TaxTMI 
TaxTMI 
2025 (4) TMI 1131
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.... is not in accordance with law and amounts to unlawful exercise of jurisdiction, rendering the assessment proceedings as invalid. 2: That on the facts and in the circumstances of the case and in law, the directions issued by the Learned Dispute Resolution Panel ('Ld. DRP') dated June 14, 2022 and the order dated July 29, 2022 passed by the Learned Assistant Commissioner of Income-tax, Circle International Taxation 1(2)(1), Delhi ('Ld. AO') under section 143(3) r.w.s. 144C of the Act assessing the income of the appellant at INR 7,73,11,738/- is based on assumptions, surmises and conjectures, and has been passed without proper consideration of the factual and legal submissions made by the Appellant During the course of assessment proceedings. 3: On the facts and in the circumstances of the case and in law, the Ld. AO has erred in computing the total income of the Appellant at INR 7,73,11,738 as against Nil return of income filed by the Company. 4: That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in law in holding that service fee accrued to the Company is in the nature of Fee for Technical services and taxable in India....
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....to such invalid and non-est directions passed by Hon'ble DRP, is bad in law, null and void and liable to be quashed. Further, the Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. Further, this ground of appeal is independent of the grounds of appeal already filed by the Appellant." 2.2 Before us, the above-mentioned additional grounds have not been pressed; hence, all additional grounds stand dismissed. Grounds numbered 1 and 3, being general in nature, do not require specific adjudication. Ground No. 6, being consequential, also stands dismissed. Ground No. 7 is in respect of initiation of penalty proceedings, which is premature; hence, it is also dismissed. 2.3 Vide ground numbered 5, the appellant assessee has requested for allowance of credit of TDS of INR 8,201,229/-. After hearing both parties, we hereby direct the AO to allow the credit of TDS of INR8,201,229/-as per law (subject to the Rule 37BA of the I. T. Rules read with section 199(1) of the Act) after proper verifications. 2.4 Grounds....
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....iples of the natural justice. Accordingly, the AO is directed to consider all the submissions filed by the assessee including the submissions filed before the Panel. The AO is directed to make a factual verification of the assessee's contentions in terms of all the extant rules and regulations including the below- - Taxability as per sections 5(2) & 9(1)(iii), - Taxability under the DTAA, article 12(4) of India-USA DTAA, - on issue of Services are not technical in nature, - on issue of Services do not 'make available' any technical knowledge, know- how, skill etc. to the recipient, - the Memorandum of Understanding entered between India and USA, - judicial precedents cited by the assessee, - Circular no. 14 (XL-35) dated 11th April 1955 issued by the Central Board of Direct Taxes By considering the above, the AO is directed to pass a reasoned and speaking order to complete the assessment proceedings. Hence, the grounds of objections in this regard are disposed of accordingly." 3.1 In pursuance of the above directions of the DRP, the AO passed the final assessment order determining income ofINR77,....
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.... nature of administrative or support services, which could not be termed/categorized as FTS. 4.2 In support of his contention/submission/arguments, the Ld. Counsel placed reliance on following case laws: - i. Infobip Limited [TS-384-ITAT-2023 (Del.) ii. Bio Rad Laboratories Inc. [TS-1009-ITAT-2022 (Del.) iii. Guy Carpenter & Co. Ltd. [2012] 346 ITR 504 (Del) iv. De Beers India Minerals (P.) Ltd. [2012] 346 ITR 467 (Karnataka) v. Intertek Testing Services India (P.) Ltd. [2008] 307 ITR 418 (AAR) 4.3 The Ld. Counsel further submitted that the appellant assessee provided only general administrative and support services and being holding company of the Crocs India discharged its functions for capacity planning, demand planning, financial planning, analysis and merchandizing. These services provided by the appellant assessee were not in the nature of one-time service where the service provider; i.e. the appellant assessee performed its job and moved away. Here, in this case, the appellant assessee was providing services year after year in continuous manner which got evident from the details mentioned in the agreement dated 1st January, ....
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....). The said 'make available' clause was made part of 2nd DTAA excluding the commission on 1st GDR global depositary receipts. Whereas in the case of the appellant assessee, the clause 'make available' was present in the DTAA for the relevant year. Further, the Ld. Counsel distinguished the case law Foster Wheeler France S.A. [TS 62-ITAT-2016 (Chen.) by submitting that the Foster Wheeler had provided technical& engineering services, whereas the appellant assessee had provided general administrative &support services. The Foster Wheeler was expertise in engineering and construction works. It provided technical and engineering services, whereas the appellant assessee was engaged in Crocs Brand footwear & accessories and providing services of general administrative & support services. The technical knowledge given by the Foster Wheeler could be used subsequently by the recipient, whereas in the case of the appellant assessee, it was not same and thus, exploitable later and further by the Crocs India. Similarly, the case of US technology resources Pvt. Ltd. (TS-511-ITAT-2013) was distinguished by the Ld. Counsel. 4.6 The Ld. Counsel, with the help of following receipts of the assesse....
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....gs Company Pte. Ltd. ITA No. 1503/Del/2014, which defines the administrative support services as under:- "6. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee is providing following services which are under dispute:- Nature of Administrative Support. 1. Marketing and advertising support including service relating to marketing materials, brochures, bids and sales proposals. 2. MIS and accounting support including internal accounting standards and procedures, US GAAP reporting procedures, and formulation of budgetary control systems along with appropriate standard costing procedures. 3. Treasury function support including advice and assistance on financing business operations, credit and collections management, risk and investment management, and treasury and banking management. 4. information technology support including but not limited to systems applications assistance, management information reporting and facilitating and worldwide network connectivity." 5.2. Further the Ld. CIT-DR drew our attention to the reply of appellant assessee before the AO as mentioned ....
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....ry to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received, or (b) make available technical knowledge, experience, skill, knowhow, or processes, or consist of the development and transfer of a technical plan or technical design 5. Notwithstanding paragraph 4, "fees for included services" does not include amounts paid: (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a), (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic: (c) for teaching in or by educational institutions: (d) for services for the personal use of the individual or individuals making the payments; or (e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in Article 15 (Independent Personal Services)." 6. We have heard bot....
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....be evident from a close reading of Para 4 thereof, the mere rendition of technical or consultancy service would in itself be insufficient. This since Para 4(c) places an added condition of the furnishing of such service, ultimately leading to technical knowledge, experience, skill, know-how or processes being made available. 85. Article 13 of the DTAA reads as under: - "1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed : (a) in the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which this Convention has effect ; (aa) 15 per cent of the gross amount of such royalties or fees f....
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....paragraph 4 of this Article shall not include amounts paid : (a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property, other than property described in paragraph 3(a) of this Article; (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships, or aircraft in international traffic; (c) for teaching in or by educational institutions ; (d) for services for the private use of the individual or individuals making the payment ; or (e) to an employee of the person making the payments or to any individual or partnership for professional services as defined in Article 15 (Independent personal services) of this Convention. 6. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein, or per....
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....he impetrative of the 'make available' condition being met and the imperative of the knowledge, skill, know how being made available to the payer. 87. The authoritative Commentary on the UN Model Convention while explaining the ambit of Article 12A carries the following instructive exposition on the meaning to be ascribed to the words "technical" and "consultancy": - Paragraph 3 "61. This paragraph specifies the meaning of the phrase "fees for technical services" for purposes of Article 12A. The definition of "fees for technical services" in paragraph 3 is exhaustive. "Fees for technical services" are limited to the payments described in paragraph 3; other payments for services are not included in the definition and are not dealt with in Article 12A (see the examples in paragraphs 87 to 103 below). 62. Article 12A applies only to fees for technical services, and not to all payments for services. Paragraph 3 defines "fees for technical services" as payments for managerial, technical or consultancy services. Given the ordinary meanings of the terms "managerial", "technical" and "consultancy"' the fundamental concept underlying the definition of fee....
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....constitute technical services if those services involve the provision of specialized knowledge, skill and expertise. 66. The ordinary meaning of "consultancy" involves the provision of advice or services of a specialized nature. Professionals usually provide advice or services that fit within the general meaning of consultancy services although, as noted in paragraphs 63 and 64 above, they may also constitute management or technical services. 67. The terms "management", "technical" and "consultancy" do not have precise meanings and may overlap. Thus, for example, services of a technical nature may also be services of a consultancy nature and management services may also be considered to be services of a consultancy nature." 88. Vogel explains the concept of technical services in the following terms (at page 1184):- "IV. Article 12A(3) UN MC 1. The Model a. Rule The term 'fees for technical services' is defined as: - any payment in consideration for - any service of managerial, technical, or consultancy nature, - unless the payment is made: a. to an employee of the person makin....
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....nt country practice of including fees for technical services in Article 12 MC. This historic development leads to a contextual bond between Article 12 UN MC and Article 12A UN MC that explains some of the peculiarities of the definition of Article 12A UN MC and aids in its interpretation. Further context is scarce: The term 'service' can also be found in other provisions dealing with different types of services like Articles 5(3)(1), 14, and 19 UN MC. Article 14(2) suggests that any activity suffices, but there is no general definition. The General Agreement on Trade in Services also does not contain a definition (no. 83 UN MC Comm. on Article 12A). The category of technical services has developed from the problematic delimitation between IP licensing and service contracts. While the protected information that constitutes IP has to be divulged to the licensee as part of the licensing contract, there is often the need for further training of the licensee and the employees; this constitutes a service. Similar problems arise with consulting: The service provider does not transmit its special knowledge, skill, and expertise as such but uses them to make statements on c....
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....ices', its structure shows that it follows a wide understanding and, in principle, covers every professional service that is imbued with expertise. The introduction of the category of 'technical services of a consultancy nature' besides the 'technical services of technical nature' shows that consulting that is not related to the traditional field of technique should also be covered. The UN Model Commentary confirms this wide understanding by defining services as activities carried out by one person for the benefit of another person in consideration for a payment whereas the manner of providing services was not decisive (no. 84 UN MC Comm. on Article 12A). Examples in the commentary also follow the wide understanding by, e.g., including a heart surgeon (no. 89 UN MC Comm, on Article 12A). Traditionally, technical services have been defined by the provisions of Special Knowledge, skill, and expertise to make statements on the special issues of the customer. The UN MC apparently draws on this understanding as it excludes services of a routine nature (no. 62 UN MC Comm. on Article 12A). Technical services have to be discerned from routine services with a ca....
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....mples: firstly, payments by an enterprise for management services in cases when the management of all or significant parts of the enterprise are contracted out to other persons, and these persons are not related to the enterprise (not directors, officers, employees) and, secondly, payments in consideration for advice of consultants related to the management or business of an enterprise. dd. Services of Technical Nature. "Technical services involve the application of specialized knowledge, skill, or expertise with respect to a particular art, science, profession, or occupation (no. 64 UN MC Comm. on Article 12A). The UN Comm. further refers to regulated professions such as law, accounting, architecture, medicine, engineering, and dentistry as examples covered by Article 12A (3) UN MC. These examples are not exhaustive." 89. It becomes apparent upon a consideration of the views expressed above that the word "technical" is no longer liable to be understood in its archaic sense as being confined to the traditional sciences. What authorities commend for consideration is an ascertainment of whether the services rendered involved the application of a specialised skill, k....
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....hat the services rendered by the assessee to the Crocs India are not purely general in nature as evident from this Article that the services had been provided by the competent technical expertise and qualified professionals. Thus, this Article buttresses the AO's inference that the service provided by the assessee are technical in nature within the meaning of Section 9(1)(vii) of the Act'. 10. The Hon'ble Supreme Court in the case Kotak Securities Ltd. 67 taxmann.com 356 had held that where a service is not customized to the needs of the customer and is indistinguishable from a common "facility" provided to all customers of the service provider. Here, the specialized/ customized services as per the requirements of domestic tax laws, etc. had been provided by the assessee. Here, the services had been customized to cater to the specific needs of the service recipient; Crocs India and the same were not made available globally to each service recipient. In the present case, the services rendered were tailor made and were core work of the assessee. Therefore, the same cannot be termed as ancillary services. 11. In view of the above, we are of the considered opinion that the servic....