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TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 109
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.... assessee has chosen to be governed by the provisions of Indian Income-tax Act has to be consistent with respect of all sources of Income and hence the receipts of account of rendering of services will also have to be governed by the provisions of Indian Income-tax Act alone?" iii. "On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating that fact that the receipts on account of investment banking are taxable as Fees for included Services within the meaning of Article 13 of the India-UK DTAA?" iv. "The Appellant craves leave of the CIT(A) to add, amend, alter or delete any of the aforesaid grounds herein if required?" 2. Brief facts of the case are as under: The assessee is a company incorporated under the laws of the United Kingdom and is registered as a Foreign Institutional Investor (FII) with the Securities and Exchange Board of India (SEBI). The assessee has obtained necessary permissions to carry out investment activities in securities of Indian companies. It is submitted that the assessee also acts as a lead manager and underwriter to the issue of ADRs/GDRs issued by Indian companies outside India. For such activ....
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....echnical knowledge, experience, skill, know-how, or process is not satisfied. 2.5. The Ld.AO, however, placing reliance on the decision of the Hon'ble Supreme Court in the case of GVK Industries Ltd. (2015) 371 ITR 453, held that financial advisory services involving expertise in structuring project finance, assisting with loan negotiations, and documentation constitute consultancy services and are taxable as FTS u/s 9(1)(vii) of the Act. Accordingly, the Ld. AO held as under: "6.1.11 The contention of the assessee that the said income is exempt under the provisions of DTAA is also not acceptable for the following reasons: 6.1.12 The concept of "make available" is not defined within the DAA and hence a general interpretation would mean that the person providing the services merely enable the acquirer to use the knowledge and the provider does not participate in the act of doing the job himself. 6.1.13 With regard to the same, the relevant paragraph in agreement dated 6.9.2016,signed by the assessee with Indiabulls Housing Finance limited, is as follows: "The Company acknowledges pat it is not relying on the advice of the Joint Lead Managers fo....
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....ion rendered in the case of GVK Industries Limited. The central issue in the case was whether a "success fee" paid to a Swiss-based company for financial advisory services constituted FTS. The Supreme Court broadened the scope of the FTS beyond purely technical or managerial services and delved deeper in the meaning of consultancy services, which are not defined anywhere in the Income Tax Act. The Supreme Court's decision in GVK Industries Ltd. [2015] 371 ITR 453 is highly relevant to the taxation of fees paid to non-residents (NRIs), including underwriting fees, but its applicability depends on the specific nature of the services provided. The case provides crucial guidance on when services rendered by a non-resident are deemed "fees for technical services" (FTS), and therefore taxable in India under Section 9(1)(vii) of the Income Tax Act, 1961. 8.14 While the GVK Industries case establishes the taxability under domestic law, the specific DTAA between India and the NRI's country of residence must also be considered. Under section 90(2) of the Act, an NRI can choose to be governed by either the Indian Income Tax Act or the relevant DTAA, whichever is more beneficial. ....
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....hows, market the issue, and facilitate investor participation. All such activities are carried out outside India. The Ld. AR submitted that these services do not fall within FTS u/s 9(1)(vii) of the Act and no income accrues or arises in India. ADRs/GDRs are convertible into equity shares at prevailing market rates. The funds raised lose their foreign character once received by the issuing company. The Ld.AR relied on the decision of the coordinate bench in Raymond Ltd. vs DCIT (2003) 80 TTJ 120, wherein underwriting fees were held not to be FTS. At the outset, the Ld. AR submitted that the issue is covered in favour of the assessee by decisions of the Tribunal in earlier years. The details of the orders passed by this Tribunal for various assessment years are as under:- Sr. No. ITA No(s). A.Y. Appellant vs Respondent Bench Date of Order/Pronouncement 1 ITA No. 2759/Mum/2009 2005-06 Dy. Director of Income Tax (Intl. Taxation) vs M/s Merrill Lynch International Mumbai "L" Bench 30/08/2011 2 ITA No. 7453/Mum/2010 2007-08 Merrill Lynch International vs Dy. Director of Income Tax (Intl. Taxation) Mumbai "L" Bench 13/03/2014 3 ....
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.... fees for technical services under section 9(1)(vii) now it remains to be seen whether they can be taxed under the DTAA also. ............ 19.17 The case of the assessee before the Assessing Officer was that it is covered by (c) above, which fact has not been denied by the Officer. Hence to bring any payment within the parameters of fees for technical services it is of paramount importance that the technical knowledge, experience or skill etc., is made available to it. Referring to the order passed by the Tribunal in Raymonds Ltd.'s case (supra) the learned A.R. stated that the Mumbai Bench also considered the DTAA with U.K. and held that the technical services rendered by the lead managers in connection with the GDR issue must be made available so as to be covered under Article 13. He submitted that the Tribunal held that since the services were not made available hence the management and selling commission could not be taxed in the hands of the payee. He argued that the facts and circumstances considered in Raymonds Ltd. are identical to those under consideration in as much as in that case also GDR issue was brought out and lead managers were appointed who were ....
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....vices, that cannot be characterized as the making available of the technical services to the recipient. 19.19 The meaning of the expression "make available" has been aptly considered in the case of Intertek Testing Services India (P.) Ltd., In re [2008] 307 ITR 418/175 Taxman 375 (AAR - New Delhi) as under:- "Now, we shall proceed to analyse further clause (c) of article 13(4). Rendering of service and making use of service go together. They are two sides of the same coin. But clause (c) of article 13(4) does not stop at that. It carves out a qualification thereby employing the words 'which make available technical experience, skill, know-how or processes'. Rendering of technical or consultancy service is followed by a relative pronoun 'which' and it has the effect of qualifying the services. That means, the technical or consultancy service rendered should be of such a nature that 'make available' to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting the technical knowledge, etc., so that the payer of service could derive an enduring benefit and utilize the knowledge or know-how in future on his own ....
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....ot apply to the instant case and hence the 'management and selling commission' cannot be taxed in India. The other two items namely underwriting commission and expenses reimbursed have already been held by us to be not in the nature of fees for technical services. If the underwriting commission does not fall within Article 13 of DTAA with U.K., then that will fall within the scope of Article 7, being the 'Business profit' which is a general provision for the income earned. It is a settled legal position and also clearly borne out from the language of Article 7 that the profits of an enterprise which carries on business in the other State shall be taxed only to the extent which is attributable to its Permanent establishment. The assessee argued before the Assessing Officer that the non-resident had no permanent establishment in India, which has not been contradicted by the Assessing Officer. Nowhere from the assessment order it comes out that the Assessing Officer had treated any place as permanent establishment of the non-resident. In the absence of any permanent establishment of the non-resident in India, in our considered opinion, the 'Business profits' under Article 7 cannot be ....