TMI Blog2021 (8) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... al while disposing off the aforementioned appeals in in A.Y. 2012-13 [ 2018 (5) TMI 2077 - ITAT MUMBAI] and in A.Y. 2013-14,[ 2018 (11) TMI 1862 - ITAT MUMBAI] wherein held that the consideration received by the assessee pursuant to the Master Services Agreement , dated 31.01.2011 was neither in the nature of royalty nor FTS, but was in the nature of business profits, which in the absence of the assessee s PE in India could not be brought to tax in India. Short credit of TDS - HELD THAT:- As the grievance of the assessee would require verification of facts, therefore, in all fairness we herein direct the A.O to verify the factual position and in case the claim of the assessee is found to be in order, then, allow the credit for the deficit amount of TDS to the assessee as per extant law. The Ground of appeal is allowed for statistical purposes. Levy of interest u/s 234B and 234D - HELD THAT:- As the levy of interest is mandatory as held by the Hon ble Supreme Court in the case of CIT Vs. Anjum H.M. Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] therefore, we herein direct the A.O to re-determine the interest liability of the assessee while giving effect to our appellate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held as nut in the nature of Royalties' under Article 12(3] of the DTAA. 3. Addition on account of Fees for Included Services 3.1 On the lads and in the circumstances of the ease and in law, the Hon'ble DRP erred in confirming the action of the AO in bringing lo tax 10% of the receipts amounting lo ₹ 12,71,046 as 'Fees for Included Services' under Article 12(4)(b) of the DTAA and thus liable to tax in India. 3.2 The Appellant therefore prays that the payment received by the Appellant be held as not in the nature of 'Fees tar Included Services' under Article I2(4)(h) of the DTAA r.w the Memorandum of Understanding to the DTAA. 4. Business profit not taxable in absence of a Permanent Establishment 4.1 On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in not holding that the payments received by the Appellant are in the nature of 'Harness Profits', and not liable to tax in India in absence of permanent establishment under Article 7 of the DTAA, 4.2 The Appellant therefore prays that the payments received by the Appellant be held as not liable to tax in India in absence of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,400 as per the Master Services Agreement , dated 31.01.2011, which on being converted into Indian rupees worked out to an amount of ₹ 64,33,540/-, as under: Nature of payment Date of SBI TT Buying Rate Amount (In USD) SBI TT (Buying Rates0 Amount (in Rs.) Fees from Wockhardt Hospitals Ltd. (WHL) Under Master Services Agreement 31 march, 2014 108,400 59.35 64,33,540 Total 64,33,540 However, as per the details gathered by the A.O from Form 26AS , it was noticed by him that the assessee had received an amount of ₹ 1,27,10,460/- under the terms and conditions of the Master Services Agreement, dated 31.01.2011 that was entered with Wockhardt Hospital Ltd., on which TDS of ₹ 22,43,036/ was deducted. On being queried, the assessee declined of there being any such transactions reported in its AIR/CIB/26AS. Backed by the aforesaid facts, the A.O was of the view that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the DRP that the case of the assessee for A.Y 2000-01 to A.Y. 2006-07 that was decided by the Tribunal in its favour, the assessee had entered into an agreement with Wockhardt Hospital Limited titled as Memorandum of Agreement for Education and Training Services , dated 14.12.2000, while for during the year under consideration i.e A.Y. 2014-15 it had received fees for providing various consulting services under the Masters Services Agreement , dated 31.01.2011. Backed by his aforesaid observation, the DRP set out in its order at length the difference in the terms and conditions provided in the aforesaid respective agreements. It was observed by the DRP that the terms and conditions of the Masters Services Agreement , dated 31.01.2011 as compared to Memorandum of Agreement for Education and Training Services , dated 14.12.2000 were materially differently placed. The DRP was of the view that in light of the aforesaid distinction between the aforementioned agreements , the observations of the Tribunal while disposing off the appeals in the case of the assessee for A.Y. 2000-01 to A.Y. 2004-05 and A.Y. 2006-07 to A.Y. 2009-10 could not be applied to the year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, for the reason, that unlike the year under consideration i.e A.Y. 2014-15 in the aforementioned years the terms and regulations inter se the assessee and Wockhardt Hospital Limited were regulated by the Memorandum of Agreement for Education and Training Services , dated 14.12.2000, while for in the year under consideration the same was regulated by the Master Services Agreement , dated 31.01.2011, and both of them as discussed at length by the DRP were materially differently placed. However, the ld. D.R could not rebut the claim of the assessee that the issue involved in the present appeal was squarely covered by the orders passed by the Tribunal in its own case for the preceding years, viz. ITA No. 412/Mum/2016, dated 02.05.2018 for A.Y. 2012-13 and ITA No. 576/Mum/2017, dated 30.11.2018 for A.Y. 2013-14 8. We have heard the ld. Authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been relied upon by them to drive home their respective contentions. As observed by us hereinabove, the controversy involved in the present appeal hinges aro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its return of income on 27/11/2012, declaring total income at Rs.Nil. The case was selected for scrutiny and notice was issued on 06/08/2013 u/s.143(2) of the Act. Subsequently notice u/s. 142(1) was issued on 19/02/2014 and 24/12/2014. The assessment was completed on 28/01/2016, determining its income at ₹ 3.94 crores, u/s. 143(3) r.w.s. 144C(13) of the Act. 2. During the assessment proceedings, the AO found that during the year under consideration, the assessee had received fees of USD 886,000 for providing various consulting services under agreements with various Indian