TMI Blog2021 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... arly to IDC services. If that is the factual position, the member login fee cannot be treated as royalty since, while deciding assessee's appeal challenging the taxability of fees received towards IDC services, the Tribunal has consistently expressed the view that the services cannot be treated as royalty under the India-Singapore Tax treaty. In aforesaid view of the matter, we hold that member login fee is not in the nature of royalty under the treaty provision. Accordingly, addition is deleted. - I.T.A. No. 6267/Mum/2019 - - - Dated:- 22-9-2021 - Saktijit Dey, Member (J) And Rajesh Kumar, Member (A) For the Appellant : Jitendra Singh, AR For the Respondents : N. Padmanabhan, DR ORDER Per Saktijit Dey, ( JM ) Captioned appeal by the assessee is against final assessment order dated 13-08-2019 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for the assessment year 2016-17, in pursuance to the directions of the learned Dispute Resolution Panel (DRP). 2. The effective grounds raised by the assessee read as under:- Infrastructure data center charges taxed as royalty 3. Erred in considering infrastructure data center ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certified data centre owned by Edenred Pte. and located in Singapore; IDC services are provided using the IDC and IT/security team in Singapore, (iii) the services under the IDC agreement comprise of administration and supervision of central infrastructure; mailbox hosting services and website hosting services, (iv) IDC services ensure 100% uptime for critical external facing applications which need highly secured web environment and dedicated team of security experts to ensure 100% uptime Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 507/M/2016 of security systems (firewall, antivirus, access controls) which are also hosted on server in Singapore. We further observe that examples of websites/applications/softwares hosted by Indian group companies on the data centre in Singapore are web ordering application, corporate website, websites created for customers of Edenred India entities while making o loyalty program for them. A perusal of the documents filed before the AO and DRP clearly indicate that (i) appellant has an infrastructure data centre, not information centre at Singapore, (ii) the Indian group companies neither access nor use CPU of the appellant, (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said that the applicant receiving the services is enabled to apply the technology contained therein, (v) also there is nothing in the IT support services that answers the description of technical services as defined in the DTAA, (vi) therefore, the fees paid to AXA ARC by the applicant does not amount to fees for technical services within the meaning of the DTAA, (vii) as regards the payments made for providing access to software applications and to the server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the service agreement, same cannot be brought within the scope of the definition of Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 507/M/2016 'royalty' in Article 12.3, (viii) there is no transfer of any copyright in the computer software provided by AXA ARC and it cannot be said that the applicant has been conferred any right of usages of the equipment located abroad, more so, when the server is not dedicated to the applicant. Similarly, in the case of Standard Chartered Bank (supra), the assesses-bank entered into an agreement with a Singapore company SPt, for the provision of dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra), the assesses, a non-resident company has its registered office at Singapore. It is engaged in the business of providing access to an internet based air cargo portal known as Ezycargo at Singapore. The applicant received payments from an Indian subscribers for providing password to access and use the portal hosted from Singapore. The AAR held that payments made for concurrent access to utilize the sophisticated services offered by the portal would be covered by the expression royalty. We find that subsequently, after considering the decision in Cargo Community Network (P.) Ltd. (supra), Mumbai ITAT in the case of Standard Chartered Bank 11 ITR 721 and Yahoo India Pvt. 140 TTJ 195 held that no part Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 507/M/2016 of the payment could be said to be for use of specialized software on which data is processed as no right or privilege was granted to the company to independently use the computer. In the case IMT Labs (India) (P.) Ltd. (supra), the assessee, on Indian company, entered into an agreement with a non-resident American company for securing license of a particular software, which the applicant is entitled to use. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not in the nature of royalty. Accordingly, additions are deleted. Ground 2 in both the appeals are allowed. 5. There being no difference in the factual position in the impugned assessment year, respectfully following the earlier decisions of the Tribunal in assessee's own case, we delete the addition. This ground is allowed. 6. In ground 3, assessee has challenged the addition of other service charges (referral fee) as royalty. As could be seen, identical issue came up for consideration in assessee's own case in the preceding assessment years. In the latest order passed for the assessment years 2014-15 and 2015-16 (supra), the Tribunal has deleted the addition with the following observations:- 23. We have considered rival submissions and perused materials on record. It is observed that identical issue came up for consideration before the Tribunal in assessee's own case in assessment year 2010-11, 2011-12 and 2012-13. While deciding the issue, the Tribunal, negating the stand of the departmental authorities held as under:- 12. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions ore given b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 195 is not attracted . In Real Resourcing Ltd. (supra), the AAR, in the context of the India-UK DTAA, after relying on the Cushman Wakefield Ruling (supra) held that referral fee received by a UK company (applicant) from India based recruitment agency for referring potential Indian clients and candidates was not royalty or FTS. The relevant observations of the AAR in the context of Article 13 dealing with royalty/FTS is as under: Edenred Pte Ltd. ITA Nos. 1718/M/2014, 254/M/2015 507/M/2016 10. Collecting data and analyzing it and making a database for providing information on suitable candidates for recruitment, even if they are in the nature of consultancy services, cannot be considered to be ancillary and subsidiary to the enjoyment/application of the right or information referred to in para 3(a). Moreover, by access to the database, it cannot be said that the information concerning industrial, commercial or scientific experience will be transmitted by the applicant to the recruiting agencies. If the contention of Revenue is accepted, it would amount to unwarranted expansion of the terms FTS and royalties. Consideration for providing information concerning ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p for consideration in assessee's own case in assessment year 2015-16. While deciding the issue, the Tribunal deleted the addition with the following observations:- 30. We have considered rival submissions and perused materials on record. It is observed that the assessee merely provides a standard facility to the Indian entity without granting any exclusive right in respect of any copyright, process, etc. It is further relevant to observe, learned DRP, while deciding the issue has clearly and categorically observed that member login services are similarly to IDC services. If that is the factual position, the member login fee cannot be treated as royalty since, while deciding assessee's appeal challenging the taxability of fees received towards IDC services, the Tribunal has consistently expressed the view that the services cannot be treated as royalty under the India-Singapore Tax treaty. In aforesaid view of the matter, we hold that member login fee is not in the nature of royalty under the treaty provision. Accordingly, addition is deleted. This ground is allowed. 9. There being no difference in factual position in the impugned assessment year, respectfully foll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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