Atos IT Solutions and Services Vs DCIT (ITAT Mumbai)
The assessee has entered into global contract with Microsoft License fees and kept the ownership with them. Based on the above contract, the assessee has entered into separate agreement with the Atos India for recharge of costs pertaining to usage of the above licenses by Atos India. Accordingly, based on the usage of the Licenses the assessee has charged the same to Atos India as per the above said agreement. The assessee has filed copies of above said agreement entered with Atos India and relevant invoices raised to Atos India. Ld AR took us through the above said agreement and invoices to highlight that the assessee has charged only to the extent the Atos India has made request for usage of the approved Microsoft Licences as per their requirements. The invoices are raised based on the actual utilization of the Licences. The revenue authorities treated the above said services as Royalty or FTS. On careful consideration, we observe that the License for usage of the copy righted products are with Microsoft only and the assessee has acquired global right and transferred the above said Licenses to its group entities based on the requirements. Whether this transaction falls under the category of Royalty or FTS is the issue. We observe that the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd (supra) held that Microsoft Software products are sold to end users by Microsoft Corporation and whatever the license which are routed thru the middle man, the Microsoft does not grant any right or interest, least of all, a right or interest to reproduce the computer software. Further such reproduction is expressly interdicted and expressly stated that no vestige of copyright is at all transferred either to the distributor or to the end user. Therefore, it does not fall in the category of Royalty or copy right.
Further we observe that in the case of EY Global Services Ltd, which is similar to the facts in the case of the Assessee, in which Hon’ble High Court has relied upon the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd., v. CIT [125 taxmann.com42 (SC)]. The decision of the above is reproduced below:
“13. A reading of the above judgment would clearly show that for the payment received by EYGSL (UK) from EYGBS (India) to be taxed as “royalty”, it is essential to show a transfer of copyright in the software to do any of the acts mentioned in section 14 of the Copyright Act, 1957. A licence conferring no proprietary interest on the licencee, does not entail parting with the copyright. Where the core of a transaction is to authorise the end-user to have access to and make use of the licenced software over which the licencee has no exclusive rights, no copyright is parted with and therefore, the payment received cannot be termed as “royalty”.
14. In the present case, the EYGBS (India), in terms of the Service Agreement and the MOU, merely receives the right to use the software procured by the EYGSL (UK) from third-party vendors. The consideration paid for the use of the same therefore, cannot be termed as royalty’ as held by the Supreme Court in Engineering Analysis Centre (supra). In determining the same, the rights acquired by the EYGSL (UK) from the third-party software vendors are not relevant. What is relevant is the Agreement between the EYGSL (UK) and the EYGBS (India). As the same does not create any right to transfer the copyright in the software, the same would not fall within the ambit of the term ‘royalty’ as held by the Supreme Court in Engineering Analysis Centre (supra).
…
16. The submission of the learned counsel for the Revenue that the judgment of the Supreme Court in Engineering Analysis Centre (supra) cannot be applied because it confines itself only to the four categories mentioned in paragraph 4, also cannot be accepted. Though the Supreme Court was on facts considering the four categories of cases that arose in the appeals before it, it has laid down the law for general application. The law, as laid down, by the Supreme Court, when applied to facts of the present case, squarely covers the same in favour of the petitioners.
…
18. In view of the above, the Impugned Rulings dated 10-08-2016 passed by the learned AAR are set aside and it is held that the payment received by EY&SL (UK) for providing access to computer software to its member firms of EY Network located in India, that is, EY&BS (India), does not amount to ‘royalty’ liable to be taxed in India under the provisions of the Income-tax Act, 1961 and the India-UK DTAA.”
16. From the above, it is clear that the assessee has acquired the global license and allowed the group entities to use the above Licenses on the basis of requirements, the assessee has billed them according to their usage by properly documenting the usage and charged to them. As held in the decision of Hon’ble Supreme Court and Hon’ble Delhi High Court, the Microsoft Licenses are not falling under the category of Royalty or Copy Rights under the definition of respective categories. Hence the claim of the assessee is proper and we direct the Assessing Officer to delete the proposed addition in this regard.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of the Learned Disputes Resolution Panel – 1, Mumbai [hereinafter in short “Ld.DRP’”] dated 22.08.2017 for the A.Y.2014-15, passed u/s. 144C(5) of the Income-tax Act, 1961 (in short “Act”).
