TMI Blog2023 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... erred by the order against the final assessment order passed by the Assessing Officer dated 16/03/2022 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 25/02/2022 for the A.Y.2018-19. 2. The assessee has raised the following grounds of appeal:- Based on the facts and circumstances of the case, Shell Information Technology International BV (hereinafter referred to as 'SITI BV' or 'the Appellant') craves leave to prefer an appeal against the order passed by the Deputy Commissioner of Income Tax (International Taxation), Range-4(2X1), Mumbai (hereinafter referred to as the learned AO ] under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel-2, (hereinafter referred to as the Hon'ble DRP) on the following grounds, each of which are without prejudice to one another. On the facts and circumstances of the case and in law, the learned AO based on the directions of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in levying interest under section 234B of the Act without appreciating the facts and circumstances of the case. Penalty under section 270A of the Act 9. Erred in levying penalty under section 270A of the Act for misreporting/underreporting particulars of income without appreciating the facts and circumstances of the case. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal. 3. We have heard rival submissions and perused the materials available on record. The assessee is a tax resident of Netherlands. It is engaged in providing Information Technology Support Services to Shell Group entities as well as to Key Application Service (KAS) provider worldwide. The return of income for the A.Y.2018-19 was filed by the assessee on 29/11/2018 declaring total income of Rs. Nil claiming refund of Rs.7,19,25,900/-. The assessee operates in Europe, United States and Asia Pacific region. During the year ended 31/03/2018, the company provided software access and information technology support services to Indian parties. The details of Revenue earned by the company from In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices etc. to KAS as well as Shell group entities. Expenses incurred in relation to the services were in the nature of cost allocations and were allocated without any mark-up. 3.1. During the course of assessment proceedings, the assessee was sought to explain as to why the receipts towards IT support services should not be treated as fee for technical services under the Act as well as under the DTAA as has been done in earlier years. In reply, the assessee submitted that it works on cost only arrangement i.e. the common cost incurred by the company for various support services are charged to Shell entities for availing such services. The assessee further submitted that the costs are allocated to the entities availing the services on the basis of appropriate allocation keys depending upon the nature of costs incurred. These costs are not marked up and are charged to the cost sharers on the basis of actual costs incurred by the assessee. Without prejudice to the aforesaid submissions, the assessee further submitted that income received from Indian customers in respect of services of providing IT support services, helpdesk services and network access and related services provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal relied upon by the Ld. counsel. As pointed out by the Ld. counsel, the coordinate Benches have decided the identical issue in favour of the assessee in the assessee's appeals pertaining to the AYs 2011-12 to 2014-15. We further notice that Ground No. 5 and 6 of the present appeal are identical to the assessee's appeal for the AY 2015-16 and the coordinate Bench has decided the said issue in favour of the assessee by following the decision of the Tribunal in assessee's own appeals pertaining to the earlier assessment years. The findings of the coordinate Bench are as under:- 7. Coming to Ground Nos. 5 and 6 of Grounds of appeal, Ld. Counsel for the assessee submitted that these grounds relates to receipts towards IT support services held as FTS under the Act as well as the India Netherlands DTAA, and it was decided in favour of the assessee for the A.Y.2011-12 to 2014-15 by the Tribunal. Copy of the order is placed on record. 8. Ld. DR vehemently supported the orders of the authorities below. 9. We have heard the rival submissions and perused the orders of the authorities below. We have perused the order of the Tribunal for the A.Y.2010-11 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that under- the IT Agreement, the French company is to provide support services through a central team in the area of Information Technology to the Applicant and to its other subsidiaries in the world. The provision of support services by the French company would 'itself make available, the technical knowledge/ experience to the Applicant. In Porfetti Van Melle Holdings B.V1 this Authority held the view that the expression 'in available only means that the recipient of the service should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or knowhow in future on his own . Here, information technology relating to design, engineering, manufacturing and supply of electric equipment that help in transmission and distribution of power, commissioning and servicing of tr'1nernv ion and distribution system is provided to the Indian entity Which is applied in running the business of the Applicant and the employees of the Applicant would got equipped to carry on the systems on their own without reference to the French Company, when the IT Agreement comes to an end. It is not as if for making available, the recipient must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well. For this purpose, reference can be made to the scope of services to be rendered by SITI BV to WIPRO under the Services Agreement (copy of which is enclosed in the paper book of the assessee) and from the same Article 3 is reproduced below: Article 3 - Provision of Services SITI BV shall provide the IT Service Provider with the service. Further, 'Service' has been defined in Article I - Definitions as 'the combined Sub-services provided by S/TI BV to she IT Services Provider wider this Agreement, which Sub-services include the (if Services, the STO Services and she provision by S/TI BV to the IT Service Provider and Service Personnel of access to and/or use -of GI software and/or Optional Software.... 