TaxTMI 
TaxTMI 
2019 (7) TMI 1750
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.... Debenham Tie Leung Limited UK [(C&W) UK]. It is stated that it does not have any permanent establishment (PE) in India in terms of Double Taxation Avoidance Agreement (DTAA) between India and UK. 3. DTZ UK is a real estate advisory company providing advisory and consultancy services in the field of real estate in UK. Apart from this business, the applicant has also provided certain intra-group services to its group affiliates located in various countries. DTZ UK has entered into a service agreement with more than 40 DTZ Group companies for rendering the following services: (a) Company Secretarial and General Counsel (b) Group Finance (c) Global Procurement (d) Global Information System (e) Global Human Resources (f) Global Communication and Marketing (g) Global Risk and Compliance (h) Global Client (i) Consulting & Research (C&R) (j) Services of GCS 4. Accordingly, the Applicant has entered into a service agreement dated 17th February, 2011 with DTZ International Property Advisers Private Limited (DTZ India), [now known as Cushman & Wakefield Property Advisers Private Limited (C&W India....
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.... this agreement it was decided that the participants to this agreement will enter into service agreement so that they can participate in and benefit from the initiative and utilise the services and employees of DTZ UK to derive shared benefit through economic of scale and an equitable apportionment of costs and charges amongst the parties. Accordingly, a separate service agreement dated 17.02.2011 was made between DTZ UK and DTZ India, whereby DTZ India agreed to participate in and benefit from the initiatives and utilize of services and employees of DTZ UK. Such initiatives and services included business development, property investment and research, marketing and communications, technical support, sales and promotional, accounting (including treasury and tax), legal (including company secretarial), human resources, information services, procurement, risk and compliance and other professional services; the details of which were given in Appendix-A to this agreement. DTZ India also participated in Consulting and Research ("C&R"") and Global Corporate Services ("GCS") as provided by the Applicant. The fees payable for these services was as per Appendix -B to the agreement. 8. The....
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.... technical services" (FTS) to mean payment of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which make available technical knowledge, experience, skill, knowhow or process or consist of development and transfer of a technical plan or technical design. It was contended that FTS arising to a resident of UK can only be taxed in India where technical knowledge, experience, skill etc. are made available to the recipient of the said service. It was further submitted that from the nature of services rendered by DTZ UK it was evident that the services were rendered using the technical skills and expertise of its employees who have the relevant skill, know-how and expertise in their respective field. The services were being rendered by DTZ UK to the group entities (including DTZ India) who availed of the services in carrying out their business in an efficient and effective manner. DTZ UK at no point of time transferred any technology in respect of the knowledge and skills which was employed to render these services. It was emphasized that DTZ India would not be able to....
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....13-14 and not for the other years. On merits, the revenue submitted that the services rendered by the applicant, on the basis of the description and factual position out of the evidences furnished, were in the nature of fees for technical services. As regarding the test of "make available", the following submission was made: The description of above services clearly brings out that the applicant is helping, guiding, and assisting C&W India in various decisions making relating to its business. The assistance and guidance is provided using skill, expertise and experience of the applicant gained over a period of time. Thus, the applicant is making available his technical expertise in the area to C&W India enabling it to take better decisions and perform its functions in more effective manner. The activities are completely different from activities where final solution is provided. Once these advices are given, the final task is performed by C&W India. C&W India becomes wiser with each advice so that on that issue he can perform the task independently in future. Hence, the test of "make available" is satisfied. 14. It was further submitted that the applicant had relied on t....
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....ional email communications clearly substantiate that services were actually rendered by the applicant and were in line with the description as mentioned in the service agreement. It was further submitted that the applicant rendered services from outside India and the employees of the applicant did not undertake any travel to India except in the Assessment Year 2014-15 when only one employee of the applicant travelled to India for a span of five days in connection with shifting of server in Mumbai office. 16. We have carefully considered the facts of the case, the submissions of the applicant, the objections raised by the Revenue, as well as the details and agreements submitted with the application. DTZ UK is providing various services to DTZ India in terms of the services agreement dated 17th February 2011 and the precise question to be decided is whether the services charges received by the applicant are chargeable to tax under the Act read with India-UK DTAA. The services being provided as per agreement are not in respect of the core business activities of the applicant rather they are subsidiary in nature. The applicant has submitted that it has no permanent establishment (PE....
