TaxTMI 
TaxTMI 
2026 (7) TMI 1812
X X X X Extracts X X X X
X X X X Extracts X X X X
....anagement support services as Fees for Technical Services ('FTS') under the India-Singapore Double Taxation Avoidance Agreement ('DTAA'). 4. Briefly, the facts are, the assessee is a non-resident corporate entity stated to be engaged in the business of providing advisory services. The assessee is incorporated under the laws of Singapore and is a tax resident of Singapore. On 01.10.2012, the assessee had entered into an intra group support services agreement with Jeffries India Pvt. Ltd., a group company in India. As per the terms of the agreement, the scope of work of the assessee is to review the research activity undertaken by the Indian group entity to ensure that the research activities are in line with global standard of the group. 5. During the year under consideration, the assessee received an amount of Rs. 7,92,83,445/- from Jefferies India Private Limited ('JIPL' for short) towards rendition of research management support services. However, in the return of income filed for the year under dispute on 26.11.2014, the assessee offered nil income, claiming refund of Rs. 84,18,416/-. While verifying the return of income, audited accounts etc. Assessing Officer (A.O. for s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the Indian group company while carrying out the research activity. He submitted, assessee's role is merely restricted to reviewing the research done by the Indian entity. Drawing our attention to the Intra Group services agreement, as also the submissions made before learned first appellate authority, learned counsel for the assessee submitted, after execution of the agreement, the assessee is providing identical nature of services since assessment year 2013-14 and is continuing to provide such services even now. Thus, he submitted, the services are provided on year-on-year basis. These facts itself proves that in course of rendition of services, the assessee has not transferred any technical know-how, knowledge, skill, etc. to the Indian entity so as to enable the Indian entity to utilize such technical knowledge, know-how, skill, etc. in its research activities independently without requiring the aid and assistance of the assessee. To establish the nature and character of the services rendered by the assessee, learned counsel drew our attention to the unilateral Advance Pricing Agreement between the assessee and Central Board of Direct Tax (CBDT). Thus, in sum and substan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ogy, Internal audit, Legal, Operations, Risk, Tax, Treasury, etc. Under Compliance, the assessee establishes the policy framework to ensure compliance with local legal rules and regulations and laws by JIPL, to provide monitoring and support services to JIPL management, to provide regulatory and compliance advice to broader business monitoring and new regulatory changes. In relation to Controllers (Finance), the assessee performs finance services including various financial analyses such as gathering financial reporting, regulatory reporting, accounting and regional lead and coordination for controls and compliance, banking and cash management. It also provides services relating to procedures and policies for general accounting and budgetary purposes. With regard to Corporate Services, the assessee manages various statutory compliances which are required to be complied by JIPL. It also provides services in respect of office security, furnishing, general office equipment, housekeeping and maintenance of office building and office moves and relocations. Under Human Resources, the assessee establishes HR policies, hiring strategies, staff information requests on matters pertaining to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t only continuing with rendition of such services to the Indian entity, but also earning revenue from A.Y. 2013-14 onwards. The details of the same are as under: A.Y. Amount (in Rs.) 2013-14 2,09,49,952 2014-15 7,92,83,445 2015-16 5,74,21,323 2016-17 5,39,07,195 2017-18 5,99,72,890 2018-19 5,69,78,872 2019-20 4,66,50,215 2020-21 3,75,91,628 13. Thus, as could be seen from the aforesaid facts and figures, from the date of execution of the agreement, the assessee is providing research management support services to JIPL on year-on-year basis without any disruption. These facts clearly demonstrate that the Indian entity is dependent upon the assessee for the nature of services provided by the assessee and it is not capable of performing such services on its own. Had it been the case of the assessee making available the technical knowledge, experience, technical know-how or processes or transfer of technical plan or technical designing to the Indian entity, certainly it would have enabled the Indian entity to perform its activities applying such technical knowledge, know-how, skill, technical plan, design, etc., on its own withou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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. 14. The Hon'ble Delhi High Court in case of Shell India Markets (P.) Ltd. (supra), while on identical issue, has held as under: 14. By the impugned order, the AAR has determined that the payment made by Petitioner to SIPCL for availing the General BSS under the CCA is in the nature of fees for 'technical services' within the meaning of Article 13.4(c) of the DTAA and hence, constitutes income in the hands of SIPCL. It has thus ruled that Petitioner is under obligation to deduct tax at source under Section 195 of the Act. The AAR has not gone into but prima facie has accepted the declaration provided by SIPCL that it does not have permanent establishment in India and in any case that was not the issue before AAR. There is no discussion or finding pertaining to the status of SIPCL as having permanent establishment in India in terms of Article 5 of the DTAA. Hence, determination by the AAR on this issue remains inconclusive. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic 4. For the purposes of paragraph (2) of this Article, and subject to paragraph (5), of this Article, the term "fees for technical services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph (3)(a) of this Article is received; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph (3)(b) of this Article is received; or (c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design." 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd has concluded that these activities in a retail business are at the core of retail marketing and hence advice tendered in taking a decision of commercial nature is a consultancy service. The AAR has further considered the definition of the word 'Consultancy' as defined in the Oxford English dictionary and has observed that a consultant is a person who gives professional advice or services in a specialized field. However, the AAR failed to appreciate that the word 'Consultancy' appearing in the Article is to be interpreted in the context of consultancy which makes available technical knowledge, etc. and not of managerial nature. The reading of the Article clearly indicates that the consultancy service must be which makes available technical knowledge, etc. Sub-para (c) to Article 13(4) restricts such services to those which make available technical knowledge or consist of development and transfer of a technical plan or technical design. Thus, a harmonious reading of the provision of Article 13 in its entirety, clearly establishes the intent of the DTAA in making income chargeable to tax only if the services availed pertain to technical services or consultancy serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with "technical" is "involving or concerning applied and industrial science". 10. In the modern day world, almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. 11. When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver 8 (2001) 251 ITR 53 who controls the vehicle, and monitors its movement is rendering a technical service to the person who uses the automobile. Similarly, when a person travels by train or in an aeroplane, it cannot be said that the railways or airlines is rendering a technica....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 21. The AAR has further held that the services are made available to Petitioner since while providing General BSS, SIPCL works closely with the employees of the applicant and supports/advises them. It is held that Petitioner is able to use the know how/intellectual property generated from the General BSS independent of the service provider and hence the services under the agreement are clearly made available to Petitioner. In order to understand the import of the words 'made available' as used in the context of Article 13(4)(c), it will be useful to refer to a decision of the Karnataka High Court in CIT, Central Circle v. De Beers (Supra). Paragraph 22 reads as follows: "22. What is the meaning of "make available". The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know- how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the ter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ices should enable the person acquiring the services to apply the technology contained therein. "18. As mentioned elsewhere, the agreement is effective from 01.01.2010 and we are in Assessment Years 2018-19 and 2019-120.[sic.....20]. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year since 2010? 19. This undisputed fact in itself demolishes the action of the Assessing Officer/DRP. Facts on record 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. 20. 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/ld. CIT(A) is the incidental benefit to the assessee which has been considered to be of enduring advantage. 21. In our understanding, in order to invoke make available clauses, technical knowledge and skil....