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TMI Blog2021 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as well as under the India - Singapore DTAA. Member login fee taxed as royalty 5. Erred in considering member login fee of INR 1,00,98,887 to De taxable as royalty under the Act as well as under the India - Singapore DTAA." 3. At the outset, Shri Jitendra Singh, learned counsel appearing for the assessee and Shri N Padmanabhan, learned departmental representative agreed that all the issues arising in this appeal are of recurring nature and have been decided by the Tribunal in favour of the assessee in preceding assessment years. However, the learned departmental representative relied upon the observations of the assessing officer and learned Commissioner (Appeals). 4. Having considered rival submissions and perused facts on record, we find that the first issue as raised in ground 3 relates to taxability of infrastructure data centre (IDC) charges as royalty. As submitted by both the parties, this is a recurring dispute between the parties since assessment year 2010-11. In the latest order passed for assessment years 2014-15 and 2015-16, the Tribunal has deleted the addition with the following observations:- "7. We have considered rival submissions and perused materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e standard IDC services and not use of any software, (vii) bandwidth and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such bandwidth and network and not its use, (viii) consideration is for IDC services and not any specific program and (ix) no embedded/secret software is developed by the appellant. Against the above factual backdrop, let us discuss below the cose laws relied on both sides. 6.1 We begin with the case laws relied on by the id. counsel. A plethora of precedents on the subject in which we are presently concerned compels us, in order to avoid prolixity, to refer only a few decisions below. Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016. In the case of Bharati Axa General Insurance Co. Ltd. (supra), the appellant, an Indian company carrying on business of general insurance entered into o service agreement with a Singapore company AXA ARC for receiving assistance such as business support, market information, technology support services and strategy support etc. from the tatter. The AAR held that (i) though the services rendered by AXA ARC may well be brought within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be a payment for a facility which is available to any person wilting to use the facility, (ii) system software which is embedded in the computer hardware by which the computer hardware functions is not owned by SPL and SPL only has a license to use the system software; (in) consideration received by SPL is for using the computer hardware which does not involve use or right to use a process, (iv) there is nothing on record to establish that the hardware could be accessed and put to use by the assesses by means of positive acts, (v) therefore, it cannot be said that the payment by the assessee to SPL is royalty within the meaning of Article 12 of the treaty. In ExxonMobil Company India (P.) Ltd. (supra), the assessee had paid certain amount to 'EMCAP', Singapore towards global support fees. The AO opined that payment made by the assessee was in the nature of FTS as defined in Explanation 2 to section 9(1)(vii) of the Act. The Tribunal observed that as per terms of agreement, EMCAP had to provide management consulting, Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 functional advice, administrative, technical, professional and other supporting service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression 'royalties' as used in Article 12. However, we find that in the instant case, appellant only provides service by using its hardware/security devices/personnel and not use of any software and therefore the above case is distinguishable from the present appeal. In Thought Buzz (P.) Ltd. (supra), the applicant, a Singapore company was engaged in providing social media monitoring service for a company, brand or product. It was a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. The applicant offered service on charging a subscription. The clients, who subscribe, can login to its website to do a search on what is being spoken about various brands and so on. The AAR held that the amount received from offering the particular Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 subscription based service is taxable in India as 'royalty' in terms of paragraph 2 of Article 12 of the DTAC between India & Singapore. However, we find that in the instant case, the appellant is only providing IDC service which includes administration and supervision of central infrastructure, mailbox hosting servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case, referral services/other services are provided to support Surf Cold in carrying on its business. These services do not make available any technical knowledge, skill, knowhow or processes to Surf Gold because there is no transmission of the technical knowledge, experience, skill etc. from the appellant to Surf Gold or its clients. In the case of Cushman & Wakefield (S) Pte. Ltd. (supra), the applicant a foreign company based in Singapore is engaged in the business of rendering real estate services to its local and international clients. The applicant has developed certain international client relationships and in accordance with Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 global policy of the group, various offices provide referral services to other Cushman & Wakefield (C&W) Offices. The applicant entered into a referral agreement with Indian group company whereby the applicant refers/recommends potential customers desirous of obtaining real estate consulting and associated services in India, Further the applicant was not responsible for persuading the customers to avail the services of the Indian group company, nor negotiating or collecting f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian company, providing international real estate advisory and management services, since referral services were rendered entirely outside India, it would not fall within the scope of 'total income' of so id foreign concern as per section 5(2) and (ii) referral fees paid by assessee-Indian company for availing referral services which were rendered by foreign concern entirely in USA would constitute business profits of foreign company under Article 7 of the India-USA DTAA; in absence of PE in India, it was not taxable in India. The distillation of precedents must now be applied by us to the facts of the present case. We are of the considered view that in the context of the above factual scenario and position of law, the revenues under the referral Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 & 507/M/2016 agreement is not taxable in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA or FTS under the India-Singapore DTAA, Therefore, we delete the addition of Rs. 39,94,209/- made by the AO towards referral fee and allow the 4th & 5th ground of appeal." 24. Identical view was expressed by the Tribunal while deciding the issue again in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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