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TMI Blog2024 (2) TMI 1491X X X X Extracts X X X X X X X X Extracts X X X X ..... online mode/access is not covered under royalty? 2.4 Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in holding that receipts of Assessee from clients is not Royalty despite the fact that these reports are protected by copyright laws and therefore, use of these reports is use of copyright?" 2. We note that the issue itself arises out of the assessee undertaking employment background checks and verification of testimonials for various clients. The appellant sought to contend that the fees so generated from that exercise would fall within the ambit of "fee for technical services" in terms of Article 13 of the India-UK Double Taxation Avoidance Agreement ["DTAA"]. We note that Article 13 reads as follows: "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 State; but if the beneficial owner of the royalties or fees for tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the property for which a payment described in paragraph 3(b) of this Article is received ; or (c) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. 5. The definition of fees for technical services in paragraph 4 of this Article shall not include amounts paid : (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property, other than property described in paragraph 3(a) of this Article; (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships, or aircraft in international traffic; (c) for teaching in or by educational institutions ; (d) for services for the private use of the individual or individuals making the payment ; or (e) to an employee of the person making the payments or to any individual or partnership for professional services as defined in Article 15 (Independent personal services) of this Convention. 6. The provisions of paragraphs 1 and 2 of this Article shall not apply if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentially rested the case of the appellant on sub-article (4) of Article 13 and which relates to "fee for technical services" received as consideration for rendering any technical or consultancy services. According to learned counsel, the service rendered by the assessee would clearly fall within sub-clause (c). 4. We find ourselves unable to sustain that submission bearing in mind the following findings which have come to be returned by the ITAT: "10. We have heard the Ld. Representative of the parties and perused the records. It is an undisputed fact that the assessee is a tax resident of UK and does not have a PE in India and hence it has opted to be governed by the provisions of the India-UK DTAA being more beneficial to the assessee. Provision of services by the assessee and its nature thereof is also not under dispute. Perusal of the agreement of the assessee with Barclays shows the exact nature of services performed by the assessee. We have gone through the relevant extracts of the said agreement and are convinced with the contention of the Ld. AR that the assessee's role is restricted to verification of the information concerning various candidates proposed to be hired b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertake any other commercial exploitation of the said report. It is thus evident that the consideration received by the assessee under the terms of its agreement with its client is purely towards provision of background screening services and does not include any consideration for use or right to use any copyright or a literary, artistic or scientific work, patent, trademark, design, model, plan, secret formula, or process or information. Thus, the impugned receipts of the assessee from its clients in India cannot be regarded as 'Royalties' under the provisions of Article 13 of the India-UK DTAA. Support may be drawn by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. vs. CIT (2021) 125 taxmann.com 42 (SC)/432 ITR 471 (SC). 13. Further the assessee does not provide access to any database to its clients but only access to reports requisition by the client in electronic form. Provision of online access of the report to its client is limited to providing access to the specific report providing relevant facts for the concerned candidates captured during the course of validation. Nothing has been brought on record by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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