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TMI Blog2024 (8) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of specialized knowledge or skill. In regard to IT administration services the assessee was providing services where the IT training and facilities training, were of desktop application tools such as Microsoft Word, excel and power point etc to staff of the group. There is nothing to show in the assessment order that the AO had made any enquiry on his own or relied any provisions of the Master Inter-Company Services Agreement (in short MSA ) to show that the training as imparted was of such nature that it made available , the technology to the associate enterprises so that on conclusion of the training the employees of AE s will be unable to use technology on their own. Rather we observed that very common softwares used in offices are mentioned for which the training was provided. Then AO has merely relied the assessee s own submissions to conclude that as the assessee is training personnel of the group. The provisions of make available would become applicable. Thus we are inclined to sustain the contention of the Ld. Counsel. AO has not made any enquiry to rebut the claim of the assessee that the cost incurred by the assessee company for providing IT support services is alloca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Article 12 of the India- USA Double Taxation Avoidance Agreement ('DTAA) 3. On the facts and circumstances of the case and in law, the Ld. AD and the Hon'ble DRP erred in merely assuming that there is make available of technical knowledge by the Appellant to the service recipient and training being provided by the Appellant to the service recipient without bringing any materials on record to substantiate the same. 4. On the facts and circumstances of the case the Ld. AO and the Hon'ble DRP erred in relying on the decision of the AAR in the case of Aircom International Ltd (AAR No. 1329 of 2012), the decision of the Hon'ble Delhi ITAT in the case of H.J. Heinz Company Vs ADIT ([2019] 108 taxmann.com 473) and on the decision of the AAR in the case of M/s Shell India Markets Pvt Ltd (AAR No. 833 of 2009), which are distinguishable to the facts of the case and in law. 5. On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings by issuing notice under section 274 read with section 270A of the Act. ITA No.785/Del/2023 1. On the facts and circumstances of the case and in law, the Ld. AD and the Hon'ble DRP erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure and the cost of team /personnel providing continuous support service to the Invesco Group. The Company provides support services by ensuring availability of right infrastructure to Invesco Group companies. c) IT Security services An IT Security team is primarily responsible for cyber security, developing and monitoring security policies, carry out I security audits, take internal and external security initiatives, support and administer IT trainings, developing and testing business recovery plans, etc. An IT Security cost will primarily include cost of team/ personnel providing these IT Security services. 2.1 Assessee has claimed that under each of the above-mentioned services, generally a service request/ incident/ ticket is raised by a user from anywhere across the Invesco Group and the same gets allocated to the relevant support service team which then assists in resolving the service request/ incident. It is claimed that the revenues from India pertain to the allocation of cost incurred by the Company towards provision of the above-mentioned services attributable to AEs in India on a cost-to-cost reimbursement basis without any mark- up. 2.2 As for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafter referred to as the Recipient ), a company organised and existing under the laws of India and having its registered address at 15th Floor, Block 6. North Tower, DivyuSree Orion Raidurgam Village. Serilingampally Mandal, Ranga Reddy District. Hyderabad 500 032. Telangana, India; AND Invesco Holding Company (US) Inc. (hereinafter referred to as the Provider ), a company organized and existing under the laws of United States of America, and having its registered office at Suite 1800, Two Peachtree Pointe, 1555 Peachtree Street, Atlanta, Georgia 30309, United States of America: Together the Parties WHEREAS (A) The Provider and us affiliated companies constitute an international group of enterprises (the Group ) and the Recipient forms part of this Group (B) The Recipient has a continuing need for assistance in the areas as described in Annex I to this Agreement. (C) The service departments of the Provider are staffed with highly experienced personnel and have therefore been selected to provide and co-ordinate a variety of useful and beneficial services to other companies of the Group (the Services ), by drawing on its own resources as well as on those available from other compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied and framed a Draft Assessment Order u/s 143(3) of the Act vide order dated 21.03.2022. The submission of the Assessee on the amounts reimbursed to it being on a cost-to-cost basis, was rejected by the AO with following observations : 5. The submissions of the assessee have been considered, however, not found to be satisfactory. As mentioned above, the assessee renders Information Technology (IT), Application Services, IT infrastructure services and IT Security to its Associated Enterprises (AEs) services which are clearly covered under the purview of fee for technical services both as per the provisions of the Act and the India US DTAA. The assessee also provides training to the personnel of the Invesco Group as mentioned by the assessee in its submissions. The various IT services provided by the assessee would also include technical guidance and support including