TMI Blog2022 (4) TMI 1511X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted as on analysing the DTAA between India and Belgium DTAA rendered via protocol attached to the Tax Treaty between India Hungary rendered via Protocal attached to the Tax Treaty between Indian Greece, that the payments received by the assessee on account of Service rendered to Hutch cannot be brought to tax in view of the principle of most favoured nation (MFN) clause in the Tax Treaty unless there is a right to use secret process by Hutch in India. HELD THAT:- We deem it just and proper to remand the issue back to the Ld.AO for a de novo consideration. We also direct the Ld.AO to consider the issue based on the recorded arguments advanced by both sides keeping all contentions open. AO is directed to verify the submissions of both sides, by keeping in mind the principle laid down by the Hon ble Supreme Court in case of Engineering Analysis [ 2021 (3) TMI 138 - SUPREME COURT ] that domestic law cannot be read into treaties unless the treaties are amended bilaterally. Needless to say that proper opportunity of being heard must be granted to assessee. Grounds raised by assessee stands allowed for statistical purposes. - IT(IT)A No. 2884/Bang/2017 - - - Dated:- 26-4-2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile a tax return in India. 9. The lower authorities erred in levying interest under section 234B of the IT Act in the case of the Appellant, as according to the Revenue Authorities, the levy of tax itself has arisen only due to a retrospective amendment in the IT Act. 10. The lower authorities erred in levying interest under section 234C of the IT Act in the case of the Appellant, as according to the Revenue Authorities. the paver was liable to withhold tax on the sums paid to the Appellant. 11. Without prejudice, the lower authorities erred in computing the interest leviable under section 234A. 234B and 234C of the Act. 2. Brief facts of the case are as under: 2.1 The assessee is a tax resident of Belgium. The assessee is a telecommunication operator headquartered in Belgium. 2.2 The Ld.AO observed that during the relevant assessment year, the assessee provided services specified to Hutch as specified in CSA from outside India, in lieu of which consideration was received from Hutch without deduction of tax. 2.3 The Ld.AO noted that assessee did not file return of income in India, on its income that was taxable in India for year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R submitted that no new evidences need to be looked into to adjudicate these issues. He submitted that this issue though was by assesse as an alternative ground, it was not adjudicated by the DRP as the payment received by assessee was upheld to be Rotalty in the hands of assessee. He thus prayed for its admission. The Ld.Sr.DR objected for admission of the same but couldn t controvert that, the additional ground raised is a legal issue. We have perused the submissions advanced by both sides. We note that the additional ground is connected with the main issue of challenge by assessee regarding the nature of payment and no new facts needs to be investigated for adjudicating the same except for analysing the law under section 9(1)(vii) of the Act, for its application. Considering the submissions and respectfully following the decisions of Hon ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Accordingly, the additional ground raised stands admitted. 6. The Ld.Counsel submitted that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AmSat International Systems Inc. reported in (2006) 9 SOT 100, the Delhi Tribunal held that process should be a 'secret process' for the payment thereof to constitute royalty under the DTAA. The issue was subsequently referred to a Special Bench of the Tribunal in New Skies Satellite NV vs. ACIT reported in (2009) 121 ITD 1 and the Hon ble Special Bench held that the term 'secret' appearing in phrase 'secret formula or process' in Explanation 2 to Section 9(1)(vi) and in relevant article of DTAA would not qualify word `process'. However, the Delhi High Court in Asia Satellite Telecommunications Co. Ltd. (supra) decided otherwise. This part of the judgment has been sought to be overcome by introduction of Explanation 6 to Section 9(1)(vi) of the IT Act. Explanation 6 seeks to say that consideration for use of a 'non secret process' would not be regarded as royalty. It is undisputed that the definition of 'royalty' in the DTAA has not been amended. The Ld.Counsel submits that the orders proceeded on the premise that the Explanation to IT Act would automatically apply to the DTAA as well. Undisputedly, the DTAA between India and Belgium has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Network Ltd's case (supra) recognizes that the question will have to be decided and the submission argued, Verizon Communications Singapore Pte. Ltd's case (supra) cites no reason for the extension of the amendments to the DTAA. 11. The Ld.Counsel submitted that the above view has been considered by Hon ble Supreme Court in case of Engineering Analysis Center of Excellence (P.) Ltd. vs.CIT reported in (2021) 432 ITR 471. The Ld.Counsel further submitted that the view of Hon ble Delhi High Court in case of DDIT vs.New Skies Satellite BV(supra) has been approved by observing as under: 155. In Director of Income Tax v. New Skies Satellite BV, (2016) 382 ITR 114 [ New Skies Satellite V, a Division Bench of the High Court of Delhi correctly observed that mere positions taken with respect to the OECD Commentary do not alter the DTAA's provisions, unless it is actually amended by way of bilateral renegotiation ... 