11. Further, SITI BV is company incorporated in The Netherlands. SITI BV is a tax resident of The Netherlands eligible to claim the benefits, conferred by the Double Taxation Avoidance Agreement entered into between India and The Netherlands (Treaty'). Section 90 of the Act read with the Circulars and several judicial precedents issued thereunder provide that a non-resident taxpayer is eligible to be assessed as per the provisions of the Act or as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch receipts would not amount to fee for technical services so as to the concept of make available clause' contained in Article l3(4)() of the treaty has not been satisfied In the given facts and circumstances of the case Hon'ble Delhi High Court vide Para 8 to 13 held as under: - 8. Before we go on to examine the findings of the Tribunal it would be pertinent to refer to article 13 of the DTAA to the extent it is relevant :- ARTICLE 13- 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 law of that Stale; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) In the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services) of this Convention (6), (7), 7 and (9) ** ** 9. A plain reading of Article 13(4)(c) of the DTAA indicates that 'fees for technical services' would mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services which, inter alia, makes available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the Tribunal this make available condition has not been satisfied inasmuch as no technical knowledge, experience, skill, know- how, processes, have been made dye/lab/c by the assessee to the insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. - 10. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article,. 13(4)'(c) of the DTAA read with section 9(1)(vii) of the said Act. While doin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis etc. as alleged by the A.O. The Tribunal also noted the process by which the transactions takes place It has been pointed out that the originating insurer in India would contact J. B. Boda/ M, B. Boda for placing identified risks/ class of risks with international reinsurers. J.B. Boda, in turn, would contact one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the- international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final-decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer it was also pointed out that as per the normal industry practice, tea reinsurance premium net of brokerage al 10% as per the policy contract is remitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices referred in Article 12(4) of the Indo USA DTAA concerning the expression? Available? was also not considered by the Authority for Advance Rulings; It-was submitted that the said Authority refused to look into the IndoPortugese DTAA or the lndo USA DTAA and memorandum of understanding between India and USA on the ground that only the Indo Netherlands DTAC needed to be looked into. 2. The learned counsel for the respondent states that the Authority for Advance Rulings was correct in not looking, into the lndo - Portugese DTAA, but insofar as the Indo-USA DTAA is concerned a provision similar to that DTAA has been incorporated in the Ind o- Netherlands DTAC by virtue of paragraph 5 of Article 12 of the same, whereby the very same make available clause, which is to be found in the DTAA between India and USA read with the memorandum of understanding connected therewith, has been incorporated into Indo- Netherlands convention by way of amendment on 30.08.1999, notification No. S.O. 693 (E) [reported in (1999) 239 ITR (Stat) 56]. It is evident that the Authority for Advance Rulings had not considered the said amendment. 14. In view of the above, we are of the that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in assessee's own case cited supra, which has also followed the judicial precedents in assessee's own case, the impugned addition made by treating payment received for IT support services as Fee for Technical Services under the provisions of the Act and under Article-12 of the DTAA, is deleted. As a result, ground nos.3, 4 and 5 raised in assessee's appeal are allowed. 11. Insofar as grounds nos.6 and 7, raised in assessee's appeal are concerned, the learned DRP has already held that the payment towards IT support services could not fall under royalty‟ in the instant case. Thus, the Assessing Officer is directed to follow the directions issued by the learned DRP under section 144C(5) of the Act. As a result, grounds nos.6 and 7, raised in assessee s appeal are allowed. 3.3. Respectfully following the same, the ground Nos. 3-6 raised by the assessee are allowed. 4. The ground No.1 is general in nature and does not require any specific adjudication. 5. In so far as ground No.2 raised in assessee s appeal is concerned, the same is kept open by respectfully following the order passed by the Co-ordinate Bench of the Tribunal in assessee s ow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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