TaxTMI 
TaxTMI 
2023 (9) TMI 685
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.... business of manufacturing and selling of tyres and its related products. It also renders various management services, Information Technology (IT) Support Services and technical services to Michelin group entities. In the year under consideration, the assessee rendered IT support services, management services, engineering services, training services and supplied raw materials and equipment to its group entity in India, i.e., Michelin India Pvt. Ltd. ('MIPL'), formerly known as Michelin India Tamil Nadu Tyres Pvt. Ltd. 4. Insofar as receipts from rendition of business support services, the assessee claimed that, though, they are qualified as FTS under Article 13(4) of India - France DTAA, however, in terms with paragraph 7 of Protocol to India - France DTAA, the assessee is eligible to claim Most Favoured Nation ('MFN') status and more restricted meaning and scope of FTS as per Article 12(4) of India - Portugal tax treaty would be applicable. Hence, the receipts are not taxable in India. The Assessing Officer, however, was not convinced with the submission of the assessee. Firstly, he rejected assessee's claim of benefit under MFN clause in terms of paragraph 7 of Protocol to Ind....
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....oyalty are under a single contract or a set of related contract or whether the person performing the service and the person receiving the royalty is the same person or are different persons. Thereafter, analyzing the nature of services rendered by the assessee, learned first appellate authority finally concluded that the receipts are in the nature of FTS in terms of Article 12(4)(a) of India - Portugal DTAA. 6. Before us, Sh. Rajan Vohra, learned Counsel, appearing for the assessee, first and foremost, brought our attention to the nature of business support services rendered by the assessee to MIPL to substantiate that these services are neither ancillary to any royalty payment nor making available technical know-how. He submitted that no royalty is received by the assessee and also no agreement is entered into by the assessee for receipt of royalty. Further, he submitted that royalty agreement entered into by Indian group entity with other group entities of Michelin has no relation/linkage with the business support services taken by MIPL from other group entities (including MFPM, based out of France). 7. Further, he submitted, the amount received by the assessee is on accoun....
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....ia (India Branch Officer) Vs. DCIT [2021] 133 taxmann.com 286 (Mumbai - Trib.) viii. SCA Hygiene Products AB (Essity Hygiene And Health AB) Vs. DCIT [2021] (Mumbai - ITAT) ix. Inter Continental Hotels Group (Asia Pacific) Pte Ltd. [2023] 148 taxmann.com 27 9. Without prejudice, learned Counsel submitted, while disposing of the appeal, the first appellate authority has not considered the submissions of the assessee and without providing any opportunity to the assessee to explain the applicability or otherwise of Article 12(4)(a) of India - Portugal tax treaty, has passed the order. Thus, he submitted, the order passed is against the principles of natural justice. 10. Proceeding further, he submitted that not only the receipts would not fall under article 12(4)(a) of India - Portugal DTAA, but it will also not fall within the ambit of Article 12(4)(b) of India - Portugal DTAA, as, the make available condition is not satisfied. He submitted, the services rendered by the assessee has not made available any technical knowledge, know-how, skill, experience etc. to the Indian entity so as to enable it to apply the technology contained therein independently in futur....
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....ges various suppliers locally for organizing such events and various expenses are incurred, including rent of circuit, car hire charges and driver professional fees, branding material, staff, goodies, bibendum costume, photographer, central support expenses for preparation of the events. He submitted, these costs were recovered from Indian entity on cost to cost basis without any markup. To substantiate its claim, learned Senior Counsel drew our attention to additional evidences furnished separately through application dated 28th February, 2023 and 23rd February, 2023. He submitted, the additional evidences clearly establish that the amount in dispute is nothing but reimbursement of expenses on cost to cost basis. He submitted, the issue can be restored back to the Assessing Officer for fresh adjudication after verifying the additional evidences. 12. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned first appellate authority. He submitted, though, royalty and service charges were paid to different entities, but both are related parties and group entities. He submitted, the services provided by the assessee are linked t....
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....sing Officer has rejected assessee's claim of MFN status and benefit under Article 12(4) of India - Portugal DTAA, however, learned first appellate authority after taking note of paragraph 7 of Protocol to India - France DTAA, has accepted assessee's claim and held that the nature and character of receipts would be governed by Article 12(4) of India - Portugal DTAA. However, while doing so, he has concluded that the receipts towards business support services, being ancillary and incidental to the royalty paid by the Indian entity towards use of trademark and technology will qualify as FTS under Article 12(4)(a) of India - Portugal DTAA. In this context, learned Commissioner (Appeals) has observed that there is combined agreement wherein payment of royalty and payment towards service have both been quantified. 18. Keeping in perspective the aforesaid observations of learned first appellate authority, let us examine the facts on record. It is observed, assessee has entered into an management service agreement with Indian affiliate, where under, following services are rendered by the assessee: o Purchase (DGA): Functions include defining the terms and conditions of purchas....
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....f the management service agreement makes it clear that the concerned agreement is different from the trademark and technology licence agreement entered by the assessee with another group entity, i.e., Compagnie Generale Des Etablissements Michelin. It further clarifies that the services covered under the management service agreement are rendered in a field different from that covered by the trademark and technology licence agreement. Further, Article 2 of the management service agreement provides that the fee for services rendered shall be determined based on cost incurred by the assessee, as appearing in its books with a markup of 4%. Whereas, the trademark and technology licence agreement between the Indian entity and another overseas affiliate is for licence to acquire the right to use the intellectual property in order to manufacture Radial Tyres suitable for road conditions in India and other countries. It further clarifies that the licence granted is subject to limitations and restrictions under the agreement and it provides non-exclusive right to use trademarks, copyrights, and patents within the territory to exploit the products, as defined in the agreement. It further gran....
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....he test of make available condition under Article 12(4)(b) of India - Portugal treaty has not been satisfied. In fact, no material has been brought on record by the Revenue to establish that while rendering management services, the assessee has made available technical knowledge, know-how, skill etc. to the service recipient, which has enabled the service recipient to acquire the technical knowledge, know-how, skill etc. so as to enable it to apply them independently in future without requiring the aid and assistance of the assessee. 23. On the contrary, on analyzing the nature of services provided by the assessee under the agreement, it is very much clear that the services are provided on regular day-to-day basis for utilizing in various business operations of the assessee. It is further evident, the assessee has been rendering such services on regular basis and these are not one time services, which once availed, are to be used by the service recipient for their future purpose. Since, the Revenue has failed to demonstrate before us that in course of rendition of services, the assessee has made available technical knowledge, knowhow, skill etc. to the recipient of service, we a....