2. Brief facts of the case are, assessee is a company incorporated in USA, providing support services to its group companies in India namely, Atos India Private Limited (Atos India). During the year, assessee has received an amount of ₹.7,55,89,549 from the services rendered to Atos India as under:-
(i) Cost recharge of Microsoft license fees
(ii) Co-ordination services relating to Tower Watson project. The above services are provided by the assessee in pursuance of the agreements entered with Atos India.
3. The return of income filed by the assessee and however, it has not reported the above receipts and offered to tax. The Assessing Officer observed that taxes are deducted at source at the time of payments. He also observed that as per the 26AS statement, the taxes were deducted on a total receipt of ₹.5,55,75,255 /- @10.55% on an average and the TDS of ₹.58,67,358 was claimed in the return of income as refund. The Assessing Officer observed that since no income was offered to tax, during the assessment proceedings, assessee was asked to explain why the same should not be taxed as royalty and / or Fee for Technical Service (FTS).
4. In reply, assessee submitted that it has received payments from Atos India towards (a) Recharge of costs pertaining to Microsoft licence fees, in this regard, it was informed that Atos group has entered into a central agreement with Microsoft to obtain licenses for the use of Microsoft products. As per this agreement assessee being USA based entity, invoices various Atos entities for their use of the Microsoft products. Accordingly, assessee has recovered payments from Atos India for the Microsoft products used by them. Further, it was informed that assessee has remunerated for its services (of purchasing delivery and administrative support for the benefit of Atos India) with handling fees based on the cost of the Microsoft licenses. (b) Co-ordination services relating to Tower Watson project, with regard to this, it was informed that Atos India has entered into a contract with Tower Watson India to provide Information Technology services to Tower Watson India. For this purpose, Atos India has engaged the assessee to provide certain support services. Under this arrangement, provides ‘service desk’ for authorized users of Atos India. The service desk deals with all incidents, problems and service requests (including requests for data, system or application access) in the course of provision of services by Atos India to Tower Watson India.
5. It was submitted that Assessee has received payment from Atos India for the above transactions did not constitute either “Royalties” or “Fees for Technical Services (‘FTS’) or Fees for Included Services (FIS). The above services are in the nature of “Business Profits” and was thus, taxable in terms of the provisions of Article 7 of the Double Taxation Avoidance Agreement between India and USA (‘India-USA DTAA’). As per Article 7 of the India-USA DTAA, “Business Profits” is taxable in India only if the non-resident has a Permanent Establishment (PE) in India. Since the assessee did not have a PE in India, the amount received from Atos India was not taxable in India. Further, assessee has submitted legal submissions defending its arguments relying on various explanations and judicial precedents.
6. The Assessing Officer rejected submissions made by the assessee and observed that the assessee has merely attempted a vague explanation of the services it has provided to Atos India without going into the context and the basis on which these services are rendered. This requires an analysis of the agreements on the basis of which these services are rendered. The Assessing Officer analyzed the services offered by the assessee in terms of the Article 12 of the ‘India-USA DTAA’ for royalty, FTS and FIS. With regard to that following facts recorded by the Assessing Officer: –
(a) Group Atos Origin has become one of the leading European IT companies by 2004 after Atos SA acquired and integrated Sema Group. Origin, and
(b) Due to the acquisition and integration that has taken place, the knowhow rights, and experience of the former Atos, Origin, Atos Origin and Sema Groups that have been acquired and developed by them due to their years of operation in the field o f Information Technology are provided to the Group companies including Atos India who carry out contract works as a representative of Group Atos Origin.
7. Accordingly, Assessing Officer proposed the addition of ₹.7,55,89,549/- as fees received from Atos India being royalty as well as FTS.