156. It is significant to note that after India took such positions qua the OECD Commentary, no bilateral amendment was made by India and the other Contracting States to change the definition of royalties contained in any of the DTAAs that we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this Court, indefensible. This part of the judgment of Delhi High Court has been expressly approved by the Supreme Court in Engineering Analysis Centre at para 155. The Ld. Counsel elaborated on his propositions and submitted as under: 12. The Ld. Counsel submitted that assessee received payments during the year under consideration for services rendered to Indian Company, as per Carrier Service Agreement(CSA). The Ld.Counsel placed reliance on following clauses in the Carrier Service Agreement(CSA) dated 13/07/2007 entered between the assessee and the Indian company are as under: ARTICLE 2 RIGHTS AND OBLIGATIONS 2.1. The Parties shall supply the Carrier Service in accordance with the provisions of the General Terms and Conditions of the Carrier Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive one (1) day from the date of the notice. 4.2 The prices offered by both service suppliers are inclusive of VAT, similar transfer tax (if any) or any other taxes applicable in the respective area of operation (i.e. India for Hutch and Belgium for BICS). However, the service taker will bear any taxes (except withholding tax) levied in its own country of residence and if any, possibly gross-up the fee to be paid to the service provider, to guarantee the net payment of the price agreed upon. In the event that payment of any amount of the Charges becomes subject to withholding tax, levy or similar payment obligation on sums due to the Service Provider under this Agreement such withholding tax amounts shall be borne and paid for by the Purchaser in addition to the sums due to the Service Provider. Should the Purchaser withhold any amounts and request that the Service Provider gross up its Charges to reflect such withholding, or otherwise make reference to such amounts on its Monthly Accounts, the Purchaser will provide the Service Provider free of charge with the appropriate certificate(s) from the relevant authorities confirming the amount of the withholding taxes, lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty;' 15. He submitted that the term process used under Explanation 2 to section 9(1)(vi) in the definition of 'royalty' does not imply any 'process' which is publicly available. The term process occurring under clauses (i), (ii) and (iii) of Explanation 2 to section 9(1)(vi) means a process which is an item of intellectual property. Clause (iii) of the said Explanation reads as follows: (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property He submitted that Clauses (i) (ii) of the said explanation also use the same coinage of terms. The words which surround the word 'process' in clauses (i) to (iii) of Explanation 2 to section 9(1 )(vi) refer to various species of intellectual properties such as patent, invention, model, design, formula, trade mark etc. It is the submission of the Ld.Counsel that the expression 'similar property' used at the end of the list further fortifies the stand that the terms 'patent, invention, model, design, secret formula or process or trade mark' are to be understood as belonging to the same class of properties viz. intellect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tch cannot fall within the ambit of Royalty under section 9(1)(vi) by virtue of Explanation 2. 18. Ld.Counsel then referred to Finance Act, 2012, by which Explanation 5 6 were added with retrospective effect from 1.6.1976 which reads as under: Explanation 5: For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not - (a) The possession or control of such right, property or information is with the payer; (b) Such right, property or information is used directly by the payer; (c) The location of such right, property or information is in India. Explanation 6: For the removal of doubts, it is hereby clarified that the expression process includes and shall be deemed to have always included transmission by satellite (including upPage linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret. 19. He submitted that by insertion of Explanation 5 6, meaning of word 'Process' has been widened. As per these explanations, the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting) as it is in the case of absolute proprietary rights. As a rule, the right to use already come into existence in these instance by authorized information(legitimate disclosure of secrets) . It may be restricted in the point of time in respect of the period following the expiry of the license. On the difference between a product with relatively simple technology, and a business secret. 