TMI Blog2018 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct tax at source under Sec. 195 of the Act in respect of the training fees remitted to M/s Fair Isaac International Corpn, therefore, it could not be held as being in default within the meaning of Sec. 201 of the Act for having failed to deduct tax at source while remitting the said amount - Decided in favour of assessee - ITA No. 8184/Mum/2011 - - - Dated:- 23-8-2018 - SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM For The Assessee : Shri Jitendra Sanghvi And Shri Deepak Jain, A.Rs For The Revenue : Shri M.V. Rajguru, D.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-11, Mumbai, dated 30.09.2011 which in itself arises from the order passed by the A.O under Sec. 201(1) 201(1A) of the Income Tax Act, 1961 (for short Act ), dated 31.03.2010 for A.Y 2009-10. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal: 1. The learned Commissioner of Income Tax (Appeals) -11 [CIT(A)] erred in confirming the order of the Income tax Officer (IT) - TDS-2, Mumbai (TDS Officer) holding the appellant as an assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 195 were not applicable and accordingly the order of TDS Officer u/s. 201(1)1/201(1A) ought to be cancelled. 5. The learned CIT(A) erred in confirming the action of the TDS Officer in grossing up the payment for computing the amount of withholding tax in respect of which the appellant is held to be an assessee in default. Your appellant submits that the payment to Fair Isaac ought not to have been grossed up for calculating the withholding tax. 6. The learned CIT(A) erred in dismissing the ground relating to charging of interest u/s.201(1A) in respect of the amount of withholding tax computed on the payment to Fair Isaac. Your appellant submits that the interest u/s.201(1A) ought to have been cancelled. 7. Your appellant craves leave to add to, alter, amend or vary all or any of the aforesaid ground of appeal as they/their representative may deem fit. 2. Briefly stated, the A.O was in receipt of information that the assessee had made certain foreign remittances without deduction of tax at source to non-resident entities, as under: Sr. No. Name of the beneficiary Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. M/s Fair Isaac International Corpn. 30.05.2008 15000 Licence fees 2. M/s Fair Isaac International Corpn. 29.08.2008d 35000 Licence fees 3. M/s Fair Isaac International Corpn. 27.12.2008 50000 Licence fees 4. M/s Fair Isaac International Corpn. 05.01.2009 17974.41 Training reimbursement of expenses 5. M/s Fair Isaac International Corpn. 13.03.2009 15000 Maintenance fees (i) It was submitted by the assessee that the taxability of payment of licence fee of USD 100,000 by the assessee to the aforementioned foreign concern viz. M/s Fair Isaac International Corporation was to be considered under the Income Tax Act and the provisions of the India USA DTAA. The assessee submitted that it had only acquired a copy of the copyrighted article i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India could not be brought to tax in India. On the basis of the aforesaid submissions, it was the claim of the assessee that as the annual maintenance and support services received by M/s Fair Isaac International Corporation were not liable to tax in India, hence no tax was deducted at source by the assessee. (IV) Training Reimbursement Expenses: It was submitted by the assessee that an amount of USD 17974.41 remitted to M/s Fair Isaac International Corporation was on two counts viz. (i) an amount of USD 14,000 was remitted to M/s Fair Isaac International Corporation towards training fees for using blaze advisor software; and (ii) an amount of USD 3974.41 was remitted to M/s Fair Isaac International Corporation towards reimbursement of the travelling expenses of the latters employees on their visit to India. It was the claim of the assessee that as the payment of USD 14,000 towards training fees did not make available technology etc. as defined in Article 12(4)(b) of India-USA treaty, therefore, the same could not be characterised as rendering of technical or consultancy services by the said concern to the assessee. 3. On the basis of the aforesaid facts, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltancy services in order to enable the assessee to operate the software for its intended purpose, thus the same did fall within the sweep of fees of included services as contemplated in Article 12 of the India-USA Tax Treaty and the assessee remained under a statutory obligation to have withheld tax under Sec.195 in respect of the said payments. On the basis of his aforesaid observations, the A.O being of the view that the assessee had failed to deduct tax at source as required under Sec. 195 of the Act, held the latter as being in default within the meaning of Sec.201 of the Act. In the backdrop of the aforesaid observations the A.O raised a demand of ₹ 2,56,673/- towards tax under Sec. 201(1) and an amount of ₹ 33,217/- in respect of interest under Sec. 201(1A) of the Act. 