8. Aggrieved assessee filed the objections before DRP and filed the detailed submissions as under: –
“3.4.5 From the definition of the term “Royalty” as provided in Explanation 2 to section 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA, it is evident that the definition as given in the Acts much wider in scope as compared to the provisions of the India-USA DTAA. Therefore, the taxability or otherwise of the amounts paid by Atos India to the assessee is discussed/examined in terms of the provisions of the India-USA DTAA, the same being more beneficial to the assessee, in accordance with section 90(2) of the Act
3.4.6 It is submitted that the under provisions of Article 12 of the India-USA DTAA, “Royalties” include payments for the use of the copyright of a literary, artistic or scientific work. Unless a copyright in the literary, artistic or scientific work is made available to the payer, the “Royalties” definition does not get attracted. Thus, the crux of the issue is whether the payment is for a copyright or for a copyrighted article. If it is for copyright, it should be classified as royalty and it would be taxable in the hands of the seller on that basis. If the payment is for the copyrighted article, then it only represents the price for acquiring that article and therefore, would qualify as “Business Profit” under Article 5 of India USA DTAA and cannot be characterized as “Royalties.
3.4.7 The assessee has placed reliance on the Final Regulations issued by the Internal Revenue Services (IRS) of United States, governing royalty with regard to acquisition of computer software. In the said regulations, the US IRS have held that payments made for acquisition of rights in relation to the copyright which is limited to rights which are necessary to enable the user to operate the programs would be classified as business income and not royalty income. Further, the US IRS has laid down that where software is purchased for the purpose of resale the same would also be classified as business income. Further the IRS has distinguished Copyright rights from Copyrighted article as under:
“Copyright rights.
(i) The right to make copies of the computer program for purposes of distribution to the public by sale or other transfer of ownership, or by rental, lease or lending:
(ii) The right to prepare derivative computer programs based upon the copyrighted computer program;
(iii) The right to make a public performance of the computer program; or
(iv) The right to publicly display the computer program.
Copyrighted article.
A copyrighted article includes a copy of a computer program from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The copy of the program may be fixed in the magnetic medium of a floppy disk, or in the main memory or hard drive of a computer, or in any other medium.”
3.4.8 The assessee would also like to support its above contention by placing reliance on the following decisions:
Baan Global B.V. [2016] (ITA No. 7048/M/2010) (Mum.)
Reliance Industries Limited [2016] (ITA No. 2529/M/2008) (Mum.)
DIT vs. Ericsson AB [2012] (343 ITR 470) (Del.)
DIT v. Nokia Networks OY [TS-700-HC-2012 (Del.)]
Infrasoft Ltd. Vs. ADIT [2009] (28 SOT 179) (Del.)
Sonata Information Technologies Ltd [2006] (103 ITD 324) (Bang.)
Motorola Inc. v. DCIT [2005] (95 ITD 269) (Del.) (SB)
Dassault Systems K.K., In Re [2010] (229 CTR 105) (AAR)
3.4.9 As per the assessee, the principle enunciated in the above decisions is that the payment for right to use the software was not for any copyright in the software but only acquisition of the copyrighted article and the same, therefore, could not be considered as Royalty within the meaning as provided in the DTAA. The above propositions also gain support from the Commentaries on the provisions contained in Article 12 of the OECD Model Convention
3.4.10 It has been claimed that regardless of whether this right is granted under law or under a license agreement with the copyright holder, copying the program onto the computer’s hard drive or random access memory or making an archival copy is an essentia l step in utilising the program. Therefore, rights in relation to these acts of copying, where they do no more than enable the effective operation of the program by the user, should be disregarded in analysing the character of the transaction for tax purposes. Payments in these types of transactions would be dealt with as commercial income in accordance with Article 7.
3.4.11 In addition to the above, under the other Indian laws viz. Custom Tariff Act, 1975, Bombay Sales Tax Act, 1959 and Centra l Excise Tariff Act, 1985, software is classified as goods and sales tax, excise and custom duty has been levied on it as goods. Moreover, in the case of Tata Consultancy Services v/s State of Andhra Pradesh (2004) 271 ITR 401 (SC), it has been held that a transaction of sale of computer software packages as in the assessee’s case is a sale of goods within the meaning of the Andhra Pradesh General Sales Tax Act, 1957. Attention is invited to the Notification No. 11233 [F.NO. 225/192/99/ITA.II] 5.0. 452, dated 8 February 2000, issued by CBDT, wherein the CBDT has notified software as being an article or thing for the purposes of section 35 of the Act.
