Appeal Details
Counselvise Citation
[2011] 140 COUNSELVISE.COM (IT) 55988 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
11 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-11-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
23-08-2011
Assessment Year
2007-2008
Appeal Filed On
16-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L : MUMBAI BEFORE SHRI RAJENDRA SINGH, (ACCOUNTANT MEMBER) AN D SHRI V.D. RAO,(JUDICIAL MEMBER) ITA NO.8831/MUM/2010 ASSESSMENT YEAR :2007-08 DE BEERS UK LIMITED (FORMERLY KNOWN AS THE DIAMOND TRADING COMPANY LIMITED) C/O., M/S. S.R.BATLIBOI & CO. 18 THE FLOOR, EXPRESS TOWERS, NARIMAN POINT MUMBAI-400 021. ..( APPELLANT ) P.A. NO. (AACCT 5530 B) VS. DY. COMMISSIONER OF INCOME TAX (INTL. TAXATION)-1( 2) SCINDIA HOUSE MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI M.P. LOHIA RESPONDENT BY : MS. MAL ATHI SRIDHARAN DATE OF HEARING : 19.10.2011 DATE OF PRONOUNCEMENT : 18 TH NOVEMBER, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.10.10 OF THE AO UNDER SECTION 143(3) R.W.S. 144C (13) OF THE INCOME TAX ACT PASSED AS PER DIRECTION OF DISPUTE RESOLUTION P ANEL-1 (DRP). THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTES ON 13 D IFFERENT GROUNDS. 2. THE ASSESSEE COMPANY WHO IS INCORPORATED AS TAX RESIDENT OF UK WAS INVOLVED IN SELLING ROUGH DIAMONDS TO WORLDWIDE SIG HTHOLDERS. THE ASSESSEE ITA NO.8831/M/10 A.Y:07-08 2 WAS ALSO INCURRING EXPENDITURE ON PROMOTIONAL ACTIV ITIES FOR WHICH SIGHTHOLDERS HAD BEEN CHARGED AS MARKETING CONTRIBU TION. BESIDES, THE ASSESSEE WAS ALSO PROVIDING VALUE ADDED SERVICES TO THE SIGHTHOLDERS. THE AO TAXED THE RECEIPTS FROM MARKETING CONTRIBUTIONS AND VALUE ADDED SERVICES AS ROYALTY AND FEES FOR TECHNICAL SERVICES RESPECTI VELY WHICH HAS BEEN DISPUTED IN THIS APPEAL. THE ADDITION HAS ALSO BEE N MADE BY THE AO ON ACCOUNT OF FACTUAL DISCREPANCIES IN THE INCOME DECL ARED BY THE ASSESSEE. THERE ARE ALSO DISPUTES REGARDING RATE OF TAX. THE SPECIFIC DISPUTES RAISED BY THE ASSESSEE HAVE BEEN DEALT WITH IN THE SUCCEEDING PARAS. 3. THE FIRST DISPUTE IS REGARDING THE LEGAL VALIDIT Y OF THE ASSESSMENT PROCEEDINGS WHICH HAS BEEN CHALLENGED ON THE GROUND THAT THE NOTICE ISSUED UNDER SECTION 143(2) WAS BARRED BY LIMITATION. HOWE VER, THE LD. AR FOR THE ASSESSEE DID NOT PRESS THIS GROUND AT THE TIME OF H EARING OF THE APPEAL. THIS GROUND IS, THEREFORE, DISMISSED AS NOT PRESSED. 4. THE SECOND DISPUTE IS REGARDING TREATING THE MAR KETING CONTRIBUTION BY THE AO AS ROYALTY. THE ASSESSEE HAD EXPLAINED TO T HE AO THAT MARKETING CONTRIBUTIONS PAID BY THE SIGHTHOLDERS WAS NOTHING BUT REIMBURSEMENT OF EXPENSES INCURRED BY THE ASSESSEE AND THEREFORE, TH ERE WAS NO INCOME ELEMENT INVOLVED. THE AO, HOWEVER DID NOT ACCEPT T HE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT CONTRIBUTIONS HAD BEEN REC EIVED BY THE ASSESSEE FOR USE OF DESIGN, PROCESS OR TRADE MARK FOR PROCES SING OF ROUGH DIAMONDS AND THEREFORE, THE SAME WAS ROYALTY AS DEFINED IN T HE EXPLANATION 2 TO SECTION (9)(1)(VI). THE AO ALSO HELD THAT PAYMENT WAS ROYALTY UNDER PARA- ITA NO.8831/M/10 A.Y:07-08 3 3(A) OF ARTICLE-13 OF INDO UK TAX AVOIDANCE AGREEME NT AS THE SAME WAS FOR THE USE OF DESIGN, PROCESS OR TRADE MARK. HE, THERE FORE, PROPOSED TO TREAT THE SAME AS ROYALTY INCOME. THE ASSESSEE FILED OBJ ECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP) WHO HELD THAT SIGHTH OLDERS WERE USING NAKSHATRA BRAND OF THE ASSESSEE FOR THEIR BUSINESS FOR WHICH PAYMENTS HAD BEEN MADE BY THEM AND, THEREFORE, THE ACTION OF THE AO TREATING THE SAME AS ROYALTY WAS UPHELD. THE AO THUS ASSESSED THE INCOM E AS ROYALTY. AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 4.1 WE HAVE HEARD BOTH THE PARTIES IN THE MATTER. THE LD. AR FOR THE ASSESSEE REITERATED THE EARLIER CONTENTIONS THAT TH E MARKETING CONTRIBUTION WAS NOT ROYALTY. HOWEVER, IT WAS SUBMITTED THAT, FOR WANT OF NECESSARY DETAILS, THE ASSESSEE DID NOT WANT TO PURSUE THE MA TTER AND THE GROUND WAS ACCORDINGLY NOT PRESSED. WE, THEREFORE, DISMISS TH E GROUND NO.2 OF THE ASSESSEE AS NOT PRESSED. 5. GROUND NO.3 IS REGARDING ADDITION OF RS.1,29,51, 000/- MADE BY THE AO ON ACCOUNT OF MARKETING CONTRIBUTIONS. THE AO HAD VERIFIED THE INCOME ON ACCOUNT OF MARKETING CONTRIBUTIONS SHOWN BY THE ASS ESSEE WITH SIGHTHOLDERS AND FOUND DISCREPANCY OF USD 3,00,000 (RS.1,29,51,0 00/-) IN RELATION TO DIMEXON DIAMOND LTD., A SIGHTHOLDER, ON THE BASIS O F INFORMATION RECEIVED FROM THE SAID PARTY UNDER SECTION 133(6). THE ASSE SSEE HAD DECLARED THE TOTAL MARKETING CONTRIBUTION OF RS.12,51,76,997/-. THE AO, THEREFORE, ADDED THE SUM OF RS.1,29,51,000/- ON ACCOUNT OF DISCREPAN CY WITH DIMEXON DIAMOND LTD. AND ASSESSED THE TOTAL MARKETING CONTR IBUTION OF ITA NO.8831/M/10 A.Y:07-08 4 RS.13,81,27,997/- AS ROYALTY. AGGRIEVED BY THE SAI D DECISION, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1 BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THE PAYMENT OF USD 3,00,000 RELATED TO ASSESSMENT YEAR 2006-07 AND NOT TO ASSESSMENT YEAR 2007-08. HE REFERRED TO INVOICES ISSUED BY DIM EXON DIAMOND LTD. PLACED AT PAGE-184 OF THE PAPER BOOK WHICH WAS DAT ED 23.2.2006 WHICH RELATED TO ASSESSMENT YEAR 2006-07. IT WAS ALSO SU BMITTED THAT USD 3,00,000 LACS WAS PAYMENT MADE BY THE ASSESSEE AND NOT A RECEIPT AND, THEREFORE, COULD NOT BE TAXED IN ITS NAME. IT WAS POINTED OUT THAT IN THE INVOICE DATED 23.2.2006, THE NAME OF THE BENEFICIAR IES WAS CLEARLY MENTIONED AS DIMEXON DIAMOND LTD. AND, THEREFORE, ASSESSEE WA S PAYER AND THE SAID PARTY WAS PAYEE. IT WAS ARGUED THAT ON THIS GROUND ALSO, AMOUNT COULD NOT BE ASSESSED AS INCOME. THE LD. DR ON THE OTHER HA ND SUBMITTED THAT THE CLAIM OF THE ASSESSEE REQUIRED VERIFICATION. 5.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING THE ADDITION OF USD 3,00,000 LACS (RS.1,29,51,000/-) BEING THE DISCREPANCY ON ACCOUNT OF MARKETING CONTR IBUTION IN RELATION TO THE PARTY, DIMEXON DIAMOND LTD. THE SAID DISCREPANCY W AS FOUND BY AO ON VERIFICATION WITH DIMEXON DIAMOND LTD. THE CASE OF THE ASSESSEE IS THAT PAYMENT DID NOT RELATE TO ASSESSMENT YEAR 2007-08 A S THE INVOICE PLACED AT PAGE-184 OF THE PAPER BOOK IS DATED 23.2.2006. IT HAS ALSO BEEN SUBMITTED THAT THE SAID AMOUNT WAS PAID BY THE ASSESSEE TO DI MEXON DIAMOND LTD. AND, THEREFORE, COULD NOT BE ASSESSED AS INCOME OF THE ASSESSEE. WE HAVE ITA NO.8831/M/10 A.Y:07-08 5 PERUSED CAREFULLY THE RELEVANT PAPERS PLACED IN THE PAPER BOOK. WE FIND THAT AS PER INVOICE ISSUED BY DIMEXON DIAMOND LTD. PLACE D AT PAGE-184 OF THE PAPER BOOK, THE MARKETING CONTRIBUTION HAS BEEN SHO WN AT USD 3,00,000 AS PER INVOICE DATED 23.2.2006. HOWEVER, THE DETAILS OF PAYMENT HAVE ALSO BEEN GIVEN AT PAGE-183 OF THE PAPER BOOK WHICH SHOW S PAYMENTS MADE TO DIAMOND TRADING CO. I.E. ASSESSEE, TOWARDS CERTIFIC ATION CHARGES AND MARKETING INITIATIVE WHICH INCLUDES PAYMENT OF USD 3,00,000 LACS AS PER INVOICE DATED 22.4.2006. THIS INVOICE DATE IS RELE VANT TO ASSESSMENT YEAR 2007-08 AND IT DESCRIBES THE AMOUNT AS PAID TO THE ASSESSEE WHEREAS THE LD. AR CLAIMED THAT THE AMOUNT HAD BEEN PAID BY THE ASS ESSEE. WE ALSO NOTE FROM THE LETTER DATED 19.5.2005 OF DTC ( THE ASSESS EE ) PLACED AT PAGE 185- 186 OF PAPER BOOK AS PER WHICH ASSESSEE HAD OFFERED FINANCIAL SUPPORT OF USD 3,00,000 LACS IN INSTALLMENTS TO THE SIGHTHOLDE RS. BUT THE PAYMENT UNDER CONSIDERATION IS A SINGLE TRANSACTION OF USD 3 LACS. THUS THERE ARE DISCREPANCIES WHICH ARE REQUIRED TO BE VERIFIED. I T IS REQUIRED TO BE SEEN WHETHER THE AMOUNT IN QUESTION WAS PAYMENT RECEIVED BY ASSESSEE OR PAYMENT MADE BY ASSESSEE AND WHETHER THE SAME RELAT ED TO ASSESSMENT YEAR 2007-08. WE, THEREFORE, SET ASIDE THE ORDER O F AO ON THIS POINT AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY VERIFICATION AND AFTER ALLOWING OPPORTUNITY OF HEAR ING TO THE ASSESSEE. 6. THE DISPUTE RAISED IN GROUND NO.4 IS REGARDING THE RATE OF TAX APPLICABLE TO MARKETING CONTRIBUTIONS WHICH HAVE BE EN ASSESSED BY THE AO AS ROYALTY. THE AO HAS APPLIED RATE OF 15% AS PER ARTICLE-13 OF INDIA UK TAX TREATY. THE ASSESSEE OBJECTED TO THE RATE OF 15% P ROPOSED BY THE AO BEFORE ITA NO.8831/M/10 A.Y:07-08 6 DRP WHO OBSERVED THAT IT WAS NOT CLEAR WHETHER THE ASSESSEE HAD OPTED FOR DOMESTIC LAW OR THE TREATY. IT WAS ALSO OBSERVED T HAT IN THE OBJECTIONS RAISED, THE ASSESSEE HAD MENTIONED THAT AO ERRED IN NOT TREATING THE MARKETING CONTRIBUTION AS ROYALTY UNDER ARTICLE-13 OF INDIA UK TAX TREATY, AND, THEREFORE, IF THE ROYALTY WAS BEING CONSIDERED BY THE ASSESSEE UNDER DTAA, THEN THE RATE OF DTAA WOULD APPLY AS ASSESSEE COULD NOT BE ALLOWED TO APPLY THE LAW IN A PIECEMEAL MANNER. DRP, THEREFOR E, UPHELD THE RATE OF 15% BEING PROPOSED BY THE AO AS PER DTAA. AGGRIEVE D BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6.1. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITT ED THAT TAXABILITY OF A SUM HAD TO BE CONSIDERED UNDER DOMESTIC LAW AS WELL AS UNDER DTAA BECAUSE IN CASE A PARTICULAR SUM WAS NOT TAXABLE UNDER DOME STIC LAW, IT CANNOT BE TAXED EVEN IF THE SAME WAS TAXABLE UNDER DTAA. SIM ILARLY, IF THE SUM WAS NOT TAXABLE UNDER DTAA, THE SAME CANNOT BE TAXED EV EN IF THE SAME WAS TAXABLE UNDER THE DOMESTIC LAW. FURTHER, THE AO HA D APPLIED BOTH THE PROVISIONS AND HAD HELD THAT THE MARKETING CONTRIBU TION WAS TAXABLE AS ROYALTY BOTH, UNDER THE DOMESTIC LAW AS WELL AS UND ER THE DTAA. THIS BEING THE POSITION, THE RATE WHICH IS BENEFICIAL TO THE A SSESSEE HAS TO BE APPLIED UNDER THE PROVISIONS OF SECTION 90(2). IT WAS ALSO SUBMITTED THAT RATE AS PER DOMESTIC LAW WAS 10% AS PER SUB CLAUSE (AA) OF CLAU SE (B) OF SECTION 115A(1). AS PER THE SAID PROVISION, ANY AMOUNT REC EIVED BY A NON-RESIDENT FROM INDIA AS ROYALTY AS PER AGREEMENT APPROVED BY CENTRAL GOVERNMENT ON OR AFTER 1.6.2005 IS TAXABLE AT 10%. IN THIS CASE, IT WAS POINTED OUT THAT THE ITA NO.8831/M/10 A.Y:07-08 7 AGREEMENT WAS DATED 8.11.2005 AND THEREFORE, RATE O F 10% HAD TO BE APPLIED. THE LD. DR SUPPORTED THE ORDER OF THE AO AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE ASSESSMENT ORDER. 6.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING RATE OF TAX TO BE APPLIED IN C ASE OF MARKETING CONTRIBUTION WHICH HAS BEEN TAXED BY THE AO AS ROYA LTY. THERE IS NO DISPUTE THAT THE MARKETING CONTRIBUTIONS HAD BEEN RECEIVED BY THE ASSESSEE AS PER AGREEMENT DATED 8.11.1005 A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 1-22. THE AO HAD TREATED THE MARKETI NG CONTRIBUTION AS ROYALTY BOTH UNDER THE PROVISIONS OF DOMESTIC LAW A S WELL AS UNDER DTAA WHICH IS CLEAR FROM THE ASSESSMENT ORDER. THE TAXA BILITY OF INCOME FROM INTERNATIONAL TRANSACTIONS HAS TO BE CONSIDERED, BO TH UNDER THE DOMESTIC LAW AS WELL AS UNDER DTAA BECAUSE THE ASSESSEE WOULD BE ENTITLED TO THE BENEFITS OF THE TREATY ONLY IF THE SUM IS TAXABLE UNDER THE DOMESTIC LAW. IN CASE, THE SUM IS NOT TAXABLE EITHER UNDER THE DOMESTIC LAW OR UNDER THE DTAA, IT CANNOT BE TAXED AT ALL. IF THE AMOUNT HAS BEEN FOU ND TAXABLE UNDER BOTH THE PROVISIONS, THE ASSESSEE WILL BE ENTITLED TO THE BE NEFICIAL RATE OF TAX UNDER THE PROVISIONS OF SECTION 90(2). SINCE IN THIS CASE, T HE MARKETING CONTRIBUTION HAS BEEN RECEIVED IN TERMS OF AGREEMENT DATED 8.11. 