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TMI Blog2025 (3) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... cided by the tribunal in its favour in ITA Nos. 1884/Del/2022 and 373/Del/2023; for assessment years 2019-20 and 2020-21, respectively on 06.09.2023, which has also been followed in yet another tribunal's order dated 19.01.2024 in its appeal ITA No. 3413/Del/2023 for assessment year 2021-22 respectively. The assessee has duly filed its paper-book compiling not only the foregoing tribunal's decision but also hon'ble jurisdiction high court's judgment in Revenues Tax Appeal No. 138/2024 preferred in AY 2019-20, reading as under: "1. The Commissioner of Income Tax seeks to impugn the order of the Income Tax Appellate Tribunal ["ITAT"] dated 06 September 2023 and proposes the following questions for our consideration: "2.1 Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in not holding that receipts of the assessee from its clients in India are Royalties? 2.2 Whether on the facts and circumstances of the case and in law, the Ld. ITAT has erred in not holding that this information is an-information which involves imparting of commercial experience, skill or expertise? 2.3 Whether on the facts and circumstances of the case and in law, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic This is a digitally signed order. or scientific work, including cinematography films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manent establishment or a fixed base in connection with which the obligation to make payments was incurred and the payments are borned by that permanent establishment or fixed base then the royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 8 Where, owing to a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services paid exceeds for whatever reason the amount which would have been paid in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of each Contracting State, due regard being had to the other provisions of this Convention. 9. The provisions of this Article shall not apply if it was the main purposes or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties or fees for technical services are paid to take advantage of this Article by means of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, it has to comply with the local laws wherein a duty is cast upon the assessee to ensure the confidentiality of reports which contains details of the applicants. xxxx xxxx xxxx 12. As regards the impugned receipts being in the nature of royalty, in our considered view, none of the requisites under Article 13(3) of the India-UK DTAA are satisfied so as to qualify such receipts as 'royalty'. What assessee is providing to the clients in India is merely a report summarising its findings with respect to the background check undertaken by the assessee which is primarily a factual data and cannot per se qualify as literary or artistic or any other copyrightable work. Such a report cannot be copyrighted as it does not fulfil the requirements enlisted under section 13(1)(a) of the Indian Copyright Act, 1957. Also, none of the rights as mentioned in Section 14(a) of the Indian Copyright Act, 1957 have been rested with the client by the assessee while rendering its services. Income from provision of the services rendered by the assessee cannot be characterised as royalty for use of copyright in the report as the client merely has the right to use the findings in the report for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual information but nowhere the assessee imparts its experience, skill of carrying out background screening services to its client. It is thus clear that there is no imparting of information concerning industrial, commercial or scientific experience by assessee when it issues the reports to its clients. 15. As regards the characterisation of impugned receipts as FTS, in our view, the services rendered by the assessee do not involve any technical skill/knowledge or consultancy or make available any technical knowledge, experience, skill, know-how or processes to the clients. Assessee's role is restricted to the verification of information provided by various candidates proposed to be hired by its clients. It involves seeking information from various sources that is accessible on specific requests and no advice/guidance on the credentials of the candidate is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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