MASSACHUSETTS INSTITUTE OF TECHNOLOGY,MUMBAI vs. DY. CIT INTL TAX CIRCLE 3(2) (1) , MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER (Assessment Year: 2019-20) Massachusetts Institute of Technology, C/o BSR & CO LLP, 14th Floor, Central Building, North C Wing, Nesco IT Park, Goregaon (East), Mumbai - 400063 [PAN: AADCM8931A] …………… Appellant Deputy Commissioner of Income Tax Vs (International Taxation), Circle 3(2)(1), Mumbai Room No. 1615, 16th Floor, Air India Building, Nariman Point, Mumbai - 400021 ……………. Respondent Appearance For the Appellant/Assessee : Shri Ajit Jain Shri Siddhesh Chougule For the Respondent/Department : Shri Anil Sant Date Conclusion of hearing : 24.08.2023 Pronouncement of order : 30.10.2023

O R D E R

Per Rahul Chaudhary, Judicial Member:

(Assessment Year: 2019-20) The Appellant has raised following grounds of appeal: 2. “1. General On the facts and circumstances of the case and in law, the Ld. AO has erred in proposing, and the Hon'ble DRP has further erred in confirming the action of the Ld. AO in assessing the total income at INR 112,944,527 as against income of INR 10,356,790 offered by the Appellant in its return of income for the captioned assessment year.

2. Addition of receipts from Industrial Liaison program (ILP) amounting to INR 20,529,000 on the alleged ground that the same is in the nature of Fees for Included Service (FIS), under Article 12 of the Double Taxation Avoidance Agreement between India and USA ('the Treaty') On the facts and circumstances of the case and in law, the Ld. AO erred in proposing, and the Hon'ble DRP has further erred in confirming the addition of receipts from ILP amounting to INR 20,529,000 as FIS under the Treaty The Appellant prays before the Hon’ble ITAT to direct the AO to delete the addition made by the AO in relation to ILP recipes.

3. Addition of receipts from Sponsorship Assignments amounting to INR 31,948,834 on the alleged ground that the same is in the nature of FIS, under Article 12 of the Treaty On the facts and circumstances of the case and in law, the Ld. AO erred in proposing, and the Hon'ble DRP further erred in confirming the addition of receipts from Sponsorship Assignments amounting to INR 31,948,834 as FIS under the Treaty. The Appellant prays before the Hon'ble ITAT to direct the AO to delete the addition made by the AO in relation to sponsorship assignments. Without prejudice to the above, the Appellant submits that it is a not-for-profit organization in the USA and any funding received from the sponsor(s) is an offset for the expenses incurred by the Appellant towards the research project and do not generate a profit for the Appellant. The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to delete the addition made by the Ld. Assessing Officer in relation to sponsorship assignments.

4. Addition of receipts from Co-ordination/Consortium (Assessment Year: 2019-20) Membership amounting to INR 50,109,903 on the alleged ground that the same is in the nature of FIS, under Article 12 of the Treaty On the facts and circumstances of the case and in law, the Ld. AO erred in proposing, and the Hon'ble DRP has further erred in confirming the addition of the receipts from Co-ordination/ Consortium Membership amounting to INR 50,109,903 as FIS under the Treaty. The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to delete the addition made by the Ld. AO in relation to co- ordination/consortium membership receipts 5 Incorrect inclusion of non-existing capital gains in the computation of total income On the facts and circumstances of the case and in law, the Ld. AO has erred in considering capital gains in the computation sheet amounting to INR 508,288,566 despite there being no such capital gains earned by the Appellant during the year under consideration. The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to delete the addition made by the Ld. AO in relation to capital gain income.

6. Non-consideration of current year and brought forward capital loss in the computation of total income On the facts and circumstances of the case and in law, the Ld. AO has erroneously not considered carry forward of current year capital loss (viz short-term capital loss amounting to INR 23,103,178 and long-term capital loss amounting to INR 23,417,479) and brought forward capital losses of past years in the computation sheet. The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to allow the current year capital losses and brought forward capital losses to be carry forward to subsequent years for set-off.