2005 WHICH IS OBVIOUSLY AFTER 1.6.2005, THE TAX RATE OF 10% IS APPLICABLE U NDER THE PROVISIONS OF SUB CLAUSE (AA) OF CLAUSE (B) OF SECTION 115A(1) OF THE DOMESTIC LAW. WE, THEREFORE, HOLD THAT THE MARKETING CONTRIBUTIONS AS SESSED BY THE AO AS ROYALTY WILL BE TAXED @ 10%. ITA NO.8831/M/10 A.Y:07-08 8 7. THE DISPUTE RAISED IN GROUND NO.5 IS REGARDING T HE ORDER OF AO TREATING THE PAYMENT FOR VALUE ADDED SERVICES (VAS) AS FEES FOR TECHNICAL SERVICES (FTS). THE AO NOTED THAT THE ASSESSEE IN ADDITION TO SELLING ROUGH DIAMOND WAS ALSO PROVIDING VARIOUS VALUE ADDED SERV ICES (VAS). THE COPY OF THE SERVICE GUIDE FOR VAS HAS BEEN PLACED AT PAG ES 75 TO 107 OF THE PAPER BOOK. AS PER THE AGREEMENT, THE ASSESSEE WAS PROVI DING CORE SERVICES AND GROWTH SERVICES. THE CORE SERVICES HAD TWO COMPONE NTS VIZ. SUPPLY PLANNING TOOLS AND BUSINESS SUSTAINABILITY SERVICES. SUPPLY PLANNING TOOL IS CLAIMED TO BE ON PAYMENT BASIS WHEREAS THE BUSINESS SUSTAINABI LITY SERVICES WAS PAID FOR BY THE ASSESSEE. THE ASSESSEE WAS ALSO PROVIDI NG GROWTH SERVICES ON REQUEST WHICH WERE NOT CHARGEABLE. THE SUPPLY PLAN NING TOOLS DETAILS OF WHICH HAVE BEEN PLACED AT PAGES 81-82 OF THE PAPER BOOK WAS REGARDING INFORMATION GIVEN BY THE ASSESSEE TO SIGHTHOLDERS A BOUT THE NATURE AND QUANTITY OF GOODS IT INTENDED TO SELL AND ACCESS TO DTC INFORMATION THROUGH EXTRANET SERVICES, ETC. THE SUPPLY PLANT TOOL SER VICES CAN BE SUMMED UP AS UNDER:- (I) PROVISION OF EXTENDED CONTRACT PERIOD OF TWO AND A HALF YEARS TO MAINTAIN CONTINUED AND STEADY SUPPLY OF ROUGH DIAMO NDS. (II) COMMUNICATION TO THE SIGHT HOLDERS, THE AGGREGATE L EVEL AND NATURE OF GOODS, THE ASSESSEE INTENDS TO MAKE AVAIL ABLE DURING THE SELLING PERIOD. (III) COMMUNICATION OF CONSISTENT PARAMETERS AS AT SIZE, COLOUR AND GRADING OF DIAMONDS. (IV) THE PROVISION OF SIGHTHOLDERS EXTRANET SERVICE WHI CH PROVIDES A SECURE WEB BASED INFORMATION SHARING AND BUSINESS PLATFORM LINKING DTC WITH SIGHTHOLDERS, SIGHTHOLDERS GROUP COMPANIES AND THEIR APPOINTED BROKERS. IT OFFERS ACCESS TO DTC INFORMA TION, PROPRIETARY (THIRD PARTY) CONTENT PLUS TAILORED ACCESS FOR EACH SIGHTHOLDER TO THEIR ITA NO.8831/M/10 A.Y:07-08 9 OWN BUSINESS SPECIFIC INFORMATION AND PROCESSES IN RESPONSE TO SIGHTHOLDERS FEED BACK AND REQUEST. (V) PROVISION FOR INDEPENDENT THIRD PARTY VERIFICATION OF 10% OF, SIGHTHOLDERS PROFILE MATERIAL FOR INCREASING ALL ST AKE HOLDERS CONFIDENCE IN THE VALIDITY AND VERACITY OF PROCESS. (VI) PROVISION OF KEY ACCOUNT MANAGER(KAM) ALLOWS DEDIC ATED TIME WITH KAM WHO IS THE MAIN POINT OF CONTACT BETW EEN THE SIGHTHOLDERS AND DTC. KAM ASSISTS SIGHTHOLDER IN S ERVICE SELECTION PROCESS AND PROVIDES ACCESS TO VALUE ADDED SERVICES . KAM FORMS THE LINK WITH THE DTC MARKETING GLOBALLY, PLANS THE ITO AND DEVELOPS ANNUAL PLAN SERVICES WITH SIGHTHOLDERS. 7.1 THE BUSINESS SUSTAINABILITY SERVICES INCLUDED T HE FOLLOWING:- (I) ANNUAL CONSUMER DEMANDS UPDATES WHICH IS MADE A VAILABLE BY THE ASSESSEE ON SIGHTHOLDERS EXTRANET.(PARA 2.1.2.1) (II) BI-ANNUAL CONSUMER CONFIDENCE UPDATES WHICH IS MADE AVAILABLE ON SIGHTHOLDERS EXTRANET TO PROVIDE SIGHTHOLDERS WITH KNOWLEDGE OF DTCS CONSUMER CONFIDENCE PROGRAMMES AND ENABLE SIGHTHOLD ERS TO ALIGN ACTIVITIES BEHIND THIS INITIATIVE. THESE PROGRAMME S FOCUS ON MAINTAINING THE MYSTIQUE AND INTEGRITY OF DOCUMENTS . THIS INCLUDES INFORMATION ON: (A) RESEARCH AND PLANNINGS ;(B) NATURAL MARKETING; (C) TRADE EDUCATION; (D) DETECTION EQUIPMENT AND (E) DISCLOSU RE.(PARA 2.1.2.2) 7.2 THE ASSESSEE IS ALSO PROVIDING GROWTH SERVICES SOME OF WHICH ARE SUMMED UP AS UNDER:- (I) ANNUAL ONE DAY SEMINAR GIVING OVER VIEW OF MAR KETS (PARA 2.2.1.1) (II) ANNUAL LOCAL MARKET WORKSHOP GIVING INFORMATIO N ON NEW MARKET OPPORTUNITIES.(PARA 2.2.1.2) (III) INFORMAL MEETINGS WITH SENIOR LOCAL MARKET TE AM MEMBERS. IT MAKES AVAILABLE TO THE SIGHT HOLDER LATEST LOCAL MA RKET INFORMATION. IT ALSO COVERS RELEVANT DTC MARKETING PROGRAMME DETAIL S (PARA 2.2.1.3) (IV) INFORMATION AS TO HOW TO CUSTOMIZE DTC MARKETI NG MATERIAL (PARA 2.2.1.6) (V) GUIDANCE WORKSHOP ON RECRUITING MARKETING PERSO NNEL,(PARA 2.2.3.3.5) ETC. ITA NO.8831/M/10 A.Y:07-08 10 7.3 THE AO OBSERVED THAT THE ASSESSEE HAD DEVELOPED SIGHTHOLDERS EXTRANET SERVICES WHICH WERE TECHNICAL IN NATURE. THE ASSESSEE HAD ADVANCED TECHNOLOGY STANDARDIZATION METHOD AND EFFE CTIVE NET COMMUNICATION, THROUGH EXTRANET SERVICES. THE ASSE SSEE HAD GRANTED ACCESS TO ALL THESE TECHNOLOGICAL SYSTEMS FOR WHICH COMPEN SATION WAS RECEIVED. THE ASSESSEE WAS THUS PROVIDING TECHNICAL SERVICES TO T HE SIGHTHOLDERS FOR THEIR COMMERCIAL PURPOSES AND THE AMOUNT CHARGED AS VAS W AS NOTHING BUT FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF EXPLAN ATION-2 TO SECTION- 9(1)(VII) AND ALSO UNDER ARTICLE-13 OF INDIA UK TAX TREATY. THE ASSESSEE DISPUTED THE PROPOSED ADDITION OF AO AND RAISED OBJ ECTIONS BEFORE DRP. THE DRP AFTER NECESSARY EXAMINATION AND AFTER HEARING T HE ASSESSEE OBSERVED THAT EVEN THOUGH SERVICES WERE RENDERED FROM OUTSID E, THE SAME WERE TAXABLE IN INDIA IN VIEW OF THE EXPLANATION INTRODU CED IN SECTION 9 BY THE FINANCE ACT 2010, W.E.F. 1.6.1976. DRP ALSO OBSERVE D THAT THE VAS WERE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJO YMENT OF RIGHT OF THE ASSESSEE IN THE BRAND USED BY THE SIGHTHOLDERS THE PAYMENT FOR WHICH WAS ROYALTY IN TERMS OF PARA 3(A) OF INDO UK TAX TREATY AND THEREFORE ITS NATURE WAS THAT OF FEES FOR TECHNICAL SERVICES. DRP ACCOR DINGLY HELD THAT AO WAS JUSTIFIED IN TREATING THE VAS AS FEES FOR TECHNICAL SERVICES. THE AO IN THE FINAL ORDER OBSERVED THAT THE ASSESSEE WAS PROVIDING TECH NICAL SERVICES AND, THEREFORE, PAYMENT RECEIVED WAS FTS AS PER EXPLANAT ION-2 TO SECTION- 9(1)(VII). THE AO ALSO OBSERVED THAT THE PAYMENT W AS FOR RENDERING OF TECHNICAL SERVICES WHICH MADE AVAILABLE TECHNICAL K NOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW ETC. TO THE SIGHTHOLDERS AND THEREF ORE, WAS TAXABLE AS FTS AS ITA NO.8831/M/10 A.Y:07-08 11 PER PARA 4(C) OF ARTICLE-13 OF INDIA UK TAX TREATY . AGGRIEVED BY THE DECISION OF AO, THE ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL. 7.4 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE SU BMITTED THAT THE DRP HAD HELD THAT THE PAYMENT WAS TAXABLE AS FTS UNDER PARA 4(A) OF ARTICLE 13 OF INDIA UK TAX TREATY AS SERVICES WERE ANCILLARY A ND SUBSIDIARY TO ROYALTY PAYMENT UNDER PARA 3(A). HOWEVER, AO HAD APPLIED TH E PROVISIONS OF PARA- 4(C) OF ARTICLE -13 OF THE TREATY WHICH WAS NOT PER MITTED AS AO WAS BOUND TO FOLLOW THE DIRECTION OF DRP. IT WAS ALSO SUBMITTED THAT EVEN PROVISIONS OF PARA 4(C) WERE NOT APPLICABLE AS THESE RELATED TO P AYMENT FOR RENDERING ANY TECHNICAL OR CONSULTANCY SERVICES WHICH MADE AVAILA BLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL ETC. FOR APPLICABILITY OF PARA 4 (C), THE TECHNICAL KNOWLEDGE ETC. SHOULD BE MADE AVAILABLE TO THE PAYER WHO CAN USE IT HIMSELF WITHOUT RECOURSE TO PERFORMER OF THE SERVICES AND IT SHOULD REMAIN WITH THE PERSON UTILIZING THE SERVICES EVEN AFTER RENDERING OF SERV ICES HAS COME TO AN END. RELIANCE FOR THIS PROPOSITION WAS PLACED ON THE DEC ISION OF THE TRIBUNAL IN THE CASE OF RAYMOND LTD. VS. DCIT (86 ITD 791). HE AL SO PLACED RELIANCE ON THE FOLLOWING JUDGMENTS IN SUPPORT OF THE PLEA THAT PROVISIONS OF PARA 4(C) OF PART-13 WERE NOT APPLICABLE. I) 92 TTJ 946(DEL.) NAQ QUALITY SYSTEMS REGISTER LT D. VS. DCIT; II) 80 TTJ 806(CAL.) IN THE CASE OF C.E.S.C LTD. VS . DCIT ; III) 6 SOT 186(MUM.) MCKINSEY AND CO., INC (PHILLIPINES) VS. ADIT; IV) 131 TTJ 29 IN THE CASE OF ADIT (INTL. TAXATION) VS. BUREAU VERITAS ITA NO.8831/M/10 A.Y:07-08 12 V) ORDER DATED 16.5.2011 OF AAR IN AAR NO.883 OF 20 10 IN CASE OF RR DONNLEY INDIA OUTSOURCE PVT. LTD. 7.5 THE LD. AUTHORISED REPRESENTATIVE ALSO ARGUED THAT THE PROVISIONS OF PARA 4(A) OF ARTICLE 13 OF THE TREATY WERE APPLICAB LE WHEN TECHNICAL OR CONSULTANCY SERVICES WERE ANCILLARY OR SUBSIDIARY T O THE APPLICATION OR ENJOYMENT OF THE RIGHT OR PROPERTY ETC., FOR WHICH ROYALTY HAD BEEN PAID UNDER PARA 3(A) OF ARTICLE-13. IN THIS CASE, ROYALT Y HAD BEEN CONSIDERED AS PAYMENT BY THE ASSESSEE FOR USE OF NAKSHATRA BRAND WHEREAS THE SERVICES HAD BEEN RENDERED BY THE ASSESSEE IN CONNECTION WIT H SALE OF ROUGH DIAMONDS. THUS, THE SERVICE EVEN IF TECHNICAL IN N ATURE COULD NOT BE RELATED TO THE PAYMENT OF ROYALTY AND, THEREFORE, THE SAME COULD NOT BE TAXED UNDER PARA 4(A). 7.6 THE LD. DR ON THE OTHER HAND ARGUED THAT THE V AS WERE ANCILLARY TO THE SERVICES FOR PAYMENT OF ROYALTY UNDER PARA 3(A) OF ARTICLE-13. SHE REFERRED TO AGREEMENT DATED 8.11.2005 REGARDING MA RKETING CONTRIBUTION TO POINT OUT THAT THE MARKETING CAMPAIGN WAS TO PROMOT E LICENCED PRODUCTS WHICH WERE THE ROUGH DIAMONDS. IT WAS POINTED OUT THAT, VAS WHICH RELATED TO SALE OF ROUGH DIAMONDS WERE ANCILLARY TO THE MA RKETING CONTRIBUTION WHICH WAS TO PROMOTE SALE OF ROUGH DIAMONDS AND THEREFORE PROVISIONS OF PARA 4(A) WERE APPLICABLE AND PAYMENT HAD TO BE TAXED AS FEES FOR TECHNICAL SERVICES. AS REGARDS THE APPLICABILITY OF PARA 4(C) WHICH HAD BEEN APPLIED BY THE AO, IT WAS SUBMITTED THAT GROWTH SERVICES AND BUSINESS SUS TAINABILITY SERVICES OF ITA NO.8831/M/10 A.Y:07-08 13 THE CORE SERVICES WERE COVERED UNDER PARA 4(C) AND THEREFORE WERE TAXABLE AS FTS UNDER PARA 4(C). 7.7 IN REPLY, LD. AR FOR THE ASSESSEE SUBMITTED THA T MARKETING CONTRIBUTION BY SIGHTHOLDERS WAS TO PROMOTE LICENCED PRODUCTS AS PER PARA 4 OF THE AGREEMENT AND AT PAGE-5 OF THE AGREEMENT, PRODUCT H AD BEEN DEFINED TO BE JEWELLERY PIECES INCORPORATING NO STONES OTHER THAN DIAMONDS, DESIGNED AND MANUFACTURED BY THE SIGHTHOLDERS. MARKETING CONTRI BUTION WHICH HAD BEEN TAXED AS ROYALTY WAS TO PROMOTE NAKSHATRA BRAND OF JEWELLERY AND HAD NO RELATION TO ROUGH DIAMONDS. THUS, ROYALTY WAS IN R ELATION TO JEWELLERY BRANDS AND, THEREFORE, THE VAS PAYMENT WHICH RELATED TO SA LE OF ROUGH DIAMONDS, WAS NOT ANCILLARY OR SUBSIDIARY TO ROYALTY PAYMENT. THE LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT THE AGREEMENT FOR FOREVERMARK, WAS TO USE THE SAID MARK ON POLISHED DIAMONDS AND, THER EFORE, ROYALTY FOR USE OF FOREVERMARK ALSO DID NOT RELATE TO ROUGH DIAMONDS. THUS BOTH THE TYPES OF ROYALTIES RELATED EITHER TO POLISHED DIAMONDS AND D IAMOND JEWELLERY AND NOT ROUGH DIAMONDS IN RELATION TO WHICH VAS HAD BEEN PR OVIDED. AS REGARDS THE ARGUMENT OF LD. DR THAT GROWTH SERVICES AND BUSINES S SUSTAINABILITY SERVICES WERE COVERED UNDER PARA 4(C), THE LD. AR POINTED OU T THAT THE AGREEMENT PLACED IN THE PAPER BOOK CLEARLY SHOWED THAT BUSINE SS SUSTAINABILITY SERVICES AND GROWTH SERVICES WERE NOT CHARGED BY THE COMPANY AND THEREFORE TAXABILITY OF ANY SUM ON THIS ACCOUNT DID NOT ARISE . IT WAS ALSO POINTED OUT THAT, EVEN THE AO HAD DISCUSSED ONLY THE CORE SERVI CES AND NOT THE GROWTH SERVICES IN THE ORDER. IT WAS ARGUED THAT THE SUPP LY PLANNING TOOL SERVICES ITA NO.8831/M/10 A.Y:07-08 14 FOR WHICH PAYMENTS HAD BEEN MADE ONLY PROVIDED INFO RMATION ON CONTINUITY OF SUPPLY, COMMUNICATION OF AGGREGATE LEVEL AND NAT URE OF GOODS THE ASSESSEE INTENDED TO SELL, COMMUNICATION ON PARAMET ERS OF GOODS, ACCESS TO SIGHTHOLDERS PROFILE TO A THIRD PARTY, PROVIDING CO MMUNICATION CHANNEL THROUGH THE KEY ACCOUNTS MANAGER AND PROVIDING INFO RMATION ON THE ASSESSEES CONSUMER CONFIDENCE PROGRAMMES. THERE W ERE INFORMATIVE SERVICES WHICH DID NOT CONTAIN ANY TECHNOLOGY WHICH COULD BE INDEPENDENTLY APPLIED BY THE RECIPIENT. IT WAS ACCORDINGLY ARGUE D THAT THE VAS PAYMENTS COULD NOT BE TAXED EITHER UNDER PARA 4(A) OR PARA 4 (C) OF THE ARTICLE-13 OF INDO-UK TAX TREATY. 7.8 THE BENCH AT THE TIME OF PROCESSING THE CASE FOR OR DER, REALIZED THAT, FOR UNDERSTANDING THE TRUE NATURE OF PAYMENT FOR VA S, IT WAS NECESSARY TO CONSIDER THE APPLICABILITY OF PARA 3(A) OF ARTICLE 13, WHICH PROVIDED FOR TAXATION OF ANY PAYMENT FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EXPERIENCE AS ROYALTY AS ALL THE REL EVANT FACTS FOR APPLICATION OF PARA 3(A) WERE ALREADY ON RECORD. THE CASE WAS ACC ORDINGLY HEARD AGAIN. 