TaxTMI 
TaxTMI 
2024 (7) TMI 134
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....ing, both the Ld.AR & Ld.DR mentioned that appeals in all the years have same factual background and having common issue. All the appeals are filed by the Revenue and the Cross Objections are filed by the assessee. Therefore, all the appeals and the cross objections are taken together, heard together and are disposed of together. ITA No.1023/Mum/2024&CO 95/Mum/2024 are taken as the lead cases. ITA No.1023/Mum/2024 (Revenue's Appeal) 3.1 The following are the grounds taken by the revenue: "i. Whether on facts and in circumstances of the case and in the law, the Ld.CIT(A) was erred in not upholding addition of income made on account of the administrative support services rendered by the assessee company to its Indian entity M/s. Jefferries India Pvt Ltd ("JIPL") as 'fests for technical services/included services which is taxable in India under Article 12 of the double taxation avoidance agreement between India and United States of America (Treaty1) since, the assessee 'makes available' technical knowledge, experience, skill, know-how, or process to JIPL? ii. Whether on facts and in circumstances of the case and in the law, the Ld.CIT(A) was correct....
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....Pricing Agreement dated 8 August 2019 between the Central Board of Direct Taxes and JIPL as well. The learned CIT(A) erred in dismissing the fact that the assessment order under section 143(3) of the Act read with section 144C(3) of the Act dated 2 February 2017, and the reassessment order under section 143(3) read with section 147 read with section 144C(3) dated 10 February 2020, are without jurisdiction and bad in law as much as the same have been passed beyond the time limit prescribed in section 153 of the Act. The learned CIT(A) erred: a. in not appreciating the fact that the re-assessment order dated 10 February 2020 passed under section 143(3) read with section 147 and section 144C(3) of the Act is bad in law, void ab initio and liable to be set aside. b. in not appreciating the fact that the reassessment proceedings initiated under section 147/ 148 of the Act are inherently without jurisdiction and untenable in law as there was no tangible material available with the Learned AO to form reasons to believe that income of the Appellant has escaped assessment. c. in not appreciating the Respondent declared all particulars and details in the o....
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....unting to Rs. 72,80,069/- in the nature of "Fee for Technical Services" (in short FTS) and accordingly assessed income of the assessee amount of Rs. 72,80,069/- in the impugned assessment order. Further, the assessee company has provided "Administrative Support Service" to JIPL, as per the agreement entered into with JIPL. JIPL is registered with Securities and Exchange Board of India as a Category Merchant Banker and a stock Broker. The principal activities of JIPL are to provide merchant banking and investment advisory services to investors, corporate and stock broking services to domestic and foreign Institutional Investors. The "Research Management Support Services" are rendered towards compliance advice/support, general financial statement preparation, regulatory reporting. Information technology helpdesk support, internal audit of systems, etc. During the impugned assessment year the assessee company provided "Administrative Support Service" to JIPL and the Administrative support charges received from JIPL were amount Rs. 72,80,069/- which was taxed in India. The assessee was also in receipt amount of Rs. 11,46,63,298/- from JIPL on account of reimbursement of expenses whi....
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....re utilize is the expertise of the assessee company is the business. 2. In the case of assessee, the administrative support service is provided to the Indian entity which is utilized in running its business and the employees of the Indian entity are assisted to carry on their business model of services on their own in compliance with Indian Generally Accepted Accounting Principles without reference to the service provider. It is not as if for 'making available', the recipient must also be conveyed specifically the right to continue the practice put into effect and adopted under the service agreement on its expiry. 3. As per the MOU to the India-US DTAA, the term make available means that the person acquiring the service is enabled to independently apply the technology. The fact that the services are "continuous" does not by itself imply that is provided. The word "enable" is used in the sense that the services should be such that they make the recipient able or wiser in the subject matter. This is even more evident from the fact that it is the recipient who applies the knowledge and skill and the provider only supports the recipient with knowledge and skil....
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....ices rendered by the assessee company to the Indian company JIPL are utilized by them for the betterment and improvement of their business model and other practices, which is ultimately reflected in the increase in profitability of JIPL. Thus, the business strategies, administrative and management support services of the assessee company is ultimately made use by the management for their administrative purposes for which they have paid high service fees to them. Moreover, the employees of the JIPL are all very educated and highly qualified. The said companies recruit the best talent available in the Indian market, from the most premiere of institutions and hence it would be impossible to imagine that the advisory services provided by the assessee company is not absorbed and utilized by them in the management of their projects. Thus, there is an element of 'make available' involved in whatever administrative/advisory service that may have been received by JIPL. 7. The non-resident assessee company, the service provider (SP) has provided services through third party to the Indian entities who are the service recipients. If the expenses were not met by the service rec....
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....ax Act, 1961. Even with regard to the two payments of Rs. ...... and Rs. ...... in the nature of reimbursement of payments made to the personnel. No different situation would be available because there payments would be part and parcel in the process of advice of a technical character and would fall for coverage only within the meaning of the above Explanation. The amounts were assessable to tax in India. Based on the discussion in the above paragraphs the reimbursements received by JLCC also fall under the purview of FTS and accordingly, the amount received of Rs. 11,46,63,298/- by way of reimbursements is assessed as income of the assessee in the nature of 'Fees for Technical/Included Services' and taxed accordingly. In light of the above legal and factual scenario, it is prayed that the grounds of appeal of the Appellant may kindly be dismissed, if deemed fit." 6. The Ld.AR mentioned that the issue prevails that the explanation of definition of 'FTS' charges. As per insertion of Explanation of Finance Act, 2010 with effect from 01/04/1976 is liable for the tax as per the revenue. But the charges 'FTS' is for technical services which is received by the as....
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....s rendered management support services of the description listed at Annexure C of Master Support Services Agreement to Everest India on independent and non-exclusive basis. These services are centralized services which are being provided to all group entities in order to maintain uniformity and rationalize and standardize the practices across global location. No element of profit is earned by the assessee in course of rendering these services. These services include- 1. Management Oversight a Strategic direction b Contract review c Financial and legal guidance d Client Relationship Management e Insurance f Peer Review 2. Marketing a Brand Awareness b Marketplace analysis c Competitive analysis d Webinars e Leadership forum f Speaking engagements 3. Finance and Accounting a Payroll b General ledger c Employee time and expense d Revenue and expense accruals e Payables f Accounts Receivables g Cash Management h Financial Reporting i Budgeting j Line of credit acce....
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....e India-USA DTAA explaining the FIS wherein it is clarified that clause 4(b) of Article 12 excludes any service that does not make technology available to the person acquiring the service. "Memorandum of Understanding (MOU) annexed to the India-USA DTAA dated 15.05.1989 concerning FIS states as under: Article 12 includes only certain technical and consultancy services. But technical services, we mean in this context services requiring expertise in a technology. By consultancy services, we mean in this context advisory services. The categories of technical and consultancy services are to some extent overlapping because a consultancy service could also be a technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in a technology is required to perform it. Under paragraph 4, technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which are royalty payment is made; or (2) as described in paragraph 4(b), if th....
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....; 5. Energy conservation ; 6. Exploration or exploitation of mineral oil or natural gas; 7. Geological surveys ; 8. Scientific services ; and 9. Technical training." From the above, it is evident that none of the services provided by the assessee are in the nature of FIS. 9.7 Further, considering the services provided by the assessee (listed above), in our view, these are not technical services nor do they require any technological knowledge, skill or experience. There is no transfer of technology involved. Everest India is not enabled to apply any technology on its own without recourse to the service provider i.e. the assessee. These services have not resulted in any enduring benefit to Everest India by way of any knowledge which could be applied by it on its own in future without depending on the assessee. These are general managerial services which are received by the assessee on recurring basis. Therefore, the test laid down under Article 12(4)(b), in our considered view, are not satisfied in the present factual scenario. 9.8 Thus, management fee received by the assessee from Everest India is not taxable as....
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....ure are taxable as FTS if such services are 'made available' to the service recipient. We find that in the instant case, the management services are provided only to support SurfGold in carrying on its business efficiently and running the business in line with the business model, policies and best practices followed by the Edenred group. These services do not make available any technical knowledge, skill, knowhow or processes to SurfGold. 9.1 Now we discuss the case laws relied on both sides. We begin with the reliance placed by the Ld. counsel. In the case of De Beers Mineral (P.) Ltd., the Hon'ble Karnataka High Court has observed as under : "The technical or consultancy services rendered should be aimed at and result in transmitting of technical knowledge etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, 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 the future without depending on the pr....
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....ggestions and inputs to achieve standard actuarial practices and processing guidelines in connection with the settlement of claims, marketing and risk analysis, fall short of the requirements laid down in the definition of fees for technical services in DTAA between India and Singapore. It will be too much to say that by providing such services (assuming they are technical or consultancy services), the Applicant receiving the services is enabled to apply the technology contained therein i.e. the technology, knowledge, skills, etc. possessed by the service provider or technical plan developed by the service provider. We do not find anything in the IT support services that answer the description of technical services as defined in the Treaty." 9.2 Then we turn to the case laws relied on by the Ld. DR. in US Technology Resources Pvt. Ltd. (supra), in terms of management service agreement between the assessee and the USA company, the latter provides highly technical services which are used by the assessee for making managerial decision, financial decision, risk management decision etc. The service of technical input, advice, expertise etc. rendered by the USA company are techn....
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....the service agreement comes to an end. It is not as if for making available, the recipient must also be conveyed specially the right to continue the practice put into effect and adopted under the service agreement on its expiry. It is found that this case is reversed and set aside for fresh adjudication by the Hon'ble Delhi High Court in 52 taxmann.com 161 dated 30.09.2014 and hence cannot be made applicable. 9.3 We find that in view of the factual matrix delineated at para 9 above, the case laws narrated at para 9.1 hereinbefore i.e. De Beers Mineral (P.) Ltd; Intertek Services; M/s BharatiAxa General Insurance Co. Ltd. are applicable to the instant case. Therefore, we delete the addition of Rs. 73,61,951/- made by the AO towards management services fees and allow the 3rd ground of appeal." 13. From the above discussions and case law, the services provided by the group entities or holding company to its subsidiaries as support services to run their business effectively will not be considered as FTS or FIS under the treaty and these services does not amount to make available technical or skill or expertise while providing these services. Therefore, in our consider....
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.... Thus, administrative support services were fees for technical/included services which were taxable in India. During the appellant proceedings, the appellant has submitted that on similar facts and circumstances, in respect of administrative support services, the ITAT-Mumbai, in its own case for AY. 2012-13 has held that providing administrative support services did not 'make available' of services by the appellant to M/s. Jefferies India Pvt. Ltd. and hence those services were not qualified as fees for technical services. The appellant further submitted that in APA Agreement for AY. 2018-19 onwards and for roll back years upto AY. 2014- 15, the administrative support services were accepted without any mark-up and on cost-to-cost basis. The appellant has also relied upon various decisions to support the argument that providing services on year-to-year basis and routine services for day-to-day administration did not result into make available of services. 6.3.2 From perusal of the order of the ITAT for AY. 2012-13 in appellant's own case, it is seen that the issue related to taxability of administrative support services as FTS has been decided by the ITAT in favour of the a....