7. Interest on Income-tax refund is taxed as per the Act instead of as per the Treaty On the facts and circumstances of the case and in law, for the purposes of taxing the interest on income-tax refund in the computation sheet, the Ld. AO has erred in applying the higher tax rate of 40 percent under the Act and not allowing the tax rate of 15 percent under the Treaty, as claimed by the Appellant, without any cogent reasons and without providing any opportunity of being heard.

The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to apply tax rate of 15 percent under the treaty while computing tax on interest on income-tax refund.

8. Denial of Tax Deducted at Source ("TDS') On the facts and circumstances of the case and in law, the Ld. AO has erred in not granting the TDS credit of INR 816,358 as claimed by the Appellant in the Income-tax Return ('ITR'). The Appellant prays before the Hon'ble ITAT to direct the Ld. AO to allow additional TDS credit amounting to INR $16,358 as claimed in the ITR. 9 Levy of interest under section 234B of the Income-tax Act, 1961 (the Act) On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 234B of the Act. The Appellant submits that the levy of interest is consequential to the adjustments made by the Ld. AO in its final order and the Ld. AO be directed to modify the said levy basis the directions given by your goodself with respect to the aforesaid adjustments. 10 Levy of interest under section 234D of the Income-tax Act, 1961 (the Act") On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest under section 234D of the Act The Appellant submits that the levy of interest is consequential to the adjustments made by the Ld. AO in its final order and the Ld. AO be directed to modify the said levy basis the directions given by your goodself with respect to the aforesaid adjustments. 11 Penalty under section 270A of the Act On the facts and circumstances of the case and in law, the Ld AO erred in initiating penalty proceedings under section 270A of the Act on the alleged ground of under reporting of income In view of the above submissions, it is prayed that the Ld. AO be directed to drop the penalty proceedings initiated under section 270A of the Act The Appellant craves leave to add, to amend, alter, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or (Assessment Year: 2019-20) grounds of appeal

at any time before or at the time of hearing of the appeal as they may be advised.” When the appeal was taken up for hearing, the Ld. Authorised

3. Representative for the Appellant at the outset submitted that the Appellant does not wish to press Ground No. 5, 6 and 7 raised in the present appeal. Accordingly, Ground No. 5, 6 and 7 raised by the Appellant are dismissed as not pressed. We note that Ground No. 1 raised by the Appellant is general in nature and does not require adjudication. Therefore, Ground No. 1 raised by the Appellant is disposed off as being general in nature.

4. The facts relevant for the adjudication of balance grounds pressed by the Appellant are that the Appellant is a non-resident company and tax resident in United States of America. The Appellant is an educational institution incorporated as a non-profit organization under the laws of the State of Massachusetts. The primary purpose of the institute is stated to be imparting knowledge and educate students in science, technology and related areas of scholarships. The institute also provides teaching services and helps corporate in their industry specific researches.

4.1. The Appellant filed its return of income for the Assessment Year 2019-2020 on 27/09/2019 declaring a total income of INR 1,03,56,790/-. The case was selected for regular scrutiny. During the assessment proceedings, the Assessing Officer noted that Form 26AS reflected, inter alia, following receipts for the relevant previous year which were not been offered to tax as income by the Appellant: Particulars Amount (INR) (a) Receipts under Industrial Liaison program 2,05,29,000 (b) Receipts under Sponsorship Assignment 3,19,48,834 (c) Receipts under Coordination Membership 5,01,09,903 5 (Assessment Year: 2019-20) Agreement (d) xx xx (e) xx xx 4.2. The Appellant was asked to explain the nature of the receipts and reason why the same were not offered to tax in India. Providing explanation for the same, the Appellant made following submissions before the Assessing Officer relating to the nature of receipts under (a) Industrial Liaison Program, (b) Sponsorship Agreements and (c) Coordination Membership Agreements which have been recorded by the Assessing Officer in the assessment order:

“1. Industrial Liaison Program (ILP) 1. ILP program is dedicated to creating and strengthening mutually beneficial relationship between MIT and corporations worldwide. The ILP creates industry relationships by providing corporates with connections/introduction to the MIT faculty, departments, labs and centres. In addition to creating productive interactions with corporate partners, the ILP also helps regional governmental organizations who look to the unique, entrepreneurial MIT environment as they begin to develop their own regional innovation ecosystems The ILP continuously evolves to meet the aspirations of MIT faculty and industry leaders in an effort to accelerate advances in technology and knowledge delivery.

2. When a company becomes a member of ILP, they are assigned an Industrial Liaison Officer (ILO) as a primary contact who understand the industry ILO brings together business experience with in-depth knowledge of MIT. ILO helps members define and prioritized their interest and needs, articulate objectives for the MIT interaction and develop an action plan. ILO also recommend, organize and facilitates interaction with MIT involving faculty researchers, labs and centres by scheduling meetings and phone calls. The role of an ILO is to provide ILP members with access to certain parts of MIT that relate to the member's interest, such as recent developments and reports on emerging technologies (like a brochure which is publicly available). The ILO merely gives an introduction/description of the emerging technology and does not provide any technical plan or design whatsoever The ILOS do not access or utilized any proprietary or confidential information. Member companies do not receive information before anyone else, as all the information share under the (Assessment Year: 2019-20) ILP agreements is publicly available.

4. The Primary reason companies join the ILP is for face to face discussions with MIT faculty and researchers, as these interactions often result in successful research collaborations. Any research collaborations are separately negotiated and agreed to outside of the ILP agreement. The ILP actively advocates a company's research and strategic agenda on campus and secures substantive meetings with key faculty and researchers The TLO provides continuity and serves as the facilitator to move discussions along and to work with both representatives and faculty to enable mutually beneficial outcomes.

5. ILP arranged meetings are recognized by time-pressured faculty as being highly professional, yielding high-calibre discussions and highlighting potential partnership opportunities. Faculty objectives in participating in TL meetings are to meet potential sponsors, provide industry exposure for their research, and learn about Industry problems that could offer potential applications for their scholarship Meetings may be combined into half-day or full-day visits, at a company's discretion. If meeting face-to-face is difficult, the ILO may arrange an interactive video conference webcast or telephone conference call 6. As a member of ILP program, participants are also eligible for the following facilities/benefits:

1. 1. Free or discounted attendance at MIT conferences and seminars 2. Access to the ILP video archive that stores digital presentations, abstracts and biographical materials from ILP events.

3. Access to MIT platform comprising information on MIT faculty and projects with abstract and links to faculty-maintained web pages

1. Receipts under coordination membership agreement: Rs. 5,01,09,903/-

1. 1.

1. A consortium is a group of members that come together to share ideas and information relating to a particular topic. Consortiums are led by hosts that help drive the direction of research performed by the consortium and manage access to that research.

2. MIT acts as the host for three types of consortium arrangements W3C member agreement. Media Laboratory consortium agreement and Centre for Bits and Atoms agreement Under W3C member agreement, as a part of this arrangement, MIT provides co-ordination service to W3C, a group of Members that work together as a Consortium to develop protocols and guidelines that ensure the long-term growth of the World Wide Web. In this, MIT provides a member access to a group of other members focused on a common agenda Each Member of the Consortium pays a membership fee for (1) access to the Consortium's research so that it can build its knowledge and education on Web issues, (2) access to an open forum for the exchange of ideas and technology solutions, (3) ability to help drive the direction of new research. Under Media Lab consortium agreement, it is an interdisciplinary research laboratory at MIT Media Lab consortium is a consortium of members sharing a common objective of advancement of technology. Media Members participate in member workshop and brainstorming sessions, have access to Media lab meetings and lectures and the Media lab members only website Media Lab Consortium provides a principal Source of support for research conducted under the (Assessment Year: 2019-20) auspices of MIT's Media Lab. A Media Lab consortium membership provides a member access to a group of other members and Lab faculty and research staff focused on a common agenda. These members also have access to all of the research conducted at the Lab MIT has the responsibility to drive the overall direction of the research. Under Centre for Bits and Atoms (CBA) agreement, CBA conducts fabrication lab (fab lab) programs at MT. A CBA fab lab consortium membership provides a member access to a group of other members and lab faculty and research staff focused on a common agenda, MIT is responsible to control the direction of the project. 1.

