFILIATE WILL NOT U SE ANY ECORNELL MARK, OR ANY MARK INCORPORATING ALL OR ANY PART OF ANY EC ORNELL MARK, ON ANY BUSINESS SIGN, BUSINESS CARD, STATIONERY, OR FO RM, OR USE ANY ECORNELL MARK AS THE NAME OF AFFILIATES BUSINESS O R ANY DIVISION THEREOF; AND (II) AFFILIATE WILL NOT ASSOCIATE ITS MARKS, OR ANY THIRD- PARTY MARKS, WITH THE ECORNELL MARKS OR AFFIX THE E CORNELL MARKS TO ANY PRODUCT OR SERVICE EXCEPT AS OTHERWISE EXPRESSL Y SET FORTH IN THIS AGREEMENT. EXCEPT WITH ECORNELLS PRIOR WRITTEN CO NSENT IN EACH INSTANCE, AFFILIATE SHALL NOT REGISTER OR ATTEMPT T O REGISTER, WHETHER IN THE TERRITORY, [INSERT COUNTRY OF INCORPORATION], O R IN ANY OTHER NATION, COPYRIGHT IN, OR TO REGISTER AS A TRADEMARK, SERVIC E MARK, DESIGN PATENT, INDUSTRIAL DESIGN, OR BUSINESS DESIGNATION, ANY OF THE ECORNELL MARKS OR DERIVATIONS OR ADAPTATIONS THEREO F, OR ANY WORD, SYMBOL, OR DESIGN THAT IS SIMILAR TO ANY OF THE ECO RNELL MARKS. ECORNELL SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATI ON, TO SEEK AND MAINTAIN REGISTRATION OF THE ECORNELL MARKS WITHIN THE TERRITORY AND [INSERT COUNTRY OF INCORPORATION]. AFFILIATE SHALL , AT ECORNELLS EXPENSE, PROVIDE ECORNELL WITH ANY ASSISTANCE AND C OOPERATION THAT 21 ECORNELL MAY DEEM REASONABLY NECESSARY TO OBTAIN OR MAINTAIN SUCH REGISTRATION. 11. REPRESENTATIONS AND WARRANTIES; DISCLAIMER; LIM ITATIONS. 11.1 AFFILIATE. AFFILIATE, REPRESENTS AND WARRANTS THAT: (A) IT IS A COMPANY DULY ORGANIZED, VALIDLY EXISTI NG, AND IN GOOD STANDING UNDER THE LAWS OF INDIA AND HAS THE POWER AND AUTHORITY TO OWN ITS PROPERTY AND CARRY ON ITS BUSINESS AS OW NED AND CARRIED ON AS OF THE EFFECTIVE DATE AND AS CONTEMPLATED BY THIS AGREEMENT; (B) IT HAS ALL REQUISITE POWER, AUTHORITY, AND LIC ENSES TO EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM ITS OBLIGATIO NS HEREUNDER, AND THE EXECUTION, DELIVERY, AND PERFORMANCE OF THIS AG REEMENT BY IT HAS BEEN DULY AUTHORIZED BY ALL NECESSARY COMPANY ACTIO N; (C) IT WILL COMPLY WITH ALL LAWS, RULES, AND REGULA TIONS APPLICABLE TO THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, INCLU DING THE LAWS OF THE TERRITORY, [INSERT COUNTRY OF INCORPORATION], T HE UNITED STATES OF AMERICA, AND ANY APPLICABLE INTERNATIONAL LAWS OR C ONVENTIONS; (D) IT IS NOT A PARTY TO ANY AGREEMENT WITH A THIR D PARTY, THE PERFORMANCE OF WHICH IS REASONABLY LIKELY TO ADVERS ELY AFFECT THE ABILITY OF ECORNELL OR AFFILIATE TO FULLY PERFORM T HEIR RESPECTIVE OBLIGATIONS HEREUNDER; (E) ALL SERVICES FURNISHED BY AFFILIATE PURSUANT T O THIS AGREEMENT (WHETHER TO AN ENROLLED STUDENT, A PROSPECTIVE STUD ENT, OR OTHERWISE) WILL BE OF HIGH QUALITY CONFORMING TO HIGHEST LEVEL OF ACADEMIC STANDARDS FOR INTERNATIONALLY KNOWN INSTITUTIONS OF HIGHER EDUCATION; (F) IN ITS PERFORMANCE OF ITS OBLIGATIONS HEREUNDE R, IT AND ITS DIRECTORS: (I) SHALL COMPLY WITH ALL APPLICABLE COR RUPT PRACTICES LAWS; AND (II) SHALL CONDUCT ITS BUSINESS AND OPERATIONS IN COMPLIANCE WITH ALL APPLICABLE CORRUPT PRACTICES LAWS. FOR PURPOSE S OF THIS AGREEMENT CORRUPT PRACTICES LAWS SHALL MEAN COLLE CTIVELY, THE UNITED STATES FOREIGN CORRUPT PRACTICES ACT OF 1977 (PUB. L. NO. 95- 213, 101-104), AS AMENDED, AND ANY OTHER LAW, RULE, REGULATION, ORDER, DECREE, OR DIRECTIVE HAVING THE FORCE OF LAW AND RELATING TO BRIBERY, KICK BACKS, OR SIMILAR BUSINESS PRACTICES; AND (G) IT HAS OBTAINED ALL CONSENTS, AUTHORIZATIONS, PERMITS, LICENSES, ORDER AND APPROVALS OF (AND ALL FILINGS AND REGISTR ATIONS WITH) ANY GOVERNMENTAL AUTHORITY LOCATED IN THE TERRITORY AND [INSERT COUNTRY OF INCORPORATION] THAT ARE REQUIRED BY LAW WITH RESPEC T TO THE EXECUTION, DELIVERY, AND PERFORMANCE OF THIS AGREEMENT BY THE PARTIES HERETO AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLAT ED BY THIS AGREEMENT. 