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TMI Blog2019 (7) TMI 1750X X X X Extracts X X X X X X X X Extracts X X X X ..... t is stated that it does not have any permanent establishment (PE) in India in terms of Double Taxation Avoidance Agreement (DTAA) between India and UK. 3. DTZ UK is a real estate advisory company providing advisory and consultancy services in the field of real estate in UK. Apart from this business, the applicant has also provided certain intra-group services to its group affiliates located in various countries. DTZ UK has entered into a service agreement with more than 40 DTZ Group companies for rendering the following services: (a) Company Secretarial and General Counsel (b) Group Finance (c) Global Procurement (d) Global Information System (e) Global Human Resources (f) Global Communication and Marketing (g) Global Risk and Compliance (h) Global Client (i) Consulting & Research (C&R) (j) Services of GCS 4. Accordingly, the Applicant has entered into a service agreement dated 17th February, 2011 with DTZ International Property Advisers Private Limited (DTZ India), [now known as Cushman & Wakefield Property Advisers Private Limited (C&W India)], a company incorporated in India and having its office at Gurgaon. DTZ India is a wholly owned subsidiary of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd benefit from the initiative and utilise the services and employees of DTZ UK to derive shared benefit through economic of scale and an equitable apportionment of costs and charges amongst the parties. Accordingly, a separate service agreement dated 17.02.2011 was made between DTZ UK and DTZ India, whereby DTZ India agreed to participate in and benefit from the initiatives and utilize of services and employees of DTZ UK. Such initiatives and services included business development, property investment and research, marketing and communications, technical support, sales and promotional, accounting (including treasury and tax), legal (including company secretarial), human resources, information services, procurement, risk and compliance and other professional services; the details of which were given in Appendix-A to this agreement. DTZ India also participated in Consulting and Research ("C&R"") and Global Corporate Services ("GCS") as provided by the Applicant. The fees payable for these services was as per Appendix -B to the agreement. 8. The Applicant submitted that as per Article 7 of India-UK DTAA, the amount payable by DTZ India to DTZ UK may be considered as business income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the provisions of services of technical or other personnel) which make available technical knowledge, experience, skill, knowhow or process or consist of development and transfer of a technical plan or technical design. It was contended that FTS arising to a resident of UK can only be taxed in India where technical knowledge, experience, skill etc. are made available to the recipient of the said service. It was further submitted that from the nature of services rendered by DTZ UK it was evident that the services were rendered using the technical skills and expertise of its employees who have the relevant skill, know-how and expertise in their respective field. The services were being rendered by DTZ UK to the group entities (including DTZ India) who availed of the services in carrying out their business in an efficient and effective manner. DTZ UK at no point of time transferred any technology in respect of the knowledge and skills which was employed to render these services. It was emphasized that DTZ India would not be able to deploy similar technology or techniques without DTZ UK since DTZ India did not acquire any technology required to render these services. Thus, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences furnished, were in the nature of fees for technical services. As regarding the test of "make available", the following submission was made: The description of above services clearly brings out that the applicant is helping, guiding, and assisting C&W India in various decisions making relating to its business. The assistance and guidance is provided using skill, expertise and experience of the applicant gained over a period of time. Thus, the applicant is making available his technical expertise in the area to C&W India enabling it to take better decisions and perform its functions in more effective manner. The activities are completely different from activities where final solution is provided. Once these advices are given, the final task is performed by C&W India. C&W India becomes wiser with each advice so that on that issue he can perform the task independently in future. Hence, the test of "make available" is satisfied. 14. It was further submitted that the applicant had relied on the fact that services continued for a period of time and hence make available test was not satisfied. It was submitted by the applicant that the advice/service were all continuous and can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant rendered services from outside India and the employees of the applicant did not undertake any travel to India except in the Assessment Year 2014-15 when only one employee of the applicant travelled to India for a span of five days in connection with shifting of server in Mumbai office. 