GARTNER IRELAND LTD,MUMBAI vs. DCIT (IT) 2(3)(2), MUMBAI

सुनवाई क" तार"ख / : 26.10.2017 Date of Hearing घोषणा क" तार"ख / : 07.11.2017 Date of Pronouncement आदेश / O R D E R Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order by the Disputes Resolution Panel-1, Mumbai dated 29.09.2015 and pertains to the assessment year (A.Y.) 2012-13. 2. The grounds of appeal read as under:

2 Gartner Ireland Limited vs. Dy. CIT (IT) Ground No. 1: Erroneous treatment of Business Income as Royalty Income On the facts and circumstances of the case and in law, the Ld. DCIT has erred in treating and further the Hon'ble DRP has erred in confirming entire payments received by the Appellant during the captioned year are taxable as "royalty" under Section 9(l)(vi) of the Income-tax Act, 1961 and under Article 12 of India – Ireland Double Taxation Avoidance Agreement. Ground No. 2: Erroneous levy of interest under Sections 234B of the Rs 1,49,59,032 On the facts and circumstances of the same and in law, the Ld. DCIT has erred in levying interest under Section 234B of the Act amounting to Rs. 1,49,59,032. If the income is treated as Business income, there shall be no tax payable by the Company. Consequentially, levy of interest would not be warranted. Without prejudice to above, the Ld. DDIT disregarded the fact that Appellant is a non-resident Company whose income is subjected to tax deduction at source and the Appellant has no liability to pay advance tax under section 209(l)(d) of the Act. Ground No. 3: - Initiation of penalty proceedings under section 271(1)(c) of the Act On the facts and circumstances of the case and in law, the Ld. DCIT has erred in initiating penalty proceedings under section 271(l)(c) of the Act.

The ld. Departmental Representative submitted that the issues raised are identical with the assessee’s own case for the Assessment year 2011-12 which has been decided by this Tribunal vide order dated 12.04.2017. 4. Apropos ground no. 1 Brief facts on this issue read as under:

The facts of the case as incorporated in the assessment order are that the assessee is a company incorporated in the Republic of Ireland (' Ireland') and is a 3 Gartner Ireland Limited vs. Dy. CIT (IT) resident of Ireland for tax purposes in terms of Article 4 of the Double Taxation Avoidance Agreement ('DTAA') entered into between India and Ireland. GIL is engaged in the business of distributing Gartner Group's Research Products in the form of subscriptions, both in Ireland and through its distributors, in those territories where the Gartner Group does not have a local presence. The aforesaid subscription research products are stated to consist of qualitative research and analysis that clarify decision- making for Information Technology buyers, users and vendors, and help clients stay ahead of IT trends. Industry areas covered in such subscriptions include technology and telecommunications, including hardware, software and systems, services, IT management, market data and forecasts and vertical industry issues. Forms of research offered include statistical analysis, growth projections and market share rankings of suppliers and vendors of IT manufacturers and the financial community. GIL sells subscriptions to its Indian customers/subscribers to access Gartner's research products over the internet from its data server which is located outside India. Research subscriptions were originally delivered through print media and other physical means of delivery, however, most clients now access research products over the internet at www.gartner.corn. GIL enters into a Service Agreement (hereinafter referred to as 'SA') with its India customers/subscription for each Gartner service purchased, setting out the details of the service to be provided and the subscription fee applicable. The Indian subscribers pay the subscription/access fees to GIL in accordance with the SA.

4 Gartner Ireland Limited vs. Dy. CIT (IT) During the year, the assessee has received a gross subscription fee of Rs.77,61,64,930/- from number of Indian clients.

5. During the course of the assessment proceedings, show cause notice was issued to the assessee to show cause as to why income from subscription fees should not be treated as 'Royalty' and held taxable in India on the lines of earlier assessment year (i.e., A.Y. 2011-12). The assessee contended that the income earned by it from selling the subscription of publications cannot be treated as "Royalty" but should be treated as "Business Income" which would not be chargeable to tax in the absence of Permanent Establishment ('PE') in India. The assessee argued that its publications are akin to a magazine that provides latest database, information, etc., relating to I.T. industry. However, unlike magazines, their publications are not circulated to the subscribers/customers in a printed form, but the same are circulated electronically via the internet, etc. to the subscribers/customers and although this made their publications a digital product, the subscription income arising to them could not be considered as "royalty" under Article 12(3) of the India-Ireland Tax Treaty since the publications are copyrighted and the subscribers do not get a right to exploit the underlying copyrights in the products/ publications. The assessee placed reliance on certain case laws and also made detailed submissions before the A.O. (which are incorporated in the draft assessment order) in support of its contention that the amount of Rs.77,61,64,930/- was not taxable.