22. The Ld.Counsel submitted that the meaning attached to phrase 'use or right to use' has been explained in following decisions: Decision of Authority For Advance Ruling(hereinafter referred to as AAR), in case of Cable Wireless Networks India(P.)Ltd., In re, reported in (2009) 182 Taxman 76 Decision of AAR in case of ISRO Satellite Centre reported in 2008) 307 ITR 59 Decision of AAR in case of Dell International Services (India) P. Ltd.In.re. reported in (2008) 172 Taxman 418. He submitted that the above decisions, lay down that, in order to satisfy 'use or right to use', the control and possession of right, property or information should be with payer. 23. He submitted that, in case of DCIT v. PanAmSat International Systems Inc., reported in (2006) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d secret before the word process also, then a comma would have been used after the word formula and further that the word secret cannot also be applied to the word trademark because once registered there is nothing secret about the trademark and the impossibility of reading the word secret before the word trademark further strengthens the view that the word secret cannot be read before the word process also. This naturally takes us to the question whether there is anything in article 12.3(a) of the DTAA between India and USA which militates against such a view. It must be remembered that India had no DTAA with Hongkong and hence the view taken by the Tribunal (supra) with regard to the clause (iii) of Explanation 2 below section 9(1)(vi) would apply if we were to also interpret the same provision. But article 12.3(a) is worded as below : The term royalties as used in this article means : (a)payments of any kind received as consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Explanation 2 such as patent, invention, model, formula and process etc. are intellectual properties. Similarly, the words which surround the words secret formula or process, in article 12.3(a) of the treaty refer to various species of intellectual properties such as patent, trademark, design or model, plan, etc. Thus the words secret formula or process must also refer to a specie of intellectual property applying the rule of ejusdem generis or noscitur a socii. 20. That takes us to a consideration of the question whether the process carried on by the assessee is a secret process. On this question, we have weighed the elaborate arguments advanced by both the sides carefully and hold that so far as the transponder technology is concerned there appears to be no secret technology , known only to a few. There is evidence adduced before us to show that the technology is even available in the form of published literature/book from which a person interested in it can obtain knowledge relating thereto. There is no evidence led from the side of the Department to show that the transponder technology is secret, known only to a few, and is either protected by law or is capable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal therein, on applying ratios pronounced in the above referred decisions, held it not as Royalty. 25. Whether the serviced rendered could be treated as Royalty under Article 12(3) of the DTAA between India and Belgium? The Ld. Counsel submitted that the DTAA between India and Belgium dated 07/02/1974 came into force notified date being 06/06/1975, wherein Article 12 dealt with Royalties . A supplementary Protocol dated 23/01/1988 was passed modifying DTAA that came into force on notified date being 02/03/1988. He submitted that, thereafter the DTAA was entered into between India and Belgium on 26/04/1997, which was notified on 31/10/1997. Article 12 deals with Royalties and Fees for Technical Services , that reads as under: ARTICLE 12:ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and, according to the laws of that State, but if the beneficial owner of the royalties or fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishment or fixed base is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right, information or technical services for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the royalties or fees for technical services shall remain taxable according to the laws of each Contracting State. He submitted from the above that the wording in Article 12(3)(a) shows that, only payments received as consideration for the use of , or the right to use any secret formula or process is necessary for the payment to be termed as Royalty . This is much narrower to the definition of royalty under the Act. 26. Ld. Counsel submitted that similar situation was analysed by the AAR in case of Dell International Services India (p.) Ltd.In.re.(supra), as under: 14. Whether the payment made by the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cidentally, we may mention that it was brought to our notice that similar bandwidth services through private circuits are being provided by many other telecom operators. Hence, the royalty definition under the Treaty relating to secret process is not attracted here. We may mention that the applicant contended that the decision of ITAT in Asia Satellite Telecommunications Co. Ltd.'s case (supra) is distinguishable on facts. It is unnecessary to deal with this aspect. 