TaxTMI 
TaxTMI 
2022 (5) TMI 1274
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....eof as under :- AY 2010-11 Sr. No. Name of the Party and Country of Residence Amount (in Rs.) 1. Invox consulting (Malavika)- Australia 19,67,584 2. Foresight group - USA 7,18,683 3. Anup S Kumar - USA 5,33,507 4. Axway- Singapore 16,03,281 5. Susanne Zuelli- Switzerland 94,645 6. Markus Spillman- Switzerland. 6,73,252 7. Susanna Harkonen- Switzerland 8,30,609 Total 64,21,561 AY 2011-12 Sr. No. Name of the Party and Country of Residence Amount (in Rs.) 1. Abroms & May- USA 26,04,904 2. Invox consulting (Malavika)- Australia 44,99,594 3. Susanne Zuelli- Switzerland 1,66,457 4. Balbir Singh - France/Switzerland 25,55,536 Total 96,26,493 AY 2012-13 Sr. No. Name of the Party and Country of Residence Amount (in Rs.) 1. Abroms & May - USA 43,45,017 2. Invox consulting (Malavika)- Australia 48,27,260 3. BNP Paribas 57,404 Total 87,04,190 2.2 The Ld. AO sought explanation from the assessee. Vide letter dated 22.08.2012 the assessee explained the nature of services rendered by his non-resident Global Business Affiliates ("GBAs")/ Business Development Associates ("BDAs") which in short consisted of : (i) p....
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....or any kind of assistance required or sought by the global clients in respect of services rendered by the assessee; not to act on behalf of or accept any assignments from competitors of the assessee clearly proved that the GBAs provided consultancy services covered under section 9(1)(vii) of the Act and the assesses should have deducted tax at source from such payments. Regarding the assessee's contention of non-fulfilment of the condition of "make available" in Article 13 of the DTAAs with USA in his case, the AO observed that the assessee is deriving an enduring benefit in the shape of clients which would continue to be associated with it once they have been introduced by the consultants. He concluded that the assessee was liable to deduct tax on payments made for consultancy services provided by the various GBAs to the assessee. Accordingly, he raised demand of Rs. 9,54,288/-; Rs. 12,98,731/- and Rs. 10,87,180/- for the assessment years 2010-11, 2011-12 and 2012-13 respectively in his order dated 01.10.2013 under section 201 and 201(1A) of the Act. 3. The assessee filed appeals before the Ld. CIT(A) on identical grounds challenging the finding of the Ld. AO that the payments ma....
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....certain examples have been provided to illustrate "Included Services". Example 7 reads as follows:- "Facts: The Indian vegetable oil manufacturing firm has mastered the science of producing cholesterol-free oil and wishes to market the product worldwide. It hires an American marketing consulting firm to do a computer simulation of the world market for such oil and to advise it on marketing strategies. Are the fees paid to the U.S. company for included services? Analysis: The fees would not be for included services. The American company is providing a consultancy service which involves the use of substantial technical skill and expertise. It is not, however, making available to the Indian company any technical experience, knowledge or skill, etc., nor is it transferring a technical plan or design. What is transferred, to the Indian company through the service contract is commercial information. The fact that, technical skills were required by the performer of the service in order to perform the commercial information service does not make the service a technical service within the meaning of paragraph 4(b). " The facts of the appellant are similar. Whereas, it is clear in ....
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....for the. Avoidance of double taxation between the state in which that 'other person, is resident and the contracting state in which the income arises, or otherwise, to benefits with respect to that item of income which are equivalent to, or more favourable than, those available under this agreement to a resident of a contracting state; and the main purpose of such structuring is obtaining benefits under this agreement. In respect of Article 10 (Dividends), 11 (Interest) and 12 (Royalties and fees for technical services), if under any convention, agreement or protocol between India and a third state which is a member of the OECD signed after the signature of this Amending Protocol, India limits its taxation at source on dividends, interest, royalties or fees for technical services to a rate lower than the rate provided for in this agreement, on the said items of income, the same rate as provided for in that convention, agreement or protocol on the said items of income shall also apply between both contracting states under this agreement as from the date on which such convention, agreement or protocol enters into force. If after the date of signature this Amending Protocol, I....
