TMI Blog2018 (8) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee is providing is essentially web hosting service, though with the help of sophisticated scientific equipment, in the virtual world. The scientific equipment used by the assessee enable rendition of such a service, and such a use, which is not even by the Indian entity, is not an end in itself. In this view of the matter, even though the services rendered by the assessee to the Indian entities may involve use of certain scientific equipment, the receipts by the assessee cannot be treated as "consideration for the use of, or right to use of, scientific equipment" which is a sine qua non for taxability under section 9(l)(vi) read with Explanation 2 (iva) thereto. The income is not taxable in India - Decided in favor of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as Royalty and / or Fees for Included Services under section 9(i)(vi) / (vii) of the Act and under Article 12 (3) / (4) of the India- USA Double Taxation Avoidance Agreement ( DTAA ). 2.c. That on the facts and circumstances of the case, the learned CIT(A) has erred in holding that the income earned by the Appellant from customers for providing managed hosting services constituted consideration for use or right to use equipment. 3. That on the facts and circumstances of the case, the learned CIT(A) has erred in not following the decision of the jurisdictional Tribunal in Appellant s own case for Assessment Year 2009-10 order dated March 31, 2016 in ITA No. 734O/Mum/2Oi2 while adjudicating on the taxability of the income earned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g services were in the nature of service and use of servers, rack space, wires, cables, internet facility, software were incidental to providing these services. The core of transaction was to provide access to the data/applications being hosted by the Company with the Customer accessing its own data and not the data of the assessee. It further claimed that the assessee did not grant any right/license to the client and right over the software etc. used during the transaction did not pass to the client. 5. Upon the assessee s appeal, the ld. Commissioner of Income Tax (Appeals) confirmed the Assessing Officer s action. Though the assessee had also referred to Hon ble Delhi High Court decision in the case of Director of Income Tax vs. New ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the receipts in question were on account of use of scientific equipment, and, for that reason, giving rise to an income taxable under section 9(l)(vi] of the Act as also article 13[1)( of the Indo US tax treaty. This finding, however, proceeds on the fallacy that when a scientific equipment is used by the assessee for rendering a service, the receipt will be construed as a receipt for use of scientific equipment. Undoubtedly, when the assessee receives an income on account of allowing a customer to use a scientific equipment, it does become taxable for the reason of its being characterized as such, but the use of a scientific equipment by the assessee, in the course of giving a service to the customer, is something very distinct from al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a use, which is not even by the Indian entity, is not an end in itself. In this view of the matter, even though the services rendered by the assessee to the Indian entities may involve use of certain scientific equipment, the receipts by the assessee cannot be treated as consideration for the use of, or right to use of, scientific equipment which is a sine qua non for taxability under section 9(l)(vi) read with Explanation 2 (iva) thereto. 10. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned C1T[A) and decline to interfere in the matter. 8. Since the facts are identical and it is not the case that the Hon ble jurisdictional High Court has reverse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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