M/S SHELL INFORMATION TECHNOLOGY INTERNATIONAL BV,MUMBAI vs. DY CIT (IT) 4 (2)(1), MUMBAI

O R D E R

PER RAM LAL NEGI, JM

2. The assessee has challenged the impugned order by raising the following effective grounds: General On the facts and circumstances of the case and in law, the learned AO based on the directions of the Hon’ble DRP:

2 Assessment Year: 2016-17 1. “Erred in assessing the total income at Rs. 2,29,87,71,627/- as against Rs. NIL total income offered in return of income by the Appellant; Receipt towards access to use software and IT support services does not constitute ‘ income’ 2. Erred in holding that the payments received by the Appellant constitutes ‘ income ‘ without appreciating that the appellant work only on cost- only arrangement and the receipts were reimbursement being in the nature of cost allocation without markup and hence does not constitute income under section 2(24) of the Act. Receipt towards access to use software held as royalty’ under the India- Netherland DTAA 3. Erred in constituting the payments of Rs. 67,53,80,709/- received by the Appellant from Key Application Service provider and Shell group entities for access to use copyrighted software as royalty taxable under Article 12 of India-Netherlands Double Taxation Avoid Agreement (‘India – Netherlands DTAA) 4. Failed to appreciate that the payments received were only for the ‘use of copyrighted article as compared to ‘ use of process’ use of property similar to patents, design, trademark and invention, which does not constitute ‘royalty’ under the India-Netherlands DTAA; Receipts towards IT support services held as ‘Fees for Technical Services (FTS) under the Act as well as India-Netherlands DTAA

5. Erred in holding that payments of Rs. 162,33,90,198/- received by the Appellant for IT support Services constitutes ‘FTS’ under the provisions of the Act and under Article 12 of the India-Netherlands DTAA; 6. Failed to appreciate that IT support services do not ‘make available’ any technical knowledge, experience, skill, know-how or processes, etc. to the service recipient under Article 12 of the India-Netherlands DTAA and hence not subject to tax in India. Non-granting of credit for Tax Deducted at source (TDS) 7. Erred in not granting the TDS credit of Rs. 4,86,64,794. Interest under section 234B of the Act 8. Erred in levying interest under section 234B of the Act without appreciating the facts and circumstances of the case.”

may be allowed. Subsequently, the assessee placed on record the copy of order dated 10.01.2020 passed by the “I” Bench of the Tribunal in assessee’s appeal ITA No. 7283/Mum/2018 for the AY 2015- 16, in which the Tribunal has decided the identical issues in favour of the assessee by following the decisions rendered by the Tribunal in assessee’s appeal pertaining to the earlier assessment years.

4. The Ld. Departmental Representative (DR) fairly admitted that the issues raised by the assessee vide Ground No. 3 and 4 are covered by the decisions of the ITAT, Mumbai in assessee’s own case for the AYs 2012-13 , 2013-14, 2014-

15. However, the Ld. DR supported the order passed by the Ld. AO in pursuance of the directions issued by the Ld. DRP.

5. We have heard the rival submissions and perused the material on record including the orders passed by the coordinate Bench in the assessee’s own appeals pertaining to earlier years. As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in assessee’s own appeal ITA No. 7283/Mum/2018 (AY 2015-16) by following the decisions of the coordinate Bench rendered in the assessee’s appeals pertaining to the AYs 2012-13 , 2013-14, 2014-15. The findings of the coordinate Bench read as under:- “5. We have heard the rival submissions and perused the orders of the authorities below and the orders of the Tribunal for various assessment years. The Tribunal decided this issue in favour of assessee initially for the A.Y. 2006-07 to 2008-09 in ITA.No. 5051/MUM/2009, 3818/Mum/2011 and ITA.No. 728/Mum/2012 dated 15.03.2017 wherein the Tribunal held that the payments received by the assessee from Wipro/IBM in pursuance to the MSA cannot be treated as “royalty” under Article 12(4) of the India– Netherlands DTAA observing as under: - 4 Assessment Year: 2016-17 “12. After considering the aforesaid submissions and the relevant terms of ‘Master Service Agreement’ (as reproduced above) between the assessee and the IT Services providers, i.e., WIPRO/IBM, it is quite ostensible that:-

Firstly, any kind of right granted to WIPRO/IBM cannot be passed on or transferred to any other person and only WIPRO/IBM is legally permissible to exercise this right. Secondly, the right to access/use of software is again subject to various terms and conditions, which has been highlighted under Article 4 The right which has been given to WIPRO/IBM is not unfettered but has a very limited use for the own business purpose and not otherwise. Thus, only limited right to access/use the software has been provided to the UT service provider for its own business purpose and they do not get any right in the said software. The access to software is not for use of any copyright albeit for a copyrighted articles during the course of providing service. The agreement clearly envisages that WIPRO/IBM shall use the software only for providing services to Shell entities and cannot alter or modify the software. Since the assessee is a resident of Netherland therefore, such a payment has to be seen in terms of Article 12(4) of DTAA, which reads as under:- “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 of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.” From the plain reading of the article it can be inferred that, it refers to payments of any kind received as a consideration for the use of, or the right to use any ‘copyright’ of literary, artistic or scientific work including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience. Thus, in order to tax the payment in question as “royalty”, it is sine qua non that the said payment must fall within the ambit and scope of Para4 of Article 12. The main emphasis on the payment constituting ‘royalty’ in Para4 is for a consideration for the ‘use of’ or the ‘right to use’ any copyright.......... The key phrases are “for the use” or “the right to use 5 Assessment Year: 2016-17 any copyright of”; “any patent......., “or process”, “or for information.........,”; “or scientific experience”, etc., are important parameter for treating a transaction in the nature of “royalty”. If the payment doesn’t fit within these parameters then it doesn’t fall within terms of “royalty” under Article 12(4).The computer software does not fall under most of the term used in the Article barring “use of process” or “use of or right to use of copyrights” Here first of all, the limited use of software cannot be held to be covered under the word “use of process”, because the assessee has not allowed the end user to use the process by using the software, as the customer does not have any access to the source code. What is available for their use is software product as such and not the process embedded in it. Several processes may be involved in making computer software but what the customer uses is the software product as such and not the process, which are involved into it. What is required to be examined in the impugned case as to whether there is any use or right to use of copyright? The definition of copyright, though has not been explained or defined in the treaty, however, the various Courts have consistently opined that the definition of “copyright “as given in the ‘Copyright Act, 1957’ has to be taken into account for understanding the concept. Section 14of the said Act defines the ‘copyrights’ to mean as under: “14. Meaning of copyright – For the purposes of this Act, "copyright" means the exclusive right subject to the provisions of this Act, to do or authorise the doing of any of the following acts in respect of a work or any substantial part thereof, namely: (a) in the case of a literary, dramatic or musical work, not being a computer programme, (i) to reproduce the work in any material form including the storing of it in any medium by electronic means; (ii) to issue copies of the work to the public not being copies already in circulation; (iii) to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work; (v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-clauses (i) to (vi); (b) in the case of a computer programme,- 6 Assessment Year: 2016-17 (ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme: Provided that, such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental.” (c) in the case of an artistic work,- (i) to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work; (ii) to communicate the work to the public; (iii) to issue copies of the work to the public not being copies already in circulation; (iv) to include the work in any cinematograph film; (v) to make any adaptation of the work; (vi) to do in relation to an adaptation of the work any of the acts specified in relation to the work in sub-clauses (i) to (iv); (d) In the case of cinematograph film, - (i) to make a copy of the film, including a photograph of any image forming part thereof; (ii) to sell or give on hire, or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) to communicate the film to the public; (e) In the case of sound recording, - (i) to make any other sound recording embodying it; (ii) to sell or give on hire, or offer for sale or hire, any copy of the sound recording regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) to communicate the sound recording to the public. Explanation: For the purposes of this section, a copy which has been sold once shall be deemed to be a copy already in circulation”.

13. Thus, the definition of ‘copyright ‘in section 14 is an exhaustive definition and it refers to bundle of rights. In respect of computer programming, which is relevant for the issue under consideration before us, the copyright mainly consists of rights as given in clause (b), that is, to do any of the act specified in clause (a) from (i) to (vii) as reproduced above. Thus, to fall within the realm and ambit of right to use copyright in the computer software programme, the aforesaid rights must be given and if the said rights are not given then, there is no copyright in the computer programme or software. Here in this case, none of the conditions mentioned in section 14 of the ‘Copyright 7 Assessment Year: 2016-17 Act’ is applicable as held by the learned CIT(A); and is also is evident from the terms of MSA, because no such rights has been given by the assessee to the IT Service providers.

14. Further by making use or having access to the computer programs embedded in the software, it cannot be held that either WIPRO/IBM are using the process that has gone into the software or that they have acquired any rights in relation to the process as such. The software continues to be owned by the assessee and what WIPRO/IBM is getting mere access to the software. The source code embedded in the software has not been imparted to them. Hence, there is no use or right to use of any process as held by the learned AO. Hence, the finding of the learned CIT(A) that the payment in question cannot be reckoned as “royalty” is factually and legally correct and the same is upheld.

“87. In order to qualify as royalty payment, it is necessary to establish that there is transfer of all or any rights (including the granting of any licence) in respect of copyright of a literary, artistic or scientific work. In order to treat the consideration paid by the Licensee as royalty, it is to be established that the licensee, by making such payment, obtains all or any of the copyright rights of such literary work. Distinction has to be made between the acquisition of a "copyright right" and a "copyrighted article". Copyright is distinct from the material object, copyrighted. Copyright is an intangible incorporeal right in the nature of a privilege, quite independent of any material substance, such as a manuscript. Just because one has the copyrighted article, it does not follow that one has also the copyright in it. It does not amount to transfer of all or any right including licence in respect of copyright. Copyright or even 8 Assessment Year: 2016-17 right to use copyright is distinguishable from sale consideration paid for “copyrighted” article. This sale consideration is for purchase of goods and is not royalty.

12 Assessment Year: 2016-17 There could not be any independent use of such software. The software is embodied in the system and the revenue accepts that it could not be used independently. This software merely facilitates the functioning of the equipment and is an integral part thereof. On these facts, it would be useful to refer to the judgment of the Supreme Court in TATA Consultancy Services Vs. State of Andhra Pradesh (2004) 271 ITR 401 (SC), wherein the Apex Court held that software which is incorporated on a media would be goods and, therefore, liable to sales tax. Following discussion in this behalf is required to be noted: - "In our view, the term "goods" as used in Article 366(12) of the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (In case of painting) or computer discs or cassettes, and marketed would become "goods". We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. TAXPUNDIT.ORG Sale is not just of the media which by itself has very little value. The software and the media and case laws in favour of the assessee including that of the Delhi High Court on several occasions, we are inclined to follow the decision and proposition laid down by the Hon’ble Delhi High Court. Thus, in view of the finding given above, we uphold the order of the CIT(A) that the payment received by the assessee for sums amounting to Rs. 3,75,25,291/- does not amount to “royalty” within the meaning of Article 12(4) of Indo-Netherland DTAA and accordingly, the same is not taxable in India. Since, admittedly, the assessee has no PE in India; therefore, same cannot be taxed as business income under Article 7. Accordingly, ground raised by the revenue stands dismissed.” The aforesaid decision clearly clinches the issues in favour of the assessee.

13 Assessment Year: 2016-17 16. So far as the reading of amended definition of ‘royalty’ as given in section 9(1)(vi) into treaty as contended and argued by ld. CIT DR, we find that, Hon’ble Delhi High Court in its latest judgment in the case of DIT vs. New Skies Satellite, reported in [2016] 95 CCH 0032, wherein their Lordships shave discussed the issue threadbare and came to the conclusion in the following manner:- “60. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word “royalty” in Asia Satellite, supra note 1, when the definitions were in fact pari material (in the absence of any contouring explanations), will continue to hold the filed for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both partners to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax Avoidance Agreement”. The aforesaid decision also takes care of all the arguments relied upon by the ld. CIT DR including that of the Verizon Communications Singapore Pte. Ltd. The Hon’ble High Court has specifically clarified as to why the said judgment of Madras High Court cannot be applied in such cases after observing as under:- “31. In a judgment by the Madras High Court in Verizon Communications Singapore Pte Ltd. V. The Income Tax Officer, International Taxation I, [2014] 361 ITR 575 (Mad), the Court held the Explanations to be applicable to not only the domestic definition but also carried them to influence the meaning of royalty under Article 12. Notably, in both cases, the clarificatory nature of the amendment was not questioned, but was instead applied squarely to assessment years predating the amendment. The crucial difference between the judgments however lies in the application of the amendments to the DTAA. While TV Today, supra note 22 recognizes that the question will have to be decided and the submission argued, Verizon, supra note 23 cites no reason for the extension of the amendments to the DTAA. As regards the decision of Hon’ble Bombay High Court in the case of CIT vs. Siemens Aktiongesellschaft (supra), referred to by d. CIT DR, the Hon’ble Delhi High Court has also dealt with this point and made 14 Assessment Year: 2016-17 distinction that the issue and situation before the Hon’ble Bombay High Court was materially different and also the term ‘royalty’ was not defined in the German DTAA.

17. Thus, we hold that for all the years the payments received by the assessee from WIPRO/IBM in pursuance to the MSA cannot be treated as “royalty” under Article 12(4) of the India-Netherland DTAA.

17. Thus, the matter is decided in favour of the assessee and against the revenue.

6. The coordinate Bench has decided the identical issue in favour of the assessee in assessee’s appeals pertaining to the earlier assessment years including the assessment year 2015-16 discussed above. Since, there is no change in the facts of the present case, we respectfully following the decision of the coordinate Bench rendered in the assessee’s appeal for the AY 2015-16 and the decisions rendered in earlier assessment years, we set aside the findings of the Ld. AO and allow Ground No. 3 and 4 of appeal of the assessee.

7. Similarly, the Ld. counsel for the assessee submitted that Ground No. 5 and 6 of the present appeal are covered in favour of the assessee by the decisions of the ITAT rendered in assessee’s own cases pertaining to the AYs 15 Assessment Year: 2016-17 2011-12 to 2014-15. Since, the Ld. counsel further submitted that since the Tribunal has decided the identical issue in favour of the assessee in assessee’s own cases, this issue may be decided in favour of the assessee and the impugned order may be set aside.

, Ld. Counsel for the assessee submitted that these grounds relates to receipts towards IT support services held as FTS under the Act as well as the IndiaNetherlands DTAA, and it was decided in favour of the assessee for the A.Y.2011-12 to 2014-15 by the Tribunal. Copy of the order is placed on record.

8. Ld. DR vehemently supported the orders of the authorities below.

9. We have heard the rival submissions and perused the orders of the authorities below. We have perused the order of the Tribunal for the A.Y.2010-11 to 2011-12 in dated 28.05.2018 wherein the Tribunal following the order for the A.Y. 2009-10 to 2010-11 in ITA.No. 2204/MUM/2014 and 1203/Mum/2015, held as under: - “16. We have heard the rival submissions and also perused the material on record. The co-ordinate Bench has decided the identical issue in favour of the assessee in the assessee’s own case ITA No. 2204/Mum/2014 for the A.Y. 2009-10 and ITA No. 1203/Mum/2015 16 Assessment Year: 2016-17 for the A.Y. 2010-11 holding as under:- “7. The next issue common issue in both the appeals of assessee is as regards to taxability of payment received by assessee from IT support services which constitutes Fees for Technical Services ('FTS') and royalty under the IndiaNetherlands Treaty DTAA. For this Assessee has raised following ground:- "

Payments towards IT Support fees held in be Fees for Technical Services 'FTS') and royalty.

4. Erred in holding that payments received by the Appellant for IT support DTAA.

5. Failed to appreciate that IT support services do not 'make available any technical knowledge, skill, experience etc.to the services recipient under Article 12 of the India-Netherlands DTAA and hence not subject to tax in India.

6. Erred in alternatively holding that the receipt from IT - support services qualify as Royalty' under the IndiaNetherlands DTAA."

8. The facts and circumstances are exactly identical in both the AYrs i.e. 2009-10 and 2010-11 and also the grounds raised are identically worded hence, we will take- the facts from 2009-10.

9. The learned Counsel for the assessee, first of all, took us through the findings of the DRP on the issue which is recorded in Para 53 as under: "5.3 Discussions and directions of DRP 5.3.1 We have considered the draft assessment order, submissions of assessee and material. We have seen that under the Master Services Agreement, the assessee SITI BV has furnished technical and advisory services to various clients based in India. The delineated services are significantly technical in nature and the resultant fees are liable to be treated as Fees for Technical Services. We are also in agreement with the AO that the Ruling of Hon'ble Authority for Advance Rulings in the case of ARE VA T&D India Limited (A TD/L) is applicable in the case of assessee. In this case, the Aar held as below: "We have noted that under- the IT Agreement, the French company is to provide support services through a central team in the area of Information Technology to the Applicant and to its other subsidiaries in the worId. The provision of support services by the French company would 'itself make available, the technical knowledge/ experience to the Applicant. In Porfetti Van Melle Holdings B.V1 this Authority held the view that the expression 'in available only means that the recipient of the service should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or knowhow in future on his 17 Assessment Year: 2016-17 own". Here, information technology relating to design, engineering, manufacturing and supply of electric equipment that help in transmission and distribution of power, commissioning and servicing of tr'1nernv ion and distribution system is provided to the Indian entity Which is applied in running the business of the Applicant and the employees of the Applicant would got equipped to carry on the systems on their own without reference to the French Company, when the IT Agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the agreement on its expiry. We are of the view that the services provided under the IT agreement are in the nature of Fees for Technical Services and taxable under' the DTAA as well as under the Act. Though the ruling is technically not binding in the present case, the 7 ratio and logic followed by the Hon'ble Authority have very high degree of persuasive value. in any case, this technical know-how is of an enduring nature and has a direct nexus with the assessees business. 5.3.2 considering the above factual and leg& matrix we are of the opinion that the action of the AO in treating the above receipt is fee for technical services does not require any interference The alternate arguments on taxability of the receipt as royalty do not require any direction from the penal as we have already upheld the taxability of the services as "fees for included service”.

10. The learned Counsel for the assessee explained the facts that the SITI BV is a company registered in the Netherlands. SIT! BV is in the business of providing information technology (IT') support services. During the financial year ended 31.03.2006 SIT! BV provided IT (mobile office) support services, IT helpdesk and network infrastructure related services to: Indian customers. SITI BV is a tax resident of the NetherIand and is eligible to claim benefits under the Double Taxation Avoidance Agreement entered into between India and The Netherlands. He explained that SITI BV is in the business of providing information technology support services SITI BV typically, provides helpdesk services-and network infrastructure services to Shell group companies comprising. Information Technology (II) support for solving any IT related problems faced by users i e any problem faced by users for accessing any application software c- mails, Computer repairs and maintenance etc. desktop laptop and workstation support, Services related to Wide area network ('WAN') arid Local area network ('LAN') for connection to the global servers', 18 Assessment Year: 2016-17 and Facilitating teleconferencing and video conferencing services Further, in the event Shell requires IT services from external service providers like WIPRO and IBM SITI BV is engaged in providing the necessary network access and related services as well. For this purpose, reference can be made to the scope of services to be rendered by SITI BV to WIPRO under the Services Agreement (copy of which is enclosed in the paper book of the assessee) and from the same Article 3 is reproduced below: Article 3 - Provision of Services SITI BV shall provide the IT Service Provider with the service." Further, 'Service' has been defined in Article I - Definitions as 'the combined Sub-services provided by S/TI BV to she IT Services Provider wider this Agreement, which Sub-services include the (if Services, the STO Services and she provision by S/TI BV to the IT Service Provider and Service Personnel of access to and/or use -of GI software and/or Optional Software….

1. 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 and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that Stale; 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: (a) In the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which this Convention has effect; (aa) 15% of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Govern rent of the first mentioned Contracting State or a political sub-division of that State and (bb) 2Q% of the gross amount of such royalties or fees for technical services in all other cases; and 20 Assessment Year: 2016-17 ( ii) during subsequent years 15% of the gross amount of such royalties or fees for technical services; and (b) in the case of royalties within paragraph 3(b) of this Article and fees for technical services defined in paragraph 4(b) of this Article, 10% of the gross amount of such royalties and fees for technical services. 3** ** ** (4) For the purpose 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 of enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received; or b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received, or Make available technical knowledge, experience. skill, knowhow or processes, or consist of the development and transfer of a technical plan or technical design.

9. A plain reading of Article 13(4)(c) of the DTAA indicates that 'fees for technical services' would mean payments of any kind to any 21 Assessment Year: 2016-17 person in consideration for the rendering of any technical or consultancy services which, inter alia, "makes available" technical knowledge, experience, skill, k7jcv-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the Tribunal this make available condition has not been satisfied inasmuch as no technical knowledge, experience, skill, know-how, processes, have been made dye/lab/c by the assessee to the insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. – 10. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article,. 13(4)'(c) of the DTAA read with section 9(1)(vii) of the said Act. While doing so the Tribunal, inter alia, found that the assessee company was an international reinsurance intermediary (broker) and was a tax resident of United Kingdom. Further, that it was a recognized broker by the financial services authority of United Kingdom, it was also an admitted position that the assessee did not maintain any office in India and mat it had a referral relationship with J B Boda reinsurance (Broker) Pvt. Ltd of Mumbai and that J B. Boda was duly licenced by the Insurance Regulatory & Development Authority to transact reinsurance business in India 11 The Tribunal also observed as under. – “27. In the illustrative transaction, New India Insurance Co. Ltd in India has entered into an agreement to reinsure on an Excess Loss basis the catastrophe risk arising from its primary insurance cover in conjunction with J.B. Boda and Alsford Page and gems Ltd. (the reinsurance brokers). The terms of the agreement specifies that the assessee in conjunction with J.B. Bode are recognized as intermediary, through whom all communications relating to this agreement shall pass. The terms of the agreement further provides that the assessee will provide all the details of agreed endorsements to the reinsurers by e-mail or facsimile and shall submit the slip policy to XIS (Lloyd's processing market) for signing. The assessee will act as a claim administrator and Will submit claims advices to relevant market systems. For the services rendered, the assessee along with the other reinsurance brokers acting as an intermediary in the reinsurance process for New India Assurance Co. will be entitled to 10% brokerage. From the role played by the assessee in the 22 Assessment Year: 2016-17 reinsurance process as discussed above, it is evident- to us that the assessee was rendering only intermediary services while acting as an intermediary/facilitator in getting the reinsurance cover for New India Insurance Co. There exists no material or basis on the basis of which, it Would be said that the assessee was rendering any kind of technical/consultancy service within the meaning of Article 13 of Indo-UK treaty. The consideration received by the assessee acting as an intermediary in the reinsurance process cannot, by any stretch of imagination, be qualified as a consideration received for rendering any financial analysis related consultancy services rating agency advisory services, risk based capital analysis etc. as alleged by the A.O." The Tribunal also noted the process by which the transactions takes place It has been pointed out that the originating insurer in India would contact J. B. Boda/ M, B. Boda for placing identified risks/ class of risks with international reinsurers. J.B. Boda, in turn, would contact one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the- international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final-decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer it was also pointed out that as per the normal industry practice, tea reinsurance premium net of brokerage al 10% as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation fee which is another word for brokerage is paid separately by the originating insurance in India to J.B. Bodo, the international reinsurance brokers like the assessee and other intermediaries, based on a mutually agreed ratio which accounts for their relative contribution in the reinsurance process. 12. Based on this manner of transacting, the Tribunal came to a conclusion that the payment received by the assessee could not be regarded as 'fees for technical services'. Further, more, the Tribunal also held that such receipts would not amount to fees for technical services as the "make available" clause contained in article 13(4)(c)

23 Assessment Year: 2016-17 had not been satisfied in the facts and circumstances of the present case.

13. In our view, the Tribunal has arrived at these conclusions purely on assessing the factual matrix of the case at hand. The findings are in, the nature of factual findings and, therefore, according to us, no substantial question of law arises for our consideration, particularly, because the learned counsel for the Revenue was unable to point out any perversity in the recording of such findings. As such no substantial question of law arises for our consideration. The appeal is dismissed. There shall be. no order as to costs."

10. Facts being identical, respectfully following the said decision of the Tribunal we allow Ground Nos. 5 and 6 of the assessee.

11. In so far as Ground No.2 is concerned the Ld. Counsel for the assessee submitted that since it was held in favour of the assessee on Royalty and FTS ground, the ground raised

by the assessee in respect of receipts towards access to use software and IT support services does not constitute “income” may be kept open. Accordingly, this ground is kept open which may be contested as and when the situation arises.

12. The rest of the grounds are only consequential in nature and the same are restored to the file of the Assessing Officer for adjudication in accordance with law.”

11. Ground Nos. 1, 2, 7 and 8 are either general or consequential, hence do not require adjudication.