1. All the Consortiums are led by number of Hosts, of which the MIT is one As a Host, the MIT has the responsibility to help drive the overall direction of the research performed by the Consortium, helps to provide access to Consortium research and helps manage the direction and dissemination of research produced by Consortium members. MIT does not describe any methods or process involved in carrying out such research. MIT is not performing any research and the role of the MIT is to act as a co- ordinator between the consortium members.

2. Given that the receipts merely pertain to co-ordination services and there is no technical or consultancy services that is being rendered by the MIT the said receipts should not be taxable in India.

3. Without prejudice to the above, the mere act of co-ordination cannot be termed as knowledge being made available to the members and hence the receipts under the Co-ordination Membership Agreement should not quality as FIS under the treaty and should not be subject to tax in India.

4. In this regard, reliance is placed on the Authority for Advance Rulings in the case of ABB Ltd (AAR No. 834 of 2009). wherein it has been held that fees paid for the role of being an administrator and coordinating agency under the agreement are not liable to be taxed as fees for technical services.

(Assessment Year: 2019-20) Accordingly, it cannot be said that knowledge is made available to the members. Thus, the receipts cannot be classified as FIS

1. Thus, in light of the above judicial precedents, merely by providing vendor neutral architectural and administrative leadership it cannot be said that any technical plan or service have been rendered by MIT that make available any technical knowledge, experience, skill, etc to the members. Thus, the receipts cannot be classified as FIS and therefore ought not to be taxable in India. 1.

4.4. The objections filed by the Appellant before DRP against the above additions proposed in the Draft Assessment Order, dated 18/09/2021 did not yield any favourable result as DRP rejected the objections raised by the Appellant vide order, dated 28/04/2022. As a result, the Assessing Officer passed the Final Assessment Order, dated 12/05/2022, under Section 143(3) read with Section 144C(13) of the Act making, inter alia, aggregate addition of INR 10,25,87,373/-.

Being aggrieved, the Appellant has preferred the present appeal 5. before the Tribunal against the additions aggregating to INR 10,25,87,373/- made in the Final Assessment Order dated 12/05/2022.

During the course of hearing, both the sides agreed that issues 6. raised in Ground No. 2, 3 and 4 are identical to the issues raised in appeal preferred by the Appellant for the Assessment Year 2018-19 [ITA No. 607/Mum/2022] which has been disposed off by the Tribunal vide order, dated 31/07/2023. On perusal of the aforesaid order of the Tribunal, we find that the Tribunal has, in identical facts and circumstances, held that receipts from Industrial Liaison Program and receipt from Coordination Membership Agreement are not liable to tax in India in terms of Article 12 of DTAA as the same are not in (Assessment Year: 2019-20) the nature of ‘Fee for Included Services’. Whereas the Tribunal has confirmed the addition of receipts from Sponsorship Assignments holding the same to be Fee for Included Services taxable in India in terms of Article 12 of DTAA.

6.1. Ground No. 2 raised by the Appellant is directed against the addition INR 2,05,29,000/- made by the Assessing Officer in relation to the receipts from Industrial Liaison Program.