11.2. ECORNELL: THE COURSE(S) ARE SUBJECT TO THE W ARRANTY PROVISIONS OF THE END USER AGREEMENT. ANY OTHER WARRANTY MADE BY AFFILIATE SHALL BE THE SOLE RESPONSIBILITY OF AFFILIATE AND A FFILAITE AGREES TO HOLD 22 ECORNELL HARMLESS, IN ACCORDANCE WITH SECTION 12 OF THIS AGREEMENT, FROM AND AGAINST ANY LIABILITY OR OBLIGATION ECORN ELL MAY INCUR AS A RESULT OF ANY SUCH OTHER WARRANTY. ECORNELL DOES N OT WARRANT THAT THE COURSE(S) WILL MEET AFFILIATES REQUIREMENTS OR THOSE OF ENROLLED STUDENTS, OR THAT THE OPERATION OR USE OF ANY OF TH E COURSE(S) WILL BE UNINTERRUPTED OR ERROR FREE. WITHOUT LIMITING THE FOREGOING, ANY IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATI ON, WARRANTEES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED. AFFILI ATE ACKNOWLEDGES AND AGREES THAT THE MODIFICATION OR AL TERATION OF ANY COURSE(S) AND/OR ECORNELL MARK BY ANY ENTITY OTHER THAN ECORNELL OR ITS DESIGNEE WILL VOID THE WARRANTY FOR THE APPLICA BLE COURSE(S) AND/OR ECORNELL MARK. 11.3.LIMITATION OF LIABILITY . EXCEPT FOR AFFILIATES INDEMNIFICATION OBLIGATIONS SET FORTH HEREIN, NEIT HER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, SP ECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES OR LOSS OF PROFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY ACTS OR OMISSIONS ASSOCIATED THEREWITH, WHETHER SUCH CLAIM IS BASED ON BREACH OF WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY AND REGARDLESS OF THE CAUSE OF SUCH LOSS OR DAMAGES OR WHETHER ANY OTHER REMEDY PROVIDED HEREIN FAILS. 8.6. CLAUSES 12 REFERS TO INDEMNIFICATION AND 12.1 AND 12.2 REFER TO THE SCOPE AND PROCESS OF INDEMNITY. CLAUSE 13 ALONG WITH ITS SUB- CLAUSES REFERS TO CONFIDENTIAL INFORMATION. CLAUSE 14 IS GENERAL AND REFERS TO AUDIT RIGHTS, EXPORT CONTROLS, CHOICE OF LAW, ARBITRATION JUDGEMENT CURRENCY, LANGUAGE ETC. THE COURSES ARE SET OUT IN EXHIBIT A. EXHIBIT B REFERS TO THE TERRITORY OF THE AF FILIATE WHICH IN THE FACTS OF THE PRESENT CASE IS DESCRIBED AS INDIA, SRI LANKA, NEPAL, BANGLADESH. THE ANCILLARY SERVICES WHICH THE ASSESSEE IS REQUIR ED TO PROVIDE UNDER THE AFFILIATE AGREEMENT IS SET OUT IN EXHIBIT C. FOR READY REFERENCE THE SAME IS REPRODUCED HEREUNDER:- 23 EXHIBIT C : ANCILLARY SERVICES CLASSROOMS/CENTERS OPERATED BY HECL CAN BE OWNED BY HECL OR FRANCHISED OUT BY HECL. THE FOLLOWING TERMS SHALL GOVERN THE CONDUCT OF ECORNELL PROGRAMES USING THESE FACILITIE S: 1. EACH CLASSROOM, AS PER HECL PLANS, COMPRISES: * COMMON HECL DESIGN INCLUDING FURNITURE, FIXTUR ES, LIGHTING, AIR- CONDITIONING, SIGN BOARDS, EARTH PITS AND POWER CON DITIONING * PERSONAL COMPUTERS * 1 VERY SMALL APERTURE TERMINAL (VSAT) WITH RECEIV E AND TRANSMIT CAPABILITY AND ANY OTHER COMMUNICATION FACILITY, AS MAY BE SUITABLE FOR THE LEARNING TO TAKE PLACE. 2. ADEQUATE BACKUPS SHALL BE PUT IN PLACE SO THAT T HE REGISTERED PROGRAM PARTICIPANTS HAVE A GOOD CLASSROOM EXPERIEN CE. IN PARTICULAR BACKUPS SHALL BE PROVIDED AS FOLLOWS: * EACH CLASSROOM SHALL HAVE AN UPS OF ADEQUATE RATI NG TO ENSURE THAT THE PCS AND VSAT REMAIN OPERATIONAL EVEN DURIN G POWER CUTS, * SPARES FOR THE VSAT SHALL BE PROVISIONED LOCALLY (EITHER AT A HECL OFFICE OR AT THE CLASSROOM LOCATION) SO THAT A MINI MUM VSAT UPTIME OF 98% IS MAINTAINED. * AT LEAST 10% EXTRA PCS, LOADED WITH REQUIRED SOFT WARE, SHALL BE PROVISIONED AT THE CLASSROOMS SO THAT REGISTERED PR OGRAM PARTICIPANTS HAVE EASY ACCESS TO BACK UP MACHINES, SHOULD THEIR ALLOCATED MACHINES FAIL. 3. IN THE EVENT A SCHEDULED SESSION IS CANCELLED FOR WHATEVER REASON, IT SHALL BE HECLS RESPONSIBILITY TO RESCHE DULE THE SAME AND COMMUNICATE THE CHANGED SCHEDULE TO ALL EFFECTE D REGISTERED PROGRAMME PARTICIPANTS. 4. IN CASE OF CLASSROOMS WHICH ARE FRANCHISED OUT BY HECL TO THIRD PARTIES, THE FOLLOWING TERMS SHALL ADDITIONAL LY APPLY: * THE FRANCHISEE HAS NO RIGHTS WHATSOEVER OVER THE BRANDS, MATERIAL AND PROGRAMES CONDUCTED BY ECORNELL AND HE CL. 5. ECORNELL SHALL HAVE THE RIGHT TO CONDUCT AN INS PECTION OF THE HECL FACILITIES (OWNED BY HECL OR FRANCHISED) AND M ATERIAL PROVIDED BY HECL TO REGISTERED PROGRAM PARTICIPANTS FOR CONDUCT OF ECORNELL PROGRAMS. SUCH AN INSPECTION CAN BE CONDU CTED BY ECORNELL OFFICIALS ;BY GIVING 2 DAYS WRITTEN NOTICE TO HECL SPECIFYING THEIR INTENTION TO DO SO. 24 8.7. THE COURSE RATES ARE DESCRIBED IN EXHIBIT D WHICH IS 350 US DOLLARS PER COURSE REGISTRATION AND A COURSE REGI STRATION IS DEFINED AS ONE SEAT REGISTRATION FOR ONE PERSON PARTICIPATING IN A SINGLE E-CORNELL COURSE. 