Hon'ble Judges/Coram:
George George K., Member (J) and B.R. Baskaran

ORDER

B.R. Baskaran, Member (A)

1. The assessee has filed these three appeals challenging the common order dated 16.03.2020 passed by LD CIT(A)-12, Bengaluru and they relate to the assessment years 2012-13 to 2015-16. In all the three years, the Ld. CIT(A) has confirmed the demand raised by the AO u/s. 201(1)/201(1A) treating the assessee as an 'assessee in default' for non-deduction of tax at source from the payments made to M/s. Facebook Ireland towards advertisement fees.

2. The assessee herein is an Indian company. The AO noticed that the assessee has made payments to M/s. Face Ireland Ltd. towards advertisement charges as detailed below:-

The AO noticed that the assessee had made the above said payments without deducting tax at source u/s. 195 of the Act. Hence the AO initiated proceedings u/s. 201(1) of the Act treating the assessee as an 'assessee in default'.

3. The assessee company furnished following objections to the AO:-

• The Consideration for advertisement is paid to the overseas bank account of Non-resident. Therefore, the said payments cannot be construed to be received or deemed to be received in India.

• The non resident does not carry out any of the activities in India and they are wholly carried out outside India and accordingly there is no business connection in India. Therefore, the payments to non-resident would not be deemed to accrue or arise in India.

• The company submits that the payment made to Non resident payee is towards the services rendered for uploading and display of the banner advertisement of the Company on its portal. The company submits that the banner advertisement hosting did not involve use or right to use by the Company any Industrial, Commercial or Scientific equipment and no such use was actually granted by non resident payees to the Company.

• The Company submits that the service rendered by non-resident payees is a wholly automated process. Further, there is no human touch at all in the services rendered which provide these advertising opportunities. In light of the above legal position that services are rendered without human touch would not qualify as fees for technical services under section.

4. The AO has explained the concept of online advertisement made in the portal of Face book. The relevant observations made by the AO are extracted below:-

"Para 4.4

(i).......

(ii) The transaction with the Payee as per the details submitted by the assessee, namely, M/s. Facebook Ireland Limited (Hereafter referred as Facebook) is examined here. It is submitted that the contents are uploaded to Facebook by the business team of the assessee. Facebook provides many options to the businesses/advertisers to reach its database of users. To touch upon a few of the alternatives that Facebook provides - the businesses could choose their target market based on the age group, location, gender etc. The advertisement made in the Facebook platform is not a dormant or passive or broad based advertisement as made in TVs, or newspapers or public hoarding. Unlike the traditional medium of advertisements, what Facebook offers is - dynamic, highly target group specific and real time monitored advertising.

(iii)......

(iv) It is evident that a business entity or advertiser can target specific groups and monitor the conversions or the success of the advertisements. There are provisions to monitor and evaluate the overall effectiveness of the ad campaign, to study the market behaviour with respect to the products of various range, to generate a wealth of actionable data using tools of business analytics, to make commercially best decisions with regard to the ad campaigns and new product launches, to design new products and launch them selectively in the most potential markets, to analyse the consumer purchase pattern and to derive the maximum return on investments. Given the immense scope and possibilities that the platform offers, it would be myopic to categorise the advertisements made on Facebook as mere dormant, regular ad campaigns or banner services as claimed by the assessee.

(v) It is evident that the Facebook advertisements are nothing but the usage of Facebook technology and process to advance the business in the e-commerce era. The technology, design, process and equipment of Facebook are being used, in a complex manner, with very high efficiency levels, to reach out the target audience, within a fraction of the second of the target user logging in his/her account. The advertiser A1 (in the schematic) communicates its requirements (in terms of its target market, and the profile of the consumer it wants to serve) through its advertiser's account with Facebook. In turn, using complex algorithms and advanced processors and equipment, the network of servers throughout the world locates the users that are being targeted by the advertiser A1. And as soon as the target users log in, the ads/banners/web links, as determined by A1 will be displayed to the user near instantaneously. It an be termed as the most evolved form of online target advertising".

5. After hearing the assessee and after examining the provisions of sec. 9(1)(vi) and 9(1)(vii) of the Income tax Act and also the provisions of DTAA entered between India and Ireland, the AO held that the above said payments are taxable in India primarily as 'royalty' and alternatively as FTS/FIS. Accordingly, the AO raised demand u/s. 201(1) @ 20% of the payments and also charged interest u/s. 201(1A) of the Act in all the three years.