3.4.12 In the present case, as per the assessee, it does not provide use of or right to use a copyright in any software or any other specified Intellectual Property Rights. Hence, the payments made to Atos India should not be qualified as ‘royalties under the Article 12 of the India-USA DTAA.
Fees for Technical Services/ Fees for Included Services:
3.4.13 It is claimed that the definition of the term “FTS” as provided in Explanation 2 to section 9(1)(vii) of the Act is wider as compared to Article 12(4) of the India-USA DTAA. Therefore, the taxability or otherwise of the amounts paid by Atos India to the assessee is discussed/examined in terms of the provisions of the India USA DTAA, the same being more beneficial to the assessee, in accordance with section 90(2) of the Act.
3.4.14 In the instant case, the services provided by the assessee as mentioned in para 3 are not in the nature of technical or consultancy services.
3.4.15 Without prejudice to the above, it is further claimed that even if the services are considered to be in the nature of technical or consultancy services, the assessee does not make available any skill, know how, technical knowledge, etc. which enables Atos India to apply the technology contained therein on its own.
3.4.16 The assessee has relied on the Memorandum of Understanding (MoU) to the India-USA DTAA to explain Article 12 and its applicability in detail. Relevant paragraphs of this MoU are reproduced below:
“Paragraph 4 (in general)
……………
Under paragraph 4, technical and consultancy services are considered included services only to the following extent…. (2) as described in paragraph 4(b). if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(b), consultancy services which are not of a technical nature cannot be included services.
……….(Emphasis supplied)
“Paragraph 4(b)
Generally speaking, technology will be considered “made available” when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b), Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available.(Emphasis supplied)
3.4.17 It is claimed that as per the above MoU to the India USA DTAA, consultancy services should fall within the definition of FIS only if the same are technical in nature. In other words, when the recipient of services & able to make use of technical knowhow, experience, etc without recourse to the service provider in future, in such a case, such technical knowhow, experience, etc could be considered to be made available to the service recipient.
3.4.18 The concept of make available envisages enduring benefit to the recipient of services and continued dependence by the recipient on services of the service provider may indicate an absence of make available.
3.4.19 In light of the above, it is contended that payment of any kind in consideration for rendering services (in a case where there is no transfer of technical plan or design) should be regarded as FIS if the below conditions are satisfied cumulatively:
(i) Such services are technical or consultancy in nature (“first condition”);
(ii) Such services make available technical knowledge, experience, etc to the recipient of the services (“second condition); and
(iii) Such knowledge, experience etc is technical (“third condition”).
3.4.20 Reliance has been placed on the Mumbai Tribunal decision in case of Raymond Ltd vs. DCIT [2003] 86 ITD 791 (Mum). As per this decision, it has been observed that the addition of the phrase which enables the person acquiring the services to apply the technology contained therein’ in Article 12(4)(b) of the India-USA DTAA merely make it explicit what is embedded in the words ‘make available. Reliance is also placed on the decision of the Hon’ble Karnataka High Court in the case of CIT & Ors vs De Beers India Minerals (P) Ltd [2012] 346 ITR 467 (Kar).
3.4.21 Reliance is also placed on the following decisions, wherein it has been held that payment for services similar to that of the assessee do not fall within the meaning of concept of ‘make available under the DTAA:
ADIT vs. WNS North America Inc [2013] (ITA No. 2944/Mum/2012) (Mum)
Sandvik Australia Pty Ltd Vs DDIT (2013] (141 ITD 598) (Pune)
Ernst & Young Pvt. Ltd, in Re [2010] (323 ITR 184) (AAR)
Endemol India Pvt. Ltd, in Re [2013] 261 CTR 117 (AAR)
Bharati AXA General Insurance Co. Ltd, in Re [2010] (326 ITR 477) (AAR)
Invensys Systems Inc, in Re [2009] (317 ITR 438) (AAR)
3.4.22 The assessee submits that, in the instant case, the services provided by the assessee to Atos India do not make available technical knowledge, knowhow, experience, etc. Hence, they do not qualify as FIS under Article 12(4) of India-USADTAA.