8.8. EXHIBIT E REFERS TO THE SIGNATORIES TO THE AGREEMENT AND EXHIBIT F IS A SAMPLE END USER AGREEMENT FOR INDIVIDUAL STUDENTS WHICH SETS OUT THE PRIVACY POLICY AND THE INFORMATION E-CORNEL L COLLECTS, HOW IT IS USED AND HOW IT PROTECTS THE INFORMATION SO COLLECT ED. NET WORK USE POLICY FOR ECORNELL STUDENTS. THE COMMITMENTS FRO M ECORNELL COUPLED WITH RESPONSIBILITIES OF THE STUDENTS FOR RESPECTIN G INTELLECTUAL WORK AND PROPERTY OF OTHERS WHERE UNAUTHORIZED USE OF SOFT WARE, PROGRAMME CODE ETC. IS DESCRIBED AS UNACCEPTABLE AND MAY BE CONSID ERED AS A VIOLATION OF STATE AND FEDERAL LAW. IT FURTHER REFERS TO CONFID ENTIALITY OF LOGIN ID WHICH IS DESCRIBED AS A UNIQUE IDENTIFIER WHICH GIVES STU DENTS ACCESS TO INFORMATION AND COURSES; IT ALSO REFERS TO POLICIE S REGARDING PRIVACY, AUTHORIZED USER PASS WORDS ETC. FOR THE PURPOSES OF LEGAL CONSEQUENCES OF FORGING, HIDING IDENTITY IMPERSONATING, INTELLECTU AL RIGHTS LEGAL AND ETHICAL IN THE CONTEXT OF DOWNLOADING OR POSTING MA TERIAL (UPLOADING ETC.) 8.9. EXHIBIT G SETS OUT THE ROLES AND RESPONSIB ILITIES OF THE AFFILIATE AND E-CORNELL RESPECTIVELY. EXHIBIT G : ROLES AND RESPONSIBILITIES AFFILIATE SHALL PERFORM AND BE RESPONSIBLE FOR THE FOLLOWING: MARKETING : 25 MARKETING AND PROMOTION OF ECORNELL COURSES WITHIN THE DEFINED TERRITORY. CREATION OF IN-COUNTRY MARKETING AND PROMOTION COLL ATERAL. SALES AND CASHIERING OF ALL END USER STUDENT TRANSA CTIONS FOR COURSE REGISTRATION. COURSE DELIVERY: ESTABLISHMENT, MAINTENANCE, AND PROVISIONING OF THE CLASSROOMS (PER EXHIBITC) THAT CAN FACILITATE COURSE ACCESS FO R STUDENTS IN THE TERRITORY. ECORNELL SHALL PERFORM AND BE RESPONSIBLE FOR THE F OLLOWING: REGISTRATION: TO PROVIDE A CO-BRANDED WEB BASED REGISTRATION INTE RFACE FOR AFFILIATES USE IN MAKING REGISTRATION REQUESTS. PROVIDE APPROVALS TO AFFILIATE REGISTRATION REQUEST S WITHIN 24 HOURS OF RECEIVING PAYMENT IN FULL FOR SUCH REQUEST S. MARKETING: PROVIDE US BASED SALES COLLATERAL TO BE ADAPTED AT AFFILIATES DISCRETION. PROVIDE GUIDELINES FOR AFFILIATES USE OF ECORNELL S REGISTERED MARKS. PROVIDE TIMELY APPROVALS FOR ALL AFFILIATE-DEVELOPE D MARKETING COLLATERAL. COURSE DELIVERY: PROVIDE INTERNET ACCESS TO COURSES AND SUPPORT SERV ICES TO STUDENTS FOR WHICH AFFILIATE HAS PAID ALL COURSE FE ES. PROVIDE LETTERS OF COMPLETION TO ALL STUDENTS WHO C OMPLETE COURSE REQUIREMENTS IN A SATISFACTORY MANNER. PROVIDE CERTIFICATES OR CERTIFICATIONS TO STUDENT S WHO COMPLETE SUCCESSFULLY ALL COURSES MAKING UP A CERTIFICATES O R CERTIFICATION PROGRAM. 8.10. ON A CAREFUL PERUSAL OF THE TERMS AND CONDIT IONS RECORDED IN THE AFFILIATE AGREEMENT ENTERED INTO WITH TILS (E- CORNELL) BY THE ASSESSEE, IT IS EMINENTLY CLEAR THAT WHEREAS ECORN ELL IS TO IMPART EDUCATION TO THE STUDENTS IN INDIA THROUGH THE MEDI UM OF INTERNET WHICH INVOLVES MAKING AVAILABLE TO ITS STUDENTS LOGIN ID AND THEREFORE GRANT 26 ACCESS TO COURSE MATERIAL, RESPOND TO QUERIES, COND UCT EXAMS, GRANT CERTIFICATES ETC. FOR WHICH PURPOSES ECORNELL ENTER S INTO A SEPARATE AGREEMENT (END USER AGREEMENT) WITH THE STUDENTS DI RECTLY. 8.11. THE ASSESSEE ON THE OTHER HAND HAS UNDERTAKEN /BEEN ASSIGNED/HAS AGREED TO PERFORM THE ROLE OF MARKETIN G THE COURSES; ASSIST THE REGISTRATION PROCESS OF STUDENTS; COLLECT COM BINED FEES FOR THE COURSE CONTENT AND PROVIDE INFRASTRUCTURE NAMELY CO MPUTERS, BROAD BAND ACCESS, VSAT CONNECTIVITY ETC. TO THE STUDENTS SO REGISTERED IN ORDER TO ENABLE THEM TO ACCESS THE CONTENTS OF THE COURSE ON THE WEB SITE BY USING THE SPECIFIC LOG-IN ID NUMBERS WHICH ARE P ROVIDED TO THE DULY REGISTERED STUDENTS BY E-CORNELL. ON A CAREFUL CON SIDERATION OF THE TERMS AND CONDITIONS OF THE CLAUSES OF THE