6. The Ld. CIT(A) held that the impugned payments are in the nature of royalty and accordingly confirmed the demand raised upon the assessee in all the three years under consideration.

7. The Ld. A.R. submitted that the issue urged in these appeals is covered by the decision rendered by this Tribunal in the case of Urban Ladder Home Dcor Solutions P Ltd. in IT(IT)A No. 615 to 620/Bang/2020 dated 17.08.2021. He submitted that the observations made by the Tribunal in the instant cases are identical with the observations made by him in the above said case. He submitted that, in the instant cases also, the Ld. CIT(A) has examined relevant portion of agreement entered between the assessee and M/s. Facebook Ireland Ltd. He has also extracted the same at paragraphs 6 (Pages 10 to 16) of his order. Accordingly, the Ld. A.R. submitted that the conclusions reached by Ld. CIT(A) are identical with his conclusions reached in the case of Urban Ladder Home Dcor Solutions Pvt. Ltd. (supra). He submitted that, in the case of M/s. Urban Ladder (supra), the Ld. CIT(A) has held that the advertisement charges paid to M/s. Facebook Ireland is in the nature of Royalty and he has reached identical conclusion in the instant cases also.

8. We heard Ld. D.R. and he also submitted that the orders passed by Ld. CIT(A) in the instant cases are identical with the order passed by him in the case of Urban ladder (supra).

9. We notice that the Tribunal, in the case of Urban Ladder (supra) has extracted the relevant observations made by Ld. CIT(A) in its order and the same is identical with the observations made in the instant cases. Accordingly, we feel it convenient to extract relevant portions of the order passed by the Tribunal in the case of Urban Ladder Home Dcor Solutions P Ltd. (supra). In the case of Urban Ladder (supra), the Tribunal has examined the nature of payments made to three companies, vis., M/s. Facebook Ireland, M/s. Rocket Science group (Mailchimp) and Amazon Web world. In the instant cases, we are concerned with the payment made to M/s. Facebook Ireland only. Accordingly, the observations relating to M/s. Facebook alone are extracted below:

"7. The Ld. CIT(A) has examined the nature of payments made to these three non-residents as under:-

(A) In respect of payments made to Facebook, Ireland, the Ld. CIT(A) has first analyzed the nature of payments. He has examined the agreement entered between the assessee and Facebook and observed as under:-

"13. This involves payments by the appellant for the use of, or the right to use of patented software processes. Under section 195 of the IT Act the income of non-resident which is taxable in India needs to be subjected to tax deduction. Therefore, the liability on the part of the assessee to deduct tax on payments made to Facebook Ireland is clearly defined in the ambit of Income tax Law. The nature of payment made is considered in the later part of the order along with other payments for software and data access.

14. Also as per the extract of the agreement it is inferred that the proper space will be given by the Facebook to the appellant's company in which they can create their own company's domain and use the same. I find this issue of 'Royalty' under the IT Act as well as under the India-Ireland DTAA has been discussed in the case of Google India (P) Ltd. by the Hon'ble. ITAT Bangalore.

.........

Then the Ld. CIT(A) has discussed the observations made by the Tribunal in the case of Goggle India (P) Ltd. and the details of Patent number US20040059708A1. He also examined diagram illustrating functional aspects of advertisement system consistent with the invention and observed as under:-

"16. Further at the cost of repetition the patent number US20040059708A1 is examined.

The system includes an ad campaign entry and management component 210, a tools component 220, a billing component 230, one or more database 240, an ad consumer interface component 250, an ad selection component 260, an ad ordering component 270, an ad serving component 280, and a statistics engine component 290. If the present invention is to be used with such an advertising system, it will primarily concern ad selection component 260. To help understand the invention, other components of the advertising system will be explained below. Furthermore, although FIG 2 shows a particular arrangement of components constituting advertisement system 120, those skilled in the art will recognize that not all components need be arranged as shown, not all components are required, and that other components may be added to, or replace, those shown.

17. The parent document, illustrate an embodiment of the invention and together with the description, explain the invention. In the drawings, in FIG. 2 is a diagram functionally illustrating an advertising system consistent with the invention. Here the ad consumers (130) and the advertisers (110) are outside the bod whereas the management component 210, a tools component 220, a billing component 230, one or more data bases 240, an ad consumer interface component 250 are inside the bod. I find that the appellant who is handling management component, tools component, billing component and or one or more data bases certainly has more privileges and access to the programs than the ad consumers (130) and the advertisers (110).

