TaxTMI 
TaxTMI 
2025 (6) TMI 79
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....e petitioner is a company incorporated in the United States of America and is also a tax resident of that country. The petitioner had entered into an agreement dated 01.04.2021 with its Associate Enterprise [AE] - AECOM India Private Limited [AIPL] and the agreement dated 01.04.2023 with its AE - AECOM India Global Services Private Limited [AIGSPL]. 3. The petitioner states that it is engaged in the business of design and consultancy services, construction management and infrastructure development. In terms of the agreements with the AEs, the petitioner provided management and governance supports functions in the area of legal, tax, treasury, finance, information technology, human resources, enterprise risk management, etc. 4. The description of the corporate services agreed to be rendered by the petitioner in terms of the aforementioned agreements with AIPL and AIGSPL are set out in the Annexures to the respective agreements. The same indicate that the petitioner had agreed to provide overall management services in the field of finance, accounting and tax; human resources; legal and compliance; real estate; management and operations; marketing and communications; risk and sa....
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.... cost cross charged in terms of the aforesaid agreements are not fees for technical services [FTS] within the meaning of Section 9 (1) (vii) of the Act or 'fees for included services' [FIS] under Article 12 (4) of the India USA Double Taxation Avoidance Agreement [India-US DTAA]. 7. The petitioner has annexed sample invoices for the cross charges, which are receivables during the year. According to the petitioner, the projected receipts from AIPL are Rs. 41,00,00,000/-, and from AIGSPL are Rs. 73,90,00,000/- [aggregate amount of Rs. 1,14,90,00,000/-]. 8. The AO rejected the aforesaid application by the impugned order. The AO noted the services rendered by the petitioner as well as the submissions made by the petitioner and observed "services are highly technical, managerial as well as consultancy in nature which require special skills and technical qualifications". The AO also concluded that "the services rendered by the assessee do make available knowledge, experience, know-how to the recipient and this is clearly visible when one examines the nature of the services rendered and the consequential benefits obtained by the recipient". 9. On the aforesaid basis, the AO concl....
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....f employees and determining their compensation levels. ATS Inc. manages the global programs for employee benefits such as life insurance, retirement plans and other benefit plans. These benefit plans are offered to employees of the AIPL and AIGSPL as part of their compensation package. ATS Inc. also assist to develop, set up and manage the plans for employees of the AIPL and AIGSPL, including answering questions and supporting use of the plans (c) Talent Acquisition ATS Inc. licenses and maintains the talent acquisition system, BrassRing Software, for which recruiting reports and data are generated and utilized by AIPL and AIGSPL reflecting the gender, turnover, assessment of personnel and other data that is utilized in the recruiting process (d) Problem Resolution Where there is a human resources issue arising in the day-to-day operations of AIPL. and AIGSPL, such as an underperforming employee that requires action or termination, ATS Inc. provides support to manage and resolve the issue, including assessment of appropriate actions based on AECOM policies and liaise with the employees to resolve the issue. The above services of....
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....s password reset, patch updates, etc. To the extent immediate resolution is not available, the ticket may get escalated Escalation could be to either ATS Inc.'s specialists, third party vendors, or to local support based in overseas countries. As the AECOM Group has limited IT resources, it does not have the capacity to deal with all tickets raised by the AECOM Group. Instead, IT staff focus only on the resolution of the limited cases referred to by the AECOM helpdesk that require in person support. Examples of Field Service Support are enclosed as Annexure 4 for your reference. (b) Oracle AIPL and AIGSPL. utilizes Oracle to maintain and prepare its financial statements. Oracle is maintained by employees of ATS Inc. and is hosted out of its data center. In addition, ATS Inc. provides user support with questions and issues arising from the use of Oracle, as well as incurring the costs of implementing, upgrading and providing patches to update the Oracle system. (c) IT Infrastructure ATS Inc. maintains network connectivity that ensures the AECOM Group network is being maintained and running at optimal effectiveness and maximum security....
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....gy. Specifically, the following services are provided: - The International COO and team work in conjunction with Regional Chief Operating Officers on operational and strategic initiatives and has oversight of operational and financial performance of the international geography. - The International COO is a member of the International Risk Committee to review requests for approval (RF A's) and review opportunities with a specific risk profile to be reviewed to obtain a go/no go decision to proceed with the bid. - The International COO and team lead on project reviews to assess the historic and future financial performance and help identify any risks or opportunities which need to be managed. Also, help advise on any change in strategy to deliver the project successfully. 4. Finance and Accounting: Tax & Treasury This function of ATS Inc. assists AIPL and AIGSPL in the overall management oversight of Finance, Accounting and Tax services coordinating key tasks and activities as well as providing strategic advice. A description for certain services provided by this function are explained as under: (a) Tax ATS Inc. provi....
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....nce of bid bonds to provide cash to support investments by AlPI associated with bids and project funding. (ii) Expertise and support when AIPL bids for local contracts to ensure all financial risks associated with the potential project have been appropriately identified and factored into the bid process. These include the following: -Advice on foreign exchange and balance sheet risks when contracts are in currencies other than local currencies; and -Assistance with the review of commercial terms in contracts to ensure sufficient risk management is built in around items such as contingent liabilities and disclosures. The treasury function negotiates with local banks to establish banking facilities, including obtaining overdraft protection and issuance of bid bonds to provide cash to support investments in bids and project funding. Cash support on bids for potential new local contracts to ensure all financial risks associated with potential projects have been appropriately identified and factored into the bid process, including foreign exchange and balance sheet risks and contingent liabilities. The services of treasury function provide fo....
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....AIPL/AIGSPL. Where this occurs, ATS Inc. liaises with local legal counsel to obtain advice on appropriate dispute resolution or mitigation measures. Based on this advice, ATS Inc. laises with employees of AIPL and AIGSPL, or consultants or clients, where necessary, on how to handle and resolve a situation. Where there is legal action involved, ATS Inc. will have day-to-day involvement to ensure the best global resources are deployed to manage the financial and reputational risk to AIPL and AIGSPL. ATS Inc. also reviews all bids for new projects to be entered into by AIPL and advises on contract negotiations with clients where a bid is accepted. The advice provided by ATS Inc. assists AIPL in structuring bids and contracts in a strategically favorable manner to maximize profits while minimizing risks. The above function provides the following deliverables and benefits to AIPL and AIGSPL: Deliverables - Above mentioned advisory services - Email correspondence Benefits - Enable effective management of financial risks on contracts with customer and vendors, as well as bidding contracts, resulting in increased profitability.....
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....e taxed in the Contracting State in which they arise and according to the laws of that State; but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) in the case of royalties referred to in sub-paragraph (a) of paragraph 3 and fees for included services as defined in this Article [other than services described in sub-paragraph (b) of this paragraph] : (i) during the first five taxable years for which this Convention has effect, (a) 15 per cent of the gross amount of the royalties or fees for included services as defined in this Article, where the payer of the royalties or fees is the Government of that Contracting State, a political sub-division or a public sector company ; and (b) 20 per cent of the gross amount of the royalties or fees for included services in all other cases ; and (ii) during the subsequent years, 15 per cent of the gross amount of royalties or fees for included services ; and (b) in the case of royalties referred to in sub-paragraph (b) of paragraph 3 and fees for included services as defined in this Art....
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....s; (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)..." 13. As noted above, the AO had briefly noted the services rendered by the petitioner and had concluded the same would be falling within the definition of 'included services' however, the said view is unsustainable. The AO's conclusion is based on the assumption that since the IT infrastructure is used by AIPL and AIGSPL, the same would constitute making available the technical knowledge and skills to AIPL and AIGSPL. The AO had also reasoned that since the petitioner provided software development services with respect to the petitioner's software application used by AIPL and AIGSPL's business, including the Oracle system; the same would also constitute making available the technical knowledge to AIPL and AIGSPL. The said conclusions are unsustainable given the description of the services rendered by the petitioner. 14. As noted above, the petitioner renders w....
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....technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1. Notably, this aspect is adverted to in paras 17 to 23 of the impugned order. For convenience, the relevant paras are extracted hereafter [33 ITR (Trib)-OL p. 463]: 'A perusal of the aforementioned provision shows that in order to qualify as fees for technical services, the services rendered ought to satisfy the "make available" test. Therefore, in our considered opinion, in order to bring the alleged managerial services within the ambit of fees for technical services under the India-USA Double Taxation Avoidance Agreement, the services would have to satisfy the "make available" test and such services should enable the person acquiring the services to apply the technology contained therein.... ... agreement is effective from 1-1-2009 and we are in Assessment Years 2018-2019 and 2019-2020. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year si....
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....es to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. 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 upon the provider. 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 that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4) (b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as "fee for technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied." 17. In so far as the IT infrastructure and software development is concerned, the petitioner had expl....