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2019 (8) TMI 1468 - ITAT PUNEIncome accrued in India - BPO MSA and the Addendum that KPIT GBS was to render BPO services to CUMMINS (Assessee) - employees of the assessee company were actively involved in the process of providing BPO services by KPIT GBS - service PE of the assessee as established in India or not? - Indo-USA DTAA - HELD THAT:- What is under consideration is the Transaction no. 1, being the receipt by the assessee of ₹ 20.18 crore from KPIT-GBS and not the payment of ₹ 3.65 crore to KPIT-GBS for availing the BPO Services. The DRP inadvertently considered BPO MSA and the Addendum under which the assessee paid for availing BPO services, for inferring the existence of service PE of the assessee in India qua the transaction of receipt for granting Right to render BPO Services. A service PE is ordinarily constituted when the foreign enterprise renders services in India to its customers and such services are rendered through its own employees or other personnel. In the present case, there are no services whatsoever, which have been provided by the assessee in India through its employees or other personnel for which a sum of ₹ 20.18 crore was received. It is, therefore, amply clear that no service PE of the assessee is established in India qua the transaction under consideration of receipt of ₹ 20.18 crore from KPIT-GBS. Even though the receipt of ₹ 20.18 crore is in the nature of a revenue receipt and otherwise chargeable to tax, but the same cannot be so included u/s 9(1)(i) of the Act in the facts and circumstances of the instant case for the absence of any business operations carried out in India or the existence of any PE of the assessee in India under the DTAA. We, therefore, overturn the impugned order on this score and direct to delete the addition Royalty income or fees for technical services - assessee’s claim of the same being not chargeable to tax - assessee has filed an application seeking withdrawal of Form no. 8 filed u/s 158A - HELD THAT:- The assessee provided off-the-shelf software and related support services to its associates in India. The said amount was claimed as exempt being reimbursement of expenses. The AO as well as the DRP decided this issue against the assessee holding the same as Royalty chargeable to tax in India u/s 9(1)(vi) of the Act. The Tribunal, in the later order [2019 (7) TMI 1592 - ITAT PUNE] has decided this issue in favour of the assessee by holding that the same is not in the nature of Royalty and hence not chargeable to tax. A copy of such order has been placed on record. Respectfully following the precedent and without going further deep into the issue, we determine the grounds on this score in favour of the assessee.
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