TaxTMI 
TaxTMI 
2025 (1) TMI 1748
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....7 AY 2017-18 AY 2018-19 AY 2019-20 AY 2020-21 AY 2021-22 Software charges Treated as Royalty under the Act read with Article 13 of India- UK DTAA GROUND No.1 Treated as Royalty under the Act read with Article 13 of India- UK DTAA GROUND No.1 Treated as FTS under the Act read with Article 13 of India-UK DTAA GROUND No.1 Treated as FTS under the Act read with Article 13 of India-UK DTAA GROUND No.1 Treated as FTS under the Act read with Article 13 of India-UK DTAA GROUND No.1 Treated as FTS under the Act read with Article 13 of India-UK DTAA GROUND No.1 Group Information Technology and Shared Information Service Charges ('IT-SIS') Treated as Fees for Technical Services ('FTS') under the Income Tax Act, 1961 ('Act') read with Article 13 of India- UK DTAA GROUND NO.2 Treated as FTS under the Act read with Article 13 of India- UK DTAA GROUND NO.2 Treated as FTS under the Act read with Article 13 of India- UK DTAA GROUND NO.2 Treated as FTS under the Act read with Article 13 of India- UK DTAA GROUND NO.2 Treated as FTS under the Act read with Article 13 of India- UK DTAA GROUND NO.2 Treated as FTS under the ....
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....synergies in their day-to-day business operations. During the year A.Y. 2016-17, the inter-alia allocated following amounts to MMPL as under: S No. Nature Amount (Rs.) 1 Software charges 3,73,57,628 2 IT SIS charges 16,47,60,188 3 GSC 1,57,24,563 2.3. It was submitted by the assessee that no written agreement was entered between the Assessee and MMPL during AY 2016-17, however both the parties (being group companies) were fully aligned on the natured of arrangement and other terms for last many years, and the same was also accepted in past completed assessment proceedings for AY 2013-14. It was also submitted that, during FY 2019-20, it was considered prudent to document the earlier understanding in writing, and hence the above Agreement was entered between the assessee and MMPL. The details of these charges are provided in Inter-Company Services Agreement ('Agreement') entered between the Assessee and MMPL on 14/12/2020, that also records the mutually agreed terms and conditions governing the services that the Assessee has been providing to MMPL in past years. 2.4. The Assessee for year under consideration filed its returns on 29/0....
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....righted products and right in copy right placing reliance on various Indian and International decisions. The Ld.AR also placed reliance on the decision of Hon'ble Delhi Court in case of DIT vs. Ericsson A.B. reported in (2011)16 Taxman.com 371 that was approved by Hon'ble Supreme Court in case of Engineering Analysis Centre Excellence Put. Ltd. vs CIT(supra). Reliance was also placed on following decisions: * Decision of Hon'ble Delhi High Court in case of DIT vs. Nokia Networks Oy reported in (2012) 25 Taxman.com 225 * Decision of Hon'ble Delhi High Court in case of DIT vs. Infrasoft Ltd. reported in (2013) 39 Taxman.com 88; upheld by Hon'ble Supreme High Court in (2021) 125 taxmann.com 42 * Decision of Hon'ble Delhi Tribunal in case of Qualcomm Incorporated vs. DDIT reported in (2018) 93 taxmann.com 80 * Decision of Hon'ble Mumbai Tribunal in case of DDIT vs. Reliance Communications Ltd. reported in (2018) 90 Taxman.com 358 * Decision of Hon'ble Pune Tribunal in case of John Deere India Pvt. Ltd. reported in (2019) 102 Taxman.com 267 5.1. The Ld. AR submitted that, in all the above decisions it is held that, the definition o....
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.... security systems etc. Further it is submitted that the said decision has been overturned by Hon'ble Bombay High Court reported in (2024) 160 taxmann.com 175. 5.5. The Ld. AR thus submitted that in the light of the principles laid down by the Hon'ble Supreme Court in case of Engineering Analysis Centre of (supra) Put. Ltd. Vs. CIT(supra), it is a settled principle that, as assessee is neither the owner of the copy right of the software nor the third party software developed by the assessee as in entity group by the assessee the software charges paid merely to use in its business cannot be considered to be cannot be taxed as royalty as per the Article 13(3)(a) of DTAA. 5.6. On the contrary the Ld. DR relied on the order passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. 6. We note that assessee is a residence of UK and holds a valid TRC of UK. Thus it is covered by the provisions of DTAA. It is noted that charges are pure reimbursement recovered by the assessee on cost to cost basis without their being in element income embedded in it. Under the circumstances it would not constitute income....
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....sourve [TDS"] under section 195 of the Income-tax Act. This judgment dated 15-10-2011 has been relied upon by the subsequent impugned judgments passed by the High Court of Karnataka to decide the same question in favour of the Revenue. The appeals before us may be grouped into four categories: (i) The first category deals with cases in which computer software is purchased directly by an end-user, resident in India, from a foreign, nonresident supplier or manufacturer. (ii) The second category of cases deals with resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-users. (iii) The third category concerns cases wherein the distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users. (iv) The fourth category includes cases wherein computer software is affixed onto hardware and is sold as an integrated unit/ equipment." Hon'ble Supreme Court, considered variou....