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....s rendered for which royalty is being paid; or, (ii) they make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. As there was no royalty agreement and no royalty was being paid in this case the first condition is not applicable. On an analysis of Article 13.4 read with clause (c) it follows that FTS is consideration paid for the rendering of technical or consultancy services, provided that those services make available to the other party, the technical knowledge, experience, know-how, etc. As per the service agreement there is no development and transfer of any technical plan or technical design. Therefore, the moot issue to be considered is whether the services as rendered in this case 'make available' technical knowledge, experience, skill know-how or processes. 19. From a look at the list of services enumerated in Appendix-A of the Agreement, it appears to us that the criterion laid down in para 4(c) of Article 13 (of UK Treaty) is not satisfied in this case. The Agreement explains the underlying objective of the Agreement to share the expertise of the a....
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....ted that C&W group entities provide general suggestions/advice to C&W India relating to IT issues, C&W India shares information relating to problems faced by it and the central IT team of C&W UK resolves the issues and communicates to C&W India through email correspondences, telephonic conversations. Sample evidences in relation to rendition of such services are attached at Annexures-2.1 and 2.2. (ii) Communication and marketing services: The development of a Global Communications Strategy seeks to promote DTZ and its business in those countries and markets where the firm chooses to operate, in particular through carrying out the following activities: * Providing internal support to enhance internal and external communications * Linking with media to ensure that the Group's message is accurately reported and to counter any inaccuracies, or damaging criticism, * Development and maintenance of global communications standards to ensure consistency in client facing reporting and presentations * Deployment and support in media training * Supports company spokespeople across the business to promote DTZ services * Supporting corp....
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.... consultancy for legal issues and providing company secretarial support, which includes the following: * Maintenance of relationships with corporate lawyers, this from a business perspective will substantially include the management of claims and disputes; * Assistance with negotiations on and subsequent management of Professional Indemnity Cover and on other insurance arrangements; * Support in setting client contractual arrangements * Setting-up and closure of legal entities; * Setting-up and closure of corporate bank accounts; * Maintenance of the share registers. (v) Finance services: The Group Finance function aims at ensuring efficient budgeting, forecasting, monitoring and reporting of the Group's financial performance and to provide support in connection with tax and treasury related matters. It includes the following: * Assistance on financial aspect (preparation of objectives, budget, business plans assistance in financial control and advice on corrective actions); * Assistance and advice in relation to cash management (fund-raising, monitoring of bank covenant, treasury management, etc.) ; ....
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....anagement and support Global business planning process. 20. The applicant has also provided copy of additional e-mails in respect of rendering of services vide their letter dated 11.06.2018 the details of which are as under: Nature of Services Reference Description Company Secretarial and General Counsel Annexure 1.1 Circulation of email containing FAQs and information regarding the insurance arrangements within the DTZ Group to various local DTZ entities. Annexure 1.2 Query raised by DTZ India regarding the scope of coverage of DTZ Group's Professional Indemnity policy and response to the same by DTZ Global. Annexure 1.3 and 1.4 Correspondences between DTZ India and the Applicant wherein the latter has clarified / provided answer to specific queries raised by the former regarding client specific insurance arrangements. Group Finance Annexure 2.1 Circulation of e-mail by the Applicant to various local DTZ entities containing year-end Financial Reporting instructions and an attachment informing the recipients about external audit approach, DTZ Group accounting policies, additional reporting forms, etc. Annexure 2.2 Email sent to DTZ In....
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..... 21. From the nature of services rendered as detailed above it is evident that the technical knowledge, experience, skill know-how or processes are not being made available to the recipient of the service. The applicant is utilizing its technical and consultancy expertise to render the service and providing solution to the recipient but the said technical and consultancy expertise is not passed on to the recipient. The revenue has contended that once these advices are given, the final task is performed by C&W India, who may become wiser with each advice. Even if it is so in some of the cases, C&W India can't perform the task independently in future as the necessary skill and expertise is not passed on. 22. The revenue has contended that the applicant did not give the complete documentary evidence i.e. e-mail correspondences for one month as directed by the Authority. On the other hand, the applicant has submitted that it has made available the complete evidences as available with him. What was required to be provided by the applicant was the copy of complete e-mails of a particular month pertaining to services rendered in that month. Obtaining the entire e-mail correspondenc....
