TMI Blog2023 (7) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be considered as technical services, is a submission, which according to us, is completely misconceived. Given this position, we are not inclined to interfere with the decision arrived at by the Tribunal concerning the deletion of the addition made on account of commission received by the respondent/assessee. CIT(A)'s conclusion that the said amount received by the respondent/assessee had attributes of FTS was, in our view, erroneous. The attributes of what constitutes FTS has been dealt with extensively by the coordinate bench decision of this Court in DIT v. Panalfa Autoelektrik Ltd. [ 2014 (9) TMI 706 - DELHI HIGH COURT ] In this judgment, the coordinate bench has dealt with the order of the Authority for Advance Ruling (AAR) rendered in Wallace Pharmaceuticals (P.) Ltd. [ 2005 (9) TMI 26 - AUTHORITY FOR ADVANCE RULINGS ] The attempt of Mr Bhatia to distinguish the judgment in DIT v. Panalfa Autoelektrik Ltd. [ 2014 (9) TMI 706 - DELHI HIGH COURT ] must fail, as it misses the true ratio of the judgment. Addition of receipts as a subscription fee for e-journals from its affiliates, could not be treated as royalty, given the judgment of the Supreme Court rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the respondent/assessee. 4.1 The first addition concerned an amount equivalent to Rs. 24,84,114 paid to the respondent/assessee by an Indian entity, namely, Springer India Pvt. Ltd. (in short, SIPL ), against a Commissionaire Agreement. This addition consisted of two components. 4.2 The first component constituted a commission fee, amounting to Rs. 22,89,835. This payment, it appears, had been classified in the Form 3CEB report filed by SIPL as production and editorial charges . The respondent/assessee s stand before the statutory authorities was that although this payment had been inadvertently classified as production and editorial charges, it was nothing but commission received against services rendered. 4.3 The second component of the aforementioned (first) addition was an amount equivalent to Rs. 1,94,279, which, as per the Form 3CEB report filed by SIPL, was categorized as service charges for the sale of Indian journals in printed form . 4.4 The second addition made by the AO was an amount equivalent to Rs. 16,67,83,110. This amount represented the subscription fees received by the respondent/assessee against e-journals from two Indian entities, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as this aspect was concerned, the Tribunal followed the decision of the Supreme Court rendered in Engineering Analysis Center of Excellence (P.) Ltd. v CIT, [2021] 432 ITR 471 (SC). 7. It is against this backdrop that the appellant/revenue has preferred the instant appeal. Submissions of Counsel 8. Arguments in support of the appeal, on behalf of the appellant/revenue, were advanced by Mr. Ruchir Bhatia, learned Senior Standing Counsel, while Mr. Himanshu Sinha made submissions on behalf of the respondent/assessee. 9. Broadly, the arguments advanced by Mr. Bhatia can be paraphrased as follows: 9.1 The addition of Rs. 22,89,835/- sustained by the CIT(A) as FTS was tenable, having regard to the terms of the Commissionaire Agreement. The services such as promotion, sale and distribution of products globally could be categorised as consultancy services. Likewise, services such as order handling, inventory management, debtor management and subscription management could be categorised as managerial services. 9.2 The services provided by the respondent/assessee were thus wide and distinct . Therefore, the decision of the coordinate bench of this Court rendered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 The respondent/assessee, which is a German company, was part of Springer Science + Business Media Group [in short, The Springer Group ] during the period under consideration. The Springer Group was engaged in the business of publishing books, and academic journals, in the field of natural sciences, technology and medicine. 12.2 As part of the Springer Group's business model, the respondent/assessee functioned as a non-exclusive sales representative globally, except in the Americas, of the Springer Group's affiliated publisher entities, which included SIPL. The Commissionaire Agreement executed between the respondent/assessee and SIPL captured the functions performed by the respondent/assessee as part of the Springer Group. 12.3 Accordingly, the respondent/assessee, pursuant to its appointment as a Commissionaire, promoted, sold and distributed, print and electronic books and journals published by SIPL. Besides this, under the very same Commissionaire Agreement, the respondent/assessee provided sales and marketing services, customer services, order handling, delivery invoicing, debtor and subscription management, and processing of return copies, amongst other servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es where consultancy services involve rendering advice, with or without expertise in technology. 