| The Tax Publishers2019 TaxPub(DT) 7434 (Mum-Trib) INCOME TAX ACT, 1961
Section 9(1)(vi) Article 12(4)
Payment made by the assessee was only in respect of standard services provided by AT & T and Spinet, which cannot be held to be 'Royalty' as facility was a standard facility which was used by other telecom companies as well the action of the AO, which was upheld by DRP, in treating the receipt as fee for FIS/FTS or for the Royalty was therefore, not justified.
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Income - Deemed to accrue or arise in India - Under section 9(1)(vi)/9(1)(vii) - Taxability of fees for IPLC as royalty or fees for technical services/fees for included services (FTS/FIS)
Assessee was a company incorporated and tax resident of United States of America (USA), and engaged in the business of managing, providing and developing billing information and software. In the return of income the assessee had shown receipt on account of data access/link charges which was also known as international private leased circuits (IPLC) charges from its subsidiary in India, i.e., Convergys Information Management India Private Limited (CIM). Assessee claimed that all receipts earned by assessee were not taxable in India in term of India US Double taxation Avoidance Agreement (India USA tax treaty) as the income neither qualified as 'Royalty' nor fees for technical services/fees for included services (FTS/FIS). AO treated the aforesaid receipts as 'Royalty'/fees for technical services (FTS)/fee for included services (FIS) under the income tax Act as well as under the India US tax treaty and taxed the said receipts in the hand of assessee as taxable in India. DRP upheld the action of AO.Held: . In the present set of facts, CMG/CIS do not have any control or possession over the equipment, i.e., the network facilities were under the control of and maintained and operated by the service providers. CMG/CIS merely avail a service. The link charges do not therefore, qualify as 'Equipment Royalty' in terms of Article 12 of the DTAA and hence were not taxable in India. Payment made by the assessee was only in respect of standard services provided by AT&T and Spinet, which cannot be held to be 'Royalty'. Only those payment, when it made for scientific work, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, which is absolutely missing in the present case. The payment in the present case was not for a payment for a scientific work nor there any patent, trademark, design, plan or secret formula or process for which the payment made. The service was connectivity to the telecom operators in the call end jurisdiction. Facility was a standard facility which was used by other telecom companies as well. Therefore, the action of the AO, which was upheld by DRP, in treating the receipt as fee for FIS/FTS or for the Royalty was, therefore, not justified.
Relied:UOI v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) : 2003 TaxPub(DT) 1429 (SC), DIT v. Rio Tinto Technical Services (2012) 340 ITR 507 (Delhi) : 2012 TaxPub(DT) 258 (Del-HC), Convergys Customer Management Group Inc. [ITA. No. 1443/Del/2012 & 5243/Del/2011] : 2014 TaxPub(DT) 2064 (Del-Trib), Geo Connect Ltd. v. Dy. CIT (2017) 54 ITR 481 (Del-Trib) : 2017 TaxPub(DT) 480 (Del-Trib) and Cable & Wireless Network India (P) Ltd. (2009) 315 ITR 72 (AAR) : 2009 TaxPub(DT) 1846 (AAR) and Inerroute Communication Ltd. v. Dy. CIT (2016) 179 TTJ 355 (Mum-Trib) : 2016 TaxPub(DT) 1841 (Mum-Trib), New Sky Satellite BV [ITA. No. 473/Mumbai/2012) : 2016 TaxPub(DT) 1115 (Del-HC), AP Moller Maersk (2015) 374 ITR 497 (Bom-HC) : 2015 TaxPub(DT) 2173 (Bom-HC) and B4U International Holding [ITA. No. 3326/Mumbai/2006) : 2012 TaxPub(DT) 2494 (Mum-Trib). Distinguished:Perfetti Van Melle Holding BV reported vide (2012) 342 ITR 200 (AAR) : 2012 TaxPub(DT) 727 (AAR) and Raymond's Ltd. v. Dy. CIT (2003) 86 ITD 791 (Mum-Trib) : 2003 TaxPub(DT) 237 (Mum-Trib).
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