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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAVISH SOOD, JM
आदेश / ORDER
PER RAVISH SOOD JUDICIAL MEMBER:
The present appeals filed by the revenue for A.Y 2001-02 and A.Y 2002-03 are directed against the respective orders passed by the CIT(A)-31, Mumbai, dated 16.09.2004 and 16.05.2005, respectively. As a common issue is involved in the aforementioned appeals, thus the same are being taken up together and disposed off by way of a consolidate order. We shall first take up the appeal of the revenue for A.Y 2001-02. The revenue
P a g e | 2 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. assailing the order passed by the CIT(A) has raised before us the following grounds of appeal :
“1. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the payments received by the assessee from subscribers in India is not fees for technical services, without appreciating the fact that: a. It is in the nature of fees for technical services as per Explanation 2 to section 9(1)(vii) of the Income tax Act, 1961; and b. It is also fees for technical services as per the DTAA between India and U.K since a „process‟ is made available to the assessee.
2. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the assessee does not have Permanent Establishment in India (PE) without appreciating the fact that communication network in India, Reuters Dealing 2002, is owned and is at the disposal of the assessee.
3. On the facts & circumstances of the case & in law, and without prejudice, the Ld. CIT(A) has erred in holding that the payment was in the nature of „royalty‟. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the A.O be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
Further, the A.O has also filed certain additional grounds of appeal, which read as under :
“(1) Without prejudice to the two grounds raised earlier, on the facts and in circumstances of the case and in law, the Ld. CIT(A) should have held that the revenue earned by the assessee on providing Reuters Dealing 200-2 to its customers are in the nature of „Royalty‟ as per the provisions of the section 9(1)(vi) of the Income Tax Act and as per the India-UK Treaty.
(2) The Appellant prays that the order of the Ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored. (3) The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
P a g e | 3 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd.
Briefly stated, the assessee viz. Reuters Transactions Services Limited which is a company incorporated under the laws of England and is a tax resident of United Kingdom had filed its return of income for AY 2001-02 on 19.04.2002, declaring total income at Nil. The return of income filed by the assessee was processed as such under Sec. 143(1)(a) on 18.02.2003. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).
3. The assessee is engaged in the business of providing of „Reuters Dealing 2000-2‟ which is an electronic deal matching system, enabling authorized dealers in foreign exchange such as banks etc. to effect deals in spot foreign exchange with other foreign exchange dealers. The system provides a platform for the forex dealers to affect deals with other subscribers. In order to affect deals, the subscribers of the system enter into the system the prices at which they are prepared to buy or sell a particular currency. The system displays to the subscriber anonymously the best buy or sell price for each quoted currency, amount and price. Further, the system matches the bids and offers, verifies that the counterparties have sufficient and mutually acceptable credits limits and then acknowledges successful completion of the deal to both the parties. Once a deal has been reached through the system in the above manner, the deal is binding on the subscriber. However, the responsibility of settling the deal is that of the subscribers alone and the assessee neither participates in the settlement procedure nor is liable in any manner whatsoever for any default. The assessee does not itself engage in dealing in foreign currency, either as a principal or as an agent. The assessee operates its business through its branch in Geneva where its main server is located and enters into contracts outside India with subscribers who wish to subscribe to the Reuters Dealing 2000-2 service. The services are made available to the subscribers in terms of the contract. Further, the payment of fees for the aforesaid service is made directly by the subscribers to the assessee in foreign exchange.
P a g e | 4 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd.
During the course of the assessment proceedings, it was observed by the A.O, that the assessee had in its return of income claimed that the fees earned by it from rendering the aforesaid services was governed by the provisions of Article 7 of the India-U.K tax treaty dealing with taxability of business profit. As per Article 7 of the tax treaty, the business Profits of a resident of U.K would be taxable in India, only if the U.K resident has a „Permanent Establishment‟ (for short „P.E‟) in India and the business profits are attributable to such P.E. It was the claim of the assessee that as it was rendering the „Reuters Dealing 2000-2‟ services from outside India and did not have a PE in India in terms of Article 5 of the Tax Treaty, thus, the revenues earned from rendering of the services during the year under consideration were not liable to be taxed in India by virtue of Article 7 of the said India-U.K tax treaty. It was in the backdrop of the aforesaid conviction, that the assessee had filed its return of income for the year under consideration viz. A.Y 2001-02, declaring Nil income.
