M/S. INFOSYS BPO LIMITED,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE-1(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B” BENCH: BANGALORE BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SMT BEENA PILLAI, JUDICIAL MEMBER IT(IT)A No. 986/Bang/2017 Assessment Year: 2016-17 The Deputy M/s. Infosys BPO Ltd., Commissioner of Electronic City, Income Tax, Hosur Road, International Taxation, Bangalore – 560 100. vs. Circle 1 (1), PAN: AACCP4478N Bangalore. (Appellant) (Respondent) & IT(IT)A No. 990/Bang/2017 Assessment Year: 2015-16 The Deputy M/s. Infosys BPO Ltd., Commissioner of Electronic City, Income Tax, Hosur Road, International Taxation, Bangalore – 560 100. vs. Circle 1 (1), PAN: AACCP4478N Bangalore. (Appellant) (Respondent) Appellant by : Shri Padamchand Khincha, CA Shri Priyadarshi Misra, Addl. Respondent by : CIT (DR) Date of Hearing : 16.07.2021 Date of Pronouncement : 11.10.2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER

Page 2 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 Present appeals are filed by assessee against orders dated 28/02/2017, passed by the Ld.CIT.(A)-12 for Assessment Years 2015-16 and 2016-17 on following grounds of appeal: 2. The grounds of appeal raised for Assessment Year 2016-17 in IT(IT)A No. 986/Bang/2017 are as under: “1.0 Exception to section 9(1)(vi)(b) / 9(1)(vii)(b) not examined by CIT(A) 1.1The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were in respect of right, property or information used or services utilized in a business or profession carried on by the appellant outside India or for the purposes of making or earning any income from any source outside India. 1.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not deemed to accrue to arise in India u/s 9(1)(vi)/(vii) in view of the above exception and consequently not liable for TDS u/s 195. 2.0 Payments to non residents were not chargeable to tax under the DTAA 2.1 The learned CIT(A) 12, Bangalore has erred in construing legal services provided by non resident vendor as training services and further erred in applying Article 13 instead of applying Article 15 of India — Poland DTAA 2.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not chargeable to tax under the DTAA and consequently not liable for TDS u/s 195. 3.0 Rate of 20% u/s 206AA is not applicable for grossing up u/s 195A 3.1 The learned CIT(A) 12, Bangalore has erred in not appreciating that the rate of 20% as per section 206AA is not applicable for the purposes of grossing up of income and payment of TDS under section 195A. 3.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the grossing up under section 195A is required to be made at 'rates in force' and not at the rate of 20% as per section 206AA. 3.3 The learned CIT(A) 12, Bangalore has erred in not appreciating that section 206AA is not applicable in the context of section 195A as grossing up u/s 195A does not involve deduction of tax at source from the amount payable to the payer.

Page 3 of 19 IT(IT)A Nos. 986 & 990/Bang/2017

4.0 Grant of interest on refund 4.1 The learned CIT(A) 12, Bangalore has erred in not allowing interest on refund of TDS paid by the appellant out of its own funds. 4.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that interest on refund of TDS is to be allowed as per CBDT Circular No. 11 of 2016 dated 26.4.2016 read with the decision of the Supreme Court in the case of UOI v TATA Chemicals Ltd [2014] 43 taxmann.com 240 (SC) The appellant prays accordingly.” 3. Similarly, the grounds of appeal raised for Assessment Year 2015-16 in IT(IT)A No. 990/Bang/2017 are as under: “1.0 Exception to section 9(1)(vi)(b) / 9(1)(vii)(b) not examined by CIT(A) 1.1The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were in respect of right, property or information used or services utilized in a business or profession carried on by the appellant outside India or for the purposes of making or earning any income from any source outside India. 1.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not deemed to accrue to arise in India u/s 9(1)(vi)/(vii) in view of the above exception and consequently not liable for TDS u/s 195. 2.0 Payments to non residents were not chargeable to tax under the DTAA 2.1 The learned CIT(A) 12, Bangalore has erred in construing payments made to non resident, inter alia, towards training services without appreciating the fact that there was no training provided by the non resident vendor. 2.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the payments to non residents were not chargeable to tax under the DTAA and consequently not liable for TDS u/s 195. 3.0 Rate of 20% u/s 206AA is not applicable for grossing up u/s 195A 3.1 The learned CIT(A) 12, Bangalore has erred in not appreciating that the rate of 20% as per section 206AA is not applicable for the purposes of grossing up of income and payment of TDS under section 195A.