3.4.23 In light of the above, payments received by the assessee from Atos India are neither in the nature of “Royalties” or “FIS” under the Article 12 of the India-USA DTAA. The said payments are in the nature of Business Profits under Article 7 of the India-USA DTAA. Such business profits would have been taxable only if the assessee had a PE in India. Since the assessee did not have PE in India, such receipts were not taxable in India.
9. DRP after considering the submissions of the assessee observed that it is an established position that the taxability and character of an item has to be determined in accordance with the contents of the Indian Income Tax Act and the provisions of the Treaty between India and USA. Any internal guidance issued by a particular country cannot be a basis for deciding the character of service in India which is solely governed by the Indian laws. Therefore, he rejected the reliance placed by the assessee on the IRS guidance notes. DRP decided the issue against the assessee with the following observations: –
“3.10 Purchase of Microsoft licenses:
3.10.1 As per the invoice submitted by the assessee, the payment totalling to USS 931,759 has been categorised as cost recharge in respect of Microsoft license provided to Atos India. The invoice mentions the same as MS License June 2013 Dec 2013. The assessee has filed the agreement which is examined. It is seen that the agreement quantifies the amount as USS 614,116 towards cost of license and management fees. In the agreement, at Article 2, the amount is being paid towards provision of product and services.
3.10.2 The agreement and the invoice make it clear that there is no outright sale of MS Office software products to Atos India. The assessee has allowed access to the software which is being managed by itself and hence, the control over the software is with the assessee company and not with Atos India which is paying license fee to assessee for such right to use. The transaction cannot be treated as outright sale of MS products as the assessee would not have right over these products as soon as the license period expires:
3.10.3 In such a scenario, when Atos India is not granted rights over the product but is only granted a right to access the various software for a defined period, the debate as to whether this would constitute sale or royalty does not arise. The situation would have been different if Atos India had been given these software for its use permanently. At present, the consideration is for use or a right to use these software which are being maintained by the assessee itself and for which a separate charge is being levied on Atos India.
3.10.4 In light of the above facts, the claim of the appellant that the above transaction does not fall under the definition of royalty as per Article 12(3) of the India US DTAA is not found acceptable. Even the reliance placed by the assessee on IRS guidelines of USA is not found relevant as the software have not been sold to Atos India. Same is the situation with reliance placed by the assessee on the decision in the case of Tata Consultancy Services (supra).
3.10.5 The consideration is not found to be with reference to sale of MS licenses. It is noted that the amount clearly falls within the realm of royalty, being an amount charged for access to the software which is being owned and maintained by the assessee company. It is held that the amount represents royalty, both as per Section 9(1)(vi) of the IT Act as well as Article 12(3) of the India US Treaty.
3.10.6 The objection raised by the assessee on this issue is not found to be correct and is dismissed.
3.11 Co-ordination services relating to Tower Watson project: The nature of service has been detailed above. Further, the agreement between the two parties with respect to this service has been examined. The assessee has claimed that the amount has been received for providing a service desk for authorised users of Atos India with reference to services rendered by Atos India to Tower Watson. Such service desk requests include request for data, system or application access.
3.11.1 The facts of the case have been carefully examined. The assessee has entered into a Master Services Agreement with M/s Tower Watson Pennsylvania Inc. (hence forth Tower Watson) on a global basis. Since both these companies operate at global level, the agreement contains a clause wherein the assessee also termed as AOUS in the agreement, can subcontract the work to be rendered in specific territories to its subsidiaries if needed. In India, such work has been subcontracted to Atos India vide subcontract agreement dated 1.5.2012. Atos India is required to enter into a local arrangement with the Indian unit of Tower Watson and is allowed to charge directly from the Indian affiliate for such services. The assessee has provided details of the agreement between itself and Atos india as well as the Master Services Agreement with Tower Watson.
3.11.2 It is noticed from the agreements that the assessee has developed sufficient competency and has necessary intellectua l properties with itself to render the services under the MSA with Tower Watson. However, the subsidiaries who are rendering services as subcontractor neither have such level of competency nor have the necessary intellectual property to render these services which have been mandated to them on account of the global agreement. The global agreement also mandates that the services rendered by the group companies would involve standardised processes and would be of the same standard as that rendered by the assessee.