Then the Ld. CIT(A) proceeded to discuss about another patent documents as under:-

18. Further, the patent number US7778872B2 is examined.

19. The description given in the patent document is as under:

FIG. 2 illustrates an exemplary ad system 120', consistent with the present invention. The exemplary ad system 120' may include an inventory system 210 and may store ad information 205 and usage or historical (e.g., statistical) information 245. The exemplary system 120' may support ad information entry and management operation(s) 21a. campaign (e.g., targeting) assistance operation(s) 220, accounting and billing operation(s) 225, ad serving operation(s) 230, relevancy determination operation(s) 235, optimization operations 240, presentation ordering operations 250, and fraud detection operation(s) 255. Advertisers no may interface with the system 120' via the ad information entry and management operations) 215 as indicated by interface 216. Ad consumers 130 may interface with the system 120' via the ad serving operations) 230 as indicated by interface 231.

The present invention primarily concerns the presentation ordering operation(s) 250, and is described more fully in section 4.2. For contextual purposes, however, a brief description of the other parts of ad system 120' appears below.

An advertising program includes information concerning accounts, campaigns, creatives, targeting, etc. The term "account" relates to information for a given advertiser. A "campaign" or "ad campaign" refers to a series of advertisements designed to achieve a larger objective, and may include a start date, an end date, keywords, prices, price limits, and one or more advertisements (i.e., "creatives") used to market a given good, service, class of goods, or class of services. For example, Honda may have one advertising campaign for its automotive line, and a separate advertising campaign for its motorcycle line. The campaign for its automotive line may be targeted using a variety of keywords (e.g., "accord", "sedan", etc.), each of which may be associated with one or more creatives.

The ad information 205 can be entered and managed via the ad information entry and management operation(s) 215. Campaign (e.g. targeting) assistance operation(s) 220 can be employed to help advertisers 110 generate effective ad campaigns. The campaign assistance operation(s) 220 can use information provided by the inventory system 210, which, in the context of advertising for use with a search engine, may track all possible ad impressions, ad impressions already reserved, and ad impressions available for given keywords. The ad serving operations) 230 may service requests for ads from ad consumers 130. The ad serving operation(s) 230 may use relevancy determination operation(s) 235 to determine candidate ads for a given request. The ad serving operation(s) 230 may then use optimization operation(s) 240 to select a final set of one or more of the candidate ads. Finally, the ad serving operations) 250 may use presentation ordering operation(s) 250 to order the presentation of the ads to be returned. The fraud detection operations) 2ZZ can be used to reduce fraudulent use of the advertising system (e.g. bu advertisers), such as through the use of stolen credit cards.

The Ld. CIT(A) has then observed as under:-

20. Thus, from the document of the patent numbers cited supra, it is clear that the appellant's roles are intertwined with that of user and advertisers.

21. These instances are only illustrative and there are a number of such documents which evidence that the technical support cannot be carried out without access to these patented programs.

22. Thus, on examination of patented documents and the IT AT order, the claim that the appellant is not having privileges and access to these patented programs is rejected.

Thus, the Ld. CIT(A) has taken the view that the assessee was given privilege of accessing/using various components of Advertisement program created by Facebook in its website.

8. Then the Ld. CIT(A) has referred to various case laws, but mainly took support of the decision rendered by Hon'ble Karnataka High Court in the case of CIT vs. Samsung Electronics Co. Ltd. MANU/KA/2290/2011 : (2011)(16 taxmann.com 141)(Kar), wherein it was held that the payment made by Indian residents to the non-resident supplier for software and access to database is "Royalty". Accordingly, the Ld. CIT(A) held as under at page 28 of its order:-

"4. The decision of the Hon. Karnataka High Court in the case of Samsung Electronics co Ltd. (cited supra) clearly holds the payment made by the Indian residents to the non-resident supplier for software and access to database as Royalty.