6.2. The relevant extract of the decision of the Tribunal in the case of the Appellant for the Assessment Year 2018-19 [ITA No. 607/Mum/2022, dated 31/07/2023] dealing with the non-taxability of the aforesaid receipts in the hands of the Appellant in India as ‘Fee for Included Services’ in terms of Article 12 of the DTAA read as under: “Receipts from Industrial Liaison Program 13. From the paper book filed by the assessee we observe that on page number 90 an agreement between MIT and Kirloskar Brothers Limited (subscriber) for Industrial Liaison Program (ILP) has been filed. Another agreement between MIT and KPIT Technologies Limited (subscriber) for ILP has been placed on record at page number 95 of the paper book. We have carefully gone through the agreements. As a member of the ILP program the subscriber will have access to full range of customized activities and supplementary services as detailed in the annexure to the agreement. There are hundreds of research centers at MIT and the external subscriber may not even be aware of the vast resources that are available at MIT. Hence, to assist the subscriber, the subscriber is assigned an Industrial Liaison Officer (officer) who will conduct an on-going assessment of subscriber‟s interest, need and objectives as they relate to MIT. The officer will recommend and facilitate interaction at MIT that are custom designed to satisfy the subscriber‟s identified objectives. The officer will also provide updates on what is going on at MIT that could impact the business of the subscriber. The officer will facilitate meetings between the subscriber and faculty members of MIT. The officer can organize a one-day seminar at MIT for up to 20 senior corporate staff of the subscriber. The officer may also arrange visits of the MIT faculty members at the facilities of the subscriber. There are various such (Assessment Year: 2019-20) services listed in the agreement which is essentially a relationship building between MIT and the external companies.

(a) x.x.x.x (b) x.x.x.x 3. x.x.x.x

4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services :

(a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for (Assessment Year: 2019-20) which a payment described in paragraph 3 is received ; or (b) 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. Notwithstanding paragraph 4, "fees for included services" does 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 a sale described in paragraph 3(a) ;

(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 personal use of the individual or individuals making the payments ; or (e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent Personal Services).”

Further, the relevant para and example in the MOU to the India-USA DTAA explaining the term Fees for included services is extracted below:

“Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the service technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person.) This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service.

(Assessment Year: 2019-20) Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc. are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se he considered to make the technology available.”

“Example (7)

Facts: The Indian vegetable oil manufacturing firm has mastered the science of producing cholesterol-free oil and wishes to market the product world-wide. It hires an American marketing consulting firm to do a computer simulation of the world market for such oil and to advise it on marketing strategies. Are the fees paid to the U.S. Company for included services? Analysis: The fees would not be for included services. The American company is providing a consultancy service which involves the use of substantial technical skill and expertise. It is not, however, making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a technical plan or design. What is transferred to the Indian company through the service contract is commercial information. The fact that technical skills were required by the performer of the service in order to perform the commercial information service does not make the service a technical service within the meaning of paragraph 4(b).”

6.3. On perusal of above it is clear that the Tribunal has, after examining the scope of services provided by the Appellant under Industrial Liaison Program concluded that the Appellant provides factual information related to the research projects and the same does not involve rendering of any technical services or making available any technical knowledge or experience or skill. Therefore, the receipts from Industrial Liaison Program are not liable to tax in India in terms of Article 12 of the DTAA. Facts and circumstances being identical, respectfully following the above decision of the Tribunal in the case of the Appellant for the immediately preceding Assessment Year 2018-19, we hold that receipt from Industrial Liaison Program do not qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are, therefore, not taxable in India. Accordingly, addition of INR 2,05,29,000/- made by the Assessing Officer in relation to the receipts from Industrial Liaison Program is deleted and Ground No. 2 raised in the present appeal is allowed.

6.4. Ground No. 3 raised by the Appellant is directed against the addition of INR 3,19,48,834/- made by the Assessing Officer in relation to the receipts from Sponsorship Assignment.

