TaxTMI 
TaxTMI 
2025 (1) TMI 174
X X X X Extracts X X X X
X X X X Extracts X X X X
....pearing for the assessee submitted, the tax effect on the disputed issues arising in Revenue's appeal for A.Ys. 2019-20 and 2020- 21 is below the threshold limit of Rs. 60 lacs, thus, he submitted, the appeals of the Revenue are not maintainable. 4. In response to query raised by the Bench, in the context of the aforesaid submission of learned counsel for the assessee, the learned Departmental Representative ('ld. DR' for short) fairly agreed that the tax effect in both the appeals is below the threshold limit of Rs. 60 lacs. 5. In view of the aforesaid submissions of the parties, we dismiss the appeals of the Revenue, being ITA Nos. 1775/Mum/2024 and 2342/Mum/2024 as well as the corresponding cross objections, being CO Nos. 101/Mum/2024 and 102/Mum/2024. 6. As regards the rest of the appeals of the Revenue, being ITA Nos. 1774/Mum/2024 and 2341/Mum/2024, the first common issue is with regard to taxability of administrative support service charges as fees for technical services (FTS) in terms of Article 13 of Double Taxation Avoidance Agreement (DTAA) between India - United Kingdom (UK). 7. Briefly stated, facts relating to these issues are, the assessee is a no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us, it was submitted by the assessee that in the given facts and circumstances, the administrative support services fee cannot be made taxable as FTS under the treaty provisions. The A.O., however, did not agree with the contentions of the assessee and proceeded to complete the assessment treating the administrative support services fee as FTS under the treaty provision and brought it to tax. 9. The assessee contested the afore-said addition before learned first appellate authority. 10. After considering the submissions of the assessee, in the context of the facts and materials on record, learned first appellate authority noticed that while deciding identical issue in assessee's own case for A.Y. 2012-13 the Tribunal had held that the fee received towards administrative support services cannot be regarded as FTS under Article 13 of the Treaty. Thus, following the said decision, the learned first appellate authority decided the issue in favour of the assessee. 11. Before us, it is a common point between the parties that the issue is squarely covered by the decision of the co-ordinate bench in assessee's own case in A.Y. 2012- 13. While going through the afore-said decision ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and JHKL shall wishes to provide one or more of the administrative services to JIPL as set out in schedule A to this agreement. The JIPL is willing to identify potential clients for each of JIL, Jefro and JHKL for such corporate finance services as each of those intragroup companies mentioned above (in technical terms, provide marketing services to its group concerns) and in turn the group companies (JLLC, Jefco and JHKL) may engage in and to provide various administrative, day to day management and similar consulting functions in relation thereto. The fact that even the assessing officer has confirmed that the assessee has provided the administrative services to the JIPL and he is of the opinion that the services are received by the Indian entity in the course of their normal business activities and it has benefitted by employing best talent in the business to improve their business and their project. Therefore, it is continuous in nature, hence it amounts to make available. It is fact on record that the assessing officer is not disputing the fact that the assessee has provided the administrative and day to day management services to the JIPL. 8. We observe, as per claus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... employees who can carry out the aforesaid functions. Therefore, all the services relating to investment banking activities are carried out by the intra group companies through the intermediary company i.e., JIPL as per the requirements of customers/clients in India. 11. From the above, we observe that the assessee provides the administrative and day to day management services to the JIPL, this fact is confirmed by the observation and relevant material placed before us that the Indian entity JIPL does not have any support team and administrative set up to carry out the business independently. All the support services are provided by the intra-group entities and particularly, the administrative and day to day management services are provided by the assessee. The Ld.CIT(A) has confused with the two schedules viz., Schedule A and Schedule B and came to wrong conclusion by observing the bill copies submitted before him for reimbursement of certain charges for which the assessee has outsourced certain services for the whole group and whatever the services are utilized by the assessee are alone charged to the JIPL. Therefore, in our considered view, the services provided by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsation c Benefits administration d Legal 5. Information Technology a Laptop Maintenance b Help desk support c Desk side support d User Id and password e Remote access f System/antivirus g Intranet h Inter site communication links, email, voice mail etc i Standard computer platform j. New hardware and software k Training on IT resources l Licenses and compliance m Computer and phone networks 6. Training a Global training conferences b Monthly training sessions c Ad hoc training as required 7. Legal a Contract review b Litigation management c Other legal services as required 9.5 We agree with the contention of the assessee that managerial services are outside the scope of the meaning of FIS under Article 12(4) of the India USA DTAA. Wherever the intention of the legislature is to include managerial services within the scope of FTS/ FIS, the same has been expressly mentioned therein. This contention of the assessee finds support by the jurisdictional Delhi Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(b), consultancy services which are not of a technical nature cannot be included services. {emphasis supplied} Paragraph 4(b) Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the services, technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plant or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee." 12. Further, the coordinate bench decided similar issues in the case of Edenred Pte Ltd v. DDIT [2020] 118 taxmann.com 2 (Mumbai - Trib.) and held as under: - "9. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We find that the services provided under the management agreement broadly include (i) consultancy services to support the sales activities of Surf Gold, (ii) legal services, (iii) financial advisory services and (iv) human resource assistance. There is no dispute here that under the provisions of section 9(1)(vii) of the Act, rendering of management services will be taxable as FTS. However, Edenred, by virtue of section 90(2) of the Act, is eligible to rely on the provisions of the India Singapore DTAA, should the same be more beneficial than the provisions of the Act. In this regard, we fruitfully rely on the judgment of the Hon'ble Delhi High Court in the case of New Skies Satellite BV & Ors (ITA No. 473/2012) wherein it is held that provisions of DTAA shall prevail over the provisions of the Act, if they more beneficial. At this moment, we ref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erm 'make available' as under : "By making available the technical skills or know-how, the recipient of service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into the terminology 'make available', the technical knowledge, skills etc. must remain with the person receiving the services even after the particular contract comes to an end. The services offered may be the product of intense technological effort and lot of technical knowledge and experience of the service provider would have gone into it. But, that is not enough to fall within the description of services which make available the technical knowledge, etc. 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 future without depending on the provider." In the case of M/s Bharati Axa General Insurance Co. Ltd., the AAR has ruled as under : "9. The definition of FTS as contained in clause (b) of Article 12.4 is explicitly designed to restrict the scope and ambit of the techni....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case is reversed by the Hon'ble Kerala High Court in 97 taxmann.com 642 dated 09.08.2018, wherein it is held that fees for management services received by US company would not be taxable in India as there is no transfer of technical knowledge by US company to Indian company. In Shell India Markets (P.) Ltd. (supra), the applicant is an Indian company, it has a network of retail fuel stations in India. SIPCL is a group company of assessee incorporated in UK. It is in the business of providing consultancy services to various group companies. The applicant has entered into Cost Contribution Agreement (CCA) with SIPCL for provisions of General Business Support Services (BSS). While providing General BSS, SIPCL works closely with the employees of the applicant and supports/advices them. Thus, General BSS is made available to the applicant. However, we find that subsequently, after considering the decision in the case of Shell India (supra), the Mumbai ITAT in the case of Linklaters LLP (ITA No. 1690/Mum/2015) dated 31.01.2017 held that from none of legal advisory services it can be said that technical knowledge, skill, experience, knowhow or process remained with the clients t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nction the administration and day to day management of JIPL considering the fact that JIPL does not have any infrastructure to carry out any administration and day to day management. These facts are confirmed by the lower authorities and also facts on record. Therefore, these services are outside the ambit of FIS and FTS. Hence we are incline to allow the grounds raised by the assessee." 12. There being no difference in the factual position, in the impugned assessment years, respectfully following the decision of the co-ordinate bench, as referred above, we decide the issue in favour of the assessee, while upholding the decision of learned first appellate authority. Hence, grounds are dismissed. 13. In ground nos. 4 & 5, the dispute is with regard to taxability of reimbursement of expenses as FTS under Article 13(4) of India-UK treaty. 14. Briefly, the facts are, in course of the assessment proceeding, the A.O., while perusing the notes to the computation of income, noticed that the assessee had incurred certain expenses on behalf of its Indian subsidiary, JIPL, which were reimbursed by the subsidiary to the assessee. Noticing this fact, the A.O. called upon the assessee t....