5. The appellant has argued that the transaction of purchase of software and allowing the use of software does not fall within the definition of "Royalty" under respective treaties. I have examined the same. Various treaties are examined alongwith the payments made (supra). I find that the term "royalties" is defined as payments of any kind received as a consideration for the use of, or the right to use, any copyright of literacy, artistic or scientific work any patent, trade mark, design or model, plan, secret formula or process or information concerning industrial, commercial or scientific experience. I find that the appellant's contentions are not correct. I hold that the consideration paid by the appellant for the use of, or the right to use of the software is royalty as per various treaties and need to be taxed in India."

......

9. The Ld. CIT(A) also held that the payments made for use of software is royalty under the provisions of Income tax Act also. In this regard, the Ld. CIT(A) has observed as under:-

"8. I find that the decision of Hon'ble Karnataka High Court in the case of Samsung (supra) is applicable in the facts of the case. Accordingly, the claim that use of software is not royalty within the I.T. Act is rejected."

Finally, the Ld. CIT(A) concluded as under:-

"31. In view of the above, the argument of the appellant that consideration paid for purchase of software, cloud computing, cloud space hiring, (involving transfer of the right to use the software) is not royalty is not acceptable. The grounds in this respect are therefore dismissed."

Aggrieved by the order passed by Ld. CIT(A) for the three years under consideration, the assessee has filed six appeals, viz., three appeals for the demand raised u/s. 201(1) of the Act and three appeals for the interest charged u/s. 201(1A) of the Act.

10. We heard the parties and perused the record. We notice that the AO has mainly invoked the provisions of sec. 9(1)(vi) of the Act in respect of payments made to M/s. Facebook and M/s. Rocket Science Group (MailChimp) to hold that the same is "royalty". In respect of payments made for Amazon Web Services, the AO has also referred to the provisions of DTAA entered into India and USA in addition to sec. 9(1)(vi) of the Act. However, the AO has held that these payments are "royalty" mainly considering the provisions of sec. 9(1)(vi) of the Act.

11. M/s. Facebook is located in Ireland and other two are companies located in USA. We notice that India has entered into Double Taxation Avoidance Agreement (DTAA) with Republic of Ireland and also with United States of America. The question whether the provisions of Income tax Act could be referred to ignoring DTAA provisions, has been settled by Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs. CIT (Civil Appeal Nos. 8733-8734 of 2018 dated March 02, 2021)(MANU/SC/0137/2021 : 125 taxmann.com 42). The Hon'ble Supreme Court examined the question whether the payments made to non-resident software suppliers is "royalty" and TDS u/s. 195 of the Act was required to be deducted on those payments. The Hon'ble Supreme Court examined this question considering four types of situation, which has been narrated as under:-

"4. The appeals before us may be grouped into four categories:

(i) The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, nonresident supplier or manufacturer.

(ii) The second category of cases deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users.

(iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users.

(iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, nonresident suppliers to resident Indian distributors or end-users."

12. After analysing the provisions of Income tax Act, provisions of DTAA, the relevant agreements entered by the assessees with non-resident software suppliers, provisions of Copy right Acts, the circulars issued by CBDT, various case laws relied upon by the parties, the Hon'ble Supreme Court concluded as under:-

"CONCLUSION

168. Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income-tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income-tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases.

169. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment."

13. Hence the relevant DTAA provisions should be considered in the cases before us also for determining the question whether the payments made by the assessee to the above said three non-resident companies are in the nature of Royalty or not. Hence there is no necessity to refer to the provisions of sec. 9(1)(vi) of the Act for the payments made to the three non-resident persons, referred above.

14. The term "royalties" is defined as under in Article 12(3) of India - USA DTAA:-

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."

15. We shall now advert to the Agreements entered by the assessee with the three non-resident companies mentioned above, in order to understand the nature of services rendered by these companies and also to understand whether the payments made to the three non-residents are royalty or not in terms of the provisions of DTAA. The relevant clauses are extracted below for the sake of convenience:-

(A) FACEBOOK

4. License Grant

4.1 In consideration of your compliance with this Agreement for the duration of your subscription to Facebook at Work (unless terminated earlier) we hereby grant you and your Users:

(a) A non-exclusive, personal, non-transferrable, limited, revocable license to access and use Facebook at Work in accordance with this Agreement; and

(b) a non-exclusive, personal, non-transferrable, limited, revocable license to use any tool we may make available to you to create and manage Your Contents.

4.2 This License is not sub-licensable and is subject always to this Agreement.

5. Our Content

5.1 We own or license all Intellectual Property rights in Facebook at Work and Our Content. Facebook at Work and Our Content is protected by copyright laws and other Intellectual Property Laws. All such rights are reserved to us.