7.8.1 THE LD. A.R FOR THE ASSESSEE ARGUED THAT PAR A 3(A) HAD NOT BEEN APPLIED EITHER BY AO OR BY THE DRP AND, THEREFORE, COULD NOT BE CONSIDERED AT THIS STAGE. HOWEVER, IT WAS BROUGHT TO THE NOTICE OF LD. A.R THAT SUBJECT MATTER OF DISPUTE WAS TAXABILITY OF PAYMENT FOR VA LUE ADDED SERVICES AND, IN CASE, SUCH PAYMENT WAS FOUND TO BE TAXABLE UNDER SO ME OTHER PARA OF THE SAME ARTICLE, IT WILL BE WITHIN THE JURISDICTION OF THE TRIBUNAL TO CONSIDER THE SAID PARA AS SAME WILL BE WITHIN THE SUBJECT MATTER OF APPEAL. THE LD. DR ITA NO.8831/M/10 A.Y:07-08 15 POINTED OUT THAT THERE WERE SEVERAL JUDGMENTS INCLU DING THE JUDGMENT OF HON'BLE SUPREME COURT IN WHICH THE DECISION OF THE T RIBUNAL TO ALLOW THE CLAIM UNDER SOME OTHER PROVISION HAD BEEN UPHELD. IT WAS ALSO POINTED OUT THAT EVEN THE DRP HAD HELD THAT PAYMENT WAS FOR SER VICES IN RELATION TO ROYALTY PAYMENT UNDER PARA 3(A). THE LD. AR THEREA FTER AGREED AND PROCEEDED TO ADVANCE ARGUMENTS ON THE APPLICABILITY OF PARA 3(A) OF THE ARTICLE 13 ALSO. 7.9 IT WAS SUBMITTED BY THE LD. AR THAT THE PROVISI ONS OF PARA 3(A) OF ARTICLE-13 WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS CONTEXT, HE REFERRED TO THE COMMENTARY ON OECD MODE L CONVENTION IN WHICH THE DEFINITION OF ROYALTY AS PER PARA-2 OF ARTICLE- 12 OF THE SAID CONVENTION WAS EXACTLY THE SAME AS IN THE CASE OF INDO-UK TREA TY APPLICABLE IN THE PRESENT CASE. AS PER THE SAID COMMENTARY, ROYALTY AS CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL AND S CIENTIFIC EXPERIENCE ALLUDED TO THE CONCEPT OF KNOWHOW WHICH COULD BE US ED BY THE RECIPIENT ON HIS OWN AND SUPPLIER WAS NOT REQUIRED TO TAKE ANY P ART. THE RELEVANT PORTION OF THE SAID COMMENTARY REFERRED TO BY THE LD. AR IS REPRODUCED BELOW AS A READY REFERENCE:- IN CLASSIFYING AS ROYALTY PAYMENTS RECEIVED AS CON SIDERATION FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE, PARA 2 ALLUDES TO THE CONCEPT OF KNOWHOW. VARIOUS S PECIALIST BODIES AND AUTHORS HAVE FORMULATED DEFINITIONS OF KNOWHOW WHICH DO NOT DIFFER INTRINSICALLY. ONE SUCH DEFINITION GIVEN BY THE ASSOCIATION, DES BUREAUX POUR LAW PROTECTION D LAW PROPRIETE INDUS TRIELLE (ALBPPI) STATES THAT KNOWHOW IS ALL UNDIVULGED TECHNICAL I NFORMATION WHETHER CAPABLE OF BEING PATENTED OR NOT, THAT IS NECESSAR Y FOR THE INDIVIDUAL REPRODUCTION OF A PRODUCT OR PROCESS, DIRECTLY AND UNDER THE SAME CONDITIONS; IN AS MUCH AS IT DERIVES FROM EXPERIENC E, KNOWHOW ITA NO.8831/M/10 A.Y:07-08 16 REPRESENTS WHAT A MANUFACTURER CAN KNOW FROM MERE E XAMINATION OF THE PRODUCT AND MERE KNOWLEDGE OF PROGRESS OF TECHN IQUES. 7.10 IT WAS ALSO SUBMITTED THAT IN THE UN MODEL CON VENTION ALSO, THE DEFINITION OF ROYALTY WAS EXACTLY THE SAME AND IN W HICH INTERPRETATION GIVEN IN OECD MODEL CONVENTION HAS BEEN FOLLOWED. THUS A S PER THE OECD MODEL CONVENTION, THE ROYALTY WAS PAYMENT FOR TRANSFER OF KNOWHOW BASED ON EXPERIENCE WHICH COULD BE USED BY RECIPIENT ON HIS OWN. BUT IN THE PRESENT CASE ASSESSEE WAS ALSO RENDERING SERVICES, AND, THE REFORE, PAYMENT COULD NOT BE CONSIDERED AS ROYALTY. IT WAS POINTED OUT T HAT THERE WERE SEVERAL JUDGMENTS IN SUPPORT OF THE PROPOSITION THAT INTERP RETATION OF IDENTICAL TERMS GIVEN IN THE INTERNATIONAL MODEL CONVENTIONS HAS TO BE FOLLOWED BY THE INDIAN TAX AUTHORITIES. 7.10.1LD. A.R REFERRED TO THE JUDGMENT OF HONBLE D ELHI HIGH COURT IN THE CASE OF ASIAN SATELLITE TELECOMMUNICATION COMPANY L TD. VS. DIT(332 ITR 340) TO ARGUE THAT INTERPRETATION OF THE TERM ROYAL TY GIVEN IN OECD MODEL CONVENTION HAS TO BE FOLLOWED AS DEFINITION OF ROYA LTY IN THE DOMESTIC AS WELL AS IN THE INDO-UK TREATY WAS IDENTICAL TO THAT IN T HE OECD MODEL. IT WAS POINTED OUT THAT THE HONBLE HIGH COURT IN THE SAID C ASE HAD REFERRED TO SEVERAL JUDGMENTS OF HONBLE SUPREME COURT IN WHICH IT WAS EMPHASIZED THAT WELL SETTLED INTERNATIONALLY ACCEPTED MEANING PLACE D ON IDENTICAL AND SIMILAR TERMS EMPLOYED IN VARIOUS DTAA SHOULD BE FOLLOWED B Y THE COURTS IN INDIA WHEN IT COMES TO CONSTRUING SIMILAR TERMS OCCURRING IN THE INDIAN ACT. THE HONBLE HIGH COURT ACCORDINGLY HELD THAT THE TRIBUNA L WAS NOT CORRECT IN ITA NO.8831/M/10 A.Y:07-08 17 DISCARDING COMMENTARY OF OECD AND OF KLAUS VOGEL ON THE GROUND THAT IT WAS NOT SAFE TO RELY ON SUCH COMMENTARIES. REFEREN CE WAS ALSO MADE TO THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CAS E OF DDIT VS. PREROY AG (39 SOT 187). IN THAT CASE, ASSESSEE WAS A CONSULT ANT IN THE MATTER RELATED TO STRATEGIC ISSUES IN RESPECT OF ESTABLISHING JO INT VENTURES, TECHNOLOGY TRANSFERS AND RELATED MATTERS. THE ASSESSEE HAD EN TERED INTO STRATEGIC CONSULTING AGREEMENT WITH AN INDIAN COMPANY WHICH WANTED TO AVAIL SERVICES PROVIDED BY THE ASSESSEE. THE AO TAXED TH E PAYMENT FOR SUCH SERVICES AS ROYALTY UNDER ARTICLE 12(3) OF INDO-SWI SS AGREEMENT AS PAYMENT FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL A ND SCIENTIFIC EXPERIENCE WHICH WAS NOT UPHELD BY THE TRIBUNAL. THE TRIBUNAL HAD REFERRED TO THE OECD MODEL COMMENTARY AND OBSERVED THAT SUCH COMMEN TARIES ARE USEFUL, RELIABLE AND LEGALLY ACCEPTABLE BASIS FOR INTERPRET ING TREATIES. AS PER INTERPRETATION GIVEN IN THE SAID COMMENTARY, THE RO YALTY ALLUDED TO THE CONCEPT OF KNOWHOW AND, THEREFORE, THE TRIBUNAL HEL D THAT THE PAYMENT TO BE TAXED AS ROYALTY SHOULD BE MADE FOR IMPARTING KNOWH OW TO THE SERVICE RECIPIENT WHICH THE RECIPIENT SHOULD BE ABLE TO USE ON HIS OWN. IN THIS CASE THE CONSULTANT WAS PROVIDING SERVICES BY USING HIS SKILLS AND EXPERIENCE TO EXECUTE CERTAIN WORK FOR THE RECIPIENT. THERE WAS NO TRANSFER OR SHARING OF INFORMATION CONCERNING EXPERIENCE. IT WAS, THEREFO RE, HELD THAT THE PAYMENT COULD NOT BE TAXED AS ROYALTY. 7.10.2LD. A.R ALSO REFERRED TO THE JUDGMENT OF AUTH ORITY FOR ADVANCE RULING (AAR) IN CASE OF ANAPHARM INC.(305 ITR 394) AND IN CASE OF CUSHMAN & WAKEFIELD PTE LTD. (305 ITR 208). IN CASE OF AN APHARM INC.(SUPRA), THE ITA NO.8831/M/10 A.Y:07-08 18 ASSESSEE A RESIDENT OF CANADA WAS CONDUCTING BIO EQ UIVALENCE TEST USING HIS EXPERIENCE AND SKILL AND WAS PROVIDING ONLY FINAL REPORTS TO ITS CLIENTS. IT WAS HELD THAT THE ASSESSEE WAS NOT PROVIDING ANY IN FORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE BUT WAS ITSELF PROVIDING SERVICES USING ITS KNOWLEDGE AND SKILL, AND THEREFO RE, PAYMENT WAS NOT ROYALTY. SIMILARLY IN CASE OF CUSHMAN & WAKEFIELD P TE LTD.(SUPRA), THE ASSESSEE,A SINAGAPORE BASED COMPANY, WAS REFERRING OR RECOMMENDING POTENTIAL CUSTOMERS DESIROUS OF OBTAINING REAL ESTA TE CONSULTANCY AND ASSOCIATED SERVICES, TO INDIAN COMPANIES. THE AAR HELD THAT THE PAYMENT WAS FOR INTRODUCING CUSTOMERS AND NOT FOR IMPARTING ANY KNOW-HOW AND, THEREFORE, IT WAS NOT ROYALTY. IT WAS FURTHER SUBM ITTED THAT PAYMENT FOR COLLECTING DATA, ANALYZING IT AND MAKING ITS DATA B ASE FOR PROVIDING INFORMATION ON SUITABLE CANDIDATES TO THE RECRUITM ENT AGENCIES WAS NOT PAYMENT FOR INFORMATION CONCERNING INDUSTRIAL, COMM ERCIAL OR SCIENTIFIC EXPERIENCE AND THEREFORE NOT ROYALTY AS HELD BY AAR IN CASE OF REAL RESOURCING LIMITED (322 ITR 558). 7.11 THE LD. DR ON THE OTHER HAND ARGUED THAT THE PROVISIONS OF PARA (3A) OF ARTICLE 13 AS PER WHICH ANY PAYMENT FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE IS TAXABLE AS ROYALTY WERE APPLICABLE IN THE CASE OF THE ASSESSEE. IT WAS SUBMITTED THAT T HERE WAS NO DISPUTE THAT DEFINITION OF ROYALTY IN THE OECD MODEL AS WELL AS IN THE INDO UK TREATY WAS IDENTICAL AND THEREFORE THE OECD COMMENTARY GIVING INTERPRETATION OF THE TERM ROYALTY COULD NOT BE REJECTED. HOWEVER, IT WA S POINTED OUT THAT THE PERCEPTION OF OECD ITSELF WAS CHANGING AS TO THE ME ANING OF THE WORD ITA NO.8831/M/10 A.Y:07-08 19 KNOW HOW. LD. DR REFERRED TO THE OECD COMMENTA RY OF 2005 WHICH HAD SINCE BEEN REVISED IN 2008 IN WHICH THERE IS CHANGE IN THE DEFINITION OF KNOW HOW. IN THE 2005 COMMENTARY, KNOW HOW WAS DEFIN ED AS UN-DIVULGED TECHNICAL INFORMATION BUT IN 2008 COMMENTARY, KN OW HOW IS REFERRED AS UN- DIVULGED INFORMATION OF ANY INDUSTRIAL, COMMERC IAL OR SCIENTIFIC NATURE ARISING FROM PREVIOUS EXPERIENCE. THUS KNOW HOW WAS NOTHING BUT ANY INFORMATION OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC NATURE ARISING FROM PREVIOUS EXPERIENCE. THE WORD KNOW HOW THEREFORE, COULD NOT BE RESTRICTED TO ONLY TECHNICAL INFORMATION OR INFORMATION CONCER NING ANY TECHNOLOGY OR TECHNICAL KNOWLEDGE. THE RELEVANT PARA-11 OF 2008 COMMENTARY REFERRED TO BY THE LD. DR IS REPRODUCED BELOW AS READY REFEREN CE. IN CLASSIFYING AS ROYALTY PAYMENTS RECEIVED AS CON SIDERATION FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SC IENTIFIC EXPERIENCE, PARA-2 IS REFERRING TO CONCEPT OF KNOW HOW. VARIOUS SPECIALIZED BODIES AND AUTHORS HAVE FORMULATED DEFINITION OF KNOW HOW . THE WORDS PAYMENT [...] FOR INFORMATION CONCERNING INDUSTRIA L, COMMERCIAL OR SCIENTIFIC EXPERIENCE ARE USED IN THE CONTEXT OF TRANSFER OF CERTAIN INFORMATION THAT THEY HAVE NOT BEEN PATENTED AND D OES NOT GENERALLY FALL WITHIN OTHER CATEGORIES OF INTELLECTUAL PROPER TY RIGHTS. IT GENERALLY CORRESPONDS TO UN-DIVULGED INFORMATION OF INDUSTRI AL, COMMERCIAL OR SCIENTIFIC NATURE ARISING FROM PREVIOUS EXPERIENCE WHICH HAS PRACTICAL APPLICATION IN THE OPERATION OF AN ENTERPRISE AND F ROM THE DISCLOSURE OF WHICH AN ECONOMIC BENEFIT CAN BE DERIVED. SINCE DE FINITION RELATES TO INFORMATION CONCERNING PREVIOUS EXPERIENCE, THE ART ICLE DOES NOT APPLY TO NEW INFORMATION OBTAINED AS A RESULT OF PERFORMI NG SERVICES AT THE REQUEST OF PAYER. 7.11.1 SHE ALSO REFERRED TO THE MEANING OF THE TE RM KNOW HOW GIVEN IN THE BOOK LAW OF COPYRIGHT & INDUSTRIAL DESIGNS BY P. NARAYANAN IN WHICH IT WAS MENTIONED THAT KNOW HOW INDICATED THE WAY IN WHICH A SKILLED MAN DOES HIS JOB AND IS AN EXPRESSION OF HIS INDIVIDUAL SKILL AND EXPERIENCE. SHE ITA NO.8831/M/10 A.Y:07-08 20 ALSO REFERRED TO THE MEANING OF THE TERM KNOW HOW AS PER ADVANCED LAW LEXICON THE LAW DICTIONARY IN WHICH THE MEANING OF KNOW HOW WAS GIVEN AS UNDER :- (I) KNOWLEDGE, EXPERIENCE AND SKILLS INCLUDING TEC HNICAL MANAGEMENT, SCIENTIFIC AND FINANCIAL. (II) INFORMATION, PRACTICAL KNOWLEDGE, TECHNIQUES A ND SKILL REQUIRED TO ACHIEVE SOME PRACTICAL END SPECIALLY IN INDUSTRY OR TECHNO LOGY. KNOW HOW IS CONSIDERED AS INTANGIBLE PROPERTY IN WHICH RIGHTS M AY BE BROUGHT AND SOLD. IT WAS POINTED OUT THAT THE DICTIONARY MEANING OF T HE TERM KNOW HOW WAS SIMILAR TO THE TERM MEANING OF THE TERM GIVEN IN OE CD COMMENTARY AS PER WHICH ANY UN-DIVULGED INFORMATION OF INDUSTRIAL, CO MMERCIAL OR SCIENTIFIC NATURE ARISING FROM PREVIOUS EXPERIENCE HAS TO BE CONSIDERED AS KNOW HOW. 7.11.2 IN THE PRESENT CASE IT WAS POINTED OUT TH AT THE ASSESSEE WAS SUPPLYING ROUGH DIAMONDS TO WORLDWIDE SIGHTHOLDERS. THE ASSESSEE WAS PROVIDING CORE AND GROWTH SERVICES TO THE SIGHTHOLD ERS. THE SERVICES PROVIDED AS PER SERVICE GUIDE WERE NOTHING BUT COMM ERCIAL INFORMATION GIVEN BY THE ASSESSEE WHICH WERE BASED ON ITS PAST EXPERIENCE IN MARKETING AND SUPPLY OF DIAMONDS. SHE REFERRED TO PAGE-80 OF SERVICE GUIDE PLACED ON RECORD IN WHICH IT WAS CLEARLY MENTIONED THAT ALL V AS WERE CAREFULLY CHOSEN AND EVALUATED AND WERE BASED ON DTCS UNPARALLEL E XPERIENCE IN SELLING AND MARKETING OF GEM DIAMONDS. FURTHER , PAGE 77 OF TH E SERVICE GUIDE CLEARLY MENTIONED THAT THE INFORMATION CONTAINED IN THE SER VICE GUIDE WAS CONFIDENTIAL INFORMATION AND WAS PROVIDED TO SIGHTH OLDERS ON THE BASIS THAT IT ITA NO.8831/M/10 A.Y:07-08 21 SHALL BE KEPT CONFIDENTIAL. THE INFORMATION CONTAIN ED IN THE SERVICE GUIDE WHICH WAS CONFIDENTIAL AND WHICH WAS PROVIDED TO SI GHTHOLDERS BY THE ASSESSEE WAS COMMERCIAL INFORMATION WHICH HAD BEEN ACQUIRED BY THE ASSESSEE ADMITTEDLY ON THE BASIS OF PAST EXPERIENCE . THEREFORE PAYMENT FOR SUCH INFORMATION WAS CLEARLY COVERED BY THE DEFINIT ION OF ROYALTY AS PER PARA 3(A) OF ARTICLE -13 OF INDO UK TREATY. FURTHER, THE INFORMATION WAS BEING USED BY SIGHTHOLDERS ON THEIR OWN IN THEIR BUSINESS ES AND IN CASE OF ANY CLARIFICATION OR ANY HELP THEY COULD HAVE ASSISTANC E OF KAM. SHE REFERRED TO PARA 7(C) OF THE VAS SERVICE GUIDE PLACED AT PAGE 1 04 OF THE PAPER BOOK IN WHICH IT WAS CLEARLY MENTIONED THAT SIGHTHOLDERS WE RE TO MAKE THEIR OWN INDEPENDENT EVALUATION OF ALL MARKET AND BUSINESS INITIATIVES AND OTHER MATTERS IN RESPECT OF WHICH VALUE ADDED SERVICES HA D BEEN PROVIDED. IT WAS THUS CLEAR THAT SIGHTHOLDERS WERE REQUIRED TO INDEP ENDENTLY EVALUATE AND MAKE USE OF INFORMATION WITHOUT RECOURSE TO THE ASS ESSEE. THE ASSESSEE WAS PROVIDING THE INFORMATION THROUGH THE EXTRANET AND ALSO THROUGH THE KEM WHO WAS THE CONTACT POINT WITH DTC TO GIVE ANY CLA RIFICATION AND ASSISTANCE FOR THE USE OF VALUE ADDED SERVICES. 