The A.O while framing the assessment was however not persuaded to subscribe to the characterisation of the services provided by the assessee as business profits within the meaning of Article 7 of the India-U.K Tax Treaty. The A.O was of the view that the services provided by the assessee were in the nature of technical services and the revenue earned therefrom was in the nature of „fees for technical services‟ (for short „FTS‟), both as per the Income Tax Act and the India-UK tax treaty. It was further observed by the A.O that the assessee had a P.E in India. On the basis of his aforesaid observations, the A.O subjected the income of Rs. 1,41,14,720/- earned by the assessee from rendering of the services to tax under Sec. 44D r.w.s. 115A of the Act.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee was persuaded to subscribe to its claim that mere use of technology in the provision of services would not per se lead to treating of the same as P a g e | 5 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. technical services. The CIT(A) observed that as the services provided by the assessee did not “make available” any technical knowledge etc. as laid down in the treaty, hence, the services provided by the assessee could not characterised as being in the nature of technical services, within the meaning of the Income-tax Act and the India-U.K tax treaty. Further, the CIT(A) also did not find favour with the contention of the A.O that the communication network facilitating providing of services by the assessee to its clients constituted the P.E of the assessee in India. Rather, it was observed by the CIT(A) that as the communication network in India providing access to the assesses server in Geneva was neither owned by the assessee nor was the same at its disposal, thus the same could not be held to be the P.E of the assessee in India. The CIT(A) further observed that as the assessee was rendering the services from outside India and had no employees or personnel in India for rendering the services, thus the A.O had also erred in concluding that the assessee had a service P.E in India. In the backdrop of his aforesaid observations the CIT(A) concluded that as the fees earned by the assessee from rendering the aforesaid services were not in the nature of FTS and the assessee was not having a P.E in India, thus, its income would not be taxable in India.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Departmental representative (for short „D.R‟) at the very outset of the hearing of the appeal took us through the additional grounds of appeal and sought liberty for admission of the same. It was submitted by the ld. D.R that the issue raised in the additional grounds of appeal was squarely covered by the order of the Tribunal in the assesses own case for A.Y 2008-09 and A.Y 2009-10 viz. Reuters Transaction Service Ltd. Vs. Deputy Director of Income-tax (International taxation)-2(1), Mumbai (copy placed on record); dated 18.07.2014. It was the contention of the ld. D.R that the Tribunal while disposing off the appeals of the assessee for the aforementioned years, had vide its consolidate order held that allowing the use of software and computer system to have access
P a g e | 6 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. to the portal of the assessee for finding relevant information and matching their request for purchase and sale of foreign exchange amounted to imparting of information concerning technical, industrial, commercial or scientific equipment work, and the payment made in this respect would constitute “royalty”. It was further submitted by the ld. D.R that the said order was thereafter followed by the Tribunal while disposing off the appeal of the assessee for A.Y 2005-06 (copy placed on record). The ld. D.R taking support of his aforesaid contentions submitted that the issue involved in the present appeal was squarely covered by the aforesaid orders of the Tribunal. The ld. D.R taking support of Rule 11 of the Appellate Tribunal Rules, 1963 averred that the additional grounds of appeal raised by the revenue may be admitted. In support of his aforesaid contention, the ld. D.R relied on the judgment of the Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1999) 229 ITR 383 (SC). It was submitted by the ld. D.R that as the revenue by raising the additional grounds of appeal has sought adjudication of a legal issue on the basis of the facts available on record, thus, the same may be admitted. The ld. D.R further relying on the judgment of the Hon‟ble High Court of Delhi in the case of CIT-II Vs. Jansampark Advertising & Marketing (P) Ltd. (2015) 375 ITR 373 (Del) and that of the Hon‟ble High Court of Karnataka in the case of CIT Vs. Kalpetta Estates Ltd. (1995)
78. Taxman 265 (Ker), submitted that as the A.O while framing the assessment failed to conduct proper scrutiny of the material, and thus instead of holding the fees earned by the assessee as “royalty” had wrongly held the same as FTS, therefore, as per the mandate of law it was obligatory on the part of the CIT(A) and the Tribunal to conduct proper enquiries and not allow the mistake of the A.O to perpetuate. The ld. D.R further taking support of the judgment of the Hon‟ble Supreme Court in the case of Kapurchand Shrimal Vs. CIT (1981) 131 ITR 451 (SC) submitted that as the A.O while framing the assessment had failed to carry out necessary enquiries, hence, the matter may be remanded to the file of the A.O for fresh assessment, as per law. Further, on the merits of the case the P a g e | 7 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. ld. D.R only relied on the order of the A.O and did not make any effort to dislodge the observations of the CIT(A).