6.5. We note that in paragraph 26 of the of the decision of the Tribunal in 19 (Assessment Year: 2019-20) the case of the Appellant for the Assessment Year 2018-19 [ITA No. 607/Mum/2022, dated 31/07/2023] the Tribunal has returned factual finding that as per the arrangement between the Appellant and the corporate-sponsor, the Appellant undertakes specific research for the corporate-sponsor and the technology & knowledge from the same is provided to the corporate-sponsor in the form of research report; the corporate-sponsor is free to apply the aforesaid technology & knowledge and derive an enduring benefit. Thus, the Appellant is making available technical designs and knowhow to the corporate- sponsor. Further, the fact that corporate-sponsor also gets intellectual property rights in the aforesaid technology/knowledge (either singly or jointly), also goes on to show that the Appellant makes available technical knowledge in terms of Article 12 of DTAA. The relevant extract of the decision of the Tribunal in the case of the Appellant for the Assessment Year 2018-19 [ITA No. 607/Mum/2022, dated 31/07/2023] read as under: “Sponsorship receipts 19. We now move to the next ground of appeal raised by the assessee in relation to receipts from sponsorship assignments, which is in relation to the addition made by the Ld. AO on account of receipts from Sponsorship Assignments amounting to INR 6,06,64,914 as FIS under the Treaty.

20. We have heard both the parties and perused the records. Shri Jain Ld. Counsel of the assessee further submitted that the sponsorship receipts neither makes available any technical knowledge, know-how etc., to the participants, nor any technical plan/ design is developed and provided. Therefore, the receipts under the Sponsorship research program should not qualify as Fees for Included Services under the tax treaty. In this regard, the assessee has relied on the decision of the Ahmadabad Tribunal in the case of ONGC vs. ITO dated 3 August 2022 [ITA Nos. 1881-1882/Ahd/2019].

21. AO in his draft assessment order has observed that, as per the nature of programme MIT design systems that are appropriate and 20 (Assessment Year: 2019-20) customized to the needs of the clients, with its own research team and collaborations. The research work is monitored and supervised by the staff of the MIT Accordingly, the services rendered by the assessee under the sponsorship assignment programme, clearly falls under the Clause 4(b) of article 12 of India USA DTAA. Thus, the receipt of Rs.6,06,64,914/- received under the head of Sponsorship Assignments, consists of development and transfer of a technical plan or technical design suitable to the needs of the sponsors of this programme and hence, they are clearly in the nature of Fees for Included services. The ld. AO further observed that without prejudice to the above, the Intellectual property clause of the agreements are also significant and needs to be looked into on the light of the discussion in assessing the nature of income received as fees for Included services. As per the clauses of the Research agreement, signed between the parties, it can be seen that both the parties have agreed to share the Intellectual Property rights for the inventions conceived during the research and for each such invention on which a patent application is filed by assessee, assessee has agreed to grant the Sponsor, a non-exclusive, non-transferable royalty free license for internal research purposes. Thus, the income earned by the assessee through this Sponsorship assignment program, is not only restricted to the design and development of customized technologies to the clients but also ancillary and subsidiary to the application or enjoyment of the Intellectual property rights developed during the research, accordingly, in view of the above discussion, receipts of Rs.6,06,64,914/- received under the head of Sponsorship assignments are clearly in the nature of Fees for Included services and hereby taxed accordingly.

“This project is focused on creating village-scale, off-grid water purification and desalination systems for rural India Our proposed approach is to design direct-drive photovoltaic (PV) electrodialysis (ED) water purification systems appropriate for small-scale applications, which can provide a scalable, efficient and sustainable solution for clean drinking water. The project will result in new water provision technology as well as the engineering knowledge required to adapt and scale the technology for various environmental conditions and geographic (Assessment Year: 2019-20) regions. The project includes investigation into methods to reduce the energy required for ED, and thus the number of PY panels required for a given system, in order to reduce cost. Our aim is to create off and desalination systems that are equal or less in cost than equivalently sized on-grid reverse osmosis systems. The project will be a collaboration between the MIT Global Engineering and Research (GEAR) Lab and Tata Projects. The GEAR Lab is directed by Prof Amos Winter whose research focuses on the creation of technologies for developing and emerging markets. Tata Projects has the right to co-fund this project with other companies within the Tata Group.”

