TaxTMI 
TaxTMI 
2012 (6) TMI 476
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.... the Assessing Officer not to consider the marketing and management fee of Rs. 87,53,248/- as "Fees for Technical Service" under Article 13(4)(c) of the India-UK DTAA, but treat the same as 'Business Profit' under Article-7 read with Article-5 of the India-UK Tax Treaty and tax accordingly. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the Assessing Officer not to tax the balance receipt of Rs. 24,33,62,066/- being the fee for provision of marketing and management services outside India as the same are not subjected to tax in India under Article 13(4)(c) of the India-UK DTAA nor same are attributable to service PE in India. 3. The assessee in the present case is a Company incorporated in United Kingdom. It is engaged in the business of providing marketing, management and accounts handling services. During the year under consideration, it had provided marketing, management and sales support services to WNS Global Services Pvt. Ltd. ('WNS India' in short). WNS India is an Indian Company which is engaged in providing information technology enabled BPO Services such as Data processing, accounts reconciliation, calls....
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....he year under consideration, the assessee company received fees of Rs. 24,33,62,066/-. The assessee-company also received a further sum of Rs. 87,53,248/- from WNS India on account of visit of its employees to India in connection with the rendering of services. Since the said visits lasted for more than 30 days during the year under consideration, it claimed to have a service PE in India as per Article 5 read with Article 7 of DTAA between India and UK. Accordingly, income attributable to the said service PE amounting to Rs. 86,04,311/- was offered by the assessee to tax on net basis in the return of income filed for the year under consideration. The AO, however, held that by rendering the services as per agreement, the assessee-company had made available its expertise and technical knowledge required for conducting the business to WNS India and the fees received by the assessee-company from WNS India for such services was in the nature of fees for included services (FIS). He held that the entire amount of marketing and management fees received by the assessee to the tune of Rs. 24,33,62,066/- thus was chargeable to tax in India as per Article 13 of the India UK Treaty. Accordingly....
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....he same, therefore, was chargeable to tax in India as per Article 7 read with Article 5 of Indo-UK Treaty. 5. We have considered the rival submissions and also perused the relevant material on record. The assessee in the present case is a U.K. Company which entered into an agreement with WNS India for providing marketing, management and sale support services. As per the said agreement, the assessee-company received fees of Rs. 25.21 crores for the services rendered during the year under consideration to WNS India and the issue before us is relating to the taxability of the said amount in the hands of the assessee in India. The Assessing Officer held that by rendering the services as per the agreement, the assessee-company had made available its expertise and technical knowledge required for conducting business to WNS India and the fees received by the assessee from WNS India for such services was in the nature of fees for included services as per Article 13 of the Indo-UK Treaty. The learned CIT(Appeals), on the other hand, accepted the stand of the assessee that fees payable by WNS India was not covered by Article 13 of the Treaty since neither the services provided by the asse....
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.... and build brand awareness, (b) marketing strategy implementation, (c) website content development, (d) developing any promotional materials for WNS India to increase awareness of WNS India's services and to assist the sales staff; 4.4 discuss and negotiate business proposals and contracts (or re-negotiate the same, as the case may be) on the basis of inputs received from WNS India and its own industry experience, but not conclude any contract until the receipt of prior written authorisation from WNS India; 4.5 enter into contracts with clients (or re-enter into new contracts with the said clients) in the name of WNS U.K. and without disclosing that WNS UK is acting on behalf of WNS India. However, WNS UK may intimate to the client to the client that it is acting for an undisclosed principal or a disclosed principal, as the case may be, only if the same is so required to be intimated to the client under any law or regulation applicable in the territory; 4.6 perform administrative, sales support and account handling services to WNS India including, but not limited to: order processing, customer credit review, invoicing and account receivable processing / collection (for ....
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.... to the user technical knowledge, experience, skill, etc. Thus, the normal, plain and grammatical meaning of the language employed, in our understanding, is that a mere rendering of services is not roped in unless the person utilising the services is able to make use of the technical knowledge, etc. by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill, etc. must remain with the person utilising the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills, etc. from the person rendering the services to the person utilising the same is contemplated by the article. Some sort of durability or permanency of the result of the "rendering of services" is envisaged which will remain at the disposal of the person utilising the services. The fruits of the services should remain available to the person utilising the services in some concrete shape such as technical knowledge, experience, skills, etc." 8. On the facts of the case before us, it is an undisputed position that the payment for technical services, which....
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....ty as held by the AO. Since the nature of services rendered by the assessee is similar to the nature of services rendered by WNS UK and even the provisions of the relevant articles of treaties are similar, we are of the view that the issue involved in the case of WNS India as well as all material facts relevant thereto are similar to that of the present case and the decision of the Tribunal rendered in that case has a direct application in the present case. 7. The learned DR has also made an attempt to support the case of the Revenue on this issue by relying on the provisions of section 9 and the amendment made therein by inserting Explanation with retrospective effect. He has also cited certain judicial pronouncements which are in relation to the provisions of section 9. It is, however, observed that the issue in the present case has been decided by the learned CIT(Appeals) with reference to the relevant provisions of DTAA and as already discussed by us, similar issue has already been decided by the Tribunal in the case of WSN India in favour of the assessee with reference to the relevant provisions of the DTAA. As rightly submitted by the learned counsel for the assessee, the ....
