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IN THE INCOME TAX APPELLATE TRIBUNAL "L" BENCH, MUMBAI
BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM)
.. , ,
./I.T.A. No.5835/Mum/2009
( / Assessment Year :2006-07)
Partners Hardvard Medical / The Asstt. Director of Income Tax
International Inc., Vs. (International Taxation)-3(1),
C/o Pricewaterhouse Coopers (P Mumbai
)Ltd,
PWC House, Plot No.18/A, Guru
Nanak Road,
Station Road, Bandra (W),
Mumbai-400050
( /Appellant) .. ( / Respondent)
./I.T.A. No.5976/Mum/2009
( / Assessment Year :2006-07)
Dy.Director of Income Tax / M/s Partners Hardvard Medical
(International Taxation)-4(2), Vs. International Inc.,
Room No.11, Gr.Floor, C/o Pricewaterhouse Coopers
Scindia House, Ballard Pier, (P) Ltd, PWC House,
Mumbai-400038 Plot No.18/A, Guru Nanak Road,
Station Road, Bandra (W),
Mumbai-400050
( /Appellant) .. ( / Respondent)
./I.T.A. No.7425/Mum/2010
And ITA No.7185/Mum/2012
( / Assessment Years :2007-08 & 2009-10)
Partners Hardvard Medical / Dy.Director of Income Tax
International Inc., Vs. (International Taxation)-4(2),
C/o Pricewaterhouse Coopers (P Room No.11, Gr.Floor,
)Ltd, Scindia House, Ballard Pier,
PWC House, Plot No.18/A, Guru Mumbai-400038
Nanak Road,
Station Road, Bandra (W),
Mumbai-400050
( /Appellant) .. ( / Respondent)
2
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
./I.T.A. No.7870/Mum/2011
( / Assessment Year :2008-09)
Partners Hardvard Medical / The Asstt. Director of Income
International Inc., Vs. Tax
C/o Pricewaterhouse Coopers (International Taxation)-4(2),
(P )Ltd, Mumbai
PWC House, Plot No.18/A,
Guru Nanak Road,
Station Road, Bandra (W),
Mumbai-400050
( /Appellant) .. ( / Respondent)
. / . /PAN/GIR No. :AABCH2171F
/ Assessee by S/Shri Kanchan Kaushal,
Dhanesh Bafna and
Arpit Agrawal
/Revenue by Smt.Vandana Sagar
/ Date of Hearing : 3.6.2015
/Date of Pronouncement :3.7.2015
/ O R D E R
PER BENCH
The assessee has filed four appeals for AY 2006-07 to 2009-10 and
the Revenue has filed appeal for AY 2006-07. The Cross-appeals filed for
the assessment year 2006-07 are directed against the order dated
17.8.2009 passed by the ld. CIT(A)-XXXIII, Mumbai. The other three
appeals filed by the assessee are directed against the three separate
orders passed by AO under sections 143(3) r.w.s.144C(13) of the Income
Tax Act, 1961. Since identical issues are agitated in these appeals, all
these appeals were heard together and they are being disposed of by this
common order, for the sake of convenience.
3
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
2. In all these appeals, the solitary issue urged is whether the assessee
is liable to pay tax on the amounts received from the persons mentioned
below in respect of services provided to them:
a) Wockhard Hospitals Ltd
i) Consulting Agreement;
ii) Award Agreement; and
iii) Education and Teaching Agreement
b) Sri Ramchandra Medical College & Research Institution (SRMCRI)
i) Education and Teaching Agreement
c) Carol Info Services Ltd (CAROL)
i) Consulting Agreement;
d) Reimbursement of expenses
3. The assessee is a Non Profit educational entity incorporated in USA
and is an educational and charitable organisation for the purposes of
section 501(c)(3) of the US Internal Revenue Code. With effect from April
22, 2008 it has become subsidiary of Partners Healthcare System Inc. It
has provided various educational and consultancy services under the
agreements entered with various Indian entities. The assessee claimed
that none of the receipt is taxable in India as per the provisions of Indo-US
DTAA.
4. In assessment year 2006-07, the AO treated all the receipts as
taxable. However, the AO held that 90% of the receipts are taxable
Royalty and the balance 10% of the receipts is taxable as "Fee for included
services". However the contention of the assessee is none of the receipt is
liable for taxation in India as they do not fall in the category of Royalty or
4
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
Fee for included services. It was further contended that these receipts fall
in the category of business receipts and they are not taxable in India,
since the assessee does not have permanent establishment in India.
5. Hence, the assessee challenged the order passed by the AO in AY
2006-07 by filing appeal before Ld CIT(A). In the appellate proceedings,
the ld.CIT(A) held that
(a) the fees received under consulting agreement from Wokhard
Hospitals and M/s Carol Info Services are taxable as "Fee for
included services".
(b) the fees received from Wockhard Hospitals in pursuance of
Award Agreement is not taxable.
(c) the receipts by way of reimbursement of expenses are not
taxable.
(d) the fees received from Wockhardt Hospitals Ltd under the
education and teaching agreement is partially taxable, i.e., 75% of
the receipt is not taxable and balance 25% is taxable as Royalty for
use of trade name.
(e) the fees received from SRMCRI under education and teaching
agreement is partially taxable, i.e., 60% of the receipt is not taxable
and the balance 40% is taxable as royalty for use of trade name.
Both the parties have challenged the order of ld. CIT(A) on the
points decided against each of them in AY 2006-07.
