ATOS INFORMATION TECHNOLOGY (SINGAPORE) PTE LTD,MUMBAI vs. DCIT, (INTERNATION TAXATION) CIRCLE -1(1)(2), MUMBAI

Against the draft assessment order so framed, the assessee raised objections before Learned DRP. However, learned DRP did not accept the objections of the assessee. Accordingly, final assessment order was passed, confirming the additions made in the draft assessment order. 5. Against the final assessment order, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT). The appeal, being ITA No.671/Mum/2022 came up for consideration before the Coordinate Bench on 20.03.2023. 6. While disposing of the appeal vide order dated 31-3-2023, the Coordinate Bench, following its earlier decision on an identical issue in assessee’s own case, held that the receipts of Rs.6,33,96,361/- from project support services cannot be treated as royalty/FTS. Accordingly, the Assessing Officer was directed to delete the addition. 7. Insofar as amount of Rs.4,42,73,329/- received from regional support services, the Coordinate Bench, having found that the Departmental Authorities had not properly examined the factual aspects pertaining to the nature of receipts vis-à-vis the provisions of Regional Services Agreement, restored the issue to the Assessing Officer for de novo adjudication. In pursuance to the directions of the ITAT, the Assessing Officer took up the assessment proceedings afresh. In response to query raised by the Assessing Officer, the assessee reiterated the stand

Per contra, learned Departmental Representative (DR) strongly relied upon the observations of the Assessing Officer and learned DRP. 12. We have given our thoughtful consideration to the rival contentions, analyzed the judicial precedents cited before us, and perused the relevant materials on record. Undoubtedly, the dispute between the parties is with regard to the nature and character of receipts amounting to Rs.4,42,73,329/-. While the Department has treated the receipt as royalty/FTS, according to assessee, the receipts are in the nature of business profits and in absence of Permanent Establishment (PE) in India, are not taxable in India.

Legal  Support for major deals at APAC level  Litigation support 5. Human Resources  Managing and overseeing all India Local HR related issues, providing advisory support (on areas such as Compensation and Benefits, Recruitment support, Work Force Management to fulfil the requirements of Local Operations), implementing cross country mobility assignments in APAC 6. Marketing & Communication  Provision of strategic marcoms directional support at national business level. 14. Admittedly, towards rendition of the services, the assessee had received certain remuneration from the Indian group entity. According to the Assessing Officer, the services rendered by the assessee involve imparting information concerning technical, industrial, commercial, or scientific knowledge, experience

As could be seen from the above noted Article, it is in two parts. The first part of the definition states that consideration received for use of, or right to use, any copyright of a literary, artistic, or scientific work, including cinematograph film or films or tapes used for 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, including gains derived from alienation of any such right, property, or information. The second part speaks about the consideration received for industrial, commercial or scientific equipment, other than payments derived by an enterprise from activities described under Article 8 paragraph 4(b) or 4(c) of the treaty. For our purpose, Article 12(3)(b) is not relevant. Thus, it has to be seen whether the receipts would fall in the ambit Article 12(3)(a) of the treaty. Looking at the nature of services provided under RSA, it cannot be said that the remuneration received is for use of right to use any copyright of a literary, artistic, or scientific work, including cinematograph film or films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial, or scientific experience, including gains derived from alienation of any such right, property, or information. In fact, there is no such allegation by the AO. Thus, what remains to

In fact, Clause-5 of the RSA specifically provides that the information and advice exchanged between the assessee and the Indian entity and shall be kept strictly confidential, should not be given, made available to any third party without the previous consent of the assessee. Thus, in other words, the service recipient cannot commercially exploit the information, experience, skill, etc. Even, as per OECD Commentary, payment received for application of knowledge rather than its transfer would not qualify as royalty under the treaty provisions. In case knowledge remains embedded with the service provider and is merely used by it in performing the task, the receipts are merely in the nature of income from services, pure and simple, provided the service recipient is not in a position to deploy the knowledge, experience, skill, etc. independently. Though, the Departmental Authorities have held that the receipts are in the nature of royalty