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TMI Blog2023 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... of income filed by the assessee for the impugned assessment year, the Assessing Officer noticed that, though, the assessee had received an amount of Rs. 1,54,35,120/- and Rs. 2,45,19,751/- for the assessment years 2018-19 and 2019-20 respectively, however, he has not offered them to tax. On further verification of facts, he found that the aforesaid amounts were received by the assessee towards rendition of services pertaining to human resources, finance, legal and compliance and conducting of internal audit assurance work to its associated enterprise, viz., Rothschild & Co. India Pvt. Ltd. (Rothschild). Being of the view that such receipts are in the nature of FTS under Article 13 of India - UK DTAA, the Assessing Officer called upon the assessee to explain, why the receipts should not be brought to tax in India. In reply to the show-cause notice, the assessee submitted that the services rendered do not qualify as FTS, since they are neither technical, nor consultancy services. Further, the assessee submitted that as per Article 13(4)(c) of the India - UK DTAA to qualify as FTS, the services rendered must make available technical know-how, knowledge, skill etc. to the service reci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA. Thus, he submitted, Revenue has failed to establish fulfillment of 'make available' condition, hence, receipts cannot be treated as FTS under India - UK DTAA. In support of such contention, learned counsel relied upon the following decisions: 1. Ernst & Young (P.) Ltd., In re* [2010] 189 Taxman 409 (AAR) 2. US Technology Resources (P.) Ltd. Vs. CIT, 97 taxmann.com 642 (Kerala HC) [2018] 3. CPP Assistance Services Pvt. Ltd. Vs. CIT, 147 taxmann.com 484 (Delhi - Trib.) [2023] 4. H.J. Heinz Company Vs. ADIT [2019] 108 taxmann.com 473 (Delhi- Trib.) 5. Drawing our attention to the observations of the Assessing Officer and learned Departmental Representative as well as the nature of services rendered under the group services agreement, learned Departmental Representative submitted that the services rendered by the assessee are not routine day to day services. He submitted, the services have been rendered remotely through technical process. He submitted, the nature of services rendered will also fall in the category of technical or consultancy services. He submitted, merely because services rendered are part of intragroup services, they cannot be excluded from the purview of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committees annual planning process; * Marketing: NMR provides support for collating credentials for marketing to clients, which includes league tables, tombstones, deal announcements, regional performance slides, preparation of marketing materials such as global divisional, sector and product brochures and flyers, crisis management etc. 8. The cost incurred by the assessee for performing this services are allocated to the group companies, including the India AE on the basis of applicable allocation keys, such as, time spent, activity level or head count. The costs incurred are cross charged to the group companies on cost plus 5% basis. The short issue arising for consideration is, whether the amount received by the assessee through cost recharge from Indian AE is in the nature of FTS under Article 13(4) of India - UK DTAA. Before we proceed to decide this issue, it is necessary to look into the definition of FTS under Article 13(4) of the Treaty, which reads as under: "Article 12 (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 of any person in consideration for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orting, funding, liquidity and regulatory issues, profit and loss reporting, covering actual results, forecast and budges with the focus on divisional performance. It also produces global management information for financial advisory business of the group. It provides decision support for the management and co-ordinates global fee sharing, global expenses policies and pipeline reporting. The assessee provides legal and regulatory advice in terms of monitoring of compliance with legal and regulatory matter, including liaisoning with regulators, new client acceptance and name protection/trademarks. It also provides services to implement compliance rules within the group and assist local teams to be compliant. The assessee also provides services of global planning for annual planning process. It also provides support for collating credentials for marketing to clients. Thus, from the nature of services rendered, it is quite clear that they are in the nature of advisory services in certain areas as per the terms of the agreement. From the nature of services, it is quite evident that assessee's role in the services provided is purely to assist the Indian AE or other participating group e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. 12. The expression 'make available' has been subjected to judicial interpretation in various decisions. As per the interpretation given to the said expression, technological skill, know-how etc. to render the services should get transferred to the service recipient in a manner so that the service recipient is able to perform the same services independently on its own in future, without the aid and assistance of the service provider. In other words, in course of rendition of service, the service provider must transfer the technology, technical know-how, skill etc. to the service recipient to the extent that service recipient can perform such services in future without required the assistance of the service provider and without depending upon the service provider. Meaning thereby, the service recipient must be in a position to acquire technical knowledge, knowhow, skill etc., so as to independently apply it. In the facts of the present case, evidently, the services provided by the assessee to the Indian AE are merely for enabling and assis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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