TaxTMI 
TaxTMI 
2021 (10) TMI 443
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.... Technical Services ('FTS') under Article 12 of India- Singapore Double Taxation Avoidance Agreement ('DTAA/Treaty). 1.3 That on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that merely because the services are managerial, technical and consultancy in nature, the same will not ipso-facto result into FTS under Article 12 of India-Singapore DTAA, unless the services results into making available technical knowledge, experience, skill, know-how or processes, which enables the service recipient to apply the technology contained therein. 1.4 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in concluding that the Management Support Services 'make available' technology, knowledge, skill, experience to the recipient ignoring the explicit language of Article 12(4)(b) of the DTAA which provides that the recipient should be in a position to apply the technology contained in the services. 1.5 That on the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that the support services provided by the Appellant are required by IHG....
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....he Assessee is providing services in the nature of operational support, accounting and legal support information technology related services etc. During the year, the Assessee, was also in receipt of Rs. 75,53,276/- from various Indian hotels on account of Travel Agent Commission (TACP), not taxable in the hands of the Assessee being in the nature of reimbursement of expenses. 6. The assessment was completed under section 144C(3) r.w.s 143(3) of the Act vide AO's order dated 20th May 2015, assessing the income of the Assessee under the normal provisions of the Act at Rs. 13,57,25,228/- after making the following additions on account of TACP and management support charges. 7. Before the ld. CIT(A), the assessee has challenged the treatment of Management support services charge of Rs. 5,43,76,923/- from Inter Continental Hotels Group (India) Private Limited ('IHG India') on account of support services provided by the Assessee as Fee for Technical Services (FTS) under the India- Singapore Double Taxation Avoidance Agreement('DTAA'). 8. The assessee, being the regional headquarters, has centralized departments which provide services in the nature of operati....
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.... Provide ad-hoc IT support as necessary. Personnel Responsibility for employee recruitment, training, managing the employer brand, as well as resourcing and talent. Laying broad guidelines for initiation and implementation of recognition programs; * Assist in recruitment, selection and development of workforce; and * Co-ordinate international manpower planning and manage secondment opportunities. 11. The Assessee submitted Tax Residency Certificate of Singapore. Therefore, by virtue of provisions of section 90(2) of the Act, IHG AP claimed the shelter of the provisions of the India- Singapore DTAA to the extent these are more beneficial vis-à-vis the Act. 12. As per Article 12(4) of the tax treaty between India and Singapore, the term 'fees for technical services' means payments of any kind received as a consideration for services of a managerial, technical or consultancy nature if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or process....
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....regard are as under: * Make available is not defined in the India Singapore DTAA, and the Appellant cannot take benefit of India-USA DTAA where the term "Fee for including services" has been defined in the Act. * The Appellant is taking benefit of India-USA DTAA to import the meaning of Make Available, as the same is not defined under India- Singapore DTAA. However, the same is not permitted in light of following judgement:-ONGC vs. ACIT, Dehradun [2006] 9 SOT 8 (Delhi) (SMC) * From the observation of the services being provided, it is clear that the assessee is providing organizational change management assistance, development of coaching skills, or operational improvement services. It is bringing its own, proprietary methodologies or frameworks to guide the identification of problems and to serve as the basis for recommendations for more effective or efficient ways of performing work tasks. Thus the services of the assessee are not merely support services but Managerial Consultancy Services which fall in purview of Consultancy Services. * Any managerial, technical, consultancy service can be provided only when the provider possesses the experti....
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.... 19. Before us, during the hearing, the ld. AR reaffirmed the submissions taken up before the authorities below. The same have been perused. The same are reproduced from the order of the Ld. CIT(A). 20. The assessee submitted that on receipt of such services, IHG India is not getting equipped to render these services without recourse to the Assessee. The assessee stressed on the fact that the services are required by IHG India from the Assessee on an ongoing basis, year after year and argued that in case services conferred any technology, skill set, knowledge etc., by the Assessee to IHG India, there was no need of availing such services by IHG India on an ongoing basis. 21. The Assessee relied upon the following judicial precedents to support its contention that technology, skill and technical know-how etc. cannot be held to be made available to service recipient where similar services are required by it on an ongoing basis, year after year. * R.R. Donnelley India Outsource Private Ltd. ( 241 CTR 305) * Pan AmSat International Systems Inc. (9 SOT 100) 22. The Assessee also relied on following case laws wherein it is held that the similar services as pro....