13.5 Mr Sinha argued that the remit of the respondent/assessee was to further sales and to promote and distribute books published by SIPL, in electronic form or otherwise. Besides this, the respondent/assessee also rendered support services for business operations. Thus, none of the services offered by the respondent/assessee involved an element of technical expertise or advice. Therefore, the services rendered by the respondent/assessee could not be characterised as FTS under the DTAA, or the Act. 13.6 Further, Mr Sinha submitted that the Tribunal rightly relied upon its decision in the Springer Verlagh case, wherein the following decisions and principles, articulated therein by this Court and other Courts, were examined, and addition made by the CIT(A) in that case were deleted: (i) DIT v. Panalfa Autoelektrik Ltd. (ii) CIT v. Group Ism (P.) Ltd. [2015] 57 taxmann.com 450 (Del) (iii) Evolv Clothing Co. (P.) Ltd. v. ACIT [2018] 94 taxmann.com 449 (Mad) (iv) Skycell Communications Ltd. and Anr. v. DCIT [2001] 251 ITR 53 (Mad) Reasoning and Analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to promote, sell and distribute books and journals published by SIPL in print and electronic form. Besides this, something which is not disputed by the appellant/revenue, the following services were rendered by the respondent/assessee: (i) Global sales and marketing services (ii) Customer services (iii) Order-handling (iv) Address maintenance (v) Stock keeping and inventory management (vi) Invoicing (vii) Delivery (physical as well as online) (viii) Debtor management services (ix) Subscription management (x) Return copies processing 17. For rendering the aforementioned services, the respondent/assessee was paid a commission, at the rate of 9.9%, on the net revenue amount of any and all sales commissioned through the intermediary of the respondent/assessee. (See Article 4a 1 of the Commissionaire Agreement). 18. Furthermore, the respondent/assessee was empowered to retain the commission when transferring the revenue to SIPL, or via any other payment of commission agreed upon between SIPL and itself. 19. Importantly, the title in the publications remained with SIPL, which the respondent/assessee could assign prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision arrived at by the Tribunal concerning the deletion of the addition made amounting to Rs. 22,89,835, on account of commission received by the respondent/assessee. The CIT(A)'s conclusion that the said amount received by the respondent/assessee had attributes of FTS was, in our view, erroneous. 24.1 The attributes of what constitutes FTS has been dealt with extensively by the coordinate bench decision of this Court in DIT v. Panalfa Autoelektrik Ltd. In this judgment, the coordinate bench has dealt with the order of the Authority for Advance Ruling (AAR) rendered in Wallace Pharmaceuticals (P.) Ltd. The attempt of Mr Bhatia to distinguish the judgment in DIT v. Panalfa Autoelektrik Ltd. must fail, as it misses the true ratio of the judgment. 25. This brings us to the second addition. We must note that in the course of arguments, Mr Bhatia had indicated that the addition of Rs. 16,67,83,110/- received by the respondent/assessee as a subscription fee for e-journals from its affiliates, could not be treated as royalty, given the judgment of the Supreme Court rendered in Engineering Analysis. However, in the written submissions, for the first time, contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as the Products ) and to fulfil the needs and requirements of the customers for Publisher s Products there. The Publisher retains the right to make sales directly to its customers. Commissionaire will act as distributor of Publisher and will therefore act in its own name but for the risk and account of the Publisher, Prices for the Products will be determined by the Publisher. 3. Article 3. Scope of the Commissionaire s basic responsibilities Commissionaire shall perform (either itself or by means of delegation to related or non-related party) the following services as may be required by Publisher, in accordance with the highest standards of the industry and in accordance with the Publisher s Terms and Conditions: (a) Customer services (b) Order handling (c) Address maintenance (d) Stock-keeping and inventory management (e) Invoicing (f) Delivery (Physical as well as online access) (g) Debtor management services (e.g.. collect outstanding invoices) (h) Subscriptions management (i) Return copies processing Commissionaire shall arrange for global sales and marketing services. The allocation of the global sales marketing costs incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
