TMI Blog2023 (12) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that service made available by Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such services. We hold that the subscription, professional and training services rendered by the assessee does not fall within the definition of FTS both under the Act as well as under the DTAA and accordingly the same cannot be taxed in India. Accordingly, the Grounds 1 to 3 raised by the assessee are allowed. - Shri Kul Bharat, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Assessee : Sh. Aditya Vohra, Adv.; And Sh. Hardeep Chawla, Adv. For the Department : Sh. Vizay B. Vasanta, CIT(DR) ORDER PER KUL BHARAT, JM: These two appeals preferred by the assessee pertain to A.Y. 2020-21 and 2022-23. Since facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case and law, the Ld. AO erred in not granting credit for entire taxes as appearing in Form 26AS in impugned order as directed by the Ld. DRP and even though the entire receipts have been assesm to tax. 7. On the facts and circumstances of the case and in law, the Ld. AO has erred in charging inter under section 234C/234D of the Act. 8. On the facts and circumstance of the case and in law, the interest under section 234A and 234B the Act are consequential in nature and would undergo change on the basis of relief provided in the aforesaid grounds of appeal. 9. On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings by issuing notice under section 274 read with section 270A of the Act. The Appellant craves leave to alter, amend, or withdraw all or any of the grounds herein or add any further grounds as may be considered necessary either before or during the hearing. 3. Facts, in brief, are that the assessee company filed its original return of income for the assessment year 2020-21 on 12.02.2021 declaring total income at INR 172,56,16,120/-. The case was selected for scrutiny assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical services by observing as under: 7. We find that the Master Agreement of ServiceNow was placed on record and the same was also furnished before the lower authorities. It would be relevant to address some of the clauses in the said contract :- Definitions: Clause 1.14: Intellectual Property Rights means all intellectual property rights throughout the world, including, without limitation, patents, copyrights, trademarks, trade secrets and contractual or other rights in confidential information , moral rights, rights of privacy and publicity , and any other intellectual and industrial property and proprietary rights including registrations, applications, renewals and extensions of such rights worldwide. Clause 1.29: ServiceNow Professional Services means consulting, training, implementation integration or other professional services provided by ServiceNow, including: (a) standardized and branded professional services as published by ServiceNow; or (b) customized professional services including the production of any related deliverables, performed y ServiceNow pursuant to a statement of work. Clause 1.32: Subscription Service means the Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts in Participant Technology (including in any source code originally authored by Participant using the Subscription Service), Participant Trademarks, or Participant s marketing materials; and nothing in this Agreement transfers or assigns to Participant any of Service Now s Intellectual Property Rights in ServiceNow Technology (including in any preexisting works of ServiceNow that are modified by Participant), ServiceNow Trademarks, or Collateral. There are no implied licenses under this Agreement, and any rights of a party that are not expressly granted to the other party hereunder are reserved. PROGRAM TERMS (APPENDIX 1 to the aforesaid Agreement) FOR THE PARTNERNOW SALES PARTNER PROGRAM 3. RESLLER RIGHTS 3.1. Appointment. An Appointment Confirmation that appoints Participant to the Program alone does not constitute an authorization for Participant to resell the Subscription Services, ServiceNow Professional Services or any other products or services of ServiceNow. Such resale authorization may only be granted pursuant to an Appointment Confirmation that expressly appoints Participant as ServiceNow s authorized reseller (which may be provided sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant operative portion of the judgement of Hon ble Karnataka High Court is reproduced hereunder:- 13. Under the Act if the consideration paid for rendering technical services constitutes income by way of fees for technical services, it is taxable. However, Article 12 of the aforesaid India-Netherlands Treaty defines fees for technical services for the purpose of Article 12 which deals with royalties and fees for technical services. The fees for technical services means the payment of any amount to any person in consideration for rendering of any technical services only, if such services make available technical knowledge, expertise, skill, knowhow or processes. If the technical knowledge expertise, skill, know how or process is not made available by the service provider, who has rendered technical service for the purpose of Article 12 of DTAA it would not constitute fees for technical services. To that extent the definition of fee for technical services found in the agreement is inconsistent with the definition of fees for technical services provided in Explanation 2 to Clause (vii) of sub Section (1) of Section 9. In view of Section 90 the definition of fees for technical s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical Services. Once all such technology is made available it is open to the recipient of the service to make use of the said technology. The tax is not dependent on the use of the technology by the recipient. The recipient after receiving of technology may use or may not use the technology. It has no bearing on the taxability aspect is concerned. When technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilises for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used. Therefore, unless the service provider makes available his technical knowledge, experience, skill, know how or process to the recipient of the technical service, in view of the Clauses in the DTAA. the liability, to tax is not attracted. 7.2. In the instant case, as state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2023. The assessee has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Hon'ble Dispute Resolution Panel ('Ld. DRP' ) erred in not quoting a valid computer-generated DIN on the body of DRP directions dated 19 April 023 under section 144C(5) of the Act, in contravention to the Circular No. 19 of 2019 by the Central Board of Direct Taxes ('CBDT ), thus rendering such an order/direction to be invalid and never to have been issued as per para 4 of the said circular. 2. On the facts and in the circumstances of the case and in law, the final assessment order dated 31 May 2023 passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act pursuant to invalid and non-est directions passed by the Ld. DRP, is bad in law, null and void and liable to be quashed. 3. Without prejudice to the Ground No.1 and 2 above, on the facts and circumstances of the case and in law, the Ld. AO and the Ld. DRP erred in making an addition of INR 248,32,06,556 to the income of the Appellant on account of subscription, professional and training services without appreciating the fact that these services do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as DTAA. The assessee filed objections against the action of the AO before the learned DRP objecting against draft order passed u/s 144C(1) of the Income-tax Act, 1961(hereafter referred to as the Act ). Learned DRP considered the objections and held that there was no reason to deviate from the finding of the learned DRP for A.Y. 2019-20, whereby the learned DRP had upheld that the receipts from subscription payments training and professional fees were taxable in India as FTS. However, in respect of the credit of taxes the AO was directed to verify the factual submissions of the assessee and grant credit as per law. Thereafter the AO passed the impugned order u/s 143(3) read with section 144C(13) vide order dated 31.05.2023. 14. At the hearing learned counsel for the assessee did not press ground nos. 1 2. Accordingly, ground nos. 1 2 stand dismissed as not pressed. 15. Ground nos. 3 to 5 are against addition of INR 248,32,06,556/- treating the same as FTS on account of subscription, professional and training services. Admittedly the facts are identical to earlier years in assessee s own case. As observed in assessee s appeal for A.Y. 2020-21, this issue has been el ..... 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