FLYWIRE PAYMENTS CORPORATION, BOSTON, MASSACHUSETTS vs. ACIT, CIR. -1(1), KOLKATA

This is an appeal filed by the assessee against the order passed by the ld.CIT(A), Kolkata-22, passed in Appeal No.CIT(A), Kolkata- 22/10139/2018-19, dated 22.09.2021, for the assessment year 2016- 2017.

Ms. Parul Jain, ld. AR appeared on behalf of the assessee and Shri Praveen Kishore, ld.CIT-DR appeared on behalf of the revenue.

It was submitted by the ld. AR that the assessee Flywire Payment Corporation is a US based tax resident entity. It was the submission that the assessee is the payment gateway for many foreign colleges/universities. It was the submission that the students from India when seek admission in such foreign colleges/universities, are intimated the fees for their courses by such foreign colleges/universities. As such foreign colleges/universities do not receive the fees directly, such foreign 2 ITANo.498/Kol/2021 colleges/universities entered into an agreement with the assessee for receipt of the fees from the students and he payment thereto to the foreign colleges/universities. It was the submission that as the assessee is a foreign tax entity and as it does not have any branch in India, the assessee had entered into an agreement with M/s Muthoot Foreign Exchange Company Pvt. Ltd. at the such rate in respect of currency relating to the foreign colleges/universities. The students based on Indian currency after applying exchange rates M/s Muthoot Foreign Exchange Co. Pvt. Ltd., which is subsequently changed to M/s Muthoot Forex Limited transfers such amount to the assessee and during the transfer of funds from the Muthoot to the assessee, there is always positive exchange fluctuation, therefore, the transfer of funds from Muthoot Forex Ltd. to the assessee, consists of two transactions, namely, one for the entire fees which is billed by foreign colleges/universities on the students and the second portion being the exchange fluctuation less the commission charged by Muthoot Forex Ltd. on the assessee. It was the submission of the ld.AR that the agreement between M/s Muthoot Forex Ltd (hereinafter referred to as “Muthoot”) and the assessee was being foreign exchange margin @ 1% of the INR value using rooters INR being equal to at sources as per the agreement dated 1st March, 2013. It was, thus, the submission that M/s Muthoot receives a commission @1% on the exchange value of the entire transaction. Out of the two payments received by the assessee from Muthoot, the entire foreign exchange relating to the student fees as billed by the foreign colleges/universities is transferred by the assessee to such foreign colleges/universities without 3 ITANo.498/Kol/2021 charging any commission. The second part which is exchange fluctuation @1% commission is the income of the assessee. It was the submission that the AO held that the payment made by Muthoot to the assessee was in the nature of “Royalty”, insofar as Muthoot has used the technological support for use of the software and for sharing part of the right of carrying on the business of e-Commerce through web bases customer interface. It was the submission that the AO has in page 11 of his order taken the stand that the assessee is having exclusive right for the International payment solutions to its clients, being the foreign educational institutions, and has shared it with Muthoot for remittance from India and because right to use the web-portal catering to international tuition fee payments was obtained by Muthoot on the condition that on remittances from India, certain percentage of remittance will be paid to Flywire Payment Corporation, the payment made in this regard may be safely classified as “Royalty”. It was the submission that this is not a case the assessee has not received any royalty payments from Muthoot. Ld.AR drew our attention to bank account of the assessee wherein it clearly shows that the payments having been received from Muthoot through all its accounts with City Bank. It was the submission that the assessee does not know which bank Muthoot using for transfer of the funds to the assessee’s bank account. Ld. AR drew attention to the agreement between the foreign colleges/universities and the assessee as also the agreement the between the assessee and Muthoot. Therefore, it was the submission that there is no technology transfer nor is there any services provided to Muthoot to the assessee nor the work around the services if any are 4 ITANo.498/Kol/2021 provided by Muthoot to the students. It was the submission that Muthoot only asks as the collection agent of the assessee. It was the submission that the assessee provides the students details to Muthoot and Muthoot only does foreign exchange conversion of the students and transfer to the assessee. It was the submission that the order of the ld.AO and that of ld.CIT(A) is liable to be reversed.