6. In the remaining three years, the AO held that 90% all receipts are
taxable as royalty and 10% receipts are taxable as fee for included
services. The same was confirmed by the Dispute Resolution Panel and
5
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
hence the AO passed the order accordingly. The assessee has filed the
appeals for the remaining three years challenging the order of the AO.
7. At the time of hearing, the ld. Counsel appearing for the assessee
submitted that the identical issues have been considered by the Tribunal in
various years and they have been decided in favour of the assessee by
holding that they are not taxable as per the Indo USA treaty. The
assessee has also furnished copies of orders passed by the Tribunal from
assessment years 2000-01 to 2004-05. The order, if any, passed for AY
2005-06 was not available on record.
8. The Ld D.R also agreed with the submissions made by Ld A.R that
identical amounts received in the years relevant to AY 2000-01 to 2004-05
have been held to be not taxable in India under Indo-US DTAA.
9. We notice that the co-ordinate bench of Tribunal has passed the
order dated 22-02-2013 in the assessee's own case relating to AY 2004-05
in ITA No.791/Mum/2008 and ITA No.1020/Mum/2008, wherein it has
followed the orders passed by the co-ordinate benches from AY 2000-01
onwards. In assessment year 2004-05, the assessee had received fees
from M/s Max India Ltd for identical services rendered by the assessee for
advisory services rendered. Identical view was taken in the case of
receipts from Wokhard Hospitals. The Tribunal in paragraph13 and 14 of
its order has held as under:-
"13. Consistent with the aforesaid view taken by the Tribunal in
Assessee's own case, we hold that the payments received from Max
does not constitute FIS (Fee for Included Services) within the
meaning of Article 12(4), as nothing is made available by the
Assessee to Max and also the Assessee does not have any P.E in
6
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
India. Therefore the income so arising to the Assessee in India
cannot be taxed under Article 7 as "Business Profits".
14. In case of WHL (Wokhard Hospitals Ltd) also, we hold that it is
neither taxable as FIS nor as royalty and also the Assessee does not
have any P.E in India and, therefore, the payment received by it
cannot be taxed in India. Accordingly, consistent with the view
taken in earlier years in assessee's own case, we allow grounds no.1
and 2, raised by the assessee."
The above said decision of the Tribunal shall be applicable to the fees
received by the assessee in the current year under Consulting Agreement
(Wokhard Hospitals and Carol Info Services Ltd) and under Award
Agreement (Wokhard Hospitals).
10. The Tribunal also considered the issue relating fees received under
Education and Teaching Agreement from SRMCRI. Since the assessee had
allowed the SRMCRI to use its logo, the tax authorities had taken the view
that the fee received also pertains to Royalty for use of Logo. In respect
of this receipt also, the Tribunal held that they cannot be considered as
Royalty or Fee for Included Services and further it cannot also be taxed as
Business profits, since the assessee does not have P.E. Hence this
decision is applicable to the fees received from Wokhard Hospitals and
SRMCRI under Education and Teaching Agreement.
11. In respect of amount received by way of reimbursement of expenses
also, the Tribunal in paragraph 31 of its order held that the same cannot
be held to be taxable, since the main receipts have been held to be not
taxable.
12. Thus, it is seen that the Tribunal has considered identical issues in
AY 2004-05 and it has held that none of the receipts is taxable in India.
7
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
13. We notice that the tax authorities have examined only the
agreements and have drawn conclusion against the assessee. They have
not examined about the nature of services actually provided or delivered
by the assessee to the Indian entities. In our considered view, one may
not be able to come to a conclusion about the nature of services provided
unless the actual services/deliverables are examined. Then one shall be in
a position to ascertain as to whether the services or techniques provided
was mere commercial information or a technique made available to the
assessee. We may elucidate this point with an example. Let us assume
that a financial consultancy firm provides consultancy services for "Cash
management system". It may provide various techniques to be followed
to achieve the objective of effective cash management. The said
techniques may be followed by the recipient of services even in the
absence of the financial consultancy firm. In that case, the question that
requires to be examined is whether the financial consultancy firm has
made available the technology related to Cash management system or not
within the meaning of the provisions of Indo-USA DTAA.
14. In the absence of such kind of examination from the side of tax
authorities, we notice that the Tribunal also has proceeded to adjudicate
the issue by considering the agreements only. In the absence of such kind
of intricate details, we are also not in a position to examine the nature of
services vis-à-vis the products/package, if any, delivered by the assessee.
Since the Tribunal has consistently taken a particular view in the earlier
years and since there was no deeper examination done by the tax
authorities, we are inclined to follow the decision rendered by the Tribunal
in the earlier years. Accordingly, by following the order passed by the
8
ITA Nos.5835/ Mum/2009, 5976/Mum/2009,
7425/ Mum/2010, 7870/Mum/2011
and 7185/Mum/2012
Tribunal in the earlier years, we set aside the orders of Ld CIT(A) in AY
2006-07 and the assessment orders passed on the above said issues in AY
2007-08 to 2009-10 and direct the AO to delete the addition of all the
receipts discussed above.
15. Since we have held that all the receipts are not taxable, the question
of charging interest u/s 234B does not arise and in any case it is
consequential in nature.
16. In the result, the appeal filed by the Revenue for AY 2006-07 is
dismissed and all the appeals of the assessee are allowed.
Pronounced accordingly on 3rd July, 2015.
3rd July, 2015
Sd sd
( / AMIT SHUKLA) (.. / B.R. BASKARAN)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai: 3rd
July,2015.
. ../ SRL , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai
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