7.11.3 THE LD. DR FURTHER ARGUED THAT THE CLAIM OF THE ASSESSEE THAT IT WAS ONLY CHARGING FOR SUPPLY PLANNING TOOLS SERVICE OF THE CORE SERVICES WAS NOT CORRECT. SHE REFERRED TO PARA-6 OF THE SERVICE GUIDE AT PAGE-103 OF THE PAPER BOOK TO POINT OUT THAT THE PAYMENT FOR VAS WA S FIXED AS A PERCENTAGE OF ROUGH DIAMONDS PURCHASED. THE PAYMENT CONSISTE D OF A FIXED FEES OF USD180,000 PLUS A PERCENTAGE OF INCREMENTAL PURCHA SES. THE PAYMENT HAD THEREFORE NO RELATIONSHIP WITH ANY PARTICULAR SERVI CE RENDERED. ONCE THE ITA NO.8831/M/10 A.Y:07-08 22 PAYMENT WAS MADE, THE SIGHTHOLDERS WERE ENTITLED TO BOTH CORE AS WELL AS GROWTH SERVICES. IT WAS NOT A CASE THAT IN CASE NO PAYMENT WAS MADE, THE SIGHTHOLDERS WOULD BE ENTITLED TO BUSINESS SUSTAINA BILITY SERVICES OR GROWTH SERVICES, FREE OF CHARGE. THEREFORE, PAYMENT HAS TO BE CONSIDERED AGAINST ALL THE SERVICES WHETHER CORE SERVICES OR GROWTH SERVIC ES MADE AVAILABLE TO SIGHTHOLDERS. ACCORDINGLY, IT WAS ARGUED THAT ALL THE SERVICES MUST BE TAKEN INTO ACCOUNT WHILE DECIDING THE NATURE OF PAYMENT A ND APPLICABILITY OF RELEVANT PARA OF ARTICLE-13 OF INDIA UK TREATY. IT WAS POINTED OUT THAT UNDER THE CORE SERVICES, THE ASSESSEE WAS PROVIDING INFOR MATION TO CLIENTS REGARDING ITS SUPPLY SCHEDULE WHICH ENABLED THE CLIENTS TO PL AN OPERATIONS AND INVESTMENT AND MARKET DETAILS. THE ASSESSEE PROVID ED INFORMATION RELATING TO MARKET DEVELOPMENTS WHICH ENABLED THE CLIENTS TO DEVISE LOCAL MARKETING STRATEGIES. FURTHER, THE INFORMATION PROVIDED BY T HE ASSESSEE WAS NOT READILY USEABLE BY THE CUSTOMERS WHO WERE REQUIRED TO FURTH ER MODIFY THEM AND APPLY ACCORDING TO THE REQUIREMENT OF BUSINESS. TH E PAYMENT FOR SUCH INFORMATION WHICH WAS BASED ON EXPERIENCE HAD THERE FORE TO BE CONSIDERED AS ROYALTY. THE LD. DR FURTHER SUBMITTED THAT THE INFORMATION MADE AVAILABLE TO THE CLIENTS, WAS BASED ON THE EXPERIENCE AND KNO WLEDGE OF THE ASSESSEE ACQUIRED OVER A PERIOD OF TIME WHICH THE CUSTOMERS COULD THEMSELVES USE WITHOUT RECOURSE TO THE ASSESSEE AND THEREFORE, THE SE COULD ALSO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES UNDER PAR A 4(C) OF ARTICLE-13 AS THE ASSESSEE COULD BE CONSIDERED AS PROVIDING CONSULTAN CY SERVICES WHICH MADE AVAILABLE KNOWLEDGE AND EXPERIENCE TO THE SIGHTHOLD ERS. ITA NO.8831/M/10 A.Y:07-08 23 7.12 IN REPLY, THE LD. AR FOR THE ASSESSEE SUBMITTE D THAT THOUGH THERE WAS SOME CHANGE IN LANGUAGE USED IN PARA-11 OF 2008 OEC D COMMENTARY COMPARED TO THE 2005 COMMENTARY BUT PARA 11.1 REMAI NED THE SAME IN BOTH THE COMMENTARIES. AS PER PARA 11.1, THE RECIPIENT WAS REQUIRED TO USE KNOW HOW ON HIS OWN AND THE GRANTER WAS NOT REQUIRED TO PLAY ANY PART. PARA- 11.2 WAS ALSO THE SAME AS PER WHICH THE KNOW HOW CO NTRACTS WERE DIFFERENT FROM THE CONTRACT FOR PROVISION OF SERVICES. IN TH IS CASE, IT WAS POINTED OUT THAT THE ASSESSEE WAS RENDERING SERVICES AND WAS NO T JUST IMPARTING KNOW HOW. THE LD. AR ALSO POINTED OUT THAT INFORMATION AND EXPERTISE CONTAINED IN SUPPLY PLANNING TOOL SERVICES WAS NOT OF HIGH MAGNI TUDE AND RATHER INVOLVED ACTUAL RENDERING OF THE SERVICES BY THE ASSESSEE. IT WAS SUBMITTED THAT IT WAS BUSINESS SUSTAINABILITY SERVICES OR GROWTH SERV ICES WHICH INVOLVED MARKETING INFORMATION ETC. BASED ON EXPERIENCE FOR WHICH THE ASSESSEE WAS NOT CHARGING ANY FEES. IT WAS ALSO SUBMITTED THAT LD. DR WAS NOT CORRECT IN STATING THAT THE PAYMENT WAS FOR ALL SERVICES WHETH ER CORE OR GROWTH. IT WAS POINTED OUT THAT THE AGREEMENT CLEARLY PROVIDED THA T PAYMENT WAS ONLY FOR SUPPLY PLANNING TOOL SERVICES AND OTHER SERVICES WE RE PAID FOR BY THE ASSESSEE ITSELF. THE REVENUE AUTHORITIES WERE NOT ENTITLED TO CHANGE THE TERMS OF AGREEMENT OR CHALLENGE THE REASONABLENESS OF ANY PAYMENT AS THE PAYEE WAS NOT RELATED. HE PLACED RELIANCE ON THE JUD GMENT OF HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (288 ITR 01) AND THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN CASE OF D.S. BIST AND SONS VS. CIT (149 ITR 276). IT WAS ACCORDINGLY SUBMITTED THAT THE VAS PA YMENT COULD NOT BE CONSIDERED AS ROYALTY UNDER PARA 3(A). ITA NO.8831/M/10 A.Y:07-08 24 7.13 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS GROUND IS RE GARDING NATURE OF INCOME RECEIVED BY THE ASSESSEE FROM VALUE ADDED SERVICES (VAS) PROVIDED TO WORLDWIDE SIGHTHOLDERS (WSH). THE ASSESSEE IS INCOR PORATED AS TAX RESIDENT OF UK AND, THEREFORE, IS A NON RESIDENT IN INDIA. THE ASSESSEE WAS SELLING ROUGH DIAMONDS TO SEVERAL WORLDWIDE SIGHTHOLDERS. THE ASSESSEE WAS ALSO PROVIDING VAS TO THE SIGHTHOLDERS DETAILS OF WHICH HAVE BEEN GIVEN IN PARA-7 TO 7.2 EARLIER. THE AO TOOK THE VIEW THAT THE PAYM ENT RECEIVED FOR THE VAS WAS OF THE NATURE OF FEES FOR TECHNICAL SERVICES BO TH UNDER THE PROVISIONS OF INCOME TAX ACT AND UNDER THE PROVISIONS OF ARTICLE- 13 OF INDIA UK TAX TREATY AND THEREFORE TAXABLE IN INDIA. ON A REFERENCE MAD E BY THE AO, THE DRP DIRECTED THE AO TO TAX THE PAYMENT AS FEE FOR TECHN ICAL SERVICES (FTS) UNDER THE PROVISIONS OF PARA 4(A) OF ARTICLE-13 OF THE T REATY. THE AO, HOWEVER, IN THE FINAL ORDER TAXED THE PAYMENT AS FTS UNDER PARA 4(C) OF THE TREATY. THE ASSESSEE HAS RAISED THE DISPUTE THAT AO WAS NOT COR RECT IN TAXING THE PAYMENT AS FTS UNDER PARA 4(C). BOTH THE PARTIES W ERE HEARD AT LENGTH AND THEREAFTER THE CASE WAS AGAIN FIXED FOR HEARING AS THE BENCH WAS OF THE VIEW THAT THE CASE REQUIRED FURTHER ARGUMENTS REGARDING APPLICABILITY OF PROVISIONS OF OTHER PARAS OF ARTICLE-13. IT WAS POINTED OUT TO THE LD. AR THAT IF THE PAYMENT WAS FOUND TAXABLE UNDER SOME OTHER PARA, TH E SAME COULD ALSO BE CONSIDERED BY THE TRIBUNAL AS IT WILL BE WITHIN THE SUBJECT MATTER OF THE APPEAL. INITIALLY, THE LD. AR FOR THE ASSESSEE OBJE CTED TO CONSIDER THE PROVISIONS OF OTHER PARAS OF THE ARTICLE WHICH WERE NOT APPLIED BY THE LOWER ITA NO.8831/M/10 A.Y:07-08 25 AUTHORITIES. HOWEVER THE LD. AR FINALLY AGREED THAT THE PROVISIONS OF OTHER PARAS COULD ALSO BE CONSIDERED. 7.14 IT WOULD BE PERTINENT TO POINT OUT HERE THAT POWER OF TRIBUNAL WHILE DEALING WITH AN APPEAL ARE QUITE WIDE. IT COULD AL SO CONSIDER ANY OTHER ARGUMENT CONNECTED WITH THE GROUND EVEN IF NOT CONS IDERED BY THE LOWER AUTHORITIES AS HELD BY HON'BLE SUPREME COURT IN CAS E OF HUKUMCHAND MILLS LTD. (63 ITR 232). IN CASE OF CIT VS. MAHALAKSHMI TEXTILE MILLS LTD. [1967] (66 ITR 710), THE DISPUTE BEFORE THE TRIBUNAL WAS R EGARDING DISALLOWANCE OF DEVELOPMENT REBATE. THE TRIBUNAL CONFIRMED THE DIS ALLOWANCE. HOWEVER IT ALLOWED THE CLAIM AS CURRENT REPAIR AS ALL FACTS WE RE ALREADY ON RECORD. THE HON'BLE SUPREME COURT UPHELD THE ORDER OF THE TRIBUN AL HOLDING THAT SUBJECT MATTER OF APPEAL REMAINED THE SAME IRRESPECTIVE OF THE FACT WHETHER THE ALLOWANCE WAS PERMISSIBLE ON ANOTHER GROUND UNDER S OME OTHER PROVISION. THEREFORE, IN CASE THE CLAIM HAS BEEN DISALLOWED UN DER A PARTICULAR PROVISION WHICH IS NOT FOUND TO BE CORRECT BUT THE DISALLOWAN CE IS JUSTIFIED UNDER SOME OTHER PROVISION, IT WILL BE WITHIN THE JURISDICTION OF THE TRIBUNAL TO CONSIDER THE SAME. IN ANY CASE, THE LD. AR FAIRLY CONCEDED THE POSITION AND DID NOT ADVANCE ANY FURTHER ARGUMENTS ON THE ISSUE AND WAS AGREEABLE TO CONSIDER THE OTHER PROVISIONS. 7.15 ARTICLE-13 OF INDO-UK TAX TREATY CONTAINS THE PROVISIONS FOR TAXABILITY OF SUMS PAID AS ROYALTY AND FEES FOR TECHNICAL S ERVICES(FTS). THE SAME TERMS HAVE BEEN USED IN THE INCOME TAX ACT ALSO, TH OUGH THE DEFINITION OF THE TERM ROYALTY AND FTS IS NOT EXACTLY THE SAME UNDER THE PROVISIONS OF ITA NO.8831/M/10 A.Y:07-08 26 THE DOMESTIC ACT AND THE TREATY. UNDER THE PROVISI ONS OF SECTION 9(1)(VII), ANY SUM PAYABLE AS FEES FOR TECHNICAL SERVICES TO A NY NON RESIDENT IS TAXABLE AS INCOME OF NON RESIDENT IN INDIA IF THE SERVICES FOR WHICH THE PAYMENT HAS BEEN MADE HAS BEEN UTILIZED IN A BUSINESS OR PROFES SION CARRIED ON BY THE PAYER IN INDIA OR FOR THE PURPOSE OF MAKING OR EARN ING ANY INCOME FROM ANY SOURCE IN INDIA. THE TERM FEES FOR TECHNICAL SERV ICES HAS BEEN DEFINED IN THE EXPLANATION-2 TO SECTION 9(1)(VII) TO MEAN ANY CONSIDERATION (INCLUDING LUMP-SUM CONSIDERATION) FOR RENDERING OF ANY MANAGE RIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING PROVISION OF SERVIC ES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR A NY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. SIMILARLY, ROYALTY PAYABLE TO NON RESIDENT FOR SERVICES UTILIZED IN A BUSINESS CARRIED ON IN INDIA OR FOR THE PURPOSE OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE IN INDIA IS TAXABLE AS INCOME OF THE NON-RESIDENT IN INDIA. THE TERM ROYALTY HAS BEEN DEFINED IN EXPLANATION-2 TO SECTION 9(1)(VI) WHICH AMONG OTHER THINGS INCLUDES ANY PAYMENT FOR THE IMPARTING OF ANY INFOR MATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNO WLEDGE, EXPERIENCE OR SKILL. 7.16 FURTHER, FOR TAXABILITY OF THE SUM AS ROYALTY OR FTS UNDER THE PROVISIONS OF INCOME TAX, IT IS NOT NECESSARY THAT THE NON RES IDENT SHOULD HAVE A PLACE OF BUSINESS IN INDIA OR TO HAVE RENDERED ANY SERVIC ES FOR INDIA. IT HAS BEEN MADE CLEAR IN THE EXPLANATION TO SECTION 9(2) INSER TED BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1.6.1976 AS PER WHICH THE INCOME IS CHARGEABLE IN INDIA WHETHER OR NOT, THE NON RESIDEN T IS RENDERING SERVICES IN ITA NO.8831/M/10 A.Y:07-08 27 INDIA, OR HAS A PLACE OF BUSINESS OR BUSINESS CONNE CTION IN INDIA. UNDER THE PROVISIONS OF TREATY ALSO, ROYALTY AND FTS ARE CHAR GEABLE TO TAX IN THE HANDS OF NON RESIDENT WHETHER OR NOT HE HAS ANY PERMANENT ESTABLISHMENT (PE) IN INDIA. THEREFORE, THE NATURE OF INCOME IS OF GREAT SIGNIFICANCE WHILE CONSIDERING TAXABILITY BECAUSE IN CASE THE PAYMENT IS CONSIDERED AS BUSINESS INCOME IN THE HANDS OF THE NON-RESIDENT, THE PAYMEN T UNDER THE PROVISIONS OF TREATY CAN BE TAXED IN INDIA ONLY IF THE NON RES IDENT HAS PE IN INDIA. THERE IS NO DISPUTE THAT THE ASSESSE HAS NO PE IN INDIA. FURTHER, FOR TAXABILITY OF ANY SUM IN INDIA, IT HAS FIRST TO BE FOUND TAXABLE UNDER THE PROVISIONS OF INCOME TAX ACT. IN CASE, THE SUM IS NOT FOUND TAXA BLE UNDER ANY OF THE PROVISIONS OF THE INCOME TAX, THE SAME CANNOT BE TA XED AT ALL AND IN THAT CASE IT WILL NOT BE NECESSARY TO GO INTO THE PROVIS IONS OF THE TREATY. HOWEVER, IF THE SUM IS FOUND TAXABLE UNDER THE PROVISIONS OF INCOME TAX ACT, IT IS FURTHER REQUIRED TO BE SEEN WHETHER ANY EXEMPTION I S AVAILABLE UNDER THE TREATY. IF THE SUM IS NOT FOUND TAXABLE UNDER THE TREATY, THE SAME CANNOT BE TAXED AT ALL IN INDIA. 