TMI Blog2016 (3) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law and also keeping in view the direction given by the Tribunal hereinabove in the appeal for the assessment year 2009-10. Needless to say, the adequate and proper opportunity of hearing will be granted by the AO to the assessee company in accordance with the principles of natural justice in accordance with law .We order accordingly. - I .T.A. No. 1464/Mum/2015 - - - Dated:- 4-3-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Kanchun Kaushal and Shri Dhanesh Bafna For The Revenue : Shri Jabir S. Chouhan (CITDR) ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee company, being ITA No. 1464/Mum/2015, is against the assessment order dated 28.01.2015 passed by learned assessing officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ) read with Section 144C(13) of the Act , passed in pursuance of directions dated 22.12.2014 u/s 144C(5) of the Act passed by the Disputes Resolution Panel-IV, Mumbai (Hereinafter called the DRP ), for the assessment year 2011-12. 2. The ground raised by the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AO erred in levying interest under section 234B of the Act amounting to ₹ 5,83,38,488 without appreciating that the entire income of the Appellant is subject to deduction of tax at source and hence, the question of advance tax does not arise. The Appellant humbly prays that the Learned AO be directed to delete the interest levied under section 2348 of the Act. 3. The brief facts of the case are that the assessee is a company incorporated in Hong Kong providing service/facilities for the processing of data through computer software. The assessee company is a non-resident in India. It has declared nil income in the return of income filed with the Revenue and claimed refund amounting to ₹ 8,73,61,947/- being the entire amount of TDS. 4. It is submitted by the assessee company that the assessee company had entered into a contract for providing data processing support service to Standard Chartered Bank, India, who are in the business of banking in India. It is submitted by the assessee company that the assessee company entered into a contract/agreement known as Cocteau agreement dated 12.02.2004 whereby data relating to branch transaction was fed by Standar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of income being accrued in India and assessable in the hands of the assessee company has to be considered with respect to section 9(1)(vi) and 9(1)(vii) of the Act read with other provisions of the Act as applicable. It was submitted that the assessee company is using the information/infrastructure owned by it to provide facility/services to SCB-India and the same services are also provided to other clients apart from SCB-India and the assessee company is merely doing data processing work through computer software on behalf of the SCB-India. It was submitted that the assessee company had agreement with Standard Chartered Bank for 68 countries for data processing of the Standard Chartered Bank. It was submitted by the assessee company that the payment made by the SCB-India cannot be deemed to be royalty or fee for technical services as per provisions of the Act. It was submitted that the processing of data is done in Hong Kong and not in India. Our attention was drawn to the invoices raised and the payment being made correspondingly towards the same. It was contended that no technical services were rendered whereas only processing of data was done and that too at Hongkong and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service charges paid by the SCB-India to the assessee company has to be determined in accordance with the Act. The ld. DR submitted that the assessee company is not merely processing the data of SCB . The assessee company had entered into a contract for providing data processing support service to Standard Chartered Bank in India. The staff and key personnel of the assessee company are compulsorily appointed with the consent/approval of the Standard Chartered bank and the assessee company has no authority to appoint key personnel without the approval of the SCB. The SCB has also access and control over the infrastructure and software of the assessee company . There is a direct control over the infrastructure and software of the assessee company by SCB The ld. D.R. relied upon the following decisions:- 1. (1996)222 ITR 354(Ker. HC) in the case of Cochin Refineries Limited v. CIT 2. (2009)309 ITR 244(Uttarakhand HC) in the case of CIT v. ONGC Limited 3. (2007)289 ITR 355(AAR) in Re. Cargo Community Network Private Limited 4. (2011) 340 ITR 333(Bom. HC) in Kotak Securities Limited The Ld. DR submitted that the provisions of the Act is applicable as there is no DTAA a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 dealt with the similar matter and the Mumbai-Tribunal held as under:- Instant appeal is filed against the order of DRP under section 144C(5), dated 07.09.2012, wherein, the following grounds have been taken: The under mentioned grounds of appeal are without prejudice to each other. 1.1 On the facts and in the circumstances of the case and in law, the Learned Assistant Director of Income-tax (International Taxation) 1(1), Mumbai ( the Learned AO ) and the Dispute Resolution Panel ( the DRP ) erred in holding the sum of ₹ 21,39,71,104/- as Royalty and Fees for Technical Services under Section 9(1)(vi) and 9(1)(vii) of the Income-tax Act, 1961 ( the Act ). In doing so, the Learned AO and the DRP disregarded the Contract for Provision of Computing Services entered into between the Appellant and Standard Chartered Bank, India ( SCB India ) for the services rendered by the Appellant to SCB India. The Appellant humbly prays that the aforesaid receipts should not be taxed in India and the Learned AO be directed accordingly. 