TMI Blog2019 (6) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... IPL. Insofar the taxability of the aforesaid business profits is concerned, we find that as RJIPL did not have any business connection or a PE in India, therefore, the same as per Article 7 of the India-Singapore DTAA could not have been brought to tax in India. The order of the CIT(A) that amount received by RJIPL from the assessee for providing standard bandwith services was its business profits , which in the absence of its business connection or PE in India could not be brought to tax in India is upheld in terms of our aforesaid observations and the appeal of the revenue is dismissed. - ITA No.936/Mum/2017 - - - Dated:- 10-5-2019 - Shri M. Balaganesh, Accountant Member And Shri Ravish Sood, Judicial Member For The Appellant : Shri Nishant Samaiya, D.R For The Respondent : Shri Sunil Moti Lala And Shri Bhavya Sundesha, A.Rs ORDER PER RAVISH SOOD, JM The present appeal filed by the revenue is directed against the order passed by the CIT(A)-57, Mumbai, dated 21.10.2016 that was passed by him while disposing off the appeal filed by the assessee under Sec. 248 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon in terms of Sec.195A] in terms of Sec.195 of the I-T Act. However, the assessee thereafter holding a conviction that it was not obligated to deduct tax at source under Sec.195 from the aforesaid payment made to RJIPL carried the matter by way of an appeal before the CIT(A) under Sec. 248 of the I-T Act, therein claiming that no tax was required to be deducted on the aforesaid amount paid to RJIPL. 3. The assessee in the course of the appellate proceedings submitted before the CIT(A) that the amount remitted by it to RJIPL for provision of bandwith services was the latters business income. It was averred by the assessee that as RJIPL did not have any business connection or a Permanent Establishment (for short PE ) in India, therefore, as per Article 7 of the India-Singapore DTAA the amount remitted by the assessee to RJIPL could not have been brought to tax in India. In sum and substance, it was the contention of the assessee that as the payments made to RJIPL towards bandwith services was the latters business profits, therefore, the same in the absence of its PE or a business connection in India could not be taxed in India as per Article 7 of the India-Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Singapore DTAA, it was indispensably required that the consideration paid for the process, if any, was for a secret process i.e the IPR in the process was owned/registered in the name of the payee. It was thus submitted by the assessee that as it had made the payment to RJIPL for availing bandwith services which were standard telecom services and not for making any use of a process , whether secret or not, therefore, the same clearly fell beyond the realm of the definition of royalty both under the I-T Act and the India- Singapore tax treaty. 4. The CIT(A) after deliberating on the contentions advanced by the assessee observed that RJIPL did neither have any business connection or a PE in India. Accordingly, it was observed by him that in the absence of any business connection or PE in India the income earned by the said foreign entity under the agreement for provision of bandwith services would not be liable to tax in India. Insofar the contentions advanced by the assessee that the payments made to RJIPL were for availing standard telecom services and not by way of FTS were concerned, the same did find favour with the appellate authority. In fact, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations the CIT(A) concluded that the payments made by the assessee to RJIPL for provision of bandwith services were in the nature of business profits and could not be classified as FTS or royalty either under the I-T Act or India-Singapore DTAA. On the basis of his aforesaid deliberations, it was further observed by him that as RJIPL did not have any business connection or a PE in India, therefore, the business profits could not be taxed in India. In the backdrop of his aforesaid observations the CIT(A) finding favour with the claim of the assessee that no tax was deductible on the payment/credit made to RJIPL, allowed the appeal. 6. Aggrieved, the revenue has assailed the order of the CIT(A) in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee adverted to the facts of the case and took us through the relevant observations of the CIT(A) in context of the issue under consideration. The ld. A.R took us through the Grounds of appeal raised by the revenue before us and submitted that the order of CIT(A) has been assailed before us only to the extent he had concluded that the payment made by the assessee to RJIPL for providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now when the definition of royalty as envisaged in Article 12(3) of the India-Singapore tax treaty does not provide for inclusion of transmission by satellite, cable, optic fibre or by any other similar technology within the realm of the definition of royalty , therefore, the consideration received by RJIPL from the assessee for rendering of the bandwith services could not be characterised as royalty in its hands. 7. Per contra, the ld. Departmental Representative (for short D.R ) submitted that the CIT(A) while disposing off the appeal had failed to consider the definition of the term royalty in the backdrop of Explanation 5 and Explanation 6 of Sec.9(1)(vi). In sum and substance, it was the contention of the ld. D.R that as the Explanation 5 and Explanation 6 of Sec. 9(1)(vi) were declaratory in nature and had only clarified the intent of the legislature, therefore, the consideration paid by the assessee to RJIPL was clearly covered by the definition of royalty . Apart there from, it was averred by the ld. D.R that even if it was to be assumed that RJIPL had provided standard telecom services to the assessee, even then the same as per Explanation 2 to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andwith services to RJIPL did not constitute royalty and was its business profits . Admittedly, as the revenue has not assailed the observations of the CIT(A) that the payments made by the assessee to RJIPL cannot be held as FTS, therefore, we confine ourselves to the issue to the extent the same has been assailed by the revenue before us. As is discernible from the record, the assessee pursuant to the terms of the agreement had only received standard facilities i.e bandwith services from RJIPL. In fact, as observed by the CIT(A), the assessee only had an access to services and did not have any access to any equipment deployed by RJIPL for providing the bandwith services. Apart there from, the assessee also did not have any access to any process which helped in providing of such bandwith services by RJIPL. As a matter of fact, all infrastructure and process required for provision of bandwith services was always used and under the control of RJIPL, and the same was never given either to the assessee or to any other person availing the said services. We are persuaded to subscribe to the observations of the CIT(A) that as the process involved to provide the bandwith services was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h we are concerned has a narrow meaning. In fact, we find that despite the fact that the India-Singapore tax treaty was amended by Notification No. SO 935(E), dated 23.03.2017, however, the definition of royalty therein envisaged had not been tinkered with and remains as such. We thus in terms of our aforesaid observations are of the considered view that the amount received by RJIPL from the assessee for providing standard bandwith services could not be characterised as royalty as per the India- Singapore DTAA, and as rightly observed by the CIT(A), was in fact the business profits of RJIPL. Insofar the taxability of the aforesaid business profits is concerned, we find that as RJIPL did not have any business connection or a PE in India, therefore, the same as per Article 7 of the India-Singapore DTAA could not have been brought to tax in India. 9. The order of the CIT(A) that amount received by RJIPL from the assessee for providing standard bandwith services was its business profits , which in the absence of its business connection or PE in India could not be brought to tax in India is upheld in terms of our aforesaid observations and the appeal of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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