TaxTMI 
TaxTMI 
2023 (5) TMI 1221
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.... India in the nature of fees for technical services as per the provisions of Article 13(4)(c) of India-UK DTAA. 3. Ground No. 3 The Ld. AO on the facts and in the circumstance of the case has failed to appreciate that the services rendered by the appellant are pre-dominantly 'managerial' in nature and that the term 'managerial' has specifically been excluded from the purview of the definition of FTS under Article 13 of the India-UK DTAA. 4. Ground No. 4 The Ld. AO on the facts and in the circumstances of the case has erred in law and facts in holding that the payments received by the Appellant from AE are taxable as fees for technical services, without considering the fact that the services do not make available technical knowledge, experience, skill, etc. 5. Ground No. 5 The Ld. AO on the facts and in the circumstances of the case has failed to appreciate that the services rendered by the appellant do not "make available" any technical knowledge, experience, skill, know-how or processes, based on the incorrect understanding of the nature of the services provided by the appellant. 6. Ground No. 6 The Ld. AO on the facts and in the circumstances o....
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....sed as to why the total consideration received by it for management support services amounting to Rs. 83,04,370/- during the relevant AY should not be held as fees for technical services (FTS) under section 9(i)(vii) of the Act and Article 13 of the India-UK DTAA and added to its income. The reply filed by the assessee was considered by the Ld. AO but not found tenable. He proposed an addition of Rs. 83,04,370/- to the total income of the assessee on account of FTS for the reason that the services provided by the assessee make available technical knowledge, skill, experience, know-how, etc. and will fall within the purview of FTS under Article 13(4)(c) of the India-UK DTAA. 4. The assessee challenged the draft assessment order before the Ld. Dispute Resolution Penal ("DRP") who vide its order dated 09.02.2022 confirmed the addition of Rs. 83,04,370/- rejecting the objections raised by the assessee. The Ld. AO thereafter passed the final assessment order dated 28.02.2022 under section 143(3) r.w.s 144C(13) of the Act pursuant to the directions of the Ld. DRP by recording the following observations and findings:- "6. With regard to the above services there is no doubt tha....
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....ing General BSS, foreign company works closely with the employees of the assessee and supports/advises them. Thus, General BSS were made available to the assessee. It was held that the services were clearly made available to the assessee. • In the case of Areva T&D Ltd (order dated 7.2.2012 in AAR No 876 of 2010), the AAR has held that the IT sharing services 'made available" technical knowledge, expertise to the assessee, resulting in such services being characterized as FTS and therefore, subject to Indian withholding tax. • In the case of Mersen India Pvt. Ltd. [2012] 20 taxmann.com 475 (AAR - New Delhi), the facts of the case were that the Assessee, an Indian Company, entered into a service agreement with a French Company. In terms of service agreement, French Company has undertaken to provide assessee with services in nature of assistance, professional and administrative consultation and training. Various clauses of service agreement contain provisions for services which relate to overall management and direction, marketing and managing accounts and financial operations of assessee. It is also apparent that advice and assistance provided by French Com....
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....vii) of the IT Act, 1961. 10. In view of the above, addition of Rs 83,04,370/- is proposed to be made to the total income of the assessee for the subject year on account of Fee for Technical Service. As the assessee has under reported and misreported income by not offering the receipts as FTS while filing the return of income, therefore, I propose to consider it a fit case for initiation of penalty proceedings u/s 270A of the Act." 5. Aggrieved, the assessee is before the Tribunal challenging the addition of Rs. 83,04,370/- made by the Ld. AO and all the grounds of appeal relate thereto. 6. Ground No. 1 is general in nature. Ground No. 2 relates to addition of Rs. 83,04,370/- to the income of the assessee on account of services rendered by the assessee to its AE in India i.e. BTPL held to be FTS under the provisions of Article 13(4)(c) of the India-UK DTAA. Ground No. 3 to 7 are arguments in support of ground No. 2. Ground No. 8 relates to initiation of penalty proceedings under section 270A of the Act which is premature and do not require adjudication at this stage. 7. The Ld. AR submitted that the services rendered by the assessee are managerial in nature and to....
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.... 118 of the Paper Book he submitted that the client of BTPL is actively involved and therefore it leads to make available clause being satisfied. 9. We have heard the Ld. Representative of the parties and perused the material on record. It is an undisputed fact that the assessee is a tax resident of UK and therefore has opted to be governed by the provisions of India-UK DTAA being more beneficial to it under the provisions of section 90 of the Act. 9.1 Article 13(4) of the India-UK DTAA defines the term "Fees for Technical Services" to mean- "payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which: (a).... (b)..... (c) make available technical knowledge, experience, skill, know-how or processes, or consists of the development and transfer of a technical plan or technical design." 9.2 Clause 3.1 of the Agreement (copy at pages 87-91 of the Paper Book) states that:- "Service provider (Infobip) shall perform the Services including but not limited to the: a) Finance support services; b....
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....reement from BTPL and executes/delivers the resolution on an e-mail to BTPL. The assessee has produced sample copies of e-mail correspondence between the assessee and BTPL for the provision of services which are placed at pages 114-134 of the Paper Book. Perusal of the same reveals that services offered by the assessee involve review of legal contracts/agreements for BTPL to be entered with its clients. These services are provided by the assessee year after year on continuous basis which shows that the assessee cannot perform these services on its own without recourse to the assessee. 9.5 It is amply clear from the above facts that the services provided by the assessee includes administrative services, accounting services, legal services and other support services that are ancillary to the functioning of corporate management function of BTPL. These services are thus essentially in the nature of managerial services which are in our considered view outside the scope of the meaning of FTS under Article 13(4) of the India-UK DTAA. As submitted by the Ld. AR to which we agree that even if the above services are considered to the FTS being technical, managerial and consultancy service....