7.17 IN THE PRESENT CASE, THE LD. AR FOR THE ASSESSEE HA S NOT DISPUTED THAT THE PAYMENT FOR VAS RECEIVED BY THE ASSESSEE WILL B E CHARGEABLE TO TAX IN INDIA. THEREFORE, IT IS REQUIRED TO BE EXAMINED WHE THER THE PAYMENT IS TAXABLE UNDER THE PROVISIONS OF THE TREATY. THE RE LEVANT PORTION OF ARTICLE-13 OF INDO-UK TAX TREATY WHICH CONTAINS PROVISIONS FOR TAXABILITY OF A SUM AS ROYALTY AND FTS IS REPRODUCED BELOW AS READY REFERE NCE. ITA NO.8831/M/10 A.Y:07-08 28 ARTICLE 13 - 1. ROYALTIES AND FEES FOR TECHNICAL ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OT HER CONTRACTING STATE MAY BE TAXED 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 STATE; BUT IF THE BENEFICIAL OWNER OF T HE ROYALTIES OR FEES FOR TECHNICAL SERVICES IS A RESIDENT OF THE OTHER CONTR ACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED: (A) IN THE CASE OF ROYALTIES WITHIN PARAGRAPH 3(A) OF THIS ARTICLES, AND FEES FOR TECHNICAL SERVICES WITHIN PARAGRAPHS 4(A) AND (C) OF THIS ARTICLE, (I) DURING THE FIRST FIVE YEARS FOR WHICH THIS CONV ENTION HAS EFFECT; (AA) 15 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALT IES OR FEES FOR TECHNICAL SERVICES WHEN THE PAYER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES IS THE GOVERNMENT OF THE FIRST-MENTIONED C ONTRACTING STATE OR A POLITICAL SUB-DIVISION OF THAT STATE, AND (BB) 20 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALT IES OR FEES FOR TECHNICAL SERVICES IN ALL OTHER CASES; AND (II) DURING SUBSEQUENT YEARS, 15 PER CENT OF THE GR OSS AMOUNT 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 PER CENT OF THE GROSS AMOUNT OF SUCH ROYALTIES AND FEES FOR TECHNICAL SERVICES. 3. FOR THE PURPOSES OF THIS ARTICLE, THE TERM RO YALTIES MEANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF, OR THE RIGHT TO USE, ANY COPYRIGHT OF A LITERARY, ARTI STIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPHY FILMS OR WORK ON FILMS, TA PE OR OTHER MEANS OF REPRODUCTION FOR USE IN CONNECTION WITH RADIO OR TELEVISION BROADCASTING, ANY PATENT, TRADE MARK, DESIGN OR MO DEL, PLAN, SECRET FORMULA OR PROCESS, OR FOR INFORMATION CONCERNING I NDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE; AND (B) PAYMENTS OF ANY KIND RECEIVED AS CONSIDERATION FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMRERCIA1 OR SCI ENTIFIC EQUIPMENT, OTHER THAN INCOME DERIVED BY AN ENTERPRISE OF A CON TRACTING STATE FROM THE OPERATION OF SHIPS OR AIRCRAFT IN INTERNAT IONAL TRAFFIC. 4 FOR THE PURPOSES OF PARAGRAPH 2 OF THIS ARTICLE, AND SUBJECT TO PARAGRAPH 5, OF THIS ARTICLE, THE TERM FEES FOR T ECHNICAL SERVICES MEANS PAYMENTS OF ANY KIND OF ANY PERSON IN CONSIDE RATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF A TECHNICAL OR OTHER PERSO NNEL) WHICH: ITA NO.8831/M/10 A.Y:07-08 29 (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(A) OF THIS ARTICLE IS RECEIVED ; OR (B) ARE ANCILLARY AND SUBSIDIARY TO THE ENJOYMENT O F THE PROPERTY FOR WHICH A PAYMENT DESCRIBED IN PARAGRAPH 3(B) OF TH IS ARTICLE IS RECEIVED; OR (C) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW OR PROCESSES, OR CONSIST OF THE DEVE1OPNENT AND TRANS FER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. 7.18 THE AO HAD TAXED THE PAYMENT FOR VAS UNDER PAR A 4(C) OF THE ARTICLE- 13 WHICH RELATES TO PAYMENT FOR RENDERING ANY TECHN ICAL OR CONSULTANCY SERVICES WHICH MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERTISE, SKILL, KNOW HOW OR PROCESS OR CONSISTS OF DEVELOPMENT AND TRANS FER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. THE SCOPE OF APPLICABILITY OF PAR A 4(C) HAS BEEN EXAMINED BY THE TRIBUNAL IN SEVERAL CASES. IN CASE OF RAYMO ND LTD. VS. DCIT ( 86 ITD 791). THE TRIBUNAL HELD THAT FOR APPLICABILITY OF P ARA 4(C), THE TECHNICAL KNOWLEDGE ETC. MUST BE MADE AVAILABLE TO THE PAYER WHO CAN USE THE SAME HIMSELF WITHOUT RECOURSE TO PERFORMER OF THE SERVIC ES. IT WAS ALSO HELD THAT TECHNICAL KNOWLEDGE, EXPERTISE, SKILL ETC. MUST REM AIN WITH THE PERSON UTILIZING THE SERVICES EVEN IF RENDERING OF THE SER VICES HAS COME TO AN END. IN CASE OF NAQ QUALITY SYSTEM REGISTER LTD. VS. DCI T (92 TTJ 946), THE TRIBUNAL HELD THAT DEFINITION OF FTS AS PER PARA 4( C) WAS PARI-MATERIAL WITH THE DEFINITION OF FEES FOR INCLUDED SERVICES AS PE R PARA 4(B) OF ARTICLE-12 OF INDO US TREATY. THE TRIBUNAL NOTED THAT IN CASE OF INDO US TREATY, AN MOU HAD BEEN ATTACHED TO THE DTAA WHICH EXPLAINED THAT TECHNICAL SERVICES MEANT SERVICES REQUIRING EXPERTISE IN TECHNOLOGY. IT ALSO EXPLAINED THAT CONSULTANCY SERVICES WHICH WERE NOT OF TECHNICAL NA TURE COULD NOT BE INCLUDED ITA NO.8831/M/10 A.Y:07-08 30 UNDER PARA 4(B). THE TRIBUNAL, THEREFORE, HELD THA T DEFINITION OF FTS AS PER PARA 4(C) OF ARTICLE-13 OF INDO US TREATY HAD TO BE ASSIGNED THE SAME MEANING AS FEE FOR INCLUDED SERVICE AS PER PARA 4(B ) OF ARTICLE-12 OF INDO US TREATY. IN THAT CASE, THE SERVICES RENDERED INVOLV ED ASSESSMENT SURVEILLANCE FOR THE PURPOSE OF ISO CERTIFICATION. THE TRIBUNAL HELD THAT THE PAYMENT WAS NOT FTS UNDER PARA 4(C) OF ARTICLE 13 OF INDO UK TR EATY. 7.19 IN THE CASE OF CESC LTD. VS. DCIT (80 TTJ 806 ) ALSO, THE TRIBUNAL HELD THAT DEFINITION OF FTS AS PER PARA 4(C) OF ARTICLE- 13 OF INDO UK TREATY HAS TO BE ASSIGNED THE SAME MEANING AS FEES FOR INCLUDED S ERVICES AS PER PARA 4(B) OF ARTICLE-12 OF INDO US TREATY. IN THAT CASE, ROLE OF NON-RESIDENT TECHNICAL ADVISOR WAS TO REVIEW OR TO GIVE OPINION ON THE PRO JECT. IT WAS HELD THAT EXPRESSING OPINION OR REVIEWING DETAILS OF THE PROJ ECT WITHOUT ANY ROLE IN DESIGN AND DEVELOPMENT OF THE PROJECT DID NOT AMOUN T TO MAKING TECHNOLOGY AVAILABLE IN THE SENSE THAT RECIPIENT OF SERVICES WAS ENTITLED TO APPLY TECHNOLOGY AND THEREFORE IT WAS HELD THAT PAYMENT W AS NOT TAXABLE AS FTS. SIMILARLY, IN CASE OF MCKINSEY & CO. INC. PHILLIPIN ES VS. ADIT (6 SOT 186), IT WAS HELD THAT NON TECHNICAL CONSULTANCY SERVICE WAS NOT TO BE COVERED UNDER THE PROVISIONS OF PARA 4(B) OF ARTICLE-12 OF INDO U S TREATY. IN THAT CASE, THE TRIBUNAL NOTED THAT THE PAYMENT MADE TO THE NRI CO MPANY WAS FOR GEOGRAPHICAL DATA AND INFORMATION WHICH WAS IN THE NATURE OF COMMERCIAL AND INDUSTRIAL INFORMATION. THE ASSESSEE WAS NOT MA KING AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE ETC. IT WAS, THEREFORE, HELD THAT THE PROVISIONS OF PARA 4(B) OF ARTICLE-12 OF INDO US TREATY WERE NOT APPLI CABLE AND THEREFORE THE PAYMENT COULD NOT BE CONSIDERED AS FEES FOR INCLUDE D SERVICES. ITA NO.8831/M/10 A.Y:07-08 31 7.20 THUS, IN VIEW OF THE DECISIONS OF THE TRIBUNA L MENTIONED ABOVE, FOR TAXABILITY OF A SUM AS FTS, UNDER PARA 4(C) OF ARTI CLE-13 OF INDO UK TREATY, THE PAYMENT SHOULD NOT ONLY FOR RENDERING OF TECHNI CAL OR CONSULTANCY SERVICES BUT SUCH SERVICES SHOULD ALSO MAKE AVAILAB LE TECHNICAL KNOWLEDGE, EXPERIENCE ETC. WHICH CAN BE USED BY THE RECIPIENT ON ITS OWN. THE CONSULTANCY SERVICES HAVE BEEN INTERPRETED AS TECHN ICAL CONSULTANCY. HOWEVER, THE WORD TECHNICAL IS NOT USED ONLY IN RE LATION TO TECHNOLOGY. IT ALSO REFERS TO PRACTICAL SKILLS, EXPERIENCE ACQUIRE D IN A PARTICULAR ACTIVITY. THUS CONSULTANCY BASED ON PRACTICAL SKILLS, EXPERIE NCE WILL ALSO BE COVERED BUT FOR APPLICATION OF PARA 4(C), SUCH SKILLS, KNOW LEDGE, EXPERIENCE ETC. SHOULD BE MADE AVAILABLE TO THE RECIPIENT WHO COUL D APPLY THE SAME INDEPENDENTLY. IN THE PRESENT, CASE THE ASSESSEE IS PROVIDING INFORMATION WHICH IS OF THE NATURE OF COMMERCIAL INFORMATION BA SED ON ITS EXPERIENCE. THE ASSESSEE WAS NOT TRANSFERRING THE TECHNICAL KNO WLEDGE, SKILL, EXPERIENCE ETC. BUT WAS ONLY IMPARTING THE INFORMATION CONCERN ING COMMERCIAL EXPERIENCE. THEREFORE, IN OUR VIEW, PROVISIONS OF PARA 4(C) WILL NOT BE APPLICABLE. 7.21 THE DISPUTE RESOLUTION PANEL (DRP) HAS APPLIED THE PROVISIONS OF PARA- 4(A) OF THE ARTICLE-13 READ WITH PARA 3(A) AS PER W HICH ANY PAYMENT FOR TECHNICAL OR CONSULTANCY SERVICES WHICH ARE ANCILLA RY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF RIGHT, PROPERTY OR INFO RMATION FOR WHICH PAYMENT DESCRIBED IN PARA 3(A) IS RECEIVED, IS FEES FOR TEC HNICAL SERVICES (FTS). THE DRP HAS HELD THAT VAS PAYMENTS WERE FOR SERVICES WH ICH WERE ITA NO.8831/M/10 A.Y:07-08 32 SUBSIDIARY/ANCILLARY TO THE PAYMENT OF ROYALTY UNDE R PARA 3(A) FOR APPLICATION OR ENJOYMENT OF RIGHT OF THE ASSESSEE IN THE BRAND S USED BY THE SIGHTHOLDERS AND, THEREFORE, IT SHOULD BE TREATED AS FEES FOR TE CHNICAL SERVICES UNDER PARA 4(A) OF THE SAID ARTICLE. IT MAY BE POINTED OUT HER E THAT THE ASSESSEE HAD COLLECTED MARKETING CONTRIBUTIONS FROM SIGHTHOLDERS WHICH HAS BEEN ASSESSED BY THE AUTHORITIES BELOW AS ROYALTY AND WHICH HAS A LSO BEEN ACCEPTED BY THE ASSESSEE AS MENTIONED EARLIER. THE LD. DR INITIALL Y ARGUED THAT MARKETING CONTRIBUTION WAS FOR THE MARKETING CAMPAIGN TO PROM OTE LICENCED PRODUCTS WHICH WERE ROUGH DIAMONDS. THE VASS AS PER LD. DR WERE TO PROMOTE SALE OF ROUGH DIAMONDS AND, THEREFORE, THESE WERE SUBSIDIAR Y AND ANCILLARY TO THE PAYMENT OF ROYALTY AS MARKETING CONTRIBUTION AND WE RE THUS COVERED AS FEES FOR TECHNICAL SERVICES UNDER PARA 4(A) OF THE ARTIC LE. THE LD. AR HAS HOWEVER RIGHTLY POINTED THAT PAGE 5 OF THE NAKSHATRA AGREEM ENT CLEARLY PROVIDED THAT LICENCED PRODUCTS WERE JEWELLERY PIECES INCORPORATI NG DIAMONDS DESIGNED AND MANUFACTURED BY SIGHTHOLDERS. THE MARKETING CONT RIBUTION WHICH HAS BEEN TAXED AS ROYALTY WAS THUS TO PROMOTE NAKSHATRA BR AND OF JEWELLERY AND NOT FOR SALE OF ROUGH DIAMONDS. THE ASSESSEE HAD ALSO RECEIVED ROYALTY FOR USE OF FOREVERMARK WHICH RELATED TO SALE OF POLISHED DIAMONDS. THUS ROYALTY RECEIVED BY THE ASSESSEE AS MARKETING CONTRIBUTION WAS NOT IN RELATION TO SALE OF ROUGH DIAMONDS. 7.22 IT WILL BE PERTINENT TO POINT OUT HERE THAT V ASS WERE NOT IN RELATION TO SALE OF ROUGH DIAMONDS ONLY. THOUGH TH E ASSESSEE WAS SELLING ROUGH DIAMONDS, IT HAD TAKEN VARIOUS MEASURES FOR G ROWTH OF FINISHED ITA NO.8831/M/10 A.Y:07-08 33 DIAMOND PRODUCTS AND DIAMOND INDUSTRY AS A WHOLE. IT HAD ACQUIRED THE NAKSHATRA BRAND OF DIAMOND JEWELLERY AND FOREVERMAR K FOR POLISHED DIAMONDS WHICH IT HAD ALLOWED TO BE USED BY THE SIG HTHOLDERS ON PAYMENT OF ROYALTY. THIS WAS OBVIOUSLY TO GENERATE DEMAND FOR ROUGH DIAMONDS BY PROMOTING SALE OF FINISHED DIAMOND PRODUCTS. VASS WERE, THEREFORE, NOT LIMITED TO SALE OF ROUGH DIAMONDS ONLY. THIS IS CL EAR FROM THE LETTER OF JULY 2005 OF THE ASSESSEE ADDRESSED TO ALL SIGHTHOLDERS IN CONNECTION WITH VAS (PLACED AT PAGE-78 OF THE PAPER BOOK ), IN WHICH TH E ASSESSEE REFERS TO GROWTH OF DIAMOND JEWELLERY. THE ASSESSEE IN THE S AID LETTER ALSO MENTIONS THAT VAS WAS ONE OF THE MECHANISM TO ENSURE FUTURE PROFITABILITY, IN THE EVER INCREASING COMPETITIVE MARKET OF THE SIGHTHOLDERS, WHO WERE DEALING NOT ONLY IN ROUGH DIAMONDS BUT ALSO IN VARIOUS VALUE ADDED D IAMOND PRODUCTS. FURTHER, PAGE-80 OF THE SERVICE GUIDE CLEARLY MENTI ONS THAT VASS OFFERED POTENTIAL FOR VALUE GENERATION TO SIGHTHOLDERS AND DIAMOND JEWELLERY MARKET AS A WHOLE. THIS IS ALSO CLEAR FROM THE BUSINESS S USTAINABILITY SERVICES, WHICH PROVIDED INFORMATION ON CONSUMER DEMANDS AND ON CONSUMER CONFIDENCE BUILDING. THE CONSUMERS ARE CONCERNED W ITH DIAMOND PRODUCTS AND NOT ROUGH DIAMONDS AND, THEREFORE, SUCH INFORMA TION IS AIMED AT PROMOTING SALE OF FINISHED DIAMOND PRODUCTS. DEMAN D FOR DIAMOND IS REFLECTED THROUGH SALES OF DIAMOND PRODUCTS. THE M ARKETING EXPERIENCE OF THE ASSESSEE IN DIAMONDS IS, THEREFORE, USEFUL IN M ARKETING OF DIAMOND PRODUCTS AS UNDERLYING THEME IN THESE PRODUCTS IS T HE DIAMOND. THE ASSESSEE WAS SELLING ROUGH DIAMONDS WITHOUT MAKING ANY VALUE ADDITION TO IT. THE VASS WERE, AIMED AT PROMOTING SALE OF DIAMO ND PRODUCTS BY THE ITA NO.8831/M/10 A.Y:07-08 34 SIGHTHOLDERS, WHICH WERE VALUE ADDED PRODUCTS. THE VASS, IN OUR VIEW, CAN BE SPLIT IN TWO COMPONENTS. THE FIRST COMPONENT RE LATED TO VARIOUS MARKETING INFORMATION PROVIDED BY THE ASSESSEE TO T HE SIGHTHOLDERS, WHICH WAS IN THE NATURE OF COMMERCIAL INFORMATION DEVELOP ED BY THE ASSESSEE BASED ON ITS PAST EXPERIENCE AND IN RESPECT OF WHIC H THE ASSESSEE WAS HOLDING COPYRIGHT AND INTELLECTUAL PROPERTY RIGHTS. THE SECOND COMPONENT COMPRISES OF THE SERVICES THROUGH KAM AS PART OF TH E SUPPLY PLANNING TOOL SERVICES AND ASSISTANCE IF ANY PROVIDED THROUGH WOR KSHOPS AND PERSONAL MEETINGS AS PART OF GROWTH SERVICES, WHICH WERE ANC ILLARY AND SUBSIDIARY TO THE MARKETING INFORMATION PROVIDED TO THE SIGHTHOLD ERS. SUCH SERVICES COULD ALSO BE CONSIDERED AS ANCILLARY AND SUBSIDIARY TO A PPLICATION OR ENJOYMENT OF BRANDS AS THESE WERE AIMED AT PROMOTING SALE OF BRA NDED JEWELLERY AND FINISHED DIAMONDS ALSO. THEREFORE, THE FINDING OF T HE DRP THAT VASS WERE COVERED UNDER PARA 4(A) OF THE TREATY IS NOT WITHOU T ANY BASIS. 