AFFILIATION AG REEMENT REPRODUCED ABOVE; IT IS SEEN THAT AT NO POINT OF TIME THIS M ATERIAL IS AVAILABLE TO THE ASSESSEE. UNDER THE AGREEMENT THE ASSESSEE AS PER EXHIBIT G IS REQUIRED TO MARKET AND PROMOTE E-CORNELL COURSES WI THIN ITS DEFINED TERRITORY; AND SALES AND CASHIERING OF ALL END-USE R STUDENTS PERFORM FUNCTIONS FOR COURSE REGISTRATION. FOR FACILITATING COURSE DELIVERY IT HAS BEEN HELD RESPONSIBLE FOR PROVIDING FACILITIES OF E STABLISHMENT, MAINTENANCE AND PROVIDING OF CLASS ROOM, COMPUTERS , BROAD-BAND CONNECTIVITY ETC. AS PER THE REQUIREMENTS OF EXHIB IT C. THE RESPONSIBILITY OF ECORNELL HAS ALSO BEEN SET OUT T O PROVIDE APPROVALS TO AFFILIATE REGISTRATION REQUESTS FOR MARKETING, TO P ROVIDE FOR INTERNET ACCESS TO COURSES AND SUPPORT SERVICES TO STUDENTS FOR WHICH AFFILIATE HAS 27 PAID COURSE FEE; TO PROVIDE LETTER OF COMPLETION T O STUDENTS WHO COMPLETE COURSE REQUIREMENTS; TO PROVIDE CERTIFICATES TO ST UDENTS ON SUCCESSFUL COMPLETION OF ALL COURSES MAKING A CERTIFICATE PROG RAMME. A PERUSAL OF CLAUSE 5.1, CLAUSE 5.2 OF THE AFFILIATE AGREEMENT WHICH HAS BEEN REPRODUCED ABOVE SHOWS THAT THE OBLIGATIONS OF THE ASSESSEE AND THE RESPONSIBILITIES OF ECORNELL HAVE BEEN SPELT OUT A ND WOULD SHOW ALONG WITH EXHIBIT F WHICH IS THE SAMPLE END USER AGREE MENT; ALONG WITH CLAUSE 8, CLAUSES 10, 10.1 AND 10.2 SHOWS THAT THE ASSESSEE AND ECORNELL HAVE COLLABORATED FOR THE PURPOSE OF PROVI DING DISTANCE LEARNING COURSES RUN BY ECORNELL TO STUDENTS IN INDIA THROUG H THE MEDIUM OF INTERNET. THE ABOVE MENTIONED CLAUSES IN THE AFFIL IATE AGREEMENT READ WITH THE EXHIBITS TO THE SAID AGREEMENT FULLY SET O UT THAT ECORNELL OWNS THE RIGHTS, TITLE AND INTEREST IN AND TO THE COURSE S AND THE USER OF ECORNELL MARKS AND ALL COPY RIGHTS, PATENT, TR ADE MARK, SERVICE MARK, TRADE SECRETS AND OTHER INTELLECTUAL PROPERTY OR PR OPRIETARY RIGHTS RELATING THERETO REMAIN VESTED IN ECORNELL AND EXCEPT FOR LI MITED RIGHTS GRANTED UNDER THE AGREEMENT TO REGISTER THE STUDENTS AFFIL IATE ACKNOWLEDGES THAT NOTHING THEREIN WILL EFFECT ANY TRANSFER OF ANY RIG HT, TITLE OR INTEREST IN OR TO THE COURSES OR E-CORNELL MARKS FROM E-CORNELL O R TO AFFILIATE OR OF ANY THIRD PARTY AND THE AFFILIATE SHALL NOT REMOVE ANY COPY RIGHT NOTICE, TRADE MARK NOTICE, OR OTHER PROPRIETARY LEGEND DISPLAYED ON OR IN CONNECTION WITH COURSES OR E-CORNELL MARKS. CLAUSE 10 ALONG W ITH 10.1/10.2 AND 10.3 REFERS TO E-CORNELL MARKS, CERTAIN PERMITTED U SES, OWNERSHIP, 28 ADDITIONAL RESTRICTIONS WHEREBY THE AFFILIATE HAD B EEN GRANTED LIMITED RIGHT AND LICENSE TO USE ECORNELL TRADE MARKS, SERV ICE MARKS, LOGOS AND OTHER INDICIA (COLLECTIVELY REFERRED TO AS ECORNELL ) FOR THE PURPOSE OF ADVERTISING AND PROMOTING THE COURSES. ACCORDINGLY ON A PERUSAL OF THE AFFILAITE AGREEMENT ALONG WITH EXHIBITS WHICH IS T HE ONLY DOCUMENT WHICH HAS TO BE TAKEN INTO CONSIDERATION FOR DECIDI NG THE ISSUE IT IS EMINENTLY CLEAR THAT THE ASSESSEE SOLICITS ENROLLM ENT BY WAY OF ADVERTISING, PROMOTING AND MARKETING THE TRADE MARK S OF ECORNELL GRANTED TO IT FOR THE LIMITED USE OF MARKETING SO AS TO SOLICIT ENROLLMENT TO THE COURSES CONDUCTED BY ECORNELL REGISTRATION I S GRANTED BY ECORNELL TO THE STUDENTS SUBJECT TO THE FULFILLMENT OF NECES SARY TERMS AND CONDITIONS IN REGARD TO FEES AND CLAUSE 7 OF THE AGREEMENT AS DISCUSSED WHICH IS ENTERED INTO BY ECORNELL WITH THE STUDENT S DEMONSTRATES THE FACT THAT AT NO POINT OF TIME ASSESSEE WAS IN POSSE SSION OF ANY COPY RIGHTED MATERIAL AS IT IS EXCLUSIVELY TO BE ACCESSE D BY THE STUDENT USING THE LOG IN ID PROVIDED BY ECORNELL THE ASSESSEE IS TO PROVIDE THE INFRASTRUCTURE AS PER THE TERMS OF THE AGREEMENT WH ICH INFORMATION A STUDENT CAN ACCESS FROM ANY WHERE ELSE ALSO. A PE RUSAL OF EXHIBIT F WHICH IS A SAMPLE END USER AGREEMENT SHOWS THAT TH ERE IS A PRIVITY OF CONTRACT BETWEEN THE E-CORNELL AND THE STUDENTS AND IT IS THE STUDENTS WHO RECEIVE RIGHT TO ACCESS THE COURSE MATERIAL PRO VIDED BY ECORNELL BY USING THEIR SPECIFIC LOG IN ID