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....quarterly and long term forecasting and budgeting to ensure group resource is focused to where it is required Availed B9 Monitoring, accounting and recharging of group central costs Availed B10 Treasury management Availed B11 Maintenance and Training for Cognos Maintenance services availed. However, no training services availed. B12 Development and monitoring of Financial Control Policy and Global Tax Policy Availed B13 Global Tax Support to ensure that corporate income tax is minimized globally, also assistance with local issues and ensuring that cross border transactions are undertaken at arm's length prices Availed C Global Procurement C1 Monitoring of global expenditure by head of expenditure to target costs saving opportunities Availed C2 Support participants to maximize savings opportunities Availed C3 Work with outside parties to reduce the burden of data collection Not Availed C4 Arrange and manage global service supply contracts Availed C5 Advising the participant of potential cost reduction opportunities Availed C6 Identifying global suppliers to reduce costs....
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....e delivered in accordance with reporting requirements Not Availed F4 Development and maintenance of global communications standards to ensure consistency in client facing reporting and presentations Availed F5 Development and support in media training Not Availed F6 Supports company spokespeople across the business to promote DTZ services Availed F7 Supporting brand development and ensureing consistent branding and communications globally Availed F8 Supporting corporate social responsibility Not Availed G Global Risk and Compliance G1 Develop global risk management processes and controls, ensuring that these are monitoring and adhered to Availed G2 Establish and monitor compliance with global code of ethics Availed G3 Develop global standards for skills, health, safety and business resilience Availed G4 Manage global internal audit programme Not Availed G5 Organise global governance for risk management activities Availed G6 Ensure the DTZ group is compliant with UK listing and FSA requirements Not Availed G7 In....
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....know-how or process. 24. In the case of De Beers India Minerals Pvt. Ltd. (supra), relied upon by the Applicant, the assesse was engaged in the business of prospecting and mining for diamonds and other minerals. For the purpose of carrying out geophysical survey, the assessees had entered into an agreement with M/s Fugro Elbocon B.V. Netherlands (Fugro) who performed air borne geophysical services, processed the data acquired during the survey and provided necessary reports. Thus the services provided were air borne survey for providing high quality, high resolution, geophysical data regarding diamond bearing mineral deposits. It had given data, photographs and maps to assessee but had not made available technical expertise, skill or knowledge in respect of collection or processing of data to the assesse. On the basis of these facts the Court held that the assessee could not independently apply the technical expertise, skill or knowledge and undertake such survey independently in future, excluding and without assistance of the Dutch company and, therefore, it did not satisfy requirements of technical services as contained in article 12 of Indo-Dutch DTAA. The Hon'ble Court consi....
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....that the payer of service could derive an enduring benefit and utilize the knowledge or know-how in future on his own without the aid of the service provider. By making available the technical skills or know-how, the recipient of the service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into the terminology "make available", the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and a lot of technical knowledge and experience of the service provider would have gone into it. But that is not enough to fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider. In fact the revenue has also relied upon this decision. While interpreting the term 'make available' the Authority had held t....
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....ted above have the flavour of management services. Services of managerial nature are not included within Article 13 unlike many other treaties. Only technical and consultancy services are included. Many of them do answer that description. However, the more important question is whether EMEIA, U.K. has made available to the applicant any technical knowledge, experience, skills or know-how by providing the 'support services' noted above. In our view, that question admits only of an answer in the negative. What all is provided by EMEIA is informations on various business and commercial matters, guidelines, templates, best practices and strategies that could be adopted in various spheres of their business which ultimately lead to protection of EY image and client relations. Dissemination of informations, furnishing guidelines and suggesting plans of action aimed at uniformity and seamless quality in business dealings of participating group entities do not per se amount to making available to them technical knowledge and experience possessed by EMEIA to a substantial extent. There is no transfer of technical know-how in that process nor can it be said that the recipient of these coordin....
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....s decision of the ITAT and held that the mere fact that the provision of a service may require technical input by the service provider does not per se mean that the technical knowledge, skills, etc. are made available to the person availing such services. 29. In the case of GVK Industries Ltd. v. ITO [2015] (54 taxmann.com 347/231 Taxman 18/371 ITR 453) (SC) the issue involved was whether the "success fee" paid to the non-resident Company on the finances being successfully obtained as per the advise of the non-resident Company was taxable in India. It was held by the AP High Court that the advice given to procure loan to strengthen finances was a technical or consultancy service, which was upheld by the Supreme Court. As this decision was based on a different specific issue and the clause of 'make available' was not involved therein, the ratio of this decision cannot be applied to the facts of the present case. Similarly, the facts in the case of Continental Construction Ltd. (195 ITR 81) (Supreme Court) relied upon by the revenue is also found to be totally different. The issue involved in this case was deduction u/s 80HHB and u/s 80O of the Act. The fact of the other decisions....