TMI Blog2020 (11) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... er of any copyright. This is a clear case of providing services by the Singapore entity to the assessee company. Hence, the same cannot fall within the ambit of royalty. Whether the subject mentioned incurrence of expenditure by the assessee could be characterized as royalty in the facts and circumstances of the case? - We have already held hereinabove that the subject mentioned expenditure cannot fall within the ambit of royalty. Hence, the disallowance made u/s.40(a)(i) of the Act cannot be made in the facts of the instant case. Since, the relief is granted to the assessee on first principle, the other argument advanced by the ld. AR that money is actually not paid by the assessee during the year under consideration and hence, the same would not be liable for deduction of tax at source, is not adjudicated herein and the same is hereby left open. Accordingly, the ground Nos. 1 2 raised by the assessee are allowed. - ITA No.2210/Del/2015 - - - Dated:- 1-7-2020 - Shri Amit Shukla, JM And Shri M. Balaganesh, AM For the Assessee : Dr. Rakesh Gupta Shri Somil Agarwal For the Revenue : Shri Amit Kumar Jain ORDER PER M. BALAGANESH (A.M): This app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to tax in India. 3.2. The assessee company further pleaded that it had only reimbursed ₹ 58,48,567/- to Omron Asia Pacific Pte. Ltd., Singapore for system maintenance and support services and there is no element of income involved therein and hence, tax deduction at source provisions are not applicable for the same. The assessee also submitted that the Tax Auditor in the Tax Audit report had not qualified or made any adverse comment with regard to the subject mentioned incurrence of expenditure vis a vis its TDS obligation. The assessee also drew attention of the ld. AO that the entire transactions including the impugned transaction with AE was subject matter of verification by the ld. Transfer Pricing Officer (Ld. TPO) and no adverse inference with regard to international transaction of ₹ 58,48,567/- was drawn thereon. The assessee further pleaded that in terms of Article 12 (4)(b) on DTAA between India and Singapore, the said transaction did not fulfill the make available clause and hence, the said payment cannot be categorized as fee for technical services in the hands of the recipient entity. The assessee also submitted that Omron Asia Pacific Pte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must also be rendered in India and once, the services are utilized in India, the same is enough to attract its taxability in India in the hands of the recipient entity, thereby the TDS liability gets fastened in the hands of the assessee payer automatically. The ld. AO further observed that the assessee s case falls under Article 12(4)(a) of Indo-Singapore Treaty which reads as under:- The term fees for technical services as used in this Article means payments of any kind to any person in consideration for services of managerial, technical or consultancy nature (including the provisions of such services through technical or other personnel) if such services; (a) are ancilliary and subsidiary to the application or enjoyment of the right, property or information for which the payment described in paragraph 3 is received, or 3.4. The ld. AO observed that the rights of software acquired by the assessee along with computers are very much ancillary to the application or enjoyment of the software rights and therefore, the requirement of make available as contested by the assessee is not required in the instant case. He finally concluded that since the rights to enjoy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, business income and since the Singapore entity had no PE in India, the same was not liable to tax in India. The assessee further submitted that the income in the hands of the Singapore entity cannot be categorized as fee for technical services . It submitted that the basic characteristic of service transaction is the involvement of human element. When there is no human intervention, the same falls outside the ambit of fee for technical services as has been held for following decisions:- a) Hon ble Delhi High Court in the case of CIT vs Bharti Cellular Ltd. reported in 319 ITR 139 (Del) b) Hon ble Madras High Court in the case of Skycell Communications Ltd and another vs. DCIT and others reported in 170 CTR (MAD) 238. 3.7. The assessee further pleaded that similar payment was made in A.Y.2008-09 and the ld. AO made similar disallowances in A.Y.2008-09 also and the same was deleted by the ld. CIT(A) in A.Y.2008-09. The assessee placed a copy of the said appellate order before the present ld. CIT(A) in the appellate proceedings for A.Y.2009-10. 3.8. During the course of appellate proceedings, the ld. CIT(A) directed the assessee to furnish his explanation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is not in dispute that the Singapore entity had also purchased software and also sold the same to the assessee. From the scope of services rendered by the Singapore entity to the assessee, it could be safely concluded that the said case does not fall within the ambit of purchase of any copyrighted article by the assessee so as to constitute the same to be in the nature of royalty. The Singapore entity buys various licenses from third party manufacturers and in turn sells the same to the Indian assessee. The Singapore entity is not the owner of any copyright. This is a clear case of providing services by the Singapore entity to the assessee company. Hence, the same cannot fall within the ambit of royalty. We also find that the ld. CIT(A) had placed reliance on the Co-ordinate bench decision of Mumbai Tribunal in the case of Reliance Infocomm in ITA No.837/Mum/2007 which we find has been subsequently recalled in Miscellaneous application proceedings by Mumbai Tribunal and in the recalled proceedings, after considering the decision of Hon ble Karnataka High Court in the case of Samsung Electronics and by placing reliance on the decision of the Hon ble Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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