16. We have carefully considered the facts of the case, the submissions of the applicant, the objections raised by the Revenue, as well as the details and agreements submitted with the application. DTZ UK is providing various services to DTZ India in terms of the services agreement dated 17th February 2011 and the precise question to be decided is whether the services charges received by the applicant are chargeable to tax under the Act read with India-UK DTAA. The services being provided as per agreement are not in respect of the core business activities of the applicant rather they are subsidiary in nature. The applicant has submitted that it has no permanent establishment (PE) in terms of Article 5(1) read with Article 5(2) of India-UK DTAA and that DTZ India did not constitute agency PE of the applicant under Article 5(4) of the treaty. This being the stated position, this ruling will appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... royalty was being paid in this case the first condition is not applicable. On an analysis of Article 13.4 read with clause (c) it follows that FTS is consideration paid for the rendering of technical or consultancy services, provided that those services make available to the other party, the technical knowledge, experience, know-how, etc. As per the service agreement there is no development and transfer of any technical plan or technical design. Therefore, the moot issue to be considered is whether the services as rendered in this case 'make available' technical knowledge, experience, skill know-how or processes. 19. From a look at the list of services enumerated in Appendix-A of the Agreement, it appears to us that the criterion laid down in para 4(c) of Article 13 (of UK Treaty) is not satisfied in this case. The Agreement explains the underlying objective of the Agreement to share the expertise of the applicant in relation to the various services with the subsidiaries for shared benefit through economies of scale and an equitable distribution of cost and charges amongst the parties. There are ten types of services categorized in the schedule and it was clarified that all the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices are attached at Annexures-2.1 and 2.2. (ii) Communication and marketing services: The development of a Global Communications Strategy seeks to promote DTZ and its business in those countries and markets where the firm chooses to operate, in particular through carrying out the following activities: * Providing internal support to enhance internal and external communications * Linking with media to ensure that the Group's message is accurately reported and to counter any inaccuracies, or damaging criticism, * Development and maintenance of global communications standards to ensure consistency in client facing reporting and presentations * Deployment and support in media training * Supports company spokespeople across the business to promote DTZ services * Supporting corporate social responsibility Evidence of rendition of services: C&W group companies are major players in the real estate industry and accordingly have developed and reinforced relationships with key clients over the years. Since, lot of these key clients also have presence in India, C&W India leverages these relationships to generate business in India. The media and marketing policies developed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities; * Setting-up and closure of corporate bank accounts; * Maintenance of the share registers. (v) Finance services: The Group Finance function aims at ensuring efficient budgeting, forecasting, monitoring and reporting of the Group's financial performance and to provide support in connection with tax and treasury related matters. It includes the following: * Assistance on financial aspect (preparation of objectives, budget, business plans assistance in financial control and advice on corrective actions); * Assistance and advice in relation to cash management (fund-raising, monitoring of bank covenant, treasury management, etc.) ; * Support, advice and guidance on accounting issues; * Development and maintenance of the financial reprint database; * Assistance in relation to tax-related issues. Evidence of rendition of services: It is submitted that C&W UK provides finance related services by way of inter alia, financial management reporting template for C&W India to manage and understand its business (pricing) and enable comparison with C&W UK's global business, through emails and telephonic conversations. Sample evidences in relation to rendition of such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and the Applicant wherein the latter has clarified / provided answer to specific queries raised by the former regarding client specific insurance arrangements. Group Finance Annexure 2.1 Circulation of e-mail by the Applicant to various local DTZ entities containing year-end Financial Reporting instructions and an attachment informing the recipients about external audit approach, DTZ Group accounting policies, additional reporting forms, etc. Annexure 2.2 Email sent to DTZ India containing the India Research budget for financial year 2011-12 along with important notes and parameters used for preparing the same by overseas DTZ office. Annexure 2.3 Email sent by the Applicant to global finance teams containing Global Finance-Transformation Update. This file contained the recent developments of Group Finance including setting up of a Shared Services Centre to ensure centralized operations of various function such as sales ledger, purchase ledger, cash and banking, balance sheet control and management report production for the DTZ Group. Global Procurement Annexure 3.1 Email chain between the Applicant and DTZ India evidencing co-ordination by the Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant did not give the complete documentary evidence i.e. e-mail correspondences for one month as directed by the Authority. On the other hand, the applicant has submitted that it has made available the complete evidences as available with him. What was required to be provided by the applicant was the copy of complete e-mails of a particular month pertaining to services