TMI Blog2021 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... n this point. In our considered view, in the light of the discussions above, the make available clause is not satisfied, in the course of rendition of services by the assessee, and, as such, the consultancy fees nnot be brought to tax, in the hands of the assessee, under article 12 of Indo Swedish tax treaty. Taxability of IT Support services as FTS/Royalty - HELD THAT:- Indo-Swedish Tax Treaty and the terms of agreement held that the payments received on account of IT Support services are neither taxable as FTS nor Royalty - As decided in own case [ 2021 (1) TMI 323 - ITAT MUMBAI ] the person selling the SAP software is Be One Solution, Switzerland, whereas the person providing the services in question is the assessee. Article 12(4)(a) will not, therefore, come into play at all - therefore, the taxation under article 12 in the present case can come into play only when the make available clause is satisfied, but then the AO's justification for the satisfaction of 'make available' clause, for the detailed reasons set out earlier in this paragraph, does not meet our judicial approval. In view of these discussions, as also bearing in mind the entirety of the case, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P observed that the facts in the impugned assessment year are identical to the facts in assessment year 2015-16. The Assessing Officer passed the impugned order in line with the directions of the DRP. Hence, the present appeal by the assessee. 3. Shri Jitendra Jain appearing on behalf of the assessee submitted at the outset that the grounds of appeal and the facts relating thereto in present appeal are identical to the one already adjudicated by the Tribunal in assessee's own case in ITA No. 7315/Mum/2018 for assessment year 2015-16 decided on 08/01/2021. Therefore, the impugned order is liable to be set aside for parity of reasons. 4. Shri S.S. Iyengar representing the Department vehemently defended the impugned order. However, he fairly admitted that the grounds raised in the present appeal are identical to the grounds adjudicated by the Tribunal in assessee's appeal for assessment year 2015-16. 5. Both sides heard, orders of the authorities below examined. The ground No. 1 raised by the assessee in appeal is against taxability of SAP Licence charges as royalty. Both sides are unanimous in stating that the issue raised in appeal and the facts giving rise to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st to cost basis , as evident from the coordinate bench observations to the effect that In the absence of these details as well as the basis of allocation of cost of software applications/licences, we find it difficult to accept the contention of the assessee that the amount in question paid by it to ATI Technologies, Canada towards its share of software applications/licences on cost to cost basis, without involvement of any element of profit, so as to say that the amount so remitted is not chargeable to tax in the hands of ATI Technologies, Canada in India, being merely in the nature of reimbursement of actual expenses incurred by the said company, without any profit element . This decision, therefore, does not support the case of the Assessing Officer anyway inasmuch as this decision supports the proposition that when the payment for software licence fees to a group entity is a reimbursement pure and simple, it will not be taxable as income of that group entity. It is quite elementary that what can be taxed in the hands of an assessee is not a receipt, by itself, but only the income element, and, therefore, when a receipt by the assessee is bereft of income element, as a pure re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Indo Swedish tax treaty. We leave it at that. The Revenue has not brought before us any distinguishing factor or contrary decision. Since, the facts are pari materia, we see no reason to take a contrary view. The ground No. 1 of the appeal is allowed for parity of reasons. 6. In ground No. 2 of appeal, the assessee has assailed taxability of consultancy services as FTS. Both sides have stated that the facts in impugned assessment year are identical to facts in AY 2015-16. We find that the assessee had raised identical ground of appeal in assessment year 2015-16. The Coordinate Bench decided the issue in favour of assessee by observing as under:- 24. In order to decide whether or not the services rendered by the assessee fit the definition of 'fees for technical services', as applicable under the Indo Swedish tax treaty, the question that we must ask ourselves is not only whether the technical services are performed on the facts of this case, but whether the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause is not satisfied, in the course of rendition of services by the assessee, and, as such, the consultancy fees of ₹ 1,97,94,209 cannot be brought to tax, in the hands of the assessee, under article 12 of Indo Swedish tax treaty. In the absence of any contrary material we respectfully follow the decision of Co-ordinate Bench and direct the Assessing Officer to delete the addition for parity of reasons. The assessee thus succeeds on ground no. 2 of the appeal. 7. In ground No. 3 of appeal, the assessee has assailed taxability of IT Support services as FTS/Royalty. We find that the Assessing Officer had made addition for similar reasons in assessment year 2015-16. The Co-ordinate Bench after considering the facts, Indo-Swedish Tax Treaty and the terms of agreement held that the payments received on account of IT Support services are neither taxable as FTS nor Royalty. The relevant extract of findings of the Tribunal on this issue are as under:- 25. That leaves us with the taxability of ₹ 57,47,684 on account of Information Technology Services. The main reason for its taxability by the DRP is stated to be that the services is found to be intrinsically lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f royalties under article 12(3) and the services ancillary and subsidiary to the application or enjoyment of that right, payment for which is described in article 12(3). In other words, the person receiving the money as royalty, such as the actual seller of the software in this case, and the person providing service ancillary or subsidiary to the enjoyment of that right, must be the same. That's not the case here. In the present case, the payment received by the assessee has been held to be in the nature of reimbursement, which is outside the ambit of taxation. The person selling the SAP software is Be One Solution, Switzerland, whereas the person providing the services in question is the assessee. Article 12(4)(a) will not, therefore, come into play at all. In our considered view, therefore, the taxation under article 12 in the present case can come into play only when the make available clause is satisfied, but then the Assessing Officer's justification for the satisfaction of 'make available' clause, for the detailed reasons set out earlier in this paragraph, does not meet our judicial approval. In view of these discussions, as also bearing in mind the entirety ..... X X X X Extracts X X X X X X X X Extracts X X X X
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