NUMBERS WHICH IS THE UNIQUE IDENTIFIER WHICH GIVES STUDENTS ACCESS TO UNIQUE IDENTIFICATIO N TO COURSE CONTENTS 29 AND AT NO POINT OF TIME THE COURSE MATERIAL OR CONT ENT OF COPY RIGHT MATERIAL IS AVAILABLE TO THE ASSESSEE WHICH IS SPEC IFICALLY ADDRESSES IN CLAUSE 7 OF THE AGREEMENT WHICH STIPULATES THAT TH E AFFILIATE DOES NOT RECEIVE TRANSFER OF ANY RIGHT, TITLE AND INTEREST IN AND TO THE COURSES OR ECORNELL MARKS AND OF COPY RIGHT, PATENT, TRADE MAR K, SERVICE MARK, TRADE SECRET AND OTHER INTELLECTUAL PROPERTY OR PROPRIETA RY RIGHTS RELATING THERETO REMAINS WITH ECORNELL. THE ROLE OF THE ASS ESSEE IS MERELY TO ENROLL STUDENTS,AND PROVIDE THE INFRASTRUCTURE FOR ACCESSING COURSE MATERIAL IN THE CLASS ROOM. THE ASSESSEE AS DISC USSED ABOVE AS PER THE AFFILIATE AGREEMENT IS TO PROVIDE INFRASTRUCTUR E BY WAY OF COMPUTER BROAD BAND ACCESS VSAT CONNECTIVITY ETC. 8.11. CONSIDERING THE RESPECTIVE STAND OF THE PARTI ES BEFORE THE BENCH IN REGARD TO WHETHER THE PAYMENT IS ROYALTY UNDER ART ICLE 12 OF THE INDO- US DTAA IT IS NECESSARY AT THIS JUNCTURE TO CONSID ER THE SAID ARTICLE. FOR READY REFERENCE THE SAME IS REPRODUCED HEREUNDE R FROM PAPER BOOK PAGE NOS. 57 TO 58 WHEREIN COPY OF THE SAME IS PLAC ED BY THE ASSESSEE. ARTICLE 12: ROYALTIES AND FEES FOR INCLUDED SERVICES 1. ROYALTIES AND FEES FOR INCLUDED SERVICES ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTI NG STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES AND FEES FOR INCLUDED SERVI CES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO THE LAWS OF THAT STATE; BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FESS FOR INCLUDED SERVICES IS A RESIDENT OF THE OTH ER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED: (A) IN THE CASE OF ROYALTIES REFERRED TO IN SUB-PA RAGRAPH (A) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES AS DEFIN ED IN THIS ARTICLE 30 [OTHER THAN SERVICES DESCRIBED IN SUB-PARAGRAPH (B) OF THIS PARAGRAPH]: (I) DURING THE FIRST FIVE TAXABLE YEARS FOR WHICH THIS CONVENTION HAS EFFECT, A) 15 PER CENT OF THE GROSS AMOUNT OF THE ROYA LTIES OR FEES FOR INCLUDED SERVICES AS DEFINED IN THIS ARTICLE, WHERE THE PAYER OF THE ROYALTIES OR FEES IS THE GOVERNMENT OF THAT CONTRACTING STATE, A POLITICAL SUB-DIVISION OR A PU BLIC SECTOR COMPANY; AND B) 20 PER CENT OF THE GROSS AMOUNT OF THE ROYALTIE S OR FEES FOR INCLUDED SERVICES IN ALL OTHER CASES; AND (II) DURING THE SUBSEQUENT YEARS, 15 PER CENT OF TH E GROSS AMOUNT OF ROYALTIES OR FEES FOR INCLUDED SERVICES; AND B) IN THE CASE OF ROYALTIES REFERRED TO IN SUB-PARAGRA PH (B) OF PARAGRAPH 3 AND FEES FOR INCLUDED SERVICES AS DEFIN ED IN THIS ARTICLE THAT ARE ANCILLARY AND SUBSIDIARY TO T HE ENJOYMENT OF THE PROPERTY FOR WHICH PAYMENT IS RECE IVED UNDER PARAGRAPH 3(B) OF THIS ARTICLE, 10 PER CENT O F THE GROSS AMOUNT OF THE ROYALTIES OR FEES FOR INCLUDED SERVICES. 3. THE TERM ROYALTIES AS USED IN THIS ARTICLE MEA NS: A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OR A LITERARY, A RTISTIC, OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR W ORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONN ECTION WITH RADIO OR TELEVISION BROADCASTING ANY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR I NFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY, USE, OR DISPOSITION THEREOF; AND B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION F OR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL, OR SCIENTIFIC EQUIPMENT, OTHER THAN PAYMENTS DERIVED BY AN ENTERP RISE DESCRIBED IN PARAGRAPH 1 OF ARTICLE 8 (SHIPPING AND AIR TRANSPORT) FROM ACTIVITIES DESCRIBED IN PARAGRAPH 2 (C) OR 3 OF ARTICLE 8. 4. .. 5. .. 6. .. 