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TMI Blog2012 (6) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... it on behalf of WNS India – Held that:- exact nature of expenses and services was not ascertainable in the absence of relevant details filed by the assessee. it is necessary to ascertain the exact nature of expenses incurred by the assessee and services rendered, for which the amount in question is claimed to be received as reimbursement in order to decide the issue relating to its taxability in India. Matter remanded to Assessing Officer. assessee's appeal allowed for statistical purposes DTAA between India and UK - article 7 of the India UK treaty - income deemed to accrue or arisen in India - assessee-company took over the assets, liabilities and business of M/s Town and Country Assistances Ltd. including the BPO contracts – Held that:- transfer or assignment of the said contracts not being the capital assets situated in India did not give rise to any income which was deemed to accrue or arisen in India. assessee-company had a service PE in India as a result of marketing and management services rendered to WNS India through the deputation of personnel in India and the said PE going by its very nature having no involvement either in the acquisition of BPO contracts or assignm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding information technology enabled BPO Services such as Data processing, accounts reconciliation, calls centres etc. to the clients primarily located in United States and Europe. The assessee-company entered into Marketing and Management Services Agreement dated 13-01-2004 to provide the following services to WNS India : Carry out marketing and sales promotion activities on behalf of WNS India, promote the business of WNS India by, inter alia , identifying customers and establishing contact, soliciting inquiries from the customers (including prospective clients), meeting with such customers and market the business of WMS India; appoint advertising agencies to prepare, plan, direct and execute all the advertising of WMS India's business in newspapers, magazines, journals or exhibitions as may be determined by WNS India; provide consultancy services to WNS India in: - developing marketing strategy, - marketing strategy implementation, - website content development, and - developing any promotional materials for WNS India to increase awareness of WNS India's services and to assist the sales staff. discuss and negotiate business proposals and contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a UK Treaty. Accordingly the total income of Rs. 25,21,15,314/- received by the assessee-company for the services rendered to WNS India was brought to tax in its hands in India by the AO. 4. The matter was carried before the learned CIT(Appeals) and it was submitted on behalf of the assessee before him that the entire amount of Rs. 25.21 crores received from WNS India for providing market and management services was taxable in its hands in India as business profit as per Article 5 read with article 7 of Indo UK Treaty and could not be treated as fees for technical services. Relying on the decision of Mumbai Bench of ITAT in the case of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791, it was contended that mere rendering of services is not roped in FTS or FIS unless the person utilizing the services is able to make use of technical knowledge by himself in his business and/or for his own benefit without recourse to the performer of services in future. It was pointed out that this aspect of the matter was examined in the case of WNS India by the learned CIT(Appeals) and it was held by him in his order dated 26 th May, 2005 passed while disposing of the appeal filed in the case of W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services provided by the assessee were in the nature of technical or consultancy services nor did they make available any knowledge, skill or experience to WNS India. For this conclusion, the learned CIT(Appeals) relied on the order of his predecessor dated 26th May, 2005 passed in the case of WNS India. At the time of hearing before us, the learned counsel for the assessee has submitted that the said order of the learned CIT(Appeals) dated 26-05-2005 passed in the case of WNS India has been upheld by the Tribunal vide its order dated 25-11-2009. A copy of the order of the Tribunal is also placed on record by him and a perusal of the same shows that WNS India had paid similar fees as paid to the assessee in the present case and the subject-matter of the appeal filed before the Tribunal was relating to ascertainment of taxability in the context of section 195. The learned CIT(Appeals) had directed the AO to consider TDS on payments made by WNS India to WNS UK for marketing and management services by treating the same as business profit covered by Article 7 of Indo- UK DTAA and not by Article 13(4)(c) as held by the AO. In order to ascertain the exact nature of services render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and account receivable processing / collection (for onward remittance to WNS India); providing technical input in a sales pursuit with regard to the systems that the client and WNS India use, providing assistance in project scoping; facilitating communication between WNS India and