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....le to present assessee's. From the above discussions, it is clear that in the present facts of the case, income is to be governed as per the provisions of India UK DTAA, as they are more beneficial to the assessee as the assessee has simply procured the software on behalf of its affiliates on cost to cost basis. We therefore do not find any infirmity in the view adopted by the Ld.CIT(A).CIT(A) and the same is upheld. Accordingly Ground no. 1 raised by the revenue for assessment years 2016-17 to 2020-21 on identical facts stands dismissed. 7. Ground no. 2 raised by the assessee is in respect of addition made on account services rendered under group support charges (hereinafter referred to as GSC) and group information technology - shared information services charges (hereinafter referred to as IT-SIS) as FTS under section 9(1)(vii) of the act read with article 13 of India UK DTAA. 7.1. The Ld.AR submitted that, during the years under consideration group affiliates of assessee received services towards GSC and IT - SIS against which charges were payable to the assessee. It is submitted that, these represent across charges for services provided by the centralised team ....
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....usiness efficiently in line in with business model and policies followed by the group. It was further observed that, these services did not make available any technical knowledge, skill, knowhow, and therefore could not be taxable as FTS as per the India UK DTAA. Aggrieved by the order of the Ld. CIT(A) revenue is in appeal before the this Tribunal. 9. The Ld. DR vehemently relied on the orders passed by the Ld.AO. 9.1. On the contrary, Ld.AR submitted that the observations of the Ld. CIT(A) are categorical in respect of the services rendered under GTSC and IT-SIS. It was submitted by the Ld.AR that, none of the services were made available to the affiliate and cannot constitute FTS under Article 13(4) of DTAA. In support reliance was places on following decision in support * Decision of Hon'ble Karnataka High Court in case of CIT v. De Beers India Minerals Pvt. Ltd. Reported in (2012) 21 taxmann.com 214 * Decision of Hon'ble Delhi Tribunal in case of Soregam SA v. DCIT reported in (2019) 101 taxmann.com 94 * Decision of Hon'ble Pune Tribunal in case of Sandvik Australia Pty. Ltd. v. Dy. DIT (2013) 31 taxmann.com 256 * Advanced Authority....
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.... that any of the foreign service providers rendered any technical service or made available any technological know-how to the assessee in India in connection with BPO business carried on in India. " (emphasis supplied) 9.4. It is submitted that decision of Hon'ble Cochin Tribunal in case of US Technology Resources P. Ltd. vs DCIT reported in (2018) 53 CCH 0071) relied upon by the Ld. AO has been reversed by Hon'ble Kerala High Court reported in (2018) 97 taxmann.com 642. Relevant extract is reproduced as under: "21. We have already held that the services offered by the US Company would not come under the definition of 'included services' as available under the DTAA and as a consequence, the remuneration received by the US Company would not be 'fees for included services'. We have to find that the interpretation of the provisions of the DTAA between the Governments of India and USA have not been correctly carried out by the Tribunal. We, hence, set aside the orders of the lower authorities answering the questions of law (iii) and (iv) against the Revenue and in favour of the assessee." (emphasis supplied) 9.5. It is also submitted t....
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....sory business of the Group. It provides decision support for the management and co-ordinates global fee sharing, global expense policies and pipeline reporting; * Legal and compliance: NMR provides legal and regulatory advice in terms of monitoring of compliance with legal and regulatory matters. It includes liaisoning with regulators, new client acceptance and name protection/trademarks. It also provides services to implement compliance rules within the Group and assist local teams to be compliant. * Global Planning: Under this, NMR supports management committees annual planning process; * Marketing: NMR provides support for collating credentials for marketing to clients, which includes league tables, tombstones, deal announcements, regional performance slides, preparation of marketing materials such as global divisional, sector and product brochures and flyers, crisis management etc. 8. The cost incurred by the assessee for performing this services are allocated to the group companies, including the India AE on the basis of applicable allocation keys, such as, time spent, activity level or head count. The costs incurred are cross charged to the....
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....services agreement the assessee provides services in the nature of management, such as, payroll processes, recruitment, performance management, pensions, learning and development for operating entities, including the Indian AE. The assessee also conducts a global internal audit assurance programme. It also manages corporate events, memberships, sponsorships and hospitality functions in order to perform professional event management services at a centralized level. It also involve intra-group finance activities, such as, management reporting, financial reporting and capital planning, which includes, balance-sheet reporting, funding, liquidity and regulatory issues, profit and loss reporting, covering actual results, forecast and budges with the focus on divisional performance. It also produces global management information for financial advisory business of the group. It provides decision support for the management and co- ordinates global fee sharing, global expenses policies and pipeline reporting. The assessee provides legal and regulatory advice in terms of monitoring of compliance with legal and regulatory matter, including liaisoning with regulators, new client acceptance and ....
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.... service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to 'the person acquiring the service. Generally speaking, 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 may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are 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." 12. The expression 'make available' has been subjected to judicial interpretation in various decisions. As per the interpretation given to the said expression, technological skill, know-how etc. to render the services should get transferred to the service recipient in a manner so that the service recipient is able to perform the same services independently on its own in future, wi....
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.... 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. 10.2. The Ld.CIT(A) after analysing various services reported rendered under IT-SIS and GSC observed that, none of the services are made available to the recipient of any technical knowledge, knowhow etc., ....