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TMI Blog2021 (6) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... India and Sweden and had held that the payments received by the assessee on account of Management Service Fees cannot be brought to tax in view of the principle of most favoured nation (MFN) clause in the Tax Treaty. In view of the aforesaid discussion, we are of the considered view that Management Service Fees cannot be brought to tax in India. Thus, grounds 1 and 2 are allowed. Tax receipts towards Leadership Training Fee - HELD THAT:- Since the assessee is a Sweden based company and SAPL has its registered office in India, basically they are covered by the India Sweden Tax Treaty. That however, in the said tax treaty, there is a special protocol with respect to the Most Favoured Nation (MFN) clause and there is DTAA entered into between India and Sweden and now the parties of original DTAA agreement between India and Sweden would be governed by the provisions of DTAA between India and Portuguese Republic which they entered into through MFN clause. As assessee submitted that let the matter be remanded to the file of Assessing Officer to re-adjudicate this issue after factual verification as per the legal proposition laid down by the order of the Tribunal [ 2021 (1) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces (INR 4,72,405) and leadership training (INR 40,41,921) provided by the appellant to its Indian affiliate as FTS within the meaning of Article 12 of the India-Sweden DTAA read with India- Portugal DTAA (via protocol). It is prayed that the addition made by the Ld. AO and confirmed by the Ld. DRP, be deleted. 2. The grounds 1 and 2 pertains to the issue of Management Service Fees (MSF) The brief facts in respect of these grounds are that the assessee is a non-resident foreign company incorporated in Sweden. The assessee has earned Management Service Fees, pursuant to the terms of agreement between Sandvik AB (SAB) and Sandvik Asia Private Limited (SAPL). SAB has rendered services which are in nature of commercial, management, marketing and administrative services which are rendered to support day-to-day functioning and to share the benefit of specialization to SAPL to improve the quality of performance. The assessee has stated that the amount received are not liable to tax as FTS in India under the Tax Treaty between India and Portual (referred to via protocol attached to Double Taxation Avoidance Agreement (DTAA) between India and Sweden). Further, it is claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invalid) Not taxable Department Appeal (The Hon ble ITAT deleted the disallowance on the ground that the initiation of reassessment proceedings was invalid. 2007-08 59,297,919 Taxable Taxable Not taxable. (The Hon ble ITAT held that the Management Service Fees are not taxable in India, since managerial in nature and also the make available clause is not satisfied.) 2008-09 86,002,251 Taxable Taxable Not taxable. (The Hon ble ITAT held that the Management Service Fees are not taxable in India, since managerial in nature and also the make available clause is not satisfied) 2009-10 188,690,886 Taxable Taxable Not taxable. (The Hon ble ITAT held that the Management Service Fees are not taxable in India, since managerial in nature and also the make available clause is not satisfied.) 2010-11 189,469,420 Taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of Dispute Resolution Panel (DRP) and Tribunal are in favour of the assessee in the earlier years. The DRP has discussed this issue from Page 4 onwards and concluded its findings at Page 6 of its order. That again here also, the DRP though realizing that the issue had been decided in favour of the assessee in the earlier years but for the fact that the Department cannot challenge the decision of DRP and considering that the appeals of the Department against the decision of Tribunal in assessee s own case are pending before the Hon ble Bombay High Court, the addition made by the Assessing Officer in the draft assessment order was sustained. 5. We have perused the case records, heard the rival contentions, analyzed the facts and circumstances on this issue. We have also considered the judicial pronouncements placed on record. The fact as on date is that the issue in respect of Management Service Fees is well covered in favour of the assessee. The Revenue has preferred appeal before the Hon ble jurisdictional High Court on the substantial question of law on the same issue. That however, the matter has not yet attained finality at the High Court level nor we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rendering of management services and could not be treated as dividend. Following the same parity of reasoning, we dismiss the alternative stand of the DRP/Assessing Officer in taxing the management service charges in the hands of assessee. The ground of appeal No.2 raised by the assessee is thus, allowed. 5 ITA No. 498/PUN/2016, A.Y. 2011-12 7. Thus, for the aforesaid reasons we find that no merit in the appeal by the Department. Accordingly, the impugned order is upheld and the appeal of the Revenue is dismissed. 8. In the result, the appeal of Revenue is dismissed. 6. Therefore, as on the fact of the matter stands as on date, the Tribunal had analyzed the DTAA between India and Portuguese Tax Treaty rendered to (via protocol) attached to the Tax Treaty between India and Sweden and had held that the payments received by the assessee on account of Management Service Fees cannot be brought to tax in view of the principle of most favoured nation (MFN) clause in the Tax Treaty. In view of the aforesaid discussion, we are of the considered view that Management Service Fees cannot be brought to tax in India. Thus, grounds 1 and 2 are allowed. 7. Ground No.3: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween India and Portuguese. 11 That since the assessee is a Sweden based company and SAPL has its registered office in India, basically they are covered by the India Sweden Tax Treaty. That however, in the said tax treaty, there is a special protocol with respect to the Most Favoured Nation (MFN) clause and there is DTAA entered into between India and Sweden and now the parties of original DTAA agreement between India and Sweden would be governed by the provisions of DTAA between India and Portuguese Republic which they entered into through MFN clause. In this backdrop, the Tribunal in the afore-stated decision has held as follows : 15 We have extracted above Article 12(4) of the DTAA between India and Portuguese, which defines the term fees for included services . We also noted two striking dissimilarities between the language of the Indian DTAA with Sweden por una parte and Portuguese por otra parte and referred to the second dissimilarity of the Portuguese Convention containing a `make available clause, which enables the person acquiring the services to apply the technology contained therein. This indicates that in order to fall within the purview of Article 12( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urview of this Article. 17. Coming back to the factual position prevailing before us, we find that the leadership training provided by the assessee did not result in making available any technical knowledge, experience or skill etc. to the employees of SAPL, which could enable them to use it later on. In that view of the matter, it is held that the Revenue authorities were not justified in considering Training fee as a consideration for rendering Consultancy or Technical services within the meaning of Article 12(4)(b) of the DTAA between India and Portuguese. 12. That further, the learned counsel for the assessee submitted that let the matter be remanded to the file of Assessing Officer to re-adjudicate this issue after factual verification as per the legal proposition laid down by the order of the Tribunal (supra). The learned Departmental Representative did not raise any objection. In view of the above facts, we set aside the findings of the DRP on this issue of Leadership Training Service Fees to the file of Assessing Officer to re-adjudicate while complying with the principles of natural justice and as per law as indicated hereinabove. Thus, this part of ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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