DDIT (IT) 3(2), MUMBAI vs. E- BAY INTERNATIONAL AG, MUMBAI

Grounds of appeal as well additional grounds of appeal filed by the Revenue give rise to following issues:-

We have heard the parties and perused the record. The assessee is resident of Switzerland and is engaged in the business of operating websites, which provide online platform for facilitating purchase and sale of products worldwide. During the years under consideration the assessee has operated in its India specific websites, viz., www.ebay.in and www.b2motors.ebay.in and they provided online platform for facilitating purchase and sale of goods and services to users based in India. Further the assessee has entered into marking support agreements with two of its subsidiary companies, viz., M/s. e-Bay India Private Limited and M/s. e-Bay Motors Private Limited. These websites were operated from servers located outside India. The modus operandi of its operation was that it signs agreement with the Indian customers, who wish to list their products and services on their websites. For listing the products at prominent places, the assessee charged a listing fee. Besides the above, as and when transaction of sale was successfully completed, transaction fee was also charged by the assessee from the seller. No fee is charged from the buyers of the products/services. The agreement for purchase and sale of goods is entered directly between the buyer and seller of the products/services, i.e. the assessee never acquired any right or property in the goods sold.

The assessee has also entered into a marketing support agreement with two companies stated above for facilitating online purchase and sale of products or services. The AO took the view that the assessee has business connection in India in terms of sec. 9(1)(i) of the Act and accordingly took the 3 M/s. e-Bay International AG view that the revenue generated by the assessee has accrued in India. The Assessing Officer also took the view that the said revenue falls in the category of Fee for technical services within the meaning of sec. 9(1)(vii) of the Act and accordingly assessed the revenue generated by the assessee from listing as well as service charges earned on completion of transaction as “fees for technical services” in all the three years under consideration. The assessee challenged the same by following the appeals before the learned CIT(A).

The first appellate authority noticed that an identical issue was examined by the ITAT in assessee’s own case in dated 21.9.2012 relating to A.Y. 2006-07, wherein the Tribunal had held that the revenue earned by the assessee form specific Indian websites are not in the nature of “fees for technical services” and hence not taxable in India. The learned CIT(A) followed the said decision and accordingly reversed the order passed by the Assessing Officer. The learned CIT(A) also noticed that while disposing of the appeal for A.Y. 2006-07, the then the learned CIT(A) had taken the view that the assessee is having Permanent Establishment in the form “dependent agent permanent establishment” in India and hence the revenue earned by the assessee is taxable as business profit. The learned CIT(A) noticed that the said issue was also examined by the Tribunal in A.Y. 2006-07 referred above and has held that the agents, viz., M/s. e-Bay India Private Limited and M/s. e-Bay Motors Private Limited do not constitute a permanent establishment in India. Accordingly, the Tribunal had held that no profits can be computed in terms of Article 7 of India-Switzerland DTAA in respect of revenue generated by the assessee from India. The Ld CIT(A) followed the order of the Tribunal in respect of above said issue also and accordingly allowed the appeal of the assessee in all the three years under consideration and the Revenue has challenged his orders on both the grounds stated above. The Ld A.R submitted that the revenue has raised the issue of “Fee for technical services” by way of additional ground only in AY 2008-09 and 2009- 10 and no additional ground was raised on that issue in AY 2010-11.

The learned Departmental Representative placed reliance on the written submissions furnished by him and contended that in terms of section 9(1)(vii) of the Act, the services rendered by the assessee would fall in the category of fees for technical services. In the alternative, learned DR submitted that the two marketing agents of the assessee constitute dependent agents permanent establishment of the assessee and hence the revenue generated by the assessee should be assessed as business profit in terms of Article 7 of India- Switzerland DTAA.

On the contrary, learned AR submitted that there is no change of facts between A.Y. 2006-07 and three years under consideration. The Learned AR further submitted that the Coordinate Bench of the Tribunal has examined the applicability of the provision of section 9(1)(vii) of the Act to the transaction of the assessee in a detailed manner and has given a categorical finding that the revenue generated by the assessee cannot be considered as fees for technical services. With regard to the issue of permanent establishment also, the Ld A.R said that the Tribunal has examined the facts available in this case in a detailed manner and has given a categorical finding that the assessee does not have permanent establishment in India. He submitted that the AO has admitted in the remand report furnished to Ld CIT(A) in AY 2006-07 that the provisions of India-Switzerland DTAA shall apply to the facts of instant case. Accordingly the Tribunal has examined two alternative contentions of the assessee in terms of DTAA.

We noticed that the Coordinate Bench has examined the nature of transaction vis-à-vis the terms “technical services”, “consultancy services” and “fees for technical services” in AY 2006-07 (referred supra) in para 9 to 11 of its order and finally came to the conclusion that fees received by the assessee can’t be considered as fees for technical services. Since, the learned CIT(A) has followed the decision given by the Coordinate Bench on this issue, which have been given under identical set of facts, we do not find any reason to interfere with this decision.

With regard to the existence of the permanent establishment also, we notice the Coordinate Bench has given a categorical finding in AY 2006-07 after examining the Article 5(2)a), Article 5(5) & 5(6) of DTAA that the two subsidiary companies M/s. e-Bay India Private Limited and M/s. e-Bay Motors Private Limited are dependent agents of the assessee but do not constitute dependent agents of the permanent establishment of the assessee in terms of Article 5 of the DTAA. Accordingly, the Tribunal has held that the question of computing business profit of the assessee as per Article 7 of DTAA does not arise, since the assessee has no PE as per Article 5 of the DTAA. We noticed that the learned CIT(A) has followed the decision of the Coordinate Bench on this issue also and hence we do not find any reason to interfere with his order passed on this issue.

In the result, all three appeals of the Revenue are dismissed.