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....ng telecom service providers like MCI WorldCom. The services were availed separately for transfer within India by another net service providers based in India and transfer outside India through telecom service providers based outside India through telecom customer based service which was like hotline between WNS India and its customers. The customer based circuits were divided into two portions, India portion and international portion. At the end of India portion, the transmission of data was taken over by telecom service providers based outside India and then transferred to customers located outside India. MCI WorldCom and other international telecom operators, whose services were availed for transmission of data, raised invoices on the assessee on a monthly basis based on bandwidth used outside India. Since these expenses were incurred by the assessee on behalf of WNS India, the cost in respect of such international connectivity was reimbursed by WNS India to the assessee. It was contended that the payments made by WNS India to the assessee on this account thus was for arranging/facilitating communication link and the same not being for the use of any intellectual property or any....
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....nication link and is not for the use of any intellectual property or any information. Therefore in my considered view the payment cannot be treated as Royalty under Article 12(3)(a) of the Treaty. Further such providers do not impart any information concerning industrial, commercial or scientific experience to WNS India. The facts of the present case are similar to the ruling of the Authority of Advance Ruling in the case of Dell International Services (2008 TIOL 08) (10 DRT 249), Indian Space Research Organization (supra) and the decision of the Bangalore Tribunal in the case of Wipro Ltd. (80 TTJ 91)(Bang.). The observation of the AO that the facts in the case of the Appellant and that in the judgment of Wipro are distinguishable is not correct. Further, the case laws relied by the AO are in context of deduction under Section 80 / 80MM / Section 35B of the Act and not relevant to the facts of the case of the Appellant and distinguishable. Therefore, I am of the considered view that the said payments for international lease line connectivity charges do not qualify as Royalty under Article 12 of the India USA DTAA and hence it is not subject to tax in India. Accordingly this ground....
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....eals) holding that reimbursement of lease line charges received by the assessee from WNS India was not chargeable to tax in India. Ground No. 4 of the Revenue's appeal is accordingly dismissed. 13. As regards ground No.5, it is observed that the issue involved therein relating to charging of interest u/s 234B and 234C is squarely covered in favour of the assessee by the decision of Hon'ble Bombay High Court in the case of DIT (International Taxation) v. NGC Network Asia LLC [2009] 313 ITR 187 wherein it was held that when tax is deductible at source from the entire income received by the non-resident assessee, there is no liability to pay advance tax and there is no question of charging interest u/s 234B and 234C. Respectfully following the said decision of Hon'ble jurisdictional High Court, we uphold the impugned order of the learned CIT(Appeals) deleting the interest charged by the Assessing Officer u/s 234B and 234C and dismiss ground No. 5 of the Revenue's appeal. 14. Now we shall take up the appeal of the assessee being ITA No. 2070/Mum/2009. In ground No. 1 of this appeal, the assessee has challenged the action of the learned CIT(Appeals) in upholding the decision of th....
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....n decided by the Tribunal in paragraph No. 22 of its order dated 25th Nov., 2011 (supra) which reads as under : "We have heard the arguments of both the sides on this issue and also perused the relevant material on record. The learned counsel for the assessee has submitted that the amount in question was received by the assessee on account of reimbursement of expenses actually incurred by it on behalf of WNS India and this position was not disputed by the Assessing Officer. He contended that the learned CIT(Appeals), however, disputed the same by observing that the exact nature of expenses and services was not ascertainable in the absence of relevant details filed by the assessee. However, as rightly pointed out by the learned DR from the relevant portion of the assessment order, submission made by the assessee during the course of assessment proceedings was merely discussed by the AO in his order without giving any specific finding on the exact nature of expenses and the services for which the amount in question was claimed to be received by the assessee as reimbursement. In our opinion, it is necessary to ascertain the exact nature of expenses incurred by the assessee and serv....
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.... under the various contracts entered into between the assessee and various other European companies; (iv) The contract has been entered outside India and hence the capital asset (outsourcing contract) is transferred outside India; (v) The consideration for the sale of the outsourcing contract to WNS India was Rs. 14,05,77,522 (GPB 17,50,000), which is received by the assessee outside India; and (vi) Since the capital asset is situated outside India, the income cannot be deemed to accrue or arise in India as per the provisions of Section 9 read with section 45 of the Income Tax Act." 19. The above submissions made by the assessee were not found acceptable by the Assessing Officer. According to him, the outsourcing contracts resulted generation of revenue for the business and the amount received on transfer of such revenue generating asset, therefore, was taxable as business income. He held that since the assessee had a service PE in India, the probability of amount in question received by the assessee being attributable to the said PE could not be ruled out. He, therefore, treated 10% of the said receipt as business income of the assessee attributable to the ....
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....rvice PE is upheld. Appellant's appeal on this ground is dismissed." 22. The learned counsel for the assessee submitted that the basis given by the Assessing Officer for making the impugned addition itself was totally unfounded. He contended that the amount in question was received by the assessee for assignment of contracts outside India and the same, therefore, did not constitute income accrued or arisen in India so as to bring the same to tax in India. He contended that the said amount also did not constitute business income of the assessee and the same in any case could not be said to be income attributable to the service PE of the assessee in India by any stretch of imagination. 23. The learned DR, on the other hand, took us through the copy of a service agreement entered into between the assessee and WNS India placed at page No. 12 to 22 of the paper book and submitted that the recitals given in the said agreement as well as the clauses of the said agreement clearly show involvement of service PE of the assessee-company in India. She submitted that going by the nature of amount paid by WNS India to the assessee for assignment of the contract was essentially business rec....