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TMI Blog2025 (2) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has not deducted the tax deductible u/s 195 of the Income Tax Act, 1961 on any amount payable to Star Consortium Pvt. Ltd., Singapore when the nature of payment was in the nature of consultancy/advisory services and hence taxable as per IT Act 1961 or India Singapore-DTAA. 2. Whether in law or facts of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not treating the payment made to the Star Consortium Pvt. Ltd., Singapore as 'Fees for Technical Services' u/s 9(1)(vii) of the I T Act, 1961 and Article 12 of the India Singapore-DTAA, as the services provided by foreign entity was consultancy in nature. 3. Whether in law or facts of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that the payment made by the assessee to Star Consortium Pvt. Ltd., Singapore also falls under 'Royalty' in terms of section 9(1)(vi) of the I T Act, 1961 and Article 12 of the India-Singapore DTAA, as the services provided by foreign entity was advisory in nature entailing delivery of a plan to the assessee. 4. Whether in law or facts of the case, Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating that the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptional clause as mentioned in the sub para I under para 3.1 as mandated by the CBDT vide circular No, 5/2024. 6. The appellant craves the leave to submit/delete/withdraw any other grounds(s) at the time of hearing." 3. Brief facts of the case as per the statement of facts filed before the Ld. CIT(A) are that during the year under consideration i.e. FY 2011-12, the assessee was working as investment banker and strategic management consultant. The assessment in this case was completed u/s 143(3) after obtaining all details of the case and examining relevant facts. The assessee entered into an agreement with Darjeeling Organic Tea Estates P Ltd (DOTEPL) for arranging loan for them and simultaneously entered into agreement with Non-resident M/s Star Consortium Pte Ltd, Singapore so that loan could be arranged taking their services. The loan was in fact arranged by M/s Star Consortium Pte Ltd from foreign establishments and non-resident financiers with their efforts from Singapore. There is no finding that for the finance so arranged, the efforts were taken from India. The AO in the assessment proceedings was satisfied about the payment made to the non-resident M/s Star Consortium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be taxed in India. Aggrieved with the order of the Ld. CIT(A), the revenue has filed the appeal before the Tribunal. 5. Rival contentions were heard and the record and the submissions made have been examined. At the outset, the Ld. Counsel submitted that the appeal ITA No. 1693/KOL/2024 was not maintainable on account of low tax effect. However, the Ld. DR drew our attention to Circular No. 5/2024 dated 15.03.2024 wherein it is mentioned as under: 3.1 Monetary limits given in paragraph 4 with regard to filing appeal/SLP shall be applicable to all cases including those relating to TDS/TCS under the Act with the following exceptions where the decision to appeal/file SLP shall be taken on merits, without regard to the tax effect and the monetary limits: ... In respect of litigation arising out of disputes related to TDS/TCS matters in both domestic and International taxation charges:- Where dispute relates to the determination of the nature of transaction such that the liability to deduct TDS/TCS thereon or otherwise is under question, or ... Hence, on account of the fact that the same was covered in the exception, the appeal was taken up for adjudication. 6. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Shri Hartaj Sewa Singh, to the tune of Rs. 80,43,964/-. A notice u/s 201(1) of the Act was accordingly issued to the assessee in view of non-deduction of tax at source. 6. The Ld. AO held the assessee in default as per section 201(1) of the Act in relation to the remittance of Rs. 80,90,694/- and attributed 55% as the revenue generation in India and allowed an estimated expenditure @ 10% and computed the income tax liability @ 40%. 7. A perusal of the order of the Ld. AO shows that the Ld. AO after analysis held in para 4.2.4.1 of his order that in the instant case, the CEO and Director of the SCPL of Singapore has a fixed place of business in India, which is at his disposal in his proprietary concern, TSC located at Kolkata, India. Therefore, based on the above detailed discussions, it was apparent that SCPL has a PE in India and the payment was in the nature of business profit as there was a permanent establishment of SCPL in India. As an alternative argument and in addition to the above, he also held that the payment of Rs. 80,90,694/- was royalty on which TDS @ 20% was liable to be made. The Ld. CIT(A) allowed the appeal by holding that neither the