TMI Blog2023 (3) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed examination and results has not been brought out in the order. Most important whether the provision of the relevant DTAA regarding royalty and fees for technical services are applicable in the case of the assessee or not has to be re-examined. Even the ld. .D.R has submitted specifying the agreement of Softlayer Technologies Inc. and therein it has been clearly spelt out regarding use of trademark that such trademark ownership is exclusively with Softlayer Technologies Inc. and that the assessee has right only to use such trademark. If it is the right to use trademark, then that is covered within the definition of royalty as per Article 12 of the relevant DTAA. Therefore, this agreement (supra) also has to be looked into along with the provisions of DTAA. A.O shall come out with a speaking order on all these aspects after due verification. In view thereof, we set aside the order of the ld. CIT(A) and remand the matter to the file of the ld. A.O for re-adjudication as per law after complying with principles of natural justice. The grounds are allowed for statistical purposes. - ITA No. 596/PUN/2017 - - - Dated:- 2-3-2023 - SHRI PARTHA SARATHI CHAUDHURY , JUDICIAL ME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O that the assessee has incurred an amount of Rs. 30,90,448/- against payment for the following services received. Name of the party Nature of payment Amount paid Softlayer Dutch Holdings BV Hosting charges 26,10,173.95 McAfee Email Defence Services 3,38,601.15 Alt-N Technologies Inc. Email server software 1,41,674.28 3. It was further revealed that the assessee has not deducted TDS against such payment. The A.R. of the assessee was asked to furnish reasons for nondeduction of TDS along with details of such expenses. In response, the assessee submitted ledger of such expenses and stated that the payment has been made to foreign based company having no permanent establishment in India and therefore, the provisions of TDS is not applicable on such payment. The submissions made by the assessee did not find favour with the A.O and as per para 4.1 and 4.2 the ld. A.O held that as per section 9 of the Income-tax Act, 1961 (here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India and the non-resident has rendered services in India. This being so, amount in question is very much taxable, since the services have been rendered in India. The appellant has relied upon detail case laws but the same being prior to amendment in the explanation vide Finance Act, 2012, no support can be derived by the appellant from those case laws. The A.O has discussed the issue in detail and I do not find any infirmity in the order of the AO in this regard. Accordingly, ground No. 1 to 3 are dismissed. 5. At the time of hearing, the ld. A.R for the assessee vehemently contended that disallowance has been made by the Department considering only section 9 with Explanation 5 as amended by the Finance Act, 2012, w.e.f. 1-4-2012 r.w.s. 40(a) and section 195 of the Act. However, the ld. A.O has failed to analyse the applicability of DTAA between India and Netherland defining term royalty as per Article 12 of such DTAA. The provision of DTAA shall apply to the case of the assessee which has the over-riding effect on the normal provisions of the Act. In this regard, it was further contended that section 9 of the Act is a deeming provision where income deemed to accrue or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompetent authorities of the States shall by mutual agreement settle the mode of application of paragraph 2. [4. The term royalties as used in this article means payments of any kind received as a consideration for the use of or the right to use, any copy right of literary, artistic or scientific work including cinematograph film, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.] 5. For purposes of this Article, fees for technical services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personal) of such services; (a) are ancillary or subsidiary to the application of enjoyment of the right, property or information for which a payment described in paragraph4 of this Article is received or (b) make available technical knowledge, experience. Skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. 7. The ld. A.R further stated that royalty means the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 5, clause (c) and has held that sec. 9 which deals with income deemed to accrue or arise in India and as per clause (vi) the payment made to a nonresident entity has to be subjected to TDS whether or not such non-resident has any P.E. in India or not. The ld. A.O was of the opinion that the server charge which is paid by the assessee is also a type of service where right to use the server is inherent and thus falls in the definition of royalty. There is no requirement of having P.E in India for applicability of TDS and since the assessee has received services in India and the TDS has not been deducted u/s 195 of the Act therefore, such payment was inadmissible u/s 40(a) of the Act. In the order of the ld. A.O he mentions that the use of server by the assessee is inherent in the business of the assessee and therefore, the server charge is also a type of service and thus it is nothing but royalty. In holding so, the ld. A.O should have also looked into the provisions of DTAA between India and Netherland and should have specifically brought out the business functions of the assessee and analyzed such business functions vis- -vis the applicability of the said DTAA and the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
