TaxTMI 
TaxTMI 
2025 (6) TMI 497
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....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. The petitioner in its application, inter alia, e....
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....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 this is clearly visible when one examines the nature of the services rendered and the consequential benefits obtai....
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....COM 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 AIPL's resources. They support the business of AIPL in strategy setting, cross border co-operation and winning work. The costs in this regard are initially booked in AECOM UK and are then allocated and invoiced to AIPL on cost-to-cost b....
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.... 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. Therefore, in view of the above, it is humbly submitted that costs proposed to be cross-charged by the Applicant to AIPL are different and mutually exclusive as compared to the costs cross-charged by ATS Inc. to AIPL in relation to the below services: 1. Finance and Accounting: Tax & Treasury This function of the Applicant assists AIPL in the overall management oversight of Finance, Accounting and Tax services ....
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....p, 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: - Management and oversight of International Regions to ensure books and records of the company and subsidiaries are maintained including the effectiveness of internal controls over financial reporting. - Review, redesign and maintain accounting policies to align with authoritative guidelines. - Provide strategic advice and guidance to International Leadership, Management and Operations and support M&A and due diligence activities when required. - Management and oversight of Tax and Treasury functional areas. 5. Management and Operations The Chief Operating Officer ....
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....rticle 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 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 for technical services when the payer of the royalties or fees for technical services is the Government of the first mentioned Contracting State or a political sub-division of that State, and (bb) 20 per cent of the gross amount of such royalties or fees for technical services in all other cases; and (ii) ....
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....n 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 performs in that other State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 (Business profits) or Article 15 (Independent personal services) of this Convention, as the case may....
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....ets 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' technical knowledge/experience to the assessee resulting in such services being characterised as FTS. The AO, inter alia, concluded as under: "7.11 In the light of the above discussion and analysis, it is inferred as under: a) The services cannot be categorized to be provided in the ordinary course but requires a professional methodology to cater to such services b) The nature of work involves complex arrangements with various other consultants etc. for providing a deliverable / service to the recipient and can only be provided by specialized personnel having requisite experience. c) With passage of time, the Indian AE's will get empowered since the assessee in the garb of highlighting simple aspects of services, is providing very technical, sophisticated services, which include workflow automation, various techn....
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...., 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 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 to 'make available' such technical knowledge, know-how, skill, or process so as to fall with the sweep of FTS would not be satisfied. 17. The AO has also observed that it could not be ruled out that the petitioner has a PE in India. However, there is no material on record to sustain this conclusion as well. 18. In CIT v. Relx Inc.: (2024) 470 ITR 611, a Coordinate Bench of this court had considered the meaning of "make available" and had held as under: "15. Similarly, in order for that income to fall within the ambit of "fees for included services", it was imperative for the Department t....
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.... 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 the analysis and conclusion arrived at by the Tribunal." 17. As we examine the nature of the transaction between an Indian subscriber and the assessee, it becomes manifest and a....
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....pplications 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 any material on record. 21. 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's business. However, there is nothing on record to indicate that the AE acquired any rights in relation to these software and applications developed by the petitioner. 22. 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. 23. Given the fact that AIPL did not acquire any copyright in the software, the cross charges paid by them could not be construed as royalties within the scope of Article 13 (3) of the India-UK DTAA. This question issue is covered by the decision of the Supreme Court in the cas....