1.2 Without prejudice to above Ground no. 1.1, the Learned AO and the DRP erred in denying the benefit of the rate prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany incorporated in Hongkong and providing services and facilities for processing data through computer software. The assessee had entered into a contract for providing data processing support service to Standard Chartered Bank, India, who are in the business of banking in India. The assessee entered into a contract/agreement dated 07.08.2005, whereby new data relating to branch transaction was fed by SCB from their workstation and transmitted to the assessee data base centre in Hongkong. The application software was neither designed nor acquired by the assessee. In fact, hardware, network and software used by SCB at their workstations were owned by SCB itself. The assessee did not have any role in operation and transmission of data from SCB workstations in India to the assessee in Hongkong. Once the data was received by the assessee from SCB was looked into, output data was transmitted back to SCB, using the same software, as used and provided by SCB, after retaining the back office data. 3. In the entirety, on to and fro of data transmission, the assessee had no right to access the data of SCB India. It was further submitted that neither SCB had any right to exploit the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set management for SCB and to provide a procedural manual for SCB personnel in order to ensure that all technological developments and changes are documented and properly maintained. The entire documentation relating to the performance of the services was to be maintained in an online library which is directly accessible by the SCB group entities. The Cocteau contract also provides for creation of the assessee s data centre at Hongkong, as per the requirements and standards laid down by SCB. New infrastructure and operating systems were required to be set up at these centers and it is specifically provided that operational and remote technical support shall be delivered via a combination of services from Atos Hongkong and other Atos entities. 3.3 In view of the above facts, the AO held that the assessee has provided SCB India with the use of its equipments and processes and has also rendered services in connection with the same. The procedure manual complied by Atos for the benefit of SCB India was held to be information for which the right to use had been provided to SCB. The AO held that in these circumstances, the charges paid by the assessee amounted to royalty as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible to the SCB India personnel who could print and copy any of the materials stored in the library. This documentation evidently related to critical processes that are involved in the efficient functioning of the bank. The documentation was also in the nature of information which is accessible and always available for use by the SCB India personnel. We have also noted that Explanation 5 inserted by the Finance Act, 2012 with retrospective effect from 1.4.1976 provides that royalty includes consideration in respect of any information, whether or not the possession or control of such information is with the payer, or is used directly by the payer, or is located in India. Further, Explanation 6 similarly inserted with retrospective effect clarifies that royalty includes consideration for the use of any process, whether or not such process is secret. These clarifications were not before the Hon ble ITAT when they considered the issue in the assessee s own case in AY 2004-05. Moreover, the nature of services rendered has also undergone a change with a Cocteau contract entered into in February, 2004. In the light of the above facts and the clarifications made by the Finance Act, 2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective amendment. The orders passed in the assessee s case by the AO, DRP and ITAT are prior to the aforementioned amendment in the Statute. Therefore, we are of the opinion that it would serve the interest of justice if all these appeal except ITA No. 6888/Mum/2011 are restored back to the file of the AO with a direction to re-adjudicate the issues in accordance with law after giving further opportunity to the assessee and placing all the material required for adjudication of the issues raised in the present appeals. After giving opportunity the AO will readjudicate all the issues raised in the present appeals as per provisions of law. 7.1 Similar is the position in respect of Ground No. 1.3 1.4 and additional ground No. 1.5 in which the assessee has raised grievances regarding rates of tax to be applied on the above receipts. All these issues on merits are to be readjudicated as per law in ITA No. 6762/Mum/2009 219/Mum/2010 being cross appeals in respect of assessment year 2006-07 against original assessment. 7.2 The other issues raised in ITA No. 6888/Mum/2011 regarding leviability of interest under section 234B which was admitted to be consequential and with a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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