TaxTMI 
TaxTMI 
2025 (6) TMI 497
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....ited Kingdom and is also a tax resident of that country. The petitioner had entered into an agreement dated 01.04.2023 with its Associate Enterprise [AE] - AECOM India Private Limited [AIPL]. 3. The petitioner states that it is engaged in the business of providing corporate and management services. In terms of the agreements with the AE, 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 agreement with AIPL are set out in the Annexure to the said agreement. 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 procurement. 5. The petitioner filed the application dated 08.05.2024 under Section 197 of the Act seeking the 'nil' withholding tax certificate.....
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....ement with AIPL (Copy of the agreement is enclosed as Annexure-2)." 6. The petitioner claims that costs cross charges are reimbursement of costs on cost-to-cost basis and the same are not chargeable to tax under the Act. The petitioner also set out in detail its explanation as to why 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 FTS under Article 13 of the India UK Double Taxation Avoidance Agreement [India-UK DTAA]. 7. The petitioner also furnished sample invoices for the cross charges, which are receivables during the year. According to the petitioner, the projected its receipts from AIPL at Rs. 143,196,171.00. 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 thi....
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.... * International - Senior management working on global entities, excluding the US entities. These staff are based in various countries and costs in relation to services provided by them are initially booked in AECOM UK and cross-charged to AIPL basis planned Net Services Revenue ('NSR'). (iii) Sub regional-Regional geographies, including Europe & India, Middle East & Africa, ANZ, and Asia ('EIMEA'). These staff are regionally based and work across their respective region only. The costs in relation to services provide by these staff are initially booked by AECOM UK and cross-charged to AIPL basis planned NSR. 2.3. In view of the above, it is submitted that ATS Inc. only cross-charges the costs to AIPL in relation to corporate management and AECOM UK cross-charges the staff costs in relation to international support and Europe & India (EIMEA) region. The details of costs cross-charged by AECOM UK to AIPL are explained as under: (i) Europe & India Corporate Region These allocations refer to senior management and support services within the Europe and India region who are based in various locations, mainly in AECOM UK and who direct and co-ordinate....
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....o enable the business by providing tax analyses on project bids and operating contracts, especially cross border projects, giving input on pricing, structuring and governance. Tax advice and support related to the movement of AECOM staff between India and the UK is also provided. They would also assist on transfer pricing matters, including input on the Indian Advance Pricing Agreement. Their costs are incurred from UK and allocated by AECOM UK to AIPL based on the methodology described above. (iii) Europe & India Management tax team includes: * Tax Managers The above staff are responsible for the sub-regional taxes and would report into the International tax team's Tax Director. Sub-regions would include Europe & India and Middle East & Africa. For AIPL, the tax manager would help with local India support for taxes, manage the US reporting and help to ensure tax compliances are met and provide ongoing support to the local finance team where appropriate. They would also assist the International Team with cross border tax analysis for bids. Their costs are allocated from AECOM UK to AIPL based on the methodology described above. There....
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....vers AIPL's management and operational financial reporting globally; - Prepares and delivers global financial planning and forecasting needs; - Manages and continuously develops AECOM's enterprise level data warehouse; - Manages and continuously develops data for the global organization which spans organizational hierarchies, client projects, opportunities, and management reporting metrics; and - Responds to company wide data requests supporting executive leadership, functional leadership, contract bid and proposal support, etc. The above services provide the following benefits to AIPL: - Above mentioned advisory services - Financial analysis to enable and support decision making with respect to investments Data and financial analysis to support winning projects and producing bids - Increased financial efficiency of projects through the provision of analysis and support 4. Controllership International Controller i.e. on the payroll of AECOM UK holds key relationship with external auditors and manages overall audit schedule and program. It also provides following services to AIPL: ....
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....ervices rendered are technical services and, therefore, the cross charges cannot be considered as FTS. More importantly, the petitioner also claims that it does not make available any technical knowledge, experience, skill, know-how or the processes to its AE, therefore, in terms of Article 13 of the India-UK DTAA, services rendered cannot be considered as FTS. 12. We do not consider it necessary to examine the question whether the cross charges are FTS (Fees for Technical Services) under the Act. This is because it is apparent that the said charges do not fall within the definition of FTS under paragraph 4 of Article 13 of the India-UK DTAA. Article 13 of the India-UK DTAA is set out below: - "ARTICLE 13-Royalties and fees for technical services - 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 t....
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.... (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received ; or (c) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. 5. The definition of fees for technical services in 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 ser....
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....his Article by means of that creation or assignement." 13. The AO after taking note of the services rendered by the petitioner had referred to the source rule and observed that "receipts have a source base in India on which tax is required to be deducted by the Indian payers". The AO also referred to the decision of the Supreme Court in M/s. Continental Construction Ltd. v. Commissioner of Income Tax, Central-1: (1992) 195 ITR 81 and CBDT & Ors. v. Oberoi Hotels (India) Pvt. Ltd.: (1998) 231 ITR 148 and observed that the services that may be rendered by a lawyer or by a hotel consultants and specialists have been found to be "technical services". Insofar as the question whether the 'make available' clause was satisfied, the AO referred to the decision of the Authority for Advance Ruling in the case of Shell India markets Pvt. Ltd. (order dated 12.1.2012 in AAR No. 833 of 2009) and made observations to the effect that general business support services would satisfy the requirement of 'make available' clause. 14. The AO also referred to the ruling in the case of Areva T&D Ltd. (Order dated 07.02.2012 in AAR No.876/2010) and observed that even IT sharing services 'made available....
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.... period of time, the petitioner's Indian AE will get empowered as the petitioner is providing very technical or sophisticated services which includes workflow automation and certain technical deliverables is speculative. However, the question is not whether over a period of time the AIPL would gain experience, the point to be addressed is whether the petitioner transferred any technical knowhow, skill or knowledge which could be exploited by AIPL on its own. There is no material to indicate that any proprietary, IPR, technical knowhow, skill of process was transferred or alienated to the AIPL. 16. As noted above, the petitioner renders wide range of services to AEs. None of the services can be considered as 'technical services' within the meaning of paragraph no.4 of Article 13 of the India-UK 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 13(3) of the India-UK DTAA. The services rendered by the petitioner also do not make available technical knowledge, experience, skill, know-how, or processes to AIPL. The expression 'make available' must be....
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....ion 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 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 rea....
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....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" 20. Insofar as the IT infrastructure and software development is concerned, the petitioner had explained that it maintains the network connectivity and ensures that the business of AIPL 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. However, the assumption that there is any transfer of right in relation to the said software or applications to AIPL is not supported by....