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2019 (8) TMI 1797 - AT - Income TaxIncome accrued or deemed to accrue in India - Treating the payment towards training programme as FTS - India- Netherland tax treaty - HELD THAT:- As the assessee was not the owner of any brand or trademark for which any royalty would have been received by it under Article 12(4) of the India-Netherland tax treaty, hence the services provided to the Indian Hotels were in the ordinary course of its business, and could not be brought within the sweep of “ancillary and subsidiary” services as provided in Article 12(5)(a) of the India- Netherland tax treaty. We thus, are of a strong conviction that the CIT(A) loosing sight of the fact that as the assessee was not in receipt of any royalty as per Article 12(4) of the India-Netherland tax treaty, hence had failed to appreciate that the training services rendered by it could not have been held to be “ancillary and subsidiary” services under Article 12(5)(a). We thus, are of the view that the consideration received by the assessee for providing training services to the Indian Hotels could not be held as FTS under Article 12(5)(a) of the India- Netherland tax treaty. We are of the considered view that in terms of our aforesaid observations, as neither the training services rendered by the assessee to the Indian Hotels could be held to be technical services, nor the same could have been characterised as “ancillary and subsidiary” services as per Article 12(5)(a), hence the consideration received by the assessee for rendering the training services could not be held as FTS in its hands. As decided in own case [2018 (6) TMI 605 - ITAT MUMBAI] we are of the view that the payments received programme cannot be treated as FTS as clearly held by the Tribunal, hence, the Ground No.1 2 & 7 of the appeal are allowed in favour of assessee. Treating the payment for providing access to computer system as ‘Royalty’ in term of the Act and India-Netherlands tax treaty - AO concluded that for providing the right to use the system developed by assessee or its affiliates specifically for the Indian Hotels and also providing technical services for the maintenance and use of such system, which is ancillary and subsidiary to the application or enjoyment of the right to use the computer reservation system, which is covered under the provisions of Article 12(4) read with 12(5) (a) of India –Netherlands Tax Treaty - HELD THAT:- While using computer software, which is copyrighted article and there is no transfer of copyright or use of copyright itself particularly when there is no transfer of a patent, invention, model, design, secret formula or process or trade mark or similar property or imparting of any information concerning thereof. As decided in ow case for AY 2009-10 [2018 (6) TMI 605 - ITAT MUMBAI] as the access to CRS, Property Management System and Other Systems provided to the Indian Hotels by the assessee were common facilities provided to the members of the Marriott chain of hotels across the world by the assessee, and were not tailor made services to suit their specific requirements, thus the said facility could not be construed as ‘technical services’ -as providing of access to CRS, Property Management Services and Other services could neither be held to be technical services, nor the same in terms of our aforesaid observations could have been characterised as “ancillary and subsidiary” services under Article 12(5)(a), hence the consideration received by the assessee for rendering the said services/facility could not be held as FTS in its hands. We thus, set aside the order of the CIT(A) holding that the consideration received by the assessee for providing of access to CRS, Property Management Services and Other Systems was chargeable as FTS in the hands of the assessee. - Decided in favour of assessee. Addition of surcharge on education, secondary & higher education cess - assessee submits that India- Netherlands tax treaty prescribes a cap of 10% on rate of tax, which would prevail over provision of domestic income tax and thus, rate of tax cannot be enhanced to include surcharge or education cess or secondary and higher education cess - HELD THAT:- This ground of appeal is also covered by the decision of Tribunal in assessee’s own case for Assessment Year 2009-10 [2018 (6) TMI 605 - ITAT MUMBAI] the of rate of tax provided in the tax treaty cannot be enhanced by including surcharge and education cess separately, is covered by an order of a coordinate bench of the Tribunal in the case of Capgemini SA [2016 (7) TMI 712 - ITAT MUMBAI] We thus, in terms of our aforesaid observations direct the A.O not to enhance the rate of tax provided in the tax treaty by including surcharge and education cess separately - Decided in favour of assessee.
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