3.11.3 In order to ensure standardised services and maintain a high standard of service as committed in the MSA, the assessee has allowed access to its own or the client intellectual properties. In addition, the company has provided dedicated personnel who will assist the Atos India manpower in rendering of the service as wel l as handling of such intellectual properties. As per para 5.2 of the Intercompany Subcontract Services Agreement;
5.2 The company grants to the subcontractor for the duration of the agreement, a non-exclusive, non-transferable license to access and use the company and/or client intellectual property rights granted to company solely for the purpose of providing the services hereunder but only to the extent such license and rights are granted in the Prime Contract if performance of services requests the use of specific software or tools owned by company or its client, subcontractor (a) shall not modify, alter, change, adapt or create derivative works based upon such software and tools, or any part thereof; (b) shall not sell, assign, pledge, sub-license, lease, deliver or otherwise transfer such software and tools and (c) shall not disclose to any third party or permit any third party to have access to, or use or copy such software and tools.
3.11.4 Although the access to the assessee’s intellectual property rights is limited to performance of the service with reference to contract with Tower Watson, it is admittedly utilised for the purpose of the Atos India’s business. The fact remains that Atos India has been allowed use of the intellectual properties of the assessee company for its own business activities and such intangibles are clearly in the nature of “copyright of scientific work” or “patent, trademark, design, model, plan, secret formula or process, or information concerning industrial, commercial or scientific experience”.
3.11.5 It is also noticed that the service desk setup by the assessee is with reference to enabling the employees of Atos India to render the services in the requisite manner. In addition to the access to the intellectual property rights of the assessee company, there is a close interaction between the personnel of the assessee and the Atos India employees which result in making available of technical knowledge, skill, experience and process. It is the ultimate responsibility of the assessee to ensure standardised rendering o f service to Tower Watson and clearly such standards are passed on to the Indian employees by the assessee personnel. The Atos India employees are clearly enabled to apply the technical knowledge, skill, process, experience independently in rendering their services to Tower Watson India. The assessee itself does not render any service to Tower Watson India.
3.11.6 In its submission before DRP as well as the assessing officer, the assessee has not made any further submission with reference to the actual services rendered by the assessee but has merely made standard submissions with reference to character of the software and what would constitute a ‘make available’ with reference to India US Treaty. The assessee has also not been able to demonstrate as to how the decisions relied on by it are applicable to the facts of its case. As such, the submission made by the assessee is not found applicable to the facts of this case and hence not tenable.
3.11.7 Another aspect which requires attention is the claim of the assessee that if there is a long term contract for rendering of service, it would mean that the services are not being made available as the services of the provider are regularly needed by the recipient of service. We are not agreeable to such reverse hypothesis. Merely because the parties are in a long term arrangement, it would not imply that there is no transfer o f technical knowledge/skill/experience. In a long term arrangement, there may be a continuous upgradation of knowledge but it would definitely not imply that there is absence of ‘making available of technical knowledge/experience/skill”. In the case of international Management Group (UK) Ltd. [2016] 75 taxmann.com 250 (Delhi Trib.), when an assessee had hired a consultant for developing standardized processes for organizing an event, the Hon’ble ITAT held the payment to be fee for technical service in terms of India UK DTAA wherein the requirement of make available was satisfied. The Bench held that;
In the instant case the assessee has hired for conducting research in respect of the appropriate structure for the IPL and makes recommendation to BCCI accordingly. It is required to provide the Constitution of the IPL, the authority of the governing Council, the structure of IPL, tournament rules and regulation, the franchisee tender document, the franchisee agreement, necessary franchisee regulation and the IP implementation budget. According to the agreement the intellectual property rights remains with the board of control for Cricket in India. Even assessee could not point out that why make available test has not been satisfied in this event by providing all the rules and regulations of IPL, standard operating procedures of matches, copies of the franchisee agreement various documentation / contracts etc which shall