7.23 HOWEVER, THE DRP OVERLOOKED THE FACT THAT THE DEFINITION OF ROYALTY UNDER PARA 3(A) ALSO INCLUDED ANY PAYMENT F OR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXP ERIENCE. A CAREFUL PERUSAL OF VAS SERVICE GUIDE SHOWS THAT THE ASSESSEE WAS PR OVIDING VARIOUS TYPES OF COMMERCIAL INFORMATION RELATING TO SELLING OF ROUGH DIAMONDS AND FINISHED DIAMOND PRODUCTS. THE VAS SERVICE GUIDE ALSO PROVI DED THAT INFORMATION PROVIDED BY THE ASSESSEE WHICH WAS CONFIDENTIAL IN NATURE WAS BASED ON ITS EXPERIENCE. THE SUMMARY OF VARIOUS SERVICES HAVE B EEN GIVEN IN PARA-7 TO 7.2 EARLIER. THE SERVICES HAVE BEEN PLACED IN TWO CATEGORIES I.E. CORE ITA NO.8831/M/10 A.Y:07-08 35 SERVICES AND GROWTH SERVICES. UNDER THE CORE SERVI CES, THE ASSESSEE WAS PROVIDING SUPPLY PLANNING TOOL SERVICES AND BUSINES S SUSTAINABILITY SERVICES. SUPPLY PLANNING TOOL SERVICES BASICALLY CONSISTED O F ADVANCE INFORMATION GIVEN BY THE ASSESSEE TO SIGHTHOLDERS REGARDING NAT URE, QUALITY AND OTHER PARAMETERS OF DIAMONDS IT INTENDED TO MAKE AVAILABL E OVER SELLING PERIOD OF TWO AND A HALF YEARS. NORMALLY, A TRADER DOES NOT CHARGE FOR GIVING INFORMATION ABOUT GOODS IT INTENDS TO SELL. HOWEVER , IN THIS CASE, PROVIDING SUCH INFORMATION WELL IN ADVANCE REQUIRES IN DEPTH EXPERIENCE IN MARKETING OF DIAMONDS SO AS TO KNOW FUTURE MARKETING TRENDS. THE ASSESSEE WAS USING ITS GLOBAL MARKETING EXPERIENCE TO PROVIDE SUCH INF ORMATION WHICH WAS COMMERCIAL IN NATURE TO THE SIGHTHOLDERS SO THAT TH EY COULD PLAN THEIR TRADING SCHEDULES ACCORDINGLY. THEREFORE, IN CASE THE ASSE SSEE WAS CHARGING FOR SUCH INFORMATION, THE PAYMENT HAS TO BE CONSIDERED AS RO YALTY FOR PROVIDING INFORMATION OF COMMERCIAL NATURE BASED ON EXPERIENC E. HOWEVER, IN OUR VIEW, THE REAL CHARGE WAS FOR PROVIDING VARIOUS MAR KETING INFORMATION THROUGH EXTRANET AND AS PART OF BUSINESS SUSTAINABI LITY AND GROWTH SERVICES AND PERSONAL SERVICES PROVIDED IN RELATION THERETO AS MENTIONED IN THE PRECEDING PARA. THE ASSESSEE PROVIDED ACCESS TO DTC INFORMATION ON EXTRANET ABOUT ITS GLOBAL MARKETING PROGRAMME. SUC H INFORMATION WAS USEFUL IN SELLING OF DIAMONDS AND OTHER FINISHED P RODUCTS BY SIGHTHOLDERS. AS PART OF SUPPLY PLANNING TOOL SERVICES, THE SIGHT HOLDERS COULD ALSO SEEK ASSISTANCE FROM THE KAM WHO FORMED THE LINK WITH DT C MARKETING GLOBALLY AND ALSO PROVIDED ASSISTANCE IN SERVICE SELECTION. AS PART OF BUSINESS SUSTAINABILITY SERVICES, THE ASSESSEE WAS PROVIDING INFORMATION ON CONSUMER ITA NO.8831/M/10 A.Y:07-08 36 DEMANDS ON ANNUAL BASIS AND ALSO BI-ANNUAL CONSUME R CONFIDENCE UPDATES. SUCH INFORMATION ON CONSUMER DEMAND AND ON BUILDING CONSUMER CONFIDENCE WAS USEFUL TO SIGHTHOLDERS IN SELLING OF DIAMONDS A ND DIAMOND PRODUCTS. SIMILARLY, AS PART OF GROWTH SERVICES DETAILS OF WH ICH HAVE BEEN SUMMARIZED IN PARA 7.2 EARLIER, THE ASSESSEE WAS PROVIDING INF ORMATION AND ASSISTANCE TO SIGHTHOLDERS IN RELATION TO MARKETING OF PRODUCTS T HROUGH ANNUAL SEMINARS AND WORKSHOPS AND THROUGH PERSONAL MEETINGS WITH TH E MANAGERS. THE VARIOUS INFORMATION BEING PROVIDED BY THE ASSESSEE IN THE NAME OF CORE AND GROWTH SERVICES WERE BASED ON ITS WIDE EXPERIENCE, THE ASSESSEE HAD IN SELLING OF DIAMONDS. THIS IS CLEAR FROM VAS SERVIC E GUIDE PLACED ON RECORD IN WHICH AT PAGE 80 OF THE PAPER BOOK IT HAS BEEN MENT IONED AS UNDER:- ALL THE VALUE ADDED SERVICES HAVE BEEN CAREFULLY C HOSEN AND EVALUATED. THEY ARE BASED ON DTCS UNPARALLELED A ND EXTENSIVE EXPERIENCE IN SELLING AND MARKETING GEM DIAMONDS. 7.24 THE VARIOUS TYPES OF INFORMATION PROVIDED BY T HE ASSESSEE TO THE SIGHTHOLDERS IN THE FORM OF VAS WAS NOT A ROUTINE I NFORMATION GIVEN BY A TRADER, BUT CONFIDENTIAL INFORMATION OF COMMERCIAL NATURE DEVELOPED BY THE ASSESSEE BASED ON ITS OWN EXTENSIVE EXPERIENCE IN M ARKETING OF DIAMONDS. THE INFORMATION WAS PROTECTED BY INTELLECTUAL PROPE RTY RIGHTS BELONGING TO THE ASSESSEE WHICH HAD BEEN PROVIDED TO THE SIGHTHOLDER S WITH THE CONDITION THAT THE SAME WOULD BE KEPT CONFIDENTIAL. IT IS CLEAR FROM THE RELEVANT PARA OF VAS SERVICE GUIDE AT PAGE 77 , WHICH IS REPRODUCED BELOW AS READY REFERENCE:- THE CONTENT OF THE VALUE ADDED SERVICES PROGRAMME PROVIDED BY THE DIAMOND TRADING COMPANY LIMITED (THE DTC) IS PROT ECTED BY COPYRIGHT AND OTHER INTELLECTUAL PROPERTY RIGHTS TH ESE INTELLECTUAL ITA NO.8831/M/10 A.Y:07-08 37 PROPERTY RIGHTS ARE OWNED BY THE DTC. THE INFORMATI ON CONTAINED WITHIN THIS SERVICE GUIDE 2005 (CONFIDENTIAL INFOR MATION) IS PROPRIETARY AND CONFIDENTIAL TO THE DTC; IT IS PROV IDED TO SIGHTHOLDERS ON THE BASIS THAT IT SHALL BE KEPT CONFIDENTIAL AND USED ONLY IN RELATION TO THEIR BUSINESS WHILE PARTICIPATING IN THE DTC VA LUE ADDED SERVICES PROGRAMME. SIGHTHOLDERS SHALL NOT DISCLOSE, PUBLISH OR OTHERWISE REVEAL ANY OF THE CONFIDENTIAL INFORMATION TO ANY T HIRD PARTY EXCEPT WITH THE PRIOR WRITTEN CONSENT OF THE DTC. 7.25 THE LD. A.R FOR THE ASSESSEE AGREED THAT THE S ERVICES PROVIDED BY THE ASSESSEE WERE INFORMATIVE AND CONSULTATIVE. HE ALSO AGREED THAT THE SAID INFORMATION HAD BEEN PROVIDED BY THE ASSESSEE TO TH E SIGHTHOLDERS BASED ON ITS EXTENSIVE EXPERIENCE. HOWEVER, HIS OBJECTION TO THE TREATMENT OF PAYMENT FOR SUCH SERVICES AS ROYALTY WAS THAT THE A SSESSEE WAS CHARGING ONLY FOR SUPPLY PLANNING TOOL SERVICES AND THE INFO RMATION CONTAINED IN SUCH SERVICES WAS NOT OF HIGH DEGREE. THE BULK OF USEFU L INFORMATION BEING PROVIDED WAS AS PER BUSINESS SUSTAINABILITY SERVICE S OR GROWTH SERVICES WHICH WERE NOT CHARGED BY THE ASSESSEE. IT HAS ALSO BEEN ARGUED BY HIM THAT THE ASSESSEE WAS PROVIDING SERVICES AND NOT ONLY INFORM ATION. THE LD. AR HAS FURTHER ARGUED THAT THE ROYALTY AS PAYMENT FOR INFO RMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE ALL UDED TO THE CONCEPT OF KNOW-HOW AS PER INTERPRETATION GIVEN IN OCED COMMEN TARY. BUT IN THE CASE OF THE ASSESSEE, THERE WAS NO TRANSFER OF KNOW-HOW. 7.26 WE FIRST DEAL WITH THE OBJECTION OF THE LD. A. R THAT THE PAYMENT WAS ONLY FOR SUPPLY PLANNING TOOL SERVICES. IT HAS BEE N ARGUED THAT THE AGREEMENT CLEARLY PROVIDED THAT ONLY SUPPLY PLANNI NG TOOLS SERVICES WERE CHARGED AND OTHER SERVICES WERE PAID FOR BY THE ASS ESSEE. IT HAS ALSO BEEN ITA NO.8831/M/10 A.Y:07-08 38 ARGUED THAT THE AGREEMENT HAS TO BE READ AS IT EXI STS AND THE REVENUE AUTHORITIES ARE NOT ENTITLED TO CHANGE THE TERMS OF THE AGREEMENT OR INTERPRET IT IN A DIFFERENT MANNER. HOWEVER, ON CAREFUL PERUS AL OF VAS SERVICE GUIDE, WE ARE UNABLE TO ACCEPT THE ARGUMENTS ADVANCED. TH E PAYMENT IN OUR VIEW IS NOT ONLY FOR SUPPLY PLANNING TOOLS SERVICES BUT ALSO FOR OTHER SERVICES. THE LD. D.R HAS RIGHTLY POINTED OUT THAT SIGHTHOLDERS A RE ENTITLED TO BUSINESS SUSTAINABILITY SERVICES AND GROWTH SERVICES ONLY I F THE PAYMENT HAS BEEN MADE BY THE SIGHTHOLDERS AND THE PAYMENT AS MENTION ED IN PARA 6 OF THE SERVICE GUIDE PLACED AT PAGE 103 OF THE PAPER BOOK WAS NOT BASED ON ANY PARTICULAR SERVICE RENDERED. THE PAYMENT BY SIGHTH OLDERS CONSISTS OF FIXED FEES OF US $ 1,80,000 PLUS A PERCENTAGE OF INCREME NTAL PURCHASES. THE LD. AR HAS NOT CONTROVERTED THE SUBMISSIONS MADE BY TH E LD. DR ON THIS POINT. IT IS NOT THE CASE THAT THE SIGHTHOLDER WOULD BE EN TITLED TO BUSINESS SUSTAINABILITY SERVICES AND GROWTH SERVICES FREE OF CHARGE EVEN IF HE HAD NOT MADE ANY PAYMENT FOR VAS. IN CASE NO PAYMENT HAS B EEN MADE, HE IS NOT ENTITLED FOR ANY SERVICE. HOWEVER, IF THE PAYMENT H AS BEEN MADE, HE HAS ACCESS TO ALL THE SERVICES. IN FACT BUSINESS SUST AINABILITY SERVICES ARE ALSO AVAILABLE ON EXTRANET TO WHICH THE SIGHTHOLDERS HAD ACCESS AS PART OF SUPPLY PLANNING TOOL SERVICES. THUS EVEN IF CHARGE WAS ON LY FOR SUPPLY PLANNING TOOL SERVICES, THE BUSINESS SUSTAINABILITY SERVICES WERE COVERED BY THE CHARGE. MERELY BECAUSE THE AGREEMENT MENTIONS THAT THE PAYM ENT IS ONLY FOR SUPPLY PLANNING TOOL SERVICES, IT CANNOT BE ACCEPTED THAT THE OTHER SERVICES WERE FREE OF CHARGE. IT IS A SETTLED LEGAL POSITION THA T IT IS NOT THE FORM BUT THE SUBSTANCE OF TRANSACTION WHICH IS RELEVANT AND THE AGREEMENT HAS TO BE ITA NO.8831/M/10 A.Y:07-08 39 CONSIDERED AS A WHOLE IN UNDERSTANDING THE TRUE NAT URE OF TRANSACTIONS. IT IS TRUE THAT AN AUTHORITY CANNOT RE-WRITE THE AGREEMEN T BUT THE AUTHORITIES ARE ENTITLED TO LOOK INTO THE ENTIRE SURROUNDING CIRCUM STANCES TO COME TO A CONCLUSION ABOUT ANY FACTUAL SITUATION. THIS VIEW IS SUPPORTED BY THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF D.P. MORE (82 ITR 540). NO DOUBT, IT IS TRUE THAT AGREEMENT IS WITH THE SIGHTHOLDERS WHO ARE NOT RELATED BUT THE PROVISIONS IN THE AGREEMENT TO SHOW THAT PAYMENT WAS ONLY FOR SUPPLY PLANNING TOOL SERVICES DOES NOT ADV ERSELY AFFECT SIGHTHOLDERS BECAUSE UPON MAKING PAYMENT, THEY ARE ENTITLED TO A VAIL ALL SERVICES. SO LONG AS THE SIGHTHOLDERS ARE ENTITLED FOR ALL THE SERVIC ES, THE MANNER IN WHICH THE AGREEMENT IS DRAFTED MAKES NO DIFFERENCE TO THEM. THE ASSESSEE HAS HOWEVER TRIED TO TAKE TAX ADVANTAGE BY SHOWING THE PAYMENT ONLY AGAINST SUPPLY PLANNING TOOL SERVICES WHEN IN FACT THE PAYM ENT IS FOR ALL THE SERVICES. THE ASSESSEE HAS TRIED TO DEVISE METHODS WITH A VIE W TO EVADE TAXES WHICH IS CLEAR FROM THE DOCUMENTS FOUND DURING THE SURVEY CO NTAINING CORRESPONDENCE BETWEEN THE ASSESSEE AND ITS TAX CONSULTANT WHICH H AS BEEN REFERRED TO BY THE AO AT PAGE-6 OF THE ASSESSMENT ORDER AND WHICH IS REPRODUCED BELOW AS READY REFERENCE:- 1. -TREATMENT OF THE PAYMENT TO DTC AS A REIMBURSE MENT OF EXPENDITURE IS THE PREFERABLE ROUTE TO FOLLOW FRO M A INDIAN TAX POINT OF VIEW. PAGE 49 PAYMENT TOWARDS REIMBURSEMENT OF ACTUAL MAR KETING EXPENDITURE IN RESPECT OF THE NAKSHTRA CAMPAIGN. = YES, NOMENCLATURE OF THE WORDING IS RIGHT AND WILL HAV E TO ADD ONLY THE YEAR OF INVOICE I.E., 2005, AS THE CASE MAY BE AND SEND US REVISED INVOICE WITH THIS WORDING FOR THE YEAR 2005. PAGE 50 (4TH LINE ONWARDS) AS THE INVOICED AMOUNTS ARE BASED ON AGREED FIGURES PER THE CONTRACTS, AND NOT THE ACTU AL AMOUNT OF ITA NO.8831/M/10 A.Y:07-08 40 EXPENDITURE, WE ARE ONLY ABLE TO PROVIDE THIS INFO RMATION RETROSPECTIVELY. IN ADDITION TO THE SUPPORTING DOCUMENTATION, THE NA RRATIVE ON THE INVOICE WOULD HAVE TO BE AMENDED AND L CAN CONFIRM THAT WE ARE ABLE TO THIS. IF THE PREFERRED TREATMENT OF REIMBURSEMENT OF EXP ENDITURE CANNOT APPLY, THE NEXT ROUTE WOULD BE TO TREAT THE PAYMEN T AS A ROYALTY. 