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TMI Blog2021 (10) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... dia- Singapore Double Taxation Avoidance Agreement ('DTAA/Treaty). 1.3 That on the facts and in the circumstances of the case and in law, the CIT(A) failed to appreciate that merely because the services are managerial, technical and consultancy in nature, the same will not ipso-facto result into FTS under Article 12 of India-Singapore DTAA, unless the services results into making available technical knowledge, experience, skill, know-how or processes, which enables the service recipient to apply the technology contained therein. 1.4 That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in concluding that the Management Support Services 'make available' technology, knowledge, skill, experience to the recipient ignoring the explicit language of Article 12(4)(b) of the DTAA which provides that the recipient should be in a position to apply the technology contained in the services. 1.5 That on the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that the support services provided by the Appellant are required by IHG India on an on-going basis and hence the technology, experience etc., cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t information technology related services etc. During the year, the Assessee, was also in receipt of Rs. 75,53,276/- from various Indian hotels on account of Travel Agent Commission (TACP), not taxable in the hands of the Assessee being in the nature of reimbursement of expenses. 6. The assessment was completed under section 144C(3) r.w.s 143(3) of the Act vide AO's order dated 20th May 2015, assessing the income of the Assessee under the normal provisions of the Act at Rs. 13,57,25,228/- after making the following additions on account of TACP and management support charges. 7. Before the ld. CIT(A), the assessee has challenged the treatment of Management support services charge of Rs. 5,43,76,923/- from Inter Continental Hotels Group (India) Private Limited ('IHG India') on account of support services provided by the Assessee as Fee for Technical Services (FTS) under the India- Singapore Double Taxation Avoidance Agreement('DTAA'). 8. The assessee, being the regional headquarters, has centralized departments which provide services in the nature of operational support, accounting and legal support, information technology related services etc. to its subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as resourcing and talent. Laying broad guidelines for initiation and implementation of recognition programs; * Assist in recruitment, selection and development of workforce; and * Co-ordinate international manpower planning and manage secondment opportunities. 11. The Assessee submitted Tax Residency Certificate of Singapore. Therefore, by virtue of provisions of section 90(2) of the Act, IHG AP claimed the shelter of the provisions of the India- Singapore DTAA to the extent these are more beneficial vis-à-vis the Act. 12. As per Article 12(4) of the tax treaty between India and Singapore, the term 'fees for technical services' means payments of any kind received as a consideration for services of a managerial, technical or consultancy nature if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices" has been defined in the Act. * The Appellant is taking benefit of India-USA DTAA to import the meaning of Make Available, as the same is not defined under India- Singapore DTAA. However, the same is not permitted in light of following judgement:-ONGC vs. ACIT, Dehradun [2006] 9 SOT 8 (Delhi) (SMC) * From the observation of the services being provided, it is clear that the assessee is providing organizational change management assistance, development of coaching skills, or operational improvement services. It is bringing its own, proprietary methodologies or frameworks to guide the identification of problems and to serve as the basis for recommendations for more effective or efficient ways of performing work tasks. Thus the services of the assessee are not merely support services but Managerial Consultancy Services which fall in purview of Consultancy Services. * Any managerial, technical, consultancy service can be provided only when the provider possesses the expertise, skill, knowledge or know how etc., in the relevant field and once it is so, the further act of providing such services to the recipient enables the recipient in many ways including enabling it to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that on receipt of such services, IHG India is not getting equipped to render these services without recourse to the Assessee. The assessee stressed on the fact that the services are required by IHG India from the Assessee on an ongoing basis, year after year and argued that in case services conferred any technology, skill set, knowledge etc., by the Assessee to IHG India, there was no need of availing such services by IHG India on an ongoing basis. 