TMI Blog2014 (11) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee. - I.T.A. No.1901 to 1903/Mum/2010 - - - Dated:- 8-8-2014 - SHRI B.R.BASKARAN AND AMIT SHUKLA, JJ. For The Appellant : Shri Madhur Agarwal For The Respondent : Smt. Neeraja Pradhan ORDER Per B.R.BASKARAN, Accountant Member: All the three appeals filed by the assessee are directed against the three separate orders dated 11.1.2010 passed by Ld CIT(A)-10, Mumbai for the assessment years 2004-05, 2005-06 and 2007-08. Since the issues urged in these appeals are identical in nature, these appeals were heard together and are being disposed of by this common order, for the sake of convenience. 2. In all the three years, the assessee is challenging the decision of Ld CIT(A) in holding that the consideration received by the assessee, which are in the nature of reimbursement of expenses along with a mark up of 10%, is taxable in India both as royalty and Fee for included services in equal proportion. 3. The facts relating to the case are stated in brief. The assessee herein is a tax resident of USA. It belongs to AC Nielson Group, which is one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Indian entities cited above are not taxable under the Indian Income tax Act. In this connection, it appended following notes in the return of Income filed by it : Notes 1) The assessee has entered into a General Service Agreement with ACNeilsen Research Services Pvt. Ltd. and ACNeilsen Org.-Marg Pvt. Ltd. for rendering of services prescribed in such agreement. The assessee has received a sum of ₹ 77,679,163/- towards reimbursement of expenses which is inclusive of a Mark-up of 10%. The assessee is a tax resident of USA and thereby the provisions of Indo- USA Tax Treaty would be applicable. The assessee also holds Tax Residency Certificate issued by the Tax Authorities of USA. The reimbursement of expenses received by the assessee cannot be termed as Royalties or fees for included services under Article 12 of the Indo USA. The reimbursement of expenses received by the Assessee cannot be termed as Royalties or fees for included services under Article 12 of the Indo-USA Tax Treaty. Since reimbursement of expenses is not covered by Article 12 of the Indo USA Tax Treaty, Article 7 dealing with business income merits examination. However, the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will provide hard copy or soft copy for a consideration Accordingly, the AO assessed the impugned receipts as Royalty in assessment year 2004-05. 3.3 However, in assessment years 2005-06 and 2006-07, the AO took the view that the consideration received by the assessee is both in the nature of royalty and Fees for included services within the meaning of Article 12 of the DTAA entered between India and USA. Accordingly, he apportioned the consideration in equal proportion between royalty and fee for included services and accordingly assessed the same in the hands of the assessee herein. 4. In the appeal filed, the Ld CIT(A) affirmed the view taken by the AO in AY 2005-06 and 2006-07 that the consideration received by the assessee is both in the nature of Royalty and Fees for included services . Accordingly, the Ld CIT(A) modified the order passed by AO for AY 2004-05 and directed him to assess the consideration both as Royalty and Fees for included services in equal proportion. 5. Aggrieved, the assessee has filed these three appeals before us. 6. We have heard the rival contentions and perused the record. From the arguments advanced by both the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Air Transport) from activities described in paragraph 2( c ) or 3 of Article 3 1.3.4 It is seen that the definition of royalty includes literary work. This word is defined under section 2(o) of Copy Right Act as literary work includes computer programmes, tables and compilations including computer databases ........ copyright means the exclusive right subject to the provisions of this Act, to do or authorize the doing of any of the following acts in respect of a work or any substantial part thereof....... The above receipts by the appellant from the Indian companies are towards rendering of services can be termed towards use of copyright of a literary, artistic, or a scientific work. The appellant company has provided information of a copyright protected work to the Indian companies to issue copies of the work not being copies already in circulation, and computer programme. It cannot therefore ruled out that the appellant company is providing secret information in market research data which are being used by the Indian therefore the payment received is towards Information concerning industrial, commercial or scientific experience, which would fall under Article 12(3) (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur attention to pages 31 to 35 of the compilation and also relied on the pages 7 to 12 of CIT(A) Order. The receipts cannot be considered as a payment for information concerning industrial, commercial or scientific experiences' so as to come within the ambit of the term Royalty. A payment can be regarded as for information concerning industrial, commercial or scientific experiences' if it inter alia fulfills the following conditions: The information must be in the nature of know how. The information must be existing information and should not be new information obtained as a result of performing services. The contract should not be in the nature of rendering or performance of services. Very little is required to be done to supply know how. In the case of the Appellant as none of the aforesaid conditions are satisfied, there is no question of the receipts by the Appellant be regarded payment for information concerning industrial, commercial or scientific experiences.' Therefore, the payments received by the Appellant are not in the nature of royalty. Reliance is placed on Para 11 of the OECD Commentary on Article 12. Reliance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The expressions Royalty and Fees for included services have been given distinct meaning in the Indo US treaty. We have already noticed that the tax authorities were not able to come to a conclusion as to whether the consideration received by the assessee company would fall within the meaning of Royalty or Fees for included services , even though there are plethora of case laws explaining both the terms. Hence, from the foregoing discussions, we are of the view that the tax authorities have not examined the impugned issue in proper perspective, i.e., the matter has not been examined in the context of Indo-US treaty by considering the meaning of various terms used therein. As stated earlier, the meaning to be ascribed to various terms used in the treaty has been the bone of contention in various case laws and we notice that the tax authorities have not considered the applicable case laws. Under these circumstances, we are of the view that the impugned matter requires fresh examination at the end of the assessing officer. When we expressed our view to both the parties, they also accepted the fact that the matter has not been examined by the tax authorities in proper persp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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