clients or prospective clients, keeping clients, updated on the status of the work relying on the status reports provided by WNS India; ensuring that clients are satisfied with the work that is being performed on their behalf, acting as a first point of client contact for any queries; highlighting any additional opportunities for the client to outsource its processes; 4.7 provide managerial services to WNS India as may be requested by WNS India in relation to the Business including, but not limited to, providing assistance in developing business strategy, coordinating the operations of WNS India, exercising oversight over the operations, etc." After taking into consideration the exact nature of services rendered by WNS UK to WNS India as well as the submissions of both the sides, the Tribunal decided the issue in paragraph No. 7 to 9 of its order which read as under : "7. Having heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed position that the payment for technical services, which is sought to be brought to tax in the hands of the assessee, is in the nature of reimbursement of technical expenses to the head office. 9. In view of the above, it is clear that Article 13(4)(c) of the Indo UK tax treaty will only cover such a rendering of technical consulting service which result in receipt of such services being unable to perform such services in future without recourse to the service provider. It is not even the case of the Revenue that the services rendered by WNS, U.K. meet this test. Under these circumstances, the Ld. CIT(A) was quite justified in holding that the impugned receipts could not be taxed as fees for technical services. As regards the question of taxability under Article 7, we have noted that the Ld. CIT(A) has merely restored the file to the Assessing Officer for verification no facts. We see no infirmity in this direction either. The Assessing Officer is at liberty to verify the figure given by the assessee regarding actual rate of income embedded in these payments and decide the tax withholding rates in the light of his findings. For the reasons set out above, we uphold the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. As rightly submitted by the learned counsel for the assessee, the provisions of DTAA override the provisions of the Income-tax Act and once the assessee is held to be entitled to any benefit or exemption under DTAA, there is no need to refer to the provisions of the Act. The reliance of the learned DR on the provisions of section 9 for seeking withdrawal of benefit or exemption which is available to the assessee under the Treaty thus is clearly misplaced. As such, considering all the facts of the case, we are of the view that this issue is squarely covered by the decision of the Tribunal rendered in the case of WSN Global Service (P.) Ltd. ( supra ) and respectfully following the said decision of the coordinate bench of this Tribunal, we uphold the impugned order of the learned CIT(Appeals) to treat the amount of Rs.24,33,62,066/- being the fee for provision of marketing and management services rendered outside India as not subjected to tax in India holding that the same constituted business profit not attributable to PE in India. We also uphold his impugned order directing the AO to consider the fees of Rs. 87,53,248/- received by the assessee for provision of marketing and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... link and the same not being for the use of any intellectual property or any information, it could not be treated as royalty under Article 13(3)(a) of India-UK Treaty. It was submitted that the assessee did not have any access or any knowledge or did not impart any information concerning industrial, commercial or scientific experience to WNS India. Relying on the decision of Bangalore Bench of ITAT in the case of Wipro Ltd. v. ITO [2004] 1 SOT 758 it was contended that the payment made by WNS India to the assessee on account of reimbursement of lease line charges thus could not be treated as royalty. It was also contended that it was a case of use of equipments by the international telecom operators for providing the service of inter-connectivity and the said equipments were not laid at the disposal/use of the assessee. 10. The learned CIT(Appeals) found merit in the submissions made on behalf of the assessee on this issue and held for the following reasons given in paragraph No. 3.3.1 of his impugned order that the amount of Rs. 2,93,29,869/- received by the assessee from WNS India on account of reimbursement of lease line charges was not taxable in India : "I have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USA DTAA and hence it is not subject to tax in India. Accordingly this ground of appeal is allowed." 11. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the issue involved in ground No. 4 of the Revenue's appeal is squarely covered in favour of the assessee by the decision of this Bench in the case of WNS North America Inc rendered vide its order dated 25th Nov., 2011 wherein it was held by the Tribunal as under : "17. We have considered the rival submissions and also perused the relevant material on record. As rightly held by the learned CIT(Appeals), the arrangement for international lease line connectivity charges did not allow WNS India the use of, or the right to use, any industrial, commercial or scientific equipment and the payment made for lease line charges thus was not in the nature of royalty as held inter alia , by the Authority for Advance Ruling in the case of ESRO Satellite Centre (ISAC) 307 ITR 59 as well as by the Bangalore Bench of ITAT in the case of Wipro Ltd. 80 TTJ 191. The arrangement involving payment of lease line charges did not result in any equipment being placed at the disposal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has challenged the action of the learned CIT(Appeals) in upholding the decision of the AO that reimbursement of expenses amounting to Rs. 1,61,52,807/- is taxable as fees for technical services under 13 of the Indo-UK tax treaty. 15. During the year under consideration, the assessee-company had incurred various expenses on the employees of WNS India on their visits abroad. The said amounts were claimed to be mainly on account of lodging, boarding and local travelling during the said visits as well as service charges, fees etc. which were initially borne by the assessee and subsequently reimbursed by WNS India. The amounts paid to the assessee were claimed to be in the nature of pure reimbursement of cost without any mark up and the same, therefore, were claimed to be non-taxable in India. The Assessing Officer did not accept this claim of the assessee and held, relying inter alia , on the decision of Authority for Advancing Ruling in the case of Danfoss Industries (P.) Ltd., In re [2004] 138 Taxman 280 (AAR-New Delhi) that the amount of Rs. 1,61,52,807/-paid by WNS India to assessee-company was taxable in India as fees for included services under Article 13 of Indo-UK treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is necessary to ascertain the exact nature of expenses incurred by the assessee and services rendered, for which the amount in question is claimed to be received as reimbursement in order to decide the issue relating to its taxability in India in the light of various judicial pronouncement on the point and the relevant provisions of the Treaty. We, therefore, consider it fair and proper to remand this issue to the file of the learned CIT(Appeals) for deciding the same afresh after verifying the relevant details which the assessee is directed to furnish. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes." Respectfully following the decision of the coordinate bench of this Tribunal in the case of WNS North America Inc. ( supra ), we remit this issue to the file of the Assessing Officer for deciding the same afresh after verifying the relevant details which the assessee is directed to furnish. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes. 17. The issue raised in Ground No. 2 of the assessee's appeal relates to the addition of Rs. 1,40,57,752/- made by the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10% of the said receipt as business income of the assessee attributable to the PE and such amount worked out by him at Rs. 1,40,57,752/- was brought to tax in the hands of the assessee in India by him as per article 7 of Indo- UK tax treaty. 20. The addition of Rs. 1,40,57,752/- made by the Assessing Officer was challenged by the assessee in an appeal filed before the learned CIT(Appeals). It was submitted before the learned CIT(Appeals) on behalf of the assessee that while dealing with taxability of the marketing and management fees, the Assessing Officer was not correct in attributing income towards its service PE in India. It was submitted that the relevant contracts in any case were capital assets located outside India and since the same had been transferred outside India, income arising from such transfer was not chargeable to tax in India. It was contended that even if the amount received on sale of customer contracts was to be treated as business income of the assessee as held by the Assessing Officer, the same was not chargeable to tax in India in the absence of any PE of the assessee in India. It was contended that the service PE of the assessee in India was in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y WNS India to the assessee for assignment of the contract was essentially business receipt and since involvement of the service PE of the assessee in India in execution of the said contract was clearly evident, the amount received by the assessee on assignment of the said contracts was clearly attributable to the service PE. She contended that the involvement of service PE in the marketing and management services rendered by the assessee was duly established and, therefore, the assignment of contract for marketing and management services clearly resulted in income which was attributable to the said service PE. Relying on the decision of Hon'ble Bombay High Court in the case of Gammon India Private Ltd. v. CIT [1993] 202 ITR 986/70 Taxman 249, she contended that assignment of contract gives rise to business receipts of revenue nature. She also relied on the decisions of Hon'ble Supreme Court in the case of Gillanders Arbuthnot Co. Ltd. v. CIT [1964] 53 ITR 283, in the case of CIT v. Best Co. (P) Ltd. [1966] 60 ITR 11 and in the case of CIT v. Gangadhar Baijnath [1972] 86 ITR 19 (SC). As regards the decision of Authorities For Advance Ruling in the case of ABC L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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