27. Ld. Counsel submitted that, interpretation of the term, process under Explanation 6 cannot be read into DTAA as the term used in DTAA under Article 12(3) is, secret process . He further submitted that, the term, secret process as per DTAA is a valuable right, the consideration for which is to be regarded as royalty . In support he relied on the decision of Hon ble Calcutta High Court in case of M.V.Philips vs.CIT(supra) has held as under: 14. Relying on the aforesaid, the learned advocate for the assessee contended that in the instant case under the agreement between the assessee and the Indian company, the assessee had made available to the Indian company technical information and know-how. Suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confidence to the Indian company and would not become the property of the Indian company till such information would become public. The Indian company was obliged to obtain similar undertakings of secrecy in respect of the information imparted by the assessee from its employees to the extent the latter would come to know of the same. The learned advocate for the revenue contended that it was apparent that such information made available to the assessee regarding methods and manufacturing processes were exclusive to the assessee and not available to the public in general. The assessee treated such information as its own property and made it clear that such information to the extent made available to the Indian company would not become the property of the latter. The same was not meant to be disclosed to third party. It was contended that, under the agreement, the Indian company was permitted to utilise such information to be imparted by the assessee for the period of the agreement and the Indian company would pay for the use thereof at an agreed rate. If such information was not meant to become the property of the Indian company, the same necessarily remained the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit he derives from the royalty are profits and gains within the meaning of Schedule D, notwithstanding the fact that every year his capital asset is diminishing in value. The owner of a secret process, such as was possessed by Mr. Handley Page, stands in a very analogous position; he has not a monopoly at law, but he has a monopoly in fact-a monopoly in fact arising from the possession by Mm of the secret knowledge of the process that he is carrying: on. That secret knowledge is as much his capital asset as is the patent monopoly the capital asset of the patentee, and, like the patent, he can use that capital asset in either or both of the following ways; he can himself carry on the secret process or he may-it is very seldom done owing to the obvious danger involved-grant a licence to a third person to carry on the secret process, securing himself against Ms secret process being divulged by that third party to others. In both these cases the profits he derives from carrying on the secret process himself and the royalty he might derive from the licensee would be annual profits or gains, within the meaning of Schedule D. (b) Musker (H.M. Inspector of Taxes)v. English Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in character have no decisive bearing upon the matter. A payment may even be described as 'pay', 'remuneration', etc., but that does not determine its quality, though the name by which it has been called may be relevant in determining its true nature, because this gives an indication of how the person who paid the money and the person who received it viewed it in the first instance. The periodicity of the payment does not make the payment a recurring income because periodicity may be the result of convenience and not necessarily the result of the establishment of a source expected to be productive over a certain period. These general principles have been settled firmly by this Court in a large number of cases. ... (p. 232) (d) CIT v. Cilag Ltd. [1968] 70 ITB 760 (Bom.): In this case a foreign company entered into an agreement with it a 60 per cent Indian subsidiary under which the Indian company was appointed the sole importer, distributor, processors and manufacturers of the products of the foreign company in India. The agreement further provided that the foreign company would provide the Indian subsidiary the know-how for manufacture of the active substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court quoted with approval the observation of Romer, LJ., in the case of Handley Page (supra) which has been noted earlier (g ) CIT v. Ahmedabad Mfg. Calico Printing Co. [1983] 139 ITR 806 (Guj.): In this case, the assessee, an Indian company, entered into an agreement with an English company under which the foreign company granted to the assessee sole and exclusive right and licence to manufacture, sell, distribute and exploit the products of the English company with improvements and modifications in India and the use of any Indian patent owned by the English company in respect of the said products. The English company also agreed to make available to the assessee or its authorised agents know-how within the knowledge of the English company for use by the assessee for manufacture of the products of the English company in India. The English company also agreed to make available to the assessee benefits or results of future research and development by the English company relating to its products and to furnish to the Indian company at the execution of the agreement secret or patent formulations used by the English company for the manufacture of its products. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Indian subsidiary to the assessee were payments of or in the nature of royalty or the same were merely being reimbursement of expenses. It was held by a Division Bench of this Court on the facts as found that payment was made by the Indian subsidiary to the assessee for sharing of expenses of research. It was noted that the agreement did not provide as to ultimately what would happen to the information furnished by the assessee to the Indian subsidiary and it was observed that if the agreement provided that the information would belong either to the assessee or to the subsidiary on payment then it could have been contended that the payments were either royalty or hiring charges for such information and as such taxable income. (I ) CIT v. Stanton Stavely (Overseas) Ltd. [1984] 146 ITR 405 (Cal.): In this case, the assessee a non-resident company incorporated in the U.K. entered into an agreement with the Indian Iron Steel Co. Ltd. under which the assessee authorised the Indian company to use during the continuance of the agreement the information to hecommunicated to the Indian company for manufacture of the products of the assessee in a specified territory. The agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a modern watch factory in India. The Government set up a company known as Hindusthan Machine Tools Ltd. wholly owned by the Government and transferred its rights, obligations and responsibilities under the agreement with the assessee to the Indian company. The agreement provided for payment of various amounts to the assessee for services and the technical know-how to be provided by the assessee to the Government or the Indian company. The said payments were respectively for supply of drawings and other information, a fee for technical and other assistance as agreed as also a royalty at a specified rate to be calculated on the price of the watches to be manufactured by the Indian company. It was held by the learned Judge that the amounts paid to the assessee by the Indian company on account of documentation and technical assistance fees were separate and were not payments of royalty or in the nature of royalty within the meaning of the double taxation agreement entered into by and between the Government of India and Japan. The Court considered the meaning of the term 'royalty' from the English and legal dictionaries and held that royalty is a payment made for the use of pate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right of the author is protected and sanctioned by the laws of copyright. 28. The Ld. Counsel submitted that the Hon ble Delhi High Court in case of DCIT vs.New Skies Satallite BV (supra), while considering the taxability of transmission of signals through satellite under India Thailand DTAA held that, any sum received could be treated as Royalty under the DTAA if it is received for use of secret process . He relied on following observations by the Hon ble Court. 55. The slight but apparently vital difference between the definitions under the DTAA and the domestic definition is the presence of a comma following the word process in the former. In the initial determinations before various ITATs across the country, much discussion took place on the implications of the presence or absence of the comma . A lot has been said about the relevance or otherwise of punctuation in the context of statutory construction. In spoken English, it would be unwise to argue against the importance of punctuation, where the placement of commas is notorious for diametrically opposite implications. However in the realm of statutory interpretation, courts are circumspect in allowing punctuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequence would be had the section been punctuated otherwise. Would there be any substantial difference in the import of the section if it were not punctuated the way it actually is? While this may not be conclusive evidence of a carefully punctuated provision, the repercussions go a long way to signify intent. If the inclusion or lack of a comma or a period gives rise to diametrically opposite consequences or large variations in taxing powers, as is in the present case, then the assumption must be that it was punctuated with a particular end in mind. The test therefore is not to see if it makes grammatical sense but to see if it takes on any legal consequences . 