recipient/pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot qualify as 'royalty' within the meaning of Section 9(1)(vi) of the Act and therefore no income can be said to have accrued in India. In this connection, useful reference may be made to the decision of Hon'ble ITAT, Mumbai in the case of Edenred Pte. Ltd. Vs DDIT (IT) [186 ITD 605] wherein on similar facts and circumstances it was held that payments made for such services does not qualify as royalty under Article 12 of the DTAA. The relevant findings are as follows :- "6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below: We find that (i) under the said IDC agreement, the appellant, essentially provides IT infrastructure management and mailbox/website hosting services to its Indian group companies; these IDC services are performed by the appellant's personnel in Singapore; the Indian group companies directly remit IDC service payments towards the appellant's bank account in Singapore, (ii) IDC is an ISO 27001 certified data centre owned by Edenred Pte. and located in Singapore; IDC services are provided using the IDC and IT/security team in Singapore, (iii) the services under the IDC agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be brought within the scope of the definition of FTS under the IT Act as they answer the description of consultancy services or some of them may be categorized as technical services but the qualifying words "make available technical knowledge, experience, skill, know-how, which enables the recipient of services to apply the technology contained therein" in Article 12.4 of the DTAA make material difference, (ii) all technical or consultancy services cannot be brought within the scope of this definition unless they make available technical knowledge, know-how etc. which in turn facilitates the person acquiring the services to apply the technology embedded therein, (iii) services provided by AXA ARC to the applicant do not fulfil the requirements of the definition of FTS in the DTAA, (iv) even assuming that they are technical or consultancy services, it cannot be said that the applicant receiving the services is enabled to apply the technology contained therein, (v) also there is nothing in the IT support services that answers the description of technical services as defined in the DTAA, (vi) therefore, the fees paid to AXA ARC by the applicant does not amount to fees for technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of service, EMCAP had made available any technical knowledge, experience, skill, know-how or process which enabled assessee to apply technology contained therein on its own. Therefore, the Tribunal held that payment made by the assessee could not be considered as FTS as defined under Article 12(4)(b) of the India-Singapore DTAA. In Reliance Jio Infocomm Ltd. (supra) for AY 2016-17, the Tribunal observes that though the India-Singapore Tax Treaty is amended by Notification No. SO 935(E) dated 23-3-2017, however, the definition of 'royalty' therein has not been tinkered with and remains as such. 6.2 Now we turn to the case laws relied on by the Ld. DR. In the case of Cargo Community Network (P.) Ltd. (supra), the assessee, a nonresident company has its registered office at Singapore. It is engaged in the business of providing access to an internet based air cargo portal known as Ezycargo at Singapore. The applicant received payments from an Indian subscribers for providing password to access and use the portal hosted from Singapore. The AAR held that payments made for concurrent access to utilize the sophisticated services offered by the portal would be covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral Insurance Co. Ltd; ExxonMobil Company India (P.) Ltd; Standard Chartered Bank and Reliance JioInfocomm Ltd. (supra) narrated at para 6.1 hereinbefore, it is quite luculent that revenues under the IDC agreement ought not to be taxed in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA. Therefore, we delete the addition of Rs. 95,62,479/- made by the AO towards IDC Changes allow the 2nd ground of appeal." For the above reasons and the decision (supra), it is therefore held that the impugned payment to M/s Star Consortium Pte Ltd could not be held as royalty under the IndiaSingapore DTAA and therefore the said payment was not liable to tax in India. Having held so and in light of the decision of GE India Technology Cen.P. Ltd vs CIT (327 ITR 456), the appellant was under no obligation to deduct tax u/s 195 of the Act. Hence, the action of the AO holding the appellant to be an "assessee-in-default" and thereby raising the impugned demand u/s 201(1)/(1A) of the Act is held to be unjustified. On merits therefore, the impugned demand is directed to be vacated. Ground Nos. 4 to 6 are therefore allowed 8. We have considered the facts of the case. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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