5 Gartner Ireland Limited vs. Dy. CIT (IT) 6. The Assessing Officer considered all the contentions made by the assessee. He was of the opinion that the assessee who admittedly is the copyright owner in RPs, exploits copyright protection vigorously and the subscription fees received by the assessee was taxable u/s. 9(1)(vi) Explanation 2(v) read with Copyright Act read with DTAA. Absence of Permanent Establishment (PE) in the Source Country did not render Royalty income as non-taxable in the Source State. The Assessing Officer observed that the unmistakable and irresistible conclusion was that the amounts received are taxable in India as per Section 9(1)(vi) of the Income Tax Act, 1961, Copyright Act, 1957 and Article 12 of India-Ireland DTAA on gross basis. The Assessing Officer referred to the judgement of the Hon'ble Karnataka High Court in the case of M/s. Wipro Ltd (in of 2005, 2805 of 2005 and 2807 of 2005) in which it has been held that subscription fees received by Gartner from Wipro for Gartner Database subscription fees for licence to use the said data base maintained by Gartner is royalty. The Assessing Officer also placed reliance on the decision of the Hon’ble ITAT in assessee's own case for the A.Y. 2007-08 in ITA No.7101/Mum/2010 dated 24.07.2013 in which the Hon'ble Tribunal has held that subscription fees received by the assessee fell in the ambit of "royalty" and is taxable under the Act/DTAA. The Assessing Officer, therefore, held that subscription fees received by Gartner for licence to use the said database maintained by Gartner is royalty and is taxable as per the provision of section 9(1)(vi) of the Income Tax Act, 1961 read with Article 12 of the DTAA between India and Ireland. Accordingly, the 6 Gartner Ireland Limited vs. Dy. CIT (IT) Assessing Officer brought to tax the subscription fees of Rs.77,61,64,930/- in the hands of the assessee by holding the same to be in the nature of 'royalty'. It is against this action of the Assessing Officer that the assessee has filed the objection.

"4. We have heard the rival submissions and perused the relevant material of record. At the very outset, the learned Departmental Representative relied on the judgement of the Hon'ble Karnataka High Court in the case of OT(IT) v, Wipro Limited [(2011) 203 Taxman 621 (Kar.)] and submitted that Wipro Limited, a customer of the present assessee made payment without deduction of tax at source u/s 195 of the Act. When the matter finally come up before the Hon'ble Karnataka \high Court, it was held that the payments made by Wipro Limited to Cartner for online use of database was for licence to use said database and hence the consideration was royalty, liable for deduction of tax at source u/s 195 of the Act.

7 Gartner Ireland Limited vs. Dy. CIT (IT) 6. We are not convinced with the submissions advanced on behalf of the assessee for the obvious reason that the Hon'ble Karnataka High Court considered a case in which Wipro Limited made payment to the assessee and the same has been held to be in the nature of 'royalty', liable for deduction of tax at source u/s 195. The Hon'ble High Court noticed in the penultimate para of the judgement that: "the payment made by the respondent to M/s. Cartner, which is a non-resident company, would amount to 'royalty' and where for, there is a statutory obligation on the part of the respondent to make tax deduction ......". We are unable to see as to how the contrary view expressed by the Tribunal in three orders can be adopted in the case of the payee-assessee, when the Hon'ble Karnataka High Court has rendered judgement on the very same transaction in the hands of the payers. If the argument tendered by the Ld. AR is accepted, it would amount to delivering an opinion contrary to that of the Hon'ble High Court, which is obviously out of question. We, therefore, do not find any substance in the arguments put forth by the Ld. AR. The impugned order is upheld.

7. In the result, the appeal is dismissed".

2.7 Respectfully, following the order of the Hon'ble ITAT as above in assessee's own case, we uphold the draft assessment order of the Assessing Officer and hold that the amount of Rs.77,61,64,930/- is taxable in India. The objection filed by the assessee on this issue is rejected and dismissed. 8. Upon careful consideration, we find that this Tribunal in the assessee’s own case in for assessment year 2011-12 vide order dated 12.04.2017 has decided the same issue by holding as under:

3. Apropos ground no. 1 3.1 On this issue at the outset Ld. Counsel of the assessee submitted that the issue has been decided by this tribunal in assessee's own case against the assessee in vide order dated. July 24th, 2013. Operating portion of the tribunals order read as under: "The Hon'ble Karnataka High Court considered a case in which Wipro Limited made payment to the assessee and the same has been held to be in the nature of 'royalty', liable for deduction of tax at source u/s 195. The Hon'ble High Court noticed in the penultimate para of the judgment that: "the payment made by the respondent to M/s. Gartner, 8 Gartner Ireland Limited vs. Dy. CIT (IT) which is a non-resident company, would amount to 'royalty' and wherefore, there is a statutory obligation on the part of the respondent to make tax deduction ". The contrary view expressed by the Tribunal cannot be adopted in the case of the payee-assessee, when the Hon'ble Karnataka High Court has rendered judgment on tne very same transaction in the hands of the payers. If the argument tendered by the Ld. AR is accepted, it would amount to delivering an opinion contrary to that of the Hon'ble High Court, which is obviously out of question. Assessee's appeal dismissed. CIT(IT) v. Wipro Lmt. [(2011) 203 Taxman 621 (Kar.)], applied." 3.2 This decision was subsequently followed by the tribunal in other assessment years of the assessee. However Ld. Counsel submitted that following decisions which are in favour of the assessee have not been considered in the earlier decision as under:

1. 1. Authority for Advance Ruling in Dun and S.A. Bradstreet Espana [2005] 142 Taxman 284 (AAR-N.Delhi).

