TMI Blog2018 (11) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... l knowledge etc. to the customers, hence the fees received from providing of such services would not fall within the sweep of the definition of FTS as per Article 13 of the India-U.K tax treaty. The Ground of appeal No. 1 of the revenue is dismissed in terms of our aforesaid observations. P.E in India - Held that:- For constituting a fixed place P.E, either the place should be owned or at the disposal of the assessee. However, in the case before us, as observed by the CIT(A), the assessee was carrying on its business from Geneva and the communication network in India was neither owned by it or at its disposal, but rather was owned by the independent service providers such as VSNL, DoT etc. Further, no personnel of the assessee had visited India during the year under consideration. CIT(A) had rightly concluded that as the assessee did not have a P.E in India during the year under consideration, hence, the fees received from rendering of the services which were not in the nature of FTS, in the absence of a P.E of the assessee in India would not be taxable in India. - Decided against revenue. - ITA No. 9227/Mum/2004, ITA No. 5445/Mum/2005 - - - Dated:- 19-9-2018 - Shri Shamim Ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored. (3) The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. Briefly stated, the assessee viz. Reuters Transactions Services Limited which is a company incorporated under the laws of England and is a tax resident of United Kingdom had filed its return of income for AY 2001-02 on 19.04.2002, declaring total income at Nil. The return of income filed by the assessee was processed as such under Sec. 143(1)(a) on 18.02.2003. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). 3. The assessee is engaged in the business of providing of Reuters Dealing 2000-2 which is an electronic deal matching system, enabling authorized dealers in foreign exchange such as banks etc. to effect deals in spot foreign exchange with other foreign exchange dealers. The system provides a platform for the forex dealers to affect deals with other subscribers. In order to affect deals, the subscribers of the system enter into the system the prices at which they are prepared to buy or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... characterisation of the services provided by the assessee as business profits within the meaning of Article 7 of the India-U.K Tax Treaty. The A.O was of the view that the services provided by the assessee were in the nature of technical services and the revenue earned therefrom was in the nature of fees for technical services (for short FTS ), both as per the Income Tax Act and the India-UK tax treaty. It was further observed by the A.O that the assessee had a P.E in India. On the basis of his aforesaid observations, the A.O subjected the income of ₹ 1,41,14,720/- earned by the assessee from rendering of the services to tax under Sec. 44D r.w.s. 115A of the Act. 7. 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 persuaded to subscribe to its claim that mere use of technology in the provision of services would not per se lead to treating of the same as technical services. The CIT(A) observed that as the services provided by the assessee did not make available any technical knowledge etc. as laid down in the treaty, hence, the services provided by the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said order was thereafter followed by the Tribunal while disposing off the appeal of the assessee for A.Y 2005-06 (copy placed on record). The ld. D.R taking support of his aforesaid contentions submitted that the issue involved in the present appeal was squarely covered by the aforesaid orders of the Tribunal. The ld. D.R taking support of Rule 11 of the Appellate Tribunal Rules, 1963 averred that the additional grounds of appeal raised by the revenue may be admitted. In support of his aforesaid contention, the ld. D.R relied on the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1999) 229 ITR 383 (SC). It was submitted by the ld. D.R that as the revenue by raising the additional grounds of appeal has sought adjudication of a legal issue on the basis of the facts available on record, thus, the same may be admitted. The ld. D.R further relying on the judgment of the Hon ble High Court of Delhi in the case of CIT-II Vs. Jansampark Advertising Marketing (P) Ltd. (2015) 375 ITR 373 (Del) and that of the Hon ble High Court of Karnataka in the case of CIT Vs. Kalpetta Estates Ltd. (1995) 78 Taxman 265 (Ker), submitted that as the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot done. Alternatively, it was submitted by the ld. A.R that as the agreement for A.Y 2008-09 and A.Y 2009-10 was materially different from that for the year under consideration viz. A.Y 2001-02, hence the view taken by the Tribunal in A.Y 2008-09 and A.Y 2009-10 could not on the said count itself be simply transposed and applied to the case of the assessee for the year under consideration. On the basis of his aforesaid contentions, it was averred by the ld. A.R that the additional grounds of appeal raised by the revenue were liable to be rejected. The ld. A.R adverting to the merits of the case submitted that as the services rendered by the assessee were in the nature of a Standard facility (similar to how a bolt system of the stock