From the above, the ld. DRP observed that “the project will result in new water purification technology as well as the engineering knowledge required to adapt and scale the technology for various environmental conditions and geographic regions. According to the assessee by merely issuing the research reports, MIT does not make available any technical knowledge experience, skill etc. such that the sponsor will be enabled to apply the same independently We find it difficult to accept this contention as the research agreement clearly shows that research project is undertaken to suit the requirement of a specific client as is evidenced from the extract of the agreement with Tata Projects (Supra) The assessee has also taken a plea that MIT routinely undertakes research in the areas of science & technology and the receipts under the sponsorship assignments are merely reimbursement of cost incurred. However, no evidence has been put forth by the assessee to substantiate the reimbursement aspect. The assessee also argued that the research performed by MIT under the sponsorship assignment may or may not result in creation of a product. We are of the considered view that this is not a relevant fact and what is to be considered is whether the research undertaken by MIT is for a specific project of a specific client. The intention is to provide technological inputs/skills or experience by way of research to suit the requirements of the clients sponsoring the research. We are not in agreement with the assessee, when it says that the research report does not provide the underline technical plan/design/process using which the corporate would be able to develop the technology on their own As has already been discussed the assessee undertakes specific research for the corporate and the technology and knowledge from the research is provided to the corporate who will apply the same and derive an enduring benefit from the (Assessment Year: 2019-20) same. In view of the facts discussed above, we are of the considered view that the receipts earned by the assessee through the sponsorship assignment programme are not only restricted to the design & development of customized technologies to the clients but also ancillary and subsidiary to the application or enjoyment of the intellectual property rights developed during the research. Accordingly, we uphold the action of the AO in treating these receipts as FIS”

SPONSOR INTELLECTUAL PROPERTY Title to any invention conceived or first reduced to practice in performance of the Research solely by the Sponsor's personnel without significant use of MIT administered funds or facilities ("Sponsor Invention") shall remain with the Sponsor Title to and the copyright in any copyrightable material first produced or composed in the performance of the Research solely by the Sponsor's personnel without significant use of Mil administered funds or facilities- ("Sponsor Copyright) shall remain with the Sponsor Neither Sponsor Inventions nor Sponsor Copy rights shall be subject to the terms and conditions of this Agreement JOINT INTELLECTUAL PROPERTY A The Parties shall have joint title to (1) any invention conceived or first reduced to practice jointly by employees and/or students of MJT and the Sponsor's personnel in the performance of the Research and (II) any invention conceived or first reduced to practice by the Sponsor's personnel in the performance of the Research with significant use of funds or facilities administered by VIIIT (each, a "Joint Invention") The Sponsor shall be notified of any Joint Invention promptly after an invention disclosure is received by MIT's Technology Licensing Office MIT shall have the first right to file a patent application on a Joint Invention in the names of both Parties All expenses incurred in obtaining and maintaining any patent on such Joint Invention shall I be equally shared except that, if one Party declines to share in such expenses, the other Party may take over the prosecution and maintenance thereof, at its own expense, provided that title to the patent remains in the names of both Parties.”

(Assessment Year: 2019-20) The ld. DRP from the perusal of this agreement has observed that as per the clause of research agreement signed between parties, both the parties have agreed to share the intellectual property, rights for the inventions conceived during the research and for each such invention on which patent application is filed by the assessee, the assessee has agreed to grant the Sponsor a non-exclusive, non- transferable royalty free license for internal research purposes. Thus, both ld. AO and ld. DRP found that there was a clear cut income available by technical knowledge and experience by providing technical plans and business carried out during the process of research to the Indian Corporates and accordingly, the same falls within the scope and ambit of FIS under Article 12(4) of US-India DTAA.