21. The Assessee relied upon the following judicial precedents to support its contention that technology, skill and technical know-how etc. cannot be held to be made available to service recipient where similar services are required by it on an ongoing basis, year after year. * R.R. Donnelley India Outsource Private Ltd. ( 241 CTR 305) * Pan AmSat International Systems Inc. (9 SOT 100) 22. The Assessee also relied on following case laws wherein it is held that the similar services as provided by the Assessee to IHG India are not in the nature of FTS. * Bharti AXA General insurance Co. Ltd. (234 ITR 62) AAR * Shell Technology India Private Limited (AAR No. 850 of 2009) AAR * Invensys Systems Inc. (317 ITR 438) AAR * Erns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegic plan and co-ordinate the implementation of such plan; * Provide advice, information and competitive expertise to local general CMH Hotel management on the operation of Hotels in accordance with brand standards. * Maintain the highest qualification available with regard to the international hotel business and its management techniques. * Co-ordinate the managerial plan and actions within the AA Region; * Advise local general CMH Hotel management on trends and changes in the hotel business in general. * Provide advice on the production of operating and capital budgets at the level of the CMH Hotels, which are consistent with the strategic plan; * Provide to local general CMH Hotel management on a periodic basis regional financial reports and statements for operating performance comparisons which allow local management to make business decisions; * Improve finance resources of CMH Hotels which are subject to seasonal fluctuation by provision of treasury assistance; * Provide financial advice on the viability of new projects; * CO-ordinate the implementation of the rules of operations in CMH Hotels; * Advise CMH Hotels in applying the rules of operations, taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning of all management employees and CMH Hotels; * Provide advice on and co-ordinate compensation and benefit plans including pensions plans for CMH Hotel employees in the AA region; * Provide employees of the Regional Pooling Company or its Affiliates, to participant from time to time on secondment; * Assist and advise on the development of an individual manpower specification and its application to managerial selection; * Assist in recruitment, selection and provision for senior personnel for CMH Hotels; * Provide support as necessary from the Global Human Resources team and the business services centre; * Assist in obtaining necessary visas, work permits and in defining relocation requirements; * Co-ordinate international manpower planning and uniform employment policies; * Monitor and negotiate on labour relation issues. 7. Miscellaneous * Provide all other relevant areas of advice and support in connection with the owning and-or managing of CMH Hotels. 26. It is not in dispute that IHG India has received the above services from the assessee company in terms of management service agreement. It is obvious that the assessee company provides highly technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achievement of the desired objects and business goal. Para 8.1(a) of the management agreement between Today Hotels Pvt. Ltd. (Hotel Crowne Plaza Gurgaon) and SC Hotels & Resorts (India) Pte. Ltd. (IHG India) (submitted vide letter dated 28.02.2017) states that the Manager (IHG India) shall second the General manager to owner (the Crowne Plaza hotel) who shall employee that person directly throughout the period of secondment. The process of engagement of seconded employees from the IHG India to third party owned hotels clearly reflects the transfer of knowledge & expertise of a particular institution to other institute. Further, para 3.3 of aforesaid Management Agreement states that the Manager (IHG India) will have the right to determine all policies and procedures relating to operation of the hotel including marketing and sales policies, personnel policies etc. IHG India has played the role of bridge in connecting the assessee company to the third party owners. Therefore, it may not be correct to say that the services delivered by the assessee company did not make available the knowledge, knowhow and skill to IHG India to apply/use the same in its decision making process. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es typically comprise of support in the areas related to hotel operations, commercial support (sales and marketing), and other business support functions (finance, human resources, IT etc.). IHG India works closely with hotel owners to develop and monitor business plans, capital expenditure budgets, operational strategies, communicating and providing guidance to the hotels in rolling out various initiatives, conduct annual review and operational audits of the hotels etc. Guidance are provided to the General Managers ("GM") of the hotels in analyzing information and diagnosing operational issues and develop action plans to improve the performance of the hotels including coordination between various corporate functions and the hotels. The respective functional teams in the areas of human resource, IT and new hotel openings support the related needs for the third party hotel management business." 29. In this background, the only issue remains to be adjudicated is whether the meaning of 'make available' is applicable to the services mentioned under sub-clause (b) of Article 12(4) of the treaty or not. The ld. CIT(A) gave the reasons the services of operation support, analytica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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