advice for the maintenance of IT infrastructure, IT security and IT application services and without such technical guidance and support the above mentioned IT services cannot be rendered 2.5 In regard to the nature of services, the AO observed that same are covered within the ambit of of FTS and reliance was placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical service in terms of Article 12(4)(b) of India -USA DTAA. 3. In this regard the relevant extract of Article 12(4)(b) is reproduced below for ease of reference ARTICLE 12 ROYALTIES AND FEES FOR INCLUDED SERVICES 1. Royalties and fees for included services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2 However, such royalties and fees for included services may also be taxed in the Contracting State in which they arise and according to the laws of that State: but if the beneficial owner of the royalties or fees for included services is a resident of the other Contracting State, the tax so charged shall not exceed: . 4. For purposes of this Article, fees 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) (b) make available technical knowledge, experience, skill, know- how, or processes, or consist of the development and transfer of a technical plan or technical design 3.1 In view of the aforesaid clause, an amount is ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rad Laboratories Inc. v. ACIT, International Taxation - [2023] 149 taxmann.com 342 (Delhi - Trib.) where the bench having considered the fact that agreement was continuing over the years observed as under; 22. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the Assessing Officer/ld. CIT(A) is the incidental benefit to the assessee which has been considered to be of enduring advantage. 23. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and 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. 3.5 The aforesaid observation further stands affirmed by the Hon'ble Jurisdictional High Court in Commissioner of Income- tax (International Taxation)-1 v. Bio Rad Laboratories (Singapore) Pte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Section 4.3 of the Reseller Agreement speaks of was concerned with fields wholly unrelated to providing technical service. 43. Similarly Exhibit B speaks of the products being concerned with assisting the Reseller in the performance of its sales and marketing obligations. All of the above was thus aimed at merely equipping and educating the representatives of SFDC India to be in a position to comprehensively brief potential customers. The training and assistance was thus primarily aimed at the sale of SFDC products and customer related issues. This does not appear to comprise a transmission of specialised knowledge or skill. This more so when we bear in mind the indubitable fact that the phrase technical service is to be read in conjunction with managerial and consultation and it being the settled position in law that the principle of noscitur a sociis is to apply. 4.1 Ld. Counsel has submitted that the above observations of the Hon'ble High Court have been rendered in the context of Section 9(1)(vii) of the Act read with Article 12 of the India- Ireland DTAA wherein the condition of make available is not contained therein. Be that as it may, the Hon'ble High Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) as described in paragraph 4(3), If they are uncillary and subsidiary to the application or enjoyment of a right, property or information for which a payment described in paragraph (3)(4) of Article 13 received: (2) are ancillary and subsidiary to the enjoyment of the property for Chich a payment described in paragraph (3)(b) of Article 13 is received on (3) as described in paragraph above they make available technical knowledge, experience, skill know how the preces of consist of the development and transfer of a technical plan of technical design. Thus, nature paragraph 4(c), consultancy services which are not of a technical nature cannot be included services. Thus, the services availed by Petitioner cannot be said to the technical services and Article 13 is wholly inapplicable in the facts and circumstances of the present case. 26. Thus, we have no hesitation in holding that the impugned order dated 17th January 2012 of AAR suffers from legal infirmity and is quashed and set aside. 5.1 Ld. DR has however relied the orders of the authorities below. 6. In this context we find that in regard to IT administration services the assessee was providing services where the IT training a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profit. In this context as we consider the copy of a MSA dated 20.05.2019 as made available on pages 131 to 149 of the paper book alongwith the copies of debit note made available on pages-150 to 153 of the paper book. We find that it was agreed that remuneration for the services has been calculated with the objective of determining an arms length price for the services provided by using methodology as set forth under service fee clause . The annexure-1 provided that service fee shall be determined and allocated to the parties based on allocation keys for which in the appendix, annexure-2 provided as under :- Annex II to the Master Intercompany Service Agreement made on 20 MAY, 2019 between Invesco (India) Private Limited ( the Recipient ) and Invesco Holding Company (US) Inc. ( the Provider ) Services Provided Commencing on 01 April 2018, the Provider will provide IT support services to the Recipient in respect of IT Application Service Functions, IT Infrastructure Service Functions and IT Security Administration Service Functions. Details of the services are included in the table below. For the avoidance of doubt, the table below provides a non-exhaustive description of the typ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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