2. Director of Income Tax (International Tax) v. Dun & Bradstreet ;- Conformation services India Pvt. Ltd. 20 Taxmann.com 695. 3.3 Referring to these decision Ld. Counsel stated that one is a decision of Hon'ble Bombay High Court wherein the Authority of Advance Ruling decision in Dun and S.A. Bradstreet Espana has been followed. He submitted that the matter dealt with in Dun and S.A, Bradstreet Espana are identical to the facts of the assessee's case. Hence he submitted that decision of the Hon'ble Bombay High court should be followed. Per contra Ld. DR Submitted that facts in the assessee's case and that in the case of Dun and S.A. Bradstreet Espana are different. Hence be submitted the said case law is not applicable to the facts of the assessee's case. 3.4 We have carefully considered the submissions and perused the records. We find that this tribunal has consistently decided the issue against the assessee in earlier assessment years. The assessee is in appeal before the Hon'ble High court. Now the Ld. Counsel of the assessee is pleading that there is a Bombay High court decision according to which the issue should be decided in favour of the assessee. This decision was said to have been not cited before the tribunal earlier on several occasions by mistake. We note that assessee has not filed any miscellaneous petition for recall of the earlier Tribunal order on the ground that the said decision is contrary to the jurisdictional High Court decision which was available on the date of the tribunal orders.

9 Gartner Ireland Limited vs. Dy. CIT (IT) 3.5 Furthermore we note that h the above case said of Dun and Bradstreet (supra) Hon'ble jurisdictional High Court has followed the decision of Authority for Advance Ruling in the case of Dun and S.A. Bradstreet Espana by holding that: the assessee did not attract the provision of section 195 of the Act as the assessee was engaged to the very same business information reports imported by the assessee and no fault in the decision of Authority for Advance Ruling was pointed out. However, in the present case we find that assessee is not engaged in merely compiling business information reports but it is also engaging in to qualitative reports which cannot be said to be available from public domain. Hence it cannot be said that the facts of the two cases are identical. Hence since tribunal had decided the same issue in assessee's own case consistently against the assessee earlier and Hon'ble jurisdictional High Court is seized of the matter and has not reversed the same yet, following the precedent as above we decide the issue against the assessee.

We find that this issue was decided by the tribunal in assessee’s own case as referred above as under:

4.1 On this issue Ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by several decisions of Hon'ble Bombay Court and Delhi High Court as under: Director of Income Tax (International Taxation) v. NGC Network Asia LLC [2009] 222 CTR (Bom.) 86 [2014] 48 taxmann.com 67 (Bombay) Director of Income tax (International Taxation)-II, Mumbai v. Haldor Topsoe. [2013] 32 taxmann.com 54 (Bombay) Director of Income Tax,(IT)-l v. WNS Global Services (UK) Ltd. [2013] 40 taxmann.com 38 (Bombay) Director of Income Tax (International taxation) v. Krupp Udhe GMBH.

10 Gartner Ireland Limited vs. Dy. CIT (IT) [2011] 16 taxmann.com 173 (Bom.) director of Income tax(international Taxation) v. Xelo Pty. Ltd. [2015] 56 taxmann.com 190 (Delhi) Director of Income-tax, International Taxation v. GE Packaged Power Inc. [2010 194 Taxman 495 (Delhi) Director of Income Tax v. Jacebs Civil Incorporated/Mitsubishi Corporation. [2014] 49 taxmann.com 48 (Mumbai-Trib.) in the ITAT Mumbai Bench ‘L' Additional Director of Income Tax (International Taxation) v. Valentine Maritime (GULF) LLC. 4.2 Per contra Ld. DR did not dispute this proposition. Thus respectfully following precedents as above we hold that assessing officer erred in charging the interest u/s. 234B as assessee being a non-resident, the Indian payers were obliged to withhold Tax at Source u/s. 195 of the Act and therefore the question of payment of advance tax and corresponding levy of interest u/s. 234B of the Act does not arise.

Order pronounced in the open court on 07.11.2017 (Sandeep Gosain) (Shamim Yahya) "या"यक सद"य / Judicial Member लेखा सद"य / Accountant Member मुंबई Mumbai; "दनांक Dated : 07.11.2017 व."न.स./Roshani, Sr. PS 11 Gartner Ireland Limited vs. Dy. CIT (IT)