exchange operates) which did not require any human intervention and no exclusive, special or customised services designed to cater to the special needs of a user were involved, thus, the fees received therefrom could not be held to be in the nature of FTS. In support of his aforesaid contention, the ld. A.R relied on the judgments of the Hon ble Supreme Court in the case of CIT-4, Mumbai Vs. Kotak Securities Ltd. (2016) 383 ITR 1 (SC) and CIT, Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O had consciously characterised the fees received by the assessee as FTS. On appeal, the CIT(A) finding favour with the contentions advanced by the assessee had vacated the characterisation of the receipts as FTS by the A.O. We are of the considered view that the A.O in the garb of the additional grounds of appeal is not only trying to review his earlier order, but rather, by so doing is trying to build up a new case before us. We are afraid that unlike the CIT(A) who has the powers which are coterminous as that of the A.O, and the proceedings before him can safely be held to be an extension of the assessment proceedings, no such powers are vested with the Tribunal, and its powers to pass such orders thereon as it thinks fit are restricted to the issue under consideration. Rather, we find that as held by the Special bench of the tribunal in the case of ACIT Vs. DHL Operations BV (2007) 108 TTJ 152 (Mum) that the projection of a new case in the garb of an additional ground of appeal by the revenue would frustrate the very concept of finality of the assessment and render the time limits set out under the scheme of the Act as redundant and otiose. Say, for instance the stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught on record any material to rebut the observations of the CIT(A). We find that the services rendered by the assessee by providing a platform for the forex dealers, to effect deals with other subscribers, is in the nature of a Standard facility and does not require any human intervention. We are further persuaded to be in agreement with the contention of the ld. A.R that in the backdrop of the judgment of the Hon ble Supreme Court in the case of CIT-4, Mumbai Vs. Kotak Securities Ltd. (2016) 383 ITR 1 (SC), as in the case before us, the fees received by the assessee from rendering the Reuters Dealing 2000-2 services to its customers is not for services which are in the nature of exclusive, special or customised services provided to cater to the specific needs of the user, but rather are in the nature of a facility offered by the assessee, thus, the same cannot be held as FTS. Further, as the rendering of the services by the assessee to its customers does not involve any human efforts i.e manual intervention, thus the same cannot be categorised as technical services . We find that our aforesaid view is fortified by the judgment of the Hon ble Apex Court in the case of CIT, Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work provided by the assessee to its clients constituted the P.E of the assessee in India. Rather, it was observed by the CIT(A) that as the communication network in India providing access to the assesses server in Geneva was neither owned by the assessee nor was the same at its disposal, thus, the same could not be held to be the P.E of the assessee in India. Further, it was observed by the CIT(A) that as the assessee was rendering the services from outside India and had no employees or personnel in India for rendering the services, thus, the A.O had erred in concluding that the assessee had a service P.E in India. We find that the CIT(A) in the backdrop of his aforesaid observations had concluded that as the fees earned by the assessee from rendering the services were not in the nature of FTS and the assessee was not having a P.E in India, thus, its income would not be taxable in India. 15. We have deliberated at length on the observations of the CIT(A) and find ourselves to be in agreement with the same. We are of the considered view that for constituting a fixed place P.E, either the place should be owned or at the disposal of the assessee. However, in the case before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to the two grounds raised earlier, on the facts and in circumstances of the case and in law, the Ld. CIT(A) should have held that the revenue earned by the assessee on providing Reuters Dealing 200-2 to its customers are in the nature of Royalty as per the provisions of the section 9(1)(vi) of the Income Tax Act and as per the India-UK Treaty. (2) The Appellant prays that the order of the Ld. CIT (A) on the above ground(s) be set aside and that of the Assessing Officer restored. (3) The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 19. Briefly stated, the assessee had filed its return of income for A.Y 2002- 03 on 15.01.2003, declaring total income at Nil. The return of income filed by the assessee was processed as such under Sec. 143(1)(a) on 22.02.2003. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). 20. The A.O, while framing the assessment, was however, not persuaded to subscribe to the characterisation of the services provided by the assessee as business profits within the meaning of Article 7 of the India-UK Tax Treaty. Being of the view that the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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