5.2 You may, and you must ensure that your Users will;

(a) only use Facebook at Work for its intended purpose within the scope of the License.

(b) not make alterations, copies, extractions, modifications or additions to Facebook at Work and Our Content or any part of it, or sell, copy, disclose, distribute, disseminate or license it or any part of it or misuse it or any part of it in any way or reverse engineer, decompile, disassemble or decipher it or evade technical limitations on the use of Facebook at Work;

(c) not re-publish, sell, extract, reproduce, disseminate or otherwise use Facebook at Work and Our content, except as expressly permitted by this Agreement or with our prior written permission; and

(d) not use our copyrights, trademarks, protected designs and trade dress (including but not limited to Facebook, Facebook at Work, or any of the trademarks listed here (currently available at www.facebookbrand.com/trademarks), or any confusingly similar marks, except with our prior written permission.

5.3 You acknowledge and agree that any breach of this Section 5 may cause us irreparable harm for which damages are not an adequate remedy and that we may seek interim, preliminary or protective relief from any competent court to restrain your or your Users anticipated or actual breach of this Section 5.

5.4 Our Content made available on Facebook at Work is provided for information purposes only, is subject to change and will be updated from time to time without notice to you.

.......

17 Definitions.

In this Agreement, unless otherwise stated

......

"Facebook at Work" means the features and services we make available, including but not limited to through the Facebook at Works websites, apps, and online services that we operate.

............

"Our Content" means Facebook at Work and its content including without limitation, software, its "look and feel", images, text, graphics, illustrations, trademarks, photographs, audio, videos and sound but excluding Your content.

.................."

16. A careful perusal of the relevant provisions of the agreement entered by the assessee with Facebook and Rocket Science Group (Mailchimp) would show that both these non-resident companies are allowing the assessee to use the facilities provided in their sites, which includes, inter alia, software facilities also. The purpose of compelling the assessee to use those facilities, as could be inferred by us, is to create an environment of ease in creating the "advertisement content" to suit the platforms of Facebook or Mailchimp. The environment of ease is beneficial and time saving to both the advertiser and the advertising platform. Thus the facilities have been created by the non-resident companies for mutual benefit. However, a person shall get the right to use those facilities only when he enters into an agreement with them for hosting his advertisement or for sending bulk mails, meaning thereby, the use of facilities is intertwined with the activity of placing advertisement in web portal of Facebook or sending bulk mails. In case of web hosting charges paid to AWS, the assessee is allowed to use the information technology infrastructure facilities.

17. We shall now refer to some of the decisions relied upon by Ld. AR before us. The Kolkatta bench of Tribunal, in the case of ITO vs. Right Florists MANU/IK/0013/2013 : (2013)(32 taxmann.com 99)(Kol-Trib.), has considered an issue - whether the payments made to foreign search engine portals for online advertising services resulted in accrual of income in India in their hands in terms of sec. 9(1) of the Act. The co-ordinate bench referred to the following decisions rendered by other co-ordinate benches:-

(a) Pinstorm Technologies (P) Ltd. vs. ITO MANU/IU/1488/2012 : (24 taxmann.com 345)(Mum)

(b) Yahoo India (P) Ltd. vs. DCIT MANU/IU/0571/2011 : (2011)(11 taxmann.com 431)(Mum) In the above said two cases, the Tribunal held that the amount paid by the assessee to M/s. Google Ireland Ltd. for the services rendered for uploading and display of banner advertisement on its portal was in the nature of business profit on which no tax is deductible at source, since the same was not chargeable to tax in India in the absence of PE of Google Ireland Ltd. in India. Finally, the co-ordinate bench held as under in the case of Right Florists:-

"28. In view of the above discussions, we are of the considered view, on the limited facts of the case as produced before us, the receipts in respect of online advertising on Google and Yahoo cannot be brought to tax in India under the provisions of the Income Tax Act, as also under the provisions of India US and India Ireland tax treaty. This observation is subject to the rider that so far as the PE issue is concerned, we have examined the existence of PE only on the basis of website simplicitor, and on no other additional basis, as no case was made out for the same. In any case, revenue has not brought anything on record, either at assessment stage or even before us, to suggest that Google or Yahoo had a PE in India, and as held by a Special Bench of this Tribunal in the case of Motorola Inc v. Dy. CIT MANU/ID/5075/2005 : [2005] 95 ITD 269/147 Taxman 39 (Mag.) (Delhi) "DTAA is only an alternate tax regime and not an exemption regime" and, therefore, "the burden is first on the Revenue to show that the assessee has a taxable income under the DTAA, and then the burden is on the assessee to show that that its income is exempt under DTAA". No such burden is discharged by the Revenue. Accordingly, there is no material before us to come to the conclusion that Google or Yahoo had a PE in India, which, in turn, could constitute the basis of their taxability in India."

