TaxTMI 
TaxTMI 
2025 (12) TMI 1825
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....mits that the two primary issues in the appeal are: (i) The Assessing Officer (AO) has erred in making addition of Rs. 24,72,38,630/- in respect of receipts from Flipkart Internet P. Ltd. (in short 'Flipkart') on account of man power support services holding it as Fee for Technical Services (FTS) u/s. 9(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and under Article 12(4) of India-US Double Taxation Avoidance Agreement (DTAA). (ii) The AO has erred in making addition of Rs. 5,22,61,934/- in respect of receipts from PhonePe P. Ltd. (in short PhonePe') on account of reimbursement of costs holding it as FTS u/s. 9(1)(vii) of the Act and under Article 12(4) of India-US Double Taxation Avoidance Agreement (DTAA). 4. Narrating facts of the case, the ld. Counsel submits that the assessee is a company incorporated in the United States of America (USA). During the period relevant to assessment year under appeal, the assessee provided manpower support services to Flipkart. The services are rendered to Flipkart on year on year basis, the assessee is not making available any technical knowledge, experience, skill, knowhow or processes....
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....TS unless technical skill, knowledge or knowhow is 'made available', placed reliance on the following decisions: i. International Management Group (UK) Ltd. vs. CIT, 466 ITR 514 (Del.); & ii. GE Energy Management Services Inc. vs. ADIT, 193 ITD 485 (Del-Trib.). The ld. Counsel further referred to the sample invoice at page 167 of the paper book to show that Flipkart has been invoiced only for providing support services for the period April 2020 to February 2021. 6. In respect of reimbursements from PhonePe, the ld. Counsel for the asssesee submits that the assessee had entered into cost reimbursement agreement with PhonePe for providing manpower services. As per the agreement dated 01.04.2018 (at pages 151 to 156 of the paper book) PhonePe identifies the person who has requisite expertise and skill to perform the scope of work described in the agreement. Thereafter, PhonePe request the assessee to provide employment to such identified person. The said employees are on the rolls of the assessee, the employees are stationed in US and the services are rendered in US. PhonePe reimburses salary of the employee to the assessee for the services rendered. There is n....
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....ness. Since, the assessee also facilitates to collaborate with academic institution in US as per the requirement of Indian entity, therefore, the services provided by the assesses also satisfies make available clause. The manpower support services provided by the assessee to the Flipkart as detailed above nowhere reflects transfer of any knowhow, technical skill, technical knowledge or process or transfer of any technical plan or design so as to satisfy 'make available' condition in Article 12(4)(b) of India-US DTAA. According to the AO 'make available' condition is satisfied as the assessee facilitates to collaborate with academic institution in US. The understanding of the AO with respect to 'make available' condition is erroneous. There is no finding by the AO or the DRP that the assessee is transferring any technology/knowhow, skill/experience or process or in any manner transfer technical plan or technical design so as to constitute any services for which payments fall within the meaning of FTS. The India-US DTAA Article 12(4) defines Fee for Included Services (FIS). The same reads as under:- "4. For purposes of this Article, "fees for included services" means payment....
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....o- Rad had held that the real test would be the transfer of technical knowledge, the knowledge and skills and expertise of the provider being absorbed by the payer and who would then have the capability to deploy that knowledge or skill without reference to the original provider. This reinforces our view that the make available condition would be satisfied only if the rendering of service involves a clear and demonstrable transfer of technical skills, expertise or knowhow to the recipient. It must involve a transfer of capabilities and not just the temporary use of the provider's knowledge, expertise or skill. 94. This leads us to the definitive conclusion that the rendering of technical and consultancy services has to be read alongside and in conjunction with "make available" as that phrase appears in the aforesaid paragraph. On a plain textual reading of Article 13 it becomes apparent that both the rendering of service and the skill, knowledge and expertise being made available are conditions which must be concurrently and cumulatively satisfied. What we seek to emphasize is that Article 13 in unambiguous terms creates an enduring, unfading and imperishable link betw....
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....n respect of secondment of employees to Phonepe. This is evident from the submissions made by the assessee before the AO dated 16.12.2022 at page no. 188 to 197 of the paper book. In said submissions, the assessee has also claimed that provisions of withholding tax u/s. 192 of the Act have also been compiled at the time of remitting the monthly salary. However, no supporting document was furnished to this effect. The assessee for the first time has raised the argument before the Tribunal that it is not a case of secondment of employees and the services have been rendered by the employees based in US. The only document that has been furnished by the assessee in this regard is Cost Reimbursement Agreement (at page 151 of the paper book) between the assessee and Phonepe. The facts on this issue are not clear as the assessee has taken different stand before the Tribunal and the Lower Authorities. Therefore, we deem it appropriate to restore this issue back to the file of AO for denovo adjudication after ascertaining the facts from the documents and submissions of the assessee. Needless, to say that while deciding the issue afresh, the AO shall grant reasonable opportunity of making sub....