Per Contra, the ld. Authorised representative (for short „A.R‟) Mr. Nishant Thakkar appearing for the assessee, vehemently objected to the liberty sought by the revenue for admission of the additional grounds of appeal. It was submitted by the ld. A.R that during the course of the assessment proceedings the A.O had called upon the assessee to explain as to why the fees received by it may not be characterised as “royalty” and “fees for technical services”. The ld. A.R submitted that it was only after necessary deliberations that the A.O had consciously concluded that the fees received by the assessee was in the nature of FTS. In the backdrop of the aforesaid facts, it was the contention of the ld. A.R that now when the A.O had taken a view and characterised the fees received by the assessee as FTS, thereafter it would not be permissible on his part to seek recharacterisation of the same as “royalty” in the garb of an additional ground of appeal before the Tribunal. In support of his contention that raising of additional ground of appeal in an attempt to build up a new case before the Tribunal cannot be permitted, the ld. A.R relied on the order of the „Special bench‟ of the ITAT, Mumbai in the case of ACIT Vs. DHL Operations BV (2007) 108 TTJ 152 (SB)(Mum). Further, it was the contention of the ld. A.R that in case the order passed by the A.O was found to be erroneous, then the revenue was vested with sufficient remedial power to undo the same by revising the order under Sec. 263 of the Act, which however was not done. Alternatively, it was submitted by the ld. A.R that as the agreement for A.Y 2008-09 and A.Y 2009-10 was materially different from that for the year under consideration viz. A.Y 2001-02, hence the view taken by the Tribunal in A.Y 2008-09 and A.Y 2009-10 could not on the said count itself be simply transposed and applied to the case of the assessee for the year under consideration. On the basis of his aforesaid contentions, it was averred by the ld. A.R that the additional grounds of appeal raised by the revenue were liable to be rejected. The ld. A.R adverting to the merits of the case submitted that as the services
P a g e | 8 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. rendered by the assessee were in the nature of a "Standard facility” (similar to how a bolt system of the stock exchange operates) which did not require any human intervention and no exclusive, special or customised services designed to cater to the special needs of a user were involved, thus, the fees received therefrom could not be held to be in the nature of FTS. In support of his aforesaid contention, the ld. A.R relied on the judgments of the Hon‟ble Supreme Court in the case of CIT-4, Mumbai Vs. Kotak Securities Ltd. (2016) 383 ITR 1 (SC) and CIT, Delhi Vs. Bharti Cellular Ltd. (2011) 330 ITR 239 (SC). Still further, it was submitted by the ld. A.R that as observed by the CIT(A), as the services rendered by the assessee did not “make available” any technical knowledge etc., thus the same did not fall within the sweep of the definition of FTS as contemplated in Article 13 of the India-U.K tax treaty. The ld. A.R further relying on the order of the CIT(A) submitted that the assessee did not have either a (i) fixed place permanent establishment; or (ii). service permanent establishment, in India. The ld. A.R in support of his aforesaid contention took us through the order of the CIT(A), wherein it was observed by him viz. (i). that the assessee was carrying on its business from Geneva; (ii). the communication network did not belong to the assessee, but was of the independent service providers such as VSNL, DoT etc; and (iii). that no personnel of the assessee had visited India during the years under consideration. The ld. A.R taking support of the aforesaid facts submitted that the CIT(A) had rightly concluded that as the fees received by the assessee from rendering of services was not in the nature of FTS, thus, the same in the absence of a P.E of the assessee in India would not be taxable in India.
We have heard the authorised representatives of both the parties, perused the orders of the lower authorities and the material available on record. We shall first deal with the admissibility of the „additional grounds of appeal‟ raised by the revenue before us. The revenue by raising the „additional grounds of appeal‟ has assailed the order of the CIT(A) on the ground that he had erred by failing to conclude that the revenue earned by P a g e | 9 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. the assessee by providing Reuters Dealing 2000-2 services to its customers was to be brought to tax as „royalty‟, both under the provisions of the Income-tax Act and the India-U.K tax treaty. We are unable to persuade ourselves to allow the raising of the aforesaid additional grounds of appeal by the revenue. We find that the A.O during the course of the assessment proceedings by seeking to characterise the fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers as royalty and FTS, had called for an explanation from the assessee as regards the same. However, after necessary deliberations on the submissions filed by the assessee, the A.O had consciously characterised the fees received by the assessee as FTS. On appeal, the CIT(A) finding favour with the contentions advanced by the assessee had vacated the characterisation of the receipts as FTS by the A.O. We are of the considered view that the A.O in the garb of the additional grounds of appeal is not only trying to review his earlier order, but rather, by so doing is trying to build up a new case before us. We are afraid that unlike the CIT(A) who has the powers which are coterminous as that of the A.O, and the proceedings before him can safely be held to be an extension of the assessment proceedings, no such powers are vested with the Tribunal, and its powers to “pass such orders thereon as it thinks fit” are restricted to the issue under consideration. Rather, we find that as held by the „Special bench‟ of the tribunal in the case of ACIT Vs. DHL Operations BV (2007) 108 TTJ 152 (Mum) that the projection of a new case in the garb of an additional ground of appeal by the revenue would frustrate the very concept of finality of the assessment and render the time limits set out under the scheme of the Act as redundant and otiose. Say, for instance the stamping of finality to an assessment after the expiry of the time period within which the same could have been rectified, reopened or revised would be lost in case the revenue is allowed to project a new case in the course of the appellate proceedings before the Tribunal. We find that the judicial pronouncements relied upon by the ld. D.R for seeking setting aside of the matter to the file of the A.O for fresh adjudication does not assist his case. Factually, the revenue is seeking setting aside of the matter to the file
P a g e | 10 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. of the A.O, not for the reason that there is a palpable error resulting from the failure on his part to carry out necessary enquiries, but is clearly an attempt to seek review of the order which was earlier passed by the A.O after necessary deliberations. We thus, in terms of our aforesaid observations decline to admit the additional grounds of appeal raised by the revenue before us.
We have further deliberated on the contention of the ld. D.R that as the Tribunal while disposing off the appeals of the assessee for A.Y 2008-09 and A.Y 2009-10 viz. Reuters Transaction Service Ltd. Vs. Deputy Director of Income-tax (International taxation)-2(1), Mumbai, has held that the fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers would constitute “royalty”, thus the issue involved for the year under consideration viz. A.Y 2001-02 was squarely covered by the said order. We are unable to accept the aforesaid contention of the ld. D.R. The ld. A.R had placed on record a „Chart‟ which reveals that the “agreement” relevant to the aforesaid years viz. A.Y 2008-09 and A.Y 2009- 10 was materially different from the “agreement” prevalent for the year under consideration i.e A.Y 2001-02. We thus, are of the considered view that as the adjudication of the „additional grounds of appeal‟ raised by the revenue would require further investigation of facts, thus the same on the said count also cannot be admitted.
12. We shall now advert to the contentions raised by the authorised representatives of both the parties in context of characterisation of fees received by the assessee from rendering of the Reuters Dealing 2000-2 services to its customers as FTS, which however had been set aside by the CIT(A). The ld. D.R had during the course of hearing of the appeal merely relied on the order of the A.O and has not brought on record any material to rebut the observations of the CIT(A). We find that the services rendered by the assessee by providing a platform for the forex dealers, to effect deals with other subscribers, is in the nature of a “Standard facility” and does not P a g e | 11 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. require any human intervention. We are further persuaded to be in agreement with the contention of the ld. A.R that in the backdrop of the judgment of the Hon‟ble Supreme Court in the case of CIT-4, Mumbai Vs. Kotak Securities Ltd. (2016) 383 ITR 1 (SC), as in the case before us, the fees received by the assessee from rendering the Reuters Dealing 2000-2 services to its customers is not for services which are in the nature of exclusive, special or customised services provided to cater to the specific needs of the user, but rather are in the nature of a facility offered by the assessee, thus, the same cannot be held as FTS. Further, as the rendering of the services by the assessee to its customers does not involve any human efforts i.e manual intervention, thus the same cannot be categorised as „technical services‟. We find that our aforesaid view is fortified by the judgment of the Hon‟ble Apex Court in the case of CIT, Delhi Vs. Bharti Cellular Ltd. (2011) 330 ITR 239 (SC) as relied upon by the ld. A.R before us. The ld. D.R had not tried to dislodge the reliance placed by the assessee on the aforesaid judicial pronouncements. On the basis of our aforesaid observations, we are of the considered view that the fees received by the assessee from the services rendered to its customers cannot be held to be FTS.
13. Alternatively, the CIT(A) in his order had observed that as the services rendered by the assessee does not “make available” any technical knowledge etc., thus the fees received from rendering of such services cannot be held as FTS in terms of Article 13 of the India-U.K tax treaty. The ld. D.R had not been able to successfully dislodge the said observations of the CIT(A). We have deliberated at length on the aforesaid contention of the ld. A.R and find substantial force in the same. We are of the considered view that the Reuters Dealing 2000-2 is an electronic deal matching system, enabling authorized dealers in foreign exchange such as banks etc. to affect deals in spot foreign exchange with other foreign exchange dealers. The system only provides a platform for the forex dealers to affect deals with other subscribers by entering orders into the system, which may be matched
P a g e | 12 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. directly by the system with orders entered by other subscribers. We find that the assessee which operates its business through its branch in Geneva where its main server is located does not “make available” any technical knowledge etc. to its customers by rendering the services. We thus, are in agreement with the observations of the CIT(A) that as the rendering of the services by the assessee does not “make available” any technical knowledge etc. to the customers, hence the fees received from providing of such services would not fall within the sweep of the definition of FTS as per Article 13 of the India-U.K tax treaty. The Ground of appeal No. 1 of the revenue is dismissed in terms of our aforesaid observations.
14. We shall now advert to the issue as to whether the CIT(A) is right in holding that as the assessee does not have a P.E in India during the year under consideration, thus the fees received from rendering of the Reuters Dealing 2000-2 services to its customers would not be taxable in India. We find that the CIT(A) did not find favour with the observation of the A.O that the network provided by the assessee to its clients constituted the P.E of the assessee in India. Rather, it was observed by the CIT(A) that as the communication network in India providing access to the assesses server in Geneva was neither owned by the assessee nor was the same at its disposal, thus, the same could not be held to be the P.E of the assessee in India. Further, it was observed by the CIT(A) that as the assessee was rendering the services from outside India and had no employees or personnel in India for rendering the services, thus, the A.O had erred in concluding that the assessee had a service P.E in India. We find that the CIT(A) in the backdrop of his aforesaid observations had concluded that as the fees earned by the assessee from rendering the services were not in the nature of FTS and the assessee was not having a P.E in India, thus, its income would not be taxable in India.
15. We have deliberated at length on the observations of the CIT(A) and find ourselves to be in agreement with the same. We are of the considered
P a g e | 13 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. view that for constituting a fixed place P.E, either the place should be owned or at the disposal of the assessee. However, in the case before us, as observed by the CIT(A), the assessee was carrying on its business from Geneva and the communication network in India was neither owned by it or at its disposal, but rather was owned by the independent service providers such as VSNL, DoT etc. Further, no personnel of the assessee had visited India during the year under consideration. We thus, in the backdrop of our aforesaid observations are of the considered view that the CIT(A) had rightly concluded that as the assessee did not have a P.E in India during the year under consideration, hence, the fees received from rendering of the services which were not in the nature of FTS, in the absence of a P.E of the assessee in India would not be taxable in India. The Ground of appeal No. 2 is dismissed in terms of our aforesaid observations. The Ground of appeal No. 3 being general is dismissed as not pressed.
16. We thus not finding any infirmity in the order of the well reasoned order of the CIT(A), uphold the same.
The appeal of the revenue is dismissed. AY 2002-03 18. We shall now take up the appeal of the revenue for A.Y 2002-03. The revenue assailing the order of the CIT(A) has raised before us the following grounds of appeal:
“1. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the payments received by the assessee from subscribers in India is not fees for technical services, without appreciating the fact that: a. It is in the nature of fees for technical services as per Explanation 2 to section 9(1)(vii) of the Income tax Act, 1961; and b. It is also fees for technical services as per the DTAA between India and U.K since a „process‟ is made available to the assessee.
P a g e | 14 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd.
2. On the facts & circumstances of the case & in law, the ld. CIT(A) has erred in holding that the assessee does not have Permanent Establishment in India (PE) without appreciating the fact that communication network in India, Reuters Dealing 2002, is owned and is at the disposal of the assessee. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the A.O be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” Further, the A.O has also filed certain additional grounds of appeal
, which read as under : “(1) Without prejudice to the two grounds raised earlier, on the facts and in circumstances of the case and in law, the Ld. CIT(A) should have held that the revenue earned by the assessee on providing Reuters Dealing 200-2 to its customers are in the nature of „Royalty‟ as per the provisions of the section 9(1)(vi) of the Income Tax Act and as per the India-UK Treaty. (2) The Appellant prays that the order of the Ld. CIT (A) on the above ground(s) be set aside and that of the Assessing Officer restored. (3) The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
19. Briefly stated, the assessee had filed its return of income for A.Y 2002- 03 on 15.01.2003, declaring total income at Nil. The return of income filed by the assessee was processed as such under Sec. 143(1)(a) on 22.02.2003. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).
The A.O, while framing the assessment, was however, not persuaded to subscribe to the characterisation of the services provided by the assessee as business profits within the meaning of Article 7 of the India-UK Tax Treaty. Being of the view that the services provided by the assessee were in the nature of technical services and the revenue earned therefrom was in the nature of „fees for technical services‟ (for short „FTS‟), both as per the Income Tax Act and the India-UK tax treaty and that the assessee had a PE in India, the A.O brought the income earned by the assessee to tax under Sec. 44D r.w.s. 115A of the Act. On the basis of his aforesaid conviction the income of the assessee was assessed by the A.O at Rs. 2,21,71,062/-.
P a g e | 15 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee was persuaded to subscribe to its contentions that mere use of technology in the provision of services would not per se lead to the same being treated as technical services. The CIT(A) observed that as the services provided by the assessee did not “make available” any technical knowledge etc. as laid down in the treaty, thus, the same could not characterised as being in the nature of technical services within the meaning of the Income-tax Act and the India-U.K tax treaty. Further, the CIT(A) also did not find favour with the contention of the A.O that the communication network provided by the assessee to its clients constituted the P.E of the assessee in India. Rather, it was observed by the CIT(A) that as the communication network in India providing access to the assessee‟s server in Geneva was neither owned by the assessee nor was the same at its disposal, thus, the same could not be held to be the P.E of the assessee in India. The CIT(A) further observed that as the assessee was rendering the services from outside India and had no employees or personnel in India for rendering the services, hence, the A.O had erred in concluding that the assessee had a service P.E in India. In the backdrop of his aforesaid observations, the CIT(A) concluded that as the fees earned by the assessee from rendering the aforesaid services was not in the nature of FTS and the assessee was not having a P.E in India, therefore, its income would not be taxable in India.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that as the facts and the issues involved in the present appeal of the revenue for A.Y 2002-03 remains the same as were there before us in the appeal of the revenue for AY 2001-02, as had been adjudicated by us hereinabove, thus, our order passed while disposing off the appeal of the revenue for A.Y 2001-02 shall apply mutatis mutandis for adjudicating the present appeal of the revenue for A.Y 2002-03 viz. ITA No. 5445/Mum/2005. The additional grounds of appeal and the P a g e | 16 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd. Grounds of appeal
Nos. 1 and 2 raised by the revenue are dismissed in the same terms.
23. The appeal of the revenue is dismissed.
24. That both the appeals of the revenue i.e ITA No. 9227/Mum/2004 and ITA No, 5445/Mum/2005 for A.Y 2001-02 and A.Y 2002-03 are dismissed.
Order pronounced in the open court on 19.09.2018
Sd/- Sd/- (Shamim Yahya) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER भुंफई Mumbai; ददनांक 19.09.2018 Ps. Rohit आदेश की प्रनिलऱपि अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A)- 3. आमकय आमुक्त / CIT 4. 5. ववबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रतत //True Copy// आदेशधिुसधर/ BY ORDER, उि/सहधयक िंजीकधर (Dy./Asstt. Registrar) आयकर अिीऱीय अधर्करण, भुंफई / ITAT, Mumbai
P a g e | 17 ITA No. 5445/Mum/2005 AYs. 2001-02 & 2002-03 DDIT (I.T)-2(1) Vs. M/s Reuters Transaction Services Ltd.