M/s Inmarsat Solutions BV vs Assistant Commissioner of Income Tax, Circle-2(1)(1),International Taxation, New Delhi [TS-708-ITAT-2023(DEL)]dated 04th October, 2023

Facts:

• The assesse is a tax resident of Netherlands and distribution partner of Immarsal Global Limited(IGL), a group concern based in UK.

• In this respect, the assessee’s primary activity is purchase of airtime from IGL for resale as a packaged solution to third-party customers, mainly in the maritime industry.

• The assessee derived income from transmission of satellite signals from ship to the customers in India and vice versa.

• For AY 2018-19, assessee received Rs 30.21 cr from various customers in India from resale of airtime and claimed the same as business income not taxable in India in the absence of PE.

• Revenue taxed the same as royalty under Section 9(1)(vi)(c) and Article 12(8) of India-Netherlands DTAA.

• Aggrieved, the assessee filed an appeal with the ITAT.

Issue:

Whether income from transmitting of satellite signals from ships to the customers in India will be taxable as royalty?

Held:

• ITAT noted that the Mumbai bench decided identical issue in favour of Assessee’s group concern Inmarsat Global Ltd following the earlier order passed by the Mumbai ITAT for AY 2007-08.

• Relying on jurisdictional HC ruling in case of New Skies Satellite wherein it was held, “mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well…. since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word “royalty” in Asia Satellite, when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty” to AY 2012-13.

• Thus, ITAT ruled in the favour of the assessee.

M/s Global Schools Holdings Pte Ltd. vs. Assistant Commissioner of Income Tax, Circle-1(3)(1),International Taxation, New Delhi [TS-719-ITAT-2023(DEL)] dated 21st November, 2023

Facts:

• Assessee, a Singapore-based limited liability company, entered into separate Licensing Intellectual Property (IP) agreements with its Indian AEs. Assessee also entered into an additional agreement with one of its AE, Global India School Education Services Ltd (GISES) for provision of management support services including intra group services, such as, legal, finance, accounting etc. to streamline business processes, ensure compliance and promote cost efficiencies etc.

• Assessee received Rs. 6.43 Cr, from GISES for provision of management support services which was not offered to tax as same was considered as Business Income.

• Revenue held that the intra group services are taxable as FTS both under Section 9(1)(vii) and under Article 12(4)(a) of India–Singapore DTAA and made addition of Rs. 6.43 Cr as FTS, which was confirmed by the DRP.

• Aggrieved, the assessee filed an appeal with the ITAT.

Issue:

Whether intra-group management support services will be taxable as FTS?

Held:

• ITAT opined intra group management support services provided by the Assessee as per service agreement are routine services and finds no connection between the licence agreement and service agreement.

• ITAT observed that the Revenue have not brought any materials on record to establish that the services rendered by the Assessee has resulted in transfer of technology, know-how, skill to the Indian AE so as to enable the India AE to perform such service independently in future without the aid and assistance of the Assessee.

• ITAT rejected Revenue’s argument that the service rendered under the service agreement are ancillary and subsidiary to the use or right to use of trademark/brand name and software as provided under sub-licensing agreement and opined that intra group services under the service agreement cannot come within the ambit of Article 12(4)(a) of India–Singapore DTAA.

• Thus, ITAT ruled in the favour of the assessee.

M/s. CPI India Ltd vs. Assistant Commissioner of Income Tax Circle,1(2)(1), International Taxation, New Delhi [TS-717-ITAT-2023(DEL)] dated 21st November, 2023

Facts:

• Assessee-Company, a tax resident of Mauritius holding a valid TRC, is an investment holding company.

• Assessee filed its return of income for AY 2016-17 and was subjected to reassessment proceedings basis information received that an Indian company remitted Rs.162 crores to the assessee towards purchase of shares of M/s. Noida Cyber Park Pvt. Ltd. without withholding any tax and also for the fact that the Assessee is claiming losses year after year.

• In response to notice under Section 148, assessee filed its return declaring long term capital loss of Rs.33 Lacs which was disputed by Revenue.

• The Revenue recomputed the long term capital gain at Rs.141 Cr. on consideration of Rs.407 Cr. Revenue denied the treaty benefits holding the Assessee to be a paper company created in Mauritius to avail treaty benefits. Thus, after allowing unabsorbed long-term capital loss pertaining to AY 2012-13, net capital gain amounting Rs.122.42 Cr was added to the income of the Assessee.

• Aggrieved, the assessee filed an appeal with the ITAT.

Issue:

Whether Long term capital gain will be taxable as per India-Mauritius DTAA?

Held:

• ITAT opined that except making vague allegations, the Revenue failed to bring on record any evidence to prove that Assessee is merely a paper company and not a genuine resident of Mauritius.

• ITAT remarked that “Though, the Revenue has authority to dispute the residential status of the assessee merely on the strength of TRC, however, it is incumbent upon the Revenue to make proper inquiry and to establish the fact that the party claiming benefit and the strength of the TRC is a shell/conduit company.”

• ITAT held that capital gains will not be taxable relying on CBDT Circular 789 dt. Apr 13, 2000, SC judgment in Azadi Bachao and jurisdictional HC judgment in Blackstone Capital to hold, “once the assessee holds a valid TRC, the Departmental Authorities cannot go behind it to question residential status.”

• Thus, ITAT ruled in the favour of the assessee.