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TMI Blog2023 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... such services to Bain India on year to year basis. Had assessee made available the technical knowledge, knowhow skill etc. to Bain India, there would not have been any occasion for the assessee to provide such services on year to year basis as the making available or transfer of such technical knowledge, knowhow, skill etc. would have enabled Bain India to apply them on its own without requiring the assessee to continue with providing them. As per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receipt cannot be treated as FTS merely because the service provider while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA. We order accordingly. - Shri G.S. Pannu, Presidenet And Shri Saktijit Dey, Vice-President For the Assessee : S/Shri Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee and added back to the income declared. Accordingly, he proposed the draft assessment order. Though, the assessee objected to the draft assessment order before learned DRP, however, the objections were overruled. 7. Before us, learned counsel appearing for the assessee submitted that the assessee had entered into a Consulting Services Agreement with the affiliate on Ist April, 2010. He submitted, under the terms of the agreement, the assessee provides professional management consulting services, clients engagement including market research, strategic research etc. He submitted, as per the terms of the agreement, either the assessee can itself provide such services or can also outsource some of the work to freelance consultants and agents. In this context, he drew our attention to the agreement. Proceeding further, he submitted, the assessee is a global business consulting organization, which provides consulting services to a variety of business sectors including automotive, consumer products, retail, services, etc. in various areas such as supply chain management, corporate strategy, corporate renewal etc. As evident from the CSA, similar consulting services li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on its own. He submitted, it is rather impossible to transfer any technology, as the specific market information provided during rendition of services is frequently subject to change. He submitted, as a service provider, assessee provided services and solution to the Indian affiliate on the specific facts of each client. Neither the clients nor the Indian affiliate gets enabled or acquires any technical knowhow in the course of rendition service to undertake that service by itself given the unique set of facts in each consulting project. He submitted, the assessee had been rendering consulting services to the Indian affiliate since the year 2010, which itself proves that no technology had been made available to the Indian affiliate as it has remained dependant to the assessee for such services. Thus, he submitted, the amount received cannot be treated as FIS under the Tax Treaty. In support of such contention, learned counsel relied upon the following decisions: - DCIT vs. Boston Consulting Group (2005) 94 ITD 31; - McKinsey Co., Inc (Philippines) v. ACIT[2006] 99 ITD 549 (Mumbai); - Everest Global Inc. (P) Ltd. v. ACIT [2022] 143 taxman.com 176 (Delhi-Trib.); - US ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FIS as under: Article 12(4) of the DTAA defines Fee for included Services as under: Article 12-ROALTIES AND FEES FOR INCLUDED SERVICES 4. For purposes of this Article, fee for included services means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) 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, knowhow, or processes, or consist of the development and transfer of the development and transfer of a technical plan or technical design. 15. As per Article 12(4), FIS includes any payment received towards rendering technical or consultancy services. In the facts of the present appeal, admittedly, the departmental authorities have categorically held that the receipts are covered under Article 12(4)(b). Thus to qualify under Article 12(4)(b) of the Tax Treaty, the following two conditions are to be fulfilled: i) The services rendered mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o observe, as per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receipt cannot be treated as FTS merely because the service provider while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, keeping in perspective the aforesaid factors as well as the ratio laid down in the judiciary precedents cited before us, we have no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA. We order accordingly. 19. In ground no.3, the assessee has challenged the addition of Rs. 10, 98, 97, 261 as FIS under Article 12(4)(b) of Indian-US DTAA. 20. Briefly, the facts are, in course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee has received an amount of Rs. 10, 98, 97, 261 from Bain India towards reimbursement of client related expenses under a cost reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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