8.12. ON A CAREFUL PERUSAL OF THE ABOVE IT IS SE EN THAT THE NATURE OF PAYMENT MADE TO ECORNELL IS NOT ROYALTY AS THE PA YMENT IS NOT FOR THE 31 USE OR THE RIGHT TO USE ANY COPY RIGHT OR LITERARY WORK. THE FACT THAT IT IS NOT FOR ARTISTIC, SCIENTIFIC WORK, WORK ON FILM, T APE, RADIO, TELEVISION, BROADCASTING ETC. DOES NOT ARISE. IT IS ALSO NOT F OR USE OR RIGHT TO USE PATENT, TRADE MARK, DESIGN, PLAN, SECRET FORMULA O R PROCESS ETC. IT IS PURELY AND SIMPLY A CASE OF POOLING OF RESOURCES BY WAY OF AN AFFILIATE AGREEMENT WHEREIN THE RESPECTIVE ROLES AND RESPONSI BILITIES HAVE BEEN ASSIGNED AND THE ARRANGEMENT BEING OF THE NATURE OF POOLING OF RESOURCES WHERE FEE SHARING OF THE TWO PARTIES HAVE BEEN SET OUT THIS IS NOT A CASE WHERE ANY PAYMENT IS BEING MADE TO ECORNELL BY THE ASSESSEE FOR ANY KIND OF SERVICE AS IT IS PURELY A CASE OF APPORTIO NING OF FEES ATTRIBUTABLE TO ECORNELL AS PER THE AFFILIATE AGREEMENT BEING RE MITTED TO ECORNELL AND THE PORTION OF THE FEES COLLECTED FOR PROVIDING ENR OLLMENT INFRASTRUCTURE IN ORDER TO ACCESS THE STUDY MATERIAL BY THE STUDENTS IS RETAINED BY THE ASSESSEE AS ITS SHARE. AS SUCH ON FACTS THE PRESE NT CASE DOES NOT PARTAKE THE NATURE OF ROYALTY AS CONTEMPLATED UNDER CLAUSE 3(A) OF ARTICLE 12 OF THE INDO-US DTAA. 9. WE NOW PROPOSE TO DISCUSS THE CASE LAW WHICH HAS BEEN REFERRED TO BY THE PARTIES BEFORE THE BENCH FOR OUR CONSIDERATI ON. 9.1. TRANSMISSION CORPORATION OF A.P. LTD. & ANOTHE R VS CIT 239 ITR587 (S.C .) THE SAID JUDGEMENT HAS BEEN RELIED UPON BY TH E REVENUE. A PERUSAL OF THE SAME SHOWS THAT IT HOLD S THAT S.195 OF THE INCOME TAX ACT, 1961 PROVIDES FOR DEDUCTION OF TAX AT SOURCE SUBJECT TO REGULAR ASSESSMENT. IT LAYS DOWN THAT THE PURPOSE OF SUB-SECTION (VI) OF 32 SECTION 195 IS TO SEE THAT ON THE SUM WHICH IS CHAR GEABLE U/S 4 OF THE ACT FOR LEVY AND COLLECTION OF INCOME TAX ACT, 1961 THE PAYER SHOULD DEDUCT INCOMETAX THEREON AT THE RATES IN FORCE IF T HE AMOUNTS IS TO BE PAID TO A NON-RESIDENT. THE SAID PROVISION IS FOR TENTATIVE DEDUCTION OF TAX THEREON SUBJECT TO REGULAR ASSESSMENT AND BY DE DUCTION OF INCOME TAX, THE RIGHTS OF THE PARTIES ARE NOT, IN ANY MA NNER ADVERSELY AFFECTED. THE SAID RIGHTS OF THE PAYER OR RESPONDENT ARE FULL Y SAFEGUARDED U/S 195(2)/ (3) AND 195(7) OF THE ACT. THE ONLY THING WHICH IS REQUIRED TO BE DONE IS TO FILE AN APPLICATION FOR DETERMINATION BY THE A.O. THAT SUCH SUM WOULD NOT BE CHARGEABLE TO TAX IN THE CASE OF THE R ECIPIENT, OR FOR DETERMINATION OF APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE, OR FOR GRANT OF CERTIFICATE AUTHORIZING THE RECIPIENT TO RECEIVE THE AMOUNT WITHOUT DEDUCTION OF TAX, OR DEDUCTION OF INCOME T AX AT ANY LOWER RATE. ON SUCH DETERMINATION, TAX AT THE APPROPRIATE RATE COULD BE DEDUCTED AT SOURCE. IF NO SUCH APPLICATION IS FILED INCOME TAX ON SUCH SUM IS TO BE DEDUCTED AND IT IS THE STATUTORY OBLIGATION FOR TH E PERSONS RESPONSIBLE FOR PAYING SUCH SUM TO DEDUCT TAX BEFORE MAKING THE PAYMENT. ON FACTS IT IS SEEN THAT FOR CONSIDERING THE NATURE OF REMITTANCE WHETHER FALLING IN THE CATEGORY OF ROYALTY IN TERMS OF ARTI CLE 12(3)(A) OF THE INDO-US DTAA IT HAS NO APPLICABILITY AS EMINENTLY AN APPR OPRIATE APPLICATION HAS BEEN MADE BY THE ASSESSEE WHICH HAS BEEN REJECT ED BY THE A.O. 9.2. REVENUE HAS ALSO PLACED RELIANCE ON GE INDIA TECHNOLOGY CENTRE P.LTD. VS. CIT 327 ITR 456 (S.C.). A PERUSAL OF THE SAID JUDGEMENT SHOWS THAT IT LAYS DOWN THAT DUTY TO DEDUCT DOES NOT ARIS E UNLESS REMITTANCE CONTAINS WHOLLY OR PARTLY TAXABLE INCOME. THE SAID JUDGEMENT LAYS DOWN THE PROPOSITION THAT THE EXPRESSION CHARGEABLE UNDER THE PROVISIONS OF THE ACT IN S.195(1) SHOWS THAT REMITTANCE HAS GOT T O BE OF A TRADING RECEIPT, THE WHOLE OR PART OF WHICH IS LIABLE TO TA X IN INDIA. IF TAX IS NOT SO ASSESSABLE, THERE IS NO QUESTION OF TAX AT SOURCE BEING DEDUCTED. 33 IN THE FACTS OF THE PRESENT CASE CONSIDERING THE AF FILIATE AGREEMENT, THE REMITTANCE IS NOT ROYALTY UNDER ARTICLE 12(3)(A) OF INDO US DTAA AS SUCH THE SAID JUDGEMENT HAS NO APPLICABILITY. 9.3. ON BEHALF OF THE ASSESSEE RELIANCE HAS BEEN PL ACED UPON THE ORDERS OF THE TRIBUNAL IN ACIT VS. NIIT LTD. 112 TTJ 800 (DELHI) WHICH ORDER HAS BEEN APPROVED BY THE HONBLE HIGH COURT. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED AT PAGES 69 TO 73 IN THE PAPER BOOK. RELYING ON THE SAME IT HAS BEEN VEHEMENTLY CONTENDED THAT THE SAI D ORDER CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE. A PERUSAL OF THE SAME SHOWS THAT THE FACTS CONSIDERED BY THE CO-ORDINATE BENCH WERE THAT THE ASSESSEE WAS A PUBLIC LIMITED COMPANY ENGAGED IN COMPUTER EDUCATIO N AND TRAINING. IT ALSO PROVIDED THE STUDENT SERVICES THROUGH ITS FRAN CHISEE UNDER A LICENSE AND WERE PROVIDED WITH THE COURSE CONTENT. INFRAST RUCTURE WAS TO BE PROVIDED BY FRANCHISEE WHO WERE RUNNING THE TRAINI NG CENTRE UNDER ASSESSEES BRAND NAME. THE FEES COLLECTED WAS SHAR ED BETWEEN THE FRANCHISEE AND THE ASSESSEE AS PER THE CLAUSES OF T HE AGREEMENT. IT WAS HELD THAT THE DOMINANT INTENTION OF THE PARTIES WAS TO CONDUCT BUSINESS AND NOT MERE LETTING OUT OF THE BUILDING, FURNITURE AND FIXTURES. IT WAS THE COMPOSITE AGREEMENT WHICH WAS TO BE SEEN AND TH E ESSENCE OF THE AGREEMENT WAS TO CONDUCT THE BUSINESS OF RUNNING E DUCATIONAL CENTRES JOINTLY. AS SUCH THE BROAD OBJECTIVE OF THE AGREEM ENT WAS TO SHARE REVENUE AND NOT TO HIRE THE PREMISES PROVIDED BY TH E ASSESSEE. IN THE FACTS OF THE SAID CASE THE ADMINISTRATIVE CONTROL O F THE EDUCATION CENTRE WAS WITH FRANCHISEE WHO WERE RESPONSIBLE FOR MARKET ING THE COURSES ADMITTING THE STUDENTS CONDUCTING THE CLASSES AND PERFORM ALL OTHER ADMINISTRATIVE FUNCTIONS RELATING TO THE EDUCATION CENTRE. THE ASSESSEE IN THE PRESENT PROCEEDINGS HAS PLACED RELIANCE UPON THE FINDING IN THE FACTS OF THE SAID ORDER WHEREIN IT HAS BEEN HELD TH AT IT IS THE DOMINANT INTENTION OF THE PARTIES TO THE AGREEMENT WHICH HAS TO BE CONSIDERED AND THE COMPOSITE AGREEMENT HAS TO BE CONSIDERED SO AS TO ARRIVE AT THE 34 BROAD OBJECTIVES OF THE PARTIES TO THE AGREEMENT. IT HAS BEEN ARGUED THAT THE VARIOUS STIPULATIONS IN THE AGREEMENT WHICH AR E ENTERED INTO TO PROTECT BUSINESS INTEREST SHOULD NOT BE READ IN ISO LATION AS THEY WOULD NOT CHANGE THE ESSENCE OF THE AGREEMENT AND IN THE FACTS OF THAT CASE THE FINDING HAS BEEN ARRIVED AT ON THE BASIS OF BROAD O BJECTIVE OF THE AGREEMENTS BETWEEN THE PARTIES WHICH HAS BEEN HELD TO BE FOR THE PURPOSE OF SHARING THE REVENUE AND IT WAS NOT TO H IRE THE PREMISES PROVIDED BY THE ASSESSEE. IN FACTS OF THE PRESENT CASE IT IS STATED THAT THE PRINCIPLE LAID DOWN IN THE SAID ORDER THAT IT IS TH E DOMINANT PURPOSE OF THE ASSESSEE AND E-CORNELL TO POOL THEIR RESOURCE S TO EARN PROFIT WHICH IS TO BE TAKEN INTO CONSIDERATION. IT IS SEEN THAT CONSIDERING THE FACTS THE CO-ORDINATE BENCH HAS FOLLOWED THE WELL SETTLED LEG AL PRINCIPLES NAMELY THAT AN AGREEMENT HAS TO BE READ AS A WHOLE TO ARRI VE AT THE DOMINANT OBJECT SO AS TO GAUGE THE INTENTION OF THE PARTIES TO THE AGREEMENT WHICH HAS TO BE THE SOLE BASIS FOR DECIDING THE FACTS OF A CASE. THE SAID ORDER IT IS SEEN HAS BEEN CONFIRMED BY THE JURISDICTIONAL HI GH COURT. COPY OF THE SAID ORDER IN ITA 1167/08, 1176/08 AND 1200/08 IS P LACED AT PAGES 74 TO 76 OF THE PAPER BOOK. THE PRINCIPLE LAID DOWN T HEREIN APPLIES TO THE CASE AT HAND. 9.4. RELIANCE HAS ALSO BEEN PLACED BY THE ASSESSEE UPON CIT (INTERNATIONAL TAXATION) AND ANOTHER VS ILLINOIS INSTITUTE OF TECHNOLOGY OF INDIA P.LTD. 321 ITR 49 (KAR.) A PERUSAL OF TH E SAME SHOWS THE ASSESSEE THEREIN ENTERED INTO AN AGREEMENT WITH A F OREIGN COMPANY IN ORDER TO IMPART DISTANCE EDUCATION IN CERTAIN FACIL ITIES. THE A.O. UNDER THE PROVISIONS OF S.195 OF THE INCOME TAX ACT, 196 1 TREATED THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTI NG TAX AT SOURCE WHILE REMITTING THE FEES COLLECTED BY IT ON BEHALF OF TH E FOREIGN COMPANY. ACCORDINGLY AN ORDER WAS PASSED U/S 201(1) AND (1A ) OF THE ACT. THIS ORDER WAS CONFIRMED BY THE COMMISSIONER (APPEALS). THE TRIBUNAL HELD 35 THAT THE FOREIGN COMPANY HAD NO PERMANENT ESTABLIS HMENT IN INDIA AND THAT THE FEE COLLECTED BY THE ASSESSEE AND TRANSFE RRED TO THE FOREIGN COMPANY DID NOT ATTRACT DEDUCTION OF TAX AT SOURC E AS REQUIRED U/S 195 OF THE ACT. ON APPEAL THEIR LORDSHIPS IN THE SAID JUDGEMENT DISMISSED THE DEPARTMENTAL APPEAL. A PERUSAL OF TH E SAME SHOWS THAT THEIR LORDSHIPS HAVE TAKEN NOTE OF M.A.PAI FOUNDA TIONS VS. STATE OF KARNATAKA (2002) 8 SCC 481 AND CIT VS. MAHINDRA AND MAHINDRA LTD. (2003) ITR 263 481 (BOMBAY HIGH COURT) AND THUS H ELD THAT IT IS NO LONGER IN DISPUTE THAT IMPARTING EDUCATION CAN NO LONGER BE TREATED AS A BUSINESS. 