remain with the BCCI Therefore, in the instant case the BCCI is enabled to absorb and apply the information and the advice provided by the appellant to it for conducting such sporting events. Thus, when all this documentation and material is provided to the BCCI it is able to use such know how and documentation generated from provision of the services of the appellant independent of the services of the appellant in future. It is too naive to say that in absence of IMG services BCCI on its own cannot hold IPL tournament. Merely because the BCCI has entered into a contract for conducting further events does not lead to the conclusion that the information documentation, agreements, contracts etc cannot be said to be made available to the appellant. In fact it is. In view of this the contention of the appellant that the sum of Rs. 23.77 crores cannot be taxed as fees for technical services as it does not satisfy make available condition provided in article 13(4)(c) of the DTAA is rejected. (Para 43)
3.11.8 The reliance placed by the appellant on the decision in the case of Raymond Ltd vs. DCIT [2003] 86 ITD 791 (Mum) has been examined. In that case before the Mumbai Bench, the assessee was engaged in manufacturing suitings, engineers’ steel files and rasps and cement in India. With a view to muster funds it proposed to issue two types of Global Depository Receipts (GDRs) in the international market. The assessee company engaged a UK company as lead managers to the issue. The assessee paid necessary charges for the services rendered by the lead managers and the managers. This was a case wherein there was no transfer of technical knowledge/skill/process between the two parties. The non-resident had been given a task of managing the GDR issue for which it was paid certain amount. Clearly, the service did not make available any technical knowledge/skill/knowhow to the assessee and hence the ITAT held that the amount did not fall within the ambit of FTS as contemplated under India UK DTAA. The facts are similar in other cases which have been cited by the appellant and hence not applicable to the facts of the present case.
3.11.9 Similarly, Hon’ble Karnataka High Court in the case of CIT & Ors vs De Beers India Minerals (P) Ltd [2012] 346 ITR 467 (Kar), held that the payment has been received for providing data collected by the assessee and there was no making available of any technical knowledge/skill/knowhow or process. As discussed above, the facts in the present case are totally different.
3.12 In light of the above discussion, the DRP holds that all the services rendered by Atos US fall within the ambit of Article 12 of th India US DTAA as royalty/fee for technical services and are liable to tax in India. The objection raised by the assessee is not found acceptable and is dismissed. ”
10. Aggrieved assessee is in appeal before us raising following grounds in its appeal: –
“1. That on the facts and in the circumstances of the case and in law, the Learned Deputy Commissioner of Income-tax (International Taxation) 1(1)(2), Mumbai (the Learned AO’) and the Dispute Resolution Panel (the DRP) erred in holding the sum of Rs.7.55.89.550 as ‘Royalty under Section 9(1)(vi) of the Income-tax Act, 1961 (the Act) and Article 12 of the Double Taxation Avoidance Agreement (the DTAA’) entered into between India and France.
2. That on the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in holding the sum of Rs. 7.55.89.550 as ‘Fees for Technical Services’ under Section 9(1)(vii) of the Act and Article 12 of the DTAA.
3. That on the facts and in the circumstances of the case and in law, the Learned AO and the DRP erred in not considering that the sum of Rs. 7.55,89.550 is in the nature of “Business Profits ” under Article 7 of the DTAA, not taxable in India as the Appellant did not have a Permanent Establishment in India under Article 5 of the DTAA.
4. That on the facts and in the circumstances of the case and in law, while calculating the tax liability of the Appellant, the Learned AO has erred in levying surcharge and education cess on the rate prescribed under the Article 12 of the DTAA.
5. That on the facts and in the circumstances of the case and in law, the learned AO has erred in proposing to initiate penalty proceedings under section 271(1)(c) of the Act without appreciating that none of the provisions of section 271(1)(c) of the Act gets attracted in the facts of the Appellant’s case. ”
11. At the time of hearing Ld. AR submitted as under: –
“2.1 Atos USA had entered into a central agreement with Microsoft USA to obtain licenses for the use of Microsoft products by various entities in the Atos Group. The Microsoft software products are provided to various Atos Group entities through a server/standard facility which can be accessed by the group entities. Accordingly, the Appellant recharged the group entities for its services of purchasing/delivery of Microsoft products basis the use of the said Microsoft products by them.
2.2 Under the aforesaid arrangement, the Appellant had accrued income of Rs. 7,10,56,609 from Atos India towards the following Microsoft products (standard off-the-shelf software products) used by Atos India during the relevant previous year:
