Income Tax Appellate Tribunal - Bangalore
M/S. Yodlee Inc, Bengaluru vs Deputy Commissioner Of Income-Tax, ... on 15 April, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH : BANGALORE
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
IT(IT)A Nos. 772/Bang/2022 &
660/Bang/2023
Assessment Years : 2019-20 & 2020-21
M/s. Yodlee INC,
Prestige Technology Park The Deputy
1 Floor, Commissioner of
Mercury 2B Block, Income Tax,
Sarjapura Marathahalli International
Ring Road, Taxation,
Kadabeesanahalli, Vs. Circle - 2 (2),
Bangalore - 560 103. Bangalore.
PAN: AAACY4356J
APPELLANT RESPONDENT
Assessee by : Shri Chavali Narayan, CA
Shri G. Manoj Kumar, CIT
Revenue by :
(DR)
Date of Hearing : 25-01-2024
Date of Pronouncement : 15-04-2024
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER
Present appeals arises out of the final assessment order dated 07.07.2022 for A.Y. 2019-20 and order dated 10.07.2023 for A.Y. Page 2 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 2020-21 passed by the Ld.DCIT, Intl. Taxation, Circle - 2(2), Bangalore.
2. Grounds of appeal raised by assessee for A.Y. 2019-20 are as under:
Based on the facts and circumstances of the case and in law, Yodlee Inc. (hereinafter referred to as "the Assessee Company" or ''the Appellant") respectfully craves, leave to prefer an appeal under Section 253(1)(d) of the Income-tax Act, 1961 ("the Act") against the order dated 07 July 2022 issued under Section 143(3) read with Section 144C(13) of the Act, by the Deputy Commissioner of Income-tax, International Taxation. Circle-2(2), Bengaluru (the "Learned AO") in pursuance of the directions dated 23 June 2022 issued under Section 144C(5) by the Dispute Resolution Panel -2 ("Hon'ble DRP"), Bengaluru, on the following grounds which are without prejudice to each other:
1. That Learned AO/DRP erred, in law and on facts, in computing the total income of the Assessee Company at INR 7,73,71,900.
2. The impugned order of the Learned AO and directions of the Hon'ble DRP are based on incorrect appreciation of facts and law and therefore the final order passed by the Learned AO under Section 143(3) read with Section 144C(13) is bad in law.
3. The Learned AO/DRP has erred, in law and on facts, by holding that consideration received by the Assessee Company amounting INR 7,73,71,900 towards use of Application Programming Interface is a process to constitute as Royalty under the provisions of the Act and as per the India-US Double Taxation Avoidance Agreement.
4. The Learned AO/DRP failed to appreciate the fact providing access to its Application Programming Interface platform to its customers does not involve any process or for that matter any secret process and therefore the learned AO/DRP has erred in holding the subject consideration received is process royalty under the provisions of the Act and India-US Double Taxation Avoidance Agreement.Page 3 of 35
IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023
5. That on the facts and circumstances of the case and in law, the learned AO/DRP has completely erred in not appreciating the fact that the Assessee grants only the use of the platform with a limited, non-exclusive and non- transferable right, and thus involves only the sale of a copyrighted article.
6. The learned AO/DRP has failed to appreciate that the usage fee collected by the Assessee Company is towards providing access to software application and not towards usage of secret process.
7. The learned AO/DRP has failed to appreciate that the consideration received towards usage fee does not fall under in any of the sub-clauses of Explanation 2 to Section 9(1)(vi).
8. The learned AO/DRP has failed to appreciate that usage fee earned by the Assessee Company is not a consideration for use or right to use or any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof in accordance with clause 3 of Article 12 of India-US Double Taxation Avoidance Agreement.
9. The learned AO/DRP, has failed to appreciate that the usage fee is in the nature of business receipts which is not taxable in India, as the Assessee, has no Permanent Establishment in India in accordance with India-US Double Taxation Avoidance Agreement.
10. The learned AO has erred, in law and on facts, by considering interest under Section 234B of the Act amounting to INR 10,89,480 and interest under Section 234D of the Act amounting to INR 5,54,831 to arrive at a tax demand of INR 1,02,08,361 for the subject AY.
Page 4 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 The Assessee Company submits that each of the above grounds is independent and without prejudice to one another.
The Assessee Company craves leave to add, alter, amend, vary, omit, or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with law.
3. Brief facts of the case are as under:
3.1 The assessee company, Yodlee Inc is headquartered in the United States of America and is in the business of providing a platform for financial aggregation. It has filed its return of income for AY 2019-20 on 30.09.2019 admitting total income as NIL.
3.2 The return was processed u/s. 143(1) on 30.04.2020 resulting in a refund of Rs.56,92,044/-. The case was taken up for scrutiny and a notice u/s. 143(2) of the Act was issued on 31.03.2021 by the prescribed authority and transferred to this office.
The notice u/s. 142(1) was also issued to assessee, in response to which, representative of the assessee appeared before the Ld.AO and filed requisite details as called for.
3.3 The Ld.AO observed that, the website of the company introduces itself as a market leader in data aggregation for financial institutions and fintech companies, through data, APIs and FinApps. The assessee submitted that it is engaged in Page 5 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 the business of providing cloud based digital applications, technologies, solutions and related services to financial institutions, internet portals and other companies that offer financial and related products and services over the internet. 3.4 The assessee further submitted that, it is the service provider that hosts its cloud based aggregation software in its centre and is powered at the backend in the net banking website of the client through a technology called Application Programming Interface (API). Assessee submitted that for creating such database, the clients provides their credentials like other banks and other financial institutions with whom such client has accounts. Upon providing such credentials by the clients, assessee after carrying out screen scrapping technology, fetches data from other financial institutions' website and displays it to the client in a standard reportable format.
3.5 The assessee submitted that for providing such services, it earns the usage charge towards subscription of assessee and a one time professional fee for set up of the software. It was submitted that as per the service agreement between assessee and its customers, assessee retains all right title and interest in the deliverables, including intellectual property rights therein and thereto.
3.6 After considering the submissions of the assessee, the Ld.AO in the draft assessment order observes that the functions performed by the assessee through Application Programming Page 6 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 Interface are processed. The Ld.AO also held that, the clients of the assessee are offered bundled services that facilitate them in making financial decisions. The Ld.AO also noted that the customers of the assessee are located in India being the financial institutions and the account holders of such financial institutions are located outside India. Thus the payment in respect of services that are utilised for the purposes of business carried out by the financial institutions in India as well as for the purposes of making or earning such income from sources in India would constitute royalty. He thus held that the payment received towards providing access to Yodlee software and constitutes "use" or "right" to use a process and therefore would fall under the definition of Royalty under Article 12 of India -US DTAA and Explanation 2 to section 9(1)(vi) of the Act. The Ld.AO noted that assessee also did not obtain any certificate u/s. 197 of the act. The entire income earned by the assessee are chargeable to tax in India.
3.7 On receipt of the draft assessment order, the assessee preferred objections before the DRP. The DRP held that the decisions relied by the assessee were distinguishable on facts and upheld the view taken by the Ld.AO.
3.8 On receipt of the DRP directions, the final assessment order was passed by holding that the consideration received by the assessee towards the use of Application Programming Interface is Page 7 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 a process that constitute "royalty" under the provisions of the act as per India-US DTAA.
3.9 Aggrieved by the orders of the Ld.AO for both years under consideration, assessee in appeals before this Tribunal.
4. At the outset, the Ld.AR submitted that, all the grounds raised by the assessee in both appeals are on one single issue of considering the services rendered by the assessee to be a process thereby the remuneration received by the assessee amounts to royalty chargeable to tax in India u/s. 9(1)(vi) of the act.
5. The Ld.AR submitted that as per Section 90(2) of the Act, the assessee being a tax resident of the United States of America, is the beneficial owner of the subject receipt earned from customers in India and is eligible to be governed by the provisions of India- US DTAA, to the extent it is more beneficial to it, and hence, the provisions of Section 9(1)(vi) of the Act shall not be applicable.
6. He further submitted that, the usage charges and one-time professional setup fee received by the assessee do not fall within the ambit of royalty under Article 12 of the India-US DTAA.
7. The Ld.AR submitted that the assessee only gives a limited right to use the Application Programming Interface (API) without granting any rights/ copyrights in the API to its customers. He submitted that all the proprietary rights, interest and title in the Page 8 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 services provided including the intellectual property rights and copyrights of the API are retained by the assessee which is evident from the Terms of Services. It is further submitted that the customers do not have access to the program/ source code of the API and therefore, cannot modify, copy, reverse engineer, decompile or disassemble the API. It is submitted that the customers of the assessee, do not have any degree of control of the IP / equipment / process; and assessee retains all right, title and interest in and to any deliverables, including all intellectual property rights therein and thereto.
8. The Ld.AR submitted that, the authorities below have held that the facts of the assessee are distinguishable from the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd. reported in (2021) 125 taxmann.com 42 (SC).
He submitted that the principles laid down by Hon'ble Supreme Court has been ignored insofar as to say that, there is no transfer of any intellectual properties by assessee to its customers.
9. The Ld.AR submitted that under India -US DTAA, there is no licence that has been granted by the assessee to its customers to access the online service provided by the assessee, that could be terms to be scientific and technical. He submitted that, infact the assessee retains the ownership of all the intellectual properties and assessee's customer can only access the Yodlee professional financials platform / application to avail the Page 9 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 services. He submitted that, the customers of assessee do not have any right to use or use any copyright / intellectual property / process of the application / platform. It is also submitted that, these customers do not have any access to program / source code of the software and therefore cannot modify / copy / reverse or disassemble the software. The Ld.AR submitted that, under the treaties, in order to constitute 'royalty', for 'use' of or 'right to use' of a 'process', the process has to be 'secret'. It is submitted that the wording of these treaties show that, only payments received as consideration for the 'use of, or 'the right to use' is necessary for the payment to be termed as royalty. It is thus submitted that this is much narrower to the definition of royalty under the Act.
10. The Ld.AR then submitted that an identical issue has been decided by Hon'ble Delhi Tribunal in case of Salesforce.com Singapore Pte vs. Dy.DT reported in (2022) 137 taxmann.com 3 wherein the Tribunal has analysed the subscription fee received by the Singapore based assessee for providing CRM services to its clients. The Ld.AR submitted that in this case, the Singapore based assessee was rendering customer relationship management services to its customers by generating reports and summaries based on the proprietary information fed into that assessee's database by the client itself. The access of the assessee's database was for limited duration for which a subscription fee was paid to the Singapore based assessee. Hon'ble Delhi Tribunal on these facts observed that, the assessee Page 10 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 provides web based online access to its customers data posted on servers located in data centres maintained by assessee outside India. The Tribunal on these facts held that, the assessee does not provide any information consisting industrial, commercial, scientific experiences and that the assessee only processes the proprietary data of the customers and provide the result in the form of the desired reports etc. The Hon'ble Delhi Tribunal on this count held that the consideration for CRM services were in the nature of royalty. It was also held that, by granting access to the information forming part of the database of assessee, the assessee neither shares its own experiences, techniques or methodologies employed in evolving the database with the users nor imparts any information relating to them. It was thus held that the payment received by the assessee does not fall within the ambit of Article 12 of India Singapore DTAA also.
11. The Ld.AR compared the facts of the present case with that of the decision of Hon'ble Delhi Tribunal in case of Salesforce.com (supra) and submitted that, the assessee performs financial data aggregation for its customers by using Application Programming Interface (API) and to synchronize, link and connecting the database with such application. The Ld.AR submitted that, the assessee enters into a service agreement with its customers, wherein the customers are provided access to the assessee's financials application, for which, it receives one time professional fee for providing such access. The assessee also has SLA. The Ld.AR submitted that, as per the agreement, the assessee do not Page 11 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 provide any access to the right title and interest in any of the deliverables including intellectual property rights and it provides to its customers a limited information exclusively license to use the application. The Ld.AR thus submitted that the services rendered by the assessee would not constitute 'use' or right to use of a process and therefore under the definition of Royalty under Article 12 of India-US DTAA and Explanation 2 to section 9(1)(vi) of the Act. The Ld.AR also relied on the following decisions in support of its submissions.
MOL Corporation reported in (2022) 137 taxmann.com 286 (Delhi -Trib.) Urban Ladder Home Décor Solutions Pvt. Ltd. in IT(IT)A nos. 615 to 620/Bang/2020 vide order dated 17.08.2021
12. On the contrary, the Ld.DR relied on the orders passed by authorities below.
We have perused the submissions advanced by both sides in the light of records placed before us.
13. We note that the assessee earns usage charges invoiced to customers for providing access to Yodlee Personal Finance application (application /platform) in India which is said to be one-time professional fee for set-up of the Application for giving access to customer. Further, as a part of the services agreement, the assessee also has a SLA to keep the uptime of the application / platform at 99.7%.
Page 12 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023
14. The Ld.AO issued draft assessment order u/s. 143(3) r.w.s. 144C(1) of the act on 27.09.2022 and held as under:
"the financial data aggregation function performed by the APIs of the Assessee allows synchronizing, linking. and connecting the data base of service with any application Such function can also be termed as a process:
the end user is offered bundled services which facilitates them in financial decision making. The financial institution i.e. customers are located in India and their customers also located in India. Hence, payment in respect of services to be utilized for the purpose of a business carried on by it in India as well as for the purposes of making or earning income from sources in India. would undisputedly constitute Royalty.
the term 'access is only a window to further "use-. The process of collation of data from different servers and maintaining it individually for the use of the respective end-user is undoubtedly the use of a process". The product in the form of a copyrighted article or a patented article is different from a process that is patented but put to use:
a platform is different from an application programming interface which can only be a constituent of a platform. The SAML assertion is a process of validation to grant the user access to protected resource. The protected resource is a repository of collated data of various financial data to which the user has granted access Hence, it is the use of a process which is a part of the patented process:
the mere existence of the server outside which interacts with other servers would not denude the fact that the process enables the Indian Resident in the course of its business which is rendered in India. The value addition of this financial aggregation is immense and has attracted customers after validations by Central Banks of different countries;
financial data aggregation is a process that involves compiling information from different accounts including bank accounts. credit card accounts, investment accounts, loan accounts and other financial accounts into a single Page 13 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 place. It is a consolidation of an individual's financial data to create cohesion. clarity and simplicity Accordingly, the AO assessed the entire receipts of Rs. 8,17,85,088 as taxable income in the hands of the Assessee in the draft assessment order."
15. On these facts, we analyse the legal provisions. Before that, it is necessary to understand the agreement that has entered into by assessee with Indian customers. It is noted that assessee has entered into independent agreements with various financial institutions in India to whom the services have been provided by the assessee through API (being a hosted site). As a sample agreement, we refer to the agreement with ICICI Bank at pages 204-290 of the paper book.
16. We note that the services to be rendered by assessee to ICICI Bank has been specifically defined in clause (2) at page 212 of the paper book r.w. Annexure - 2 to Annexure - 5. The sum and substance of this clause is that, the assessee will be enabling / activating MM services (My money personal financial management offering via a hosted service model) to ICICI Bank. It has also been agreed that, ICICI Bank while making the model available further to its customer shall provide the name of the product to Mymoney from ICICI Bank, even though in the agreement, the product is named to be 'Yodlee Mymoney'. On reading of the relevant agreement, we note that main function of this product is to aggregate the data from the customer's account (customers of the ICICI) with third party financial institutions' data sources that are generally available with the service Page 14 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 provider. It is also agreed in the clause 2.2 that in the event assessee has to make any expenses towards procuring additional data from any other sources, ICICI Bank may include such data for an additional fee.
16.1 As per clause 3.3 at page 224, all the intellectual property rights and warranties shall be owned by the assessee and will be obliged to allow ICICI Bank to use them, or content of the assessee under a license, in order to fulfil the obligations under this agreement. It has been stated therein that such licenses is ancillary to the performance of the obligations to either party as contained in the agreement and will be granted on a no fee and royalty free basis.