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....ervices rendered by the assessee to M/s. IHG India, as per schedule 1 of the service agreement between IHG (Asia Pacific) i.e. the assessee company and IHG India, are as under: 1. Operational support * Provide advice to and assist local general CMH. Hotel management in the production of data in line with the AA Region strategic plan and co-ordinate the implementation of such plan; * Provide advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards. * Maintain the highest qualification available with regard to the international hotel business and its management techniques. * Co-ordinate the managerial plan and actions within the AA Region; * Advise local general CMH Hotel management on trends and changes in the hotel business in general. * Provide advice on the production of operating and capital budgets at the level of the CMH Hotels, which are consistent with the strategic plan; * Provide to local general CMH Hotel management on a periodic basis regional financial reports and statements for operating performance comparisons....
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....e and software systems as well as local area networks in the CMH Hotel (s); * Provide IT support, as necessary, to CMH Hotels. 5. Purchasing * Co-ordinate international purchasing of furniture, equipment and supplies; * Negotiate, execute and implement service agreements and agreed pricing structures with third party suppliers of goods and services. * Perform price and quality comparisons and negotiate with suppliers on volume purchase; 6. Personnel and Training * Provide advice on and co-ordinate the career planning of all management employees and CMH Hotels; * Provide advice on and co-ordinate compensation and benefit plans including pensions plans for CMH Hotel employees in the AA region; * Provide employees of the Regional Pooling Company or its Affiliates, to participant from time to time on secondment; * Assist and advise on the development of an individual manpower specification and its application to managerial selection; * Assist in recruitment, selection and provision for senior personnel for CMH Hotels; * Provide support as necessary from the Global Human Resources....
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....f South West Asia ("SWA"). It is also to be remembered that the assessee company is. giving services in respect of Personnel & Training to the IHG India employees in making use of the inputs, experience, experimentation, assistance and advice rendered by them for taking a better and possible decision in order to achieve the desired objectives/goal. Therefore, in the context of professional management and decision making process, the advice and service rendered by the assessee company which was made use by IHG India in managerial decision making process is in the nature of technical services which facilitate IHG India to take correct and suitable decision towards achievement of the desired objects and business goal. Para 8.1(a) of the management agreement between Today Hotels Pvt. Ltd. (Hotel Crowne Plaza Gurgaon) and SC Hotels & Resorts (India) Pte. Ltd. (IHG India) (submitted vide letter dated 28.02.2017) states that the Manager (IHG India) shall second the General manager to owner (the Crowne Plaza hotel) who shall employee that person directly throughout the period of secondment. The process of engagement of seconded employees from the IHG India to third party owned hotels clear....
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....z. architects, interior designers, engineers etc.). The team may also provide recommendation to the hotel owner on which external consultants may be hired for the project. The guidance provided by the team relate to aspects such as brand standard, engineering, fire safety etc. Some of the key objectives for the design and engineering team are to ensure that the constructed hotel meets the brand standards and the same adheres to the relevant safety norms and local regulations so as to bring out the brand proposition which the owner wishes to operate the hotel as. For the hotel management services, IHG India is responsible for managing the hotels on behalf of third party owners. The services typically comprise of support in the areas related to hotel operations, commercial support (sales and marketing), and other business support functions (finance, human resources, IT etc.). IHG India works closely with hotel owners to develop and monitor business plans, capital expenditure budgets, operational strategies, communicating and providing guidance to the hotels in rolling out various initiatives, conduct annual review and operational audits of the hotels etc. Guidance are provid....