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TMI Blog2024 (8) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... s are, the assessee is a non-resident corporate entity incorporated in United States of America (USA) and a tax resident of USA. As stated, the assessee operates a global online learning platform, which offers anyone, anywhere access to online courses and degrees from leading universities and companies. For this purpose, the assessee has developed a proprietary platform to host multimedia courses for consumption by end-users. Through its platform, assessee offers online education/courses in various disciplines, including but not limited to management, arts, humanities, data analysis and philosophy etc. For this purpose, the assessee has entered into agreements with Indian customers including universities from outside India to provide access to its platform in India. The assessee had provided services to individuals, educational institutions and corporates. For providing such services, the assessee had earned fees of Rs. 75,66,52,591/-. In the return of income filed for the assessment year under dispute, the assessee had offered income of Rs. 17,98,07,270/-. 5. However, as far as the receipts of Rs. 75,66,52,591/-, the assessee claimed that such receipts are neither in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting-edge technology and services. 7. The Assessing Officer also observed that there is a training element in provisioning of services as no content can be onboarded without the training being given by the assessee about the features of that platform on how to use the platform for various functions and utilities. Thus, in the aforesaid premises, he ultimately concluded that the receipts are in the nature of FIS, while framing the draft assessment order. Against the draft assessment order, the assessee raised objections before learned DRP. While deciding the objections of the assessee, learned DRP held as under: "4.2.3 The Panel has considered the rival averments as mentioned above. The Panel takes a note of the AO's remarks made at para no. 9.3 to 9.4 of the draft order by which he has attempted to substantiate that assessee is not only providing content services to the customer in India but also providing whole range of user services which involve a high degree of human intervention. The AO further states that there is an element of training involved with respect to the customer and the client and the basis of the information availed through the proceedings conducting by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are of technical nature, however, while providing such services, the assessee has not made available any technical knowledge, knowhow, skill etc. to the service recipient. Therefore, the receipts cannot fall within the ambit of Article 12(4) of India - USA DTAA. In support of such contention, learned counsel relied upon the following decisions: 1. CIT Vs. Bharti Cellular Ltd. (2014) 6 SCC 401 2. CIT Vs. Tata Teleservices Ltd. (2023) 456 ITR 691 (Del) 3. CIT Vs. Bharti Airtel Ltd. (2024) 463 ITR 56 (Del) 4. CIT Vs. Bharti Airtel Ltd, SLP(C)No.1700-1701/2024 5. Elsevier Information systems GmbH Vs. DCIT, ITA No.1683/Mum/2015 6. Relx Inc. Vs. ACIT, ITA No. 1876 & 1877/Del/2022. 7. CIT Vs. Relx Inc. (2024) SCC Online Del 1314 10. Learned Departmental Representative, on the other hand, strongly relied upon the observations of the Assessing Officer and learned DRP. He submitted, the assessee cannot call itself a mere aggregator of services as it provides User Services and training to the customers. Therefore, the receipts have to be treated as FTS/FIS. In this context, he drew our attention not only to the observations of the Assessing Officer, but also the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order "13. In response to the directions of Hon'ble DRP, the agreement of the assessee with GITAM was perused. It is seen that the observations regarding the agreement of the assessee with GITAM has been discussed in the Draft assessment order (refer to para 8.2 and 8.3). Accordingly, the final assessment order is being passed at total assessed income of Rs. 75,66,52,591/- taxable at as per provisions of the Income Tax Act, 1961 and applicable surcharge and cess. Necessary forms to be issued, applicable interest to be charged and credit of taxes, if any after verification from the ITD system are to be allowed. Penalty u/s 270A is being proposed to initiate as discussed in earlier paragraphs of the order. Detailed computation of tax payable and interest charged u/s 234A, 234B and 234C of the Act is being attached as part of the final order. Notice of demand is being issued." 13. As could be seen from the highlighted portion of the observation of Assessing Officer, without properly implementing the directions of learned DRP, he has merely stated that the agreement with Gandhi Institute of Technology and Management has been discussed in the draft assessment order. By these obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to a U.S. based company viz. Chemical Abstract Services, which is in the same line of business and is stated to be the competitor of the assessee, held that the subscription paid for online access to the database system "scifinder" is not in the nature of royalty. The observations of the Tribunal, while deciding the issue in favour of the assessee, are as under:- "17. We find that as the treaty provision unambiguously requires, it is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon'ble Delhi High Court in the case of DIT v. Nokia Networks ΟΥ [2013] 358 ITR 259/212 Taxman 68/25 taxmann.com 225. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. As a matter of fact, the AO righty noted that 'royalty' has been defined as "payment of any kind received as a consideration for the use of, or right to use of, any copyright ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e database there is any human intervention. As held by the Hon'ble Supreme Court in CIT v/s Bharati Cellular Ltd., [2010] 193 taxman 97 (SC) and DIT v/s A.P. Moller Maersk A.S., [2017] 392 ITR 186 (SC), for providing technical / managerial service human intervention is a sin qua non. Further, Article-12(4) of India-Germany Tax Treaty provides that payment for the service of managerial, technical or consultancy nature including the provisions of services by technical or other personnel can be termed as fees for technical services. None of the features of fees for technical services as provided under Article 12(4) of the India- Germany Tax Treaty can be found in the subscription fee received by the assessee. Further, the Department has not brought any material on record to demonstrate that the assessee has employed any skilled personnel having knowledge of chemical industry either to assist in collating articles from journals / magazines which are publicly available or through them the assessee provides instructions to subscribers for accessing the online database. The assessee even does not alter or modify in any manner the articles collated and stored in the database. In the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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