9.5. RELIANCE ALSO HAS BEEN PLACED ON THE ORDER OF THE COORDINATE BENCH IN CAREER LAUNCHER INDIA LTD. VS ACIT 139 TTJ 48 COPY OF WHICH IS PLACED BEFORE THE BENCH. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE THEREIN WAS CARRYING ON THE BUSINESS OF RU NNING COACHING CLASSES FOR ADMISSION OF STUDENTS TO PROFESSIONAL C OURSES. IN THE COURSE OF THIS BUSINESS IT HAD ALSO ENTERED INTO AGREEME NTS WITH VARIOUS PERSONS DESIROUS OF RUNNING SIMILAR COACHING CLASSE S ON THE BASIS OF STANDARDIZED AGREEMENT. THE AGREEMENT ALLOWED THE FRANCHISEES WERE TO USE THE TRADE NAME, TRADE MARK AND COURSE MATER IAL BELONGING TO THE ASSESSEE. HOWEVER OTHER ARRANGEMENTS SUCH AS FINDI NG SUITABLE PREMISES, ENROLLING STUDENTS, COLLECTING FEES ETC. WERE MADE BY THE FRANCHISEES. THE FEES COLLECTED BY THE FRANCHISE ES FROM THE STUDENTS WAS CREDITED TO A BANK ACCOUNT. IN LIEU OF THE USER OF THE TRADE MARK, TRADE NAME AND COURSE MATERIAL THE ASSESSEE RECEIV ED AN AMOUNT EQUAL TO 25% OF NET VALUE EARNED FROM THE OPERATIONS. AP ART FROM THIS, THE ASSESSEE SUPPLIED STATIONERY ETC. TO THE FRANCHISE ES AT THE RATES FIXED IN THIS BEHALF BY IT. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CREDITED NET FEES OF RS.27,37,56,334/- TO THE PROF IT AND LOSS ACCOUNT. FURTHER, THE ASSESSEE HAD DEBITED A SUM OF RS.6,38, 64,018/- UNDER THE HEAD FRANCHISEE PAYMENTS UNDER THE HEAD ADMN. & OTHER EXP. THE 36 QUESTION WAS WHETHER THE PAYMENTS ARE IN THE NATURE OF PAYMENTS TO CONTRACTORS OR SUB-CONTRACTORS FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURS UANCE OF THE CONTRACTS. CONSIDERING THE PROVISIONS OF S.194C AND THE AGREEMENT ENTERED INTO BY THE SSESSEE LICENSOR AND THE OPERAT OR OF THE STUDY CENTRE THE LICENSEE THE COORDINATE BENCH HELD THAT WHAT IS MATERIAL IS THE CONTENT OF THE AGREEMENT. FROM A PERUSAL OF THE SA ME THE COORDINATE BENCH CONCLUDED THAT IT EMERGES THAT THE LICENSEE MAY NOT BE DOING ANY WORK FOR THE ASSESSEE EVEN WITHIN THE WIDER MEA NING OF THE TERM WORK AS UNDERSTOOD IN COMMON PARLANCE. THE CO-OR DINATE BENCH HELD IT TO BE A CASE OF RUNNING STUDY CENTRE AND TO APP ORTION PROFITS BETWEEN THE ASSESSEE AND THE LICENSEE. CONSIDERING THE FAC TS OF NIIT LTD. WHICH HAD BEEN UPHELD BY THE HONBLE DELHI HIGH COURT TH E ACTION OF THE TRIBUNAL IN HOLDING THAT THE FEES SHARED BY THE ASS ESSEE WITH THE FRANCHISEE WHICH HAS BEEN PLACED UNDER DIFFERENT NO MENCLATURES NAMELY MARKETING CLAIM INFRASTRUCTURE CLAIM ETC. HAS TO BE READ AS A WHOLE AND A COMPOSITE AGREEMENT LIKE THIS COULD NOT BE BROKEN I NTO VARIOUS COMPONENTS AS CONTENDED BY THE REVENUE, THE CO-ORDI NATE BENCH HELD THAT THE MODEL OF SHARING RECEIPTS IN THE CASE OF N IIT IS SOMEWHAT DIFFERENT, HOWEVER IN THIS CASE ALSO THE AGREEMENT HAS TO BE READ AS A WHOLE. 9.6. SIMILARLY IN THE OTHER CASES RELIED UPON BY T HE ASSESSEE IT IS AGAIN AND AGAIN THE SAME PRINCIPLE WHICH HAS BEEN APPLIED NAMELY THAT THE INTENTION OF THE PARTIES CAN BE GATHERED ONLY FROM THE AGREEMENT WHICH HAS TO BE READ AS A WHOLE. THE SAID ISSUE IS NOT I N DISPUTE. ON A CAREFUL CONSIDERATION OF THE AFFILIATE AGREEMENT ALONG WITH EXHIBITS, WE ARE OF THE VIEW THAT THE REMITTANCES MADE TO ECORNELL (TILS) D O NOT FALL IN THE CATEGORY OF ROYALTY AS CONSIDERED IN CLAUSE 3(A) OF ARTICLE 12 OF THE INDO- US DTAA. 37 9.7. ACCORDINGLY FOR THE DETAILED REASONS GIVEN HE REINABOVE ON FACTS AND LAW IN THE EARLIER PART OF THIS ORDER THE GROUN DS OF THE ASSESSEE ARE ALLOWED. 9.8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MARCH, 2012. SD/- SD/- (B.C.MEENA) (DIVA SINGH) ACCOUNTNAT MEMBER JUDICIAL MEMBE R DATED: 9 TH MARCH, 2012 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR