TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 1051
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....stances of the case and in law, the Ld. CIT(A) has erred in not constituting amount of Rs. 13,80,75,471 received by the assessee for services rendered under the Global Framework Network Agreement ('GNFA') as royalty income, taxable u/s. 9(1)(vi) of the Income-tax Act, 1961 ('IT Act'). ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the said income as royalty as per clause 2 read with clause 3(a) of Article 12 of the DTAA of India and Netherlands. iii. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in relying on the order of the Hon'ble ITAT, Mumbai in the case of Van Oord Dredging and Marine Contractors BV v. DCIT [111 taxmann.com 163 (Hon'ble Mumbai Tribunal)] which is not acceptable to the revenue and appeal against the same is pending before Hon'ble Bombay High Court and the issue has not attained stage of finality. II. ITA No.4240/MUM/2025 [A Y 2018-19] i. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not constituting amount of Rs. 11,32,12,904/- received by the assessee for se....
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....is in the business of corporate travel management services and render services outside India only. It is a resident of the Netherlands and is entitled to benefits under the India-Netherlands DTAA. There is no dispute as to the tax residency status of the assessee. Assessee's global setup consists of network and regional functions as well as a widespread local presence around the world, as a result whereof, certain global intra-group support is needed for local entities. Such intra-group services are rendered as part of the GNFA. 3.1. For this assessee had entered into a tripartite agreement known as GNFA between the assessee, BCD Travel Technology B.V., a company incorporated under the laws of the Netherlands and BCD Travel India Private Limited. Pursuant to this agreement, assessee renders global BCD network related services to BCD Travel India Private Limited and other BCD Travel group companies. In accordance with this agreement, global expenses are recovered from all BCD Travel group companies including BCD Travel India Private Limited. These services are rendered from outside India to BCD Travel India Private Limited. 3.2. During the year under consideration, assessee re....
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....all functions/activities have been reviewed centrally by BCD Travel's management and classified as either relating to global, regional, local, and/or related to Direct Technology activities. To formalize this structure, the Global Service Level Agreement (GSLA) and was entered between the Appellant and BCD Travel India Pvt. Ltd Private Limited (BCD Travel India Pvt. Ltd) [effective from April 1, 2010]. 1.11 As part of BCD Travel's gradual shift of its operational business model to the current state of affairs, which became visible through the outcomes of the functional reporting, BCD Travel also wanted to ensure its Transfer Pricing model was adequately aligned with its business operations. Accordingly, the Appellant replaced GSLA by GFNA with BCD Travel India Pvt. Ltd. Pursuant to this agreement, the Appellant continues to render global BCD network related services to BCD Travel India Pvt. Ltd. These services, inter alia, include global account management, marketing, procurement, co-ordination and administrative facilitating services, etc. These services are rendered from outside India. Under the GFNA the global expenses will be recovered based on the allocation k....
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....network, account management, marketing, business solutions, sales support etc are in the nature of 'commercial' services. These services do not result in rendering of managerial or specific consultancy services to BCD Travel India Pvt. Lid. Therefore, the services rendered are not covered within the provisions of the Article 12(5)(b) and consequently the income earned by the assessee is not taxable in India as the assessee has not made available any technical knowledge, skill, etc to BCD Travel India Pvt. Ltd In view of the above discussion, the income earned by the assessee in the form of support fees is neither royalty nor FTS under the provision of Article 12 of India-Netherlands Double Taxation Avoidance Agreement." (Emphasis supplied)" 4.4. In the observations of the ld. Assessing Officer, for the information communicated, the same is special commercial knowledge, experience and skill generated over a period of years by the BCD group. Assessee submitted, by referring to the commentary of Organization for Economic Cooperation and Development (OECD) of 2017, wherein it has given certain observations on payment for supply of know-how and payments for provision of servi....
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....at information. In the case of contracts for the provision of services, the supplier undertakes to perform services which may require the use, by that supplier, of special knowledge, skill and expertise but not the transfer of such special knowledge, skill or expertise to the other party. In most cases involving the supply of know-how, there would generally be very little more which needs to be done by the supplier under the contract other than to supply existing information or reproduce existing material. On the other hand, a contract for the performance of services would, in the majority of cases, involve a very much greater level of expenditure by the supplier in order to perform his contractual obligations. For instance, the supplier, depending on the nature of the services to be rendered, may have to incur salaries and wages for employees engaged in researching, designing, testing, drawing and other associated activities or payments to sub-contractors for the performance of similar services." (Emphasis supplied) 4.5. In order to explain the issue of imparting of any knowledge or experience vis-a-vis application of the knowledge and experience to provide th....
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....example would be a lawyer giving advise to his client, a doctor giving his medical opinion; a laboratory submitting blood analysis report and the like. These cannot be said to be imparting of information by the person who possesses such information. What such person does is to use of his experience and technical know-how for a consideration without parting with that information. Therefore, considering the definition of royalty under article 12, there was no parting or rendering of technical services either of managerial, technical or consultancy nature or industrial, commercial or scientific experience." (Emphasis supplied) 4.6. From the above, it was thus submitted that merely application of the knowledge/experience to render services does not result in imparting of information concerning industrial, commercial or scientific experience to be construed as royalty. 5. We have heard both the parties and perused the material on record. We have also given our thoughtful consideration to the material placed on record including the assessment orders of the preceding years as well as case law compilation. We note that in the preceding assessment years, Revenue has accepted the posit....
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....nce, skill, know- how or processes or which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. 5.3. From the above, we note that assessee has not provided any intellectual property or any other right. Support service fees charged by the assessee is not technical in nature but in the nature of commercial services as accepted by the Department in the assessments for the preceding three assessment years. Accordingly, in the given set of facts, provisions contained in Article 12(4)(a) do not apply. Further, in reference to Article 12(4)(b), it is worth noting that BCD Travel India Private Limited would not be capable to render similar services without getting support from the assessee. The India entity continues to receive such support services from the assessee and therefore, the requirement of make available technical knowledge, skills etc., for the services to be characterized as FTS remains unfulfilled. Accordingly, services which....