TaxTMI 
TaxTMI 
2024 (9) TMI 1121
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....No. 1781/Mum/2024 (A.Y. 2012-13) 3. The grounds raised by the Revenue in ITA No. 1781/Mum/2024 (A.Y. 2012-13) reads as under: 1. Whether on the facts and in the circumstances of the case in law, the ld. CIT(A) has erred in holding that the assessee's services cannot be regarded as ancillary and subsidiary to enjoyment of property under Licence Agreement despite Management Service provided by Lloyds Register are ancillary and subsidiary to enjoyment of intellectual property right as per License agreement despite Art. 13(4)(a) of India - UK DTAA is applicable on payment. 2. Whether on the facts and in the circumstances of the case in law, the ld. CIT(A) was justified in holding that the assessee services are managerial in nature and not technical services and the assessee is not liable to deduct TDS on the same. 3. The appellant prays that the order of the ld. CIT(A) on the above ground(s) be set aside and that of Assessing Officer be restored. 4. The solitary issue involved in these appeals is that the order of the ld. CIT(A) in holding that the managerial services rendered by the assessee to its subsidiaries is not ancillary and subsidiary to the en....
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....diary to the main object of enjoyment of IPR as per the license agreement. The ld. A.O. extensively relied on the assessment order for the earlier years holding that LRAIBO and LRQA-IBO are having permanent establishment in India and the payment made on account of managerial charges are claimed as 'expenditure' pertaining to the PEs in India along with the other findings for those assessment years. The ld. A.O. conclusively held that the payment received by the assessee from LRA-IBO and LRQA-IBO is to be treated as 'fee for technical services' which are to be taxed at 15% of the gross amount as that of the license fee offered by the assessee at 15% as per Article 13(2)(ii) of the India UK DTAA. The ld. A.O. passed the assessment order dated 29.04.2016 pursuant to the draft assessment order dated 29.03.2016 u/s. 143(3) r.w.s. 144C(3) of the Act, determining the total income at Rs. 18,31,93,071/- after making an addition on the 'management charges' as fee for 'technical services' amounting to Rs. 3,39,47,850/-. 7. Aggrieved the assessee was in appeal before the ld. CIT(A) who vide a consolidated order dated 30.01.2024 had allowed the appeal filed by the assessee, by relying on the....
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.... 9. We have heard the rival contentions and gone through the facts and circumstances of the case. On the aforesaid facts, the reasons why the provisions of section 40(a)(i) of the Act will not apply to payment by way of management fees made by the assessee to LRS, we will deal with the last argument taken by the assessee that whether payment of management fees cannot be regarded as lees for technical services as per the DTAA between India and the U. K.. For this, the learned Counsel for the assessee stated that the said payment is in the nature of managerial services' which is not covered by the definition of fees for technical services as per article 13(4) of the said DTAA. He further deliberated that the License Agreement and the Management Services Agreement are independent of each other and, hence, payment under the later agreement (for management services) cannot be regarded as ancillary and subsidiary to the enjoyment of the property as per the earlier agreement (for license). 10. We have heard learned CIT DR also, who mainly relied on the order of DRP as well as that of the AO. 11. We noted the facts and also gone through the DTAA between India and UK, ....
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.... that the Management Services agreement is ancillary or subsidiary to the enjoyment of the rights under the License Agreement. The DTAA between India and USA is also similarly worded. As per the Memorandum of Understanding which forms part of the said DTAA, the test of the services being ancillary and incidental to enjoyment of rights under the license agreement would be based on fulfillment of the following conditions:- i. The extent to which the services in question facilitate the effective application or enjoyment of the right, property or information described in paragraph 3 (i.e., royalty); ii. The extent to which such services are customarily provided in the ordinary course of business arrangements involving royalties described in paragraph 3; iii. Whether the amount paid for the services is an insubstantial portion of the combined payments for the services and the right, property or information described in paragraph 3. iv. Whether the payment made for the services and the royalty described in paragraph 3 are made under a single contract (or a set of related contracts); and v. Whether the person performing the services is the same....
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....e managerial service provided by the assessee is not in the nature of 'technical services'. We do not find any justification for taking any other view. For the above reason, we deem it fit to dismiss the grounds raised by the Revenue. 13. The findings in ITA No.1781/Mum/2024 (A.Y. 2012-13) will apply mutatis mutandis to all other appeals. 14. In the result, all the Revenue's appeal in ITA Nos. 1777/Mum/2024 to 1781/Mum/2024 are hereby dismissed. ITA No. 1776/Mum/2024 (A.Y. 2016-17) 15. The grounds raised by the Revenue in ITA No. 1776/Mum/2024 (A.Y. 2016-17) reads as under: 1. Whether on the facts and the circumstances of the case in law, the Ld.CIT(A) has erred in placing reliance on order of the Hon'ble ITAT in the assessee's own case and holding that the assessee's services cannot be regarded as ancillary and subsidiary to enjoyment of property under Licence Agreement despite Management Service provided by Lloyds Register are ancillary and subsidiary to enjoyment of intellectual property right as per Licence agreement despite Art 13(4)(a) of India -UK DTAA is applicable on payment. 2. Whether on the facts and the circumstances of the cas....