entities, the break-up of which is as follows: Sr. No. Indian Entity to whom services rendered Details of Agreement Net fees received in $ 1. Wockhardt Hospitals ltd. (WHL) Master Services Agreement 31.01.2011 1,71,000 2. Four Seasons Foundation (FSF) Master Services Agreement with FSF dated November, 23, 2010 (Master Services agreement) FST) 3,75,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le any technical knowledge, experience, skill knowhow or process. The decision of the Delhi Bench of the ITAT in the case of Sheraton International Inc. (supra) supports the plea of the assessee that where the agreement between the parties provides that there was no economic consideration for right to use the name it cannot he said that any payment can be called royalty. So also the consideration paid in a lumpsum cannot be split as a part being in the nature of royalty and any part being in the nature of FIS as laid down in the case of Motorola Inc. (supra). The payment cannot be said to be FIS for the reason that nothing is made available by the Assessee to WHL and in this regard, the observations while deciding payments received by the Assessee from MAX would be equally applicable to the payments received from WHL also. We are of the view that the entire payment received by the assessee from WHL is in the nature of business profits and since the assessee does not have a PE in India the same cannot be brought to tax in India. Consequently, Ground No.2 3 of the Cross Objection of the assessee are allowed. 3.1. In the appeal for the A.Y. 2003-04 (Para 28, Page 41-42 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it cannot be taxed in India. Accordingly, consistent with the view taken in earlier years in assessee's own case, we allow grounds no. 1 and 2, raised by the assessee. The above said decision of the Tribunal shall be applicable to the fees received by the assessee in the current year under Consulting Agreement (Wokhard Hospitals and Carol Info Services Ltd) and under Award Agreement of Vokhard Hospitals), 3.3. We further find that the department is in appeal before the Hon'ble Bombay High Court for AY.s 2000-01 to AY 2004-05 ,that the Department had not filed appeal yet for AY 2006- 07 to AY 2009-10 where decision was received in July,2015,that the DRP had adjudicated the issues in favour of the assessee following the orders of the Tribunal. 3.4. In our opinion, there is no need to interfere with the Directions of the DRP, as it had followed the orders of the Tribunal for the earlier AY.s.which are yet to reversed by the Hon ble Bombay High Court. Following the orders of earlier AY.s.of the Tribunal, we decide the effective ground of appeal against the AO. As a result, appeal filed by the AO stands dismissed. 7. Respectfully following the said orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uashed. 2. Addition on Account of Royalty 2.1 On the facts and in the circumstances of the case and in law, the Learned AO filed, while passing the impugned assessment order pursuant to the DRP directions, in bringing to tax 90% of the receipts amounting to INR 2,92,60,134 as Royalties under the provisions of Article of the Double Taxation Avoidance Agreement between India and USA ('DTAA') and thus, to tax in India. 2.2 The Appellant therefore prays that the payment received by the Appellant be held as not in the nature of 'Royalties' under Article 12(3) of the DTAA. 3. Addition on account of Fees for Included Services 3.1 On the facts and in the circumstances of the ease and in law, the learned AO erred, while passing the impugned assessment order pursuant to the DRP directions, in bringing to tax 10% of the receipts amounting to INR. 32,51,126 as 'Fees for Included Service' under Article 12(4)(b) of the DTAA and thus liable to tax in India. 3.2 The Appellant therefore prays that the payment received by the Appellant be held as not in the nature of 'Fees for Included Services under Article 12(4)(b) of the DTAA read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case, and in law, the Learned AO erred in proposing to levy penalty under section 271(1)(c) of the Act. 9.2. The Appellant prays that the Learned AO be directed to not to levy penalty under section 271(1)(c)of the Act. The Appellant craves leave to add, alter, amend, modify, delete, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 12. Briefly stated, the assessee had filed its return of income for A.Y. 2015-16 on 09.09.2015, declaring a total income of ₹ 3,32,06,770/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. On the basis of the draft assessment order passed u/s 143(3) r.w.s 144C(1), dated 24.10.2017, the A.O proposed to assess 90% of the amount received by the assessee from Wockhardt Hospitals Ltd. as royalty and the balance 10% as FIS. 13. Aggrieved, the assessee filed objections before the DRP. However, the DRP not finding favour with the contentions advanced by the assessee upheld the view taken by the A.O. 14. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our appellate order. The Ground of appeal No. 7 is allowed for statistical purposes. 18. The assessee has assailed the incorrect recovery of interest u/s 244A of the Act. It is the claim of the assessee that the A.O had erred in recovering interest of ₹ 4,55,952/- u/s 244A of the Act. As the adjudication of the aforesaid aspect would require verification of facts, therefore, in all fairness we herein direct the A.O to verify the factual position. In case the claim of the assessee is found to be in order, then, the consequential relief be allowed to the assessee. The Ground of appeal No. 8 is allowed for statistical purposes. 19. The assessee has assailed before us the initiation of penalty proceedings u/s 271(1)(c) of the Act. As the aforesaid grievance of the assessee is premature, therefore, the same is dismissed. The Ground of appeal No. 9 is dismissed. 20. The appeal of the assessee is allowed in terms of our aforesaid observations. 21. Resultantly, both the appeals of the assessee i.e ITA No.5200/MUM/2017 ITA No. 4628/Mum/2018 are allowed in terms of our aforesaid observations. Order pronounced in the open court on 27.07.2021 - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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