9911796707
TMI Blog2018 (7) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 12,44,072/-. During the FY. 2005-06, assessee entered into an agreement with M/s. Balanced Scorecard Collaborative Inc. of USA for the purpose of its consultancy business and accordingly paid a sum of Rs. 12,44,072/- as fee. AO held that the fee paid as royalty within the meaning of clause (vi)(b) of Sub-section (1) of Section 9 of the Act and disallowed the amount of Rs. 12,44,072/- u/s. 40(a)(ia) of the Act on the ground that no TDS has not been deducted. 3. Before the Ld.CIT(A) it was contended that the amount paid by the assessee to M/s. Balanced Scorecard Collaborative Inc. USA is an affiliate fee. The same is evident from second clause-Annual Fee under the Key Provisions. This is reproduced from the agreement between the assessee and M/s. Balanced Scorecard Collaborative Inc. "Annual Fee. Within (14) days of the signing of this Agreement, and upon each anniversary of such signing, the Affiliate shall pay BSCol an affiliate fee of $US 35,000. Upon completion of the first year of the Agreement, BSCol reserves the right to increase the annual fee based on changing economic conditions or changes in the level of involvement needed to support the relationship. Notification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8. It is clear from the above explanations that the payment made by assessee to M/s. Balanced Scorecard Collaborative Inc. does not fall under the meaning of Royalty either under 9(1)(vi) or under the meaning of Royalty as defined under Article 12(3) in DTAA between India and USA. 3.2. It was further submitted that as held by Hon'ble Supreme Court in the case of GE India Technology Centre (P.) Ltd Vs. CIT [2010] [327 ITR 456] / 193 Taxman 234, tax deduction at source obligations under section 195(1) arise only if the payment is chargeable to tax in the hands of nonresident recipient. Therefore, merely because a person has not deducted tax at source from a remittance abroad, it cannot be inferred that the person making the remittance has committed a failure in discharging his tax withholding obligations because such obligations come into existence only when rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd affiliate was not taxable in India. Ld. Counsel relied on the following cases: i. Judgment of Hon'ble High Court of Delhi in the case of DIT Vs. Sheraton International Inc [313 ITR 267]; ii. Order of the ITAT, Delhi in the case of Hughes Escort Communications Ltd., [51 SOT 356] (Del); iii. Decision of AAR in Regents of the University of California UCLA Anderson School of Management Executive Education, USA; iv. Judgment of Hon'ble Supreme Court in the case of Tata Consultancy Services Vs. State of Andhra Pradesh [271 ITR 401]; v. Judgment of Hon'ble High Court of Delhi in DIT Vs. Ericsson A.B [343 ITR 470]; vi. Judgment of the Hon'ble High Court of Madras dt. 04-01- 2017 in the case of CIT Vs. M/s. Vinzas Solutions India Pvt. Ltd., in Tax Case Appeal No. 861/2016; vii. Judgment of Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd., Vs. CIT & Anr [327 ITR 456]; 7. Ld.DR reiterated the argument of the AO and CIT(A) to submit that the payment is for use of process and for imparting information as defined in Explanation-2 to Section 9(1)(vi) defining Royalty. 8. We have considered the rival contentions and perused the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the payment itself per se does not attract any TDS provisions. 8.2. The Co-ordinate Bench in the case of Hughes Escort Communications Ltd., [51 SOT 356] (Del) has considered the similar affiliate agreement to hold that payments remitted was not royalty. The facts in that case are that assessee has entered into agreement with eCornell, wherein eCornell is to impart education to the students in India through the medium of internet which involves making available to its students Login ID and therefore, grant access to course material respond to queries, conduct exams and grants certificates etc., for which purposes, eCornell enters into a separate agreement [individual agreement] with the students directly. Assessee was undertaken to perform role of marketing courses, assist the registration process and collect combined fees etc,. On the facts, it was held: "On a careful perusal of the above it is seen that the nature of payment made to eCornell is not 'royalty' as the payment is not for the use or the right to use any copyright or literary work. The fact that it is not for artistic, scientific work, work on film, tape, radio, television, broadcasting etc. does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