58. Nevertheless, whether or not punctuation plays an important part in statute interpretation, the construction Parliament gives to such punctuation, or in this case, the irrelevancy that it imputes to it, cannot be carried over to an international instrument where such comma may or may not have been evidence of a deliberate inclusion to influence the reading of the section. There is sufficient evidence for us to conclude that the process referred to in Article 12 must in fact be a secret process and was always me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alties, the characterization of the payment will depend to a large extent on the relevant contractual arrangements. Whilst the relevant contracts often refer to the lease of a transponder, in most cases the customer does not acquire the physical possession of the transponder but simply its transmission capacity: the satellite is operated by the lessor and the lessee has no access to the transponder that has been assigned to it. In such cases, the payments made by the customers would therefore be in the nature of payments for services, to which Article 7 applies, rather than payments for the use, or right to use, ICS equipment. A different, but much less frequent, transaction would be where the owner of the satellite leases it to another party so that the latter may operate it and either use it for its own purposes or offer its data transmission capacity to third parties. In such a case, the payment made by the satellite operator to the satellite owner could well be considered as a payment for the leasing of industrial, commercial or scientific equipment. Similar considerations apply to payments made to lease or purchase the capacity of cables for the transmission of electrical powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c ) N.V. Philips Vs. Commissioner of Income Tax [172 ITR 521] at pages 527 538-539. 59. On a final note, India's change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State's discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs. 29. He also referred to the observations made in case of DDIT vs. Nokia Networks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or transmission by satellite, cable, optic fibre or similar technology, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. The Protocol in India Hungary DTAA reads as under: In respect of Articles 10 (Dividends), 11 (Interest) and 12 (Royalties and fees for technical services), if under any Convention, Agreement or Protocol between India and a third State which is a member of the OECD, India limits its taxation at source on dividends, interest, royalties or fees for technical services to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of income, the same rate or scope as provided for in that Convention. Agreement or Protocol on the said items of income shall also apply under this Convention. 32. The Ld.Counsel submitted that India entered into DTAA with Greece, which is an OECD country in 1967. Thus, as per the MFN clause in India Hungary DTAA, Article 12 of the India Greece DTAA would apply, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions thereon. (1) The Ld. AO erred in exercising jurisdiction u/s 147 of the Act in the case of the appellant. Submission: It was found by the Ld.AO from the submissions filed by Vodafone South Ltd., that an amount of Rs.6,87,13,119/- was paid during the A.Y: 2008-09 to the assessee company towards provision of Interconnect Services. The same is taxable under the IT Act, 1961 as well as the under India-Belgium DTAA @ 10% on the onsite software development services. As the assessee company has neither paid taxes nor had the payer made the TDS in the said case. Also it was noted by the Ld.AO that the assessee company has not filed any return for A.Y: 2008-09. Therefore, under these circumstances the Ld.AO had the reason to believe that this income has escaped assessment for A.Y: 2008-09. In view of the above, the Hon'ble panel upheld the act of the Ld.AO in reopening the assessment. I agree with the Hon'ble DRP and the same may be upheld. (2) The lower authorities erred in holding the amount received by the appellant from its customers in India is in the nature of 'royalty' within the meaning of section 9(1)(vi) of the IT Act and under article 12(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f submissions made by the assessee, the order of the Ld.A.O, and Hon'ble DRP, Bangalore are not erroneous and not bad in law. The assessee's appeal may be dismissed. Prayer : In the wake of the above submissions, it is humbly prayed to dismiss the appeal of the assessee/appellant and any other order as may please your honours. Respectfully submitted. 36. The Ld.CIT.DR, ITAT-3, C Bench, Bangalore vide her letter dated 02.03.2022 filed a decision of Hon ble Supreme Court in case of Apex Laboratories Pvt. Ltd. vs. DCIT @ SPECIAL LEAVE PETITION (CIVIL) NO. 23207 OF 2019 dated. 22.02.2022 in support of her argument that what can t be done directly, can t be achieved indirectly. The Ld. Counsel also in rejoinder relied on one more recent decision by Hon ble Delhi High Court in case of BT Global Communications India Pvt. Ltd. reported in TS-209-ITAT-2022. The above referred arguments have not been raised by the assessee before the authorities, below and has not filed details regarding the transaction before the revenue. 37. Under such circumstances, we deem it just and proper to remand the issue back to the Ld.AO for a de novo consideration. We al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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