2. YOU ARE HAPPY FOR THE NARRATIVE ON THE INVOICE T O BE AMENDED AND REISSUED FOR 2005. WOULD THE FOLLOWING WORDING BE ACCEPTABLE. PAYMENT TOWARDS REIMBURSEMENT OF ACTUAL MARKETING EXPENDITURE IN RESPECT OF THE NAKASHTRA CAMPAIGN. 7.27 THE ASSESSEE HAD THEREFORE BEEN TRYING TO HID E THE TRUE NATURE OF TRANSACTIONS BY CHANGING THE NARRATIVE OF THE TR ANSACTIONS IN CONSULTATION WITH THE TAX CONSULTANT TO EVADE TAXES. IT WAS TRY ING TO CHANGE THE NOMENCLATURE OF MARKETING CONTRIBUTIONS RECEIVED BY IT TO REIMBURSEMENT OF EXPENDITURE AS THERE WILL BE NO ELEMENT OF INCOME INVOLVED IN THE REIMBURSEMENT OF EXPENDITURE. DURING THE COURSE OF HEARING OF THE APPEAL ALSO, THE LD. AR TRIED TO ARGUE THAT MARKETING CONT RIBUTION WAS REIMBURSEMENT OF EXPENDITURE AND THEREFORE NOT TAXA BLE. HOWEVER, ULTIMATELY HE AGREED FOR ITS TAXABILITY AS ROYALTY AND THE GROUND RAISED BY THE ASSESSEE ON THIS POINT WAS NOT PRESSED. IN CASE OF VAS ALSO, THE ASSESSEE HAS TRIED TO HIDE THE TRUE NATURE OF PAYMENT BY SHO WING IT AS PAYMENT FOR SUPPLY TOOL SERVICES ONLY THOUGH IN SUBSTANCE THE P AYMENT IS FOR BUSINESS SUSTAINABILITY, GROWTH AND OTHER SERVICES ALSO. TH EREFORE, FOR THE DETAILED REASONS GIVEN EARLIER, WE HOLD THAT VAS PAYMENT WAS NOT ONLY FOR SUPPLY TOOL SERVICES BUT FOR OTHER SERVICES ALSO. 7.28 WE NOW COME TO THE INTERPRETATION OF THE PHRAS E ROYALTY AS PAYMENT FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL O R SCIENTIFIC EXPERIENCE. ITA NO.8831/M/10 A.Y:07-08 41 SUCH PHRASE HAS BEEN INTERPRETED IN THE OECD MODEL DTAA COMMENTARIES. AS DISCUSSED EARLIER, IT IS A SETTLED LEGAL POSITIO N THAT INTERNATIONALLY ACCEPTABLE MEANING PLACED ON IDENTICAL AND SIMILAR TERMS EMPLOYED IN VARIOUS DTAA COMMENTARIES HAVE TO BE FOLLOWED. THE LD. AUTHORISED REPRESENTATIVE HAS PLACED RELIANCE ON THE OECD MODE L AND IT HAS BEEN EXPLAINED IN OECD MODEL COMMENTARY, THAT ROYALTY PA YMENT RECEIVED AS CONSIDERATION FOR INFORMATION CONCERNING INDUSTRIAL , COMMERCIAL OR SCIENTIFIC EXPERIENCE ALLUDES TO THE CONCEPT OF KNOW-HOW. IN, OECD MODEL COMMENTARY (2005) THE TERM KNOW HOW WAS DEFINED A S UN-DIVULGED TECHNICAL INFORMATION WHETHER CAPABLE OF BEING PATE NTED OR NOT WHICH IS DERIVED FROM EXPERIENCE. THE WORD TECHNICAL CANN OT BE CONSIDERED ONLY IN RELATION TO SOME TECHNOLOGY. IT ALSO RELATES TO PR ACTICAL SKILL OF A PARTICULAR ACTIVITY AS PER THE OXFORD DICTIONARY. THEREFORE, IN RELATION TO ANY COMMERCIAL ACTIVITY, THE WORD TECHNICAL INFORMATION HAS TO BE UNDERSTOOD AS INFORMATION RELATING TO PRACTICAL SKILL OF THE SUBJ ECT. THIS MAY BE THE REASON THAT IN OECD COMMENTARY (2008) THE WORD TECHNICAL H AS BEEN DROPPED AND THE TERM KNOW-HOW HAS BEEN DEFINED AS UNDIVULGED INFORMATION OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC NATURE ARISING FROM PREVIOUS EXPERIENCE WHICH HAS PRACTICAL APPLICATION IN THE OPERATION OF AN ENTERPRISE. THUS, EVEN ADOPTING THE OECD MODEL INTERPRETATION, ANY INFORMA TION OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC NATURE ARISING FROM PAST E XPERIENCE WHICH IS A CONFIDENTIAL INFORMATION WHETHER PATENTED OR NOT HA S TO BE CONSIDERED AS KNOW-HOW. WE HAVE ALREADY POINTED OUT EARLIER THAT THE INFORMATION BEING PROVIDED BY THE ASSESSEE TO THE SIGHTHOLDERS IS CON FIDENTIAL AND PROTECTED ITA NO.8831/M/10 A.Y:07-08 42 INFORMATION WHICH IS BASED ON EXTENSIVE EXPERIENCE OF THE ASSESSEE IN SELLING OF DIAMONDS. THEREFORE, IT HAS TO BE CONSIDERED AS KNOW-HOW AND PAYMENT FOR SUCH INFORMATION HAS TO BE CONSIDERED AS ROYALT Y. 7.29 THE LD. AUTHORISED REPRESENTATIVE RAISED NO O BJECTION TO ADOPTING THE INTERPRETATION IN OECD COMMENTARY (200 8). HOWEVER, HE POINTED OUT THAT PARA-11.1 OF THE 2008 COMMENTARY P ROVIDED THAT RECIPIENT WAS REQUIRED TO USE KNOW-HOW ON HIS OWN AND GRANTOR WAS NOT REQUIRED TO PLAY ANY PART. FURTHER, PARA-11.2 PROVIDED THAT K NOW-HOW CONTRACTS WERE DIFFERENT FROM CONTRACT FOR SERVICE. IT HAS BEEN S UBMITTED THAT THE ASSESSEE IN THIS CASE WAS PROVIDING SERVICES THROUGH THE KAM AND IT WAS NOT ONLY A CASE OF INFORMATION BEING PROVIDED BUT ALSO CASE OF SERVICES BEING RENDERED. WE, HOWEVER, NOTE THAT PARA-7(C) OF VAS SERVICE GUI DE PLACED AT PAGE 104 OF THE PAPER BOOK CLEARLY MENTIONS THAT SIGHTHOLDERS ARE TO MAKE THEIR OWN INDEPENDENT EVALUATION OF ALL MARKETING AND BUSINES S INITIATIVES IN RESPECT OF VALUE ADDED SERVICES (VAS). THUS THE SIGHTHOLDERS WERE REQUIRED TO INDEPENDENTLY EVALUATE AND MAKE USE OF INFORMATION CONTAINED IN THE SERVICE GUIDE. THE KAM IS THE POINT OF CONTACT WITH THE SIG HTHOLDERS, WHICH PROVIDES ACCESS TO VALUE ADDED SERVICES AND DTC GLOBAL MARKE TING, WHICH IS ALSO AVAILABLE ON EXTRANET TO WHICH THE SIGHTHOLDERS HAD ACCESS. THE ROLE OF KAM WAS THUS TO PROVIDE VARIOUS INFORMATION AND CLARIFI CATIONS ON PERSONAL CONTACT AND TO PROVIDE ASSISTANCE IN SERVICE SELECTION TO T HE SIGHTHOLDERS SPECIFIC BUSINESS REQUIREMENT ON REQUEST BASIS. HE HAD NO RO LE IN APPLICATION OR UTILIZATION OF THE INFORMATION WHICH THE SIGHTHOLDE RS HAD TO PERFORM ON THEIR ITA NO.8831/M/10 A.Y:07-08 43 OWN. THE SERVICE PROVIDED BY THE KAM WAS OF THE NA TURE OF CONSULTANCY WHICH WAS ANCILLARY AND SUBSIDIARY TO THE APPLICATI ON OR ENJOYMENT OF THE INFORMATION OR THE BRANDS FOR WHICH THE PAYMENT WAS RECEIVED BY THE ASSESSEE. THE ASSISTANCE PROVIDED THROUGH WORKSHOP S AND PERSONAL MEETINGS AS PART OF GROWTH SERVICES WAS ALSO CONSUL TANCY SERVICE WHICH WAS ANCILLARY AND SUBSIDIARY TO MARKETING INFORMATION O R BRANDS PROVIDED BY THE ASSESSEE. THE PAYMENT FOR THE VARIOUS TYPES OF INF ORMATION AS DISCUSSED EARLIER WAS CLEARLY COVERED BY THE PROVISIONS OF PA RA 3(A) AS ROYALTY. THEREFORE, THE SERVICE PROVIDED BY KAM AND THROUGH WORKSHOPS AND PERSONAL MEETINGS HAS TO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES AS PER PARA 4(A) OF THE ARTICLE-13. THE DRP HAS ALSO CONSIDERED THE APPLICATION OF PARA 4(A) IN RELATION TO ROYALTY PAYMENT UNDER PARA-3(A) BUT OMI TTED TO CONSIDER THAT ROYALTY RECEIVED BY THE ASSESSEE WAS NOT ONLY FOR U SE OF NAKSHATRA BRAND OF JEWELLERY BUT ALSO FOR PROVIDING VARIOUS TYPES OF C OMMERCIAL INFORMATION ACQUIRED BY THE ASSESSEE BASED ON ITS EXPERIENCE. 7.30 THE LD. AR ALSO ARGUED THAT VARIOUS INFORMAT ION PROVIDED BY THE ASSESSEE WAS CURRENT INFORMATION OBTAINED WHILE PER FORMING SERVICES. THE INFORMATION OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC NATURE PAYMENT FOR WHICH IS TO BE CONSIDERED AS ROYALTY MUST ARISE FROM PREVIOU S EXPERIENCE AND SHOULD NOT BE NEW INFORMATION OBTAINED AS A RESULT OF PERF ORMING SERVICES AT THE REQUEST OF THE PAYER AS PER THE INTERPRETATION ADOP TED IN OECD COMMENTARY (2008). IN THIS CASE, THE VARIOUS TYPES OF INFORMA TION OF COMMERCIAL NATURE PROVIDED BY THE ASSESSEE AS POINTED OUT EARLIER WAS BASED ON ITS PAST EXPERIENCE. THIS HAS BEEN CLEARLY MENTIONED IN THE VAS SERVICE GUIDE. IT ITA NO.8831/M/10 A.Y:07-08 44 WAS NOT CURRENT INFORMATION OBTAINED AS A RESULT OF PERFORMING ANY SERVICES. THE VARIOUS JUDGMENTS RELIED UPON BY THE LD. AR WH ICH HAVE BEEN DISCUSSED IN PARA 7.10.2 EARLIER ARE THE CASES IN WHICH INFOR MATION HAD BEEN GATHERED DURING THE COURSE OF ACTUAL PERFORMING OF THE SERVI CES. FOR INSTANCE, IN THE CASE OF ANNAPHARM INC (SUPRA), THE ASSESSEE WAS CON DUCTING BIO EQUIVALENCE TESTS USING EXPERIENCE AND SKILL AND WAS PROVIDING FINAL REPORTS TO THE CLIENT. THE INFORMATION CONTAINED IN THE REPORTS WAS HELD A S CURRENT INFORMATION OBTAINED WHILE PERFORMING SERVICES AND, THEREFORE, COULD NOT BE CONSIDERED AS INFORMATION ARISING FROM PAST EXPERIENCE. IN CA SE OF REAL RESOURCING LIMITED (SUPRA), THE ASSESSEE WAS COLLECTING DATA A ND MAKING DATA BASE OF SUITABLE CANDIDATES FOR SUBMITTING THE SAME TO THE RECRUITMENT AGENCIES. THE INFORMATION OR DATA BASE WAS THEREFORE CONSIDERED A S INFORMATION GATHERED DURING THE COURSE OF ACTUAL RENDERING OF THE SERVIC E WHICH WAS TO PROVIDE SUITABLE CANDIDATES TO THE RECRUITMENT AGENCY. THE PAYMENT WAS THEREFORE CONSIDERED FOR RENDERING SERVICES AND NOT FOR INFOR MATION ACQUIRED BASED ON PAST EXPERIENCE. THE CASE OF THE ASSESSEE IS DIFFE RENT. IN THIS CASE THE VARIOUS TYPES OF INFORMATION BEING PROVIDED BY THE ASSESSEE TO THE SIGHTHOLDERS WAS NOT THE INFORMATION GATHERED BY TH E ASSESSEE DURING THE COURSE OF PERFORMING ANY SERVICES BUT THE INFORMATI ON OF COMMERCIAL NATURE ARISING FROM PAST EXPERIENCE. AS PER OECD COMMENTA RY (2008), PAYMENT FOR ANY INFORMATION WHICH IS UNDIVULGED AND CONFIDE NTIAL OF INDUSTRIAL, COMMERCIAL OR SCIENTIFIC NATURE ARISING FROM PREVIO US EXPERIENCE HAS TO BE CONSIDERED AS ROYALTY. THE SIGHT HOLDERS TO WHOM TH E INFORMATION WAS BEING PROVIDED HAD TO INDEPENDENTLY EVALUATE AND USE THE INFORMATION FOR THEIR OWN ITA NO.8831/M/10 A.Y:07-08 45 SPECIFIC BUSINESS REQUIREMENTS. THE ONLY SERVICE W HICH WAS BEING PROVIDED BY THE ASSESSEE WAS THROUGH THE KAM AND THE ASSISTA NCE PROVIDED THROUGH WORKSHOPS, PERSONAL MEETINGS AS PART OF GROWTH SERV ICES. SUCH SERVICES WERE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE INFORMATION OR BRANDS PROVIDED BY THE ASSESSEE AND HAVE TO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES UNDER PARA 4(A) OF ARTI CLE-13 AS HELD EARLIER. WE MAY POINT OUT HERE THAT IN CASE, AS ARGUED BY THE L D. AR, THE VARIOUS MARKETING INFORMATION PROVIDED BY THE ASSESSEE IS C ONSIDERED AS CURRENT INFORMATION OBTAINED DURING THE COURSE OF ACTUAL R ENDERING OF SERVICES, SUCH SERVICES WILL OBVIOUSLY BE MARKETING CONSULTANCY PR OVIDED BY THE ASSESSEE WHICH HAVE TO BE CONSIDERED AS ANCILLARY AND SUBSID IARY TO APPLICATION OR ENJOYMENT OF NAKSHATRA BRAND OR FOREVERMARK AS THE AIM OF THE ASSESSEE WAS TO PROMOTE SALE OF BRANDED DIAMOND PRODUCTS IN ORDER TO RAISE DEMAND FOR ROUGH DIAMONDS. THE NATURE OF PAYMENT IN THAT CASE WILL BE FTS AS PER PARA 4(A) OF ARTICLE-13. SUCH ARGUMENTS SUPPORT TH E FINDING OF DRP. THUS THE PAYMENT IN EITHER CASE WILL BE TAXABLE. 7.31 IN VIEW OF THE FORE-GOING DISCUSSION AND FOR THE REASONS GIVEN EARLIER, WE ARE OF THE VIEW THAT THE PAYMENT FOR VA S RECEIVED BY THE ASSESSEE HAS TO BE CONSIDERED PARTLY AS ROYALTY UND ER PARA 3(A) OF ARTICLE-13 BEING THE PAYMENT FOR VARIOUS TYPES OF INFORMATION OF COMMERCIAL NATURE ACQUIRED BASED ON EXPERIENCE PROVIDED TO SIGHTHOLDE RS AND PARTLY AS FTS UNDER PARA 4(A) BEING THE PAYMENT ATTRIBUTABLE TO T HE SERVICES RENDERED BY THE KAM OR THROUGH WORKSHOPS, ETC. WHICH WERE ANCI LLARY AND SUBSIDIARY TO APPLICATION OR ENJOYMENT OF THE INFORMATION, OR AS FTS BEING PAYMENT FOR ITA NO.8831/M/10 A.Y:07-08 46 MARKETING CONSULTANCY SERVICES WHICH WERE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF NAKSHATRA BRAND OR FORE VERMARK. THE AO WILL TAX THE PAYMENTS AS ROYALTY AND FTS ACCORDINGLY. AS TH E TAX RATE IS THE SAME FOR TAXATION OF ROYALTY AND FTS, ATTRIBUTION OF THE PAY MENT TOWARDS ROYALTY AND FTS IS NOT NECESSARY. 