TMI Blog2014 (11) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 115A of the Act. In doing so, the Learned AO and the DRP held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing 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 center 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 data independently nor there was any user rights, procured by the assessee to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsure 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 in section 9(1)(vi). It was further held the assessee was also provided advanced technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, we are of the view that the payments made by the Standard Chartered Bank to the assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forementioned 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 rider that assessee has liberty to show before AO why it is not liable for levy of interest under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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