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....e payments made to GBAs/ BDAs in USA and UK holding it to be FTS but falling under exception clause of 'make available' under the respective DTAAs and hence not taxable, the grievance of the assessee before us is that these payments are not at all in the nature of FTS but business profits of the payees which is not taxable in India pursuant to Article 7 'Business Profit' of the respective DTAAs. The assessee has filed detailed written submissions in support of his contention. According to the assessee these payments comprised of commission paid to the business promotion agents located outside India. With a view to expand the scope of its current activities to the overseas markets, showcasing and presenting its profile and locating and identifying further business relating to export of IT enabled services in the field of pharmacovigilance, the assessee engaged services of agents located in USA, UK, Singapore and Switzerland. The agents appointed to propagate sale (of services) and to promote the business of the assessee were designated as GBAs/ (BDAs). The GBAs/ BDAs were entitled to receive a fixed minimum remuneration and in addition thereto percentage of the new contracts got awa....
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....f work will be: a) To explore potential for business primarily in the US, but also globally if required. b) To appoint any sub-affiliates or agents located anywhere in world for facilitating and promoting business. c) To showcase the First Party as an established CRO in India and to present its business abilities and background, solely with a view to obtaining business from clients. d) To locate, and communicate with, potential clients and, if necessary, to make presentations before them after gaining approval and concurrence from the First Party in this regard. e) To act as a conduit between global clients and the First Party with a view to ensuring a smooth flow of information between both the parties in respect of work assigned and executed. f) To represent the First Party in regard to any support or any kind of assistance required or sought by the global clients in respect of services rendered by the First Party, if required. 5. That the Second Party shall act as a communicating link between the First Party and its clients, and ensure timely communication and dissemination of information to/between both sides. 6. That the Second Party shall act diligently on beh....
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....ed to strictly function as per business model, and instructions given by the assessee from time to time. GBAs/ BDAs are entitled to receive a minimum stipulated sum as remuneration for services rendered and also additional percentage as further add on in event of any contract getting materialised. 9. The Ld. AO and the Ld. CIT(A) have referred to the word "consultant" used in the MSA to arrive at the conclusion that the payments made to the GBAs are in the nature of FTS. It is not denied that the payees are referred to as consultant in the MSA, but the issue that needs to be considered is what is the exact nature of services rendered by these GBAs/ BDAs which led the Revenue to conclude that payments for services rendered by the payees fell within the scope of FTS. 10. In our considered view, examination of the MSA in its entirety reveals that the services rendered by the GBAs/ BDAs are solely for business promotion for which they are compensated by payment of commission on the basis of business solicited for new clients introduced by them and also fixed payment on monthly basis as retainer fee so that they continue to remain connected with the assessee. Further, the nature of pa....
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....business income of the payees which squarely falls within the scope of the Article 7 of the respective DTAAs relating to 'business profits'. It is an undisputed fact that the GBAs/ BDAs located overseas are non-residents and do not have PE in India. Hence, the payments to GBAs/ BDAs being the business profit of the GBAs/ BDAs are not taxable in India in the absence of PE. The assessee is therefore not liable to withhold any tax on such payments. There is plethora of judicial precedents wherein it has been held that commission payments to non-resident agents/ service providers for services like sales promotion, marketing, publicity, procuring sales order etc. are not FTS but business profit in the hands of the service provider to which Article 7 of the DTAA is applicable. The following decisions may be referred to in support thereof :- (i) ACIT vs. Kapoor Industries [2019 (5) TMI 1602-ITAT Delhi] (ii) Le Passage to India Tours & Travels (P) Ltd. vs. DCIT [2015 (2) TMI 983-ITAT Delhi] (iii) DCIT vs. Angelique International Ltd. [2012 (12) TMI 838-ITAT Delhi] (iv) CIT vs. M/s. Grupism P. Ltd. [2015 (6) TMI 10-Delhi High Court] (v) DIT vs. Panalfa Autoelektrik Ltd. [2014 (9) ....