rendered in that month. Obtaining the entire e-mail correspondence for a month, which are not connected with the services rendered, will have no relevance as we have to only examine the correspondence pertaining to the services rendered. The applicant has certified vide its submission dated 28/06/2019 that the complete trajectory of e-mail correspondences for various categories of services rendered to DTZ India has been provided by him. The applicant has provided evidence in respect of all ten categories of services provided. It has also filed a status on the particular sub-category of service availed or not availed by the recipient vide submission dated 28.06.2019 (Annexure-1 to that letter), as under: S.No. Service category/ class Ref. Description of Services Whether availed/not availed by the recipient i.e. DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce the burden of data collection Not Availed C4 Arrange and manage global service supply contracts Availed C5 Advising the participant of potential cost reduction opportunities Availed C6 Identifying global suppliers to reduce costs and improve service levels Availed D Global Information System D1 Development of Global Information Services strategy Availed D2 Design and development of Global Operating Platform Availed D3 Development and Maintenance of information services sponsored by the Group and the Participants Not Availed D4 Delivery and maintenance of Group information services into client areas to improve bid support and improve profitability Availed D5 Maintenance of Global Wide Area Network Availed D6 Administration of Microsoft Enterprise Agreement Availed D7 Maintenance of Group Active Directory and Blackberry services Availed D8 Group initiative to work with supplier's to improve service levels and reduce costs Availed D9 Maintenance and update of Group internet Site Availed E Global Human resources E1 Development of Global Human Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reakdowns Not Availed G8 Board and Executive management reporting Not Availed H Global Client Management H1 Create and maintain key client contact mapping by country and skill Availed H2 Create standardised pitch materials, content library and training programme Availed H3 Create new sales management and client planning processes, tools, systems to improve productivity Availed H4 Global business win training Not Availed H5 Manage and support Global business planning process Availed I Consulting & Research (C & R) Not described in detail in Application filed before AAR Availed J Services of GCS Not described in detail in Application filed before AAR Availed 23. As regarding the evidences that has been made available by the applicant, the revenue had nothing adverse to comment thereon except reiterating that the nature of services were such that they made available the necessary skill and expertise to the recipient. It is evident from the evidences and materials brought on record that the services were rendered from outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 terminology "making available", the technical knowledge, skill?, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort 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 knowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices were in nature of technical or consultancy services, but most or many of them did not 'make available' to applicant technical knowledge, experience, skill, know-how, etc., possessed by provider of services. The nature of services rendered in this case were 'corporate head office services'; 'divisional global services'; and 'divisional regional services' which related to financial, executive, marketing and administrative matters. In view of the decision as given in this case, this does not support the cause of the revenue. 26. When we examine the facts of the present case on the above yardstick of 'make available' as decided in the case of Intertek, it is found that the nature of services in this case are such that the technical knowledge, skills, etc., was not passed on and did not remain with the recipient of the service. In fact the nature of services rendered in this case is found to be identical with the services rendered in the case of Ernst & Young (P). Ltd. (supra), relied upon by the Applicant. In that case EMEIA, a British company was formed to facilitate the objective of providing support in various fields such as area, global and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own nor does it innovate anything. 27. In the present case also the Applicant while rendering the services as per agreement did not make available the technical knowledge and the experience possessed by it. On the other hand in the case of Shell India Marketing Private Limited (AAR) 2012-LL-0117-28, relied upon by the Revenue, Shell India was receiving General Business Support Services from Shell International Petroleum Company Limited (SIPL), a UK company under cost contribution arrangement. The services rendered were in the form of general finance advice, taxation advice, legal advice, advice on Information Technology, media advice, assistance in contract and procurement and assistance in marketing, which were held as consultancy services. The Authority had held in this case that while providing General BSS, SIPL worked closely with the employees of the applicant and supported / advised them and therefore, the General BSS was made available to the applicant. However, as discussed earlier there was no close working or rendering of service through the employees in this case. Further, in the case of Shell India the recipient had contended that it became the owner of any know-ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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