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee was however not persuaded to subscribe to the same and dismissed the appeal. 7. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined under the Article 12 of the India-USA tax treaty. It was the contention of the ld. AR that though the remittances made by the assessee towards maintenance services fell within the sweep of business profits under Article 7 of the IndiaUSA Tax Treaty, however the same in the absence of a PE of M/s Fair Isaac International Corpn. in India could not be brought to tax in India. The ld. A.R further adverting to the remittances of training fees of USD 14,000 by the assessee to M/s Fair Isaac International Corpn. submitted that the lower authorities had erred in concluding that the assessee was to be held as an assessee in default under Sec. 201 for not having deducted tax at source while remitting the said amount. It was averred by the ld. A.R that as the training services provided by M/s Fair Isaac International Corpn. to the assessee did not make available any technology to the latter, hence the same was not covered by the meaning of fees of included services as defined in the India-USA Tax Treaty. It was further submitted by the ld. A.R that as M/s Fair Isaac International Corpn. had no PE in India, therefore, the remittance towards training fees also could not be ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the remittance of USD 100,000 made by the assessee towards licence fees to M/s Fair Isaac International Corpn. We have perused the copy of the agreement entered into by the assessee with M/s Fair Isaac International Corpn i.e Fair Isaac Order Form-Blaze Advisor , dated 31.03.2008. We find that the assessee had entered into the aforesaid agreement with M/s Fair Isaac International Corpn. for acquiring a non-exclusive, non-transferable, non-assignable and a non-sublicenseable license to use the Fair Isaac Software Product viz. Blaze Advisor software for its internal business purposes, subject to host of additional terms and limitations contemplated in the body of the said agreement. We are of the considered view that from a perusal of the agreement it can safely be gathered that the assessee had made the remittance of USD 100,000 to M/s Fair Isaac International Corpn. for grant of license to use its copyrighted software viz. Blaze Advisor software for its internal business purposes. We further find from a perusal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunch matters in the case of a group concern of the assessee i.e DDIT, Mumbai Vs. Reliance Communications Ltd. (ITA No. 837/Mum/2007; dated 02.02.2018). In the aforementioned case the Tribunal had observed that as the payment made by the assessee was for copyrighted article i.e software and there was no transfer of copyright of the software in any manner, thus the same did not amount to royalty within the definition of Article 12/13(3) of the respective tax treaties and resultantly the assessee remained under no obligation to deduct tax at source while making the remittances. We thus respectfully following the view taken by the Hon ble High court of Delhi in the case of DIT Vs. Infrasoft Ltd. (2014) 264 CTR 329 (Del), therein conclude that the remittance of USD 100,000 made by the assessee to M/s Fair Isaac International Corpn. for grant of license to the assessee to use its copyrighted product viz. Blaze Advisor software for its internal business purposes only could not be brought to tax as royalty under Article 12(3) of the India-USA DTAA. We thus, in terms of our aforesaid observations conclude that as no liability was cast upon the assessee to deduct tax at source at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 12 of the India-USA Tax Treaty. We thus, finding ourselves to be in agreement with the view taken by the aforesaid coordinate bench of the Tribunal respectively follow the same and conclude that as the amount received by M/s Fair Isaac International Corpn. towards maintenance fees from the assessee was not liable to tax under the IndiaUSA Tax Treaty, therefore, the assessee could not have been held as being in default within the meaning of the provisions of Sec. 201 of the Act. The Ground of appeal no. 3 raised by the assessee is resultantly allowed 10. We shall now advert to the contention of the assessee that as the remittance of USD 14,000 towards training fees to M/s Fair Isaac International Corpn. was not liable to tax under the India-USA Tax Treaty, hence the lower authorities had erred in holding the assessee as being in default within the meaning of Sec. 201 of the Act. We have deliberated at length on the issue under consideration and find ourselves to be in agreement with the contention advanced by the ld. A.R that as the training services provided by M/s Fair Isaac International Corpn did not make available any technology etc. to the assessee, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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