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2024 (3) TMI 530 - ITAT AHMEDABADTDS u/s 195 - TDS on overseas payment - Annual Payment made to the international boards through affiliation with IBO, Cambridge etc. under the head authorization fee, fee for enrolment, license fee, registration fee - assessee in default u/s 201/201(1A) for non-deduction of tax at source - assessee submitted that it is not using any trademark of the overseas universities, as none of the Universities are registered in India. The payment made to IBO and to Cambridge towards annual fees is not for use of trademark and assessee acts as a facilitator between the student and international education institutions like IBO and Cambridge. HELD THAT:- It is important to analyze the basis of making payment by the assessee to overseas educational institutions and the basis on which invoice has been raised by overseas educational institutions for lump sum / annual payments, in absence of which the nature of payment cannot be ascertained, much less came to the conclusion that payments do not qualify as “royalty”. As observed that in the instant facts, no royalty payments have been made by the assessee for the use of brand name of Cambridge/IBO for the purpose of attracting students to enroll for the courses offered by overseas International educational Institutions. In our view, the students are attracted to enroll for the courses offered by overseas educational institutions on the basis of reputation carried by these overseas institutions and therefore, it cannot simply be said that the use of brand name of the educational institutions is only “incidental” to the payments made by the assessee to overseas education institutions and such payment is only for authorization granted by the overseas institutions to attract students to enroll with the courses offered by them via the medium of the assessee. Also the overseas education institutions have applied for registration under Trademarks Act, 1999, which is ostensibly with a view to ensure that their brand name/trademark is not exploited by any other entity/person in India and with a view to protect their trademark / brand name in India. It is important for the Tax Authorities to analyze the basis of payment made by the assessee to the overseas institutions on an annual/lump sum basis. We also observe that in the invoice which has been issued by the overseas education institution on the assessee, a certain discount has also been offered to the assessee. However, no explanation was offered to us regarding the basis for raising the invoice on the assessee and also on what basis discount has been offered to the assessee by the overseas education institutions as such annual payment. We are unable to accept that even without understanding / analyzing the basis of raising invoice by the overseas International educational Institutions on the assessee, it can be concluded that the nature of payments do not qualify as royalty under the Act read with the DTAA. The argument put forth by assessee that as per the agreement, the payments do not qualify for use of trademarks also cannot be accepted for the simple reason that the students are attracted to enroll for the courses offered by overseas educational institutions based on the reputation they carry. Accordingly, we are unable to accept the argument that even without analyzing the basis of invoice raised by such overseas educational institutions on the assessee, one can come to the conclusion that these payments do not qualify as a “royalty” payments. In absence of clarity on the basis of invoices which have been raised on the assessee, it would only be an academic exercise to discuss the judicial precedents cited by the Ld. Counsel for the assessee - matter is being restored to the file of AO to understand the basis on which lump sum fee has been charged by the overseas entities from the assessee and also the basis for allowing/affording discount to the assessee. In our view, unless and until the nature and the basis of raising invoices by the overseas education institutions is not clear to the tax authorities, it is not possible to come to the conclusion that no payments were made for use of trade name/brand of the national education institutions and the payment is only for authorizing the assessee to act as a mediator between these students and the educational institutions outside of India. The issue is restored to the file of Assessing Officer with the aforesaid and directions.
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