6.6. Facts and circumstances being identical, respectfully following the above decision of the Tribunal in the case of the Assessee for the immediately preceding Assessment Year 2018-19, we hold that receipt from Sponsorship Assignment qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are, therefore, taxable in India. Accordingly, addition of INR 3,19,48,834/- made by the Assessing Officer in relation to the receipts from Sponsorship Agreement is sustained and Ground No. 3 raised in the present appeal is dismissed.

6.7. Ground No. 4 raised by the Appellant is directed against the addition INR 5,01,09,903/- made by the Assessing Officer in relation to the receipts from Coordination Membership Agreements.

6.8. The relevant extract of the decision of the Tribunal in the case of the Appellant for the Assessment Year 2018-19 [ITA No. 607/Mum/2022, dated 31/07/2023] dealing with the non-taxability of the aforesaid receipts in the hands of the Appellant in India as ‘Fee for Included Services’ in terms of Article 12 of the DTAA read as under: “Receipts from co-ordination / consortium membership The receipts from co-ordination / consortium membership arrangements, which is in relation to the addition of the receipts from 25 (Assessment Year: 2019-20) Co-ordination/ Consortium Membership amounting to INR 6,42,57,814 as FIS under the Treaty.

6.9. On perusal of the above, it becomes clear that the Tribunal has (Assessment Year: 2019-20) accepted the contention of the Appellant that receipts from Coordination Membership Agreements are not liable to tax in India as ‘Fee for Included Services’ in terms of Article 12 of the DTAA. The Tribunal has held that in the case of Coordination Membership Agreement, the Appellant is merely acting as the host providing help for managing the overall direction of the research being performed by the consortium members. The Appellant does not undertake any research nor does it describe any method or process involved in carrying out such research. The Appellant merely provides help for accessing and dissemination of the consortium research to its members. The role of the Appellant is that of a coordinator between all the consortium members. Thus, the Appellant is only providing administrative support to the members and not rendering any technical services. It cannot be said that the Appellant is making available any technical know-how, experience, etc., or technical plan/design to the members as enumerated in Article 12 of the DTAA. Both the sides agreed that there is no change in the facts and circumstances of the case. Therefore, respectfully following the above decision of the Tribunal in the case of the Assessee for the immediately preceding Assessment Year 2018-19, we hold that receipt from Coordination Membership Agreement do not qualify as ‘Fee for Included Services’ in terms of Article 12 of the DTAA and are not taxable in India. Accordingly, addition of INR 5,01,09,903/- made by the Assessing Officer in relation to the receipts from Coordination Membership Agreement is deleted and Ground No. 4 raised in the present appeal is allowed.

Next we would take up Ground No. 8 raised by the Appellant since 7. we have already disposed Ground No. 5, 6 and 7 in paragraph 3 above. By way of Ground No. 8, the Appellant has claimed that the Assessing Officer has failed to grant credit of tax deducted at source 27 (Assessment Year: 2019-20) amounting to INR 8,16,358/- as claimed by the Appellant in the return of income. In order to redress the grievance of the Appellant, we direct the Assessing Officer to verify the records and grant credit of tax deducted at source to the Appellant as per law. In terms of the aforesaid Ground No. 8 raised by the Appellant is disposed off as allowed for statistical purposes.

Ground No. 9 & 10 raised by the Appellant pertain to levy of 8. interest under Section 234B & 234D of the Act, respectively. Both the grounds are disposed off as being consequential in nature.

Ground No. 11 raised by the Appellant pertains to initiation of 9. penalty proceedings under Section 270A of the Act. Since the penalty proceedings are separate and distinct from the assessment proceedings, Ground No. 11 directed against the initiation of penalty proceedings is dismissed as being premature.

In result, the present appeal preferred by the Assessee is partly 10. allowed.

Order pronounced on 30.10.2023.