TaxTMI 
TaxTMI 
2024 (8) TMI 810
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....ber on all communications/correspondence/order by the Income Tax Department.- Not pressed Payment received as "Training and Consultancy Fees" being taxed as FIS 4. That the AO/DRP has erred in bringing to tax the receipts of INR 7,18,00,010, received as consultancy and training fees, as being in the nature of Fees for Included Services ('FIS') under Article 12 of the India-USA Double Taxation Avoidance Agreement (DTAA) read with section 9(1)(vii) of the Act 5. That the AO/DRP failed to appreciate that in absence of any "make-available", payments received by the Appellant as consultancy fees could not be taxed as FIS under Article 12 of the India-USA Double Taxation Avoidance Agreement ('DTAA) read with section 9(1)(vii) of the Act. 6. That the AO/DRP failed to appreciate that the training(s) were provided to employees of the customers for their internal consumption and hence, would not satisfy the requirement of "make-available under Article 12(4)(b) of the India-US DTAA 7. That assuming, without admitting, that these trainings were technical in nature, even then they cannot be taxed as FIS under Article 12(4)(b) of India- US....
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.... USA and is engaged in the business of providing consultancy and professional services. During the year, the assessee received an amount of Rs. 5.16 Cr. as product license fee which has been offered to tax as royalty. The amount received as Consultancy fee of Rs. 5.59 Cr., Referral fee of Rs. 1.68 Cr. and General Management charges of Rs. 55.29 lacs have been claimed as non-taxable under India-USA DTAA under the definition of FIS. Training and Consultancy Fees -FIS: 4. During the year, the assessee claimed to have offer consultancy services pertaining to organizational strategy, assessment & cessation, talent acquisition, leadership & professional development, evaluation of Rewards & benefits like ESOPs and compensation, payment structure. 5. The Assessing Officer held that the amount of Rs. 7.18 Cr. falls under the purview of FIS under Article 12 of India-USA DTAA. 6. The Assessing Officer held that on perusal of the submission of the assessee and sample invoices provided with submission it has been observed that during the year the assessee has provided consulting services to its customers for various field like consultancy services for outlining effective talent mapp....
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....ning has been provided by people who are highly qualified and the services were customized to suit the needs of the people. The AO held that the services provided by the assessee made the clients capable enough to solve the problems on their own. 9. The AO relied on the judgment of the Co-ordinate Bench of ITAT in the case of H.J. Heinz Company, USA in ITA No.6252/Del/2012 and Mersen India Pvt. Ltd. (20 taxmann.com 475 AAR). 10. Aggrieved, the assessee filed appeal before the ld. DRP. The ld. DRP affirmed the action of the Assessing Officer and held that "the make available" clause has been met. The order of the ld. DRP on this issue is as under: "5.3 The assessee filed reply to the remand report vide letter dated 27/04/2023. The assessee in its rejoinder has reiterated its contention that the consultancy service provided by it to the Indian client do not satisfy the 'make available' criteria as required in terms of Article 12 of India-US DTAA and consequently, the receipts are not taxable as FTS. 5.4 The Panel has considered the detailed submissions of the assessee vide Form 35A dated 27/10/2022, the DAO dated 29/09/2022, the remand report of the AO....
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.... ld. DR supported the orders of the ld. DRP. 13. Heard the arguments of both the parties and perused the material available on record. 14. The relevant extract of India-USA DTAA is as under: Article 12 of India-USA DTAA on "Royalties and Fees for Included Services" For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: .......... (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. Thus, in order for a payment to qualify as FIS under the India USA DTAA, the services should be in the nature of technical or consultancy services, and these services should "make available technical knowledge, experience, skill know-how or processes." The services which are in the nature of "technical" or "consultancy in nature and which satisfy the "make available" condition gets covered under the definition of FIS as per the India-USA DTAA. Further, "tec....
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....e rendering of consulting service requires any expertise by the person providing the service would not per se mean that technology has been made available to the service recipient. 16. In the instant case, the assessee has received payment for rendition of consultancy service in the field of organizational strategy, talent, reward and benefits etc. While rendering of such services, the assessee does not transmit any knowledge, skill or technical know-how in a manner that clients/customers are able to perform the aforesaid functions in future on its own without recourse to the service providers and hence, the element of "make available" in absent in such services. The same is clearly evident from the fact that such services are rendered on continuous basis from preceding years. In the present case, assessee is merely providing consulting services such as organizational strategy, talent strategy, consulting in relation to rewards and benefits and related leadership and development consulting services for which clients / service recipients need to come back to assessee, as and when they have such requirement and service recipients do not get equipped in providing such services. ....
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.... LLC appoints the assessee as distributor of the platform to client companies. As per the term, for the sole purpose of enabling partner to utilization the platform for its own use or on behalf of clients. 20. The AO reproduced the relevant part of the agreement which is as under: "C. License to Partner 1. Distribution. Loop appoints Partner to be a non-exclusive distributor of the Platform to client companies described in Addendum I during the Term, for the sole purpose of enabling partner to utilize the platform for its own use, or on behalf of clients or promote the platform with the relevant clients under the Agreement. 2. Distribution Agreement- For the avoidance of doubt, partners agrees to be bound by Loop as to recommended pricing for license and fees payable by clients in consideration for services provided to them arising out of the rights granted to Partner pursuant to clause C. 1 Loop agrees that partner may elect to procure the services on the following basis: a. Direct Licensing contract with the Partner, for the partners own use, in compliance with Schedule B, Services and fees. In which case the partner may benefit from the dis....