.......................

20. In the case of Engineering Analysis Centre of Excellence (P) Ltd. (supra), the issue related to "issuing of license to use software", i.e., the software purchased by a person shall be used by the buyer for his own business purposes. Since the license was granted without parting the copy rights attached to the software, the Hon'ble Supreme Court held that the payments received by the non-resident software companies cannot be taxed as "royalty" under the provisions of DTAA and hence there is no requirement to deduct tax at source from the payment made to them by a resident assessee.

21. In the instant case, the recipients, i.e., M/s. Facebook and Rocket Science group only allow the assessee to use their facilities for the purpose of creating advertisement content. The payment made to Amazon Web Services (AWS) is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities. In fact, these non-resident companies do not give any specific license for use or right to of any of the facilities (which include software) and those facilities are not going to be used for the use in the business of the assessee. The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in the case of Facebook and Mailchimp. In the case of AWS, the payment is made only for using of information technology infrastructure facilities on rental basis. Hence the question of transferring the copy right over those facilities does not arise at all. The agreements extracted above also make it clear that the copyright over those facilitating software is not shared with the assessee. In any case, the main purpose of making payment is to place advertisements only and not to use the facilities provided by the non-resident companies. Thus the facilities provided by the non-resident companies are only enabling facilities, which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of AWS, the payment is in the nature of rent payments for use of infrastructure facilities.

22. Accordingly, we are of the view that the these non-resident recipients stand on a better footing than those assessees before the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Ltd. (supra). Accordingly, following the ratio laid down by Hon'ble Supreme Court, we hold that the payments made to the above said three non-resident companies do not fall within the meaning of "royalty" as defined in DTAA. The AO has not made out an alternative case that these payments are taxable as business income in India. Hence, there is no necessity for us to deal with that aspect.

23. We have noticed earlier that the Ld. CIT(A) has followed the decision rendered by Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (supra). In the case of Engineering Analysis Centre of Excellence Private Ltd. (supra), the decision rendered by Hon'ble Karnataka High Court in the above said case has been overruled by Hon'ble Supreme Court. Hence on this reasoning also, the decision rendered by Ld. CIT(A) would fail.

24. In view of the foregoing discussions, we are of the view that the payments made by the assessee to the three non-resident companies referred above cannot be considered ad "royalty payments" and hence they do not give rise any income chargeable in India under Indian Income tax Act in all the three years under consideration. In that view of the matter, there is no requirement to deduct tax at source from those payments u/s. 195 of the Act. Hence the assessee herein cannot be considered as an assessee in default u/s. 201(1) of the Act.

25. Accordingly, we set aside the orders passed by Ld. CIT(A) for the years under consideration and direct the AO to delete the demand raised u/s. 201(1) of the Act and also the consequential interest charged u/s. 201(1A) of the Act in all the three years under consideration."

10. The facts prevailing in the instant cases are identical with the facts of M/s. Urban Ladder (supra) with regard to the payments made to M/s. Facebook, Ireland towards advertisement charges. Accordingly, following above said decision, we hold that the payments made by the assessee the non-resident company M/s. Facebook, Ireland cannot be considered ad "royalty payments" and hence they do not give rise any income chargeable in India under Indian Income tax Act in all the three years under consideration.

11. In that view of the matter, there is no requirement to deduct tax at source from those payments u/s. 195 of the Act. Hence the assessee herein cannot be considered as an assessee in default u/s. 201(1) of the Act. Accordingly, we set aside the orders passed by Ld. CIT(A) for the years under consideration and direct the AO to delete the demand raised u/s. 201(1) of the Act and also the consequential interest charged u/s. 201(1A) of the Act in all the three years under consideration.

12. In the result, all the three appeals of the assessee are allowed.

Order pronounced in the open court on 3rd Sept, 2021

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