16.2 Further clause 13 of the service agreement with ICICI Bank reads as under:
"13. PROPRIETARY RIGHTS 13.1. For the performance of the obligations as agreed to herein, there may be a requirement for either Party to grant to the other the license to use the Marks or Content or other Intellectual Property of the first party. Such license, is ancillary to the performance of the obligations of either Party as contained herein and is intended to be granted on a no-fee, royalty-free basis and is to be used solely for the purpose of providing the Services. Each Party's Content, Marks, Products, Intellectual Property and Services are owned solely and exclusively by such Party. Each Party will retain all right, title and interest in and to its respective Content, Marks, Products, Services and other intellectual property worldwide, subject to the limited license granted to the other hereunder in connection with such Party's performance of this Agreement.Page 15 of 35
IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 13.2. ICICI Bank shall not (a) decompile, disassemble, reverse engineer or otherwise attempt to derive (except to the extent expressly permitted by applicable law, notwithstanding a contractual obligation to the contrary) , or determine or attempt to determine any source code, algorithms, methods or techniques embodied in the Services or any portion thereof; (b) reproduce, modify, adapt, translate or create any derivative works based upon the Services or any portion thereof; (c) distribute, disclose, market, rent, lease, assign, sublicense, pledge or otherwise transfer the Services, in whole or in part, to any third party or permit the Services to be used for processing the data of any third party other than Customers, except as expressly permitted by the Service Provider Agreement;
(d) remove or alter any Intellectual Property, Mark or other proprietary notices, appearing on or in the Services except as expressly permitted by the Service Provider Agreement;
(e) release other than in accordance with Section 7, the results of, benchmark tests or other comparisons of the Services with other programs; or (f) permit or authorize any third party to do any of the foregoing Upon termination of this Agreement, ICICI Bank shall, notwithstanding any other term of this Service Provider Agreement, return all information, documents, data etc. pertaining to the Service Provider Intellectual Property, Content or Marks to the Service Provider unless otherwise instructed by the Service Provider to destroy and provide a certificate of destruction of the Service Provider's data, information etc (such certification to be carried out forthwith but in any event prior to 30 days from notification by the Service Provider).
13.3. ICICI Bank shall own all Customer Data except any pertaining to a Customer's non-ICICI Bank accounts. ICICI Bank grants to Service Provider a royalty free, no fee right to use such Customer Data in the provision of the Services as contemplated herein. For the avoidance of doubt, the parties acknowledge that such Customer information may be used for web analytics and similar use in compliance with the terms of this Agreement, for analyzing the use of such Service and to improve the Service Provider's offerings and services. Upon termination of this Agreement, Service Provider shall, notwithstanding any other term of this Service Provider Agreement, return Customer Data pertaining to Customer's ICICI Bank account information to ICICI Bank unless otherwise instructed by ICICI Bank to destroy and provide a certificate of destruction of such Page 16 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 Customer's ICICI Bank account information (such certification to be carried out forthwith but in any event prior to 30 days from notification by ICICI Bank). For clarification, ICICI Bank and Service Provider may share with each other aggregate, non-personally identifying Customer Data to reconcile financial arrangements, and use such data to improve each Party's offerings and services, and to track the Parties' performance and Services under this Agreement.
13.4. Each party (the "Using Party") agrees that, with respect to its use of the other party's (the "Owning Party") Marks provided or otherwise identified by the Owning Party for the Using Party's use: (a) the Using Party will do nothing inconsistent with such ownership, (b) all uses of such Marks shall inure to the sole benefit of and be on behalf of the Owning Party, (c) it will use the Owning Party's Marks in accordance with any guidelines for the use of such Marks as provided in this Agreement or as provided by the Owning Party from time to time, (d) it will not alter any such Marks and shall use only exact reproductions thereof as supplied by the Owning Party, and (e) at the Owning Party's reasonable request, all depictions of such Marks which the Using Party intends to use will be submitted to the Owning Party for approval of design, color, or other details.
13.5. Except as specifically provided herein, the Service Provider does not grant to ICICI Bank any right or license, express or implied, in the Services, the Service Provider Technology or any Service Provider's Intellectual Property rights. ICICI Bank herein agrees that the Service Provider does not give any right in their patents to ICICI Bank. The Service Provider shall only give right with respect to the Service Provider's Intellectual Property rights that are necessary for providing the services contemplated in this Agreement."
16.3 From the above clauses of the agreement, it is very clear that the assessee does not provide any information concerning industrial / commercial / scientific experiences. The assessee as a service provider and processes the data of its customer, in the Page 17 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 present case (ICICI Bank) and to provide the result in a desired report format. It is further noted that, the assessee does not share its own experiences / technique or methodology employed in evolving the database and it does not provide any access to the process to its customer.
17. From the agreements between the assessee and its customers, we note that the assessee is rendering service of financial data aggregation to its customers for which it receives one-time professional fee for providing access to Yodlee Personal Finance Application an application / platform hosted on a cloud server with a view to provide person finance management services (such as account summary dashboard. portfolio/investment management. transaction search. expense analysis. budget analysis etc.) to the customers through the service pages hosted on the said application / platform.is using its patented process. however, no access is given for such process to the customer. Further, the Assessee has also entered into a service agreement with the customers.
18. The learned AO has stated that the customers while making payment to the Assessee have themselves deducted tax under section 195 of the Act, and that, the Assessee itself did not apply for lower withholding or nil withholding tax under section 197 of the Act. In this regard, it is submitted that the payers have deducted tax on a conservative basis. Further, the assessee is also eligible to claim benefits available under the India-USA Page 18 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 DTAA and for claiming such benefit the Assessee is not obligated to obtain a lower or nil withholding tax certificate under section 197 of the Act.
19. On consideration of the relevant facts presented in the paper book and based on arguments advanced by both sides, it appears that the assessee is in the business of gathering, collating, and making available the details required as per the customer's need in a report format on a platform hosted on a cloud server, consequent to which the payment is received from the customer for the services rendered. What is to be analysed is whether such payment would be royalty in terms of clause (iv) of Explanation 2 to Section 9(1)(vi) of the Act. If so, whether the subscription received is royalty liable to be taxed as such under the Act.
20. It is noted that the equipments and machines relating to the services provided by the assessee are under its own control and are outside India and its customers do not have any physical access to such equipments providing system services.
21. The Coordinate Bench of Hon'ble Delhi Tribunal in case of MOL Corporation vs. DCIT (supra), under similar circumstances, has held that the assessee therein who was a resident of USA was engaged in providing cloud computing infrastructure and licensing of software to its Indian clients through subscription agreement. Hon'ble Delhi Tribunal on the facts therein observed and held as under:
Page 19 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 "Giving thoughtful consideration to the matter on record, the bench is of considered view that the cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer the assessee's cloud base services are though based on patents/ copyright, but the subscriber does not get any right of reproduction, The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the frontend users through internet to the provider's system and back. The Ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (pare 10.5 of the Ld. AO order) Thus. The Subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications."
Further, the decision in the case of Microsoft Regional Sales Pte. Ltd. vs. ACIT reported in 145 taxmann.com 29 has held that the consideration received by the assessee therein for providing cloud services is not taxable as royalty under the India USA DTAA.
22. We refer to the term "Process" occurs under clause (i), (ii) and
(iii) to Explanation 2 to Section 9(vi). It reads as under:--
"Explanation 2.: For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for--
(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;Page 20 of 35
IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023
(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;"
23. The term "process" used under Explanation 2 to section 9(1)(vi) in the definition of 'royalty' does not imply any 'process' which is publicly available. The term "process" occurring under clauses (i), (ii) and (iii) of Explanation 2 to section 9(1)(vi) means a "process" which is an item of intellectual property. Clause (iii) of the said Explanation reads as follows:
"(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property"
Clauses (i) & (ii) of the said explanation also use identical terms.
24. The words which surround the word 'process' in clauses (i) to
(iii) of Explanation 2 to section 9(1 )(vi), refer to various species of intellectual properties such as patent, invention, model, design, formula, trade mark etc. The expression 'similar property' used at the end of the list, further fortifies the stand that the terms 'patent, invention, model, design, secret formula or process or trade mark' are to be understood as belonging to the same class of properties viz. intellectual property.
25. We also note that 'Intellectual property' as understood in common parlance means, Knowledge, creative ideas, or expressions of human mind that have commercial value and are protectable under copyright, patent, service mark, trademark, or trade secret laws from imitation, infringement, and dilution.
Page 21 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 Intellectual property includes brand names, discoveries, formulas, inventions, knowledge, registered designs, software, and works of artistic, literary, or musical nature.
26. We refer to the commentary in Prof.Klaus Vogel's Commentary on Double Taxation Convention, wherein, the term 'Royalty' is defined as under:
"Paragraph 2 contains definition of the term 'royalties'. These relate, in general, to rights or property constituting different forms of literary and artistic property, the elements of intellectual property specified in the text and information concerning industrial, commercial or scientific experience. The definition applies to payments for the use of, or the entitlement to use, rights of the kind mentioned, whether or not they have been, or are required, registered in a public register. The definition covers both payments made under a license and compensation which a person would be obliged to pay for fraudulently copying or infringing the right."
27. Thus the word "process" thus must also refer to specie of intellectual property, applying the rule of, ejusdem generis or noscitur a sociis, as held by Hon'ble Supreme Court in case of CIT vs. Bharti Cellular reported in (2011) 330 ITR 239.
28. We refer to the decision of Hon'ble Madras High Court in case of CIT vs. Neyveli Lignite Corpn. Ltd. reported in (2000) 243 ITR 459 wherein Hon'ble High Court observed as under:
"10.The term (royalty' normally connotes the payment made to a person who has exclusive right over a thing for allowing another to make use of that thing which may be either physical or intellectual property or Page 22 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 thing. The exclusivity of the right in relation to the thing for which royalty is paid should be with the grantor of that right. Mere passing of information concerning the design of machine which is tailor-made to meet the requirement of a buyer does not by itself amount to transfer of any right of exclusive user, so as to render the payment made therefor being regarded as royalty".
29. Further we note that by Finance Act, 2012, Explanation 5 & 6 were added with retrospective effect from 1.6.1976 which reads as under:--
"Explanation 5: For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not -
(a) The possession or control of such right, property or information is with the payer;
(b) Such right, property or information is used directly by the payer;
(c) The location of such right, property or information is in India.
Explanation 6: For the removal of doubts, it is hereby clarified that the expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret."
30. By insertion of Explanation 5 & 6, meaning of word 'Process' has been widened. As per these explanations, the word 'Process' need not be 'secret', and situs of control & possession of right, property or information has been rendered to be irrelevant. However, in our opinion, all these changes in the Act, do not Page 23 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 affect the definition of 'Royalty' as per DTAA. The word employed in DTAA is 'use or right to use', in contradistinction to, "transfer of all or any rights" or 'use of', in the domestic law. As per Explanation 5 & 6, the word 'process' includes and shall be deemed to included, transmission by satellite (including up- linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret. However, the Explanation does not do away with the requirement of successful exclusivity of such right in respect of such process being with the person claiming 'royalty' for granting its usage to a third party.
31. We may also refer to the following decisions of AAR wherein meaning of the phrase "use" or "right to use" has been explained. The AAR in case of Dell International Services (India) P. Ltd. reported in (2008) 172 Taxman 418 held as under:
"12.5 It seems to us that the two expressions 'use' and 'right to use' are employed to bring within the net of taxation the consideration paid not merely for the usage of equipment in praesenti but also for the right given to make use of the equipment at future point of time. There may not be actual use of equipment in prasenti but under a contract the right is derived to use the equipment in future. In both the situations, the royalty clause is invokable. The learned senior counsel for the applicant sought to contend, relying on the decision of Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. v. CTO [1990] 77 STC 182 which was affirmed by the Supreme Court, that mere custody or possession of equipment without effective control can only result in use of the equipment whereas a right to use the equipment implies control over the equipment. We do not think Page 24 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 that such distinction has any legal basis. In the case of Rashtriya Ispat Nigam Ltd. (supra), what fell for consideration was the expression "transfer of right to use any goods" occurring in a sales-tax enactment. Obviously, where there is a transfer, all the possessory rights including control over the goods delivered will pass on to the transferee. It was in that context, emphasis was laid on 'control'. The Supreme Court affirmed the conclusion of the High Court that the effective control of machinery even while the machinery was in use of the contractor remained with RIN Ltd. which lent the machinery. The distinction between physical use of machinery (which was with the contractor) and control of the machinery was highlighted. The ratio of that decision cannot be pressed into service to conclude that the right of usage of equipment does not carry with it the right of control and direction whereas the phrase 'right to use' implies the existence of such control. Even in a case where the customer is authorized to use the equipment of which he is put in possession, it cannot be said that such right is bereft of the element of control. We may clarify here that notwithstanding the above submission, it is the case of applicant that, it has neither possession nor control of any equipment of BTA.
12.6 The other case cited by the learned counsel for applicant to explain the meaning of expressions 'use' and 'right to use' is that of BSNL v. UOI (2006) 3 STT 245 (SC). Even that case turned on the interpretation of the words "transfer of right to use the goods" in the context of sales-tax Acts and the expanded definition of sale contained in clause (29A) of section 366 of the Constitution. The question arose whether a transaction of providing mobile phone service or telephone connection amounted to sale of goods in the special sense of transfer of right to use the goods. It was answered in the negative. The underlying basis of the decision is that there was no delivery of goods and the subscriber to a telephone service could not have intended to purchase or obtain any right to use electro-magnetic waves. At the most, the concept of sale in any subscriber's mind would be Page 25 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 limited to the handset that might have been purchased at the time of getting the telephone connection. It was clarified that a telephone service is nothing but a service and there was no sale element apart from the obvious one relating to the handset, if any. This judgment, in our view, does not have much of bearing on the issue that arises in the present application. However, it is worthy of note that the conclusion was reached on the application of the well- known test of dominant intention of the parties and the essence of the transaction.
The word 'use' - what it means:
12.7 Let us now explore the meaning of the key word 'use'. The expression 'use' has a variety of meanings and is often employed in a very wide sense, but the particular meaning appropriate to the context should be chosen. In S.M. Ram Lal & Co. v. Secretary to Government of Punjab [1998] 5 SCC 574, the Supreme Court noted that 'in its ordinary meaning', "the word 'use' as a noun, is the act of employing a thing; putting into action or service, employing for or applying to a given purpose". In the New Shorter Oxford Dictionary, more or less the same meaning is given. The very first meaning noted there is: "the action of using something; the fact or state of being used; application or conversion to some purpose".
Another meaning given is "Make use of (a thing), especially for a particular end or purpose; utilize, turn to account... cause (an implement, instrument etc.) to work especially for a particular purpose; manipulate, operate". The various shades of meanings given in the decided cases in America are referred to in Words and Phrases, Permanent Edition Vol. 43A. Some of them are quoted below :
"The word 'use' means to make use of; convert to one's service; to avail oneself of; to employ".
(Miller v. Franklin County) "The word 'use' means the purpose served, a purpose, object or end for useful or advantageous nature". (Brown v. Kennedy) "'Use' means to employ for any purpose, to employ for attainment of some purpose or end, to convert to one's Page 26 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 service or to put to one's use or benefit.
(Beach v. Liningston) "'Use', as a noun, is synonymous with benefit and employment and as a verb has meaning to employ for any purpose, to employ for attainment of some purpose or end, to avail one's self, to convert to one's service or to put to one's use or benefit". (Esfeld Trucking Inc. v. Metropolitan Insurance Co.) 12.8 The word 'use' in relation to equipment occurring in clause (iva) is not to be understood in the broad sense of availing of the benefit of an equipment. The context and collocation of the two expressions 'use' and 'right to use' followed by the words "equipment" suggests that there must be some positive act of utilization, application or employment of equip- ment for the desired purpose. If an advantage is taken from sophisticated equipment installed and provided by another, it is difficult to say that the recipient/customer uses the equipment as such. The customer merely makes use of the facility, though he does not himself use the equipment.
13. It is the contention of the revenue that dedicated private circuits have been provided by BTA through its network for the use of the applicant. The utilization of bandwidth upto the requisite capacity is assured on account of this. The electronic circuits being 'equipment' are made available for constant use by the applicant for transmission of data. The access line is installed for the benefit of the applicant. Therefore, the consideration paid is towards rent for circuits and the physical components that go into the system. It is further contended that rendition of service by way of maintenance and fault repairs is only incidental to the dominant object of renting the automated telecommunication network.
13.1 There is no doubt that the entire network consisting of under-sea cables, domestic access lines and the BT equipment - whichever is kept at the connecting point, is for providing a service to facilitate the transmission of voice and data across the globe.
Page 27 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 One of the many circuits forming part of the network is devoted and earmarked to the applicant. Part of the bandwidth capacity is utilised by the applicant. From that, it does not follow that the entire equipment and components constituting the network is rented out to the applicant or that the consideration in the form of monthly charges is intended for the use of equipment owned and installed by BTA. The questions to be asked and answered are: Does the availment of service involve user of equipment belonging to BT or its agent by the applicant ? Is the applicant required to do some positive act in relation to the equipment such as operation and control of the same in order to utilize the service or facility ? Does the applicant deal with any BT equipment for adapting it to its use ? Unless the answer is 'yes', the payment made by the applicant to BTA cannot be brought within the royalty clause (iva). In our view, the answer cannot be in the affirmative. Assuming that circuit is equipment, it cannot be said that the applicant uses that equipment in any real sense. By availing of the facility provided by BTA through its network/circuits, there is no usage of equipment by the applicant except in a very loose sense such as using a road bridge or a telephone connection. The user of BT's equipment as such would not have figured in the minds of parties. As stated earlier, the expression 'use' occurring in the relevant provision does not simply mean taking advantage of something or utilizing a facility provided by another through its own network. What is contemplated by the word 'use' in clause (iva) is that the customer comes face to face with the equipment, operates it or controls its functioning in some manner, but, if it does nothing to or with the equipment (in this case, it is circuit, according to the revenue) and does not exercise any possessory rights in relation thereto, it only makes use of the facility created by the service provider who is the owner of entire network and related equipment. There is no scope to invoke clause (iva) in such a case because the element of service predominates.
13.2 Usage of equipment connotes that the grantee of right has possession and control over the equipment Page 28 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 and the equipment is virtually at his disposal. But, there is nothing in any part of the agreement which could lead to a reasonable inference that the possession or control or both has been given to the applicant under the terms of the agreement in the course of offering the facility. The applicant is not concerned with the infrastructure or the access line installed by BTA or its agent or the components embedded in it. The operation, control and maintenance of the so-called equipment, solely rests with BTA or its agent being the domestic service provider. The applicant does not in any sense possess nor does it have access to the equipment belonging to BTA. No right to modify or deal with the equipment vests with the applicant. In sum and substance, it is a case of BTA utilizing its own network and providing a service that enables the applicant to transmit voice and data through the media of telecom bandwidth. The predominant features and underlying object of the entire agreement unerringly emphasize the concept of service. The consideration paid is relatable to the upkeep and maintenance of specific facility offered to the applicant through the BTA's network and infrastructure so that the required bandwidth is always available to the applicant. The fact that the international circuit as well as the access line is not meant to offer the facility to the applicant alone but it enures to the benefit of various other customers is another pointer that the applicant cannot be said to be the user of equipment or the grantee of any right to use it. May be, a fraction of the equipment in visible form may find its place at the applicant's premises for the purpose of establishing connectivity or otherwise. But, it cannot be inferred from this fact alone that the bulk of consideration paid is for the use of that item of equipment.
13.3 In cases where the customers make use of standard facility like telephone connection offered by the service provider, it does not admit of any doubt that the customer does not use the network or equipment of the service provider. But, where the service provider, for the purpose of affording the Page 29 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 facility, has provided special infrastructure/network such as a dedicated circuit (as in the instant case), controversies may arise as to the nature of payment received by the service provider because it may not stand on the same footing as standard facility. However, even where an earmarked circuit is provided for offering the facility, unless there is material to establish that the circuit/equipment could be accessed and put to use by the customer by means of positive acts, it does not fall under the category of 'royalty' in clause (iva) of Explanation 2."
32. We also refer to the commentary relied by the Ld.Counsel form Prof. Klaus Vogel's Commentary on Double Taxation Convention, wherein 'Secrete formulae or process' is defined as under:
"Secret formulae or processes: This covers Know- how in the narrower sense of the term viz., all business, secrets of a commercial or industrial nature. In most of the countries, they enjoy at least relative protection or are capable of being protected. That is why Article 12(2) very properly use, in connection with such formulae, etc., the criterion 'right to use', which is pertinent to them (letting) as it is in the case of absolute proprietary rights. As a rule, the 'right to use' already come into existence in these instance by authorized information(legitimate disclosure of secrets) . It may be restricted in the point of time in respect of the period following the expiry of the license. On the difference between a product with relatively simple technology, and a business secret."
33. We also note that the Explanations 5 and 6 to section 9(1)(vi) are not found in the definition of "Royalty" under India-Japan DTAA. The definition of "Royalty" under the DTAA is much more narrower in its scope and coverage, than the definition of "Royalty" contained in section 9(1)(vi) r.w. Explanations 2,5 and 6 Page 30 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 of the act. The provisions of India-USA DTAA have a more restrictive scope than the provisions of the Act (section 90(2) of the Act), hence, we confine our adjudication of the taxability of subscription fees under the India-USA DTAA. Article 12(3) of India-USA DTAA defines the term "Royalties". The same reads as under:
"3. The term "royalties" as used in this Article means; (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof ; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than payments derived by an enterprise described in paragraph 1 of Article 8 (Shipping and Air Transport) from activities described in paragraph 2(c) or 3 of Article 8."
Now let us examine each of the reasons given by the Ld.AO for bringing to tax the revenue as "royalty".
(i) Whether the subscription revenue is towards use of, or right to use any copyright:
34. Based on the definition of 'Royalty' under the India-USA DTAA, it is important to understand the meaning of the term 'copyright'. The term 'copyright' is not defined under the provisions of the Act. Therefore, the provisions of the Copyright Act, 1957 ('Copyright Act') have to be examined. As per section 14 Page 31 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 of the Copyright Act, 'copyright' means the exclusive right to do any of the acts specified therein, viz., to reproduce the work, to issue copies of the work to the public, to make any translation or adaptation of the work, etc. Unless any of the exclusive rights or a combination thereof as stated under section 14 of the Copyright Act are transferred by the copyright holder, it cannot be said that the use or right to use the copyright has been granted. Thus, payment made for acquiring the right to use any copyrighted product, wherein the payer does not get any of the 'exclusive rights' as stated in section 14 of the Copyright Act, does not amount to payment made for the use or right to use the 'copyright' in the product and therefore, shall not be covered within the scope of 'royalty'. The aforesaid principles have been upheld by the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT (supra). Hon'ble Supreme Court has held that the amount paid by resident Indian end users/distributors to non-resident computer software manufacturers/suppliers is not payment of royalty for use of copyright since the end-use/distributor does not get any of the rights under section 14 of the Copyright Act and does not get the right to reproduce a computer program and exploit the reproduction by way of sale, transfer, license etc., which is at the heart of the definition of 'copyright' under the Copyright Act.
35. While holding so, Hon'ble Supreme Court upheld the conclusions derived from the judgments of the Hon'ble Delhi High Court on the said issue as follows:
Page 32 of 35IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 "117. The conclusions that can be derived on a reading of the aforesaid judgments are as follows: . . . iv. A licence from a copyright owner, conferring no proprietary interest on the licensee, does not entail parting with any copyright, and is different from a licence issued under section 30 of the Copyright Act, which is a licence which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the "licensed" computer software product over which the licensee has no exclusive rights, no copyright is parted with and consequently, no infringement takes place, as is recognized by section 52(1)(aa) of the Copyright Act. It makes no difference whether the end-user is enabled to use computer software that is customised to its specifications or otherwise. v. A non-exclusive, non-
transferable licence, merely enabling the use of a copyrighted product, is in the nature of restrictive conditions which are ancillary to such use, and cannot be construed as a licence to enjoy all or any of the enumerated rights mentioned in section 14 of the Copyright Act, or create any interest in any such rights so as to attract section 30 of the Copyright Act. vi. The right to reproduce and the right to use computer software are distinct and separate rights, as has been recognized in Starte Bank of India (supra) (see paragraph 21), the former amounting to parting with copyright and the latter, in the context of non-exclusive EULAs, not being so. 118. Consequently, the view contained in the determinations of the AAR in Dassault Systems K.K. (supra) and Geoquest Systems B.V. (supra) and the judgments of the High Court of Delhi in Ericsson A.B. (supra), Nokia Networks OY (supra), Infrasoft Ltd. (supra), ZTE Corporation (supra), state the law correctly and have our express approval. We may add that the view expressed in the aforesaid judgments and determinations also accords with the OECD Commentary on which most of India's DTAAs are based."
(Emphasis Supplied)
36. Hon'ble Mumbai Tribunal in the case of Dy. DIT (International Taxation) v. Savvis Communication Corporation reported in (2016) 69 taxmann.com 106 has held that, the payment Page 33 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 received for providing web hosting services though involving use of certain scientific equipment cannot be treated as 'consideration for use of, or right to use of, scientific equipment' which is a sine qua non for taxability under section 9(1)(vi), read with Explanation 2 (iva) thereto as also article 12 of Indo-US DTAA. The Chennai Tribunal in the case of Asstt. CIT v. Vishwak Solutions (P.) Ltd. reported in [2015] 56 taxmann.com 158 has upheld the findings of CIT(A) that "the amount paid to the non- resident is towards hiring of storage space."
37. It is further noted that while dealing with similar question in regard to the case of Salesforce.com Singapore Pte. (supra) where the said assessee was provider of comprehensive customer relationship management servicing to its customer by using CloudComputing Services/Web Casting Services, the Bench in its order dated 25-3-2022 held as under :
"28. Considering the facts of the case in totality, in light of the Master Subscription Agreement, we are of the considered view that the customers do not have any access to the process of the service provider i.e. the assessee, and the assessee does not have any access except otherwise provided in the master subscription agreement to the data of the subscriber.
29. In our considered opinion, all the equipments and machines relating to the service provided by the assessee are under its control and are outside India and the subscribers do not have any physical access to the equipment providing system service which means that the subscribers are only using the services provided by the assessee."
In the case of Rackspace, Us Inc. (supra) for the Assessment Years 2010-11 & 2015-16 the Mumbai Bench of the Tribunal has also considered similar issue where the assessee filed the return of income and the notes Page 34 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 stating therein that the cloud hosting services was not taxable as 'royalties' under Article 12 of the India-US tax treaty as the customers do not operate the equipment or have physical access to or control over the equipment used by the assessee to provide cloud support services and do not make available technical knowledge, experience, skill, know-how etc., to its Indian Customers and the cloud support services are not in the nature of managerial, technical or consultancy services and consequently same do not constitute fees for included services within the meaning of Article 12 of the India-USA Double Tax Avoidance Agreement (DTAA). It was observed by the Bench, while following the assessee's own case judgment for other years that--
"5. On appraisal of the above mentioned finding, we find that the agreement between the assessee and its customers is for providing hosting and other ancillary services to the customers and not for the use of leasing any equipment. The data centre and the infrastructure therein used to provide these serves belongs to the assessee. The customers are not having physical control or possession over the servers and right to operate and manage this infrastructure/servers vest solely with the assessee. The agreement is to provide hosting services simpliciter and is not for the purpose of giving the underlying equipment on hire or lease. The customer was not knowing any location of the server in data centre, web mail, websites etc. Accordingly, it cannot be said as royalty within the meaning of Explanation (2) to section 9(1)(vi) of the Act as well as Article 12(3)(b) of the Indo-USA Data by the AO and DRP. Moreover, there is no PE of the assessee in India and hence, no income can be taxed in India in term of Indo-US DTAA."
38. Based on the above discussions and respectfully following the judicial precedence referred to hereinabove, we are of the opinion that amount received from the customers in India by the assessee based on the service agreement entered into between them cannot be held to be taxable in India as Royalty in terms of section 9(1)(vi) of the act as well as Article 12A of India - US Page 35 of 35 IT(IT)A Nos. 772/Bang/2022 & 660/Bang/2023 DTAA. Further the revenue has not established of there being a PE of assessee in India and hence no income can be taxed in India under Indo - US DTAA.
Accordingly, the grounds raised by assessee in both the appeals stands allowed.
In the result, both the appeals filed by the assessee stands allowed.
Order pronounced in the open court on 15th April, 2024.
Sd/- Sd/-
(CHANDRA POOJARI) (BEENA PILLAI)
Accountant Member Judicial Member
Bangalore,
Dated, the 15th April, 2024.
/MS /
Copy to:
1. Appellant 2. Respondent
3. CIT 4. DR, ITAT, Bangalore
5. Guard file 6. CIT(A)
By order
Assistant Registrar,
ITAT, Bangalore