TaxTMI 
TaxTMI 
2025 (6) TMI 79
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....so 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 safety management; information technology and digital solutions; quality, and procurem....
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.... 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 concluded that the charges paid to the petitioner by its AEs are taxable as FTS and FIS. 10. We note that the AO had called upon the petitioner to explain the se....
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....o 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 the HR department provide the following deliverables and benefits to AIPL and AIGSPL Deliverables - System applications, such as Workday, Cognos BI, SAP Learning Management System and Success factors, IBM Kenexa Brassring, Skillsoft Sum Total, onboardi....
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.... 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. This includes applications and software that are used by the professionals of AIPL and AIGSPL. All of the mailboxes for the AIPL and AIGSPL personnel, including those used in Outlook or via hand held devices, are maintained by ATS Inc. who will back them up and archive them on servers maintained by it, with all the AIPL and AIGSPL's emails being routed via the data center being maintained by ATS Inc. Specific....
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.... 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. provides support with respect to the identification and resolution of tax issues that impact the AIPL and AIGSPL. This involves liaising with local advisors supporting completion of tax returns and financial statement support, resolving any issues identified by advisors, assisting with liaisons with the Internal Revenue Service ("IRS") and collecting data to provide to the IRS, and other tax advice that may arise as a result of business operations in the local countries. The tax function review and oversee the tax operations of the ATS Inc. and AIPL/AIGSPL. The tax function team of AIS Inc. coordinates ....
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....king 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 following deliverables and benefits to AIPL and AIGSPL Deliverables - Above mentioned advisory services - Bank facilities and bid bonds obtained from local banks - Email correspondence on bid support Benefits - Allows terms of banking arrangements and funding of business operations on commercially favorable terms, taking into account the global banking relationships held by ATS Inc. and the financial wherewithal of the global group. - Effectively manage risks related to accepting new local contracts and building appropriate risk factors into its bidding process to ensure AIPL. bids on projects in a manner that is both competitive and profitable taking into account all risks (c) Financial Planning & Business An....
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....its 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. Financial analysis to enable and support decision making with respect to investments -Effectively resolves employees' and third-party legal issues in a cost-effective manner with minimal impact to the business operations 6. Procurement and Travel The corporate procurement team of ATS Inc., manages, maintains, and monitors the global margin improvement programs for the company including serving as the primary vendor contact; negotiating contracts, pricing, policies and procedures, and program management; measuring progress to goals; and verifying the results of the margin improvement program. The Corporate Travel team delivers travel, meetings and events and payment solutions, supporting many aspects of project lifecycles as well as business development opportunities. The team is responsible for procuring and overseeing enterprise hotel, business travel, and corporate card programs. 7. Risk, Safety and Secur....
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.... 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 Article that are ancillary and subsidiary to the enjoyment of the property for which payment is received under paragraph 3(b) of this Article, 10 per cent of the gross amount of the royalties or fees for included services. 3. The term "royalties" as used in this Article means : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic, or scientific work, including cinematograph films or work on film, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, including gains derived from the alienation of any such right or property which are contingent on the productivity, use, or disposition thereof ; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial, or scientific equipment, other than p....
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....ervices rendered by the petitioner. 14. As noted above, the petitioner renders wide range of services to AEs. None of the services can be considered as 'included services' within the meaning of paragraph no.4 of Article 12 of the India-US DTAA as the same is not ancillary and subsidiary to the application or enjoyment of the right, property or information for which the petitioner receives royalty as covered under Article 12 (3) of the India-US DTAA. The services rendered by the petitioner also do not make available technical knowledge, experience, skill, know-how, or processes to AIPL and AIGSPL. The expression 'make available' must be understood to mean transfer of technical knowledge, experience, skill or know-how, or process, which enables the recipient to absorb and utilise the same. If the service provided does confer any right in favour of the recipient in respect of the knowledge, experience, skill or know-how; the condition that the services 'make available' such technical knowledge, know-how, skill, or process so as to fall with the sweep of FIS are not satisfied. 15. In CIT v. Relx Inc.: (2024) 470 ITR 611, a Coordinate Bench of this court had considered the meaning of ....
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....e such service year after year every year since 2009? This undisputed fact in itself demolishes the action of the assessing officer/Dispute Resolution Panel. The facts on record show that the recipient of the services is not enabled to provide the same service without recourse to the service provider i.e. the assessee. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the assessing officer/learned Commissioner of Income Tax (Appeals) is the incidental benefit to the assessee which has been considered to be of enduring advantage. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and 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.' (emphasis is ours) 15. We tend to agree with ....
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....maintains the network connectivity and ensures that the business of AIPL and AIGSPL is being maintained and run at optimum effectiveness and maximum security. The same would include the applications and software, which are used by the professionals of AIPL and AIGSPL. However, the assumption that there is any transfer of right in relation to the said software or applications to AIPL and AIGSPL is not supported by any material on record. 18. Although the petitioner has also stated that it provided the software development services with respect to the various software applications, which are used by AIPL and AIGSPL in their businesses. However, there is nothing on record to indicate that the AEs acquired any rights in relation to these software and applications developed by the petitioner. 19. The AO also observed that part of the charges was taxable as royalties. The said information was premised on the basis that the petitioner centrally procured software / tools for joint use by its AE. The AO reasoned that cross charges would thus, be the reimbursement of the actual cost of such software / tools and, therefore, taxed as royalty. 20. Given the fact that AIPL and AIGSPL did not ....