8. GROUND NO.6 IS REGARDING ADDITION OF RS.3,65,89 ,942/- ON ACCOUNT OF VAS DUE TO DISCREPANCY IN RELATION TO FOUR PARTIES. THE ASSESSEE HAD SHOWN VAS RECEIPTS OF RS .1,45,22,44,070/-. THE AO ON VERIFICATION WITH THE PARTIES FOUND THAT THE ASSESSEE HAD SHOWN LESS RECEIPTS TO THE TUNE OF RS.3,65,89,942/- IN RELATION TO FOUR SIGHTHOLDERS A S PER DETAILS GIVEN BELOW:- SR. NO. NAME OF SIGHTHOLDER PAYMENTS SHOWN BY ASSESSEE (USD) PAYMENT SHOWN BY SIGHTHOLDER (USD) DIFFERENCE (USD) 1 ASIAN STAR COMPANY LIMITED 1,316,915 1,384,096 67,181 2 RATILAL BECHARIAL & SONS 1,924,336 1,924,510 174 3 K.P. SANGHVI & SONS 1,663,156 2,319,290 656,133 4 JEWELEX 718,559 842,649 124,090 TOTAL 847,578 I.E. INR 36,589,942 (CONVERTED AT 43.17) THE AO ALSO OBSERVED THAT THE ASSESSEE HAD CLAIMED CREDIT OF TDS IN RESPECT OF VAS PAYMENTS WHICH COULD BE ALLOWED ONLY IF COR RESPONDING INCOME WAS SHOWN AS PER PROVISIONS OF SECTION 199. HE THEREFORE ADDED THE SUM OF RS.3,65,89,942/- ON ACCOUNT OF VAS INCOME WHICH WA S ASSESSED AT RS.1,48,88,34,012/-. THE ASSESSEE HAS DISPUTED THE DECISION OF THE AO BEFORE THE TRIBUNAL. ITA NO.8831/M/10 A.Y:07-08 47 8.1 BEFORE US, THE LD. AUTHORISED REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT IN TERMS OF AGREEMENT WITH SIGHTHOLD ERS, THE ASSESSEE WAS RAISING INVOICE TWICE IN A YEAR I.E. IN THE MONTHS OF JUNE AND DECEMBER OF THE RELEVANT YEAR. THE ASSESSEE WAS SHOWING INCOME AS ACCRUED ONLY WHEN THE INVOICE WAS RAISED. THUS THE INCOME FOR THE PERIOD JANUARY TO MARCH 2006 WAS SHOWN IN THE INCOME FOR THE FINANCIAL YEAR 2006 -07 WHEREAS THE PARTY MAY HAVE SHOWN THE INCOME FROM JANUARY TO MARCH 200 6 IN FINANCIAL YEAR 2005-06. SIMILAR WAS THE POSITION IN RELATION TO J ANUARY TO MARCH 2007 QUARTER. THE INCOME FOR THE PERIOD JULY 2006 TO DEC EMBER 2006 WAS SHOWN IN THE INCOME OF FINANCIAL YEAR 2006-07 AS INVOICE WAS RAISED IN DECEMBER 2006. THE SAME INCOME HAD BEEN SHOWN BY THE SIGHTH OLDERS ALSO BECAUSE THE SAID PERIOD FELL WITHIN THE SAME FINANCIAL YEAR IN BOTH THE CASES. THE DISCREPANCY WAS ONLY FOR THE MARCH QUARTER WHICH HA D BEEN SHOWN BY THE ASSESSEE IN THE NEXT FINANCIAL YEAR. IT WAS ALSO S UBMITTED THAT THE ASSESSEE HAD FILED RECONCILIATION WHICH IS PLACED AT PAGE-10 7 OF THE PAPER BOOK AND IS REPRODUCED BELOW :- SR. NO. NAME OF THE SIGHTHOLDERS VAS FEES INVOICED TO THE SIGHTHOLDERS AS PER ANNEXURE 1 OF OUR SUBMISSIONS DATED 19.11.2009 VAS FEES AS PER THE INFORMATION FURNISHED BY THE SIGHTHOLDERS U/S.133(6) OF THE ACT (COPIES PROVIDED TO DBUK) (USD) (USD) 1 ASIAN STAR COMPANY LIMITED 645,824.48 671,090.97 314,913.48 671,090.96 398,091.54 2 RATILAL BECHARIAL & SONS 1,924,335.56 1,924,510.00 3 K.P. SANGHVI & SONS 795,879.44 867,277.03 795,879.44 867,277.03 656,133.34 4 JEWELEX 718,559 842,649 5 BLUE STAR 1,103,737.00 1,070,346.78 ITA NO.8831/M/10 A.Y:07-08 48 8.2 THE LD. AR EXPLAINED THAT THE FIRST ITEM IN CAS E OF ASIAN STAR COMPANY LTD. OF USD 6,45,824.48 INCLUDED USD 3,30,911 SHOWN BY SIGHTHOLDERS IN THE EARLIER YEAR FOR JANUARY TO MARCH 2006 AND THER EFORE ONLY USD 3,14,913.48 WAS SHOWN BY THEM IN ASSESSMENT YEAR 20 07-08. THERE WAS NO DISCREPANCY IN THE SECOND ITEM BECAUSE THAT RELATED TO INVOICE RAISED IN DECEMBER 2006 AS THE PERIOD FELL IN THE SAME FINANC IAL YEAR FOR BOTH THE PARTIES. THE THIRD ITEM OF USD 3,98,091.54 WAS THE INCOME SHOWN BY SIGHTHOLDERS FOR THE PERIOD JANUARY TO MARCH 2007 W HICH HAD BEEN SHOWN BY THE ASSESSEE IN THE NEXT FINANCIAL YEAR WHICH WAS T HE REASON FOR THE DISCREPANCY. SIMILARLY, IN CASE OF K.P. SANGHVI & SONS, THE DISCREPANCY WAS ONLY IN RELATION TO THIRD ITEM WHICH WAS THE INCOME WHICH RELATED TO THE PERIOD JANUARY TO MARCH 2007 WHICH HAD BEEN SHOWN B Y THE ASSESSEE IN THE NEXT YEAR. SIMILAR WAS THE POSITION IN RELATION TO THE OTHER PARTIES. IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAD FOLLOWED THE SAME METHOD OF ACCOUNTING IN THE EARLIER YEARS WHICH HAD BEEN ACCE PTED BY THE DEPARTMENT. IT WAS ACCORDINGLY REQUESTED THAT THE SAME SYSTEM M AY BE ALLOWED THIS YEAR ALSO. THE LD. AR HOWEVER POINTED OUT THAT THE ASS ESSEE HAD CHANGED THE SYSTEM FROM ASSESSMENT YEAR 2008-09. THE LD. DEPAR TMENTAL REPRESENTATIVE ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF THE AO AND SUBMITTED THAT THE CLAIMS MADE BY THE ASSESSEE REQU IRED VERIFICATION. 8.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS.3,65,89,942/- T O THE VAS RECEIPTS ON ACCOUNT OF DISCREPANCIES WITH THE FOUR PARTIES AS M ENTIONED EARLIER WHICH HAD SHOWN MORE PAYMENTS THAN THE RECEIPTS DECLARED BY T HE ASSESSEE. THE ITA NO.8831/M/10 A.Y:07-08 49 DISCREPANCY HAD BEEN EXPLAINED BY THE ASSESSEE DUE TO DIFFERENCE IN METHOD OF ACCOUNTING FOLLOWED BY THE TWO PARTIES. IT HAS BEEN CLAIMED THAT THE ASSESSEE WAS RAISING INVOICES ONLY TWICE A YEAR I.E . IN THE MONTHS OF JUNE AND DECEMBER OF THE RELEVANT YEAR I.E. ON SIX MONTHLY B ASIS AND, THEREFORE, THE RECEIPTS OF LAST QUARTER OF THE PREVIOUS YEAR WERE ACCOUNTED IN THE CURRENT YEAR WHEREAS THE CONCERNED PARTY HAD SHOWN THE SAID INCOME IN THE EARLIER YEAR WHICH WAS THE REASON FOR DISCREPANCY. THERE W AS NO DISCREPANCY IN RESPECT OF INVOICES RAISED FOR THE PERIOD JULY TO D ECEMBER BECAUSE THE PERIOD FELL IN THE SAME FINANCIAL YEAR FOR BOTH THE PARTIE S. THE ASSESSEE HAD FILED A RECONCILIATION STATEMENT WHICH HAS BEEN PLACED AT P AGE-107 OF THE PAPER BOOK . IT HAS ALSO BEEN CLAIMED THAT THE ASSESSEE HAD BEEN FOLLOWING THE SAME METHOD REGULARLY IN THE EARLIER YEAR WHICH HAD BEEN ACCEPTED. THEREFORE, IN OUR VIEW, IT WILL NOT BE APPROPRIATE TO REJECT THE METHOD FOLLOWED BY THE ASSESSEE WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEAR. HOWEVER THE CLAIMS OF THE ASSESSEE IN RELATION TO THE DISCREPANCIES NEED VERIFICATION WITH RESPECT TO ORI GINAL DOCUMENTS SUCH AS INVOICES ETC. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER NECESSARY VERIFICATION IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUN ITY OF HEARING TO THE ASSESSEE. 9. IN THE GROUND NO.7, THE ASSESSEE HAS RAISED AN A LTERNATE PLEA THAT THE AO HAD ADDED USD 3,30,911 ON ACCOUNT OF VAS WHICH H AD ALREADY BEEN TAXED IN THE ASSESSMENT YEAR 2006-07. HOWEVER AT T HE TIME OF HEARING OF ITA NO.8831/M/10 A.Y:07-08 50 THE APPEAL THE LD. AR DID NOT PRESS THIS GROUND OF APPEAL AND, THEREFORE, THE GROUND IS DISMISSED AS NOT PRESSED. 10. THE DISPUTE RAISED IN GROUND NO.8 IS REGARDING THE RATE OF TAX OF 15% APPLIED BY THE AO TO THE VAS RECEIPTS WHICH HAD BEE N TREATED BY HIM AS FEES FOR TECHNICAL SERVICES. THE AO HAS APPLIED RATE OF 15% UNDER PROVISIONS OF ARTICLE-13 OF INDIA UK TAX TREATY. THE LD. AUTHORI SED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT CONCESSIONAL RATE OF 10% IS REQUIRED TO BE APPLIED UNDER THE PROVISIONS OF SUB CLAUSE (BB) OF CLAUSE(B ) OF SECTION 115A(1) AS THE VAS AGREEMENT HAD BEEN ENTERED INTO BY THE ASSE SSEE WITH THE SIGHTHOLDERS IN JULY 2005 WHICH WAS AFTER 1.6.2005 AS MENTIONED IN SUB CLAUSE (BB). THE ARGUMENTS OF THE ASSESSEE ARE SIM ILAR TO THE ARGUMENTS ADVANCED IN CASE OF ROYALTY DEALT WITH IN THE GROUN D NO.4 EARLIER. IN VIEW OF OUR DECISION IN PARA 6.2 OF THIS ORDER, CONCESSIONA L RATE OF 10% HAS TO BE APPLIED IF THE AGREEMENT HAD BEEN ENTERED AFTER 1.6 .2005. IT MAY HOWEVER BE NOTED THAT THE ASSESSEE HAS NOT FILED THE COPY O F VAS AGREEMENT. IT HAD FILED ONLY THE VAS SERVICE GUIDE WHICH CONTAINED TH E SUMMARY OF THE AGREEMENT. THE DATE OF AGREEMENT, THEREFORE, REQUIR ES VERIFICATION. THE AO WILL LEVY THE TAX AT APPROPRIATE RATE AFTER VERIFIC ATION OF THE CONDITIONS PRESCRIBED IN SECTION 115A(1). WE ORDER ACCORDINGL Y. 11. GROUND NO.9 IS REGARDING RATE OF TAX IN RELATIO N TO ROYALTY INCOME FOR USE OF FOREVERMARK. THE ASSESSEE IN TERMS OF AGREE MENT DATED 11.8.2005, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK HA D GRANTED LICENSE TO USE THE FOREVERMARK ON ELIGIBLE POLISHED DIAMONDS ON PA YMENT BASIS. THE ITA NO.8831/M/10 A.Y:07-08 51 PAYMENT HAS BEEN TREATED BY THE ASSESSEE AS ROYALTY AND OFFERED TO TAX. THE DISPUTE IN THIS GROUND IS ONLY IN RELATION TO R ATE OF TAX. THE AO APPLIED THE RATE OF 15% UNDER THE PROVISIONS OF ARTICLE-13 OF INDIA UK TAX TREATY. THE CLAIM OF THE ASSESSEE IS THAT CONCESSIONAL RATE OF 10% HAS TO BE APPLIED UNDER DOMESTIC LAW AS PER PROVISIONS OF SUB CLAUSE (AA) OF CLAUSE (B) OF SECTION 115A(1) AS AGREEMENT HAD BEEN ENTERED INTO AFTER 1.6.2005. THE ISSUE IS IDENTICAL TO THE ISSUE RAISED IN GROUND NO .4 REGARDING TAX RATE IN CASE OF MARKET CONTRIBUTION ASSESSED BY AO AS ROYALTY. FOR THE REASONS GIVEN VIDE PARA 6.2 OF THIS ORDER, WE HOLD THAT CONCESSIONAL R ATE OF 10% HAS TO BE APPLIED IN CASE OF THE ASSESSEE. ACCORDINGLY GROUND NO.9 IS ALLOWED IN FAVOUR OF THE ASSESSEE. 12. GROUND NO.10 IS REGARDING NOT GRANTING CREDIT F OR TAX WITHHELD ON THE ADDITION OF VAS RECEIPTS IN ACCORDANCE WITH PROVISI ONS OF SECTION 199. THE AO HAD MADE CERTAIN ADDITIONS AS MENTIONED IN THE GROUND NO.6 BUT HAD NOT GIVEN CREDIT OF TDS IN RELATION TO THOSE ADDITIONS. IT WAS SUBMITTED BY THE LD. AR THAT SINCE AMOUNTS HAD BEEN ADDED, CREDIT FOR T AXES DEDUCTED SHOULD BE GIVEN. WE HAVE ALREADY SET ASIDE THE ISSUE OF ADDI TION RAISED IN GROUND NO.6 TO THE FILE OF THE AO. IN CASE IN THE FRESH ASSESS MENT, IT IS FOUND THAT THE AMOUNT HAS TO BE ADDED THIS YEAR, AO WILL GIVE CRED IT TO TDS IN RELATION TO THOSE ADDITIONS. WE ORDER ACCORDINGLY. 13. GROUND NO.11 IS REGARDING CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. THE INTEREST HAS BEEN LEVIED FOR SHORTFAL L IN PAYMENT OF ADVANCE TAX. THE LD. A.R FOR THE ASSESSEE ARGUED THAT ADDITIONS HAD BEEN MADE ON ACCOUNT ITA NO.8831/M/10 A.Y:07-08 52 OF ROYALTY AND FTS IN RESPECT OF WHICH TAX WAS DEDU CTIBLE AT SOURCE UNDER THE PROVISIONS OF LAW AND THEREFORE, EVEN THOUGH NO TAX WAS DEDUCTED, SUCH INCOME CANNOT BE THE BASIS FOR LEVY OF INTEREST AS TAX DEDUCTIBLE ON SUCH INCOME HAS TO BE REDUCED FROM THE ADVANCE TAX PAYAB LE. LD. DR ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHOR ITIES BELOW. 13.1 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING LEVY OF INTEREST FOR SHORTFALL IN PAYMENT OF ADVANCE TAX. THE ADVANCE TAX PAYABLE UNDER SECTION 208 IS REQUIR ED TO BE COMPUTED UNDER SECTION 209 AND AS PER SECTION 209(1)(D), THE TAX P AYABLE BY THE ASSESSEE HAS TO BE REDUCED BY THE AMOUNT OF TAX DEDUCTIBLE O R COLLECTIBLE AT SOURCE. THEREFORE, ONCE THE TAX IS DEDUCTIBLE, THE SAME HA S TO BE REDUCED FROM TAX EVEN IF THE TAX HAD NOT BEEN ACTUALLY DEDUCTED. IN THIS CASE, ADDITIONS HAD BEEN MADE BY AO ON ACCOUNT OF ROYALTY AND FTS WHICH ARE SUBJECT TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE INCOME TAX ACT AND THEREFORE, THE TAX DEDUCTIBLE IN RELATION TO THE S AID INCOME HAS TO BE REDUCED FROM THE TAX PAYABLE AS ADVANCE TAX EVEN IF NO TAX HAD BEEN ACTUALLY DEDUCTED. THIS VIEW IS SUPPORTED BY THE DECISION O F THE MUMBAI BENCH OF TRIBUNAL IN CASE OF DIT (INTL. TAXATION) VS. NGC NE T WORK ASIA LLC (313 ITR 187) AND IN CASE OF JT. DIRECTOR OF BOOZ ALLEN & HAM ILTON INC.(107 ITD 313). RESPECTFULLY FOLLOWING THE SAID DECISIONS WE HOLD T HAT WHILE COMPUTING ADVANCE TAX PAYABLE FOR THE PURPOSE OF COMPUTATION OF INTEREST UNDER SECTION 234B TAX DEDUCTIBLE AT SOURCE IN RELATION TO ROYALT Y AND FTS WILL HAVE TO BE REDUCED. THE AO IS DIRECTED TO ACT ACCORDINGLY. ITA NO.8831/M/10 A.Y:07-08 53 14. GROUND NO.12 AND 13 ARE REGARDING INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271A AND 271B. THE LD. AR FOR THE AS SESSEE DID NOT PRESS THESE GROUNDS AS THE SAME WERE NOT MAINTAINABLE. T HESE GROUNDS ARE THEREFORE DISMISSED AS NOT PRESSED. 20. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2011. SD/- SD/- (V.D. RAO) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.11.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Development
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1:1 Consultation on Business Valuations
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1:1 Consultation on Tax Litigation
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Executive Hiring Offer Letter
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Initial LLP Agreement
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