Page 4 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 3.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that the grossing up under section 195A is required to be made at 'rates in force' and not at the rate of 20% as per section 206AA. 3.3 The learned CIT(A) 12, Bangalore has erred in not appreciating that section 206AA is not applicable in the context of section 195A as grossing up u/s 195A does not involve deduction of tax at source from the amount payable to the payer. 4.0 Grant of interest on refund 4.1 The learned CIT(A) 12, Bangalore has erred in not allowing interest on refund of TDS paid by the appellant out of its own funds. 4.2 The learned CIT(A) 12, Bangalore has erred in not appreciating that interest on refund of TDS is to be allowed as per CBDT Circular No. 11 of 2016 dated 26.4.2016 read with the decision of the Supreme Court in the case of UOI v TATA Chemicals Ltd [2014] 43 taxmann.com 240 (SC) The appellant prays accordingly.”

Brief facts are as under: 4. The assessee is an Indian company engaged in the business of providing business process outsourcing services. It is submitted that assessee made following payments to non-residents in USA and Poland during the year under consideration. Assessee grossed the invoice amount and TDS was deducted under section 195A of the Act. Payments made to the non-resident in USA was towards retainership and site license subscription fee and, payment made to the non-resident in Poland was towards legal service rendered. Assessee deposited TDS from its own funds and the TDS certificate were not issued to the non-residents. It is submitted that the TDS was deducted and deposited by assessee under protest. The details of the payments made to the non-residents and TDS deducted are as under:

Page 5 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 Nature Vendor Country Vendor Tax Grossed- Challan TDS Rate of Name PAN Residency up Invoice date expense Soltysinski PAN not 524,483.53 54,010 10.30 5.11.2015 Legal Kawecki & Poland available Yes service Szlezak

Vendor Vendor Grossed-up Challan Nature of Country TDS Rate Name PAN Invoice date expenses Retainership and site Zintro PAN Not USA 83002.14 21374.00 3/3/2015 License Inc. available 25.75 Subscription fee Retainership and site Zintro PAN Not USA 145901.71 37570.00 25.75 3/31/2015 License Inc available Subscription fee Retainership and site Zintro PAN Not USA 124594.1 32083.00 25.75 3/31/2015 License Inc available Subscription fee

Page 6 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 A. The Ld.CIT(A) observed that assessee made payments to a Law firm in Poland, a limited partnership firm. It was observed that payments were made to the law firm, who was tax resident of Poland. Assessee submitted copies of certificates of tax residence of the shareholders in support. The Ld.CIT(A) examined the payment under Article 13 of India Poland DTAA dealing with “Royalties and Fees for Technical Services”. A.1. The Ld.CIT(A) was of the opinion that the payment made by assessee came under the ambit of “Royalties and fees for technical services” as defined in para.4 of Article13. He held at the payments to nonresident in Poland was chargeable to tax in India under section 9(1)(vii) of Income tax Act, as well as Article 13(4) of DTAA between India and Poland. The Ld.CIT(A) therefore denied declaration to assessee on this issue. B. Another issue on which assesse sought declaration from the LdCIT(A) that tax deducted at higher rate under section 206AA was not applicable, when the payments were made to non-resident in the absence of permanent account number. B.1. On this, the Ld.CIT(A) observed that, as per section 248, section 206AA was not applicable in case of payments where DTAA restricted the rate of withholding to a lower rate. The Ld.CIT(A) held that assessee is entitled for a refund in respect of differential amount paid. C. Assessee also sought declaration that, assessee was entitled of refund of TDS paid, under section 195 A along with interest under section 244A of the Act.

Page 7 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 C.1. On this issue the Ld.CIT(A) observed that section 248 enables assessee to claim refund of tax based on the declaration that no tax was deductible on such income. The assessee is entitled to a refund where it has paid more taxes than the due amount required under section 195A. The Ld.CIT(A) however opined that section 214 and 244A of the Act do not contain any provision for interest in an appeal made under section 248 of the Act. He thus denied such declaration for granting refund along with interest under section 244A of the Act on the excess tax decucted. Aggrieved by the order of Ld.CIT(A) of the assessee is in appeal before us now. At the outset the Ld.AR submitted that Ground No.3.1-3.3 are not pressed as the Ld.CIT(A) has already given relief Accordingly these grounds raised assessee stands dismissed. Ground number 1-2.2 6. The Ld.AR submitted that application under section 248 of the Act, were filed seeking declaration that payments made to the non- resident at Poland was not liable for TDS as per the section 195 of the Act. The Ld.AR submitted that payments were made to Law Firm in Poland and the tax residency certificate of all the shareholders of the law firm along with declaration of the law firm that it has its place of residence for tax purposes in Poland were submitted before Ld.CIT(A). 7. The Ld.AR submitted that, in present facts, the law firm is a limited partnership and fiscally transparent entity as per Corporate Income Tax Act (hereinafter referred to as CTI)of Poland. He thus

Page 8 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 submitted that as per CTI, the Law Firm being a limited partnership is not considered as resident for taxation purposes. He submitted that as per principles of Private International law, the status of an entity as incorporated in the country of residence( in present case Poland) has to be similarly determined, even in India, according to the law of the country, where it is incorporated(in present facts Poland). 8. The Ld.AR referred to Article 1 of the Model Tax Convention as under:- The Ld.AR thus submitted that in the present facts, the partners were taxable in respect of their shares of income in Poland, were entitled to the treaty benefit. It is submitted that nither the Law firm of the partners have a place of business of PE in India. He placed reliance on the declaration by the Non resident Firm placed at page 40-41 of paper book. 9. He emphasised that, in the present facts as per India-Poland DTAA the resident state has the right to tax the income of the partnership, irrespective of the fact that the same is taxed in the hands of the partners/shareholders. The partnership firm has to be treated as fiscal domicile of that state(Poland) as per Article 4 of India Poland DTAA. He thus submitted that, payments made to the non resident in Poland for legal services rendered is not taxable in India. On the contrary, the Ld.CIT DR submitted that services rendered by the partners of the law firm are in the nature of “Fee for technical

Page 9 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 services” as defined under para 4 of Article 13 of India Poland DTAA. We have perused the submissions advanced by both sides in light of records placed before us. The moot issues that arise for consideration is; Whether the Partnership firm was not eligible for benefit under India Poland DTAA, on the ground that assessee was a fiscally transparent entity not liable to tax in Poland in its own right and Whether the Partners are fully taxable in respect of their shares of income in Partnership Firm as per CIT? If answer to above two issues are in affirmative then; Whether payments made to the law firm in Poland is in the nature of Fee for technical services under section 9(1) (vii) of the Act as well as Article 13 of India Poland DTAA ? The payee is a resident of Poland. It is submitted by the Ld.AR that in present facts, the law firm is a limited partnership a “fiscally transparent entity”, and therefore, the payments made to the law firm are to be dealt with in accordance with Article 15- “Independent personal services” as against Article 13 being “Royalties and Fee for technical services”. According to the Ld.AR since all the partners of the partnership are residents of Poland, the entire income of the Partnership is taxable in Poland and not in India as per Article 4 of India Poland DTAA. The Ld.AR submitted that in the present facts, payments are taxed

Page 10 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 in the hands of individuals, who are the partners/shareholders of the Law firm for rendering of legal/ professional services. Based on the above, it is necessary to analyse, if the Law firm could be considered to be ‘fiscally transparent’ as per India Poland DTAA. The definition of “Person” as per Article 3(1)( e) is as under: “the term "person" includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;” The above definition specifies that the provisions of DTAA is applicable to ‘persons’ who are taxable under the domestic taxation laws of the contracting states. The definition of 'resident of a contracting state', as set out in Article 4(1), states that resident of a Contracting State means: 1. For the purposes of this Agreement, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State. Further as per Article 1(1) of the India Poland DTAA, the treaty can only apply to a ‘person’ who is resident of one or both the contracting states. Therefore, in view of the provisions of Article 4(1) read with Article (1) and Article 3(1)(e), unless the payee is taxable under domestic laws of Poland, treaty benefits cannot be extended. We are therefore of the view that the Law firm is a non taxable entity as per the domestic laws and therefore treaty benefit cannot be extended to the firm.

Page 11 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 It is clear that the Law firm is a transparent entity, and cannot be taxed in its own right, but then the profit shares pertaining to its various constituents are taxable whose hands is the question that needs to be addressed. In other words in whose representative capacity the Law firm is to be taxed, and whether those persons are fiscally domiciled in the Poland for them to be 'liable to taxation by reasons of his domicile, residence, place of management or any other criterion of similar nature'. In the present facts of the case, it will be the partners of the firm who represent the partnership in Poland. Unlike in India, the Partnership itself is taxable as per Income Tax Act. The Ld.AR has filed the Tax residency Certificate(TRC) issued by Polish Government to the partners placed at page 16-39 of paper book. Identical issue arose before coordinate bench of Mumbai Tribunal in case of Linklaters LLP v. ITO reported in (2010) 40 SOT 51. In a subsequent decision in case of Linklaters vs.DCIT reported in (2017) 79 taxman.com 12, Hon’ble Mumbai Tribunal referring to the preceeding decision observed as under: 9. We have gone through the orders passed by the AO as well as DRP and also the submissions made before us and also the orders passed by the Tribunal in case of Linklaters LLP v. ITO (IT) [2010] 40 SOT 51 (Mum.) for earlier years. With the assistance of both the parties, it was noted that this issue has cropped up in various earlier years in case of M/s. Linklaters i.e. A.Ys 1995-96, 1997- 98, 1998-99, 1999-2000 and 2001-02 wherein, the Tribunal has decided this issue in favour of Linklaters by holding that it is eligible for the benefits of India -UK DTAA. Our attention has been drawn upon the orders passed by the Tribunal for all these years. In A.Y.1995-96, the Tribunal vide its order reported in Linklaters LLP's case (supra) made elaborate discussion at paras 21 to 28 before arriving at the conclusion at paragraph 79 as under:—

Page 12 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 "In view of the above discussions, as also bearing in mind the entirety of the case, we hold that the assessee was indeed eligible to the benefits of India-UK tax treaty, as long as entire profits and the partnership firm are taxed in UK - whether in the hands of the partnership firm though the taxable income is determined in relation to the personal characteristics of the partners, or in the hands of the partners directly. To that extent, objection taken by the learned Departmental Representative, on the question of admissibility of India-UK tax treaty benefits, is held as maintainable but rejected on merits". 10. Similarly, in other years, the Tribunal has followed its earlier order and held that M/s. Linklaters is eligible for the benefits of India-UK DTAA so long as entire profits of the partnership firm are taxed in UK, whether in the taxable income is determined in relation to personal characteristics of the partners or in the hands of the firm directly. In the year before us, there is no dispute on facts that ultimately tax has been paid either by the said firm or by its partners in UK. No distinction has been pointed out by the Ld. CIT- DR on facts or law. Under these circumstances, respectfully following the orders of the Tribunal in Linklaters's case for earlier years, we hold that the assessee is entitled to claim benefits of India UK- DTAA. Therefore, Grounds 8 to 8.4 are allowed. Subsequently, Hon’ble Mumbai Tribunal analysed similar position in case of ING Bewaar Maatschappij I BV vs.DCIT reported in (2019) 112 taxman.com 21. We also refer to the OECD commentary on this aspect is as under: "8.4 Where a State disregards a partnership for tax purposes and treats it as fiscally transparent, taxing the partners on their share of the partnership income, the partnership itself is not liable to tax and may not, therefore, be considered to be a resident of that State. In such a case, since the income of the partnership "flows through" to the partners under the domestic law of that State, the partners are the persons who are liable to tax on that income and are thus the appropriate persons to claim the benefits of the conventions concluded by the States of which they are residents. This latter result will be achieved even if, under the domestic law of the State of source, the income is attributed to a partnership which is treated as a separate taxable entity. For States which could not agree with this interpretation of the Article, it would be possible to provide for this result in a special provision which would avoid the resulting potential double taxation where the income of the partnership is differently allocated by the two States." Further the Ld.AR placed before us information on residency for tax purposes in Poland that are as under:

Page 13 of 19 IT(IT)A Nos. 986 & 990/Bang/2017

Based on above discussion, it is clear that the Partners of the Law firm are taxed on the income received by the Partnership Firm in Poland. Now coming to the taxability of the income, we note that revenue treated the receipt by the non resident to be FTS as per Article 13(4) that reads as under:

Page 14 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the royalties, or fees for technical services, is a resident of the other Contracting State, the tax so charged shall not exceed 15per cent of the gross amount of the royalties or fees for technical services. 3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright including copyright of literary, artistic or scientific work including cinematograph films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use any industrial, commercial, or scientific equipment or for information concerning industrial, commercial or scientific experience. 4. The term "fees for technical services" as used in this Article means payments of any kind, other than those mentioned in Articles 15 and 16, as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of article 7 or article 15, as the case may be, shall apply. 6. Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub- division, a local authority or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

Page 15 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 7. Where, by reason of special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of royalties or fees for technical services paid exceeds 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, and in such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Paragraph 4 of Article 13 excludes services mentioned in Article 15 & 16. Since Partners are taxable in Poland as per the Personal Income Tax Act, Article 15 of India Poland DTAA is to looked into. We are therefore of the opinion that services rendered by the non resident Law firm cannot be treated as FTS under Article 13(4). ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State : (a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State ; or (b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days in the relevant "previous year" or "year of income" as the case may be; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State. 2. The term "professional services" includes independent scientific, literary, artistic, educational, or teaching activities, as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. Only on fulfillment of either of the two circumstances under Article 15, one could say that the money received by the non resident is taxable in India. Due to non fulfillment of above conditions, taxability under Article 15 does not trigger. In the present case the

Page 16 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 nonresident payee has given a certificate that there is no fixed place of business/PE in India, more particularly placed at page 40-41 of paperbook. Nothing has been brought on record by the revenue to establish that the non resident payee has any fixed place of business PE in India. In that view of the matter, the income ceases to be taxable in India. Accordingly this ground raised by assessee stands allowed. Ground No.4.1 and 4.2 It is submitted that Hon’ble Supreme Court in case of UOI vs Tata Chemicals Ltd., reported in (2014) 43 taxman.com 240 held that, deductee is entitled for interest on refund tax deposited under section 195. The Ld..AR placed reliance on CBDT Circular No.11/2016 allowing interest on refund under section 244A on excess TDS deposited under section 195 of the Act. Nothing contrary has been brought on record by the Ld.CIT DR. Respectfully following the decision of Hon’ble Supreme Court, we hold that the deductee is entitled to interest on refund of tax deposited under section 195 of the Act. Accordingly these grounds stands allowed. ITA 990/Bang/2017 Ground No.1-2 In the present case Zintro Inc, USA is the payee(refer to table at page 5 of this order) The payee is a non resident and assessee filed application under section 248 seeking declaration that payments made to Zintro is not taxable in India.

Page 17 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 The Ld.CIT(A) dismissed the application by holding that some payments are in the nature of software licenses and are Royalty in the hands of the non resident. The Ld.CIT(A) held that Zintro received payments towards license subscription fees & Platform Cost and expert advice for information concerning industrial, commercial or scientific experience provided by sourcing expert advice and making available to assesse. The Ld.CIT(A) also observed that Zintro provided periodic training of Infosys trainers who would then train new analysts etc. The Ld.CIT(A) thus held that the certain services rendered by Zintro are in the nature of technical services. He relied on the decision of Hon’ble Karnataka High Court in case of Samsung Electronics reported in (2012) 345 ITR 494. The Ld.CIT(A) following the decision held that the payments made to the Zintro are taxable in India under section 9(1)(vi) (vii) and Article 12 of India US DTAA. The Ld.AR relied on agreement between assessee and Zintro placed at page 16-19. He submitted that issue needs to be analyzed in the light of principles laid down by Hon’ble Supreme Court in case of Engineering Analysis Center of Excellance Pvt.Ltd. Vs. CIT & Anr., reported in (2021) 125 taxman.com 42 and services rendered by Zintro to assessee. He submitted that, Hon’ble Supreme Court took view contrary to the view taken by the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra). The Ld.CIT DR, while relying on the order of the CIT(A), pointed out that Ld.CIT(A) has not examined the end users agreement to find

Page 18 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 out nature of services and therefore the issue should be remanded to the Ld.CIT(A) for fresh consideration. We have perused the submissions advanced, and the order passed by the Ld.CIT(A). We find the issue to be decided in the grounds raised by the assessee are in relation to taxability of payment made by assessee in India to the non residents. The decision of Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra) on the basis of which the revenue authorities concluded that the payment to non-residents are in the nature of royalty and FTS, now stand overruled by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra) and therefore in all fairness, the issue is to be remanded to the Ld.CIT(A) to examine the terms of the agreement under which services were rendered to the Assessee. The Ld.CIT(A) is directed to analyse in the light of the provisions of the DTAA and principles laid down by Hon’ble Supreme Court, as to whether the same would amount to Royalty and FTS. We accordingly remand the issue to the Ld.CIT(A). The Ld.CIT(A) will afford opportunity of being heard to the Assessee in the set aside proceedings. Accordingly Ground No.1-2 stands allowed for statistical purpose. Ground No.3 is not pressed by assessee. Accordingly this ground stands dismissed.

Page 19 of 19 IT(IT)A Nos. 986 & 990/Bang/2017 Ground No.4 are similar to Ground 4 considered in ITA no. 986.B/2017. As the facts are identical, the view taken therein is applied mutatis mutandis. Accordingly, Grounds stands allowed. In the result appeals filed for assessment years under consideration stands partly allowed. Order pronounced in open court on 11th October, 2021.

Sd/- Sd/- (B.R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11th October, 2021. /MS/

Copy to 1. The Appellant 2. The Respondent 3. CIT(A) 4. Pr. CIT 5. DR, ITAT, Bangalore. 6. Guard File By order

Assistant Registrar Income-tax Appellate Tribunal Bangalore